ITEM 1. FINANCIAL STATEMENTS
SINO AGRO FOOD, INC. AND SUBSIDIARIES
QUARTERLY FINANCIAL REPORT
FOR THE SIX MONTHS ENDED JUNE 30,
2018
INDEX TO QUARTERLY FINANCIAL REPORT
SINO AGRO FOOD, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
|
|
Note
|
|
June 30, 2018
|
|
|
December 31, 2017
|
|
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
5
|
|
$
|
605,994
|
|
|
$
|
560,043
|
|
Inventories
|
|
6
|
|
|
52,941,240
|
|
|
|
52,628,947
|
|
Costs and estimated earnings in excess
of billings on uncompleted contracts
|
|
18
|
|
|
250,828
|
|
|
|
1,249,187
|
|
Deposits and prepayments
|
|
7
|
|
|
63,904,021
|
|
|
|
70,459,650
|
|
Accounts receivable, net of allowance
for doubtful accounts
|
|
8
|
|
|
89,045,305
|
|
|
|
82,971,418
|
|
Other receivables
|
|
9
|
|
|
26,039,372
|
|
|
|
20,680,478
|
|
Total current assets
|
|
|
|
|
232,786,760
|
|
|
|
228,549,723
|
|
Plant and equipment
|
|
|
|
|
|
|
|
|
|
|
Plant and equipment, net of accumulated
depreciation
|
|
10
|
|
|
243,424,801
|
|
|
|
246,857,797
|
|
Construction in progress
|
|
11
|
|
|
11,410,770
|
|
|
|
6,178,308
|
|
Land use rights,
net of accumulated amortization
|
|
12
|
|
|
56,424,062
|
|
|
|
54,838,031
|
|
Total plant and
equipment
|
|
|
|
|
311,259,633
|
|
|
|
307,874,136
|
|
Other assets
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
13
|
|
|
724,940
|
|
|
|
724,940
|
|
Proprietary technologies, net of accumulated
amortization
|
|
14
|
|
|
9,279,211
|
|
|
|
9,588,605
|
|
Interests in unconsolidated equity investees
|
|
15
|
|
|
201,311,597
|
|
|
|
193,267,696
|
|
Temporary deposits
paid to entities for investments in Sino joint venture companies
|
|
16
|
|
|
34,895,444
|
|
|
|
34,917,222
|
|
Total other assets
|
|
|
|
|
246,211,192
|
|
|
|
238,498,463
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
|
$
|
790,257,585
|
|
|
$
|
774,922,322
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’
EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
|
|
$
|
6,246,248
|
|
|
$
|
4,243,496
|
|
Billings in excess of costs and estimated
earnings on uncompleted contracts
|
|
18
|
|
|
5,602,681
|
|
|
|
5,740,065
|
|
Due to a director
|
|
|
|
|
-
|
|
|
|
107,074
|
|
Other payables
|
|
19
|
|
|
40,784,287
|
|
|
|
40,593,482
|
|
Borrowings - Short term bank loan
|
|
20
|
|
|
4,684,902
|
|
|
|
4,667,890
|
|
Negotiable promissory notes
|
|
21
|
|
|
977,155
|
|
|
|
977,155
|
|
Derivative liability
|
|
22
|
|
|
2,100
|
|
|
|
2,100
|
|
Convertible note payable
|
|
22
|
|
|
3,894,978
|
|
|
|
3,894,978
|
|
Income tax payable
|
|
|
|
|
371
|
|
|
|
377
|
|
|
|
|
|
|
62,192,722
|
|
|
|
60,226,617
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current liabilities
|
|
|
|
|
|
|
|
|
|
|
Other payables
|
|
19
|
|
|
10,949,126
|
|
|
|
11,089,779
|
|
Borrowings - Long term bank loan
|
|
20
|
|
|
5,893,910
|
|
|
|
6,045,302
|
|
|
|
|
|
|
16,843,036
|
|
|
|
17,135,081
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and
contingencies
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ equity
|
|
|
|
|
|
|
|
|
|
|
Preferred stock: $0.001 par value (10,000,000
shares authorized, 100 shares issued and outstanding as of June 30, 2018 and December 31 , 2017, respectively)
|
|
|
|
|
|
|
|
|
|
|
Series A preferred stock: $0.001
par value (100 shares designated, 100 shares issued and outstanding as of June 30, 2018 and December 31, 2017, respectively)
|
|
23
|
|
|
-
|
|
|
|
-
|
|
Series B convertible preferred stock: $0.001
par value (10,000,000 shares designated, 0 shares issued and outstanding as of June 30, 2018 and December
31, 2017, respectively)
|
|
23
|
|
|
-
|
|
|
|
-
|
|
Series F Non-convertible preferred stock: $0.001
par value (1,000,000 shares designated, 0 shares issued and outstanding as of June 30, 2018 and December 31, 2017,
respectively)
|
|
23
|
|
|
-
|
|
|
|
-
|
|
Common stock: $0.001 par value
(50,000,000 shares authorized, 40,305,492 and 29,362,875 shares issued and outstanding as of June 30,
2018 and December 31, 2017, respectively)
|
|
23
|
|
|
40,306
|
|
|
|
29,363
|
|
Additional paid - in capital
|
|
|
|
|
176,731,765
|
|
|
|
169,743,640
|
|
Retained earnings
|
|
|
|
|
447,458,892
|
|
|
|
441,488,507
|
|
Accumulated other comprehensive income
|
|
|
|
|
2,934,454
|
|
|
|
2,346,174
|
|
Treasury stock
|
|
|
|
|
(1,250,000)
|
|
|
|
(1,250,000
|
)
|
Total Sino Agro
Food, Inc. and subsidiaries stockholders’ equity
|
|
|
|
|
625,915,417
|
|
|
|
612,357,684
|
|
Non - controlling
interest
|
|
|
|
|
85,306,410
|
|
|
|
85,202,940
|
|
Total stockholders’
equity
|
|
|
|
|
711,221,827
|
|
|
|
697,560,624
|
|
Total liabilities
and stockholders’ equity
|
|
|
|
$
|
790,257,585
|
|
|
$
|
774,922,322
|
|
The accompanying notes are an integral part
of these consolidated financial statements.
SINO AGRO FOOD, INC.
CONSOLIDATED STATEMENTS OF INCOME AND OTHER
COMPREHENSIVE INCOME
(UNAUDITED)
|
|
|
|
Three months ended
|
|
|
Three months ended
|
|
|
Six months ended
|
|
|
Six months ended
|
|
|
|
Note
|
|
June
30, 2018
|
|
|
June
30, 2017
|
|
|
June
30, 2018
|
|
|
June
30, 2017
|
|
Continuing operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Sale of goods
|
|
|
|
$
|
32,932,737
|
|
|
$
|
47,726,978
|
|
|
$
|
64,191,597
|
|
|
$
|
105,150,328
|
|
- Consulting and service income from development contracts
|
|
|
|
|
1,061,986
|
|
|
|
-
|
|
|
|
3,534,390
|
|
|
|
13,189,265
|
|
- Commission and management fee
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3
|
|
|
33,994,723
|
|
|
|
47,726,978
|
|
|
|
67,725,987
|
|
|
|
118,339,593
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of goods sold
|
|
3
|
|
|
(27,671,259)
|
|
|
|
(41,218,829
|
)
|
|
|
(53,534,279)
|
|
|
|
(88,618,365
|
)
|
Cost of services
|
|
3
|
|
|
(880,418)
|
|
|
|
-
|
|
|
|
(2,664,740)
|
|
|
|
(8,782,892
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
|
|
5,443,046
|
|
|
|
6,508,149
|
|
|
|
11,526,968
|
|
|
|
20,938,336
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative expenses
|
|
|
|
|
(4,133,054)
|
|
|
|
(5,849,346
|
)
|
|
|
(7,795,783)
|
|
|
|
(11,879,081
|
)
|
Net income from operations
|
|
|
|
|
1,309,992
|
|
|
|
658,803
|
|
|
|
3,731,185
|
|
|
|
9,059,255
|
|
Other income (expenses)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government grant
|
|
|
|
|
132,847
|
|
|
|
291,800
|
|
|
|
132,847
|
|
|
|
457,288
|
|
Share of income from unconsolidated equity investee
|
|
|
|
|
1,549,960
|
|
|
|
1,313,996
|
|
|
|
5,331,971
|
|
|
|
4,072,851
|
|
Other income
|
|
|
|
|
58,860
|
|
|
|
-
|
|
|
|
59,738
|
|
|
|
-
|
|
Non-operating expenses
|
|
|
|
|
(3,139,329
|
)
|
|
|
-
|
|
|
|
(3,161,333
|
)
|
|
|
-
|
|
Interest expense
|
|
|
|
|
(417,307)
|
|
|
|
(724,774
|
)
|
|
|
(870,958)
|
|
|
|
(1,230,312
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (expenses)
|
|
|
|
|
(1,814,969)
|
|
|
|
881,022
|
|
|
|
1,492,265
|
|
|
|
3,299,827
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) before income taxes
|
|
|
|
|
(504,977
|
)
|
|
|
1,539,825
|
|
|
|
5,223,450
|
|
|
|
12,359,082
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes
|
|
4
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
(504,977
|
)
|
|
|
1,539,825
|
|
|
|
5,223,450
|
|
|
|
12,359,082
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Net (income) loss attributable to non - controlling
interest
|
|
|
|
|
1,402,644
|
|
|
|
(1,157,393
|
)
|
|
|
746,936
|
|
|
|
(3,285,217
|
)
|
Net income attributable to the
Sino Agro Food, Inc. and subsidiaries
|
|
|
|
|
897,667
|
|
|
|
382,432
|
|
|
|
5,970,386
|
|
|
|
9,073,865
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss)
- Foreign currency translation gain (loss)
|
|
|
|
|
(20,442,164
|
)
|
|
|
6,848,801
|
|
|
|
1,438,686
|
|
|
|
7,985,748
|
|
Comprehensive income
|
|
|
|
|
(19,544,497
|
)
|
|
|
7,231,233
|
|
|
|
7,409,072
|
|
|
|
17,059,613
|
|
Less: Other comprehensive (income) loss attributable to non
- controlling interest
|
|
|
|
|
10,403,204
|
|
|
|
(862,524)
|
|
|
|
(850,406)
|
|
|
|
(1,028,011)
|
|
Comprehensive income attributable to the Sino Agro Food,
Inc. and subsidiaries
|
|
|
|
$
|
(9,141,293
|
)
|
|
$
|
6,368,709
|
|
|
$
|
6,558,666
|
|
|
$
|
16,031,602
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share attributable to the Sino Agro Food, Inc. and subsidiaries common stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
28
|
|
$
|
0.02
|
|
|
$
|
0.02
|
|
|
$
|
0.17
|
|
|
$
|
0.39
|
|
Diluted
|
|
28
|
|
$
|
0.02
|
|
|
$
|
0.03
|
|
|
$
|
0.17
|
|
|
$
|
0.38
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
37,573,999
|
|
|
|
22,995,676
|
|
|
|
35,749,331
|
|
|
|
23,365,503
|
|
Diluted
|
|
|
|
|
37,573,999
|
|
|
|
25,203,537
|
|
|
|
35,749,331
|
|
|
|
25,555,083
|
|
The accompanying notes are an integral part
of these consolidated financial statements.
SINO AGRO FOOD, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
|
|
Six months
ended June
30, 2018
|
|
|
Six months
ended June
30, 2017
|
|
|
|
|
|
|
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
|
|
Net income for the period
|
|
|
|
|
|
|
|
|
- Continuing operations
|
|
$
|
5,223,450
|
|
|
$
|
12,359,082
|
|
- Discontinued operations
|
|
|
-
|
|
|
|
-
|
|
Adjustments to reconcile net income for the period to net cash from operations:
|
|
|
|
|
|
|
|
|
Share of income from unconsolidated equity investee
|
|
|
(5,331,971
|
)
|
|
|
(4,072,851
|
)
|
Depreciation
|
|
|
5,325,531
|
|
|
|
4,506,239
|
|
Amortization
|
|
|
1,134,904
|
|
|
|
1,300,504
|
|
Inventory written off
|
|
|
3,139,356
|
|
|
|
-
|
|
Common stock issued for services
|
|
|
1,350,490
|
|
|
|
3,982,813
|
|
Other amortized cost arising from convertible notes and others
|
|
|
-
|
|
|
|
1,355,819
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Increase in inventories
|
|
|
(3,451,648
|
)
|
|
|
(12,753,320
|
)
|
Decrease (increase) in cost and estimated earnings in excess of billings on uncompleted contacts
|
|
|
998,359
|
|
|
|
(508,203
|
)
|
Decrease (increase) in deposits and prepaid expenses
|
|
|
4,001,896
|
|
|
|
(9,200,854
|
)
|
Decrease in due to a director
|
|
|
(107,074
|
)
|
|
|
(1,815,827
|
)
|
Increase in accounts payable and accrued expenses
|
|
|
3,090,752
|
|
|
|
5,755,563
|
|
Increase in other payables
|
|
|
4,163,723
|
|
|
|
3,726,045
|
|
(Increase) decrease in accounts receivable
|
|
|
(6,073,887
|
)
|
|
|
17,338,773
|
|
Decrease in billings in excess of costs and estimated earnings on uncompleted contracts
|
|
|
(137,384
|
)
|
|
|
2,992,649
|
|
Increase in other receivables
|
|
|
(5,358,896
|
)
|
|
|
(9,820,337
|
)
|
Increase in interests in an unconsolidated equity investee
|
|
|
(2,600,812
|
)
|
|
|
-
|
|
Net cash provided by operating activities
|
|
|
5,366,789
|
|
|
|
15,146,095
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
Purchases of property and equipment and non-current assets held for sale
|
|
|
(4,840,642
|
)
|
|
|
(9,382,745
|
)
|
Investment in unconsolidated equity investee
|
|
|
(52,258
|
)
|
|
|
-
|
|
Payment for construction in progress
|
|
|
(4,347,826
|
)
|
|
|
(6,307,903
|
)
|
Net cash used in investing activities
|
|
|
(9,240,726
|
)
|
|
|
(15,690,648
|
)
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
Long term debts repaid
|
|
|
-
|
|
|
|
(1,478,934
|
)
|
Capital contribution from non-controlling interest
|
|
|
-
|
|
|
|
434,808
|
|
Net cash provided by financing activities
|
|
|
-
|
|
|
|
(1,044,126
|
)
|
Effects on exchange rate changes on cash
|
|
|
3,919,888
|
|
|
|
2,613,732
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents
|
|
|
45,951
|
|
|
|
1,025,053
|
|
Cash and cash equivalents, beginning of period
|
|
|
560,043
|
|
|
|
2,576,058
|
|
Cash and cash equivalents, end of period
|
|
$
|
605,994
|
|
|
$
|
3,601,111
|
|
|
|
|
|
|
|
|
|
|
Supplementary disclosures of cash flow information:
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
$
|
297,926
|
|
|
$
|
197,474
|
|
Cash paid for income taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
Non - cash transactions
|
|
|
|
|
|
|
|
|
Common stock issued for services and employee compensation
|
|
$
|
6,999,067
|
|
|
$
|
403,650
|
|
Common stock issued to secure debts loan
|
|
$
|
-
|
|
|
$
|
8,718,900
|
|
Transfer to plant and equipment from construction in progress
|
|
$
|
-
|
|
|
$
|
1,476,233
|
|
The accompanying notes are an integral part
of these consolidated financial statements.
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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, 2017, Qinghai Quanwang
Investment Management Company Limited (” Quanwang “) acquired 8.3% equity interest in SJAP for total cash consideration
of $459,137. As of June 30, 2018, 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
(UNAUDITED)
|
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 June 30, 2017. 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, SIAF took up all assets and liabilities of TRW and
JFD except fish farm. The Company converted the amount due from unconsolidated equity investee into equity interest during the
fourth quarter of 2017, which resulted in equity interest in TRW from 23.89% to 36.60%.
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. This remains the case as of the date of this report.
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, 2017, SJAP transferred all of its
equity interest to MEIJI. This remains the case of the date of this report.
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 June 30, 2017, the Company invested $77,664
in SAFS. During the year ended December 31, 2016, SAFS changed from a public to a private company.
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, 2017. As a result, QZH was derecognized
as variable interest entity of the company.
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.
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
|
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
|
|
100% (12.31.2017: 100%) directly
|
|
Fishery development and holder of A-Power Technology master license.
|
|
|
|
|
|
|
|
Capital Stage Inc. (“CS”)
|
|
Belize
|
|
100% (12.31.2017: 100%) indirectly
|
|
Dormant
|
|
|
|
|
|
|
|
Capital Hero Inc. (“CH”)
|
|
Belize
|
|
100% (12.31.2017: 100%) indirectly
|
|
Dormant
|
|
|
|
|
|
|
|
Sino Agro Food Sweden AB (“SAFS”)
|
|
Sweden
|
|
100% (12.31.2017: 100%) directly
|
|
Dormant
|
|
|
|
|
|
|
|
Macau Eiji Company Limited (“MEIJI”)
|
|
Macau, P.R.C.
|
|
100% (12.31.2017: 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% (12.31.2017: 100%) directly
|
|
Investment holding
|
|
|
|
|
|
|
|
Jiang Men City Heng Sheng Tai Agriculture Development Co. Ltd (“JHST”)
|
|
P.R.C.
|
|
75% (12.31.2017: 75%) indirectly
|
|
HylocereusUndatus Plantation (“HU Plantation”).
|
|
|
|
|
|
|
|
Jiang Men City Hang Mei Cattle Farm Development Co., Limited (“JHMC”)
|
|
P.R.C.
|
|
75% (12.31.2017:75%) indirectly
|
|
Beef cattle cultivation
|
|
|
|
|
|
|
|
Hunan Shenghua A Power Agriculture Co., Limited (“HSA”)
|
|
P.R.C.
|
|
76% (12.31.2017:76%) 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.
|
|
41.25% (12.31.2017: 41.25%) indirectly
|
|
Manufacturing of organic fertilizer, livestock feed, and beef cattle and plantation of crops and pastures
|
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
|
2.
|
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
|
|
2.3
|
BASIS OF PRESENTATION
|
The accompanying unaudited condensed
consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("U.S.
GAAP") and follow the requirements of the Securities and Exchange Commission ("SEC") for interim reporting. As
permitted under those rules, certain footnotes or other financial information that are normally required by U.S. GAAP can be condensed
or omitted. These financial statements have been prepared on the same basis as our annual financial statements and, in the opinion
of management, reflect all adjustments, consisting only of normal recurring adjustments that are necessary for a fair statement
of our financial information. The results of operations for the three and six months ended June 30, 2018 are not necessarily indicative
of the results to be expected for the year ending December 31, 2018 or for any other interim period or for any other future year.
The balance sheet as of December 31, 2017 has been derived from audited financial statements at that date but does not include
all of the information required by U.S. GAAP for complete financial statements.
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.
In the first quarter of 2018, the
company adopted Accounting Standards Update (“ASU”) 2014-09 (ASC Topic 606), “Revenue from Contracts with Customers”
using the modified retrospective method in which the new guidance was applied retrospectively to contracts that were not completed
as of January 1, 2018. Results for the reporting period beginning after January 1, 2018 have been presented under Topic
606, while prior period amounts have not been adjusted and continue to be reported in accordance with previous guidance. See Note
2.8 for a further discussion of the adoption and the impact on the consolidated financial statements.
|
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. QZH was derecognized
as variable interest entity on December 30, 2017.
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
(UNAUDITED)
|
2.
|
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
|
On January 1, 2018, the Company adopted
Topic 606, using the modified retrospective transition method applied to those contracts which were not completed as of January
1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under Topic 606, while prior period amounts
have not been adjusted and continue to be reported in accordance with our historic accounting under Topic 605. There was no adjustment
to beginning retained earnings on January 1, 2018.
Under Topic 606, revenue is recognized
when control of the promised goods or services is transferred to the customers, in an amount that reflects the consideration the
Company expect to be entitled to in exchange for those goods or services.
ASU 2014-09, “Revenue from
Contracts with Customers” outlines a single comprehensive model for entities to use in accounting for revenue arising from
contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. ASU 2014-09
outlines a five-step process for revenue recognition that focuses on transfer of control, as opposed to transfer of risk and rewards,
and also requires enhanced disclosures regarding the nature, amount, timing and uncertainty of revenues and cash flows from contracts
with customers. Major provisions include determining which goods and services are distinct and represent separate performance obligations,
how variable consideration (which may include change orders and claims) is recognized, whether revenue should be recognized at
a point in time or over time and ensuring the time value of money is considered in the transaction price.
ASU 2016-08, “Principal versus
Agent Considerations (Reporting Revenue Gross versus Net)” clarifies the principal versus agent guidance in ASU 2014-09.
ASU 2016-08 clarifies how an entity determines whether to report revenue gross or net based on whether it controls a specific good
or service before it is transferred to a customer. ASU 2016-08 also reframes the indicators to focus on evidence that an entity
is acting as a principal rather than as an agent.
ASU 2016-10, “Identifying Performance
Obligations and Licensing” amends certain aspects of ASU 2014-09. ASU 2016-10 amends how an entity should identify performance
obligations for immaterial promised goods or services, shipping and handling activities and promises that may represent performance
obligations. ASU 2016-10 also provides implementation guidance for determining the nature of licensing and royalties arrangements.
ASU 2016-12, “Narrow-Scope
Improvements and Practical Expedients” also clarifies certain aspects of ASU 2014-09 including the assessment of collectability,
presentation of sales taxes, treatment of noncash consideration, and accounting for completed contracts and contract modifications
at transition.
ASU 2016-20, “Technical Corrections
and Improvements to Topic 606, Revenue from Contracts with Customers” allows an entity to determine the provision for loss
contracts at either the contract level or the performance obligation level as an accounting policy election. The company determines
its provision for loss contracts at the contract level.
ASU 2017-05, “Clarifying the
Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets” clarifies that the scope and
application of ASC 610-20 on accounting for the sale or transfer of nonfinancial assets and in substance nonfinancial assets to
noncustomers, including partial sales, applies only when the asset (or asset group) does not meet the definition of a business.
ASU 2017-13, “Amendments to
SEC Paragraphs Pursuant to the Staff Announcement at the July 20, 2017 EITF Meeting and Rescission of Prior SEC Staff Announcements
and Observer Comments” provides guidance related to the effective dates of the ASUs noted above.
We determine revenue recognition
through the following steps:
|
l
|
identification of the contract, or contracts, with a customer;
|
|
l
|
identification of the performance obligations in the contract;
|
|
l
|
determination of the transaction price;
|
|
l
|
allocation of the transaction price to the performance obligations in the contract; and
|
|
l
|
recognition of revenue when, or as, we satisfy a performance obligation.
|
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
|
2.
|
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
|
|
2.8
|
REVENUE RECOGNITION (CONTINUED)
|
Consulting and service income
from development contracts
The company recognizes c
onsulting
and service income from development contracts
revenue over time, as performance obligations are satisfied, due to the continuous
transfer of control to the customer.
Consulting and service income from development contracts
are generally accounted for
as a single unit of account (a single performance obligation) and are not segmented between types of services. The company recognizes
revenue using the percentage-of-completion method, based primarily on contract cost incurred to date compared to total estimated
contract cost. The percentage-of-completion method (an input method) is the most faithful depiction of the company’s performance
because it directly measures the value of the services transferred to the customer. Cost of revenue includes an allocation of depreciation
and amortization. Customer-furnished materials, labor and equipment and, in certain cases, subcontractor materials, labor and equipment,
are included in revenue and cost of revenue when management believes that the company is acting as a principal rather than as an
agent (i.e., the company integrates the materials, labor and equipment into the deliverables promised to the customer). Customer-furnished
materials are only included in revenue and cost when the contract includes construction activity and the company has visibility
into the amount the customer is paying for the materials or there is a reasonable basis for estimating the amount. The company
recognizes revenue, but not profit, on certain uninstalled materials that are not specifically produced, fabricated, or constructed
for a project. Revenue on these uninstalled materials is recognized when the cost is incurred (when control is transferred). Changes
to total estimated contract cost or losses, if any, are recognized in the period in which they are determined as assessed at the
contract level. Pre-contract costs are expensed as incurred unless they are expected to be recovered from the client. Project mobilization
costs are generally charged to project costs as incurred when they are an integrated part of the performance obligation being transferred
to the client. Customer payments on consulting and service income from development contracts are typically due within 360 days
of billing, depending on the contract.
Variable Consideration
The nature of the company’s
contracts gives rise to several types of variable consideration, including claims and unpriced change orders; awards and incentive
fees; and liquidated damages and penalties. The company recognizes revenue for variable consideration when it is probable that
a significant reversal in the amount of cumulative revenue recognized will not occur. The company estimates the amount of revenue
to be recognized on variable consideration using the expected value (i.e., the sum of a probability-weighted amount) or the most
likely amount method, whichever is expected to better predict the amount. Factors considered in determining whether revenue
associated with claims (including change orders in dispute and unapproved change orders in regard to both scope and price) should
be recognized include the following: (a) the contract or other evidence provides a legal basis for the claim, (b) additional
costs were caused by circumstances that were unforeseen at the contract date and not the result of deficiencies in the company’s
performance, (c) claim-related costs are identifiable and considered reasonable in view of the work performed, and (d) evidence
supporting the claim is objective and verifiable. If the requirements for recognizing revenue for claims or unapproved change orders
are met, revenue is recorded only when the costs associated with the claims or unapproved change orders have been incurred. Back
charges to suppliers or subcontractors are recognized as a reduction of cost when it is determined that recovery of such cost is
probable and the amounts can be reliably estimated. Disputed back charges are recognized when the same requirements described above
for claims accounting have been satisfied.
The company generally provides limited
warranties for work performed under its engineering and construction contracts. The warranty periods typically extend for a limited
duration following substantial completion of the company’s work on a project. Historically, warranty claims have not resulted
in material costs incurred.
Revenue excludes sales and usage-based
taxes where it has been determined that the Company is acting as a pass-through agent.
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.
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
|
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 $1,960 and $8,398, $2,745 and $16,145
for the three months and the six months ended June 30, 2018 and 2017, respectively.
Advertising costs are included in
general and administrative expenses, which totaled $399,749 and $372,045, $800,504 and $1,003,762 for the three months ended and
the six months ended June 30, 2018 and 2017, respectively.
|
2.12
|
RESEARCH AND DEVELOPMENT EXPENSES
|
Research and development expenses
are included in general and administrative expenses, which totaled $0 and $0, $0 and $0 for the three months ended and the six
months ended June 30, 2018 and 2017, 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 $2,934,453 as of June 30, 2018 and $2,346,174 as
of December 31, 2017. The balance sheet amounts with the exception of equity as of June 30, 2018 and December 31, 2017 were translated
using an exchange rate of RMB 6.62 to $1.00 and RMB 6.53 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, 2018, and 2017 were RMB
6.37 to $1.00 and RMB 6.87 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 June 30, 2018
and December 31, 2017 are $0.
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
|
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.
|
2.19
|
LONG TERM INVESTMENT
|
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. On October 18, 2017, the Company withdrew its equity interest in RCU.
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
|
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 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.
|
2.21
|
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
|
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.
|
2.24
|
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
(UNAUDITED)
|
2.
|
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
|
|
2.25
|
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.
|
2.27
|
NON-CURRENT ASSETS HELD FOR SALE AND DISCONTINUED
|
The Company classifies non-current
assets and disposal groups as held for sale if their carrying amounts will be recovered principally through a sale rather than
through continuing use. Such non-current assets and disposal groups classified as held for sale are measured at the lower of their
carrying amount and fair value less costs to sell. The criteria for held for sale classification is regarded as met only when the
sale is highly probable and the asset or disposal group is available for immediate sale in its present condition. Property and
equipment are not depreciated once classified as held for distribution. Assets and liabilities classified as held for sale are
presented separately as current items in the consolidated balance sheets. A disposal group qualifies as discontinued operation
if it is a component of an entity that either has been disposed of, or is classified as held for sale, and:
|
·
|
represents a separate major line of business or geographical area of operations
|
|
·
|
is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations, or
|
|
·
|
is a subsidiary acquired exclusively with a view to resale
|
Discontinued operations are excluded
from the results of continuing operations and are presented as a single amount as profit or loss after tax from discontinued operations
in the consolidated statement of income and other comprehensive income.
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
|
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.
|
2.29
|
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.
|
2.30
|
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, 2018 and December
31, 2017 amounted to $348,673 and $327,019, 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:
|
|
Three months ended
June 30, 2018
|
|
|
Three months ended
June 30, 2017
|
|
|
Six months ended
June 30, 2018
|
|
|
Six months ended
June 30, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer A
|
|
|
35.13
|
%
|
|
|
27.88
|
%
|
|
|
33.40
|
%
|
|
|
26.64
|
%
|
Customer B
|
|
|
-
|
%
|
|
|
25.53
|
%
|
|
|
-
|
%
|
|
|
20.98
|
%
|
Customer C
|
|
|
18.44
|
%
|
|
|
16.16
|
%
|
|
|
16.63
|
%
|
|
|
13.63
|
%
|
Customer D
|
|
|
18.38
|
%
|
|
|
9.99
|
%
|
|
|
17.73
|
%
|
|
|
8.76
|
%
|
Customer E
|
|
|
6.26
|
%
|
|
|
6.26
|
%
|
|
|
7.64
|
%
|
|
|
7.93
|
%
|
Customer F
|
|
|
4.62
|
%
|
|
|
-
|
%
|
|
|
-
|
%
|
|
|
-
|
%
|
Customer G
|
|
|
-
|
%
|
|
|
-
|
%
|
|
|
5.22
|
%
|
|
|
-
|
%
|
Customer H
|
|
|
-
|
%
|
|
|
-
|
%
|
|
|
-
|
%
|
|
|
11.15
|
%
|
|
|
|
82.83
|
%
|
|
|
85.82
|
%
|
|
|
80.62
|
%
|
|
|
89.09
|
%
|
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
|
2.
|
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
|
|
2.30
|
CONCENTRATION OF CREDIT RISK (CONTINUED)
|
|
|
|
|
Percentage
of revenue
|
|
|
Amount
|
|
Customer A
|
|
Corporate and others Division
|
|
|
33.40
|
%
|
|
$
|
22,619,734
|
|
Customer D
|
|
Corporate and others Division
|
|
|
17.73
|
%
|
|
$
|
12,010,574
|
|
Customer C
|
|
Cattle Farm Development Division
|
|
|
16.63
|
%
|
|
$
|
11,265,270
|
|
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, 2018
|
|
|
December 31, 2017
|
|
|
|
|
|
|
|
|
Customer A
|
|
|
60.04
|
%
|
|
|
27.13
|
%
|
Customer B
|
|
|
12.15
|
%
|
|
|
7.34
|
%
|
Customer C
|
|
|
8.79
|
%
|
|
|
7.49
|
%
|
Customer D
|
|
|
5.14
|
%
|
|
|
4.78
|
%
|
Customer E
|
|
|
3.70
|
%
|
|
|
-
|
%
|
Customer F
|
|
|
-
|
%
|
|
|
12.31
|
%
|
|
|
|
89.82
|
%
|
|
|
59.05
|
%
|
As of June 30, 2018, amounts due
from customers A and B are $53,460,749 and $10,814,651, 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.
|
2.31
|
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 June 30, 2018 and December 31, 2017, 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 June
30, 2018 and 2017, basic earnings per share attributable to Sino Agro Food, Inc. and subsidiaries common stockholders amounted to $0.02 and $0.02, respectively. For the three months ended June 30, 2018 and 2017, diluted
earnings per share attributable to Sino Agro Food, Inc. and its subsidiaries’ common stockholders amounted to $0.02 and $0.03, respectively.
For the six months ended June 30,
2018 and 2017, basic earnings per share attributable to Sino Agro Food, Inc. and subsidiaries common stockholders amounted to $0.17 and $0.39, respectively. For the six months ended June 30, 2018 and 2017, diluted
earnings per share attributable to Sino Agro Food, Inc. and its subsidiaries’ common stockholders amounted to $0.17 and $0.38, respectively.
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
|
2.
|
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
|
|
2.33
|
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.
|
2.34
|
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.
|
2.35
|
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.
|
2.36
|
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
June 30, 2018 or December 31, 2017, 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 fiscal period ended June 30, 2018 or 2017.
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
|
2.
|
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
|
|
2.37
|
NEW ACCOUNTING PRONOUNCEMENTS
|
In February 2016, the Financial Accounting
Standards Board (FASB) issued Accounting Standards Update No. 2016-02,
Leases (Topic 842)
(ASU 2016-02), which
generally requires companies to recognize operating and financing lease liabilities and corresponding right-of-use assets on the
balance sheet. This guidance will be effective for us in the first quarter of 2019 on a modified retrospective basis and early
adoption is permitted. We will adopt the new standard effective January 1, 2019.
In February 2018, the FASB issued
Accounting Standards Update No. 2018-02,
Income Statement—Reporting Comprehensive Income (Topic 220): Reclassification
of Certain Tax Effects from Accumulated Other Comprehensive Income
(ASU 2018-02),
which allows companies
to reclassify stranded tax effects resulting from the 2017 Tax Cuts and Jobs Act (the Tax Act), from accumulated other comprehensive
income to retained earnings. The new standard is effective for us beginning January 1, 2019, with early adoption permitted. We
are currently evaluating the effects that the adoption of this guidance will have on our consolidated financial statements and
the related disclosures.
In May 2014, the FASB issued Accounting
Standards Update No. 2014-09,
Revenue from Contracts with Customers (Topic 606)
, which supersedes the revenue recognition
requirements in Accounting Standards Codification (ASC) Topic 605, Revenue Recognition (Topic 605). ASU 2014-09 can be adopted
using one of two retrospective transition methods: 1) retrospectively to each prior reporting period presented or 2) as a cumulative-effect
adjustment as of the date of adoption. While the Company has not yet completed their evaluation, it has reviewed ASU 2014-09 and
does not expect this new guidance to have a material impact on its consolidated financial statements. To the extent there is an
impact, the Company will apply as a cumulative-effect adjustment as of the date of adoption.
In October 2016, the FASB issued
Accounting Standards Update No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers Other than Inventory (ASU 2016-16),
which requires companies to recognize the income-tax consequences of an intra-entity transfer of an asset other than inventory
when the transfer occurs, rather than when the asset has been sold to an outside party. We adopted the new standard effective January
1, 2018, using the modified retrospective transition approach through a cumulative-effect adjustment to retained earnings as of
the effective date, which was not material to our consolidated financial statements.
In November 2016, the FASB issued
Accounting Standards Update No. 2016-18,
Statement of Cash Flows (Topic 230): Restricted Cash
(ASU 2016-18), which
requires companies to include amounts generally described as restricted cash and restricted cash equivalents in cash and cash equivalents
when reconciling beginning-of-period and end-of-period total amounts shown on the statements of cash flows. We adopted the new
standard effective January 1, 2018, using the retrospective transition approach. The reclassified restricted cash balances from
investing activities to changes in cash, cash equivalents and restricted cash on the consolidated statements of cash flows were
nil for all periods presented.
In January 2017, the FASB issued
Accounting Standards Update No. 2017-01,
Business Combinations (Topic 805): Clarifying the Definition of a Business
(ASU
2017-01), which revises the definition of a business and provides new guidance in evaluating when a set of transferred assets and
activities is a business. We adopted the new standard effective January 1, 2018 on a prospective basis. The new standard did not
have a material impact on our 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
(UNAUDITED)
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. On December 30, 2017, QZH was disposed to third party and derecognized as variable interest entity on the same date.
|
|
For
the three months ended June 30, 2018
|
|
|
|
Continuing
operation
|
|
|
Discontinued
operation
|
|
|
|
|
|
|
Fishery
|
|
|
|
|
|
Organic Fertilizer
|
|
|
Cattle Farm
|
|
|
|
|
|
Fishery
|
|
|
|
|
|
|
Development
|
|
|
HU Plantation
|
|
|
and Bread Grass
|
|
|
Development
|
|
|
Corporate and
|
|
|
Development
|
|
|
|
|
|
|
Division(1)
|
|
|
Division (2)
|
|
|
Division (3)
|
|
|
Division (4)
|
|
|
others (5)
|
|
|
Division(1)
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
1,061,986
|
|
|
|
1,044,245
|
|
|
|
7,624,303
|
|
|
|
6,073,838
|
|
|
|
18,190,351
|
|
|
|
-
|
|
|
|
33,994,723
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
54,428
|
|
|
|
(268,503
|
)
|
|
|
(689,227
|
)
|
|
|
409,794
|
|
|
|
1,391,175
|
|
|
|
-
|
|
|
|
897,667
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
81,997,442
|
|
|
|
46,569,574
|
|
|
|
341,912,724
|
|
|
|
41,143,209
|
|
|
|
278,634,636
|
|
|
|
-
|
|
|
|
790,257,585
|
|
|
|
For
the three months ended June 30, 2017
|
|
|
|
Continuing
operation
|
|
|
Discontinued
operation
|
|
|
|
|
|
|
Fishery
|
|
|
|
|
|
Organic Fertilizer
|
|
|
Cattle Farm
|
|
|
|
|
|
Fishery
|
|
|
|
|
|
|
Development
|
|
|
HU Plantation
|
|
|
and Bread Grass
|
|
|
Development
|
|
|
Corporate and
|
|
|
Development
|
|
|
|
|
|
|
Division(1)
|
|
|
Division (2)
|
|
|
Division (3)
|
|
|
Division (4)
|
|
|
others (5)
|
|
|
Division(1)
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
-
|
|
|
$
|
755,579
|
|
|
$
|
21,499,999
|
|
|
$
|
7,401,149
|
|
|
$
|
18,070,251
|
|
|
$
|
-
|
|
|
$
|
47,726,978
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(48,036
|
)
|
|
$
|
(659,970
|
)
|
|
$
|
786,481
|
|
|
$
|
795,810
|
|
|
$
|
(491,853
|
)
|
|
$
|
-
|
|
|
$
|
382,432
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
77,911,145
|
|
|
$
|
47,620,284
|
|
|
$
|
372,142,920
|
|
|
$
|
42,999,309
|
|
|
$
|
265,159,309
|
|
|
$
|
-
|
|
|
$
|
805,832,967
|
|
|
|
For
the six months ended June 30, 2018
|
|
|
|
Continuing
operation
|
|
|
Discontinued
operation
|
|
|
|
|
|
|
Fishery
|
|
|
|
|
|
Organic Fertilizer
|
|
|
Cattle Farm
|
|
|
|
|
|
Fishery
|
|
|
|
|
|
|
Development
|
|
|
HU Plantation
|
|
|
and Bread Grass
|
|
|
Development
|
|
|
Corporate and
|
|
|
Development
|
|
|
|
|
|
|
Division(1)
|
|
|
Division (2)
|
|
|
Division (3)
|
|
|
Division (4)
|
|
|
others (5)
|
|
|
Division(1)
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
3,534,390
|
|
|
|
2,094,473
|
|
|
|
16,394,895
|
|
|
|
11,071,921
|
|
|
|
34,630,308
|
|
|
|
-
|
|
|
|
67,725,987
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
615,371
|
|
|
|
(523,627
|
)
|
|
|
(20,862
|
)
|
|
|
695,812
|
|
|
|
5,203,692
|
|
|
|
-
|
|
|
|
5,970,386
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
81,997,442
|
|
|
|
46,569,574
|
|
|
|
341,912,724
|
|
|
|
41,143,209
|
|
|
|
278,634,636
|
|
|
|
-
|
|
|
|
790,257,585
|
|
|
|
For
the six months ended June 30, 2017
|
|
|
|
Continuing
|
|
|
Discontinued
|
|
|
|
|
|
|
Operation
|
|
|
operation
|
|
|
|
|
|
|
Fishery
|
|
|
|
|
|
Organic Fertilizer
|
|
|
Cattle Farm
|
|
|
|
|
|
Fishery
|
|
|
|
|
|
|
Development
|
|
|
HU Plantation
|
|
|
and Bread Grass
|
|
|
Development
|
|
|
Corporate and
|
|
|
Development
|
|
|
|
|
|
|
Division(1)
|
|
|
Division (2)
|
|
|
Division (3)
|
|
|
Division (4)
|
|
|
others (5)
|
|
|
Division(1)
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
13,189,265
|
|
|
$
|
2,078,755
|
|
|
$
|
46,077,506
|
|
|
$
|
15,813,236
|
|
|
$
|
41,180,831
|
|
|
$
|
-
|
|
|
$
|
118,339,593
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
4,310,302
|
|
|
$
|
(498,040
|
)
|
|
$
|
2,511,517
|
|
|
$
|
1,890,019
|
|
|
$
|
860,067
|
|
|
$
|
-
|
|
|
$
|
9,073,865
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
77,911,145
|
|
|
$
|
47,620,284
|
|
|
$
|
372,142,920
|
|
|
$
|
42,999,309
|
|
|
$
|
265,159,309
|
|
|
$
|
-
|
|
|
$
|
805,832,967
|
|
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
|
3.
|
SEGMENT INFORMATION (CONTINUED)
|
|
(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”), 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”). On December 30, 2017, QZH was derecognized as variable interest entity of the company.
|
|
(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”).
|
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
|
3.
|
SEGMENT INFORMATION (CONTINUED)
|
Further analysis of revenue:-
|
|
For the
three ended June 30, 2018
|
|
|
|
Fishery
|
|
|
|
|
|
Organic Fertilizer
|
|
|
Cattle Farm
|
|
|
|
|
|
|
|
|
|
Development
|
|
|
HU Plantation
|
|
|
and Bread Grass
|
|
|
Development
|
|
|
Corporate and
|
|
|
|
|
|
|
Division (1)
|
|
|
Division (2)
|
|
|
Division (3)
|
|
|
Division (4)
|
|
|
others (6)
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name of entity Sale of goods Capital Award, Inc. (“CA”)
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jiang Men City Heng Sheng Tai Agriculture Development Co., Limited (“JHST”)
|
|
|
|
|
|
|
1,044,245
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,044,245
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hunan Shenghua A Power Agriculture Co., Limited (“HSA”)
|
|
|
|
|
|
|
|
|
|
|
2,499,490
|
|
|
|
|
|
|
|
|
|
|
|
2,499,490
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Qinghai Sanjiang A Power Agriculture Co., Limited (“SJAP”)
|
|
|
|
|
|
|
|
|
|
|
5,124,813
|
|
|
|
|
|
|
|
|
|
|
|
5,124,813
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Qinghai Zhong He Meat Products Co., Limited (“QZH”)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Macau Eiji Company Limited (“MEIJI”)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,073,838
|
|
|
|
|
|
|
|
6,073,838
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sino Agro Food, Inc. (“SIAF”)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,190,351
|
|
|
|
18,190,351
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consulting and service income for development contracts Capital Award, Inc. (“CA”)
|
|
|
1,061,986
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,061,986
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commission and management fee Capital Award, Inc. (“CA”)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,061,986
|
|
|
|
1,044,245
|
|
|
|
7,624,303
|
|
|
|
6,073,838
|
|
|
|
18,190,351
|
|
|
|
33,994,723
|
|
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
|
3.
|
SEGMENT INFORMATION (CONTINUED)
|
Further analysis of revenue:-
|
|
For the
three months ended June 30, 2017
|
|
|
|
Fishery
|
|
|
|
|
|
Organic Fertilizer
|
|
|
Cattle Farm
|
|
|
|
|
|
|
|
|
|
Development
|
|
|
HU Plantation
|
|
|
and Bread Grass
|
|
|
Development
|
|
|
Corporate and
|
|
|
|
|
|
|
Division (1)
|
|
|
Division (2)
|
|
|
Division (3)
|
|
|
Division (4)
|
|
|
others (6)
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name of entity Sale of goods Capital Award, Inc. (“CA”)
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jiang Men City Heng Sheng Tai Agriculture Development Co., Limited (“JHST”)
|
|
|
-
|
|
|
|
755,579
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
755,579
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hunan Shenghua A Power Agriculture Co., Limited (“HSA”)
|
|
|
-
|
|
|
|
-
|
|
|
|
959,598
|
|
|
|
-
|
|
|
|
-
|
|
|
|
959,598
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Qinghai Sanjiang A Power Agriculture Co., Limited (“SJAP”)
|
|
|
-
|
|
|
|
-
|
|
|
|
7,308,554
|
|
|
|
-
|
|
|
|
-
|
|
|
|
7,308,554
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Qinghai Zhong He Meat Products Co., Limited (“QZH”)
|
|
|
-
|
|
|
|
-
|
|
|
|
13,231,847
|
|
|
|
-
|
|
|
|
-
|
|
|
|
13,231,847
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Macau Eiji Company Limited (“MEIJI”)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
7,401,149
|
|
|
|
-
|
|
|
|
7,401,149
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sino Agro Food, Inc. (“SIAF”)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
18,070,251
|
|
|
|
18,070,251
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consulting and service income for development contracts Capital Award, Inc. (“CA”)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commission and management fee Capital Award, Inc. (“CA”)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
$
|
-
|
|
|
$
|
755,579
|
|
|
$
|
21,499,999
|
|
|
$
|
7,401,149
|
|
|
$
|
18,070,251
|
|
|
$
|
47,726,978
|
|
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
|
3.
|
SEGMENT INFORMATION (CONTINUED)
|
Further analysis of revenue:-
|
|
For the six months ended June 30, 2018
|
|
|
|
Fishery
|
|
|
|
|
|
Organic Fertilizer
|
|
|
Cattle Farm
|
|
|
|
|
|
|
|
|
|
Development
|
|
|
HU Plantation
|
|
|
and Bread Grass
|
|
|
Development
|
|
|
Corporate and
|
|
|
|
|
|
|
Division (1)
|
|
|
Division (2)
|
|
|
Division (3)
|
|
|
Division (4)
|
|
|
others (6)
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name of entity Sale of goods Capital Award, Inc. (“CA”)
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jiang Men City Heng Sheng Tai Agriculture Development Co., Limited (“JHST”)
|
|
|
|
|
|
|
2,094,473
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,094,473
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hunan Shenghua A Power Agriculture Co., Limited (“HSA”)
|
|
|
|
|
|
|
|
|
|
|
4,865,057
|
|
|
|
|
|
|
|
|
|
|
|
4,865,057
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Qinghai Sanjiang A Power Agriculture Co., Limited (“SJAP”)
|
|
|
|
|
|
|
|
|
|
|
11,529,838
|
|
|
|
|
|
|
|
|
|
|
|
11,529,838
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Qinghai Zhong He Meat Products Co., Limited (“QZH”)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Macau Eiji Company Limited (“MEIJI”)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,071,921
|
|
|
|
|
|
|
|
11,071,921
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sino Agro Food, Inc. (“SIAF”)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
34,630,308
|
|
|
|
34,630,308
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consulting and service income for development contracts Capital Award, Inc. (“CA”)
|
|
|
3,534,390
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,534,390
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commission and management fee Capital Award, Inc. (“CA”)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
3,534,390
|
|
|
|
2,094,473
|
|
|
|
16,394,895
|
|
|
|
11,071,921
|
|
|
|
34,630,308
|
|
|
|
67,725,987
|
|
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
|
3.
|
SEGMENT INFORMATION (CONTINUED)
|
Further analysis of revenue:-
|
|
For the
six months ended June 30, 2017
|
|
|
|
Fishery
|
|
|
|
|
|
Organic Fertilizer
|
|
|
Cattle Farm
|
|
|
|
|
|
|
|
|
|
Development
|
|
|
HU Plantation
|
|
|
and Bread Grass
|
|
|
Development
|
|
|
Corporate and
|
|
|
|
|
|
|
Division (1)
|
|
|
Division (2)
|
|
|
Division (3)
|
|
|
Division (4)
|
|
|
others (6)
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name of entity Sale of goods Capital Award, Inc. (“CA”)
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jiang Men City Heng Sheng Tai Agriculture Development Co., Limited (“JHST”)
|
|
|
-
|
|
|
|
2,078,755
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,078,755
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hunan Shenghua A Power Agriculture Co., Limited (“HSA”)
|
|
|
-
|
|
|
|
-
|
|
|
|
3,723,601
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,723,601
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Qinghai Sanjiang A Power Agriculture Co., Limited (“SJAP”)
|
|
|
-
|
|
|
|
-
|
|
|
|
15,413,529
|
|
|
|
-
|
|
|
|
-
|
|
|
|
15,413,529
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Qinghai Zhong He Meat Products Co., Limited (“QZH”)
|
|
|
-
|
|
|
|
-
|
|
|
|
26,940,376
|
|
|
|
-
|
|
|
|
-
|
|
|
|
26,940,376
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Macau Eiji Company Limited (“MEIJI”)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
15,813,236
|
|
|
|
-
|
|
|
|
15,813,236
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sino Agro Food, Inc. (“SIAF”)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
41,180,831
|
|
|
|
41,180,831
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consulting and service income for development contracts Capital Award, Inc. (“CA”)
|
|
|
13,189,265
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
13,189,265
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commission and management fee Capital Award, Inc. (“CA”)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
$
|
13,189,265
|
|
|
$
|
2,078,755
|
|
|
$
|
46,077,506
|
|
|
$
|
15,813,236
|
|
|
$
|
41,180,831
|
|
|
$
|
118,339,593
|
|
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
|
3.
|
SEGMENT INFORMATION (CONTINUED)
|
Further analysis of cost of goods
sold and cost of services:-
COST OF GOODS SOLD
|
|
For the
three months ended June 30, 2018
|
|
|
|
Fishery
|
|
|
HU
|
|
|
Organic Fertilizer
|
|
|
Cattle Farm
|
|
|
Corporate
|
|
|
|
|
|
|
Development
|
|
|
Plantation
|
|
|
and Bread Grass
|
|
|
Development
|
|
|
and others
|
|
|
|
|
|
|
Division (1)
|
|
|
Division (2)
|
|
|
Division (3)
|
|
|
Division (4)
|
|
|
(5)
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name of entity Sale of goods Capital Award, Inc. (“CA”)
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jiang Men City Heng Sheng Tai Agriculture Development Co., Limited (“JHST”)
|
|
|
|
|
|
|
859,183
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
859,183
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hunan Shenghua A Power Agriculture Co., Limited (“HSA”)
|
|
|
|
|
|
|
|
|
|
|
1,645,595
|
|
|
|
|
|
|
|
|
|
|
|
1,645,595
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Qinghai Sanjiang A Power Agriculture Co., Limited (“SJAP”)
|
|
|
|
|
|
|
|
|
|
|
3,489,352
|
|
|
|
|
|
|
|
|
|
|
|
3,489,352
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Qinghai Zhong He Meat Products Co., Limited (“QZH”)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Macau Eiji Company Limited (“MEIJI”)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,507,928
|
|
|
|
|
|
|
|
5,507,928
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sino Agro Food, Inc. (“SIAF”)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,169,201
|
|
|
|
16,169,201
|
|
|
|
$
|
-
|
|
|
|
859,183
|
|
|
|
5,134,947
|
|
|
|
5,507,928
|
|
|
|
16,169,201
|
|
|
|
27,671,259
|
|
COST OF SERVICES
|
|
For the
three months ended June 30, 2018
|
|
|
|
Fishery
|
|
|
|
|
|
Organic Fertilizer
|
|
|
Cattle Farm
|
|
|
Corporate
|
|
|
|
|
|
|
Development
|
|
|
HU Plantation
|
|
|
and Bread Grass
|
|
|
Development
|
|
|
and others
|
|
|
|
|
|
|
Division (1)
|
|
|
Division (2)
|
|
|
Division (3)
|
|
|
Division (4)
|
|
|
(5)
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name of entity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consulting and service income for development contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Award, Inc. (“CA”)
|
|
|
880,418
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
880,418
|
|
|
|
$
|
880,418
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
880,418
|
|
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
|
3.
|
SEGMENT INFORMATION (CONTINUED)
|
Further analysis of cost of goods
sold and cost of services:-
COST OF GOODS SOLD
|
|
For the
three months ended June 30, 2017
|
|
|
|
Fishery
|
|
|
HU
|
|
|
Organic Fertilizer
|
|
|
Cattle Farm
|
|
|
Corporate
|
|
|
|
|
|
|
Development
|
|
|
Plantation
|
|
|
and Bread Grass
|
|
|
Development
|
|
|
and others
|
|
|
|
|
|
|
Division (1)
|
|
|
Division (2)
|
|
|
Division (3)
|
|
|
Division (4)
|
|
|
(5)
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name of entity Sale of goods Capital Award, Inc. (“CA”)
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jiang Men City Heng Sheng Tai Agriculture Development Co., Limited (“JHST”)
|
|
|
-
|
|
|
|
629,856
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
629,856
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hunan Shenghua A Power Agriculture Co., Limited (“HSA”)
|
|
|
-
|
|
|
|
-
|
|
|
|
766,897
|
|
|
|
-
|
|
|
|
-
|
|
|
|
766,897
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Qinghai Sanjiang A Power Agriculture Co., Limited (“SJAP”)
|
|
|
-
|
|
|
|
-
|
|
|
|
5,001,068
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,001,068
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Qinghai Zhong He Meat Products Co., Limited (“QZH”)
|
|
|
-
|
|
|
|
-
|
|
|
|
12,479,848
|
|
|
|
-
|
|
|
|
-
|
|
|
|
12,479,848
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Macau Eiji Company Limited (“MEIJI”)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6,278,714
|
|
|
|
-
|
|
|
|
6,278,714
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sino Agro Food, Inc. (“SIAF”)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
16,062,446
|
|
|
|
16,062,446
|
|
|
|
$
|
-
|
|
|
$
|
629,856
|
|
|
$
|
18,247,813
|
|
|
$
|
6,278,714
|
|
|
$
|
16,062,446
|
|
|
$
|
41,218,829
|
|
COST OF SERVICES
|
|
For the
three months ended June 30, 2017
|
|
|
|
Fishery
|
|
|
|
|
|
Organic Fertilizer
|
|
|
Cattle Farm
|
|
|
Corporate
|
|
|
|
|
|
|
Development
|
|
|
HU Plantation
|
|
|
and Bread Grass
|
|
|
Development
|
|
|
and others
|
|
|
|
|
|
|
Division (1)
|
|
|
Division (2)
|
|
|
Division (3)
|
|
|
Division (4)
|
|
|
(5)
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name of entity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consulting and service income for development contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Award, Inc. (“CA”)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
|
3.
|
SEGMENT INFORMATION (CONTINUED)
|
Further analysis of cost of goods
sold and cost of services (Continued):-
COST OF GOODS SOLD
|
|
For the
six months ended June 30, 2018
|
|
|
|
Fishery
Development
Division (1)
|
|
|
HU
Plantation
Division (2)
|
|
|
Organic Fertilizer
and Bread Grass
Division (3)
|
|
|
Cattle Farm
Development
Division (4)
|
|
|
Corporate
and others
(5)
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name of entity Sale of goods Capital Award, Inc. (“CA”)
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jiang Men City Heng Sheng Tai Agriculture Development Co., Limited (“JHST”)
|
|
|
|
|
|
|
1,753,905
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,753,905
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hunan Shenghua A Power Agriculture Co., Limited (“HSA “)
|
|
|
|
|
|
|
|
|
|
|
3,259,280
|
|
|
|
|
|
|
|
|
|
|
|
3,259,280
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Qinghai Sanjiang A Power Agriculture Co., Limited (“SJAP “)
|
|
|
|
|
|
|
|
|
|
|
7,625,676
|
|
|
|
|
|
|
|
|
|
|
|
7,625,676
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Qinghai Zhong He Meat Products Co., Limited (“QZH “)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Macau Eiji Company Limited (“MEIJI”)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,036,426
|
|
|
|
|
|
|
|
10,036,426
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sino Agro Food, Inc. (“SIAF”)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,858,992
|
|
|
|
30,858,992
|
|
|
|
$
|
-
|
|
|
|
1,753,905
|
|
|
|
10,884,956
|
|
|
|
10,036,426
|
|
|
|
30,858,992
|
|
|
|
53,534,279
|
|
COST OF SERVICES
|
|
For the
six months ended June 30, 2018
|
|
|
|
Fishery
Development
Division (1)
|
|
|
HU
Plantation
Division (2)
|
|
|
Organic Fertilizer
and Bread Grass
Division (3)
|
|
|
Cattle Farm
Development
Division (4)
|
|
|
Corporate
and others
(5)
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name of entity Consulting and service income for development contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Award, Inc. (“CA”)
|
|
|
2,664,740
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,664,740
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,664,740
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,664,740
|
|
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
|
3.
|
SEGMENT INFORMATION (CONTINUED)
|
Further analysis of cost of goods
sold and cost of services (Continued):-
COST OF GOODS SOLD
|
|
For the
six months ended June 30, 2017
|
|
|
|
Fishery
Development
Division (1)
|
|
|
HU
Plantation
Division (2)
|
|
|
Organic
Fertilizer
and Bread Grass
Division (3)
|
|
|
Cattle Farm
Development
Division (4)
|
|
|
Corporate
and others
(5)
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name of entity Sale of goods Capital Award, Inc. (“CA”)
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jiang Men City Heng Sheng Tai Agriculture Development Co., Limited (“JHST”)
|
|
|
-
|
|
|
|
1,085,357
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,085,357
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hunan Shenghua A Power Agriculture Co., Limited (“HSA “)
|
|
|
-
|
|
|
|
-
|
|
|
|
2,536,965
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,536,965
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Qinghai Sanjiang A Power Agriculture Co., Limited (“SJAP “)
|
|
|
-
|
|
|
|
-
|
|
|
|
10,227,933
|
|
|
|
-
|
|
|
|
-
|
|
|
|
10,227,933
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Qinghai Zhong He Meat Products Co., Limited (“QZH “)
|
|
|
-
|
|
|
|
-
|
|
|
|
24,900,756
|
|
|
|
-
|
|
|
|
-
|
|
|
|
24,900,756
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Macau Eiji Company Limited (“MEIJI”)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
13,262,170
|
|
|
|
-
|
|
|
|
13,262,170
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sino Agro Food, Inc. (“SIAF”)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
36,605,184
|
|
|
|
36,605,184
|
|
|
|
$
|
-
|
|
|
$
|
1,085,357
|
|
|
$
|
37,665,654
|
|
|
$
|
13,262,170
|
|
|
$
|
36,605,184
|
|
|
$
|
88,618,365
|
|
COST OF SERVICES
|
|
For the
six months ended June 30, 2017
|
|
|
|
Fishery
Development
Division (1)
|
|
|
HU
Plantation
Division (2)
|
|
|
Organic Fertilizer
and Bread Grass
Division (3)
|
|
|
Cattle Farm
Development
Division (4)
|
|
|
Corporate
and others
(5)
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name of entity Consulting and service income for development contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Award, Inc. (“CA”)
|
|
|
8,782,892
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
8,782,892
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
8,782,892
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
8,782,892
|
|
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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.
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
|
4.
|
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, HSA and SJAP until December 31, 2018 since they are exempt from
EIT 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 six months ended June 30, 2017 as it is within the cattle
sector. QZH was derecognized as variable interest entity on December 30, 2017.
Belize
CA, CS and CH are international
business companies incorporated in Belize, and are exempt from corporate tax in Belize.
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 three months ended June 30, 2018 and 2017.
Sweden
No Sweden Corporate income tax has
been provided in the consolidated financial statements of SAFS since SAFS incurred a tax loss for the three months ended June 30,
2018 and 2017.
No deferred tax assets and liabilities
are of June 30, 2018 and December 31, 2017 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 ended
June 30, 2018
|
|
|
Three months ended
June 30, 2017
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
SIAF
|
|
$
|
-
|
|
|
$
|
-
|
|
SAFS
|
|
|
-
|
|
|
|
-
|
|
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 six months ended June 30, 2018 and 2017. 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
(UNAUDITED)
|
5.
|
CASH AND CASH EQUIVALENTS
|
|
|
June 30, 2018
|
|
|
December 31, 2017
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
|
|
|
|
|
|
|
|
|
Cash and bank balances
|
|
$
|
605,994
|
|
|
$
|
560,043
|
|
As of June 30, 2018, inventories
are as follows:
|
|
June 30, 2018
|
|
|
December 31, 2017
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
|
|
|
|
|
|
|
Bread grass
|
|
|
437,755
|
|
|
|
976,514
|
|
Beef cattle
|
|
|
9,747,627
|
|
|
|
5,903,442
|
|
Organic fertilizer
|
|
|
12,669,705
|
|
|
|
16,832,390
|
|
Forage for cattle and consumable
|
|
|
7,204,550
|
|
|
|
7,397,910
|
|
Raw materials for bread grass and organic fertilizer
|
|
|
19,896,828
|
|
|
|
19,113,274
|
|
Immature seeds
|
|
|
2,984,775
|
|
|
|
2,405,417
|
|
|
|
$
|
52,941,240
|
|
|
$
|
52,628,947
|
|
|
7.
|
DEPOSITS AND PREPAYMENTS
|
|
|
June 30, 2018
|
|
|
December 31, 2017
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
Deposits for
|
|
|
|
|
|
|
|
|
- purchases of equipment
|
|
$
|
2,765,042
|
|
|
$
|
2,815,774
|
|
- acquisition of land use rights
|
|
|
181,352
|
|
|
|
3,244,567
|
|
- inventories purchases
|
|
|
21,721,995
|
|
|
|
24,282,950
|
|
- construction in progress
|
|
|
5,101,578
|
|
|
|
6,774,380
|
|
- issue of shares as collateral
|
|
|
25,761,658
|
|
|
|
25,427,293
|
|
Shares issued for employee compensation and overseas professional and bond interest
|
|
|
1,138,689
|
|
|
|
702,625
|
|
Others
|
|
|
7,233,707
|
|
|
|
7,212,061
|
|
|
|
$
|
63,904,021
|
|
|
$
|
70,459,650
|
|
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 June 30, 2018 and December 31, 2017.
Aging analysis of accounts receivable
is as follows:
|
|
June 30, 2018
|
|
|
December 31, 2017
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
0 - 30 days
|
|
$
|
3,580,793
|
|
|
$
|
7,973,308
|
|
31 - 90 days
|
|
|
26,555,865
|
|
|
|
18,240,251
|
|
91 - 120 days
|
|
|
8,012,583
|
|
|
|
5,725,069
|
|
over 120 days and less than 1 year
|
|
|
7,606,519
|
|
|
|
21,551,845
|
|
over 1 year
|
|
|
43,289,545
|
|
|
|
29,480,945
|
|
|
|
$
|
89,045,305
|
|
|
$
|
82,971,418
|
|
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
|
|
June 30, 2018
|
|
|
December 31, 2017
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
Advanced to employees
|
|
$
|
1,004,318
|
|
|
$
|
219,186
|
|
Advanced to suppliers
|
|
|
2,033,895
|
|
|
|
3,768,585
|
|
Advanced to customers
|
|
|
13,584,941
|
|
|
|
11,982,331
|
|
Advanced to developers
|
|
|
470,002
|
|
|
|
399,449
|
|
Others
|
|
|
8,946,216
|
|
|
|
4,310,927
|
|
|
|
$
|
26,039,372
|
|
|
$
|
20,680,478
|
|
Advanced to employees, suppliers,
customers and developers are unsecured, interest free and with no fixed terms of repayment.
|
|
June 30, 2018
|
|
|
December 31, 2017
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
|
|
|
|
|
|
|
Plant and machinery
|
|
$
|
5,443,921
|
|
|
$
|
5,501,975
|
|
Structure and leasehold improvements
|
|
|
206,926,056
|
|
|
|
209,378,338
|
|
Mature seeds and herbage cultivation
|
|
|
53,671,290
|
|
|
|
49,685,830
|
|
Furniture and equipment
|
|
|
698,700
|
|
|
|
699,494
|
|
Motor vehicles
|
|
|
608,413
|
|
|
|
614,792
|
|
|
|
|
267,348,380
|
|
|
|
265,880,429
|
|
|
|
|
|
|
|
|
|
|
Less: Accumulated depreciation
|
|
|
(23,923,579
|
)
|
|
|
(19,022,632
|
)
|
Net carrying amount
|
|
$
|
243,424,801
|
|
|
$
|
246,857,797
|
|
Depreciation expense was $2,667,023
and $2,362,429, $5,325,531 and $4,506,239 for the three months ended and the six months ended June 30, 2018 and 2017, respectively.
|
11.
|
CONSTRUCTION IN PROGRESS
|
|
|
June 30, 2018
|
|
|
December 31, 2017
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
Construction in progress
|
|
|
|
|
|
|
|
|
- Rangeland for beef cattle and office building
|
|
|
11,410,770
|
|
|
|
6,178,308
|
|
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
|
|
June 30, 2018
|
|
|
December 31, 2017
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
Cost
|
|
$
|
67,870,609
|
|
|
$
|
65,573,223
|
|
Less: Accumulated amortization
|
|
|
(11,446,547)
|
|
|
|
(10,735,192
|
)
|
Net carrying amount
|
|
$
|
56,424,062
|
|
|
$
|
54,838,031
|
|
|
|
Amount
|
|
|
|
|
|
Balance @1.1.2017
|
|
$
|
62,341,829
|
|
Exchange difference
|
|
|
3,231,394
|
|
Balance @12.31.2017
|
|
$
|
65,573,223
|
|
Addition
|
|
|
3,022,518
|
|
Exchange difference
|
|
|
(
725,132
|
)
|
Balance @6.30.2018
|
|
$
|
67,870,609
|
|
Land use rights are amortized on
the straight-line basis over their respective lease periods. The lease period of agriculture land is 10 to 60 years. Amortization
of land use rights was $418,873, $530,869, $841,453 and $1,005,360 for the three months and the six months ended June 30, 2018
and 2017 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.
|
|
June 30, 2018
|
|
|
December 31, 2017
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
|
|
|
|
|
|
|
Goodwill from acquisition
|
|
$
|
724,940
|
|
|
$
|
724,940
|
|
Less: Accumulated impairment losses
|
|
|
-
|
|
|
|
-
|
|
Net carrying amount
|
|
$
|
724,940
|
|
|
$
|
724,940
|
|
|
14.
|
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 October 1, 2015, the Company took up such assets at $5,473,720.
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 $2,270,000 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.
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
|
14.
|
PROPRIETARY TECHNOLOGIES
(CONTINUED)
|
|
|
June 30, 2018
|
|
|
December 31, 2017
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
|
|
|
|
|
|
|
Cost
|
|
$
|
11,180,413
|
|
|
$
|
11,211,100
|
|
Less: Accumulated amortization
|
|
|
(1,901,202
|
)
|
|
|
(1,622,495
|
)
|
Net carrying amount
|
|
$
|
9,279,211
|
|
|
$
|
9,588,605
|
|
Amortization of proprietary technologies
was $146,670 and $149,356, $293,451 and $295,144 for the three months and the six months ended June 30, 2018 and 2017, respectively.
No impairments of proprietary technologies have been identified for the three months and the six months ended June 30, 2018 and
2017.
|
15.
|
INTERESTS IN UNCONSOLIDATED
EQUITY INVESTEES
|
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 June 30, 2017. 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 December 31, 2016. On October 1, 2016, SIAF took up
all assets and 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 2017, which resulted in equity interest in TRW from 23.89% to
36.60%.
On May 6, 2016, SJAP invested in
30% equity interest in Guangzhou Horan Taita Information Technology Co., Limited (“
HTIT
”), a company incorporated
in P.R.C. for RMB 1,000,000. The investment has been fully impaired on December 31, 2017.
|
|
June 30, 2018
|
|
|
December 31, 2017
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
Investments at cost
|
|
|
|
|
|
|
|
|
- TRW
|
|
$
|
141,999,564
|
|
|
$
|
136,667,593
|
|
Amount due from a consolidated equity investee - TRW
|
|
|
59,312,033
|
|
|
|
56,600,103
|
|
|
|
$
|
201,311,597
|
|
|
$
|
193,267,696
|
|
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
|
16.
|
TEMPORARY DEPOSITS PAID
TO ENTITIES FOR EQUITY INVESTMENTS IN FUTURE SINO JOINT VENTURE COMPANIES
|
Intended
|
|
|
|
|
|
|
|
|
|
|
|
|
unincorporated
|
|
|
Projects
|
|
|
|
|
|
|
|
|
|
Investee
|
|
|
Engaged
|
|
|
|
|
June 30, 2018
|
|
|
December 31, 2017
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
A
|
|
|
Trade center
|
|
|
*
|
|
|
$
|
12,000,000
|
|
|
$
|
12,000,000
|
|
B
|
|
|
Fish Farm 2 GaoQiqiang Aquaculture
|
|
|
*
|
|
|
|
17,403,959
|
|
|
|
17,403,959
|
|
C
|
|
|
Cattle farm 2
|
|
|
*
|
|
|
|
5,491,485
|
|
|
|
5,513,263
|
|
|
|
|
|
|
|
|
|
|
$
|
34,895,444
|
|
|
$
|
34,917,222
|
|
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 June 30, 2018, the percentages of equity stakes of A
(trade and seafood centers), B (fish farm 2 GaoQiqiang Aquaculture Farm) and C (cattle farm 2) are 31%, 23% 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.
|
|
17.
|
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 June 30, 2018, the Company has invested $4,054,421
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
(UNAUDITED)
|
17.
|
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 June 30, 2018, 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 June 30, 2017, 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 for the three months and six months ended June 30, 2017.
The reasons for the QZH qualified
as a VIE are as follows:
|
·
|
Originally, SJAP was sole stockholder of QZH, owned 100% equity interest in QZH and controlled directorship of QZH.
|
|
·
|
On October 25, 2015, both SJAP and new stockholder, Qinghai
Quanwang Investment Management Co., Ltd (“
QQI
”) contributed additional capital of $4,157,682 and $769,941,
respectively. As of result, SJAP decreased its equity interest from 100% to 86% and QQI owned 14% equity interest. In
addition, according to investment agreement between QZH and QQI, (i) QQI only enjoyed interest 6% annually on its capital
contribution and did not enjoy any 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.
|
|
·
|
Consequently, the Company still 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 controlled QZH’s chief financial officer appointment. As a result, the financial statements of QZH were included in the consolidated financial statements of the Company.
|
As of December 30, 2017, QZH was
derecognized as a VIE
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
|
18.
.
|
CONSTRUCTION CONTRACT
|
|
(i)
|
Costs and estimated earnings in excess of billings on uncompleted contracts
|
|
|
June 30, 2018
|
|
|
December 31, 2017
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
Costs
|
|
$
|
6,186,261
|
|
|
$
|
8,208,912
|
|
Estimated earnings
|
|
|
4,777,300
|
|
|
|
6,740,289
|
|
Less: Billings
|
|
|
(10,712,733
|
)
|
|
|
(13,700,014
|
)
|
Costs and estimated earnings in excess of billings on uncompleted
contracts
|
|
$
|
250,828
|
|
|
$
|
1,249,187
|
|
|
(ii)
|
Billings in excess of costs and estimated earnings on uncompleted contracts
|
|
|
June 30, 2018
|
|
|
December 31, 2017
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
Billings
|
|
$
|
40,590,477
|
|
|
$
|
41,543,554
|
|
Less: Costs
|
|
|
(23,404,302
|
)
|
|
|
(23,980,880
|
)
|
Estimated earnings
|
|
|
(11,583,494
|
)
|
|
|
(11,822,609
|
)
|
Billing in excess of costs and estimated earnings on uncompleted
contracts
|
|
$
|
5,602,681
|
|
|
$
|
5,740,065
|
|
|
|
June 30, 2018
|
|
|
December 31, 2017
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
Billings
|
|
$
|
51,303,210
|
|
|
$
|
55,243,568
|
|
Less: Costs
|
|
|
(29,590,563
|
)
|
|
|
(32,189,792
|
)
|
Estimated earnings
|
|
|
(16,360,794
|
)
|
|
|
(18,562,898
|
)
|
Billing in excess of costs and estimated earnings on uncompleted
contracts
|
|
$
|
5,351,853
|
|
|
$
|
4,490,878
|
|
|
|
June 30, 2018
|
|
|
December 31, 2017
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
Due to third parties
|
|
$
|
11,325,613
|
|
|
$
|
11,133,656
|
|
Straight note payable
|
|
|
29,367,999
|
|
|
|
29,367,999
|
|
Promissory notes issued to third parties
|
|
|
10,949,126
|
|
|
|
11,089,779
|
|
Due to local government
|
|
|
90,675
|
|
|
|
91,827
|
|
|
|
$
|
51,733,413
|
|
|
$
|
51,683,261
|
|
|
|
|
|
|
|
|
|
|
Less: Amount classified as non-current liabilities
|
|
|
|
|
|
|
|
|
Promissory notes issued to third parties
|
|
|
(10,949,126
|
)
|
|
|
(11,089,779
|
)
|
Amount classified as current liabilities
|
|
$
|
40,784,287
|
|
|
$
|
40,593,482
|
|
Due to third parties are unsecured,
interest free and have no fixed terms of repayment.
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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 loan
Name of lender
|
|
Interest rate
|
|
|
Term
|
|
June 30, 2018
|
|
|
December 31, 2017
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
China Development Bank
Beijing City, the P.R.C
|
|
|
5.2835
|
%
|
|
November 29, 2017 - November 28, 2018
|
|
$
|
3,022,518
|
|
|
$
|
3,060,913
|
|
China Development Bank
Beijing City, the P.R.C
|
|
|
5.2835
|
%
|
|
December 14, 2017 - December 13, 2018
|
|
$
|
1,511,258
|
|
|
$
|
1,530,455
|
|
Add: current portion of long term
bank loan
|
|
|
|
|
|
|
|
$
|
151,126
|
|
|
$
|
76,522
|
|
|
|
|
|
|
|
|
|
|
4,684,902
|
|
|
|
4,667,890
|
|
Long term bank loan
Name of lender
|
|
Interest rate
|
|
|
Term
|
|
June 30, 2018
|
|
|
December 31, 2017
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
China Development Bank
|
|
|
|
|
|
December 16, 2016 -
|
|
|
|
|
|
|
|
|
Beijing City, the P.R,C.
|
|
|
5.39
|
%
|
|
December 15, 2026
|
|
$
|
6,045,036
|
|
|
$
|
6,121,824
|
|
Less: current portion of long term
bank loan
|
|
|
|
|
|
|
|
$
|
(151,126
|
)
|
|
$
|
(76,522
|
)
|
|
|
|
|
|
|
|
|
|
5,893,910
|
|
|
|
6,045,302
|
|
On November 30, 2017 and December
14, 2017, the Company obtained two 1-year short term loans of RMB20 million (approximately $3.18million) and RMB10 million (approximately
$1.59million) respectively from China Development Bank for the period from November 29, 2017 to November 28, 2018 and December
14, 2017 to December 13, 2018 respectively, bearing fixed interest at 5.2835% per annum. Both loans were guaranteed by Xining City
SME Guarantee Corporation.
On December 16, 2016, the Company
obtained a 10-year long term loan of RMB40million (approximately $6.05million) 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% (12.31.2017: 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 $418,313 as of June 30, 2018 (12.31.2017: 429,982) and a batch of plant, machinery and equipment
with net carrying amount of $5,700,609 (12.31.2017: 5,954,915). According to the loan agreement, 2 partial payments of RMB500,000
each, totaling of RMB1,000,000 (approximately $151,126) were scheduled to be repaid by December 15, 2018 and May 20, 2019 respectively.
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
(UNAUDITED)
|
21.
|
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. As
of October 1, 2016, the Company entered assignment agreement with TRW to take up liabilities of negotiable promissory notes.
|
|
June 30, 2018
|
|
|
December 31, 2017
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
Negotiable promissory notes
|
|
$
|
977,155
|
|
|
$
|
977,155
|
|
Principal amount:
|
|
$722,167 (12.31.2017: $722,167)
|
Interest payable:
|
|
$254,988 (12.31.2017: $254,988)
|
Interest rate:
|
|
2.5% (12.31.2017: 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 and October 12, 2015
|
Repayment date:
|
|
Repaid in full within 283 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
notices 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
(UNAUDITED)
|
22.
|
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 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, (price prior to reversed split) 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 a result, the amount outstanding
under Note 1 was reclassified as other payables – straight note payable of $29,367,999 (see Note 19).
On October 20, 2017, the Company
issued another Convertible Note (the
"Note 2"
) with a principal amount of $4,000,000 due on February 28, 2018.
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 June 30, 2018,
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 a year to December 31, 2018 was signed. All other terms and conditions of the Bond
Subscription Agreement and the Conditions continue in full force and effect.
|
|
June 30, 2018
|
|
|
December 31, 2017
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
|
|
|
|
|
|
|
Convertible note due December 31, 2018
|
|
$
|
3,894,978
|
|
|
$
|
3,894,978
|
|
Less: classified as current liabilities
|
|
|
(3,894,978
|
)
|
|
|
(3,894,978
|
)
|
Non-current liabilities
|
|
$
|
-
|
|
|
$
|
-
|
|
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
annually and adjusted for any change in value. For the year ended December 31, 2017, the Company recognized the amortization of
the discount of approximately $106,297.
The Company estimated the fair
value of the derivative liabilities using the Binomial Option Pricing Model and the following key assumptions during the six months
ended June 30, 2018 and the year ended December 31, 2017
|
|
June 30, 2018
|
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
June 30, 2018 and December 31, 2017.
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
LIABILITIES:
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities as of June 30, 2018
|
|
|
-
|
|
|
|
-
|
|
|
|
2,100
|
|
|
|
2,100
|
|
Derivative liabilities as of December 31, 2017
|
|
|
-
|
|
|
|
-
|
|
|
|
2,100
|
|
|
|
2,100
|
|
The following table represents the
change in the fair value of the derivative liabilities during the six months ended June 30, 2018
Fair value of derivative liabilities as of December 31, 2017
|
|
$
|
2,100
|
|
Change in fair value of derivative liabilities
|
|
|
-
|
|
Fair value of derivative liabilities as of June 30, 2018
|
|
$
|
2,100
|
|
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
(UNAUDITED)
The Group’s share capital
as of June 30, 2018 and December 31, 2017 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 June 30, 2018 and December 31, 2017, respectively.
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
|
23.
|
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 shares of Series B
convertible preferred stock issued and outstanding as of June 30, 2018 and December 31, 2017, 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 June 30, 2018 and December 31, 2017 are 0 shares and grand total issued and outstanding
preferred stock as of June 30, 2018 and December 31, 2017 are 100 shares.
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
|
23.
|
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 December 31, 2014, 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.
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 22,727,272 to 27,000,000 and the amendment was filed on December 28, 2016.
During the year ended December
31, 2017, the Company (i) issued 1,167,502 shares of employees and directors at fair value of $1.00 to $3.45 per share for $1,452,984
for employee compensation; (ii) issued 500,800 shares of common stock valued to professionals at fair value of $1 per share for
$500,800 for service compensation; (iii) issued 4,074,979 shares of common stock ranging from $1.40 to $5.15 amounting to $12,054,045
as collateral to secure trade and loan facilities, and the shares issued by the Company were valued at the trading price of the
stock on the date the shares were issued; and (iv) 892,735 shares of common stock issued for $0 as top up securities for debts
loans.
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 27,000,000 to 50,000,000 and the amendment was filed on August 24, 2017
with an effective date of August 25, 2017.
During the six months ended
June 30, 2018, the Company (i) issued 72,450 shares of common stock valued to employees and directors at fair value of $1.56 per
share for $113,022 for employee compensation; (ii) issued 10,870,167 shares of common stock valued to professionals and contractors
at fair value ranging from $ 0.55 to $1.00 per share for 6,886,045 for service compensation; and the shares issued by the Company
were valued at the trading price of the stock on the date the shares were issued.
The Company has 40,305,492
and 29,362,875 shares of common stock issued and outstanding as of June 30, 2018 and December 31, 2017 respectively.
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
|
24.
|
OBLIGATION UNDER OPERATING
LEASES
|
The Company leases (i) 2,178
square feet of agriculture space used for offices for a monthly rent of $906 in Enping City, Guangdong Province, P.R.C., its lease
expiring on March 31, 2019; and (ii) 5,081 square feet of office space in Guangzhou City, Guangdong Province, P.R.C. for a monthly
rent of $12,197, its lease expiring on July 8, 2018. The lease was renewed on July 9, 2018 for a 2,695 square feet of office space
for a monthly rent of $6,958 expired on July 8, 2020.
Lease expenses were $40,789
and $42,790, $81,547 and $83,779 for the three months ended and the six months ended June 30, 2018 and 2017, respectively.
The future minimum lease payments
as of June 30, 2018, are as follows:
Within 1 year
|
|
$
|
88,240
|
|
2 to 5 years
|
|
|
80,387
|
|
Over 5 years
|
|
|
-
|
|
|
|
$
|
168,627
|
|
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
|
25.
|
STOCK BASED COMPENSATION
|
On June 30, 2017, 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, 2017, the Company issued employees total of 500,800 shares of common stock
valued at fair value of $1per 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, 2017,
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.
During the six months ended June 30, 2018,
the Company (i) issued 72,450 shares of common stock valued to employees and directors at fair value of $1.56 per share for $113,022
for employee compensation; (ii) issued 10,870,167 shares of common stock valued to professionals and contractors at fair value
ranging from $ 0.55 to $1.00 per share for 6,886,045 for service compensation; and the shares issued by the Company were valued
at the trading price of the stock on the date the shares were issued.
The Company calculated stock-based
compensation of $2,489,179 and $4,386,463 and recognized $1,124,377, $1,991,406, $1,350,490 and $3,982,813 for the three months
and the six months ended June 30, 2018 and 2017, respectively. As of June 30, 2018, the deferred compensation balance for staff
was $1,138,689 and the deferred compensation balance of $250,400 and $888,289 were to be amortized over 3 months and 9 months
beginning on July 1, 2018, respectively.
As of June 30, 2018 and December
31, 2017, 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.
On September 19, 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 February 15, 2019.
As of June 30, 2018, the Company
has issued aggregate 4,809,979 (12.31.2017: 4,809,979) common shares as collateral.
|
27.
|
RELATED PARTY TRANSACTIONS
|
In addition to the transactions
and balances as disclosed elsewhere in these consolidated financial statements, during the three months ended June 30, 2018 and
2017, the Company had the following significant related party transactions:-
Name of
related party
|
|
Nature
of transactions
|
|
|
|
Mr. Solomon Yip
Kun Lee,
Chairman
Tri-way Industries
Limited, (“TRW’)
Unconsolidated
equity investee
|
|
Included in due to a director,
due to Mr. Solomon Yip Kun Lee is $0 and $107,074 as of June 30, 2018 and December 31, 2017, respectively.
The amounts are unsecured, interest free and have no fixed terms of repayment.
Included in interest in unconsolidated
equity investee, due from Tri-way Industries Limited is $59,814,070 and $58,572,766 as of June 30, 2018 and December 31,
2017, respectively. The amounts are unsecured, interest free and have no fixed terms of repayment.
Included in accounts receivable,
due from Tri-way Industries Limited is $53,460,749 and $49,065,385 as of June 30, 2018 and December 31, 2017, respectively.
The amounts are unsecured, interest free and have no fixed terms of repayment.
The Company has consulting and
service income from development contracts of $1,061,985 and $0, $3,534,390 and $13,189,265 from Tri-way Industries Limited
for the three months and the six months ended June 30, 2018 and 2017, respectively.
|
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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
June 30, 2018
|
|
|
Three months ended
June 30, 2017
|
|
|
|
|
|
|
|
|
BASIC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator for basic earnings per share attributable to the Company’s common stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income used in computing basic earnings per
share
|
|
$
|
897,667
|
|
|
$
|
382,432
|
|
Basic earnings per share
|
|
$
|
0.02
|
|
|
$
|
0.02
|
|
Basic weighted average shares outstanding
|
|
|
37,573,999
|
|
|
|
22,995,676
|
|
|
|
Three months ended
June 30, 2018
|
|
|
Three
months ended
June 30, 2017
|
|
|
|
|
|
|
|
|
DILUTED
|
|
|
|
|
|
|
|
|
Numerator for basic earnings per share attributable
to the Company’s common stockholders:
|
|
|
|
|
|
|
|
|
Net income used in computing
basic earnings per share
|
|
$
|
897,667
|
|
|
$
|
382,432
|
|
Convertible note
interest
|
|
|
-
|
|
|
|
361,960
|
|
Net income used
in computing diluted earnings per share
|
|
$
|
897,667
|
|
|
$
|
744,392
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings
per share
|
|
$
|
0.02
|
|
|
$
|
0.03
|
|
|
|
|
|
|
|
|
Basic weighted average shares outstanding
|
|
|
37,573,999
|
|
|
|
22,995,676
|
|
|
|
|
|
|
|
|
|
|
Add:
|
|
|
|
|
|
|
|
|
weight average of common stock convertible
from convertible note payables
|
|
|
-
|
|
|
|
2,207,861
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted average shares outstanding
|
|
|
37,573,999
|
|
|
|
25,203,537
|
|
For the three months ended June
30, 2017, full dilution effect of convertible note of $22,038,798 was taken into account for calculation of the diluted earnings
per share because convertible note holder can exercise the right to exercise to convert to common stock by giving 1 month notice
after October 1, 2015 under terms of convertible note agreement.
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
|
28.
|
EARNINGS PER SHARE (CONTINUED)
|
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:
|
|
Six
months ended
June 30, 2018
|
|
|
Six
months ended
June 30, 2017
|
|
|
|
|
|
|
|
|
BASIC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator for basic earnings per share attributable
to the Company’s common stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income used in computing basic earnings per share
|
|
$
|
5,970,386
|
|
|
$
|
9,073,865
|
|
Basic earnings
per share
|
|
$
|
0.17
|
|
|
$
|
0.39
|
|
Basic weighted
average shares outstanding
|
|
|
35,749,331
|
|
|
|
23,365,503
|
|
|
|
Six
months ended
June 30, 2018
|
|
|
Six
months ended
June 30, 2017
|
|
|
|
|
|
|
|
|
DILUTED
|
|
|
|
|
|
|
|
|
Numerator for basic earnings per share attributable
to the Company’s common stockholders:
|
|
|
|
|
|
|
|
|
Net income used in computing
basic earnings per share
|
|
$
|
5,970,386
|
|
|
$
|
9,073,865
|
|
Convertible note
interest
|
|
|
-
|
|
|
|
723,921
|
|
Net income used
in computing diluted earnings per share
|
|
$
|
5,970,386
|
|
|
$
|
9,797,786
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings
per share
|
|
$
|
0.17
|
|
|
$
|
0.38
|
|
|
|
|
|
|
|
|
|
|
Basic weighted average shares outstanding
|
|
|
35,749,331
|
|
|
|
23,365,503
|
|
|
|
|
|
|
|
|
|
|
Add:
|
|
|
|
|
|
|
|
|
weight average of common stock convertible
from convertible note payables
|
|
|
-
|
|
|
|
2,189,580
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted average shares outstanding
|
|
|
35,749,331
|
|
|
|
25,555,083
|
|
For the six months ended June
30, 2017, full dilution effect of convertible note of $22,038,798 was taken into account for calculation of the diluted earnings
per share because convertible note holder can exercise the right to exercise to convert to common stock by giving 1 month notice
after October 1, 2015 under terms of convertible note agreement.
A (1) Income Statements (Unaudited)
In $
|
|
Three months ended
|
|
|
Three months ended
|
|
|
Difference
|
|
|
Note
|
|
|
|
June 30,2018
|
|
|
June 30,2017
|
|
|
|
|
|
|
|
Continuing operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
33,994,723
|
|
|
|
47,726,978
|
|
|
|
(13,732,255
|
)
|
|
|
1
|
|
Consulting, services, commission and management fee
|
|
|
1,061,986
|
|
|
|
|
|
|
|
1,061,986
|
|
|
|
|
|
Sale of goods
|
|
|
32,932,737
|
|
|
|
47,726,978
|
|
|
|
(14,794,241
|
)
|
|
|
|
|
Cost of goods sold and services
|
|
|
27,671,259
|
|
|
|
41,218,829
|
|
|
|
(13,547,570
|
)
|
|
|
2
|
|
Consulting, services, commission and management fee
|
|
|
880,418
|
|
|
|
|
|
|
|
880,418
|
|
|
|
|
|
Sale of goods
|
|
|
27,671,259
|
|
|
|
41,218,829
|
|
|
|
(13,547,570
|
)
|
|
|
|
|
Gross Profit
|
|
|
5,443,046
|
|
|
|
6,508,149
|
|
|
|
(1,065,103
|
)
|
|
|
3
|
|
Consulting, services, commission and management fee
|
|
|
181,568
|
|
|
|
|
|
|
|
181,568
|
|
|
|
|
|
Sale of goods
|
|
|
5,261,478
|
|
|
|
6,508,149
|
|
|
|
(1,246,671
|
)
|
|
|
|
|
Other income (expenses)
|
|
|
(1,814,969
|
)
|
|
|
881,022
|
|
|
|
(2,695,991
|
)
|
|
|
|
|
General and administrative expenses
|
|
|
(4,133,054
|
)
|
|
|
(5,849,346
|
)
|
|
|
1,716,292
|
|
|
|
4
|
|
Net income (expenses) before income tax
|
|
|
(504,977
|
)
|
|
|
1,539,825
|
|
|
|
(2,044,802
|
)
|
|
|
|
|
Net Income from continuing operations
|
|
|
(504,977
|
)
|
|
|
1,539,825
|
|
|
|
(2,044,802
|
)
|
|
|
|
|
Less:Net( income) loss atributable to Non - controlling interest
|
|
|
1,402,644
|
|
|
|
(1,157,393
|
)
|
|
|
2,560,037
|
|
|
|
5
|
|
Net income from continuing operations attributale to SIAF Inc. and subsidiaries
|
|
|
897,667
|
|
|
|
382,432
|
|
|
|
515,235
|
|
|
|
|
|
Other comprehensive income (loss)
Foreign currency translation gain (loss)
|
|
|
(20,442,164
|
)
|
|
|
6,848,801
|
|
|
|
(13,593,363
|
)
|
|
|
|
|
Comprehensive income
|
|
|
(19,544,497
|
)
|
|
|
7,231,233
|
|
|
|
(12,313,264
|
)
|
|
|
|
|
Less: other comprehensive (income) loss
attributed to the non-controling interest
|
|
|
10,403,204
|
|
|
|
(862,524
|
)
|
|
|
9,540,680
|
|
|
|
|
|
Comprehensive income attributed to Sino Agro Food, Inc and subsidiaries
|
|
|
(9,141,293
|
)
|
|
|
6,368,709
|
|
|
|
(2,772,584
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Basic
|
|
|
37,573,999
|
|
|
|
22,995,676
|
|
|
|
14,578,323
|
|
|
|
|
|
- Diluted
|
|
|
37,573,999
|
|
|
|
25,203,537
|
|
|
|
12,370,462
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share attributable to Sino Agro Food, Inc. and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6
|
|
subsidiaries common stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
0.02
|
|
|
|
0.02
|
|
|
|
-
|
|
|
|
|
|
Diluted
|
|
|
0.02
|
|
|
|
0.03
|
|
|
|
(0.01
|
)
|
|
|
6.a.
|
|
Note (1, 2 & 3) Sales, cost of sales and gross
profit information and analysis:
|
l
|
The Company’s revenues were generated from (1)
Sale of Goods and (2) Consulting and Services provided in project and business developments covering engineering, construction,
supervision, training, management and technology etc.
|
The table below shows the segmental sales,
gross profit and corresponding cost of sales for the three months ended June 30, 2018 (Q2 2018) compared to the three months ended
June 30, 2017 (Q2 2017).
In US$
|
|
Sales of goods
|
|
|
Cost of Goods sold
|
|
|
Sales of Goods' Gross profit
|
|
|
|
2018Q2
|
|
|
2017Q2
|
|
|
2018Q2
|
|
|
2017Q2
|
|
|
2018Q2
|
|
|
2017Q2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SJAP
|
|
Sales of live cattle
|
|
|
1,492,775
|
|
|
|
2,496,820
|
|
|
|
1,230,393
|
|
|
|
2,378,858
|
|
|
|
262,382
|
|
|
|
117,962
|
|
|
|
Sales of feedstock
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
Bulk Livestock feed
|
|
|
491,022
|
|
|
|
1,196,225
|
|
|
|
225,288
|
|
|
|
532,341
|
|
|
|
265,735
|
|
|
|
663,884
|
|
|
|
Concentrate livestock feed
|
|
|
2,165,423
|
|
|
|
2,985,856
|
|
|
|
1,192,662
|
|
|
|
1,674,917
|
|
|
|
972,761
|
|
|
|
1,310,939
|
|
|
|
Sales of fertilizer
|
|
|
975,592
|
|
|
|
629,652
|
|
|
|
841,009
|
|
|
|
414,952
|
|
|
|
134,583
|
|
|
|
214,700
|
|
|
|
SJAP Total
|
|
|
5,124,813
|
|
|
|
7,308,554
|
|
|
|
3,489,352
|
|
|
|
5,001,068
|
|
|
|
1,635,461
|
|
|
|
2,307,486
|
|
|
|
* QZH's (Slaughter & Deboning operation)
|
|
|
|
|
|
|
125,660
|
|
|
|
|
|
|
|
53,780
|
|
|
|
-
|
|
|
|
71,880
|
|
|
|
** QZH's (Deboning operation)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
on cattle & Lamb locally supplied
|
|
|
|
|
|
|
919,142
|
|
|
|
|
|
|
|
837,932
|
|
|
|
-
|
|
|
|
81,210
|
|
|
|
on imported beef and mutton
|
|
|
|
|
|
|
12,187,045
|
|
|
|
|
|
|
|
11,588,136
|
|
|
|
-
|
|
|
|
598,909
|
|
|
|
Sales of live cattle
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
QZH Total
|
|
|
|
|
|
|
13,231,847
|
|
|
|
|
|
|
|
12,479,848
|
|
|
|
-
|
|
|
|
751,999
|
|
HSA
|
|
Sales of Organic fertilizer
|
|
|
927,067
|
|
|
|
959,598
|
|
|
|
766,897
|
|
|
|
766,897
|
|
|
|
160,170
|
|
|
|
192,701
|
|
|
|
Sales of Organic Mixed Fertilizer
|
|
|
1,572,423
|
|
|
|
-
|
|
|
|
878,698
|
|
|
|
-
|
|
|
|
693,725
|
|
|
|
-
|
|
|
|
HSA Total
|
|
|
2,499,490
|
|
|
|
959,598
|
|
|
|
1,645,595
|
|
|
|
766,897
|
|
|
|
853,895
|
|
|
|
192,701
|
|
|
|
SJAP's & HS.A./Organic fertilizer total
|
|
|
7,624,303
|
|
|
|
21,499,999
|
|
|
|
5,134,947
|
|
|
|
18,247,813
|
|
|
|
2,489,356
|
|
|
|
3,252,186
|
|
JHST
|
|
Sales of Fresh HU Flowers
|
|
|
-
|
|
|
|
11,134
|
|
|
|
|
|
|
|
9,552.00
|
|
|
|
-
|
|
|
|
1,582
|
|
|
|
Sales of Dried HU Flowers
|
|
|
132,014
|
|
|
|
312,518
|
|
|
|
122,881
|
|
|
|
290,329
|
|
|
|
9,133
|
|
|
|
22,189
|
|
|
|
Sales of Dried Immortal vegetables
|
|
|
62,706
|
|
|
|
|
|
|
|
46,637
|
|
|
|
-
|
|
|
|
16,068
|
|
|
|
-
|
|
|
|
Sales of Vegetable products
|
|
|
849,525
|
|
|
|
431,928
|
|
|
|
689,665
|
|
|
|
329,975
|
|
|
|
159,860
|
|
|
|
101,953
|
|
|
|
JHST/Plantation Total
|
|
|
1,044,245
|
|
|
|
755,579
|
|
|
|
859,183
|
|
|
|
629,856
|
|
|
|
185,062
|
|
|
|
125,723
|
|
MEIJI
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
Sale of Live cattle (Aromatic)
|
|
|
6,073,838
|
|
|
|
7,401,149
|
|
|
|
5,507,928
|
|
|
|
6,278,714
|
|
|
|
565,910
|
|
|
|
1,122,435
|
|
|
|
MEIJI / Cattle farm Total
|
|
|
6,073,838
|
|
|
|
7,401,149
|
|
|
|
5,507,928
|
|
|
|
6,278,714
|
|
|
|
565,910
|
|
|
|
1,122,435
|
|
SIAF
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
Sales of goods through trading/import/export activities
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
on seafood
|
|
|
9,525,821
|
|
|
|
7,487,629
|
|
|
|
8,467,396
|
|
|
|
6,655,671
|
|
|
|
1,058,425
|
|
|
|
831,958
|
|
|
|
on imported beef and mutton
|
|
|
8,664,530
|
|
|
|
10,582,622
|
|
|
|
7,701,805
|
|
|
|
9,406,775
|
|
|
|
962,725
|
|
|
|
1,175,847
|
|
|
|
SIAF/ Others & Corporate total
|
|
|
18,190,351
|
|
|
|
18,070,251
|
|
|
|
16,169,201
|
|
|
|
16,062,446
|
|
|
|
2,021,150
|
|
|
|
2,007,805
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Group Total
|
|
|
32,932,737
|
|
|
|
47,726,978
|
|
|
|
27,671,259
|
|
|
|
41,218,829
|
|
|
|
5,261,478
|
|
|
|
6,508,149
|
|
Increases of Q2 2018 to Q2 2017 in $
|
|
|
-14,794,241
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-1,246,671
|
|
|
|
|
|
Increases of Q2 2018 to Q2 2017 in %
|
|
|
-31
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-19
|
%
|
|
|
|
|
Overall comparison of Q2 2018 to Q2
201
7
The Company’s revenues generated from
the sale of goods was $33,994,723 for the quarterly period ended June 30, 2018 compared to $47,726,978 for the same period ended
June 30, 2017 representing a decrease of 31% or $14,794,241.
The Company’s cost of goods sold was
$27,671,259 for the quarterly period ended June 30, 2018 compared to $41,218,829 for the same period ended June 30, 2017.
Gross profits of the Company generated from
goods sold was $5,261,478 for the quarterly period ended June 30, 2018 compared to $6,508,149 for the same period ended June 30,
2017, representing a decrease of 19% or $1,246,671.
The overall poorer performance was primarily
due to the decrease of sales of SJAP in most segments and the discontinued operation of QZH, which was not sufficiently offset
by the better performing segments in SJAP’s sale of fertilizer, HSA’s sale of fertilizer, JHST’s sale of vegetable
products, and the Corporate division’s import of seafood, as reflected in the above table.
Details of each segment are being described below:
l
1.
(i) Beef and Organic Fertilizer Division refers to operation of SJAP and QZH
In US$
|
|
Sales of goods
|
|
|
Cost of Goods sold
|
|
|
Sales of Goods' Gross profit
|
|
|
|
|
|
2018Q2
|
|
|
2017Q2
|
|
|
2018Q2
|
|
|
2017Q2
|
|
|
2018Q2
|
|
|
2017Q2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SJAP
|
|
Sales of live cattle
|
|
|
1,492,775
|
|
|
|
2,496,820
|
|
|
|
1,230,393
|
|
|
|
2,378,858
|
|
|
|
262,382
|
|
|
|
117,962
|
|
|
|
% of increase / (decrease)
|
|
|
-40
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
122
|
%
|
|
|
|
|
|
|
Increase / (Decrease) in $
|
|
|
(1,004,045
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
144,420
|
|
|
|
|
|
|
|
Sales of feedstock
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
Bulk Livestock feed
|
|
|
491,022
|
|
|
|
1,196,225
|
|
|
|
225,288
|
|
|
|
532,341
|
|
|
|
265,735
|
|
|
|
663,884
|
|
|
|
% of increase / (decrease)
|
|
|
-59
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-60
|
%
|
|
|
|
|
|
|
Increase / (Decrease) in $
|
|
|
-705,203
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-398,150
|
|
|
|
|
|
|
|
Concentrate livestock feed
|
|
|
2,165,423
|
|
|
|
2,985,856
|
|
|
|
1,192,662
|
|
|
|
1,674,917
|
|
|
|
972,761
|
|
|
|
1,310,939
|
|
|
|
% of increase / (decrease)
|
|
|
-27
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-26
|
%
|
|
|
|
|
|
|
Increase / (Decrease) in $
|
|
|
(820,433
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(338,178
|
)
|
|
|
|
|
|
|
Sales of fertilizer
|
|
|
975,592
|
|
|
|
629,652
|
|
|
|
841,009
|
|
|
|
414,952
|
|
|
|
134,583
|
|
|
|
214,700
|
|
|
|
% of increase / (decrease)
|
|
|
55
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-37
|
%
|
|
|
|
|
|
|
Increase / (Decrease) in $
|
|
|
345,940
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(80,117
|
)
|
|
|
|
|
|
|
SJAP Total
|
|
|
5,124,813
|
|
|
|
7,308,554
|
|
|
|
3,489,352
|
|
|
|
5,001,068
|
|
|
|
1,635,461
|
|
|
|
2,307,486
|
|
|
|
* QZH's (Slaughter & Deboning operation)
|
|
|
|
|
|
|
125,660
|
|
|
|
|
|
|
|
53,780
|
|
|
|
-
|
|
|
|
71,880
|
|
|
|
** QZH's (Deboning operation)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
on cattle & Lamb locally supplied
|
|
|
|
|
|
|
919,142
|
|
|
|
|
|
|
|
837,932
|
|
|
|
-
|
|
|
|
81,210
|
|
|
|
on imported beef and mutton
|
|
|
|
|
|
|
12,187,045
|
|
|
|
|
|
|
|
11,588,136
|
|
|
|
-
|
|
|
|
598,909
|
|
|
|
Sales of live cattle
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
QZH Total
|
|
|
|
|
|
|
13,231,847
|
|
|
|
|
|
|
|
12,479,848
|
|
|
|
-
|
|
|
|
751,999
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SJAP and QZH total
|
|
|
5,124,813
|
|
|
|
20,540,401
|
|
|
|
3,489,352
|
|
|
|
17,480,916
|
|
|
|
1,635,461
|
|
|
|
3,059,485
|
|
|
|
% of increase
|
|
|
-75
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-47
|
%
|
|
|
|
|
|
|
Decrease in $
|
|
|
(15,415,588
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,424,024
|
)
|
|
|
|
|
As illustrated in the Table above, when comparing
Q2 2018 to Q2 2017, the losses in revenue (negative variance of $15 million, or -75%) and gross profit (negative variance of 1.42
million, or -47%) was primarily due to the decreased sales of live cattle (-$1,004,045 or -40%), Feed stock (-$820,433 or -27%)
and the discontinued operation of QZH (-$13,231,847 or -100%).
After the reorganization of SJAP’s
segmental operations (i.e., derecognition of QZH in late December 2017), its current segmented operations during this quarter
shows that its operations are self-sustainable having maintained an operating profit of RMB3.32 million (equivalent to US$0.51
million) and end cash and cash equivalent of RMB 1.9 million (equivalent to US$0.29 million) as recorded in SJAP’s stand-alone
financial report. Even though Q2 2018’s situation is poor compared to the Company’s performance prior to fiscal year
2016, the fact that SJAP is sustainable after suffering its heavy loss in FY 2017 reflects a stable environment in the interim
while management (in concert with local government officials) searches and develops a revitalization plan for SJAP’s profitable
/viable future.
The table below shows the itemized sales
of goods and related cost of sales in quantity and unit price for the quarterly period ended June 30, 2018 compared to the same
period ended June 30, 2017 of the beef and organic fertilizer divisions.
|
|
Description of items
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cattle Operation
|
|
|
|
|
2018Q2
|
|
|
2017Q2
|
|
|
Difference
|
|
|
|
|
SJAP
|
|
Production and Sales of live cattle
|
|
|
Heads
|
|
|
|
858
|
|
|
|
1,019
|
|
|
|
(161
|
)
|
|
|
A.4.1
|
|
|
|
Average Unit sales price
|
|
|
US$/head
|
|
|
|
1,740
|
|
|
|
2,450
|
|
|
|
(710
|
)
|
|
|
|
|
|
|
Unit cost prices
|
|
|
US$/head
|
|
|
|
1,434
|
|
|
|
2,335
|
|
|
|
(901
|
)
|
|
|
|
|
|
|
Production and sales of feedstock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bulk Livestock feed
|
|
|
MT
|
|
|
|
2,668
|
|
|
|
6,767
|
|
|
|
(4,099
|
)
|
|
|
A.4.2
|
|
|
|
Average Unit sales price
|
|
|
US$/MT
|
|
|
|
184
|
|
|
|
177
|
|
|
|
7
|
|
|
|
|
|
|
|
Unit cost prices
|
|
|
US$/MT
|
|
|
|
84
|
|
|
|
79
|
|
|
|
5
|
|
|
|
|
|
|
|
Concentrated livestock feed
|
|
|
MT
|
|
|
|
4,626
|
|
|
|
6,790
|
|
|
|
(2,164
|
)
|
|
|
A.4.3
|
|
|
|
Average Unit sales price
|
|
|
US$/MT
|
|
|
|
468
|
|
|
|
440
|
|
|
|
28
|
|
|
|
|
|
|
|
Unit cost prices
|
|
|
US$/MT
|
|
|
|
258
|
|
|
|
247
|
|
|
|
11
|
|
|
|
|
|
|
|
Production and sales of fertilizer
|
|
|
MT
|
|
|
|
7,790
|
|
|
|
3,351
|
|
|
|
4,439
|
|
|
|
A.4.4
|
|
|
|
Average Unit sales price
|
|
|
US$/MT
|
|
|
|
125
|
|
|
|
188
|
|
|
|
(63
|
)
|
|
|
|
|
|
|
Unit cost prices
|
|
|
US$/MT
|
|
|
|
108
|
|
|
|
124
|
|
|
|
(16
|
)
|
|
|
|
|
QZH
|
|
(Slaughter & De-boning operation)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Slaughter operation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Slaughter of cattle
|
|
|
Heads
|
|
|
|
|
|
|
|
328
|
|
|
|
|
|
|
|
A.4.5
|
|
|
|
Service fee
|
|
|
US$/Head
|
|
|
|
|
|
|
|
14
|
|
|
|
|
|
|
|
|
|
|
|
Sales of associated products
|
|
|
Pieces
|
|
|
|
|
|
|
|
328
|
|
|
|
|
|
|
|
|
|
|
|
Average Unit sales price
|
|
|
US$/Piece
|
|
|
|
|
|
|
|
369
|
|
|
|
|
|
|
|
|
|
|
|
Unit cost prices
|
|
|
US$/Piece
|
|
|
|
|
|
|
|
164
|
|
|
|
|
|
|
|
|
|
|
|
De-boning & Packaging activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A. 4.6.
|
|
|
|
From Cattle supplied locally
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
De-boned Meats
|
|
|
MT
|
|
|
|
|
|
|
|
125
|
|
|
|
|
|
|
|
|
|
|
|
Average Unit sales price
|
|
|
US$/MT
|
|
|
|
|
|
|
|
7,327
|
|
|
|
|
|
|
|
|
|
|
|
Unit cost prices
|
|
|
US$/MT
|
|
|
|
|
|
|
|
6,680
|
|
|
|
|
|
|
|
|
|
|
|
From imported beef
|
|
|
MT
|
|
|
|
|
|
|
|
1,655
|
|
|
|
|
|
|
|
|
|
|
|
Average Unit sales price
|
|
|
US$/MT
|
|
|
|
|
|
|
|
7,364
|
|
|
|
|
|
|
|
|
|
|
|
Unit cost prices
|
|
|
US$/MT
|
|
|
|
|
|
|
|
7,002
|
|
|
|
|
|
|
|
|
|
|
|
From imported lamb
|
|
|
MT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average of sales price
|
|
|
US$/MT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average of cost prices
|
|
|
US$/MT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Production and Sales of live cattle
|
|
|
Heads
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Unit sales price
|
|
|
US$/head
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unit cost prices
|
|
|
US$/head
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The live cattle prices have not improved during
the quarter, thus the lower unit price / head was primarily due to smaller sized cattle being sold and the overall situation of
the local live cattle industry remaining depressed that also affected the sales of SJAP’s livestock feed, enhancing higher
inventories with less quantity of sales.
The decrease in the sales of bulk livestock
feed of 4,099 MT represents sales going from 6,767 MT in Q2 2017 to 2,668 MT in Q2 2018, while at the same time a decrease of 2,164
MT in concentrated feed reflected going from 6,790 MT in Q2 2017 to 4,624 MT in Q2 2018, again for the same reasons as mentioned,
above.
However the sales of fertilizer increased during
the quarter from Q2 2017’s 3,351 MT to Q2 2018’s 7,790 MT reflecting district farmers seeking other agricultural alternatives
by planting other crops, which helped in increasing sale quantities of SJAP’s fertilizer. In turn, it had been necessary
to reduce the fertilizer sale price to help induce local farmers (i.e., including new customers) to help make up the difference
in our sales volume that primarily had been dependent on our contracted cooperative farmers, in the past.
1. (ii). The operations of HSA in manufacturing
and sales of organic fertilizer itemizing unit sales, costs and quantity of sales:
In US$
|
|
Sales of goods
|
|
|
Cost of good sold
|
|
|
Gross Profit
|
|
|
|
|
|
2018Q2
|
|
|
2017Q2
|
|
|
2018Q2
|
|
|
2017Q2
|
|
|
2018Q2
|
|
|
2017Q2
|
|
HS.A
|
|
Sales of Organic fertilizer
|
|
|
927,067
|
|
|
|
959,598
|
|
|
|
766,897
|
|
|
|
766,897
|
|
|
|
160,170
|
|
|
|
192,701
|
|
|
|
Sales of Organic Mixed Fertilizer
|
|
|
1,572,423
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
693,725
|
|
|
|
|
|
|
|
HS.A Total
|
|
|
2,499,490
|
|
|
|
959,598
|
|
|
|
766,897
|
|
|
|
766,897
|
|
|
|
853,895
|
|
|
|
192,701
|
|
|
|
% of increase or decrease (-)
|
|
|
160
|
%
|
|
|
|
|
|
|
-48
|
%
|
|
|
|
|
|
|
343
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018Q2
|
|
|
|
2017Q2
|
|
|
|
difference
|
|
|
|
|
|
HSA
|
|
Fertilizer and Cattle operation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
Organic Fertilizer
|
|
|
|
|
|
|
MT
|
|
|
|
3,717
|
|
|
|
3,913
|
|
|
|
-196
|
|
|
|
|
|
|
|
% of increase or decrease (-)
|
|
|
|
|
|
|
|
|
|
|
-5.01
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Unit sales price
|
|
|
|
|
|
|
US$/MT
|
|
|
|
249
|
|
|
|
239
|
|
|
|
10
|
|
|
|
|
|
|
|
Unit cost prices
|
|
|
|
|
|
|
US$/MT
|
|
|
|
202
|
|
|
|
193
|
|
|
|
9
|
|
|
|
|
|
|
|
Organic Mixed Fertilizer
|
|
|
|
|
|
|
MT
|
|
|
|
3,690
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Unit sales price
|
|
|
|
|
|
|
US$/MT
|
|
|
|
426
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unit cost prices
|
|
|
|
|
|
|
US$/MT
|
|
|
|
238
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retailing packed fertilizer (For super market sales)
|
|
|
|
|
|
|
MT
|
|
|
|
|
|
|
|
38
|
|
|
|
|
|
|
|
|
|
|
|
Average Unit sales price
|
|
|
|
|
|
|
US$/MT
|
|
|
|
|
|
|
|
678
|
|
|
|
|
|
|
|
|
|
|
|
Unit cost prices
|
|
|
|
|
|
|
US$/MT
|
|
|
|
|
|
|
|
348
|
|
|
|
|
|
|
|
|
|
During Q2 2018, HSA’s 2
nd
production plant started production having sold 3,690 MT of Organic Mixed Fertilizer for $1.57 million (or 100% increase) compared
to Q2 2017’s zero quantity of sales in organic mixed fertilizer due to the retrofitting of this production plant. As such,
HSA will improve its profit from here onward with the operation of two production plants.
At the same time, the delay in its cattle operation
is due to both the Company’s restriction placed on what’s made available for capital expenditures as well as the lack
of progress made by the Local Government with its industrial development plan of the LimLi district, where HSA owns over 250 Mu
of industrial zoned land that remains very limited at its appraised value. In the interim, HSA is negotiating with potential third
parties with synergistic operations on leasing out some of its existing assets and properties in an effort to gain some non-operational
profits on its holdings. HSA is expecting closing on some of the leasing contracts within Q3 2018.
Plantation Division
refers to
the operations of JHST. JHST is engaged in the HU Plantation business where dragon fruit flowers (dried and fresh), cash vegetable
crops and immortal vegetables are sold to wholesale and retail markets.
In
US$
|
Sales
of goods
|
|
Cost
of Goods sold
|
|
Sales
of Goods' Gross profit
|
|
|
|
|
2018Q2
|
|
|
2017Q2
|
|
|
2018Q2
|
|
|
2017Q2
|
|
|
2018Q2
|
|
|
2017Q2
|
|
JHST
|
|
Sales of
Fresh HU Flowers
|
|
|
|
|
|
|
11,134
|
|
|
|
|
|
|
|
9,552
|
|
|
|
|
|
|
|
1,582
|
|
|
|
Sales of Dried HU Flowers
|
|
|
132,014
|
|
|
|
312,518
|
|
|
|
122,881
|
|
|
|
290,329
|
|
|
|
9,133
|
|
|
|
22,189
|
|
|
|
Sales of Dried Immortal
vegetables
|
|
|
62,706
|
|
|
|
|
|
|
|
46,637
|
|
|
|
-
|
|
|
|
16,069
|
|
|
|
-
|
|
|
|
Sales
of Other Value added products
|
|
|
849,525
|
|
|
|
431,927
|
|
|
|
689,665
|
|
|
|
329,975
|
|
|
|
159,860
|
|
|
|
101,952
|
|
|
|
JHST/Plantation
Total
|
|
|
1,044,245
|
|
|
|
755,579
|
|
|
|
859,183
|
|
|
|
629,856
|
|
|
|
185,062
|
|
|
|
125,723
|
|
|
|
Increases
in $
|
|
|
288,666
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
59,339
|
|
|
|
|
|
|
|
%
of increases
|
|
|
38
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
47
|
%
|
|
|
|
|
|
|
Description
of items
|
|
|
|
|
|
|
|
|
|
|
2018Q2
|
|
|
|
2017Q2
|
|
|
|
Differences
|
|
|
|
|
|
|
|
Fresh
HU Flowers
|
|
|
|
|
|
|
Pieces
|
|
|
|
|
|
|
|
123,785
|
|
|
|
|
|
|
|
|
|
|
|
Average Unit sales price
|
|
|
|
|
|
|
US$/piece
|
|
|
|
|
|
|
|
0.09
|
|
|
|
|
|
|
|
|
|
|
|
Unit cost prices
|
|
|
|
|
|
|
US$/piece
|
|
|
|
|
|
|
|
0.08
|
|
|
|
|
|
|
|
|
|
|
|
Dried
HU Flowers
|
|
|
|
|
|
|
MT
|
|
|
|
26
|
|
|
|
53
|
|
|
|
(27
|
)
|
|
|
|
|
|
|
Average Unit sales price
|
|
|
|
|
|
|
US$/MT
|
|
|
|
5,121
|
|
|
|
5,897
|
|
|
|
(776
|
)
|
|
|
|
|
|
|
Unit cost prices
|
|
|
|
|
|
|
US$/MT
|
|
|
|
4,767
|
|
|
|
5,478
|
|
|
|
(711
|
)
|
|
|
|
|
|
|
Dried
Immortal vegetables
|
|
|
|
|
|
|
MT
|
|
|
|
1
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
Average Unit sales price
|
|
|
|
|
|
|
US$/MT
|
|
|
|
62,706
|
|
|
|
|
|
|
|
62,706
|
|
|
|
|
|
|
|
Unit cost prices
|
|
|
|
|
|
|
US$/MT
|
|
|
|
46,637
|
|
|
|
|
|
|
|
46,637
|
|
|
|
|
|
|
|
Vegetable
products
|
|
|
|
|
|
|
MT
|
|
|
|
768.0
|
|
|
|
686
|
|
|
|
82
|
|
|
|
|
|
|
|
Average Unit sales price
|
|
|
|
|
|
|
US$/MT
|
|
|
|
1,106
|
|
|
|
630
|
|
|
|
476
|
|
|
|
|
|
|
|
Unit cost prices
|
|
|
|
|
|
|
US$/MT
|
|
|
|
898
|
|
|
|
481
|
|
|
|
417
|
|
|
|
|
|
Dried flower sales volume dropped 27
MT from Q2 2017’s 53MT to Q2 2018’s 26 MT with sales revenue of dried flowers correspondingly decreasing by 58% (or
$180,504) from Q2 2017’s $312,518 to Q2 2018’s $132,014. However, sales volume of fresh vegetables increased by 82
MT at much better unit prices of $1,106 / MT versus Q2 2017’s $630 / MT, helping to enhance sales by $417,598 (or +97%)
from Q2 2017’s $431,927 to Q2 2018’s $849,525. The cultivation and sale of the proper type of vegetables based on
market demand resulted in an overall increased performance by +38% (or $288,666) from Q2 2017’s total sales of $755,579
compared to Q2 2018’s $1,044,245.
As reported in Q1 2018’s report, we are
targeting to plant about 15 acres of Immortal Vegetable plants in year 1 (starting from Q3 2018) to process into 75 MT of HHTP
to generate direct farm sales (excluding marketing and other associated sales revenue and costs, etc.) up to RMB45 million / year
1 (or the equivalent of $7.2 million) at about a 70% gross profit margin. If successful, it will enhance revenue and profit by
more than 200% of JHST’s annual sales revenue and gross profit generated in either FY 2016 or FY 2017. In this respect, JHST
has started planting the 15 acres of Immortal Vegetable plants during late July 2018 targeting to complete planting the full 15
acres within Q3 2018.
Also as reported in Q1 2017, in March 2018
JHST signed two contracts that have stable pricing conditions:
(1). With a herbal
plant oil processor to grow 50 acres of plants called “Pogestemon Patchouli” (“
PP
”) for processing
into a type of natural aromatic oil that has experienced a good market in China.
”
(2). To grow 200 acres of Passion Fruit for
a Juice Manufacturer from 2018 to 2020 for 3 years initially estimated to produce around 2,400 MT of fruit / year contracted at
RMB8,000 / MT (or $1,280 / MT) to generate over $3 million in sales revenue.
The combination of both fruits and PP will
enhance revenue and gross profit to JHST that again will exceed its performance of either FY 2016 or FY 2017, if their outcomes
prove successful, as is anticipated. In this respect, JHST has planted 20 acres of passion fruit during June and July 2018, expecting
harvesting to begin in late August on the 15 acres of passion fruit planted earlier. The planting of 50 acres of PP is still pending
the results from the soil test report. In the meantime JHST has completed a Joint Venture Agreement with another third party to
develop 500 Mu (about 75 acres) of various kinds of fruit trees for fruits that will be sold and distributed by said third party
to its market outlets. Inasmuch, over 200 Mu of tress had been planted during Q2 2018. Under a 5-year agreement, JHST is to provide
land, equipment and existing infrastructure while the said third party is responsible for the cultivation, development and associated
farming costs that will allow JHST its share of up to 25% of the profit derived from the sale of those fruits in the future.
3. Cattle Farm Division
refers to the operations
of Cattle Farm 1 under JHMC where cattle are sold live to third party livestock wholesalers who resell 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.
|
|
|
|
2018Q2
|
|
|
2017Q2
|
|
|
2018Q2
|
|
|
2017Q2
|
|
|
2018Q2
|
|
|
2017Q2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MEIJI
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of Live cattle (Aromatic)
|
|
|
6,073,838
|
|
|
|
7,401,149
|
|
|
|
5,507,928
|
|
|
|
6,278,714
|
|
|
|
565,910
|
|
|
|
1,122,435
|
|
|
|
MEIJI / Cattle farm Total
|
|
|
6,073,838
|
|
|
|
7,401,149
|
|
|
|
5,507,928
|
|
|
|
6,278,714
|
|
|
|
565,910
|
|
|
|
1,122,435
|
|
|
|
Increases in $
|
|
|
(1,327,311
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(556,525
|
)
|
|
|
|
|
|
|
% of increase or decrease (-)
|
|
|
-18
|
%
|
|
|
|
|
|
|
-12
|
%
|
|
|
|
|
|
|
-50
|
%
|
|
|
|
|
|
|
Description of items
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018Q2
|
|
|
2017Q2
|
|
|
Difference
|
|
MEIJI
|
|
Production and sale of Live cattle (Aromatic)
|
|
Heads
|
|
|
1,799
|
|
|
|
4,112
|
|
|
|
(2,313
|
)
|
|
|
Average Unit sales price
|
|
US$/head
|
|
|
3,376
|
|
|
|
1,800
|
|
|
|
1,576
|
|
|
|
Unit cost prices
|
|
US$/head
|
|
|
3,062
|
|
|
|
1,527
|
|
|
|
1,535
|
|
Revenue from the cattle farm
decreased by $1,327,311 (or 18%) from $7,401,149 for the quarterly period ended June 30, 2017 compared to $6,073,838 for the quarterly
period ended June 30, 2018. The decrease was primarily due to the “Yellow Cattle,” being a smaller cow (averaging around
340 Kg / head) yet selling at a readily stable, higher price of RMB35 to 37 per Kg of live weight versus a price point of RMB24
to 25 per kg regularly garnered for western breeds of cattle (e.g., Angus).
l
4.
Corporate & Others Division
refers to the business operations of Sino Agro Food, Inc. / Capital Award Inc. including import/export
business and consulting and service operations provided to projects not included in the above categories, and not limited to corporate
affairs. SIAF/CA does not hold import licensing or permits, and as such, SIAF/CA utilized the licenses or permits of A Power NaWay
Co. or Virgo Co. of China by SIAF’s China office, and all commissions earned by SIAF/CA were to used help to offset part
of (SIAF and CA)’s operational expenses. So as not to confuse / commingle commission income with the other production income,
these revenues are categorized under the “Corporate & others division” category.
In US$
|
Sales of goods
|
|
|
Cost of Goods sold
|
|
|
Sales of Goods' Gross profit
|
|
|
|
|
|
2018Q2
|
|
|
2017Q2
|
|
|
2018Q2
|
|
|
2017Q2
|
|
|
2018Q2
|
|
|
2017Q2
|
|
SIAF
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of goods through trading/import/export activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
on seafood
|
|
|
9,525,822
|
|
|
|
7,487,629
|
|
|
|
8,467,396
|
|
|
|
6,655,671
|
|
|
|
1,058,426
|
|
|
|
831,958
|
|
|
|
Increases in $
|
|
|
2,038,193
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
226,468
|
|
|
|
|
|
|
|
% of increases
|
|
|
27
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27
|
%
|
|
|
|
|
|
|
on imported beef and mutton
|
|
|
8,664,530
|
|
|
|
10,582,622
|
|
|
|
7,701,805
|
|
|
|
9,406,775
|
|
|
|
962,725
|
|
|
|
1,175,847
|
|
|
|
Increases in $
|
|
|
(1,918,092
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(213,122
|
)
|
|
|
|
|
|
|
% of increases
|
|
|
-18
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-18
|
%
|
|
|
|
|
|
|
SIAF/ Others & Corporate total
|
|
|
18,190,352
|
|
|
|
18,070,251
|
|
|
|
16,169,201
|
|
|
|
16,062,446
|
|
|
|
2,021,151
|
|
|
|
2,007,805
|
|
|
|
Increases in $
|
|
|
120,101
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,346
|
|
|
|
|
|
|
|
% of increases
|
|
|
1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
%
|
|
|
|
|
|
|
Description of items
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018Q2
|
|
|
2017Q2
|
|
|
Difference
|
|
SIAF
|
|
Seafood trading from imports
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mixed seafoods
|
|
MT
|
|
|
524
|
|
|
|
396
|
|
|
|
128
|
|
|
|
Average of sales price
|
|
US$/MT
|
|
|
18,179
|
|
|
|
18,918
|
|
|
|
(739
|
)
|
|
|
Average of cost prices
|
|
US$/MT
|
|
|
16,159
|
|
|
|
16,816
|
|
|
|
(657
|
)
|
|
|
Beef & Lambs trading from imports
|
|
MT
|
|
|
460
|
|
|
|
907
|
|
|
|
(447
|
)
|
|
|
Average of sales price
|
|
US$/MT
|
|
|
18,836
|
|
|
|
11,674
|
|
|
|
7,162
|
|
|
|
Average of cost prices
|
|
US$/MT
|
|
|
16,743
|
|
|
|
10,377
|
|
|
|
6,366
|
|
Revenue from the corporate division increased
by $120,101 (or approximately 1%) from $18,070,251 for Q2 2017 to $18,190,352 for Q2 2018. The increase was primarily due to more
seafood imports offsetting the unstable factors experienced in the beef industry:
(i) The decrease of sales
in imported beef by $1,919,092 (or 18%) from Q2 2017’s $10,582,622 to Q2 2018’s $8,664,530 was due to reasons previously
discussed in this Form 10-Q.
(ii) This quarter seafood
imports have increased by 128 MT compared to Q2 2017, which resulted in an increase in sales revenue by $2,038,193 (or 27%) from
Q2 2017’s $7,487,629 to Q2 2018’s $9,525,822.
Since China is short of seafood
supply with demand increasing each year, it’s been projected that China will become a negative importing country with a shortfall
of over tens of Million Metric Tons (MMT) / year. In this respect, the locally grown seafood and imported seafood trade has strong
potential to increase its revenue and profits throughout the coming years.
4.a. Share of income
from unconsolidated investee
Share of income from unconsolidated
investee increased by $294,824 (or 22%) from $1,313,996 in Q2 2017 to Q2 2018’s $1,608,820 primarily due to the Company’s
share of income generated from Tri-way’s fishery operation based on 36.6% equity interest in Tri-way prior to the finalization
of the Company’s effective equity interest in Tri-way of 36.6% and corresponding adjustments to be made within the coming
quarter.
l
5.A.
Engineering technology consulting and services:
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 fees for the same period ended
June 30, 2018 and 2017.
|
|
2018Q2
|
|
|
2017Q2
|
|
|
Difference
|
|
|
|
CA
|
|
|
1,061,986
|
|
|
|
-
|
|
|
|
1,061,986
|
|
|
Completing work in AF2
|
Revenues
|
|
|
1,061,986
|
|
|
|
-
|
|
|
|
1,061,986
|
|
|
|
CA
|
|
|
880,418
|
|
|
|
-
|
|
|
|
880,418
|
|
|
|
Cost of Consulting and Services
|
|
|
880,418
|
|
|
|
-
|
|
|
|
880,418
|
|
|
|
CA
|
|
|
181,568
|
|
|
|
-
|
|
|
|
181,568
|
|
|
|
Gross Profit
|
|
|
181,568
|
|
|
|
-
|
|
|
|
181,568
|
|
|
|
Revenues (consulting, service, commission and management
fee):
Revenues increased by $1,061,986 from $0 for
the quarterly period ended June 30, 2017 to $1,061,986 for the same period ended June 30, 2018.
Correspondingly, the cost of services for consulting,
service, commission and management fees increased by $880,418 from $0 for the quarterly period ended June 30, 2017 to $880,418
for the same period ended June 30, 2018. The increase was primarily due to higher revenues during the quarter. Gross profit from
consulting, service, commission and management fees increased by $181,568 from $0 for the quarter period ended June 30, 2017 to
$181,568 for the same period ended June 30, 2018.
Note (4) to Table A 1 General and Administrative
Expenses and Interest Expenses
General and administrative and interest expenses
(including depreciation and amortization) decreased by $1,423,759 or 22% from $6,574,120 for Q2 2017 to $5,150,361 for Q2 2018.
The decrease was primarily due to a decrease in wages and salaries of $1,944,058 from $2,498,474 expended during Q2 2017 to $551,416
expended during Q2 2018. Office and corporate expenses increased by $517,086 or 39.7% to 1,819,000 for Q2 2018 from $1,302,614
for Q2 2017.
Category
|
|
2018 Q2
|
|
|
2017 Q2
|
|
|
Difference
|
|
|
|
|
|
|
|
|
|
$
|
|
Office and corporate expenses
|
|
|
1,819,700
|
|
|
|
1,302,614
|
|
|
|
517,086
|
|
Wages and salaries
|
|
|
554,416
|
|
|
|
2,498,474
|
|
|
|
(1,944,058
|
)
|
Traveling and related lodging
|
|
|
8,039
|
|
|
|
13,772
|
|
|
|
(5,733
|
)
|
Motor vehicles expenses and local transportation
|
|
|
21,976
|
|
|
|
21,247
|
|
|
|
729
|
|
Entertainments and meals
|
|
|
10,207
|
|
|
|
22,005
|
|
|
|
(11,798
|
)
|
Others and miscellaneous
|
|
|
159,272
|
|
|
|
673,519
|
|
|
|
(514,247
|
)
|
Depreciation and amortization
|
|
|
1,559,444
|
|
|
|
1,317,716
|
|
|
|
241,728
|
|
Sub-total
|
|
|
4,133,054
|
|
|
|
5,849,346
|
|
|
|
(1,716,292
|
)
|
Interest expenses
|
|
|
417,307
|
|
|
|
724,774
|
|
|
|
292,533
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
4,550,361
|
|
|
|
6,574,120
|
|
|
|
(1,423,759
|
)
|
Note (5) 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.
|
|
Total
|
Abbreviated names
|
|
CA
|
|
(MEIJI)
|
|
(APWAM)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% of equity holding on below subsidiaries (in China)
|
|
n.a.
|
|
75%
|
|
75%
|
|
26%
|
|
41.25%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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)
|
|
Hunan Shanghua A Power Agriculture Co. Ltd (China
|
|
Quinghai Sangjiang A Power Agrivulture Co. Ltd. (China)
|
|
|
Abbreviated names
|
|
|
|
(JHST)
|
|
(JHMC)
|
|
(HSA)
|
|
(SJAP)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income of the P.R.C. subsidiaries for the period ended 30. June 2018 in $
|
|
|
|
($698,169)
|
|
$424,700
|
|
$770,224
|
|
(1,469,654)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity % of non-controlling interest
|
|
|
|
25%
|
|
25%
|
|
24.0%
|
|
58.8%
|
|
|
Non-controlling interest's shares of Net incomes in $
|
|
|
|
($174,542)
|
|
$106,175
|
|
$184,854
|
|
(863,422)
|
|
(746,936)
|
The Net Income attributed to non-controlling interest
is $(746,936) shared by JHST, JHMC, HSA, SJAP and JFD, collectively for Q1-2 2018 as shown in Table (F) above.
Note (6) to Table A 1 Earnings per shares (EPS)
Earnings per share remained the same
at 0.02 (basic) and decreased by $0.01 to $0.02 (diluted) per share from EPS of $0.02 (basic) and $0.03 (diluted) for Q2 2017 to
EPS of $0.02 (basic) and $0.02 (diluted) for Q2 2018. The reason for there having been little to no change is primarily due to
several contributing factors as outlined and discussed for each segment’s analysis of revenues and expenses throughout this
report.
Part
B. MD & A on Unaudited Consolidated Balance Sheet of Continued Operations for the six months ended 30 June 2018 (Q2 2018)
compared to the twelve months ended 31 December 2017 (fiscal year 2017)
Consolidated Balance sheets
|
|
30-Jun-18
|
|
|
December 31, 2017
|
|
|
Changes +-
|
|
|
Note
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
605,994
|
|
|
|
560,043
|
|
|
|
45,951
|
|
|
|
B
|
|
Inventories
|
|
|
52,941,240
|
|
|
|
52,628,947
|
|
|
|
312,293
|
|
|
|
9
|
|
Costs and estimated earnings in excess of billings on uncompleted contracts
|
|
|
250,828
|
|
|
|
1,249,187
|
|
|
|
(998,359
|
)
|
|
|
|
|
Deposits and prepaid expenses
|
|
|
63,904,021
|
|
|
|
70,459,650
|
|
|
|
(6,555,629
|
)
|
|
|
10
|
|
Accounts receivable
|
|
|
89,045,305
|
|
|
|
82,971,418
|
|
|
|
6,073,887
|
|
|
|
11
|
|
Other receivables
|
|
|
26,039,372
|
|
|
|
20,680,478
|
|
|
|
5,358,894
|
|
|
|
|
|
Total current assets
|
|
|
232,786,760
|
|
|
|
228,549,723
|
|
|
|
4,237,037
|
|
|
|
|
|
Property and equipment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net of accumulated depreciation
|
|
|
243,424,801
|
|
|
|
246,857,797
|
|
|
|
(3,432,996
|
)
|
|
|
12
|
|
Construction in progress
|
|
|
11,410,770
|
|
|
|
6,178,308
|
|
|
|
5,232,462
|
|
|
|
13
|
|
Land use rights, net of accumulated amortization
|
|
|
56,424,062
|
|
|
|
54,838,031
|
|
|
|
1,586,031
|
|
|
|
14
|
|
Total property and equipment
|
|
|
311,259,633
|
|
|
|
307,874,136
|
|
|
|
3,385,497
|
|
|
|
|
|
Other assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
724,940
|
|
|
|
724,940
|
|
|
|
-
|
|
|
|
|
|
Proprietary technologies, net of accumulated amortization
|
|
|
9,279,211
|
|
|
|
9,588,605
|
|
|
|
(309,394
|
)
|
|
|
|
|
Interests in unconsolidated equity investees
|
|
|
201,311,597
|
|
|
|
193,267,696
|
|
|
|
8,043,901
|
|
|
|
|
|
Temporary deposits paid to entities for investments in Sino joint venture companies
|
|
|
34,895,444
|
|
|
|
34,917,222
|
|
|
|
(21,778
|
)
|
|
|
|
|
Total other assets
|
|
|
246,211,192
|
|
|
|
238,498,463
|
|
|
|
7,712,729
|
|
|
|
|
|
Total assets
|
|
|
790,257,585
|
|
|
|
774,922,322
|
|
|
|
15,335,263
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15
|
|
Accounts payable and accrued expenses
|
|
|
6,246,248
|
|
|
|
4,243,496
|
|
|
|
2,002,752
|
|
|
|
|
|
Billings in excess of costs and estimated earnings on uncompleted contracts
|
|
|
5,602,681
|
|
|
|
5,740,065
|
|
|
|
(137,384
|
)
|
|
|
|
|
Due to a director
|
|
|
|
|
|
|
107,074
|
|
|
|
(107,074
|
)
|
|
|
|
|
Other payables
|
|
|
40,784,287
|
|
|
|
40,593,482
|
|
|
|
190,805
|
|
|
|
|
|
Borrowings - Short term bank loan
|
|
|
4,684,902
|
|
|
|
4,667,890
|
|
|
|
17,012
|
|
|
|
|
|
Negotiable promissory notes
|
|
|
977,155
|
|
|
|
977,155
|
|
|
|
-
|
|
|
|
|
|
Derivative liability
|
|
|
2,100
|
|
|
|
2,100
|
|
|
|
-
|
|
|
|
|
|
Convertible note payable
|
|
|
3,894,978
|
|
|
|
3,894,978
|
|
|
|
-
|
|
|
|
|
|
Income tax payable
|
|
|
371
|
|
|
|
377
|
|
|
|
-6.00
|
|
|
|
|
|
Non-current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16
|
|
Other payables
|
|
|
10,949,126
|
|
|
|
11,089,779
|
|
|
|
(140,653
|
)
|
|
|
|
|
Borrowings - Long term bank loan
|
|
|
5,893,910
|
|
|
|
6,045,302
|
|
|
|
(151,392
|
)
|
|
|
|
|
Total non-current liabilities
|
|
|
16,843,036
|
|
|
|
17,135,081
|
|
|
|
(292,045
|
)
|
|
|
|
|
Stockholders’ equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
40,306
|
|
|
|
29,363
|
|
|
|
10,943
|
|
|
|
|
|
Additional paid - in capital
|
|
|
176,731,765
|
|
|
|
169,743,640
|
|
|
|
6,988,125
|
|
|
|
|
|
Retained earnings
|
|
|
447,458,892
|
|
|
|
441,488,507
|
|
|
|
5,970,385
|
|
|
|
|
|
Accumulated other comprehensive income
|
|
|
2,934,454
|
|
|
|
2,346,174
|
|
|
|
588,280
|
|
|
|
|
|
Treasury stock
|
|
|
(1,250,000
|
)
|
|
|
(1,250,000
|
)
|
|
|
-
|
|
|
|
|
|
Total Sino Agro Food, Inc. and subsidiaries stockholders’ equity
|
|
|
625,915,417
|
|
|
|
612,357,684
|
|
|
|
13,557,733
|
|
|
|
|
|
Non - controlling interest
|
|
|
85,306,410
|
|
|
|
85,202,940
|
|
|
|
103,470
|
|
|
|
|
|
Total stockholders’ equity
|
|
|
711,221,827
|
|
|
|
697,560,624
|
|
|
|
13,661,203
|
|
|
|
|
|
Total liabilities and stockholders’ equity
|
|
|
790,257,585
|
|
|
|
774,922,322
|
|
|
|
15,335,263
|
|
|
|
|
|
Part B discusses and analyzes certain items (marked with notes)
to assist stakeholders in obtaining a better understanding of the Company’s results from operations and overall financial
condition:
Note (B) Cash and Cash Equivalents
The change in cash and cash equivalent was $45,951 when
comparing cash and cash equivalent of $605,994 and $560,043 as at June 30, 2018 and December 31, 2017, respectively.
Note (9) Break down on inventories
|
|
30-Jun-18
|
|
|
31-Dec-17
|
|
|
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
|
Difference
|
|
|
|
|
|
|
|
|
|
|
|
Bread grass
|
|
|
437,755
|
|
|
|
976,514
|
|
|
|
(538,759
|
)
|
Beef cattle
|
|
|
9,747,627
|
|
|
|
5,903,442
|
|
|
|
3,844,185
|
|
Organic fertilizer
|
|
|
12,669,705
|
|
|
|
16,832,390
|
|
|
|
(4,162,685
|
)
|
Forage for cattle and consumable
|
|
|
7,204,550
|
|
|
|
7,397,910
|
|
|
|
(193,360
|
)
|
Raw materials for bread grass and organic fertilizer
|
|
|
19,896,828
|
|
|
|
19,113,274
|
|
|
|
783,554
|
|
Immature seeds
|
|
|
2,984,775
|
|
|
|
2,405,417
|
|
|
|
579,358
|
|
|
|
$
|
52,941,240
|
|
|
$
|
52,628,947
|
|
|
$
|
312,293
|
|
The main increase in inventories came from beef cattle (up $3.9
m) primarily due to the cumulative increase of breeding stock and lower sales in marketable stocks that would have incurred higher
losses due to livestock prices having been low during the quarter.
Note (10)
Breakdown of Deposits and Prepaid Expenses
|
|
June 30,2018
|
|
|
December 31,2017
|
|
|
Difference
|
|
Deposits for
|
|
$
|
|
|
$
|
|
|
$
|
|
- purchases of equipment
|
|
|
2,765,042
|
|
|
|
2,815,774
|
|
|
|
(50,732
|
)
|
- acquisition of land use rights
|
|
|
181,352
|
|
|
|
3,244,567
|
|
|
|
(3,063,215
|
)
|
- inventories purchases
|
|
|
21,721,995
|
|
|
|
24,282,950
|
|
|
|
(2,560,955
|
)
|
- construction in progress
|
|
|
5,101,578
|
|
|
|
11,365,748
|
|
|
|
(6,264,170
|
)
|
- issue of shares as collateral
|
|
|
25,761,658
|
|
|
|
25,427,293
|
|
|
|
334,365
|
|
Shares issued for employee compensation and overseas professional and bond interest
|
|
|
1,138,689
|
|
|
|
702,625
|
|
|
|
436,064
|
|
Others
|
|
|
7,233,707
|
|
|
|
2,620,693
|
|
|
|
4,613,014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
63,904,021
|
|
|
|
70,459,650
|
|
|
|
(6,555,629
|
)
|
Note (11) Breakdown of Accounts receivable:
|
|
|
|
June
30,2018
|
|
|
|
|
|
Accounts receivable
|
|
|
0-30 days
|
|
|
31-90 days
|
|
|
91-120 days
|
|
|
over 120 days and
less than
1 year
|
|
|
Over One years
|
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
Consulting and Service (C&S) totaling
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CA
|
|
|
53,460,749
|
|
|
|
982,223
|
|
|
|
-
|
|
|
|
3,413,141
|
|
|
|
5,775,840
|
|
|
|
43,289,545
|
|
Sales of imported seafood (Corporate Sector of
SIAF)
|
|
|
|
|
18,639,559
|
|
|
|
-
|
|
|
|
17,064,037
|
|
|
|
1,575,522
|
|
|
|
-
|
|
|
|
-
|
|
Sales of Cattle and Beef Meats (from Enping Farm)
(MEIJI)
|
|
|
|
|
4,427,687
|
|
|
|
-
|
|
|
|
4,427,687
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Sales of HU Flowers (Fresh & Dried) (JHST)
|
|
|
|
|
1,567,527
|
|
|
|
398,420
|
|
|
|
571,127
|
|
|
|
365,310
|
|
|
|
232,670
|
|
|
|
-
|
|
Sales Fertilizer, Bulk Stock feed and Cattle
by (SJAP)
|
|
|
|
|
6,876,220
|
|
|
|
1,398,281
|
|
|
|
2,889,299
|
|
|
|
1,899,520
|
|
|
|
689,120
|
|
|
|
-
|
|
Sales Fertilizer from (HSA)
|
|
|
|
|
4,073,563
|
|
|
|
801,869
|
|
|
|
1,603,715
|
|
|
|
759,090
|
|
|
|
908,889
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
89,045,305
|
|
|
|
3,580,793
|
|
|
|
26,555,865
|
|
|
|
8,012,583
|
|
|
|
7,606,519
|
|
|
|
43,289,545
|
|
The accounts receivable of CA’s C&S
services totals US$53,460,749 made up of $982,223 (0 – 30 days), $9,188,981 (over 90-days & less than one-year), and
$43,289,545 (over one year).
|
l
|
$43,289,545 is to be settled by Tri-way’s
shares included in the 36.6% equity shares that the Company received from the “Carve-out” exercise as discussed in
the Company’s 2017 10K filing.
|
|
l
|
$3,413,141 (91 – 120 days) and $5,775,840
(over 120 days & less than one-year) is AR that will be settled within trading terms of 360 days.
|
|
l
|
CA remains as the turnkey contractor appointed
by Tri-way (i.e. the Master APM License Holder in China granted by CA for 50 years) to carry out developments and construction
work for APM and ODRAS fish farms (inclusive the Mega farm APM project and other ODRAS farm projects) that are being and will be
developed by Tri-way in China.
|
|
l
|
The other account receivables are spread
among 5 main subsidiaries and their respective subsidiaries within their own organization (i.e. SJAP has 5 and JHST has 2 subsidiaries
for example) and their respective accounts receivable aging period is less than 12 months old and within normal trading terms,
therefore no diminution in value is required, as the credit quality of the receivables is not in doubt.
|
Information
on Concentration of credit risk of revenue:
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 78.21%
or more of our consolidated revenues for Q2 2018 as shown in the table below:
Customer A
|
|
|
35.13
|
%
|
|
|
11,940,966
|
|
Customer B
|
|
|
18.44
|
%
|
|
|
6,267,187
|
|
Customer C
|
|
|
18.38
|
%
|
|
|
6,249,386
|
|
Customer D
|
|
|
6.26
|
%
|
|
|
2,985,856
|
|
|
|
|
|
|
|
|
|
|
|
|
|
78.21
|
%
|
|
|
27,443,396
|
|
Customer A is ShangHai Virgo Trading co. Ltd,
which is one of our major distributors of imported beef and seafood as well as our farmed seafood. We sold $11,940,966 of goods
to Virgo during Q2 2018 representing 35.13% of our total revenue of $ 33,994,723 during the quarter.
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
us with young cattle. During Q2 2018, transactions through Mr. Zhen Runchi generated 18.44 % of our total consolidated revenue
(equivalent to $6,267,187 of total revenue of $33,994,723).
Customer C is WSC 1, which is owned and operated
by Guangzhou City A Power NaWei Trading Co. Ltd (“APNW”). APNW distributes seafood to other wholesalers in various
cities in China. WSC 1 is ideally situated at the center of all interprovincial logistic services. At the same time, APNW has obtained
all relevant Import Quotas and Permits as of September 30, 2014. As such, SIAF relies on APNW’s import permits for its import
and export trades to be carried out in China. Sales affected through WSC-1 contribute 18.38% of our total consolidated revenue
(equivalent to $6,249,386 of total revenue of $33,994,723).
Customer D is Zhang Zhijie (
张志杰
-SJAP
销售精饲料
),
during which Q2 2018 we sold $2,985,856 million of goods representing 6.26% of total revenue of $33,994,723.
The Company had 4 major customers whose accounts
receivable balance individually represented the following percentages of the Company’s total accounts receivable during Q2
2018:
|
|
June 30,2018
|
|
|
Total
|
|
|
|
% of total Accounts receivables
|
|
|
amount in $
|
|
|
Accounts receivables
|
|
Customer A
|
|
|
60.04
|
%
|
|
|
|
|
|
|
53,460,749
|
|
Customer B
|
|
|
12.15
|
%
|
|
|
|
|
|
|
10,814,651
|
|
Customer C
|
|
|
8.79
|
%
|
|
|
|
|
|
|
7,824,908
|
|
Customer D
|
|
|
5.14
|
%
|
|
|
|
|
|
|
4,578,259
|
|
|
|
|
86.12
|
%
|
|
|
|
|
|
|
76,678,567
|
|
Note (12) Property and equipment, net
of accumulated depreciation
|
|
June 30, 2018
|
|
|
|
(Unaudited)
|
|
Plant and machinery
|
|
$
|
5,443,921
|
|
Structure and leasehold improvements
|
|
|
206,926,056
|
|
Mature seeds and herbage cultivation
|
|
|
53,671,290
|
|
Furniture and equipment
|
|
|
698,700
|
|
Motor vehicles
|
|
|
608,413
|
|
|
|
|
267,348,380
|
|
|
|
|
|
|
Less: Accumulated depreciation
|
|
|
(23,923,579
|
)
|
Net carrying amount
|
|
$
|
243,424,801
|
|
Note (13) Construction in progress
|
|
(Unaudited)
|
|
Construction in progress
|
|
|
|
|
- Rangeland for beef cattle and office building
|
|
|
11,410,770
|
|
Note (14) Land Use Rights, net
of accumulated amortization
Item
|
|
Owner
|
|
|
Location
|
|
Acres
|
|
|
Date
Acquired
|
|
Tenure
|
|
|
Expiry
dates
|
|
Cost $
|
|
|
Monthly
amortization $
|
|
|
2018.06.30
Balance $
|
|
|
Nature
of
ownership
|
|
Nature
of
project
|
Hunan lot1
|
|
|
HS.A
|
|
|
Ouchi Village, Fenghuo Town, Linli County
|
|
|
31.92
|
|
|
4/5/2011
|
|
|
43
|
|
|
4/4/2054
|
|
|
242,703
|
|
|
|
470
|
|
|
|
201,782
|
|
|
Lease
|
|
Fertilizer production
|
Hunan lot2
|
|
|
HS.A
|
|
|
Ouchi Village, Fenghuo Town, Linli County
|
|
|
247.05
|
|
|
7/1/2011
|
|
|
60
|
|
|
6/30/2071
|
|
|
36,666,141
|
|
|
|
50,925
|
|
|
|
32,388,425
|
|
|
Management Right
|
|
Pasture growing
|
Hunan lot3
|
|
|
HS.A
|
|
|
Ouchi Village, Fenghuo Town, Linli County
|
|
|
8.24
|
|
|
5/24/2011
|
|
|
40
|
|
|
5/23/2051
|
|
|
378,489
|
|
|
|
789
|
|
|
|
310,677
|
|
|
Land Use Rights
|
|
Fertilizer production
|
Guangdong lot 1
|
|
|
JHST
|
|
|
Yane Village, Liangxi Town, Enping City
|
|
|
8.23
|
|
|
8/10/2007
|
|
|
60
|
|
|
8/9/2067
|
|
|
1,064,501
|
|
|
|
1,478
|
|
|
|
870,821
|
|
|
Management Right
|
|
HU Plantation
|
Guangdong lot 2
|
|
|
JHST
|
|
|
Nandu Village of Yane Village, Liangxi Town, Enping City
|
|
|
27.78
|
|
|
3/14/2007
|
|
|
60
|
|
|
3/13/2067
|
|
|
1,037,273
|
|
|
|
1,441
|
|
|
|
841,344
|
|
|
Management Right
|
|
HU Plantation
|
Guangdong lot 3
|
|
|
JHST
|
|
|
Nandu Village of Yane Village, Liangxi Town, Enping City
|
|
|
60.72
|
|
|
3/14/2007
|
|
|
60
|
|
|
3/13/2067
|
|
|
2,267,363
|
|
|
|
3,149
|
|
|
|
1,839,083
|
|
|
Management Right
|
|
HU Plantation
|
Guangdong lot 4
|
|
|
JHST
|
|
|
Nandu Village of Yane Village, Liangxi Town, Enping City
|
|
|
54.68
|
|
|
9/12/2007
|
|
|
60
|
|
|
9/11/2067
|
|
|
2,041,949
|
|
|
|
2,836
|
|
|
|
1,673,264
|
|
|
Management Right
|
|
HU Plantation
|
Guangdong lot 5
|
|
|
JHST
|
|
|
Jishilu Village of Dawan Village,Juntang Town, Enping City
|
|
|
28.82
|
|
|
9/12/2007
|
|
|
60
|
|
|
9/11/2067
|
|
|
960,416
|
|
|
|
1,334
|
|
|
|
787,008
|
|
|
Management Right
|
|
HU Plantation
|
Guangdong lot 6
|
|
|
JHST
|
|
|
Liankai Village of Niujiang Town, Enping City
|
|
|
31.84
|
|
|
1/1/2008
|
|
|
60
|
|
|
12/31/2068
|
|
|
821,445
|
|
|
|
1,141
|
|
|
|
677,692
|
|
|
Management Right
|
|
Fish Farm
|
Guangdong lot 7
|
|
|
JHST
|
|
|
Nandu Village of Yane Village, Liangxi Town, Enping City
|
|
|
41.18
|
|
|
1/1/2011
|
|
|
26
|
|
|
12/31/2037
|
|
|
5,716,764
|
|
|
|
18,323
|
|
|
|
4,067,697
|
|
|
Management Right
|
|
HU Plantation
|
Guangdong lot 8
|
|
|
JHST
|
|
|
Shangchong Village of Yane Village, Liangxi Town, Enping City
|
|
|
11.28
|
|
|
1/1/2011
|
|
|
26
|
|
|
12/31/2037
|
|
|
1,566,393
|
|
|
|
5,020
|
|
|
|
1,114,549
|
|
|
Management Right
|
|
HU Plantation
|
Guangdong lot 9
|
|
|
MEIJI
|
|
|
Xiaoban Village of Yane Village, Liangxi Town, Enping City
|
|
|
41.18
|
|
|
4/1/2011
|
|
|
20
|
|
|
3/31/2031
|
|
|
5,082,136
|
|
|
|
21,176
|
|
|
|
3,239,862
|
|
|
Management Right
|
|
Cattle Farm
|
Qinghai lot 1
|
|
|
SJAP
|
|
|
No. 498, Bei Da Road, Chengguan Town of Huangyuan County,Xining
City, Qinghai Province
|
|
|
21.09
|
|
|
11/1/2011
|
|
|
40
|
|
|
10/30/2051
|
|
|
527,234
|
|
|
|
1,098
|
|
|
|
439,362
|
|
|
Land Use Right & Building ownership
|
|
Cattle farm, fertilizer and livestock feed production
|
Guangdong lot 10
|
|
|
JHST
|
|
|
Niu Jiang Town, Liangxi Town, Enping City
|
|
|
6.27
|
|
|
3/4/2013
|
|
|
10
|
|
|
3/3/2023
|
|
|
489,904
|
|
|
|
4,083
|
|
|
|
228,622
|
|
|
Management Right
|
|
Processing factory
|
Guangdong lot 11
|
|
|
CA
|
|
|
Da San Dui Wei ,You Nan Village, Conghua District of Guangzhou
City
|
|
|
33.28
|
|
|
10/28/2014
|
|
|
30
|
|
|
10/27/2044
|
|
|
4,453,665
|
|
|
|
12,371
|
|
|
|
3,896,957
|
|
|
Management Right
|
|
Agriculture
|
|
|
|
JHST
|
|
|
Land improvement cost incurred
|
|
|
|
|
|
12/1/2013
|
|
|
|
|
|
|
|
|
3,914,275
|
|
|
|
6,155
|
|
|
|
3,575,776
|
|
|
|
|
|
Hunan lot12
|
|
|
HS.A
|
|
|
Ouchi Village, Fenghuo Town, Linli County
|
|
|
25.54
|
|
|
6/30/2018
|
|
|
50
|
|
|
6/29/2068
|
|
|
3,022,518
|
|
|
|
5,038
|
|
|
|
3,022,518
|
|
|
Lease
|
|
Fertilizer production
|
Exchange difference
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-2,382,562
|
|
|
|
|
|
|
|
-2,751,377
|
|
|
|
|
|
Note (15)
Current Liabilities:
Accounts payable and accrued expenses
|
|
|
6,246,248
|
|
|
|
15.A
|
|
Billings in excess of costs and estimated earnings on uncompleted contracts
|
|
|
5,602,681
|
|
|
|
|
|
Due to a director
|
|
|
-
|
|
|
|
|
|
Other payables
|
|
|
40,784,287
|
|
|
|
15B
|
|
Borrowings - Short term bank loan
|
|
|
4,684,902
|
|
|
|
|
|
Negotiable promissory notes
|
|
|
977,155
|
|
|
|
|
|
Derivative liability
|
|
|
2,100
|
|
|
|
|
|
Convertible note payable
|
|
|
3,894,978
|
|
|
|
|
|
Income tax payable
|
|
|
371
|
|
|
|
|
|
|
|
|
62,192,722
|
|
|
|
|
|
Note 15A: Accounts payables and
accrued expenses clarification:
Our current trading environment is limited
to a number of suppliers who offer prolonged credit terms, yet, the Company generally pays for its purchases in cash or net, 7
– 10 days, which allows for better bargaining capability for obtaining purchase discounts, etc. Thus, our trade and accounts
payable balance stood at $6,246,248, only 18% of total revenue of $33,994,723 at the end of our 2nd quarter.
Note 15B: Analysis of Other
Payables:
As of June 30, 2018, other payables totaling
$41,129,945 was composed of the following:
|
l
|
Straight note payable of $29,867,999 represents
a 10.5% Convertible Note in the aggregate principal amount of up to $33,300,000 issued on August 29, 2014. On July 18, 2017, the
Company and the note holder entered into a restructuring agreement regarding the settlement of the Note as follows:
|
|
(i)
|
50% in cash settlement of $15,589,000 to be paid in monthly instalments.
|
|
(ii)
|
The other 50% balance of $15,589,000 to be settled by the issuance of 5,196,333 common shares of
the Company and 400,000 shares of Tri-way Industries Limited.
|
As of the date of this report, the Company
has paid $3.5 million with $12,089,000 remaining owed on the $15,589,000 balance.
|
l
|
Over the past years, other advances had
been provided by other unrelated third parties, contractors, services providers, and agents fees etc. to our subsidiaries with
some in the form of promissory notes or agreements at no fixed term of repayment and interest free; some at an interest rate calculated
from 3% up to 8% over a 2 to 5 year term; and the remainder covered by conditions settled through verbal arrangements with the
Company. These sums amount to $11,161,946 unpaid and outstanding as of June 30, 2018 after the settlement of $3,427,536 by the
issuance of 5,515,925 shares at an average of $0.55 / share during Q2 2018.
|
Note (15C): Analysis of Convertible Notes
payables:
On October 20, 2017, the Company issued a Convertible
Note (i.e.
"Note 2"
) with a principal amount of $4,000,000 due on February 28, 2018 and subsequently a US$600,000
short term note (incorporated into “Note 2”) also scheduled to mature in February 2018. 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 $1.50 per share or at 65% of the market share price of
the Company. The conversion price for Secondary Optional Conversion is $3.41 per share subject to equitable adjustment for stock
split, stock dividend or rights 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 the date of this report, no settlement
has occurred for either the origination fee or the interest payment, and as such the note holder and the Company are preparing
a settlement agreement to revise the final settlement at a sum of US$6 million covering both principal and interest payment to
be paid in installments within the next 9 months by April 2019. The Company is expecting the final agreement to be executed approximately
7 business days after the filing date of this report.
Note (16) Non-current liabilities
Other payables of $10,949,126: During Q2 2018,
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). During Q2 2018 we redeemed $984,428 of Promissory Notes for advances granted by third
parties in past fiscal years to be settled by the issuance of shares and / or cash leaving a balance of $10,949,126 of promissory
notes still due and outstanding as of June 30, 2018.
Part C. Six Months Ended June 30,
2018 Compared to Six Months Ended June 30, 2017 (presented in summarized Charts below);
Revenue:
Revenues decreased by $50,613,606 or 43% to
$67,725,987 for the six months ended June 30, 2018 from $118,339,593 for the six months ended June 30, 2017. The decrease was primarily
due to the decrease of revenue generated from our fishery, organic fertilizer, 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 six months ended June 30, 2018 to June 30, 2017.
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
Category
|
|
Q1 - Q2
|
|
|
Q1 - Q2
|
|
|
Difference
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
Fishery
|
|
|
3,534,390
|
|
|
|
13,189,265
|
|
|
|
(9,654,875
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plantation
|
|
|
2,094,473
|
|
|
|
2,078,755
|
|
|
|
15,718
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beef
|
|
|
11,529,838
|
|
|
|
42,353,905
|
|
|
|
(30,824,067
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Organic fertilizer
|
|
|
4,865,057
|
|
|
|
3,723,601
|
|
|
|
1,141,456
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cattle farm
|
|
|
11,071,921
|
|
|
|
15,813,236
|
|
|
|
(4,741,315
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate and others
|
|
|
34,630,308
|
|
|
|
41,180,831
|
|
|
|
(6,550,523
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
67,725,987
|
|
|
|
118,339,593
|
|
|
|
(50,613,606
|
)
|
Cost of Goods Sold and Services:
Cost of goods sold and services decreased by
$41,202,238 or 42% to $56,199,019 for the six months ended June 30, 2018 from $97,401,257 for the six months ended June 30, 2017.
The decrease was primarily due to the reciprocal decrease in sales generated from the Company’s fishery, plantation, beef,
organic fertilizer, cattle farm and corporate and other operations for six months ended June 30, 2018 as compared to the six months
ended June 30, 2017.
The following chart illustrates
the changes by category from the six months ended June 30, 2018 to June 30, 2017.
|
|
2018
|
|
|
2017
|
|
|
|
|
Category
|
|
Q1 - Q2
|
|
|
Q1 - Q2
|
|
|
Difference
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
Fishery
|
|
|
2,664,740
|
|
|
|
8,782,892
|
|
|
|
(6,118,152
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plantation
|
|
|
1,753,905
|
|
|
|
1,085,357
|
|
|
|
668,548
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beef
|
|
|
7,625,676
|
|
|
|
35,128,689
|
|
|
|
(27,503,013
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Organic fertilizer
|
|
|
3,259,280
|
|
|
|
2,536,965
|
|
|
|
722,315
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cattle farm
|
|
|
10,036,426
|
|
|
|
13,262,170
|
|
|
|
(3,225,744
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate and others
|
|
|
30,858,992
|
|
|
|
36,605,184
|
|
|
|
(5,746,192
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
56,199,019
|
|
|
|
97,401,257
|
|
|
|
(41,202,238
|
)
|
Gross Profit
Gross profit decreased
by $9,411,368 or 45% to $11,526,968 for the six months ended June 30, 2018 from $20,938,336 for the six months ended June 30, 2017.
The decrease was primarily due to the corresponding decreases in operation revenues of the discontinuing operation in the fishery
sales sector, nominal revenue generated from engineering and consulting services, and the decrease in sales in the Cattle and fertilizer
segments.
The following chart illustrates the changes
by category from the six months ended June 30, 2018 to June 30, 2017. The gross profit by category is as follows:
|
|
2018
|
|
|
2017
|
|
|
|
|
Category
|
|
Q1 - Q2
|
|
|
Q1 - Q2
|
|
|
Difference
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
Fishery
|
|
|
869,650
|
|
|
|
4,406,373
|
|
|
|
(3,536,723
|
)
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
Plantation
|
|
|
340,568
|
|
|
|
993,398
|
|
|
|
(652,830
|
)
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
Beef
|
|
|
3,634,162
|
|
|
|
7,225,216
|
|
|
|
(3,591,054
|
)
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
Organic fertilizer
|
|
|
1,605,777
|
|
|
|
1,186,636
|
|
|
|
419,141
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
Cattle farm
|
|
|
1,035,495
|
|
|
|
2,551,066
|
|
|
|
(1,515,571
|
)
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
Corporate and others
|
|
|
3,771,316
|
|
|
|
4,575,647
|
|
|
|
(804,331
|
)
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
11,256,968
|
|
|
|
20,938,336
|
|
|
|
(9,681,368
|
)
|
General
and Administrative Expenses and Interest Expenses
General
and administrative expenses and interest expenses
(including
depreciation and amortization) decreased by $4,442,652 or 34% to $8,666,741 for the six months ended June 30, 2018 from
$13,109,393 for the six months ended June 30, 2017. The decrease was primarily due to the decrease in Wages and salaries of
$1,101,058 for the six months ended June 30, 2018 from $4,500,600 for the six months ended June 30, 2017.
Category
|
|
2018
Q1 - Q2
|
|
|
2017
Q1 - Q2
|
|
|
Difference
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
Office and corporate expenses
|
|
|
3,123,845
|
|
|
|
2,721,286
|
|
|
|
402,559
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wages and salaries
|
|
|
1,101,058
|
|
|
|
4,500,600
|
|
|
|
(3,399,542
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Traveling and related lodging
|
|
|
11,581
|
|
|
|
30,952
|
|
|
|
(19,371
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Motor vehicles expenses and local transportation
|
|
|
31,882
|
|
|
|
56,857
|
|
|
|
(24,975
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Entertainments and meals
|
|
|
27,783
|
|
|
|
157,649
|
|
|
|
(129,866
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Others and miscellaneous
|
|
|
758,135
|
|
|
|
1,672,034
|
|
|
|
(913,899
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
2,741,499
|
|
|
|
2,739,704
|
|
|
|
1,795
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sub-total
|
|
|
7,795,783
|
|
|
|
11,879,081
|
|
|
|
(4,083,298
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expenses
|
|
|
870,958
|
|
|
|
1,230,312
|
|
|
|
(505,538
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
8,666,741
|
|
|
|
13,109,393
|
|
|
|
(4,588,836
|
)
|
Depreciation and
Amortization
Depreciation and
amortization increased by $653,693 or 11% to $6,460,435 for the six months ended June 30, 2018 from $5,806,742 for the six months
ended June 30, 2017. The increase was primarily due to the increase of depreciation by $819,292 to $5,325,531 for the six months
ended June 30, 2018 from depreciation of $4,506,239 for the six months ended June 30, 2017, and the decrease of amortization by
$165,599 to $1,134,904 for six months ended June 30, 2018 from amortization of $1,300,503 for the six months ended June 30, 2017.
In this respect,
total depreciation and amortization amounted to $6,460,435 for the six months ended June 30, 2018, out of which $2,741,499 was
booked under General and administration expenses and $3,718,936 was booked under cost of goods sold; and whereas, total depreciation
and amortization was at $5,806,742 for the six months ended June 30, 2017 out of which $2,739,704 was booked under General and
Administration expenses and $3,067,038 was booked under cost of goods sold.
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 is preparing its filing of income
tax returns with the IRS for 2016 & 2017 during Q3 2018.
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 six months ended June 30, 2018 and 2017
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 six months
ended June 30, 2018 and 2017.
No Macau Corporate income tax has been provided
in the consolidated financial statements, since APWAM and MEIJI did not earn any assessable profits for the six months ended June
30, 2018 and 2017.
No Sweden Corporate income tax has been provided
in the consolidated financial statements, since SAFS incurred a tax loss for the six months ended June 30, 2018.
No deferred tax assets and liabilities are
of June 30, 2018 and December 31, 2017 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.
Off Balance Sheet Arrangements:
None.
Liquidity and Capital Resources
As of June 30 2018, unrestricted cash and cash
equivalents amounted to $ 605,994 (see notes to the consolidated financial statements), and our working capital as of June 30,
2018 was $176,039,200.
Contractual Obligations
|
|
Less than 1 year
|
|
|
1-3years
|
|
|
3-5 years
|
|
|
More than 5 years
|
|
|
Total
|
|
Short Term Bank Loan
|
|
|
4,684,902
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,684,902
|
|
Negotiable promissory notes
|
|
|
977,155
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
977,155
|
|
Long Term Debts
|
|
|
|
|
|
|
5,893,910
|
|
|
|
|
|
|
|
|
|
|
|
5,893,910
|
|
Promissory Notes
|
|
|
|
|
|
|
10,949,126
|
|
|
|
|
|
|
|
|
|
|
|
10,949,126
|
|
convertible note payables
|
|
|
3,894,978
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,894,978
|
|
Cash provided by operating activities amounted
to $5,366,789 for Q1-2 2018. This compares with cash provided by operating activities totaling $16,025,338 for Q1-2 2017. The decrease
in cash flows from operations primarily resulted from the decrease in accounts receivable to $(6,073,887) for Q1-2 2018 from $17,338,773
for Q1-2 2017.
Cash used in investing activities totaled
$9,240,726 for Q1-2 2018. This compares with cash used in investing activities totaling $15,690,648 for Q1-2 2017. The
increase in cash balance resulting from less investing activit
i
es
primarily resulted from payment for property and equipment and non-current assets held for sale of $4,840,642 in Q1-2 2018
compared to $9,382,745 expended in Q1-2 2017.
Cash used in financing activities totaled $0 for Q1-2 2018. This
compares with cash from financing activities totaling $1,044,126 for Q1-2 2017.
Acquisition
of SFJVC’s and further acquisition plan:
An 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 the 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 Chinese 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
|
|
$
|
20.94
|
m
|
|
$
|
14.45
|
m
|
|
|
56
|
%
|
|
Q1 to Q2 2014
|
Zhongshan Prawn PF2
|
|
CA
|
|
Phase 3 Work still in progress, targeting completion Q3 2014
|
|
August 2015
|
|
$
|
26.20
|
m
|
|
$
|
9.88
|
m
|
|
|
33
|
%
|
|
Q4 2013 & all year round 2014
|
Fish & eel Farm 2
|
|
CA
|
|
Phase 3 & 4 work are in progress targeting completion Q4 2015
|
|
August. 2017
|
|
$
|
26.22
|
m
|
|
$
|
6.0
|
m
|
|
|
23
|
%
|
|
Q4 2013 & all year round 2014 & 2015
|
Cattle Farm 2
|
|
MEIJI
|
|
Final work is still in progress
|
|
August 2014
|
|
$
|
15.88
|
m
|
|
$
|
5.58
|
m
|
|
|
35
|
%
|
|
On or before June 30 2014
|
WXC businesses
|
|
SIAF
|
|
Work is in progress until end 2015
|
|
Not yet determined
|
|
|
Not fully determined
|
|
|
$
|
4.08
|
m
|
|
|
Not yet know
|
|
|
Partially in 2014.
|
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
|
|
|
Partially in 2014.
|
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 three months ended June 30, 2018 have been prepared in accordance with generally accepted accounting principles in the
United States of America (“
US GAAP
”).
The unaudited quarterly financial statements
for the three months ended June 30, 2018 results are for the period then ended 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, 2015.
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 entities 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 $1,960, $8,398, $2,745 and $16,145 for the three
months and the six months ended June 30, 2018 and 2017, respectively.
ADVERTISING
Advertising costs are included in general and
administrative expenses, which totaled $399,749, $372,045, $800,504 and $1,003,762 for the three months ended and the six months
ended June 30, 2018 and 2017, 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 twelve months ended June 30, 2018 or December 31, 2017.
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 -30 years
|
Mature seed and herbage cultivation
|
20 years
|
Furniture, fixtures and equipment
|
2.5 - 10 years
|
Motor vehicles
|
4-10 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 sleepy cod breeding technology
license is capitalized as proprietary technologies when technological feasibility has been established. Cost of granting sleepy
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) The 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 interests.
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 ownership 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 Company has adopted the cost method of
accounting for treasury stock shares. 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 P.R.C. Accordingly, the Company's business, financial condition and results of operations may be influenced by the political,
economic and legal environment in the P.R.C., and 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.
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 June 30,
2018 and 2015, 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 June 30, 2018 and
2017, basic earnings per share attributable to Sino Agro Food, Inc. and subsidiaries’ common stockholders amounted to $0.02
and $0.02, respectively. For the three months ended June 30, 2018 and 2017, diluted earnings per share attributable to Sino Agro
Food, Inc. and its subsidiaries’ common stockholders amounted to $0.02 and $0.03, respectively.
For the six months ended June 30, 2018 and
2017, basic earnings per share attributable to Sino Agro Food, Inc. and subsidiaries common stockholders amounted to $0.17 and
$0.39, respectively. For the six months ended June 30, 2018 and 2017, diluted earnings per share attributable to Sino Agro Food,
Inc. and its subsidiaries’ common stockholders amounted to $0.17 and $0.38, respectively.
FOREIGN CURRENCY TRANSLATION
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; 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 six months ended June 30, 2018
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 June 30, 2018 and
December 31, 2017 were translated at RMB6.62 to $1.00 and RMB6.94 to $1.00, respectively. The average translation rates applied
to the consolidated statements of income and comprehensive income and of cash flows for the six months ended June 30, 2018 and
June 30, 2017 were RMB6.37 to $1.00 and RMB6.53 to $1.00, respectively.
For the six months ended June 30, 2017
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 June 30, 2017 and
December 31, 2016 were translated at RMB6.77 to $1.00 and RMB6.94 to $1.00, respectively. The average translation rates applied
to the consolidated statements of income and comprehensive income and of cash flows for the six months ended June 30, 2017 and
June 30, 2016 were RMB6.87 to $1.00 and RMB6.53 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:
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 February 2017, the Financial Accounting
Standards Board (FASB) issued Accounting Standards Update No. 2017-02,
Leases (Topic 842)
(ASU 2017-02), which generally
requires companies to recognize operating and financing lease liabilities and corresponding right of-use assets on the balance
sheet. This guidance will be effective for us in the first quarter of 2019 on a modified retrospective basis and early adoption
is permitted. We are still evaluating the effect that this guidance will have on our consolidated financial statements and related
disclosures.
In March 2017, the FASB issued Accounting Standards
Update No. 2017-08,
Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue
Gross versus Net)
(ASU 2017-08) which clarifies the implementation guidance on principal versus agent considerations. The guidance
includes indicators to assist an entity in determining whether it controls a specified good or service before it is transferred
to the customers. This guidance will be effective for us in the first quarter of 2018, with the option to adopt it in the first
quarter of 2018. We are still evaluating the effect that this guidance will have on our consolidated financial statements and related
disclosures.
In March 2017, the FASB issued Accounting Standards
Update No. 2017-09,
Compensation-Stock Compensation (Topic 718): Improvement to Employee Share-based Payment Accounting
(ASU
2017-09) to simplify the accounting for share-based payment transactions, including the income tax consequences, an option to recognize
gross share-based compensation expense with actual forfeitures recognized as they occur, as well as certain classifications on
the statement of cash flows. This guidance will be effective for us in the first quarter of 2018, and early adoption is permitted.
We are still evaluating the effect that this guidance will have on our consolidated financial statements and related disclosures.
In October 2017, the FASB issued Accounting
Standards Update No. 2017-16,
Income Taxes (Topic 740): Intra-Entity Transfers Other than Inventory
(ASU 2017-16), which
requires companies to recognize the income-tax consequences of an intra-entity transfer of an asset other than inventory. This
guidance will be effective for us in the first quarter of 2018, with the option to adopt it in the first quarter of 2018. We currently
anticipate adopting the new standard effective January 1, 2018, and do not expect the standard to have a material impact on our
consolidated financial statements.
In November 2017, the FASB issued Accounting
Standards Update No. 2017-18,
Statement of Cash Flows (Topic 230): Restricted Cash
(ASU 2017-18), which requires companies
to include amounts generally described as restricted cash and restricted cash equivalents in cash and cash equivalents when reconciling
beginning-of-period and end-of-period total amounts shown on the statement of cash flows. This guidance will be effective for us
in the first quarter of 2018 and early adoption is permitted. We are still evaluating the effect that this guidance will have on
our consolidated financial statements and related disclosure
In January 2018, the FASB issued Accounting
Standards Update No. 2018-01,
Business Combinations (Topic 805): Clarifying the Definition of a Business
(ASU 2018-01),
which revises the definition of a business and provides new guidance in evaluating when a set of transferred assets and activities
is a business. This guidance will be effective for us in the first quarter of 2018 on a prospective basis, and early adoption is
permitted. We do not expect the standard to have a material impact on our consolidated financial statements.
In January 2018, the FASB issued Accounting
Standards Update No. 2018-04,
Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment
(ASU
2018-04), which eliminates step two from the goodwill impairment test. Under ASU 2018-04, an entity should recognize an impairment
charge for the amount by which the carrying amount of a reporting unit exceeds its fair value up to the amount of goodwill allocated
to that reporting unit. This guidance will be effective for us in the first quarter of 2020 on a prospective basis, and early adoption
is permitted. We do not expect the standard to have a material impact on our 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.