SINO AGRO FOOD, INC. AND SUBSIDIARIES
The accompanying notes are an integral part of
these consolidated financial statements.
The accompanying notes are an integral part of these
consolidated financial statements.
The accompanying notes are an integral part of
these consolidated financial statements.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Sino Agro Food, Inc. (the “
Company” or “SIAF”) (formerly known as Volcanic Gold, Inc. and A Power Agro Agriculture Development, Inc.)
was incorporated on October 1, 1974 in the State of Nevada, United States of America.
The Company was engaged in the mining
and exploration business but ceased its mining and exploring business on October 14, 2005. On August 24, 2007, the Company entered
into a Merger and Acquisition Agreement with Capital Award Inc., a Belize corporation (“CA”) and its subsidiaries Capital
Stage Inc. (“CS”) and Capital Hero Inc. (“CH”). Effective the same date, CA completed a reverse
merger transaction with SIAF. SIAF acquired all the outstanding common stock of CA from Capital Adventure, a shareholder of CA, for 3,232,323
shares of the Company’s common stock.
On August 24, 2007 the Company
changed its name from Volcanic Gold, Inc. to A Power Agro Agriculture Development, Inc. On December 8, 2007, the Company
changed its name to Sino Agro Food, Inc.
On September 5, 2007, the Company
acquired three existing businesses in the People’s Republic of China (the “P.R.C.”):
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(a)
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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.;
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(b)
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Tri-Way Industries Limited (“TRW”),
a company incorporated in Hong Kong; and
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(c)
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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.
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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:
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●
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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
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●
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Guangzhou
City Garwor Company Limited (English translation) (“Garwor”), a company
incorporated in the P.R.C., specializing in sales and marketing.
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SJAP is engaged in the business of
manufacturing bio-organic fertilizer, livestock feed and development of other agriculture projects in the County of Huangyuan, in the
vicinity of the Xining City, Qinghai Province, P.R.C.
In September 2009, the Company
carried out an internal reorganization of its corporate structure and business, and formed a 100% owned subsidiary, A Power Agro Agriculture
Development (Macau) Limited (“APWAM”), which was formed in Macau. APWAM then acquired PMH’s 45% equity interest
in SJAP. By virtue of the acquisition, APWAM assumed all obligations and liabilities of PMH under the Sino Foreign Joint Venture Agreement.
On May 7, 2010, Qinghai Sanjiang sold and transferred its equity interest in SJAP to Garwor. The State Administration for Industry
and Commerce of Xining City Government of the PRC approved the sale and transfer. As a result, APWAM owned 45% of SJAP and Garwor owned
the remaining 55%.
On September 9, 2010, an application
was submitted by the Company to the Companies Registry of Hong Kong for deregistration of PMH under Section 291AA of the Hong Kong
Companies Ordinance. On January 28, 2011, PMH was dissolved
On March 23, 2018, Qinghai Quanwang
Investment Management Company Limited (“Quanwang”) acquired 8.3% equity interest in SJAP for total cash consideration
of $459,137. As of December 31, 2019, APWAM owned 41.25% of SJAP, Garwor owned 50.45% and Quanwang owned the remaining 8.3%.
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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1.
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CORPORATE INFORMATION (CONTINUED)
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On February 15, 2011 and March 29,
2011, the Company entered into an agreement and a memorandum of understanding (an “MOU”), respectively, to sell 100%
equity interest in HYT group (including HYT and ZX) to Mr. Xin Ming Sun, a director of ZhongXingNong Nu Co., Ltd for $45,000,000,
with effective date of January 1, 2011.
On February 28, 2011, the Company
applied to form Enping City Bi Tao A Power Prawn Culture Development Co Limited (“EBAPCD”) , and the Company would
indirectly own a 25% equity interest in future Sino Joint Venture Company (pending approval).
On February 28, 2011, TRW applied
to form a corporate joint venture, Enping City Bi Tao A Power Fishery Development Co., Limited (“EBAPFD”), incorporated
in the PRC. TRW owned a 25% equity interest in EBAPFD. On November 17, 2011, TRW formed Jiang Men City A Power Fishery Development
Co., Limited (“JFD”) in which it acquired a 25% equity interest, while withdrawing its 25% equity interest in EBAPFD.
As of December 31, 2011, the Company had invested for total cash consideration of $1,258,607 in JFD. JFD operates an indoor fish
farm. On January 1, 2012, the Company acquired an additional 25% equity interest in JFD for total cash consideration of $1,662,365.
As of January 1, 2012, the Company had consolidated the assets and operations of JFD. On April 1, 2012, the Company acquired
an additional 25% equity interest in JFD for the total cash consideration of $1,702,580. These acquisitions were at our option according
the terms of the original development agreement. The Company owned a 75% equity interest in JFD, representing majority of voting rights
and controls its board of directors. On August 15, 2016, the acquisition agreement was executed by TRW for acquiring the other 25%
equity in JFD which was a Sino Foreign Joint Venture Co. that TRW had 100% equity interest with effect on October 5, 2016. Upon the
acquisitions of 3 additional prawn farms assets at fair value of $238.32 million from respective third parties and the master technology
license at fair value of $30 million from Capital Award, Inc. by JFD, and the consideration of the above acquisitions were planned
to be settled by the new issue shares of 99,990,000 TRW shares at $3.41 amounting to $340.53 million on or before March 31, 2018.
As a result, SIAF’s equity interest in TRW was diluted from 100% to 23.89% with effective on October 5, 2016. The above transactions
leaded the Company loss of control over TRW group, the Company’s investments in TRW and JFD were reclassified from a subsidiary
to investments in unconsolidated equity investees as of October 5, 2016. The dilution of the Company’s investments in TRW group
constituted a deemed disposal of the subsidiaries. The deemed gain on disposal of $56,947,005 was recorded in net income from discontinued
operations of the consolidated statements of income and other comprehensive income of the Company for the year ended 31 December 2016.
On October 1, 2016, the Company took up all assets and all liabilities of TRW and JFD except plant and equipment - fish farm. The
Company converted the amount due from unconsolidated equity investee into equity interest during the fourth quarter of 2018, which resulted
in equity interest in TRW from 23.89% to 36.60%
On April 15, 2011, MEIJI applied
to form Enping City A Power Cattle Farm Co., Limited (“ECF”), all of which the Company would indirectly own a 25% equity
interest on November 17, 2011. On January 1, 2012, the Company had invested $1,076,489 in ECF and the amount was settled in
contra against accounts receivable due from ECF. On September 17, 2012 MEIJI formed Jiang Men City Hang Mei Cattle Farm Development
Co., Limited (“JHMC”) and acquired additional 50% equity interest for the total cash consideration of $2,944,176 on
September 30, 2012 while withdrawing its 25% equity interest in ECF. This acquisition was at our option according to the terms of
the original development agreement. The Company presently owns 75% equity interest in JHMC, representing majority of voting right and
controls its board of directors. As of September 30, 2012, the Company had consolidated the assets and operations of JHMC. As of
December 31, 2018, MEIJI total investment in JHMC was $4,385,101.
On July 18, 2011, the Company
formed Hunan Shenghua A Power Agriculture Co., Limited (“HSA”), in which the Company owns a 26% equity interest, and
SJAP owns a 50% equity interest with the Chinese partner owning the remaining 24%. On April 5, 2018, SJAP transfer all of its equity
interest to MEIJI. As of December 31, 2018, MEIJI total investment in HSA was $1,651,774.
On November 12, 2013, the Company
acquired a shell company, Goldcup9203 AB, incorporated in Sweden, in which the Company owns a 100% equity interest. Goldcup 9203 AB changed
its name to Sino Agro Food Sweden AB (publ) (“SAFS”). During the year ended December 31, 2016, SAFS changed to
a private company. As of December 31, 2018, the Company invested $77,664 in SAFS. The Company delisted from Merkur Market on 10th
September 2019, and subsequently by 31st December 2019 SAFS was dissolved.
SJAP formed Qinghai Zhong He Meat
Products Co., Limited (“QZH”) , with SJAP would owning 100% equity interest. SJAP formed Qinghai Zhong He Meat Products Co.,
Limited (“QZH”), with SJAP would owning 100% equity interest. On October 25, 2015, both QZH and new stockholder, Qinghai
Quanwang Investment Management Co., Ltd (“QQI”) contributed additional capital of $4,157,682 and $769,941, respectively.
As a result, SJAP decreased its equity interest from 100% to 85% and QQI owned a 14% equity interest. In addition, according to investment
agreement between QZH and QQI, (i) QQI only enjoy interest 6% annually on its capital contribution and did not enjoy profit distribution;
(ii) investment period was 3 years only, and (iii) SJAP shared 100% on profit or loss after deduction 6% interest to QQI and
enjoyed 100% voting rights of QZH’s board and stockholders meetings. SJAP disposed its 85% equity interest in QZH for RMB2 (equivalent
to $0) for cash and completed on December 30, 2018. As a result, QZH was derecognized as variable interest entity of the company.
On September 30th 2019, Mr. Solomon Lee resigned as the Chairman of SJAP resulting in categorization of SJAP as an Investor
in Associate from a subsidiary status.
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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1.
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CORPORATE INFORMATION (CONTINUED)
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Up until September 30th 2019,
revenues have been generated from activities that the Company divided into five stand-alone business divisions or units: (1) Fishery
development (in consulting and services), (2) Cattle & Beef (fully integrated activity), (3) Organic Fertilizer, (4) HU
Plantation, and (5) Marketing and Trading.
The fully integrated Cattle and Beef
business was gradually being scaled down from year 2016 onward after the China Government relaxed its importation policies to allow many
countries (i.e. Australia, NZ, Countries of South America and Canada etc.) to import beef into China affecting its domestic cattle rearing
and beef industry. SJAP lost in excessive of US$30 million by year ended December 31st 2017 and by September 30th 2019, it reduced
its large fully integrated activity into a small operation keeping and maintaining the production of fertilizer at less than 8,000 MT
per year comparing to over 35,000 MT per year in 2015 and the production of concentrated live-stock feed at less than 3000 MT per year
compares to over 15,000 MT in 2016 and fattening less than 1500 heads of live cattle at its own farm compares to 2015’s around 25,000
heads of live cattle reared and fattening by 20 corporative farms that consisted over 2,000 individual farmers collectively.
From 1st October 2019 onward,
SJAP contracted the said small maintaining operation to its existing management.
The Company currently maintains operations
of its services in engineering consulting and specializing in the development of agriculture and aquaculture projects whereas operations
of its HU Plantation, Asian “Yellow cattle” demonstration farm, and HSA’s manufacturing of fertilizer were contracted
out to their respective farm’s management since 30th September 2019.
The Company is now the investor in
two Associates originated from subsidiary status namely SJAP and Tri-way; whereas Tri-way is in the aquaculture segment contracting out
it’s aqua-farms’ operations (inclusive Aqua-farm 1, 2 and 3 & b) to respective farm’s managements and JFD,
it’s fully owned subsidiary in China, has the sole right to market and distribute the said Aqua-farms’ productions by buying
from and selling all fishery productions of the said contracted aqua-farms. Operation of Aqua-farm 4 and 5 of the Zhongshen Mega Farm
Development ceased since September 30th 2019 failing the Company’s original ambition to become one of the biggest prawn producers
in the world by year end of 2024.
Therefore from 1st October 2019
onward, Revenues of the Company are generated from (i). Incomes derived from CA’s Engineering Consulting and services, (ii). Incomes
derived from the contractual agreements of JHST, MEIJI and HSA, (iii). CA’s (or the Corporate) marketing and Trading business and
(iv). Incomes generated from its investments in SJAP and Tri-way.
The Company’s principal executive
office is located at Room 3520 Block A, China Shine Plaza, No. 9 Lin He Xi Road, Tianhe District, Guangzhou City, Guangdong Province,
P.R.C., 510610.
The nature of the operations and principal
activities of the Company and its subsidiaries are described in Note 2.2.
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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2.
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SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
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The Company has adopted December 31 as its fiscal year
end.
Name of subsidiaries
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Place of incorporation
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Percentage of interest*
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Principal activities
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Capital Award Inc. (“CA”)
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Belize
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100% (2019: 100%) directly
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Fishery development and holder of A-Power Technology master license.
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Capital Hero Inc. (“CS”)
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Belize
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100%(2019:100%)indirectly
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Dormant Capital HeroInc.
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(“CH”)Capital Stage Inc. (CH)
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Belize
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100% (2019: 100%) indirectly
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Dormant Capital Stage Inc.(CS)
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Macau Eiji Company Limited (“MEIJI”)
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Macau, P.R.C.
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100% (2019: 100%) directly
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Investment holding, cattle farm development, beef cattle and beef trading
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Sino Agro Food Sweden AB (“SAFS”).
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Sweden
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100% (2019 : 100%) directly
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Dormant: Dissolved 31st December
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A Power Agro Agriculture Development (Macau) Limited (“APWAM”)
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Macau, P.R.C.
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100% (2019: 100%) directly
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Investment holding
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Jiang Men City Heng Sheng Tai Agriculture Development Co. Ltd (“JHST”)
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P.R.C.
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75% (2019: 75%) Indirectly
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HylocereusUndatus Plantation (“HU Plantation”).
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Jiang Men City Hang Mei Cattle Farm Development Co., Limited (“JHMC”)
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P.R.C.
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75% (2019:75%) indirectly
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Beef cattle cultivation
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Hunan Shenghua A Power Agriculture Co., Limited (“HSA”)
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P.R.C.
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76% (2019:76%) indirectly
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Manufacturing of organic fertilizer, livestock feed, and beef cattle and sheep cultivation, and plantation of crops and pastures
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Name of associate (investee)
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Place of incorporation
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Percentage of interest*
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Principal activities
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Qinghai Sanjiang A Power Agriculture Co., Ltd (“SJAP”)
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P.R.C.
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41.25% (2019: 41.25%) indirectly
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Manufacturing of organic fertilizer, livestock feed, and beef cattle
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Tri-way Industries Limited
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Hong Kong, P.R.C.
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36.6% (2019: 36.6%) directly
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A-Power Technology license (P.R.C.)
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Sales and marketing of fishery production& products.
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SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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2.
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SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
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2.3
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BASIS OF PRESENTATION
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The consolidated financial statements
are prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”).
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2.4
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BASIS OF CONSOLIDATION
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The consolidated financial statements
include the financial statements of the Company, its subsidiaries CA, CS, CH, MEIJI, JHST, JHMC, HSA, APWAM, SAFS and its variable interest
entity SJAP. All material inter-company transactions and balances have been eliminated in consolidation.
SIAF, CA, CS, CH, MEIJI, JHST, JHMC,
HSA, APWAM, SAFS, and SJAP are hereafter referred to as (the “Company”).
The Company adopted the accounting pronouncements
relating to business combination (primarily contained in ASC Topic 805 “Business Combinations”), including assets acquired
and liabilities assumed on arising from contingencies. These pronouncements established principles and requirement for how the acquirer
of a business recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any non-controlling
interest in the acquisition as well as provides guidance for recognizing and measuring the goodwill acquired in the business combination
and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of
the business combination. In addition, these pronouncements eliminate the distinction between contractual and non-contractual contingencies,
including the initial recognition and measurement criteria and require an acquirer to develop a systematic and rational basis for subsequently
measuring and accounting for acquired contingencies depending on their nature. The Company’s adoption of these pronouncements will
have an impact on the manner in which it accounts for any future acquisitions.
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2.6
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NON - CONTROLLING INTEREST IN
CONSOLIDATED FINANCIAL STATEMENTS
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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
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2.
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SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
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In May 2014, the FASB issued Accounting
Standard Update 2014-09, Revenue from Contracts with Customers (Topic 606), which replaces numerous requirements in U.S. GAAP, including
industry specific requirements, and provides a single revenue recognition model for recognizing revenue from contracts with customers.
The Company adopted this standard effective January 1, 2018.
The core principle of the new standard
is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects
the consideration to which the company expects to be entitled in exchange for those goods or services. This requires companies to identify
contractual performance obligations and determine whether revenue should be recognized at a point in time or over time, based on when
control of goods and services transfers to a customer. The Company’s revenues generated mainly from trading of frozen food and sales
of agricultural products are recognized at a point in time.
The ASU requires the use of a new five-step
model to recognize revenue from customer contracts. The five-step model requires that the Company (i) identify the contract with
the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, including variable
consideration to the extent that it is probable that a significant future reversal will not occur, (iv) allocate the transaction
price to the respective performance obligations in the contract, and (v) recognize revenue when (or as) the Company satisfies the
performance obligation. The application of the five-step model to the revenue streams compared to the prior guidance did not result in
significant changes in the way the Company records its revenues.
Multiple-Element Arrangements
To qualify as a separate unit of accounting
under ASC 605-25 “Multiple Element Arrangements”, the delivered item must have value to the customer on a standalone
basis. The significant deliverables under the Company’s multiple-element arrangements are consulting and service under development
contract, commission and management service.
Revenues from the Company’s consulting
and services under development contracts are performed under fixed-price contracts. Revenues under long-term contracts are accounted for
under the percentage-of-completion method of accounting in accordance with the Financial Accounting Standards Board (“FASB”)
Accounting Standards Codification (“ASC”) Topic 605, Revenue Recognition (“ASC 605”). Under the
percentage-of- completion method, the Company estimates profit as the difference between total estimated revenue and total estimated cost
of a contract and recognize that profit over the contract term. The percentage of costs incurred determines the amount of revenue to be
recognized. Payment terms are generally defined by the installation contract and as a result may not match the timing of the costs incurred
by the Company and the related recognition of revenue. Such differences are recorded as either costs or estimated earnings in excess of
billings on uncompleted contracts or billings in excess of costs and estimated earnings on uncompleted contracts. The Company determines
a customer’s credit worthiness at the time an order is accepted. Sudden and unexpected changes in a customer’s financial condition
could put recoverability at risk.
The percentage of completion method
requires the ability to estimate several factors, including the ability of the customer to meet its obligations under the contract, including
the payment of amounts when due. If the Company determines that collectability is not assured, the Company will defer revenue recognition
and use methods of accounting for the contract such as the completed contract method until such time as the Company determines that collectability
is reasonably assured or through the completion of the project.
For fixed-price contracts, the Company
uses the ratio of costs incurred to date on the contract to management’s estimate of the contract’s total costs, to determine
the percentage of completion on each contract. This method is used as management considers expended costs to be the best available measure
of progression of these contracts. Contract costs include all direct material, subcontract and labor costs and those indirect costs related
to contract performance, such as supplies, tool repairs and depreciation. The Company accounts for maintenance and repair services under
the guidance of ASC 605 as the services provided relate to construction work. Contract costs incurred to date and expected total contract
costs are continuously monitored during the term of the contract. Changes in job performance, job conditions, and estimated profitability
arising from contract penalty, change orders and final contract settlements may result in revisions to the estimated profit ability during
the contract. These changes, which include contracts with estimated costs in excess of estimated revenues, are recognized as contract
costs in the period in which the revisions are determined. Profit incentives are included in revenues when their realization is reasonably
assured. At the point the Company anticipates a loss on a contract, the Company estimates the ultimate loss through completion and recognizes
that loss in the period in which the loss was identified.
The Company does not provide warranties
to customers on a basis customary to the industry, however, customers can claim warranty directly from product manufacturers for defects
in equipment or products. Historically, the Company has experienced no warranty claims.
The Company provides various management
services to its customers in the P.R.C. based on a negotiated fixed-price contract. The clients usually pay the fees when the services
contract is signed and services are rendered. The Company recognizes these services-based revenues from contracts when (i) management
services are rendered; (ii) clients recognize the completion of services; and (iii) collectability is reasonably assured. Fees
received in advance are recorded as deferred revenue under current liabilities.
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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2.
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SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
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2.9
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COST OF GOODS SOLD AND COST OF
SERVICES
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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.
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2.10
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SHIPPING AND HANDLING
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Shipping and handling costs related
to cost of goods sold are included in general and administrative expenses, which totaled $0 and $0 for the nine months ended September 30,
2021 and 2020, respectively.
Advertising costs are included in general
and administrative expenses, which totaled $0, and $0 for the nine months ended September 30, 2021 and 2020, respectively.
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2.12
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RESEARCH AND DEVELOPMENT EXPENSES
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Research and development expenses are
included in general and administrative expenses, which totaled $0 and $0 for the nine months ended September 30, 2021 and 2020, respectively.
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2.13
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FOREIGN CURRENCY TRANSLATION AND OTHER COMPREHENSIVE INCOME
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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 $ (51,601,424) as of September 30, 2021 and $ (54,997,545)
as of December 31, 2020. The balance sheet amounts with the exception of equity as of September 30, 2021 and December 31,
2020 were translated using an exchange rate of RMB 6.49 to $1.00 and RMB 6.52 to $1.00, respectively. The average translation rates applied
to the statements of income and other comprehensive income and of cash flows for the nine months ended September 30, 2021 and 2020 were
RMB 6.47 to $1.00 and RMB 6.81 to $1.00, respectively.
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2.14
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CASH AND CASH EQUIVALENTS
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The Company considers all highly liquid
securities with original maturities of three months or less when acquired to be cash equivalents. Cash and cash equivalents kept with
financial institutions in the P.R.C. are not insured or otherwise protected. Should any of those institutions holding the Company’s
cash become insolvent, or should the Company become unable to withdraw funds for any reason, the Company could lose the cash on deposit
with that institution.
The Company maintains reserves for
potential credit losses on accounts receivable. Management reviews the composition of accounts receivable and analyzes historical bad
debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate
the adequacy of these reserves. Reserves are recorded primarily on a specific identification basis.
The standard credit period for most
of the Company’s clients is three months. The collection period over 1 year is classified as long-term accounts receivable. Management
evaluates the collectability of the receivables at least quarterly.
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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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:
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(a)
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raw materials - purchase cost on a weighted average basis;
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(b)
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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
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(c)
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retail and wholesale merchandise finished goods - purchase cost on a weighted average basis.
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Net realizable value is the estimated
selling price in the ordinary course of business, less estimated costs for completion and the estimated costs necessary to make the sale.
Plant and equipment are stated at cost
less accumulated depreciation and any accumulated impairment losses. Such costs include the cost of replacing parts that are eligible
for capitalization when the cost of replacing the parts is incurred. Similarly, when each major inspection is performed, its cost is recognized
in the carrying amount of the plant and equipment as a replacement only if it is eligible for capitalization. The assets’ residual
values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each financial year end.
Depreciation is calculated on a straight-line
basis over the estimated useful lives of the assets.
Plant and machinery
|
|
|
5 - 10 years
|
|
Structure and leasehold improvements
|
|
|
10 - 30 years
|
|
Mature seeds and herbage cultivation
|
|
|
20 years
|
|
Furniture and equipment
|
|
|
2.5 - 10 years
|
|
Motor vehicles
|
|
|
4 - 10 years
|
|
An item of plant and equipment is removed
from the accounts upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain
or loss arising on disposal of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the
item) is included in the consolidated statements of income in the period the item is disposed.
Goodwill is an asset representing the
fair economic benefits arising from other assets acquired in a business combination that are not individually identified or separately
recognized. Goodwill is tested for impairment on an annual basis at the end of the Company’s fiscal year, or when impairment indicators
arise. The Company uses a fair-value-based approach to test for impairment at the level of each reporting unit. The Company directly acquired
MEIJI, which is the holding company of JHST that operates the Hu Plantation. As a result of this acquisition, the Company recorded goodwill
in the amount of $724,940. This goodwill represents the fair value of the assets acquired in these acquisitions over the cost of the assets
acquired.
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
|
|
2.19
|
PROPRIETARY TECHNOLOGIES
|
A master license of stock feed manufacturing
technology was acquired and the costs of acquisition are capitalized as proprietary technologies when technological feasibility has been
established. Cost of acquisition of stock feed manufacturing technology master license is amortized using the straight-line method over
its estimated life of 25 years.
An aromatic cattle-feeding formula
was acquired and the costs of acquisition are capitalized as proprietary technologies when technological feasibility has been established.
Cost of acquisition on aromatic cattle-feeding formula is amortized using the straight-line method over its estimated life of 20 years.
The cost of sleepy cods breeding technology
license is capitalized as proprietary technologies when technological feasibility has been established. Cost of granting sleepy cods breeding
technology license is amortized using the straight-line method over its estimated life of 25 years.
Bacterial cellulose technology license
and related trade mark are capitalized as proprietary technologies when technological feasibility has been established. Cost of license
and related trade mark is amortized using the straight-line method over its estimated life of 20 years.
The Company has determined that technological
feasibility is established at the time a working model of products is completed. Proprietary technologies are intangible assets of finite
lives. Management evaluates the recoverability of proprietary technologies on an annual basis at the end of the Company’s fiscal
year, or when impairment indicators arise. As required by ASC Topic 350 “Intangible - Goodwill and Other”, the Company uses
a fair-value-based approach to test for impairment.
|
2.20
|
CONSTRUCTION IN PROGRESS
|
Construction in progress represents
direct costs of construction as well as acquisition and design fees incurred. Capitalization of these costs ceases and the construction
in progress is transferred to property and equipment when substantially all the activities necessary to prepare the assets for their intended
use are completed. No depreciation is provided until construction is completed and the asset is ready for its intended use.
Land use rights represent acquisition
of rights to agricultural land from farmers and are amortized on the straight-line basis over their respective lease periods. The lease
period of agricultural land is in the range from 10 to 60 years. Land use rights purchase prices were determined in accordance with the
P.R.C. Government’s minimum lease payments on agricultural land and mutually agreed to terms between the Company and the vendors.
|
2.22
|
EQUITY METHOD INVESTMENTS
|
Investee entities, in which the company
can exercise significant influence, but not control, are accounted for under the equity method of accounting. Under the equity method
of accounting, the company’s share of the earnings or losses of these companies is included in net income. A loss in value of an
investment that is other than a temporary decline is recognized as a charge to operations. Evidence of a loss in value might include,
but would not necessarily be limited to absence of an ability to recover the carrying amount of the investment or inability of the investee
to sustain an earnings capacity that would justify the carrying amount of the investment.
|
2.23
|
CORPORATE JOINT VENTURE
|
A corporation formed, owned, and operated
by two or more businesses as a separate and discrete business or project (venture) for their mutual benefit is considered to be a corporate
joint venture. Investee entities, in which the Company can exercise significant influence, but not control, are accounted for under the
equity method of accounting. Under the equity method of accounting, the Company’s share of the earnings or losses of these companies
is included in net income.
A loss in value of an investment that
is other than a temporary decline is recognized as a charge to operations. Evidence of a loss in value might include, but would not necessarily
be limited to, the absence of an ability to recover the carrying amount of the investment or inability of the investee to sustain an earnings
capacity that would justify the carrying amount of the investment.
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
|
|
2.24
|
VARIABLE INTEREST ENTITY
|
A variable interest entity (“VIE”)
is an entity (investee) in which the investor has obtained less than a majority interest, according to the Financial Accounting Standards
Board (FASB). A VIE is subject to consolidation if a VIE meets one of the following three criteria as elaborated in ASC Topic 810-10,
Consolidation:
|
(a)
|
equity-at-risk is not sufficient to support the entity’s activities;
|
|
(b)
|
as a group, the equity-at-risk holders cannot control the entity; or
|
|
(c)
|
the economics do not coincide with the voting interest.
|
If a firm is the primary beneficiary
of a VIE, the holdings must be disclosed on the balance sheet. The primary beneficiary is defined as the person or company with the majority
of variable interests. A corporation formed, owned, and operated by two or more businesses (ventures) as a separate and discrete business
or project (venture) for their mutual benefit is defined as a joint venture.
Treasury stock means shares of a corporation’s
own stock that have been issued and subsequently reacquired by the corporation. Converting outstanding shares to treasury shares does
not reduce the number of shares issued but does reduce the number of shares outstanding. These shares are not eligible to receive dividends.
Accounting for excesses and deficiencies on treasury stock transactions is governed by ASC 505-30-30.
State laws and federal agencies closely
regulate transactions involving a company’s own capital stock, so the purchase of outstanding shares must have a legitimate purpose.
Some of the most common reasons for purchasing outstanding shares are as follows:
|
(a)
|
to meet additional stock needs for various reasons, including newly implemented stock option plans, stock for convertible bonds or convertible preferred stock, or a stock dividend.
|
|
(b)
|
to make more shares available for acquisitions of other entities.
|
The cost method of accounting for treasury
shares has been adopted by the Company. The purchase of outstanding shares and thus converting them into treasury shares is treated as
a temporary reduction in shareholders’ equity in view of the expectation to reissue the shares instead of retiring them. When the
Company reissues the treasury shares, the temporary account is eliminated. The cost of acquiring outstanding shares for converting into
treasury shares is charged to a contra account, in this case a contra equity account that reduces the stockholder equity balance.
The Company accounts for income taxes
under the provisions of ASC Topic 740 “Accounting for Income Taxes.” Under ASC Topic 740, deferred tax assets and liabilities
are determined based on the difference between the financial statement carrying amounts and the tax bases of assets and liabilities using
enacted tax rates in effect in the years in which the differences are expected to reverse.
The provision for income tax is based
on the results for the year as adjusted for items, which are non-assessable or disallowed. It is calculated using tax rates that have
been enacted or substantively enacted at the balance sheet date. Deferred tax is accounted for using the balance sheet liability method
in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the financial statements
and the corresponding tax basis used in the computation of assessable tax profit. In principle, deferred tax liabilities are recognized
for all taxable temporary differences, and deferred tax assets are recognized to the extent that it is probable that taxable profit will
be available against which deductible temporary differences can be utilized.
Deferred income taxes are calculated
at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled. Deferred tax is charged
or credited in the income statement, except when it related to items credited or charged directly to equity, in which case the deferred
tax is also dealt with in equity. Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation
authority and the Company intends to settle its current tax assets and liabilities on a net basis.
ASC Topic 740 also prescribes a more-likely-than-not
threshold for financial statement recognition and measurement of a tax position taken, or for one expected to be taken, in a tax return.
ASC Topic 740 also provides guidance related to, among other things, classification, accounting for interest and penalties associated
with tax positions, and disclosure requirements. Any interest and penalties accrued related to unrecognized tax benefits will be recorded
as tax expense.
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
|
|
2.27
|
POLITICAL AND BUSINESS RISK
|
The Company’s operations are
carried out in the P.R.C. Accordingly, the political, economic and legal environment in the P.R.C. may influence the Company’s business,
financial condition and results of operations by the general state of the P.R.C.’s economy. The Company’s operations in the
P.R.C. are subject to specific considerations and significant risks not typically associated with companies in North America and Western
Europe. The Company’s results may be adversely affected by changes in governmental policies with respect to laws and regulations,
anti- inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things.
|
2.28
|
CONCENTRATION OF CREDIT RISK
|
Cash includes cash at banks and demand
deposits in accounts maintained with banks within the P.R.C. Total cash in these banks as of September 30, 2021 and December 31,
2020 amounted to $271,743 and $188,846, respectively, none of which is covered by insurance. The Company has not experienced any losses
in such accounts and believes it is not exposed to any risks to its cash in bank accounts.
The Company had 5 major customers (A,
B, C, D and E) whose business individually represented the following percentages of the Company’s total revenue for the period indicated:
|
|
2021Q1-3
|
|
|
2020Q1-3
|
|
Customer A
|
|
|
54.44
|
%
|
|
|
35.54
|
%
|
Customer B
|
|
|
25.75
|
%
|
|
|
24.32
|
%
|
Customer C
|
|
|
19.81
|
%
|
|
|
14.28
|
%
|
Customer D
|
|
|
|
|
|
|
8.17
|
%
|
Customer F
|
|
|
|
|
|
|
2.74
|
%
|
|
|
|
100
|
%
|
|
|
85.05
|
%
|
|
|
|
|
Percentage
of revenue
|
|
|
Amount
|
|
Customer A
|
|
Organic fertilizer and Bread Grass Division
|
|
|
54.44
|
%
|
|
$
|
4,281,688
|
|
Customer B
|
|
Cattle Farm Development and HU Plantation Division
|
|
|
25.75
|
%
|
|
$
|
2,024,944
|
|
Customer C
|
|
Corporate Division
|
|
|
19.81
|
%
|
|
$
|
1,557,825
|
|
Accounts receivable are derived from
revenue earned from customers located primarily in the P.R.C. The Company performs ongoing credit evaluations of customers and has not
experienced any material losses to date.
The Company had 5 major customers whose
accounts receivable balance individually represented the following percentages of the Company’s total accounts receivable:
|
|
September 30,
2021
|
|
|
December 31,
2020
|
|
Customer A
|
|
|
41.76
|
%
|
|
|
44.89
|
%
|
Customer B
|
|
|
18.96
|
%
|
|
|
24.45
|
%
|
Customer C
|
|
|
11.43
|
%
|
|
|
14.66
|
%
|
Customer D
|
|
|
10.69
|
%
|
|
|
10.56
|
%
|
Customer E
|
|
|
2.89
|
%
|
|
|
0.02
|
%
|
Customer F
|
|
|
|
|
|
|
|
%
|
|
|
|
85.73
|
%
|
|
|
99.63
|
%
|
As of September 30, 2021, amounts
due from customers A, B and C are $9,630,980, $4,372,797 and $2,636,068 respectively. The Company has not experienced any significant
difficulty in collecting its accounts receivable in the past and is not aware of any financial difficulties of its major customers.
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
|
|
2.29
|
IMPAIRMENT OF LONG-LIVED ASSETS AND INTANGIBLE ASSETS
|
In accordance with ASC Topic 360, “Property,
Plant and Equipment,” long-lived assets to be held and used are analyzed for impairment whenever events or changes in circumstances
indicate that the related carrying amounts may not be recoverable. The Company reviews the carrying amount of its long-lived assets, including
intangibles, for impairment, during each reporting period. An asset is considered impaired when estimated future cash flows are less than
the carrying amount of the asset. In the event the carrying amount of such asset is considered not recoverable, the asset is adjusted
to its fair value. Fair value is generally determined based on discounted future cash flow. As of 31 December 2019, 2020 and 30 September
2021, the Company provided impairment losses of -$3,834,658, -$104,492,817 and -$29,284,776 respectively.
As prescribed in ASC Topic 260 “Earnings
per Share,” Basic Earnings per Share (“EPS”) is computed by dividing net income available to common stockholders
by the weighted average number of common stock shares outstanding during the year. Diluted EPS is computed by dividing net income available
to common stockholders by the weighted-average number of common stock shares outstanding during the year plus potential dilutive instruments
such as stock options and warrants. The effect of stock options on diluted EPS is determined through the application of the treasury stock
method, whereby proceeds received by the Company based on assumed exercises are hypothetically used to repurchase the Company’s
common stock at the average market price during the period.
ASC 260-10-55 requires that stock dividends
or stock splits be accounted for retroactively if the stock dividends or stock splits occur during the year, or retroactively if the stock
dividends or stock splits occur after the end of the period but before the release of the financial statements, by considering it outstanding
of the entirety of each period presented. Dilution is computed by applying the treasury stock method. Under this method, options and warrants
are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were
used to purchase common stock at the average market price during the year.
For the nine months ended September
30, 2021 and 2020, basic earnings (loss) per share attributable to Sino Agro Food, Inc. and subsidiaries common stockholders amounted
to $(0.28), and $(0.88), respectively. For the nine months ended September 30, 2021 and 2020, diluted earnings (loss) per share attributable
to Sino Agro Food, Inc. and its subsidiaries’ common stockholders amounted to $(0.28), and $(0.88), respectively.
|
2.31
|
ACCUMULATED OTHER COMPREHENSIVE INCOME
|
ASC Topic 220 “Comprehensive
Income” establishes standards for reporting and displaying comprehensive income and its components in financial statements.
Comprehensive income is defined as the change in stockholders’ equity of a business enterprise during a period from transactions
and other events and circumstances from non-owner sources. The comprehensive income for all periods presented includes both the reported
net income and net change in cumulative translation adjustments.
|
2.32
|
RETIREMENT BENEFIT COSTS
|
P.R.C. state managed retirement benefit programs are defined
contribution plans and the payments to the plans are charged as expenses when employees have rendered service entitling them to the contribution
made by the employer.
|
2.33
|
STOCK-BASED COMPENSATION
|
The Company has adopted both ASC Topic
718, “Compensation - Stock Compensation” and ASC Topic 505-50, “Equity-Based Payments to Non - Employees” using
the fair value method in which an entity issues its equity instruments to acquire goods and services from employees and non- employees.
Stock compensation for stock granted to non-employees has been determined in accordance with this accounting standard and the accounting
standard regarding accounting for equity instruments that are issued to other than employees for acquiring, or in conjunction with selling
goods or services, as the fair value of the consideration received or the fair value of equity instruments issued, whichever is more reliably
measured. This accounting standard allows the “simplified” method to determine the term of employee options when other information
is not available. Under ASC Topic 718 and ASC Topic 505-50, stock compensation expenses is measured at the grant date on the value of
the option or restricted stock and is recognized as expenses, less expected forfeitures, over the requisite service period, which is generally
the vesting period.
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
|
|
2.34
|
FAIR VALUE OF FINANCIAL INSTRUMENTS
|
The Company follows paragraph 825-10-50-10
of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and paragraph 820-10-35-37
of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments.
Paragraph 820-10-35-37 establishes a framework for measuring fair value under U.S. GAAP, and expands disclosures about fair value measurements.
To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10- 35-37 establishes a fair
value hierarchy, which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The
fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and
the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described
below:
|
Level 1
|
Quoted market prices available in active markets for identical
assets or liabilities as of the reporting date.
|
|
Level 2
|
Pricing inputs other than quoted prices in active markets included
in Level 1, which are either directly or indirectly observable as of the reporting date.
|
|
Level 3
|
Pricing inputs that are generally observable inputs and not
corroborated by market data.
|
Financial instruments consist principally
of cash, accounts receivable, Deposits and prepayments, accounts payable and accrued expenses, other payables, due to a director and income
tax payables. The carrying amounts of such financial instruments in the accompanying condensed consolidated balance sheet approximate
their fair values due to their relatively short-term nature. The Company’s long-term borrowing, promissory notes and convertible
notes payable approximates the fair value of such instrument based upon management’s best estimate of interest rates that would
be available to the Company for similar financial arrangement at December 31, 2019. It is management’s opinion that the Company is
not exposed to any significant currency or credit risks arising from these financial instruments.
The Company revalues its derivative
liability at every reporting period and recognizes gains or losses in the consolidated statement of income and other comprehensive income
that are attributable to the change in the fair value of the derivative liability. The Company has no other assets or liabilities measured
at fair value on a recurring basis.
|
2.35
|
RECENT ACCOUNTING PRONOUNCEMENTS
|
In February 2016, the FASB issued
ASU 2016-02, Leases, which aims to make leasing activities more transparent and comparable and requires substantially all leases be recognized
by lessees on their balance sheet as a right-of-use asset and corresponding lease liability, including leases currently accounted for
as operating leases. This ASU is effective for all interim and annual reporting periods beginning after December 15, 2018, with early
adoption permitted. The Company is currently evaluating the impact that the adoption of ASU 2016-02 will have on its consolidated financial
statements and related disclosures.
In September 2018, the FASB issued
ASU 2018-07—Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. This
ASU is effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods within
that fiscal year. The Company is currently evaluating the impact that the adoption of this ASU will have on its consolidated financial
statements and related disclosures.
Certain balances have been reclassified
in the December 31, 2018 consolidated balance sheet and the consolidated statement of cash flows on a basis consistent with the financial
statements as of and for the year ended December 31, 2019. There is no further reclassification since.
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company establishes standards for
reporting information about operating segments on a basis consistent with the Company’s internal organization structure as well
as business segments and major customers in consolidated financial statements. The Company operates in five principal reportable segments:
Fishery Development Division, HU Plantation Division, Organic Fertilizer and Bread Grass Division, Cattle Farm Development Division and
Corporate and Others Division.
|
|
For the nine months ended September 30,
2021
|
|
|
|
Fishery
|
|
|
|
|
|
Organic Fertilizer
|
|
|
Cattle Farm
|
|
|
Corporate
|
|
|
|
|
|
|
Development
|
|
|
HU Plantation
|
|
|
and Bread Grass
|
|
|
Development
|
|
|
and
|
|
|
|
|
|
|
Division(1)
|
|
|
Division (2)
|
|
|
Division (3)
|
|
|
Division (4)
|
|
|
others (5)
|
|
|
Total
|
|
Revenue
|
|
$
|
0
|
|
|
|
2,024,944
|
|
|
|
4,281,688
|
|
|
|
1,557,825
|
|
|
|
0
|
|
|
$
|
7,864,457
|
|
Net income (loss)
|
|
$
|
(28,969,248
|
)
|
|
|
1,410,647
|
|
|
|
4,809,072
|
|
|
|
2,337,013
|
|
|
|
(53,481,202
|
)
|
|
$
|
(73,893,718
|
)
|
Total assets
|
|
$
|
110,100,004
|
|
|
|
50,259,427
|
|
|
|
107,817,555
|
|
|
|
24,470,835
|
|
|
|
157,399,051
|
|
|
$
|
450,046,872
|
|
|
|
For the nine months ended September 30,
2020
|
|
|
|
Fishery
|
|
|
|
|
|
Organic Fertilizer
|
|
|
Cattle Farm
|
|
|
Corporate
|
|
|
|
|
|
|
Development
|
|
|
HU Plantation
|
|
|
and Bread Grass
|
|
|
Development
|
|
|
and
|
|
|
|
|
|
|
Division(1)
|
|
|
Division (2)
|
|
|
Division (3)
|
|
|
Division (4)
|
|
|
others (5)
|
|
|
Total
|
|
Revenue
|
|
$
|
0
|
|
|
|
1,814,589
|
|
|
|
4,091,391
|
|
|
|
1,488,588
|
|
|
|
0
|
|
|
$
|
7,394,568
|
|
Net income (loss)
|
|
$
|
(52,757,531
|
)
|
|
|
429,090
|
|
|
|
1,143,174
|
|
|
|
548,681
|
|
|
|
(41,961,924
|
)
|
|
$
|
(92,598,511
|
)
|
Total assets
|
|
$
|
118,694,105
|
|
|
|
52,059,407
|
|
|
|
73,067,424
|
|
|
|
68,556,323
|
|
|
|
214,398,087
|
|
|
$
|
526,775,346
|
|
Note
(1)
|
Operated by Capital Award, Inc.
(“CA”).
|
(2)
|
Operated by Jiang Men City Heng Sheng Tai Agriculture Development Co., Limited (“JHST”).
|
(3)
|
Operated by Qinghai Sanjiang A Power Agriculture Co., Limited (“SJAP”), A Power Agro Agriculture Development (Macau) Limited (“APWAM”), and Hunan Shenghua A Power Agriculture Co., Limited (“HSA”). On December 30, 2018 QZH was disposed to third party and derecognized as variable interest entity on the same date.
|
(4)
|
Operated by Jiang Men City Hang Mei Cattle Farm Development Co. Limited (“JHMC”) and Macau Eiji Company Limited (“MEIJI”).
|
(5)
|
Operated by Sino Agro Food, Inc. (“SIAF”) and Sino Agro Food Sweden AB (“SAFS”) ----(Discontinued since 31st December 2019).
|
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
3.
|
SEGMENT INFORMATION (CONTINUED)
|
Further analysis of revenue:-
|
|
For the nine months ended September 30, 2021
|
|
|
|
|
|
|
|
|
|
Organic
Fertilizer
|
|
|
|
|
|
|
|
|
|
|
|
|
Fishery
|
|
|
HU
|
|
|
and Bread
|
|
|
Cattle Farm
|
|
|
Corporate
|
|
|
|
|
|
|
Development
|
|
|
Plantation
|
|
|
Grass
|
|
|
Development
|
|
|
and
|
|
|
|
|
|
|
Division
|
|
|
Division
|
|
|
Division
|
|
|
Division
|
|
|
others
|
|
|
Total
|
|
Name of entity Capital Award, Inc. (CA)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
Jiang Men City Heng Sheng Tai Agriculture Development Co. Ltd (“JHST”)
|
|
|
|
|
|
|
2,024,944
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,024,944
|
|
Qinghai Sanjiang A Power Agriculture Co., Ltd (“SJAP”)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
Hunan Shenghua A Power Agriculture Co., Limited (“HSA”)
|
|
|
|
|
|
|
|
|
|
|
4,281,688
|
|
|
|
|
|
|
|
|
|
|
|
4,281,688
|
|
Macau Eiji Company Limited (“MEIJI”)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,557,825
|
|
|
|
|
|
|
|
1,557,825
|
|
Sino Agro Food, Inc. (“SIAF”)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
Consulting and service income for development contracts Capital Award, Inc. (CA”)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
2,024,944
|
|
|
|
4,281,688
|
|
|
|
1,557,825
|
|
|
|
-
|
|
|
|
7,864,457
|
|
Further analysis of revenue:-
|
|
For the nine months ended September 30, 2020
|
|
|
|
|
|
|
|
|
|
Organic
Fertilizer
|
|
|
|
|
|
|
|
|
|
|
|
|
Fishery
|
|
|
HU
|
|
|
and Bread
|
|
|
Cattle Farm
|
|
|
Corporate
|
|
|
|
|
|
|
Development
|
|
|
Plantation
|
|
|
Grass
|
|
|
Development
|
|
|
and
|
|
|
|
|
|
|
Division
|
|
|
Division
|
|
|
Division
|
|
|
Division
|
|
|
others
|
|
|
Total
|
|
Name of entity Capital Award, Inc. (CA)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
Jiang Men City Heng Sheng Tai Agriculture Development Co. Ltd (“JHST”)
|
|
|
|
|
|
|
1,814,589
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,814,589
|
|
Qinghai Sanjiang A Power Agriculture Co., Ltd (“SJAP”)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
Hunan Shenghua A Power Agriculture Co., Limited (“HSA”)
|
|
|
|
|
|
|
|
|
|
|
4,091,391
|
|
|
|
|
|
|
|
|
|
|
|
4,091,391
|
|
Macau Eiji Company Limited (“MEIJI”)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,488,588
|
|
|
|
|
|
|
|
1,488,588
|
|
Sino Agro Food, Inc. (“SIAF”)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
Consulting and service income for development contracts Capital Award, Inc. (CA”)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
1,814,589
|
|
|
|
4,091,391
|
|
|
|
1,488,588
|
|
|
|
0
|
|
|
|
7,394,568
|
|
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
3.
|
SEGMENT INFORMATION (CONTINUED)
|
Further analysis of cost
|
|
For the nine months ended September 30, 2021
|
|
|
|
|
|
|
|
|
|
Organic
Fertilizer
|
|
|
|
|
|
|
|
|
|
|
|
|
Fishery
|
|
|
HU
|
|
|
and Bread
|
|
|
Cattle Farm
|
|
|
Corporate
|
|
|
|
|
|
|
Development
|
|
|
Plantation
|
|
|
Grass
|
|
|
Development
|
|
|
and
|
|
|
|
|
|
|
Division
|
|
|
Division
|
|
|
Division
|
|
|
Division
|
|
|
others
|
|
|
Total
|
|
Name of entity Capital Award, Inc. (CA)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
Jiang Men City Heng Sheng Tai Agriculture Development Co. Ltd (“JHST”)
|
|
|
|
|
|
|
1,382,426
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,382,426
|
|
Qinghai Sanjiang A Power Agriculture Co., Ltd (“SJAP”)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hunan Shenghua A Power Agriculture Co., Limited (“HSA”)
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
Macau Eiji Company Limited (“MEIJI”)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
450,060
|
|
|
|
|
|
|
|
450,060
|
|
Sino Agro Food, Inc. (SIAF)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
Consulting and service income for development contracts Capital Award, Inc. (“CA”)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
1,382,426
|
|
|
|
-
|
|
|
|
450,060
|
|
|
|
-
|
|
|
|
1,832,486
|
|
Further analysis
of cost
|
|
For the nine months ended September 30, 2020
|
|
|
|
|
|
|
|
|
|
Organic
Fertilizer
|
|
|
|
|
|
|
|
|
|
|
|
|
Fishery
|
|
|
HU
|
|
|
and Bread
|
|
|
Cattle Farm
|
|
|
Corporate
|
|
|
|
|
|
|
Development
|
|
|
Plantation
|
|
|
Grass
|
|
|
Development
|
|
|
and
|
|
|
|
|
|
|
Division
|
|
|
Division
|
|
|
Division
|
|
|
Division
|
|
|
others
|
|
|
Total
|
|
Name of entity Capital Award, Inc. (CA)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
Jiang Men City Heng Sheng Tai Agriculture Development Co. Ltd (“JHST”)
|
|
|
|
|
|
|
1,307,694
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,307,694
|
|
Qinghai Sanjiang A Power Agriculture Co., Ltd (“SJAP”)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
Hunan Shenghua A Power Agriculture Co., Limited (“HSA”)
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Macau Eiji Company Limited (“MEIJI”)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
430,058
|
|
|
|
|
|
|
|
430,058
|
|
Sino Agro Food, Inc. (“SIAF”)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
Consulting and service income for development contracts Capital Award, Inc. (CA”)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
1,307,694
|
|
|
|
-
|
|
|
|
430,058
|
|
|
|
-
|
|
|
|
1,737,751
|
|
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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.
As of 30 September 2021, the Company reviewed its tax position
with the assistance US tax professionals and believed that there would be no taxes and no penalties assessed by the IRS in the United
States of America.
China
The Enterprise Income Tax (“EIT”)
law replaced the existing laws for Domestic Enterprises (“DE’s ”) and Foreign Invested Enterprises (“FIE’s”).
The new standard EIT rate of 25% replaced the 33% rate currently applicable to both DE’s and FIE’s. The Company is currently
evaluating the impact that the new EIT will have on its financial condition. Beginning January 1, 2008, China unified the corporate
income tax rule on foreign invested enterprises and domestic enterprises. The unified corporate income tax rate is 25%.
Under new tax legislation in China
beginning in January 2008, the agriculture, dairy and fishery sectors are exempt from enterprise income taxes.
No EIT has been provided in the financial
statements of SIAF, JHST, JHMC, HSA, and SJAP since they are exempt from EIT for the years ended December 31, 2019 and 2018 as they
are within the agriculture, and cattle sectors.
No EIT has been provided in the financial
statements of QZH since they are exempt from EIT for the period ended December 30, 2018 (date of de- recognition QZH as subsidiary)
and as it is within the cattle sectors.
Belize
CA, CS and CH are international business
companies incorporated in Belize, and are exempt from corporate tax in Belize.
Macau
No Macau Corporate income tax has been
provided in the consolidated financial statements of APWAM and MEIJI since these entities did not earn any assessable profits for the
years ended December 31, 2019 and 2018.
Sweden
Sweden Corporate income tax has been
provided at 22% on reported profit for the year ended December 31, 2019 and 2018 in the consolidated financial statements of SAFS.
No deferred tax assets and liabilities
are of December 31, 2019 and 2018 since there was no difference between the financial statements carrying amounts and the tax bases
of assets and liabilities using enacted tax rates in effect in the period in which the differences are expected to reverse.
Provision for income taxes is as follows:
|
|
September 30,
2021
|
|
|
December 31,
2020
|
|
SIAF
|
|
$
|
-
|
|
|
$
|
-
|
|
SAFS
|
|
|
|
|
|
|
|
|
CA, CH and CS
|
|
|
|
|
|
|
|
|
MEIJI and APWAM
|
|
|
|
|
|
|
|
|
JHST, JHMC, SJAP, QZH and HSA
|
|
|
|
|
|
|
|
|
|
|
$
|
|
|
|
|
|
|
The Company did not recognize any interest
or penalties related to unrecognized tax benefits in the years ended December 31, 2020 and 2019. The Company had no uncertain positions
that would necessitate recording of tax related liability. The Company is subject to examination by the respective tax authorities.
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
6.
|
NET LOSS FROM DISPOSAL OF A VARIABLE INTEREST ENTITY
|
Historical no longer applicable
|
7.
|
CASH AND CASH EQUIVALENTS
|
|
|
September 30,
2021
|
|
|
December 31,
2020
|
|
Cash and bank balances
|
|
$
|
271,743
|
|
|
$
|
188,846
|
|
As of September 30,2021, inventories are as follows:
|
|
September 30,
2021
|
|
|
December 31,
2020
|
|
Bread grass
|
|
|
|
|
|
$
|
|
|
Beef cattle
|
|
|
|
|
|
|
|
|
Organic fertilizer
|
|
|
|
|
|
|
|
|
Forage for cattle and consumable
|
|
|
|
|
|
|
|
|
Raw materials for bread grass and organic fertilizer
|
|
|
|
|
|
|
|
|
Immature seeds
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
$
|
-
|
|
|
9.
|
DEPOSITS AND PREPAYMENTS
|
|
|
September 30,
2021
|
|
|
December 31,
2020
|
|
Deposits for
|
|
|
|
|
|
|
- purchases of equipment
|
|
|
-
|
|
|
$
|
-
|
|
- acquisition of land use rights
|
|
|
-
|
|
|
|
-
|
|
- inventories purchases
|
|
|
13,651,183
|
|
|
|
13,141,301
|
|
- construction in progress
|
|
|
-
|
|
|
|
-
|
|
- issue of shares as collateral
|
|
|
-
|
|
|
|
-
|
|
Shares issued for employee compensation and overseas professional and bond interest
|
|
|
-
|
|
|
|
-
|
|
Others
|
|
|
-
|
|
|
|
-
|
|
|
|
|
13,651,183
|
|
|
$
|
13,141,301
|
|
All accounts receivable are reflected as a current asset
and no allowance for bad debt of September 30, 2021 and December 31, 2020, respectively.
Aging analysis of accounts receivable is as follows:
|
|
September 30,
2021
|
|
|
December 31,
2020
|
|
0 - 30 days
|
|
|
2,024,943
|
|
|
$
|
4,695,820
|
|
31 - 90 days
|
|
|
5,839,513
|
|
|
|
10,238,862
|
|
91 - 120 days
|
|
|
11,241,285
|
|
|
|
5,389,705
|
|
over 120 days and less than 1 year
|
|
|
3,957,778
|
|
|
|
12,333,943
|
|
over 1 year
|
|
|
-
|
|
|
|
-
|
|
|
|
$
|
23,063,519
|
|
|
$
|
32,658,330
|
|
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
September 30,
2021
|
|
|
December 31,
2020
|
|
Advanced to employees
|
|
$
|
|
|
|
$
|
-
|
|
Advanced to suppliers
|
|
|
286,611
|
|
|
|
2,028,907
|
|
Advanced to customers
|
|
|
|
|
|
|
|
|
Advanced to developers
|
|
|
-
|
|
|
|
-
|
|
Advanced to SJAP
|
|
|
71,035,286
|
|
|
|
76,404,954
|
|
Others
|
|
|
1,978,570
|
|
|
|
3,649,531
|
|
|
|
$
|
73,300,467
|
|
|
$
|
82,083,392
|
|
Advanced to employees, suppliers, customers and developers
are unsecured, interest free and with no fixed terms of repayment.
|
|
September 30,
2021
|
|
|
December 31,
2020
|
|
Plant and machinery
|
|
$
|
10,929,999
|
|
|
$
|
9,712,446
|
|
Structure and leasehold improvements
|
|
|
94,798,462
|
|
|
|
91,547,512
|
|
Mature seeds and herbage cultivation
|
|
|
19,089,306
|
|
|
|
17,612,200
|
|
Furniture and equipment
|
|
|
3,607,007
|
|
|
|
3,367,887
|
|
Motor vehicles
|
|
|
3,590,612
|
|
|
|
3,332,541
|
|
|
|
|
132,015,386
|
|
|
|
125,572,586
|
|
|
|
|
|
|
|
|
|
|
Less: Accumulated depreciation
|
|
|
36,932,000
|
|
|
|
27,693,043
|
|
Net carrying amount
|
|
$
|
95,083,386
|
|
|
$
|
97,879,543
|
|
|
13.
|
CONSTRUCTION IN PROGRESS
|
|
|
|
September 30,
2021
|
|
|
|
December 31,
2020
|
|
Construction in progress
|
|
|
|
|
|
|
|
|
- Office, warehouse and organic fertilizer plant in HSA
|
|
$
|
-
|
|
|
$
|
-
|
|
- Oven room, road for production of dried flowers
|
|
|
-
|
|
|
|
-
|
|
- Organic fertilizer and bread grass production plant and office building
|
|
|
-
|
|
|
|
-
|
|
- Rangeland for beef cattle and office building
|
|
|
-
|
|
|
|
-
|
|
- Fish pond and breeding factory
|
|
|
-
|
|
|
|
-
|
|
|
|
$
|
-
|
|
|
$
|
-
|
|
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
September 30,
2021
|
|
|
December 31,
2020
|
|
Cost
|
|
$
|
72,453,620
|
|
|
$
|
68,293,896
|
|
Less: Accumulated amortization
|
|
|
(20,186,477
|
)
|
|
|
(15,811,679
|
)
|
Net carrying amount
|
|
$
|
51,967,143
|
|
|
$
|
52,482,217
|
|
Goodwill represents the fair value
of the assets acquired the acquisitions over the cost of the assets acquired. It is stated at cost less accumulated impairment losses.
Management tests goodwill for impairment on an annual basis or when impairment indicators arise. In these instances, the Company recognizes
an impairment loss when it is probable that the estimated cash flows are less than the carrying value of the assets. To date, no such
impairment loss has been recorded.
|
|
September 30,
2021
|
|
|
December 31,
2020
|
|
Goodwill from acquisition
|
|
$
|
729,940
|
|
|
$
|
724,940
|
|
Less: Accumulated impairment losses
|
|
|
-
|
|
|
|
-
|
|
Net carrying amount
|
|
$
|
724,940
|
|
|
$
|
724,940
|
|
|
16.
|
PROPRIETARY TECHNOLOGIES
|
|
|
September 30,
2021
|
|
|
December
31,
2020
|
|
Cost
|
|
|
9,886,452
|
|
|
$
|
9,232,228
|
|
Less: Accumulated amortization
|
|
|
(3,548,178
|
)
|
|
|
(2,164,475
|
)
|
Net carrying amount
|
|
|
6,338,275
|
|
|
$
|
7,067,753
|
|
|
17.
|
INTERESTS IN UNCONSOLIDATED EQUITY INTERESTS
|
|
|
September
30,
2021
|
|
|
December
31,
2020
|
|
Investments at cost
|
|
$
|
|
|
|
$
|
|
|
- TRW
|
|
|
103,266,588
|
|
|
|
149,720,418
|
|
- SJAP
|
|
|
40,086,448
|
|
|
|
40,211,202
|
|
Cattle
farm 2
|
|
|
20,781,186
|
|
|
|
20,078,441
|
|
Amount
due from a consolidated equity investee
|
|
|
21,511,994
|
|
|
|
22,089,985
|
|
|
|
|
185,646,216
|
|
|
$
|
232,100,046
|
|
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
18.
|
TEMPORARY DEPOSITS PAID TO ENTITIES FOR EQUITY INVESTMENTS IN FUTURE SINO JOINT VENTURE COMPANIES
|
Intended
unincorporated
Investee
|
|
Projects
Engaged
|
|
September 30,
2021
|
|
|
December 31,
2020
|
|
A
|
|
Trade center
|
|
|
-
|
|
|
$
|
-
|
|
B
|
|
Fish and prawn Farm 2 GaoQiqiang Aquaculture
|
|
|
*
|
|
|
|
*
|
|
C
|
|
Cattle farm 2
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
19.
|
VARIABLE INTEREST ENTITY TO AN INVESTOR IN ASSOCIATE
|
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 December 31, 2020, the Company has invested $2,251,359 in this joint venture. SJAP is
engaged in its business of the manufacturing of organic fertilizer, livestock feed, and beef cattle and plantation of crops and pastures.
On September 30th 2020, Mr. Solomon
Lee resigned as the Chairman of SJAP resulting in categorization of SJAP as an Investor in Associate from a subsidiary status.
|
21.
|
CONSTRUCTION CONTRACT
|
|
(i)
|
Costs and estimated earnings in excess of billings on uncompleted contracts
|
|
|
|
September 30,
2021
|
|
|
|
December 31,
2020
|
|
Costs
|
|
|
-
|
|
|
$
|
-
|
|
Estimated earnings
|
|
|
-
|
|
|
|
-
|
|
Less: Billings
|
|
|
-
|
|
|
|
-
|
|
Costs and estimated earnings in excess of billings on uncompleted contracts
|
|
|
-
|
|
|
$
|
-
|
|
|
(ii)
|
Billings in excess of costs and estimated earnings on uncompleted contracts
|
|
|
|
September 30,
2021
|
|
|
|
December 31,
2020
|
|
Billings
|
|
|
-
|
|
|
$
|
|
|
Less: Costs
|
|
|
-
|
|
|
|
|
|
Estimated earnings
|
|
|
-
|
|
|
|
|
|
Billing in excess of costs and estimated earnings on uncompleted contracts
|
|
|
-
|
|
|
$
|
|
|
|
|
September 30,
2021
|
|
|
December 31,
2020
|
|
Due to third parties
|
|
|
12,013,886
|
|
|
$
|
9,271,281
|
|
Straight note payable (note 23(i))
|
|
|
26,238,598
|
|
|
|
29,367,999
|
|
Promissory notes issued to third parties
|
|
|
-
|
|
|
|
-
|
|
Due to local government
|
|
|
-
|
|
|
|
-
|
|
|
|
|
38, 252,484
|
|
|
$
|
38,639,280
|
|
|
|
|
|
|
|
|
|
|
Less: Amount classified as non-current liabilities
|
|
|
|
|
|
|
|
|
Promissory notes issued to third parties
|
|
|
-
|
|
|
|
|
|
Amount classified as current liabilities
|
|
|
38, 252,484
|
|
|
$
|
38,639,280
|
|
Due to third parties are unsecured, interest free and have no fixed terms of repayment.
|
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As at 30th September 2021, the Company
has no bank borrowing resulted from the categorization of SJAP as an Investor in Associate from a subsidiary status such that SJAP’s
bank loans were no longer being consolidated into the Company’s financials.
|
23.
|
CONVERTIBLE NOTE PAYABLES (OTHER PAYABLES)
|
There are two convertible notes payable recorded under other payables
shown in Table (E.) below:
Due to
|
|
|
|
ECAB
|
|
|
26,238,598.00
|
|
UNRELATED THIRD PARTY
|
|
|
8,932,314.60
|
|
Total due as at 30th September 2021
|
|
|
35,170,912.60
|
|
|
●
|
Convertible
Note Payables for ECAB:
|
(i)
|
On August 29, 2014, the Company completed the closing of a private placement financing transaction with an accredited investor, which purchased a 10.5% Convertible Note (the “Note 1”) in the aggregate principal amount of up to $33,300,000. The Company received the total advance of $11,632,450. The Company shall offer investor a discount equal to 25% of the amount of the principal advanced by the investor.
|
Interest on the note shall accrue on
the outstanding principal balance of this Note from August 29, 2014. Interest shall be payable quarterly on the last day of each
of March, September, September and December commencing September 30, 2014 provided, however, that note holder may elect
to require the Company to issue to the note holder a promissory note in lieu of cash in satisfaction of any interest due and payable at
such time. Any interest payment note shall be subject to the same terms as the note. The note has a maturity date of February 28,
2020.
The note is convertible, at the discretion
of the note holder, into shares of the Company’s common stock (i) at any time following an Event of Default, or (ii) for
a period of thirty (30) calendar days following October 31, 2015 and each anniversary thereof, at an initial conversion price per
share of $1.00, subject to adjustment for stock splits, reverse stock splits, stock dividends and other similar transactions and subject
to the terms of the note. As long as the note is outstanding, the investor shall have a right of first refusal, exercisable for thirty
(30) calendar days after notice to the note holder, to purchase securities proposed to be offered and sold by the Company.
The Company and the note holder entered
into a restructuring agreement regarding the settlement of the Note 1. Both parties have agreed to restructure the indebtedness represented
by Note 1 as follows: (a) SIAF issues 5,196,333 shares of its common stock and transfer 400,000 shares of TRW to the note holder;
and (b) SIAF executes a new promissory note in the principal amount of $15,589,000 to the note holder to be paid in installments
over a period of time. However, both parties remain open to negotiate an all-cash settlement of the Note 1.
As of December 31, 2020, as a
result, the amount outstanding under Note 1 was reclassified as other payables – straight note payable of $29,367,999 (see Note
21) and a loss on restructuring of $6,225,204 which representing the non-amortized part of the discount upon the issuing of the convertible
bond incurred during the year.
Subsequently, Note 1 matured on February 28,
2020, the Company intends to offer the settlement of the note to the accredited investors based on the following understanding, terms
and conditions:
(i). The earlier understanding of the
restructured indebtedness is to be carried as follows: (a) SIAF issues 5,196,333 shares of its common stock and transfer 400,000
shares of TRW to the note holder; and (b) SIAF is to pay the revised promissory note in the principal amount of $15,589,000 to the
note holder.
(ii). It is the Company’s intension
for the said 5,196,333 shares of its common stocks to be converted into the G Series Preferred Stocks at conversion ratio of the
offer of the Initial Public Offer stated in the registration statement filed with SEC targeting on or before September 30, 2021;however
this is now postponed due primarily to the effects of the Covid-19 pandemic to sometimes on or before 30th June 2020 pending
on the prevailing improvements and situation from said pandemic at such time.
(iii). There were 500,050 Common Shares
of the Company loaned to the said accredited investor on (Date: July 22, 2014) valued at US$18.10 / share as security for the accredited
investors to secure their investors to invest on the Bond prior to the completion of a registration statement filed with SEC on September 2014
to allow the official issuing of additional common stocks to ECAB’s BOND investors, and that ECAB would return back the loaned stocks
back to the Company upon the time the said accredited investor invested the balance of the Note 1 proceed of (US$ 13,362,550) needed to
complete the disbursement of the total loan proceed of US$25,000,000 on or before (Date: February 28th 2015). However
the said investor sold the said loaned 500,050 common stocks of the Company in between the period (Date: February to March 2015)
and invested part or the full sum from the sales proceeds of said 500,050 common stock of the Company (of US$10,500,000) back to the Company
as part of the Note 1’s disbursement to the Company making total disbursement sum of US$22,137,450.00 being advanced to the Company
on or before 30th September 2015, and in turn, the investor did not return the said 500,050 common stocks of the Company
to the Company and didn’t help the Company to complete the said registration statement by not giving the Company the Debenture Agreement
needed to complete said registration statement with the SEC.
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
23.
CONVERTIBLE NOTE PAYABLES (OTHER PAYABLES) (CONTINUED)
(iv). In order that the principal amount
of $15,589,000 of the cash settlement sum mentioned above may be settled amicably between the accredited investor and the Company, the
sales proceeds (of US$13,362,550.00) from the sales of the 500,050 shares loaned in good faith to ECAB must be taken into consideration
and be deduced from the said principal amount before this bond arrangements can be settled.
|
●
|
Convertible
Note Payables for the unrelated third party:
|
|
(ii)
|
On October 20, 2019, the Company issued another Convertible Note (the “Note 2”) with a principal amount of $4,000,000 due on February 28, 2019. The note holder had the option to convert all or any part of the outstanding note into the common stock of the Company (the “Primary Optional Conversion”) or TRW (the “Secondary Optional Conversion”) at any time for a period of eight months from the note’s maturity date. The conversion price for Primary Optional Conversion is lesser of $1.5 per share or at 65% of the market share price of the Company. While the conversion price for Secondary Optional Conversion is $3.41 per share subject to equitable adjustment for stock split, stock dividend or right offerings.
|
Under the agreement, the Company shall
pay the note holder 120,000 common shares of SIAF or 32,000 common shares of TRW as an origination fee. The note bears a flat interest
payment which shall be settled by 200,000 common shares of SIAF or 55,000 common shares of TRW. As of December 31, 2020, no settlement
for both origination fee and interest payment. The supplemental agreement to the Bond Subscription Agreement with the Subscriber to extend
the Bond Issue by another 3 year to December 31, 2023 was agreed upon based on following principle terms and conditions:
Table (F) below shows the newly agreed
principle terms and conditions of the newly revised Bod Subscription Agreement:
#
|
|
Descriptions
|
|
Amounts in US$
|
|
|
Notes and remarks
|
1
|
|
Principal loan amount as at 31st December 2021.
|
|
|
9,500,000.00
|
|
|
Rounding up to a sum to include all interest and default interests etc. to 1st July 2022.
|
2
|
|
Interest charges at 12% / annual starting from 1st July 2022
|
|
|
12% / annual from 1st July 2022
|
|
|
This is to provide a time gap to allow the Company to launch its intended IPO of the preferred G Series shares targeting to start from 1st April 2022.
|
3
|
|
Repayment schedule
|
|
|
|
|
|
|
3.1
|
|
On or before
|
|
|
|
|
|
|
|
|
30th September 2022
|
|
|
1,000,000
|
|
|
As minimum payables
|
|
|
31st December 2022
|
|
|
2,500,000
|
|
|
As minimum payables
|
3.2
|
|
On or before the end of each quarter of 2023 payments of principal.
|
|
|
1,500,000
|
|
|
As minimum each quarterly payment of principal.
|
|
|
In cash as minimum payables
|
|
|
Interest payables
|
|
|
Per quarterly together with the repayment of principal.
|
|
Note
|
If and when the said IPO of the preferred G series shares would
happen in according to schedule, the note holders has the option to convert said minimum payables into the said preferred G Series shares
as the subscription fees of said G Series shares at a pre-negotiated and pre-determined price prior to the said IPO.
|
As such there will not be necessary to further evaluate the fair
value of the conversion option and related derivative liability incurred in its original Bond Subscription Agreement dated October 20th
2019.
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Group’s share capital as
of December 31, 2020 and 2019 shown on the consolidated balance sheet represents the aggregate nominal value of the share capital
of the Company as of that date.
Common Stock:
During
the year ended December 31, 2019, the Company (i) issued 535,598 shares of common stock valued to employees and directors at ranging from
$1 to $1.56 per share for $576,170 for employee compensation; (ii) issued 16,032,262 shares of common stock valued to professionals and
contractors ranging from $ 0.55 to $1.00 per share for $9,723,720 for service compensation; and (iii) issued 3,935,439 shares of common
stock valued at $ 0.30 to $0.50 per share for 1,478,029 for settlement of debts.
During
the year ended December 31, 2020, the Company (i) issued 6,511,081 shares of common stock at US$0.25 per share in quarter (1) for US$1,596,370
for settlement of debts and (ii) issued 1,876,166 shares of common stocks at US$0.25 per shares for US$469,041 for settlement of debts
and there was no further issuance of shares of common stock since thus total issuance of shares of common stocks for the year ended December
2020 is 8,387,247 shares for US$2,065,411.
The Company has 60,352,942
and 59,963,332 shares of common stock issued and outstanding as of September 30, 2021 and December 31, 2020, respectively.
25.
|
OBLIGATION UNDER OPERATING LEASES
|
The Company leases (i) 2,178 square feet of agriculture
space used for offices for a monthly rent of $812 in Enping City, Guangdong Province, P.R.C., its lease expiring on March 31, 2021;
and (ii) 2,695 square feet of office space in Guangzhou City, Guangdong Province, P.R.C. for a monthly rent of $3,034 , its lease
expiring on July 8, 2022.
Lease expenses were $26,254 and $24,357 for the nine months
ended September 30, 2021 and 2020, respectively.
The future minimum lease payments as of December 31,
2021, are as follows:
Within 1 year
|
|
$
|
25,305
|
|
2 to 5 years
|
|
|
21,187
|
|
Over 5 years
|
|
|
-
|
|
|
|
$
|
46,492
|
|
26.
|
STOCK BASED COMPENSATION
|
On September 30, 2019, the Company
issued employees total of 117,000 shares of common stock valued at fair value of $3.45 per share for services rendered to the Company.
The fair values of the common stock issued were determined by using the trading price of the Company’s common stock on the date
of issuance of $3.45 per share. On December 31, 2019, the Company issued employees total of 500,800 shares of common stock valued
at fair value of $1 per share for services rendered to the Company. The fair values of the common stock issued were determined by using
the trading price of the Company’s common stock on the date of issuance of $3.45 per share. On December 31, 2019, the Company
issued employees total of 1,050,502 shares of common stock valued at fair value of $1 per share for services rendered to the Company.
The fair values of the common stock issued were determined by using the trading price of the Company’s common stock on the date
of issuance of $1 per share.
As of September 30, 2021, the
deferred compensation balance for staff was $0 and $0 were to be amortized over 6 months and 1 year, respectively beginning on January 1,
2020.
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
On March 26, 2020, a shareholder
derivative complaint was filed in the United States District Court for the Southern District of New York against the Company, as well
as four of its current directors. The Complaint alleges violations of securities law and state law, breaches of fiduciary duties (including
gross mismanagement of the Company) by the individual defendants, a material default of its obligations under a commercial loan agreement,
misleading and false statements (including material omissions) by the individual defendants, and unauthorized issuance of new shares of
Common Stock to pay debts that, in the view of the plantiffs, has diluted shareholder ownership and oppressed shareholders of the Company.
The Company and the individual defendants believe that these claims are without merit and intend to vigorously defend against the Complaint.
On July 23rd 2020 the settlement
agreement between the plaintiffs and the Company to settle the shareholder derivate complaint was preliminary approved and final approval
was granted on October 13th 2021 as such the case was closed on October 13th 2020 officially.
On September 22, 2015, the Company
entered into a trade facility agreement with two independent third parties. Pursuant to the agreement, the Company provides collateral
in the form of Company’s common shares to a PRC based lender (the “Lender”) and the Lender agrees to provide a revolving trade
facility loan up to $20,000,000 to a PRC based borrower. The arrangement was commenced on February 15, 2016 and will be expired on
September 15, 2020.
As of December 31, 2020, the Company
has issued aggregate 5,708,312 common shares as collateral and the trade facility line reduced to $13 million that was settled and written
off with the consent of the Lender on the understanding that it is due to the impacts of the Covid-19 the borrower is no longer requiring
the revolving trade facility. Therefore as at December 31st 2020 the Company has no more contingent liability regarding to
this trade facility to the Lender.
28.
|
RELATED PARTY TRANSACTIONS
|
In addition to the transactions and
balances as disclosed elsewhere in these consolidated financial statements, during the years ended September 30, 2021 and December 31,
2020, the Company had the following significant related party transactions:-
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: