UNITED STATES

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For period Q1 to ended March 31, 2022

 

OR

 

TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from 1st January 2022 to 31st March 2022.

 

Commission File Number: 000-54191

 

SINO AGRO FOOD, INC.

(Exact Name of Registrant as Specified in its Charter)

 

 Nevada   33-1219070
(State or Other Jurisdiction
of Incorporation)
  (IRS Employer
Identification Number)

  

Room 3520, Block A, China Shine Plaza

No. 9 Lin He Xi Road

Tianhe District, Guangzhou City, P.R.C. 510610

(Address of principal executive offices, including zip code)

 

Registrant’s Telephone Number, including area code: (+86)-20-22116293

 

Securities registered pursuant to Section 12(b) of the Exchange Act: None

 

Securities registered pursuant to Section 12(g) of the Exchange Act: Common Stock, $0.001 par value per share

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes  No

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes  No

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  No

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this annual report or any amendment to this annual report.

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large Accelerated Filer Accelerated Filer
Non-Accelerated Filer Smaller Reporting Company
  Emerging growth company 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  No 

 

Securities registered pursuant to Section 12(b) of the Act: None

 

Title of each class   Trading Symbol(s)   Name of each exchange on which registered
N/A   N/A   N/A

 

The aggregate market value of the voting stock held by non-affiliates of the issuer on March 31, 2022, based upon the $0.063 per share closing price of such stock on that date, was in round figure of $3,802,477.00.

 

There were 60,356,776 shares of our common stock issued and outstanding consisting 59,516,423 free trading shares and 840,353

 

Documents incorporated by reference: None

 

 

 

 

FORWARD-LOOKING STATEMENTS

 

This Annual Report contains “forward-looking statements,” within the meaning of the Private Securities Litigation Reform Act of 1995 and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Company intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 21E of the Exchange Act. Forward-looking statements can be identified by the use of forward-looking terminology, such as “estimates,” “projects,” “plans,” “believes,” “expects,” “anticipates,” “intends,” or the negative thereof or other variations thereon, or by discussions of strategy that involve risks and uncertainties These statements reflect management’s current beliefs and are based on information now available to it. Accordingly, these statements are subject to certain risks, uncertainties and contingencies that could cause the Company’s actual results, performance or achievements in 2017 and beyond to differ materially from those expressed in, or implied by, such statements. Such statements, include, but are not limited to, statements contained in this Annual Report relating to the Company’s business, financial performance, business strategy, recently announced transactions and capital outlook. Important factors that could cause actual results to differ materially from those in the forward-looking statements include: a continued decline in general economic conditions nationally and internationally; decreased demand for our products and services; market acceptance of our products; the impact of any litigation or infringement actions brought against us; competition from other providers and products; the inability to raise capital to fund continuing operations; changes in government regulation; the ability to complete customer transactions, and other factors relating to our industry, our operations and results of operations and any businesses that may be acquired by us. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended or planned. The Company has been severely impacted by the effects of COVID-19 “Pandemic 2020”, which effects continue to this day as such presently the Company do not have the ability to control the exact timing of progresses in moving forward of its business plans tangibly except best effort basis. Readers of this Annual Report should not place undue reliance on any forward-looking statements. Except as required by federal securities laws, the Company undertakes no obligation to update or revise these forward-looking statements to reflect new events or uncertainties.

 

You should read the following discussion and analysis of the financial condition and results of operations of the Company together with the financial statements and the related notes presented herein.

 

In this Annual Report, unless the context requires otherwise, references to the “Company,” “Sino Agro,” “SIAF,” “we,” “our company” and “us” refer to Sino Agro Food, Inc., a Nevada corporation together with its subsidiaries.

 

i

 

Part 1 Business

 

1. Back Ground

 

Sino Agro Food, Inc.

 

SIAF is an agriculture technology and natural food holding company with principal operations in the People’s Republic of China. The Company acquires and maintains equity stakes in a cohesive portfolio of companies that SIAF forms according to its core mission to produce, distribute, market and sell natural, sustainable protein food and produce, primarily seafood and cattle, to the rapidly growing middle class in China. SIAF provides financial oversight and strategic direction for each company, and for the interoperation between companies, stressing vertical integration between the levels of the Company’s subsidiary food chain. The Company owns or licenses patents, proprietary methods, and other intellectual properties in its areas of expertise. SIAF provides technology consulting and services to joint venture partners to construct and operate food businesses, primarily producing wholesale fish and cattle. Further joint ventures market and distribute the wholesale products as part of an overall “farm to plate” concept and business strategy.

 

The Company (SIAF) has been established since 2007 with major activities in agriculture industry producing food produces and products (as primary producer) using modern technologies introduced and transferred mainly from Australia. SIAF became a SEC fully reporting company since 2010. The Company employs a strategy of vertical integration from primary production through processing, distribution and marketing of high quality, organic food products in the food value chain. China’s fast growing middle class is creating rapidly rising demand for gourmet and high-quality protein food. 

 

The Company’s operations and strategy are executed through a number of subsidiaries located in China, and the Company contributes financial oversight and strategic direction to otherwise independent management teams which employ the Company’s intellectual property and proprietary methods.

 

The Company has been severely impacted by the effects of COVID-19 “Pandemic 2020”, which effects continue to this day as such presently the Company is no longer a fully reporting company and has dropped from quoting on OTCQX to OTC Pink sheet from September 2020 onward due primarily to the Company’s auditors, which are located in Hong Kong, have been unable to do on-site inspections of the Company’s operations in China due to COVID-19 restrictions to complete the audit of 2019, 2020 and2021. So Basically SIAF is delinquent in its Form 10-Ks for fiscal year end 2019, 2020 and 2021, Form 10-Qs for periods ended March 31, 2020 and 2021, June 30, 2020 and 2021, September 30, 2020 and 2021, and March 31, 2022. It will need to amend and restate filings going back to December 31, 2019 to be able to apply to become a fully reporting company.

 

The aggregate market value of the voting stock held by non-affiliates of the issuer on May 11th 2022, based upon the $0.039 per share closing price of such stock on that date, was in round figure of $2,353,914.00.

 

There were 60,356,776 shares of our common stock issued and outstanding consisting 59,516,423 free trading shares and 840,353 restricted shares as at May 11th 2022.

 

1

 

Please find our company’s legal structure chart listed below;

 

 

Whereas

 

Capital Award Inc. (CA) is an Belize incorporation and the holding and operating company of Division 4 that we called the “Project Development” division (stated in C.2 below)

 

Macau EIJI Company Limited (MEIJI) is a Macau incorporation and the holding company of following operating companies in China and the lease holder of corresponding operations: (i). Jiangmen City Hang Mei Cattle Farm Development Co. Ltd. (JHMC) is the lease holder of the operation of Cattle Farm 1, (ii). Jiangmen City Heng Sheng Sheng Tai Agriculture Development Co. Ltd. (JHST) is the lease holder of the operation of the plantation, and (iii). Hunam Shenghua A Power Agriculture Co. Ltd. (HSA.) is the lease holder of the operation of fertilizer production

 

The Company has a representation office in China that has a division managing the trading and business operations of the Group called internally the “Corporate Division” managing import/export business, corporate affairs and providing consulting and service to projects that are not included in CA’s fishery development activities.

 

A Power Agro Agriculture Development (Macau) Ltd. (APWAM) is the holding company of one of its equity investees namely Qinghai Sanjiang A Power Agriculture Co. Ltd. (SJAP) that has a fully integrated operation in cattle and beef developments and businesses that are operating by SJAP itself and its operating subsidiaries namely Huangyuan Gongwei Animal Husbandry Technology Development Co. Ltd and Huangyuan Sanjiang Zhonghe Bio-organic Technology Development Co. Ltd. shown in above Table..

 

The Company is holding 36.6% equity stake in another one of its investees called Tri-way Industries Limited (TWL or Tri-way) that is a Hong Kong incorporation that is the ultimate equity owner of Jiangmen City A Power Fishery Development Co. Ltd. (JFD) operating “Fishery Development Projects in China” and various leasing contracts of farm’s operations (i.e. Leasing of farm operations, managements and upkeep of fixed property assets of the farms, managements and replacements of current operating assets in plants and equipment and brood stocks etc.) on its developed Aqua-fishery farms (namely AFF1, AFF2 and AFF3 3. Whereas, as June 30, 2021, Tri-way terminated its leasing contracts of Aqua-fishery farm 4 and 5 (AFF 4 & 5) and has written off all assets in AFF4 and AFF5 without any further liability as at December 31, 2021. (Please refer to below chapter as well as in the MD&A section for further information and financials on Tri-way).

 

2

 

2. Introduction of divisions

 

A. In the 12 months ended 31st December 2021, the Company’s revenues and incomes are generated from the following businesses activities:

 

1. Leasing of business activities

 

2. Investments in investees

 

Whereas

 

1. Consolidated revenues are generated from the leasing of following business activities:

 

The Organic fertilizer operation of HSA.

 

Cattle farms operation of (MEIJI) & (JHMC)

 

Plantation operation of (JHST)

 

2. Unconsolidated incomes are generated from the investments of following 2 investees:

 

45% equity holding in SJAP

 

36.6% equity holding in Tri-way

 

B. A summary of each business division and operations is described below:

 

B.1. Division (1) of leasing of operations:

 

The Organic fertilizer operation of HSA.

 

The operation of Hunan Shenghua A Power Agriculture Co. Ltd. (“HSA”) is in manufacturing and sales of organic fertilizer. From 1st October 2019 the Company contracted out its manufacturing and sales of organic fertilizer to its operational management; as such income of HSA is derived mainly from said leasing contract.

 

The plantation operation of (JHST)

 

Plantation operation refers to the operations of Jiangmen City Heng Sheng Tai Agriculture Development Co. Ltd. (“JHST”) in the HU Plantation business where dragon fruit flowers (dried and fresh), crops of vegetables and immortal vegetables (dried) are being grown and sold to wholesale and retail markets. JHST’s financial statements are consolidated into the financial statements of Macau EIJI Company Ltd.

 

(“MEIJI”) as one entity. From 1st October 2019 the Company contracted out its plantation operation to its operational management; as such income of JHST is derived mainly from said leasing contract.

 

The cattle farms operation of (MEIJI) & (JHMC)

 

Cattle Farm Division refers to the operations of Cattle Farm 1 under Jiangmen City Hang Mei Cattle Farm Development Co. Ltd (“JHMC”) where cattle are being grown, fatten and sold live to third party livestock wholesalers who sell them mainly to Guangzhou and Beijing livestock wholesale markets. The financial statements of JHMC are consolidated into MEIJI as one entity along with MEIJI’s operation in the consulting and service for development of other cattle farms (e.g., Cattle Farm 2) or related projects. From 1st October 2019 the Company contracted out its cattle operation to its operational management; as such incomes of JHMC are derived mainly from said leasing contract.

 

3

 

The table (C) below shows MEIJI’s 2021 leasing contract’s financial results:

 

B.2.  Division (2) of investments in equity investees

 

45% equity holding in SJAP

 

SJAP: The cattle and beef divisional operation of our partially owned subsidiary Qinghai Sanjiang A Power Agriculture Co., Ltd. (“SJAP”) in manufacturing and sales of organic fertilizer, bulk livestock feed, concentrated livestock feed, and the growing and sales of live cattle inclusive of: (a) cattle that are not being slaughtered in our own slaughter house operated by Qinghai Zhong He Meat Products Co., Limited (“QZH”) are sold live to third party livestock wholesalers, and (b) cattle that are sold to QZH and slaughtered and deboned and packed by QZH; and the sales of meats deboned and packed by QZH that are sold to various meat distributors, wholesalers and super market chains and our own retail butcher stores etc. QZH was a fully owned subsidiary of SJAP; as such, the financial statements of these three companies (SJAP, QZH and HSA) were consolidated into our wholly owned subsidiary, A Power Agro Agriculture Development (Macau) Limited (“APWAM”), as one entity. SJAP and QZH are both variable interest entities over which we exercised significant control. As of December 30, 2017, QZH was derecognized as variable interest entity and its operating profit and/or loss no longer accretive to the Company’s 45% holding in SJAP, a variable interest entity. 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, and SJAP contracted out its business operations to its existing operational management, as such from 1st October 2019 it is not a variable interest entity and SJAP was reclassified as an unconsolidated equity investee and SJAP’s cattle and beef operation is discontinued on same date.

 

SJAP became an investee of SIAF since 01102019 such that its financial is not detailed in SIAF’s consolidated financials but reported under investments in investees.

 

36.6% equity holding in Tri-way

 

Summary of Tri-way’s historical events:

 

TWL: Up until 5th October 2016, our divisional fishery production and sales operation was with our fully owned subsidiary Tri-way Industries Limited (TWL or Tri-way, a private company incorporated in Hong Kong ) and our 75% owned subsidiary Jiangman Fishery Development Co. Ltd. (JFD, a limited liability company incorporated in China) operating one indoor APM farm in Enping District, Enping City. On 5th October 2016 we carve out Tri-way that became an unconsolidated investee of the Company resulted with the Company owning 36.6% equity interest in Tri-way derived from (i) 23.89% as a result of retained interest in Tri-way, and (ii) 12.71% acquired in exchange for outstanding debt owed to the Company at the time. An independent appraisal was obtained to determine fair value, and this appraisal resulted in a one-time (deemed) gain of USD 56.9 million for SIAF. In reference to the press release dated January 17, 2017, wherein the Company had indicated that legal due diligence had been completed in relation to the carve-out of its aquaculture operations, the announcement that legal due diligence had been performed had been released in conjunction with what had been the main announcement, which was SIAF wishing to convey to its shareholders that JFD had been officially registered as a Wholly Foreign Owned Enterprise (WFOE) of Tri-way, making it legally eligible for SIAF shareholders to now own shares of Tri-way, directly. Whereas, within August 2016, JFD completed its acquisition of the operation assets of Aqua-farm 2 and 3a, 3b and 4 and 5 and Tri-way acquired the China master license on A Power Recirculating Aquaculture System (we called that APRAS Technology) from Capital Award (CA) with all said acquisitions’ considerations were satisfied by the issuance of Tri-way common stocks and Tri-way registered its fully paid up share capital at US$345 million with the Hong Kong Company Register. By mid-year 2017, the Aqua-farm 4 which was an in-door farm of 18,000 square meter (m2) enclosed built-up area situating on 60 Chinese Mu (39,600 m2) of land zoned building construction permissible; started its production operation prematurely while Aqua-farm 4 was about 85% completed. Aqua-farm 5 was the out-door farm consisting many open dams constructed using CA’s Open Dam Recirculating Aquaculture Systems (that we called the ODRAS technology and systems) situated on 1,000 Mu (about 660,000 m2) of aquaculture land started partial production from quarter (1) of 2017 while the construction of the ODRAS dams were in progresses. We called the development of the Aqua-farm 4 and 5 “the Mega Farm Project” and both farms collectively as the “Mega-farms”.

 

Somehow, Mega Farms performed poorly with Aqua-farm 4 cumulated many loses from mid-2017 to mid-2019; and Aqua-farm 5 suffered badly resulted from damages and loses caused primarily by the two strongest typhoons ever experienced in the Guangzhou districts in 2017 and in 2018. Therefore, during 2017 to 2019 Tri-way’s major revenues and incomes were generated mainly from the operations of AFF 1, 2, 3a & 3b and other sub-contracted farms.

 

4

 

Furthermore, coupling the said poor performances of the Mega farms, impacts of the COVID-19 Pandemic of 2020 caused much financial loses for AFF 1, 2,and 3 as well as to Tri-way’s sub-contracted farms incurring losses over $87 million and $118 million for the fiscal year of 2020 and 2021 respectively due primarily to its effects caused all farms to stop work for over 7 months during 2020 without sufficient workers, feed, supplementary, medications, transportation and maintenances etc. to keep the live stocks going and they all died during the period calculating to multiple million pieces (equivalent to multiple of thousand metric tons). It is estimated that it will cost over $80 million in Capital Expenditures and Working Capital and two years to replace said live stocks and to bring the fishery operation of the said AF 1, 2 & 3 back to the revenue and income generated in fiscal year 2019. Impacts of the Covid-19 continued in 2021 thus Tri-way didn’t generate any revenue but loses in 2020 and 2021 and to provide impairment loses over $135 million for the loses of expensive brood stocks and the need to replace many operational plants and equipment etc. At the same time, financials of Tri-way’s China fishery operations could not be audited by its Hong Kong Auditor due to the traveling restrictions caused by the effects of the Covid-19, therefore Tri-way could only file its standalone financial in its annual return to satisfy the requirement of HK Company Register in 2020 and 2021. In order that the said standalone financial could be presented Tri-way had to terminate the WFOE status of JFD. Therefore JFD changed its WFOE status to a Chinese Entity owned status in 2020 with Mr. Solomon Lee as the legal representative of the said Chinese Entity holding ownership of JFD for and on behalf of Tri-way. At that time, although the Change of ownership of JFD to the said Chinese Entity was approved and registered with the China Company Register yet the approval of the China Taxation Authority was not granted until sometimes in February 2022 to allow its disclosure of event such that the change of JFD’s WFOE status to a Chinese owned entity was announced in the 10K 2021 filed during April 2022.

 

C. Other divisions

 

C.1. Division (3) of the Marketing & Trading operation of The Corporate Sector

 

This division is referring to the trading segment of business operations of the Group named internally under corporate division of Sino Agro Food, Inc., including import/export business, corporate affairs and consulting and service operations provided to projects that are not included in CA’s fishery development activities. Over the years up until end of fiscal year 2019 the corporate division imported mainly live seafood from South Africa countries, Vietnam, Thailand, Russian and other nearby countries and frozen beef from Australia and South America countries; however it is due to the interruptions and adverse impacts caused by the Pandemic COVID-19 made it impossible and unprofitable to continue the imports of live seafood, and the poor political relationship between China and Australia in 2020 induced high risks on the imports of Australian beef. However, over the years the Company has built up a strong base of connections and customers in China that provides an unique opportunity to the Company to develop an additional Trading Platform aiming to generate additional revenues, profits and most importantly positive cash flows, so from July 2020 onward, the corporate division started to explore the opportunities of importing some of the China markets’ niche products. Although in so far the Company achieved minimal financial impacts due mainly to the adversities caused by the impacts of Covid-19 limiting oversea and domestic logistic, air flights and shipping services, restricting custom clearing services, inconstancy of supplies and deliveries and increasing costs and expenses of sales etc. making it extremely difficult to perform the trading activity effectively.

 

Therefore, there was no sales revenue generated in fiscal year 2020, 2021 and up to 31st March 2022 (Q1 2022) for Division (3).

 

5

 

Nevertheless presently the Company has registered in its book multiple of US$ hundred millions of supplies and sales in locally produced corns (for China domestic end users), imported sugars from Brazil, rape seed oil from Russia and coals from Indonesia for sales in China etc. that will be initiated as soon as the Company will finalize the seed capital needed for the establishment of bank instruments to generate the sizable trades. Once when these trading will be started, collectively they will bring in multiple of US$ tens of millions in gross profit per year to support the Company’s cash flows at reasonable high levels. In this respect, the Company is optimist that the said seed capital will be materialized within a further reasonable period on or before the end of Q2 2022.

 

C.2. Division (4) of the Project Development of (CA)

 

This is referring to the fishery operations of Capital Award Inc. (“Capital Award” or “CA”) covering its engineering, technology and consulting service management of fishery and agriculture farms, technology transfers and seafood sales and marketing, where;

 

Capital Award generated revenues from providing engineering consulting services as turnkey contractors to owners and developers of fishery projects that are being designed and engineered into turnkey contracts by Capital Award in China using its A Power Module Technology Systems (“APM”) as follows:

 

Engineering and Technology Services; via Consulting and Service Contracts (“CSC’s”) for the development, construction, and supply of plant and equipment, and management of fishery (and prawn or shrimp) farms and related business operations.

 

Seafood Sales from CA’s projected farms; became a discontinued segment of operations from October 5, 2016 when Tri-way was disposed to other third parties in term Tri-way was reclassified as an unconsolidated equity investee on same date.

 

From January 2020 up to the date of this annual report CA has not been able to do any fishery project or fishery project development due to the effects of the Pandemic COVID-19 as such, there was no revenue generated for fiscal year 2020 and 2021 for Division (4).

 

CA’s Potential project of 2022Q1:

 

In July 2020 SIAF became the joint venture partner of the China Africa Joint Chamber of Commerce and Industries (CAJCCI) which is a non-profit organization established in November 2016 by the China and Africa Governments to plan and to implement agriculture projects and related developments in Africa through development fund of US$60 Billion every three years provided by and granted by the China Government to Africa Nations in Agriculture industry projects and developments etc. In March 2021, development project papers in (i). Development of Trading of exporting dried cassavas to China and exporting of plant and equipment from China to Madagascar and developments of cassavas plantations and related value added processing and drying of cassavas on 100,000 acres of land in Madagascar and (ii). Development of goat farms and related value added processing in Madagascar were submitted to CAJCCI and Government of Madagascar; by early May 2021, both CAJCCI and the Government of Madagascar gave consents to both projects. Up until the date of this report, stringent traveling restriction between China and Madagascar has not been relaxed such that we have not been able to send our team members (including various professionals and professionals from CAJCCI) to assist our current Madagascar management teams of two members in Madagascar to start up the Projects but to wait until such time the said traveling restriction can be relaxed before sending staffs to Madagascar hopefully from June 2022 to start up the trading of cassavas and the development of cassavas farms etc.

 

6

 

SINO AGRO FOOD, INC. AND SUBSIDIARIES

 

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

 

  PAGE
REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM F-2
CONSOLIDATED BALANCE SHEETS F- 3
CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME F- 4
CONSOLIDATED STATEMENTS OF CASH FLOWS F- 5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F-6 - F- 36

 

F-1

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

There is no report from any independent registered public accounting firm for this March 312022 financial report due to the Covid-19 events prevented our Hong Kong based auditor to be in China to do inspection at sites and verification of our China operations.

 

F-2

 

 

SINO AGRO FOOD, INC.

CONSOLIDATED BALANCE SHEETS

 

          March 31,     December 31,  
    Note     2022     2021  
          (Unaudited)     (Unaudited)  
ASSETS                  
Current assets                  
Cash and cash equivalents     5     $ 191,448     $ 189,444  
Inventories     6      
 
     
 
 
Costs and estimated earnings in excess of billings on uncompleted contracts     18      
 
     
 
 
Deposits and prepayments     7       9,171,856       9,141,301  
Accounts receivable, net of allowance for doubtful accounts     8       12,100,674       9,605,260  
Other receivables     9       83,395,963       83,460,514  
Total current assets             104,859,941       102,396,519  
Non-current assets                        
Plant and equipment, net of accumulated depreciation     10       87,738,484       86,667,799  
Construction in progress     11      
 
     
 
 
Land use rights, net of accumulated amortization     12       51,521,934       50,777,067  
Total non-current assets             139,260,418       137,444,866  
Other assets                        
Goodwill     13       724,940       724,940  
Proprietary technologies, net of accumulated amortization     14       5,947,389       6,071,691  
Interest in unconsolidated investees     15       145,244,914       148,101,538  
Total other assets     16       151,917,243       154,898,169  
Total assets           $ 396,037,602     $ 394,739,554  
                         
LIABILITIES AND STOCKHOLDERS’ EQUITY                        
Current liabilities                        
Accounts payable and accrued expenses           $ 373,732     $ 458,140  
Billings in excess of costs and estimated earnings on uncompleted contracts     18      
 
     
 
 
Due to directors             2,257,927       1,919,393  
Other payables     19       11,626,649       9,231,613  
Borrowings - Short term bank loan     20      
 
     
 
 
              14,258,308       11,609,146  
                         
Non-current liabilities                        
Other payables     19      
 
     
 
 
Borrowings - Long term debts and bank loan     20      
-
     
-
 
             
-
     
-
 
                         
Stockholders’ equity                        
Common stock: = $0.001 par value (60,352,492  and 60,352,492  shares issued and outstanding as of March 31, 2022 and  December 31, 2021, respectively)     22       60,353       60,353  
Additional paid - in capital             135,722,287       135,722,287  
Retained earnings             222,846,563       225,866,492  
Accumulated other comprehensive income             (49,394,494 )     (51,277,535 )
Treasury stock             (1,250,000 )     (1,250,000 )
Total Sino Agro Food, Inc. and subsidiaries stockholders’ equity             307,984,709       309,121,597  
Non - controlling interest             73,794,585       74,008,811  
Total stockholders’ equity             381,779,294       383,130,408  
Total liabilities and stockholders’ equity           $ 396,037,602     $ 394,739,554  

 

The accompanying notes are an integral part of these consolidated financial statements.

 

F-3

 

 

SINO AGRO FOOD, INC.

CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME

 

    Three months
ended,
March 31,
2022
    Three months
ended,
March 31,
2021
 
Revenue            
- Sale of goods  
 
   
 
 
- Leasing & contracting income     2,687,305       2,633,393  
      2,687,305       2,633,393  
Cost of goods sold    
 
     
 
 
Cost of Leasing & contracting     (1,587,858 )     (1,556,003 )
                 
Gross profit     1,099,447       1,077,390  
General and administrative expenses     (1,134,168 )     (1,204,508 )
Net income from operations     (34,721 )     (127,118 )
Other income (expenses)                
Sharee of income from unconsolidated equity investee     (2,856,624 )     (8,547,517 )
Non-operating expenses                
Interest expense    
 
     
 
 
Net income (expenses)     (2,856,624 )     (8,547,517 )
                 
Net income before income taxes     (2,891,345 )     (8,674,635 )
Provision for income taxes    
 
     
 
 
                 
Net income     (2,891,345 )     (8,674,635 )
Less: Net (income) loss attributable to  non - controlling interest     (128,585 )     357,842  
Net income attributable to Sino Agro Food Inc. and subsidiaries     (3,019,930 )     (8,316,793 )
Other comprehensive income (loss) - Foreign currency translation gain (loss)     179,739       (195,746 )
Comprehensive income     (2,840,191 )     (8,512,539 )
Less: Other comprehensive (income) loss attributable to  non - controlling interest     85,642       (116,387 )
Comprehensive income attributable to the Sino Agro Food, Inc. and subsidiaries     (2,754,549 )     (8,628,926 )
                 
Earnings per share attributable to the Sino Agro Food, Inc. and subsidiaries common stockholders:                
Basic     (0.05 )     (0.14 )
Diluted     (0.05 )     (0.14 )
                 
Weighted average number of shares outstanding:                
                 
Basic     60,352,492       60,093,202  
Diluted     60,352,492       60,093,202  

 

The accompanying notes are an integral part of these consolidated financial statements.

 

F-4

 

 

SINO AGRO FOOD, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS

 

    2022 Q1     2021 Q1  
Cash flows from operating activities            
Net income (loss) for the year     (2,891,345 )     (8,674,635 )
Adjustments to reconcile net income for the year to net cash from operations:                
Depreciation     1,249,555       1,221,461  
Amortization     557,306       535,871  
Share of unconsolidated equity investee     2,856,624       8,547,517  
Increase in deposits and prepaid expenses     (30,555 )     524,112  
(Decrease) increase in due to a director     338,534       32,787  
Increas e/(decrease) in accounts payable and accrued expenses     (84,408 )     (657,463 )
Increase in other payables     2,395,036       (5,478,353 )
Decrease (increase) in accounts receivable     (2,495,414 )     3,526,575  
(Decrease) increase in tax payable    
 
     
 
 
Increase (decrease) in billings in excess of costs and estimated earnings on uncompleted contracts                
Decrease in other receivables     64,551       25,748  
Increase in interests in unconsolidated investees    
 
     
 
 
Net cash provided by operating activities     1,959,884       (396,380 )
Cash flows from investing activities                
Acquisition of plant, property and equipment    
 
     
 
 
Payment for construction in progress    
 
     
 
 
Proceed from disposal of a long term investee    
 
     
 
 
Proceed from disposal of plant, property and equipment    
 
     
 
 
Net cash used in investing activities    
-
     
-
 
Cash flows from financing activities                
-Proceeds from convertible bond payable    
 
     
 
 
Capital contribution from non-controlEng interest    
 
     
 
 
Proceeds from short term debts    
 
     
 
 
Long term debts repaid    
 
     
 
 
Short term bank loan repaid    
 
     
 
 
Net cash provided by financing activities    
--
     
-
 
Effects on exchange rate changes on cash     (1,957,880 )     432,945  
                 
(Decrease)/increase in cash and cash equivalents     2,004       36,565  
Cash and cash equivalents, beginning of year     189,444       188,846  
Cash and cash equivalents, end of year     191,448     $ 225,411  
                 
Supplementary disclosures of cash flow inforniation:                
Cash paid for interest    
 
     
 
 
Cash paid for income taxes    
--
     
--
 
Non - cash transactions                
Common stock issued as security for finance raised    
 
     
 
 
Common stock issued for services and compensation    
 
     
 
 
Transfer construction in progress to property and equipment    
 
     
 
 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

F-5

 

 

SINO AGRO FOOD, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

1. CORPORATE INFORMATION

 

Sino Agro Food, Inc. (the “ Company” or “SIAF”) (formerly known as Volcanic Gold, Inc. and A Power Agro Agriculture Development, Inc.) was incorporated on October 1, 1974 in the State of Nevada, United States of America.

 

The Company was engaged in the mining and exploration business but ceased its mining and exploring business on October 14, 2005. On August 24, 2007, the Company entered into a Merger and Acquisition Agreement with Capital Award Inc., a Belize corporation (“CA”) and its subsidiaries Capital Stage Inc. (“CS”) and Capital Hero Inc. (“CH”). Effective the same date, CA completed a reverse merger transaction with SIAF. SIAF acquired all the outstanding common stock of CA from Capital Adventure, a shareholder of CA, for 3,232,323 shares of the Company’s common stock.

 

On August 24, 2007 the Company changed its name from Volcanic Gold, Inc. to A Power Agro Agriculture Development, Inc. On December 8, 2007, the Company changed its name to Sino Agro Food, Inc.

 

On September 5, 2007, the Company acquired three existing businesses in the People’s Republic of China (the “P.R.C.”):

 

  (a) Hang Yu Tai Investment Limited (“HYT”), a company incorporated in Macau, the owner of 78% equity interest in ZhongXingNongMu Ltd (“ZX”), a company incorporated in the P.R.C.;

 

  (b) Tri-Way Industries Limited (“TRW”), a company incorporated in Hong Kong; and

 

  (c) Macau Eiji Company Limited (“MEIJI”), a company incorporated in Macau, the owner of 75% equity interest in Enping City Juntang Town Hang Sing Tai Agriculture Co. Ltd. (“HST”), a P.R.C. corporate Sino-Foreign joint venture. HST was dissolved in 2010.

 

On November 27, 2007, MEIJI and HST established a corporate Sino - Foreign joint venture, Jiang Men City Heng Sheng Tai Agriculture Development Co. Ltd. (“JHST”), a company incorporated in the P.R.C. with MEIJI owning a 75% interest and HST owning a 25% interest.

 

On November 26, 2008, SIAF established Pretty Mountain Holdings Limited (“PMH”), a company incorporated in Hong Kong with an 80% equity interest. On May 25, 2009, PMH formed a corporate Sino-Foreign joint venture, Qinghai Sanjiang A Power Agriculture Co. Ltd. (“SJAP”), incorporated in the P.R.C., of which PMH owns a 45% equity interest. At the time, the remaining 55% equity interest in SJAP was owned by the following entities:

 

  Qinghai Province Sanjiang Group Company Limited (English translation) (“Qinghai Sanjiang”), a company incorporated in the P.R.C with major business activities in the agriculture industry; and

 

  Guangzhou City Garwor Company Limited (English translation) (“Garwor”), a company incorporated in the P.R.C., specializing in sales and marketing.

 

SJAP is engaged in the business of manufacturing bio-organic fertilizer, livestock feed and development of other agriculture projects in the County of Huangyuan, in the vicinity of the Xining City, Qinghai Province, P.R.C.

 

In September 2009, the Company carried out an internal reorganization of its corporate structure and business, and formed a 100% owned subsidiary, A Power Agro Agriculture Development (Macau) Limited (“APWAM”), which was formed in Macau. APWAM then acquired PMH’s 45% equity interest in SJAP. By virtue of the acquisition, APWAM assumed all obligations and liabilities of PMH under the Sino Foreign Joint Venture Agreement. On May 7, 2010, Qinghai Sanjiang sold and transferred its equity interest in SJAP to Garwor. The State Administration for Industry and Commerce of Xining City Government of the PRC approved the sale and transfer. As a result, APWAM owned 45% of SJAP and Garwor owned the remaining 55%.

 

On September 9, 2010, an application was submitted by the Company to the Companies Registry of Hong Kong for deregistration of PMH under Section 291AA of the Hong Kong Companies Ordinance. On January 28, 2011, PMH was dissolved

 

On March 23, 2018, Qinghai Quanwang Investment Management Company Limited (“Quanwang”) acquired 8.3% equity interest in SJAP for total cash consideration of $459,137. As of December 31, 2019, APWAM owned 41.25% of SJAP, Garwor owned 50.45% and Quanwang owned the remaining 8.3%.

 

F-6

 

 

SINO AGRO FOOD, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

1. CORPORATE INFORMATION (CONTINUED)

 

On February 15, 2011 and March 29, 2011, the Company entered into an agreement and a memorandum of understanding (an “MOU”), respectively, to sell 100% equity interest in HYT group (including HYT and ZX) to Mr. Xin Ming Sun, a director of ZhongXingNong Nu Co., Ltd for $45,000,000, with effective date of January 1, 2011.

 

On February 28, 2011, the Company applied to form Enping City Bi Tao A Power Prawn Culture Development Co Limited (“EBAPCD”) , and the Company would indirectly own a 25% equity interest in future Sino Joint Venture Company (pending approval).

 

On February 28, 2011, TRW applied to form a corporate joint venture, Enping City Bi Tao A Power Fishery Development Co., Limited (“EBAPFD”), incorporated in the PRC. TRW owned a 25% equity interest in EBAPFD. On November 17, 2011, TRW formed Jiang Men City A Power Fishery Development Co., Limited (“JFD”) in which it acquired a 25% equity interest, while withdrawing its 25% equity interest in EBAPFD. As of December 31, 2011, the Company had invested for total cash consideration of $1,258,607 in JFD. JFD operates an indoor fish farm. On January 1, 2012, the Company acquired an additional 25% equity interest in JFD for total cash consideration of $1,662,365. As of January 1, 2012, the Company had consolidated the assets and operations of JFD. On April 1, 2012, the Company acquired an additional 25% equity interest in JFD for the total cash consideration of $1,702,580. These acquisitions were at our option according the terms of the original development agreement. The Company owned a 75% equity interest in JFD, representing majority of voting rights and controls its board of directors. On August 15, 2016, the acquisition agreement was executed by TRW for acquiring the other 25% equity in JFD which was a Sino Foreign Joint Venture Co. that TRW had 100% equity interest with effect on October 5, 2016. Upon the acquisitions of 3 additional prawn farms assets at fair value of $238.32 million from respective third parties and the master technology license at fair value of $30 million from Capital Award, Inc. by JFD, and the consideration of the above acquisitions were planned to be settled by the new issue shares of 99,990,000 TRW shares at $3.41 amounting to $340.53 million on or before March 31, 2018. As a result, SIAF’s equity interest in TRW was diluted from 100% to 23.89% with effective on October 5, 2016. The above transactions leaded the Company loss of control over TRW group, the Company’s investments in TRW and JFD were reclassified from a subsidiary to investments in unconsolidated equity investees as of October 5, 2016. The dilution of the Company’s investments in TRW group constituted a deemed disposal of the subsidiaries. The deemed gain on disposal of $56,947,005 was recorded in net income from discontinued operations of the consolidated statements of income and other comprehensive income of the Company for the year ended 31 December 2016. On October 1, 2016, the Company took up all assets and all liabilities of TRW and JFD except plant and equipment - fish farm. The Company converted the amount due from unconsolidated equity investee into equity interest during the fourth quarter of 2018, which resulted in equity interest in TRW from 23.89% to 36.60%

 

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.

 

F-7

 

 

SINO AGRO FOOD, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

SJAP formed Qinghai Zhong He Meat Products Co., Limited (“QZH”) , with SJAP would owning 100% equity interest. SJAP formed Qinghai Zhong He Meat Products Co., Limited (“QZH”), with SJAP would owning 100% equity interest. On October 25, 2015, both QZH and new stockholder, Qinghai Quanwang Investment Management Co., Ltd (“QQI”) contributed additional capital of $4,157,682 and $769,941, respectively. As a result, SJAP decreased its equity interest from 100% to 85% and QQI owned a 14% equity interest. In addition, according to investment agreement between QZH and QQI, (i) QQI only enjoy interest 6% annually on its capital contribution and did not enjoy profit distribution; (ii) investment period was 3 years only, and (iii) SJAP shared 100% on profit or loss after deduction 6% interest to QQI and enjoyed 100% voting rights of QZH’s board and stockholders meetings. SJAP disposed its 85% equity interest in QZH for RMB2 (equivalent to $0) for cash and completed on December 30, 2018. As a result, QZH was derecognized as variable interest entity of the company. On September 30th 2019, Mr. Solomon Lee resigned as the Chairman of SJAP resulting in categorization of SJAP as an Investor in Associate from a subsidiary status.

 

Up until September 30th 2019, revenues have been generated from activities that the Company divided into five stand-alone business divisions or units: (1) Fishery development (in consulting and services), (2) Cattle & Beef (fully integrated activity), (3) Organic Fertilizer, (4) HU Plantation, and (5) Marketing and Trading.

 

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 March,31th 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.

 

F-8

 

 

SINO AGRO FOOD, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

  2.1 FISCAL YEAR

 

The Company has adopted December 31 as its fiscal year end.

 

  2.2 REPORTING ENTITIES

 

Name of subsidiaries   Place of incorporation   Percentage of interest*   Principal activities
Capital Award Inc. (“CA”)   Belize   100% (2019: 100%) directly   Fishery development and holder of A-Power Technology master license.
             
Capital Hero Inc. (“CS”)   Belize   100%(2019:100%)indirectly   Dormant Capital HeroInc.
             
(“CH”)Capital Stage Inc. (CH)   Belize   100% (2019: 100%) indirectly   Dormant Capital Stage Inc.(CS)
             
Macau Eiji Company Limited (“MEIJI”)   Macau, P.R.C.   100% (2019: 100%) directly   Investment holding, cattle farm development, beef cattle and beef trading
             
Sino Agro Food Sweden AB (“SAFS”).   Sweden   100% (2019 : 100%) directly   Dormant: Dissolved 31st December
             
A Power Agro Agriculture Development (Macau) Limited (“APWAM”)   Macau, P.R.C.   100% (2019: 100%) directly   Investment holding
             
Jiang Men City Heng Sheng Tai Agriculture Development Co. Ltd (“JHST”)   P.R.C.   75% (2019: 75%) Indirectly   HylocereusUndatus Plantation (“HU Plantation”).
             
Jiang Men City Hang Mei Cattle Farm Development Co., Limited (“JHMC”)   P.R.C.   75% (2019:75%) indirectly   Beef cattle cultivation
             
Hunan Shenghua A Power Agriculture Co., Limited (“HSA”)   P.R.C.   76% (2019:76%) indirectly   Manufacturing of organic fertilizer, livestock feed, and beef cattle and sheep cultivation, and plantation of crops and pastures

 

Name of associate (investee)   Place of incorporation   Percentage of interest*   Principal activities
Qinghai Sanjiang A Power Agriculture Co., Ltd (“SJAP”)   P.R.C.   41.25% (2019: 41.25%) indirectly   Manufacturing of organic fertilizer, livestock feed, and beef cattle
             
Tri-way Industries Limited   Hong Kong, P.R.C.   36.6% (2019: 36.6%) directly   A-Power Technology license (P.R.C.)
            Sales and marketing of fishery production& products.

 

F-9

 

 

SINO AGRO FOOD, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

2.3 BASIS OF PRESENTATION

 

The consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”).

 

2.4 BASIS OF CONSOLIDATION

 

The consolidated financial statements include the financial statements of the Company, its subsidiaries CA, CS, CH, MEIJI, JHST, JHMC, HSA, APWAM, SAFS and its variable interest entity SJAP. All material inter-company transactions and balances have been eliminated in consolidation.

 

SIAF, CA, CS, CH, MEIJI, JHST, JHMC, HSA, APWAM, SAFS, and SJAP are hereafter referred to as (the “Company”).

 

2.5 BUSINESS COMBINATION

 

The Company adopted the accounting pronouncements relating to business combination (primarily contained in ASC Topic 805 “Business Combinations”), including assets acquired and liabilities assumed on arising from contingencies. These pronouncements established principles and requirement for how the acquirer of a business recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any non-controlling interest in the acquisition as well as provides guidance for recognizing and measuring the goodwill acquired in the business combination and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. In addition, these pronouncements eliminate the distinction between contractual and non-contractual contingencies, including the initial recognition and measurement criteria and require an acquirer to develop a systematic and rational basis for subsequently measuring and accounting for acquired contingencies depending on their nature. The Company’s adoption of these pronouncements will have an impact on the manner in which it accounts for any future acquisitions.

 

2.6 NON - CONTROLLING INTEREST IN CONSOLIDATED FINANCIAL STATEMENTS

 

The Company adopted the accounting pronouncement on non-controlling interests in consolidated financial statements, which establishes accounting and reporting standards for the non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary. This guidance is primarily contained in ASC Topic “Consolidation.” It clarifies that a non-controlling interest in a subsidiary is an ownership interest in the consolidated financial statements. The adoption of this standard has not had material impact on the Company’s consolidated financial statements.

 

2.7 USE OF ESTIMATES

 

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.

 

F-10

 

 

SINO AGRO FOOD, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

2.8 REVENUE RECOGNITION

 

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.

 

F-11

 

 

SINO AGRO FOOD, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

The percentage of completion method requires the ability to estimate several factors, including the ability of the customer to meet its obligations under the contract, including the payment of amounts when due. If the Company determines that collectability is not assured, the Company will defer revenue recognition and use methods of accounting for the contract such as the completed contract method until such time as the Company determines that collectability is reasonably assured or through the completion of the project.

 

For fixed-price contracts, the Company uses the ratio of costs incurred to date on the contract to management’s estimate of the contract’s total costs, to determine the percentage of completion on each contract. This method is used as management considers expended costs to be the best available measure of progression of these contracts. Contract costs include all direct material, subcontract and labor costs and those indirect costs related to contract performance, such as supplies, tool repairs and depreciation. The Company accounts for maintenance and repair services under the guidance of ASC 605 as the services provided relate to construction work. Contract costs incurred to date and expected total contract costs are continuously monitored during the term of the contract. Changes in job performance, job conditions, and estimated profitability arising from contract penalty, change orders and final contract settlements may result in revisions to the estimated profit ability during the contract. These changes, which include contracts with estimated costs in excess of estimated revenues, are recognized as contract costs in the period in which the revisions are determined. Profit incentives are included in revenues when their realization is reasonably assured. At the point the Company anticipates a loss on a contract, the Company estimates the ultimate loss through completion and recognizes that loss in the period in which the loss was identified.

 

The Company does not provide warranties to customers on a basis customary to the industry, however, customers can claim warranty directly from product manufacturers for defects in equipment or products. Historically, the Company has experienced no warranty claims.

 

The Company provides various management services to its customers in the P.R.C. based on a negotiated fixed-price contract. The clients usually pay the fees when the services contract is signed and services are rendered. The Company recognizes these services-based revenues from contracts when (i) management services are rendered; (ii) clients recognize the completion of services; and (iii) collectability is reasonably assured. Fees received in advance are recorded as deferred revenue under current liabilities.

 

F-12

 

 

 

SINO AGRO FOOD, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

  2.9 COST OF GOODS SOLD AND COST OF SERVICES

 

Cost of goods sold consists primarily of direct purchase cost of merchandise goods, and related levies. Cost of services consist primarily direct cost and indirect cost incurred to date for development contracts and provision for anticipated losses for development contracts.

 

  2.10 SHIPPING AND HANDLING

 

Shipping and handling costs related to cost of goods sold are included in general and administrative expenses, which totaled $0 and $0 for the three months ended March 31, 2022 and March 31, 2021, respectively.

 

  2.11 ADVERTISING

 

Advertising costs are included in general and administrative expenses, which totaled $0, and $0 for the three months ended March 31, 2022 and March 31, 2021, respectively.

 

  2.12 RESEARCH AND DEVELOPMENT EXPENSES

 

Research and development expenses are included in general and administrative expenses, which totaled $0 and $0 for the three months ended March 31, 2022 and March 31, 2021, respectively.

 

  2.13 FOREIGN CURRENCY TRANSLATION AND OTHER COMPREHENSIVE INCOME

 

The reporting currency of the Company is the U.S. dollars. The functional currency of the Company is the Chinese Renminbi (RMB).

 

For those entities whose functional currency is other than the U.S. dollars, all assets and liabilities are translated into U.S. dollars at the exchange rate on the balance sheet date; shareholders’ equity is translated at historical rates and items in the statements of income and of cash flows are translated at the average rate for the period. Because cash flows are translated based on the average translation rate, amounts related to assets and liabilities reported in the statements of cash flows will not necessarily agree with changes in the corresponding balances in the balance sheets. Translation adjustments resulting from this process are included in accumulated other comprehensive income in the statements of shareholders’ equity. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the statements of income and comprehensive income, as incurred.

 

Accumulated other comprehensive income in the consolidated statement of shareholders’ equity amounted to $ (49,394,494) as of March 31, 2022 and $ (51,277,535) as of December 31, 2021. The balance sheet amounts with the exception of equity as of March 31, 2022 and December 31, 2021 were translated using an exchange rate of RMB 6.35 to $1.00 and RMB 6.38 to $1.00, respectively. The average translation rates applied to the statements of income and other comprehensive income and of cash flows for the three months ended March 31, 2022 and March 31, 2021 were RMB 6.35 to $1.00 and RMB 6.48 to $1.00, respectively.

 

  2.14 CASH AND CASH EQUIVALENTS

 

The Company considers all highly liquid securities with original maturities of three months or less when acquired to be cash equivalents. Cash and cash equivalents kept with financial institutions in the P.R.C. are not insured or otherwise protected. Should any of those institutions holding the Company’s cash become insolvent, or should the Company become unable to withdraw funds for any reason, the Company could lose the cash on deposit with that institution.

 

  2.15 ACCOUNTS RECEIVABLE

 

The Company maintains reserves for potential credit losses on accounts receivable. Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves. 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.

 

F-13

 

 

SINO AGRO FOOD, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

  2.16 INVENTORIES

 

Inventories are valued at the lower of cost (determined on a weighted average basis) and net realizable value. Costs incurred in bringing each product to its location and conditions are accounted for as follows:

 

  (a) raw materials - purchase cost on a weighted average basis;

 

  (b) manufactured finished goods and work-in-progress - cost of direct materials and labor and a proportion of manufacturing overhead based on normal operation capacity but excluding borrowing costs; and

 

  (c) retail and wholesale merchandise finished goods - purchase cost on a weighted average basis.

 

Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs for completion and the estimated costs necessary to make the sale.

 

  2.17 PLANT AND EQUIPMENT

 

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.

 

  2.18 GOODWILL

 

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.

 

F-14

 

 

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.

 

  2.21 LAND USE RIGHTS

 

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.

 

F-15

 

 

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.

 

  2.25 TREASURY STOCK

 

Treasury stock means shares of a corporation’s own stock that have been issued and subsequently reacquired by the corporation. Converting outstanding shares to treasury shares does not reduce the number of shares issued but does reduce the number of shares outstanding. These shares are not eligible to receive dividends. Accounting for excesses and deficiencies on treasury stock transactions is governed by ASC 505-30-30.

 

State laws and federal agencies closely regulate transactions involving a company’s own capital stock, so the purchase of outstanding shares must have a legitimate purpose. Some of the most common reasons for purchasing outstanding shares are as follows:

 

  (a) to meet additional stock needs for various reasons, including newly implemented stock option plans, stock for convertible bonds or convertible preferred stock, or a stock dividend.

 

  (b) to make more shares available for acquisitions of other entities.

 

The cost method of accounting for treasury shares has been adopted by the Company. The purchase of outstanding shares and thus converting them into treasury shares is treated as a temporary reduction in shareholders’ equity in view of the expectation to reissue the shares instead of retiring them. When the Company reissues the treasury shares, the temporary account is eliminated. The cost of acquiring outstanding shares for converting into treasury shares is charged to a contra account, in this case a contra equity account that reduces the stockholder equity balance.

 

  2.26 INCOME TAXES

 

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.

 

F-16

 

 

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 March 31, 2022 and December 31, 2021 amounted to $191,448 and $189,444, 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:

 

      2022 Q1       March
2021Q1
 
Customer A     55.15 %     55.15 %
Customer B     24.79 %     24.79 %
Customer C     20.06 %     20.06 %
Customer D                
Customer F                
                 
      100 %     100 %

 

        Percentage
of revenue
   

 

Amount

 
Customer A   Organic fertilizer and Bread Grass Division     55.15 %   $ 1,481,921  
Customer B   HU Plantation Division     24.79 %   $ 666,210  
Customer C   Cattle Farm Development     20.06 %   $ 539,174  

 

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:

 

    March,31,
2022
    December 31,
2021
 
Customer A     38.15 %     35.89 %
Customer B     28.49 %     35.69 %
Customer C     17.60 %     17.13 %
Customer D     12.42 %     10.77 %
Customer E     3.35 %     0.52 %
Customer F             %
      100 %     100 %

 

As of March 31, 2022, amounts due from customers A, B and C are $4,616,063, $3,447,374 and $2,129,250 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.

 

F-17

 

 

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.

 

  2.30 EARNINGS PER SHARE

 

As prescribed in ASC Topic 260 “Earnings per Share,” Basic Earnings per Share (“EPS”) is computed by dividing net income available to common stockholders by the weighted average number of common stock shares outstanding during the year. Diluted EPS is computed by dividing net income available to common stockholders by the weighted-average number of common stock shares outstanding during the year plus potential dilutive instruments such as stock options and warrants. The effect of stock options on diluted EPS is determined through the application of the treasury stock method, whereby proceeds received by the Company based on assumed exercises are hypothetically used to repurchase the Company’s common stock at the average market price during the period.

 

ASC 260-10-55 requires that stock dividends or stock splits be accounted for retroactively if the stock dividends or stock splits occur during the year, or retroactively if the stock dividends or stock splits occur after the end of the period but before the release of the financial statements, by considering it outstanding of the entirety of each period presented. Dilution is computed by applying the treasury stock method. Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the year.

 

For the three months ended March 31,2022 and March 31,2021, 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 three months ended March 31,2022 and March 31,2021, 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.

 

F-18

 

 

SINO AGRO FOOD, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

  2.34 FAIR VALUE OF FINANCIAL INSTRUMENTS

 

The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value under U.S. GAAP, and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10- 35-37 establishes a fair value hierarchy, which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:

 

Level 1 Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.

 

Level 2 Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.

 

Level 3 Pricing inputs that are generally observable inputs and not corroborated by market data.

 

Financial instruments consist principally of cash, accounts receivable, Deposits and prepayments, accounts payable and accrued expenses, other payables, due to a director and income tax payables. The carrying amounts of such financial instruments in the accompanying condensed consolidated balance sheet approximate their fair values due to their relatively short-term nature. The Company’s long-term borrowing, promissory notes and convertible notes payable approximates the fair value of such instrument based upon management’s best estimate of interest rates that would be available to the Company for similar financial arrangement at December 31, 2019. It is management’s opinion that the Company is not exposed to any significant currency or credit risks arising from these financial instruments.

 

The Company revalues its derivative liability at every reporting period and recognizes gains or losses in the consolidated statement of income and other comprehensive income that are attributable to the change in the fair value of the derivative liability. The Company has no other assets or liabilities measured at fair value on a recurring basis.

 

  2.35 RECENT ACCOUNTING PRONOUNCEMENTS

 

In February 2016, the FASB issued ASU 2016-02, Leases, which aims to make leasing activities more transparent and comparable and requires substantially all leases be recognized by lessees on their balance sheet as a right-of-use asset and corresponding lease liability, including leases currently accounted for as operating leases. This ASU is effective for all interim and annual reporting periods beginning after December 15, 2018, with early adoption permitted. The Company is currently evaluating the impact that the adoption of ASU 2016-02 will have on its consolidated financial statements and related disclosures.

 

In June 2018, the FASB issued ASU 2018-07—Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. This ASU is effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. The Company is currently evaluating the impact that the adoption of this ASU will have on its consolidated financial statements and related disclosures.

 

  2.36 RECLASSIFICATION

 

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.

 

F-19

 

 

SINO AGRO FOOD, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

3. SEGMENT INFORMATION

 

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.

 

    March 31,2022  
    Fishery Development Division (1)     HU Plantation Division (2)     Organic Fertilizer and Bread Grass Division (3)     Cattle Farm Development Division (4)     Corporate and others (5)     Total  
                                     
Revenue   $ 0       666,210       1,481,921       539,174       0     $ 2,687,305  
                                                 
Net income (loss)   $ (37,114 )     (9,523 )     163,549       146,584       (3,283,426 )   $ (3,019,930 )
                                                 
Total assets   $ 95,141,892       32,870,511       101,981,491       17,054,939       148,988,769     $ 396,037,602  

 

    March 31,2021  
    Fishery Development Division (1)     HU Plantation Division (2)     Organic Fertilizer and Bread Grass Division (3)     Cattle Farm Development Division (4)     Corporate and others (5)     Total  
                                     
Revenue   $ 0       652,845       1,452,191       528,357       0     $ 2,633,393  
                                                 
Net income (loss)   $ (37,114 )     (10,666 )     173,362       177,367       (8,619,742 )   $ (8,316,792 )
                                                 
Total assets   $ 99,898,987       35,828,857       119,318,345       20,636,476       190,705,624     $ 466,388,289  

 

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).

 

F-20

 

 

SINO AGRO FOOD, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

4. INCOME TAXES

 

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 31 March 2022, 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.

 

F-21

 

 

SINO AGRO FOOD, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

4. INCOME TAXES (CONTINUED)

 

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 three months ended March 31, 2022 and 2021as they are within the agriculture, and 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 three months ended March 31, 2022 and 2021.

 

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 the three months ended March 31, 2022 and 2021 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:

 

    March, 31,
2022
    March, 31,
2021
 
SIAF   $
-
    $
-
 
SAFS    
 
     
 
 
CA, CH and CS    
 
     
 
 
MEIJI and APWAM    
 
     
 
 
JHST,  JHMC and HSA    
 
     
 
 
    $
         
     
         
 

 

The Company did not recognize any interest or penalties related to unrecognized tax benefits for the three months ended March 31, 2022 and 2021. 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.

 

F-22

 

 

SINO AGRO FOOD, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

5. NET LOSS FROM DISPOSAL OF A VARIABLE INTEREST ENTITY

 

Historical no longer applicable

 

6. CASH AND CASH EQUIVALENTS

 

    March,31,
2022
    December 31,
2021
 
Cash and bank balances   $ 191,448     $ 189,444  
                 

 

F-23

 

 

SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

7. INVENTORIES

 

As of March, 31, 2022, inventories are as follows:

 

    March, 31,
2022
    December 31,
2021
 
Bread grass    
       
    $
       
 
Beef cattle    
 
     
 
 
Organic fertilizer    
 
     
 
 
Forage for cattle and consumable    
 
     
 
 
Raw materials for bread grass and organic fertilizer    
 
     
 
 
Immature seeds    
 
     
 
 
     
-
    $
-
 

 

8. DEPOSITS AND PREPAYMENTS

 

    March, 31,
2022
    December 31,
2021
 
Deposits for                
- purchases of equipment    
-
    $
-
 
- acquisition of land use rights    
-
     
-
 
- inventories purchases     9,171,856       9,141,301  
- construction in progress    
-
     
-
 
- issue of shares as collateral    
-
     
-
 
Shares issued for employee compensation and overseas professional and bond interest    
-
     
-
 
Others    
-
     
-
 
      9,171,856     $ 9,141,301  

 

9. ACCOUNTS RECEIVABLE

 

All accounts receivable are reflected as a current asset and no allowance for bad debt of March 31, 2022 and December 31,2021, respectively.

 

Aging analysis of accounts receivable is as follows:

 

    March, 31,
2022
    December 31,
2021
 
0 - 30 days     1,873,136     $ 1,580,788  
31 - 90 days     4,010,526       2,761,450  
91 - 120 days     369,285       1,161,635  
over 120 days and less than 1 year     5,847,727       4,097,387  
over 1 year    
-
     
-
 
      12,100,674     $ 9,605,260  

 

F-24

 

 

SINO AGRO FOOD, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

10. OTHER RECEIVABLES

 

    March, 31,
2022
    December 31,
2021
 
Advanced to employees   $
     
    $
-
 
Advanced to suppliers     2,028,907       1,958,785  
Advanced to customers    
 
     
 
 
Advanced to developers    
-
     
-
 
Advanced to SJAP     76,404,954       76,404,954  
Others     4,962,102       5,096,775  
    $ 83,395,963     $ 83,460,514  

 

Advanced to employees, suppliers, customers and developers are unsecured, interest free and with no fixed terms of repayment.

 

11. PLANT AND EQUIPMENT

 

    March, 31,
2022
    December  31,
2021
 
Plant and machinery   $ 8,841,367     $ 8,838,326  
Structure and leasehold improvements     89,054,451       86,899,910  
Mature seeds and herbage cultivation     17,664,989       17,513,513  
Furniture and equipment     2,591,393       2,525,915  
Motor vehicles     1,528,690       1,441,330  
      119,680,890       117,218,994  
                 
Less: Accumulated depreciation     31,942,406       30,551,195  
Net carrying amount   $ 87,738,484     $ 86,667,799  

 

F-25

 

 

SINO AGRO FOOD, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

12. CONSTRUCTION IN PROGRESS

 

    March, 31,
2022
    December 31,
2021
 
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    
-
     
-
 
    $
-
    $
-
 

 

F-26

 

 

SINO AGRO FOOD, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

13. LAND USE RIGHTS

 

    March, 31,
2022
    December 31,
2021
 
Cost   $ 70,572,240     $ 69,080,116  
Less: Accumulated amortization     (19,050,306 )     (18,303,050 )
Net carrying amount   $ 51,521,934     $ 50,777,067  

 

14. GOODWILL

 

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.

 

    March, 31,
2022
    December 31,
2021
 
Goodwill from acquisition   $ 729,940     $ 724,940  
Less: Accumulated impairment losses    
-
     
-
 
Net carrying amount   $ 724,940     $ 724,940  

 

15. PROPRIETARY TECHNOLOGIES

 

    March, 31,
2022
    December 31,
2021
 
Cost     9,256,055     $ 9,236,995  
Less: Accumulated amortization     (3,308,666 )     (3,165,304 )
Net carrying amount     5,947,389     $ 6,071,691  

 

F-27

 

 

SINO AGRO FOOD, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

16. INTERESTS IN UNCONSOLIDATED EQUITY INTERESTS

 

    March 31,
2022
    December 31,
2021
 
Investments at cost   $           $        
- TRW     131,251,600       131,251,600  
- SJAP     21,398,361       21,398,361  
Cattle farm 2    
-
     
-
 
Amount due from a consolidated equity investee     (9,405,947 )     (6,548,423 )
      145,244,914     $ 148,101,538  

 

F-28

 

 

SINO AGRO FOOD, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

17. TEMPORARY DEPOSITS PAID TO ENTITIES FOR EQUITY INVESTMENTS IN FUTURE SINO JOINT VENTURE COMPANIES

 

Intended unincorporated Investee   Projects Engaged   March, 31,
2022
    December 31,
2021
 
A   Trade center    
           -
    $
           -
 
B  
Fish and prawn Farm 2 GaoQiqiang Aquaculture
   
*
     
*
 
C   Cattle farm 2    
-
     
-
 
        $
-
    $
-
 

 

18. VARIABLE INTEREST ENTITY TO AN INVESTOR IN ASSOCIATE

 

As of 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.

 

F-29

 

 

SINO AGRO FOOD, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

19. CONSTRUCTION CONTRACT

 

  (i) Costs and estimated earnings in excess of billings on uncompleted contracts

  

    March, 31,
2022
    December 31,
2021
 
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

 

    March, 31,
2022
    December 31,
2021
 
Billings          -     $    
Less: Costs     -          
Estimated earnings     -          
Billing in excess of costs and estimated earnings on uncompleted contracts     -     $           

 

20. OTHER PAYABLES

 

    March, 31,
2022
    December 31,
2021
 
Due to third parties     11,626,649     $ 9,231,613  
Straight note payable (note 23(i))    
-
     
-
 
Promissory notes issued to third parties    
-
     
-
 
Due to local government    
-
     
-
 
      11,626,649     $ 9,231,613  
                 
Less:  Amount classified as non-current liabilities    
 
     
 
 
  Promissory notes issued to third parties    
-
     
 
 
Amount classified as current liabilities     11,626,649     $ 9,231,613  

 

Due to third parties are unsecured, interest free and have no fixed terms of repayment.

 

F-30

 

 

SINO AGRO FOOD, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

21. BORROWINGS

 

There is no bank borrowing as at March 31, 2022 

 

22. CONVERTIBLE NOTE PAYABLES

 

As of December 31, 2019, we have other payables totaling $42,514,342, comprised of the following:

 

Convertible Notes Payables of

 

Note (1) is a 10.5% convertible note in aggregate principal amount of $33 million issued on August 29, 2014. Note has been transferred to an suspended account and please refer to further details described in chapter below marked notes to Note (2).

 

Note (2) is another convertible note with principle sum of $4 million issued on October 29, 2019 that was fully satisfied without any further liability to the note holder on January 20, 2022 by (i) 120,000 common shares of the Company previously issued in October 29, 2019 as security to and has been accepted by the Note holder as part repayment of Note (2) and (ii) the transfer of 32,000 common shares of Tri-way from a friendly shareholder of Tri-way to the note holder on January 20, 2022 with all interest to be voided. This convertible note was fully redeemed on January 20, 2022.

 

Other payables on loan debts of

 

Loan (1) is a friendly party’s loan granted by the lender on October 12, 2017 with principal amount of $6 million and accrued interest to present (date of March 31, 2022) of $3 million rounding up to a sum of $9 million as at December 31, 2021.

 

Loan (2) is consisting loans granted by 2 friendly third parties for $1,482,027 collectively during the period of fiscal year 2021 that are interest free and have no fixed term of repayments.

 

Table 13.a. below shows further summarized details of the Other Payables:

 

    31.12.2021      
Other payables as at   Principal     Outstanding     Note
Convertible Note 1     33,000,000      
-
    Transferred to Suspend accont 31.12.2021
Convertible Note 2     4,000,000      
-
    Fully paid on January 20, 2021
Loan 1     6,000,000       9,000,000.0     Intending to be fully paid within year 2022.
Loan 2                      
Friendly party 1     900,000       900,000.0     Intending to be fully paid on or before April 8, 2022
Friendly party 2     582,027       582,027.4      
Total Other Payables as at             10,482,027        

 

F-31

 

 

SINO AGRO FOOD, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

22. CONVERTIBLE NOTE AND OTHER PAYABLES (CONTINUED)

  

Note to Convertible Note 1 (CP 1):

 

History of CP1

 

On August 29, 2014, the Company completed the closing of a private placement financing transaction with an accredited investor, which purchased a 10.5% Convertible Note (the “Note 1”) in the aggregate principal amount of up to $33,300,000. The Company received the total advance of $11,632,450. The Company shall offer investor a discount equal to 25% of the amount of the principal advanced by the investor.

 

Interest on the note shall accrue on the outstanding principal balance of this Note from August 29, 2014. Interest shall be payable quarterly on the last day of each of March, June, September and December commencing September 30, 2014 provided, however, that note holder may elect to require the Company to issue to the note holder a promissory note in lieu of cash in satisfaction of any interest due and payable at such time. Any interest payment note shall be subject to the same terms as the note. The note has a maturity date of February 28, 2020.

 

The note is convertible, at the discretion of the note holder, into shares of the Company’s common stock (i) at any time following an Event of Default, or (ii) for a period of thirty (30) calendar days following October 31, 2015 and each anniversary thereof, at an initial conversion price per share of $1.00, subject to adjustment for stock splits, reverse stock splits, stock dividends and other similar transactions and subject to the terms of the note. As long as the note is outstanding, the investor shall have a right of first refusal, exercisable for thirty (30) calendar days after notice to the note holder, to purchase securities proposed to be offered and sold by the Company.

 

The Company and the note holder entered into a restructuring agreement regarding the settlement of the Note 1. Both parties have agreed to restructure the indebtedness represented by Note 1 as follows: (a) SIAF issues 5,196,333 shares of its common stock and transfer 400,000 shares of TRW to the note holder; and (b) SIAF executes a new promissory note in the principal amount of $15,589,000 to the note holder to be paid in installments over a period of time. However, both parties remain open to negotiate an all-cash settlement of the Note 1.

 

As of December 31, 2020, as a result, the amount outstanding under Note 1 was reclassified as other payables – straight note payable of $29,367,999 (see Note 21) and a loss on restructuring of $6,225,204 which representing the non-amortized part of the discount upon the issuing of the convertible bond incurred during the year.

 

Subsequently, Note 1 matured on February 28, 2020, the Company intends to offer the settlement of the note to the accredited investors based on the following understanding, terms and conditions:

 

(i). The earlier understanding of the restructured indebtedness is to be carried as follows: (a) SIAF issues 5,196,333 shares of its common stock and transfer 400,000 shares of TRW to the note holder; and (b) SIAF is to pay the revised promissory note in the principal amount of $15,589,000 to the note holder.

 

(ii). It is the Company’s intension for the said 5,196,333 shares of its common stocks to be converted into the G Series Preferred Stocks at conversion ratio of the offer of the Initial Public Offer stated in the registration statement (i.e. S1 and S4 registration statement) filed with SEC on or before June 30, 2021. However it was due primarily to the effects of the Covid-19 delayed the completion of the said filing of the said registration statements until such time a comprehensive re-statement of financials of (2019 to present date ) of the Company will be filed targeting on or before May 15, 2022. The repayment of Note 1 is subjecting to the below stated item (iii) being satisfied and resolved.

 

(iii). There were 500,050 Common Shares of the Company loaned to the said accredited investor on (Date: July 22, 2014) valued at US$18.10 / share as security for the accredited investors to secure their investors to invest on the Bond prior to the completion of a registration statement filed with SEC on June 2014 to allow the official issuing of additional common stocks to ECAB’s BOND investors, and that ECAB would return back the loaned stocks back to the Company upon the time the said accredited investor invested the balance of the Note 1 proceed of (US$ 13,362,550) needed to complete the disbursement of the total loan proceed of US$25,000,000 on or before (Date: February 28th 2015). However the said investor sold the said loaned 500,050 common stocks of the Company in between the period (Date: February to March 2015) and invested part or the full sum from the sales proceeds of said 500,050 common stock of the Company (of US$10,500,000) back to the Company as part of the Note 1’s disbursement to the Company making total disbursement sum of US$22,137,450.00 being advanced to the Company on or before 30th June 2015, and in turn, the investor did not return the said 500,050 common stocks of the Company to the Company and didn’t help the Company to complete the said registration statement by not giving the Company the Debenture Agreement needed to complete said registration statement with the SEC.

 

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 resolved satisfactorily to the Company this CP 1 can be fully settled.

 

F-32

 

 

SINO AGRO FOOD, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

23. SHAREHOLDERS’ EQUITY

 

The Group’s share capital as of December 31, 2021 and 2020 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, 2020, 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.

 

The Company has 59,963,332 and 59,963,332 shares of common stock issued and outstanding as of March 31, 2022 and December 31, 2021, respectively.

 

F-33

 

 

SINO AGRO FOOD, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

24. 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 $11,538 and $12,207 for the three months ended March 31,2022 and March 31,2021, respectively.

 

The future minimum lease payments as of December 31, March 31, 2022, are as follows:

 

Within 1 year   $ 27,285  
2 to 5 years     84,772  
Over 5 years    
-
 
    $ 112,057  

 

25. STOCK BASED COMPENSATION

 

On March,31, 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 March 31,2022, 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, 2022.

 

F-34

 

 

SINO AGRO FOOD, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

26. CONTINGENCIES

 

On March 26, March 31,2021, 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 plaintiffs, 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 March 31, 2021 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 March 31, 2021 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, March 31, 2021. 

 

As of December 31, March 31,2021, 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 March 31,2022 the Company has no more contingent liability regarding to this trade facility to the Lender.

 

27. RELATED PARTY TRANSACTIONS

 

In addition to the transactions and balances as disclosed elsewhere in these consolidated financial statements, during the years ended March 31,2022 and December 31, 2021, the Company had the following significant related party transactions:-

 

Name of related party   Nature of transactions
Mr. Solomon Yip Kun Lee, Chairman   Included in due to director, due to Mr. Solomon Yip Kun Lee is $929,318 and $1,919,393 as of March 31, 2022 and December 31, 2021, respectively. The amounts are unsecured, interest free and have no fixed terms of repayment.
     
Tri-Way Industries Limited (“TRW”) Unconsolidated equity investee   Included in interest in unconsolidated equity investee, due from Tri-Way Industries Limited is $123,861,227 and $126,703,177 as of March 31, 2022 and December 31, 2021, respectively. The amounts are unsecured, interest free and have no fixed terms of repayment.
     
 SJAP   Included in interest in unconsolidated equity investee, due from SJAP Limited is $21,398,361 and $21,398,361 as of March 31, 2022 and December 31, 2021, respectively. The amounts are unsecured, interest free and have no fixed terms of repayment.

 

F-35

 

 

SINO AGRO FOOD, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

28. EARNINGS PER SHARE

 

Basic earnings per share is computed by dividing net income attributable to common shareholders by the weighted average number of common shares outstanding during the year. Diluted earnings per share reflects the potential dilution of securities by including other potential common stock, including convertible preferred stock, stock options and warrants, in the weighted average number of common shares outstanding for the year, if dilutive. The numerators and denominators used in the computations of basic and dilutive earnings per share are presented in the following table:

 

    Three months ended
March, 31,
2022
    Three months ended
March, 31,
2021
 
BASIC                
Numerator for basic earnings per share attributable to the Company’s common stockholders:                
Net income used in computing basic earnings per share     (3,019,930 )   $ (8,316,793 )
Basic earnings per share     (0.05 )   $ (0.14 )
Basic weighted average shares outstanding     60,352,492       60,093,202  

 

    Three months ended March, 31, 2022    

Three months ended,

March 31, 2021

 
DILUTED            
Numerator for basic earnings per share attributable to the Company’s common stockholders:            
Net income used in computing diluted earnings per share     (3,019,930 )   $ (8,316,793 )
Diluted earnings per share     (0.05 )   $ (0.14 )
Diluted weighted average shares outstanding     60,352,492       60,093,202  

 

F-36

 

 

PART 2; MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

A. For the 3 months ended 31st March 2022, the Company’s revenues and incomes are generated from the following businesses activities:

 

1. Leasing of business activities

 

2. Investments in investees

 

Whereas

 

1. Consolidated revenues are generated from the leasing of following business activities:

 

The Organic fertilizer operation of HSA.
Cattle farms operation of (MEIJI) & (JHMC)
Plantation operation of (JHST)

 

2. Unconsolidated incomes are generated from the investments of following 2 investees:

 

45% equity holding in SJAP
36.6% equity holding in Tri-way

 

B. A summary of each business division and operations is described below:

 

C. B.1. Division (1) of leasing of operations:

 

The Organic fertilizer operation of HSA.

 

The operation of Hunan Shenghua A Power Agriculture Co. Ltd. (“HSA”) is in manufacturing and sales of organic fertilizer. From 1st October 2019 the Company contracted out its manufacturing and sales of organic fertilizer to its operational management; as such income of HSA is derived mainly from said leasing contract.

 

The table (a) below shows HSA’s 2022Q1leasing contract’s financial results:

 

    RMB     US$
equivalent
    Notes
Leasing revenue     9,410,200       1,481,921      
Administration  expenses                    
Depreciation     (4,786,486 )     (753,777 )   All HSA’s administration charges and expenses are being billed directly in SIAF’s account
Amortization     (1,286,217 )     (202,554 )    
Others & miscellaneous     (1,971,000 )     (310,394 )    
Leasing net incomes     1,366,497       215,196      

 

The plantation operation of (JHST)

 

Plantation operation refers to the operations of Jiangmen City Heng Sheng Tai Agriculture Development Co. Ltd. (“JHST”) in the HU Plantation business where dragon fruit flowers (dried and fresh), crops of vegetables and immortal vegetables (dried) are being grown and sold to wholesale and retail markets. JHST’s financial statements are consolidated into the financial statements of Macau EIJI Company Ltd. (“MEIJI”) as one entity. From 1st October 2019 the Company contracted out its plantation operation to its operational management; as such income of JHST is derived mainly from said leasing contract.

 

7

 

 

The table (b) below shows JHST’s 2021 leasing contract’s financial results:

 

    RMB     US$
equivalent
    Notes
Leasing revenue     4,230,435       666,210      
Administration expenses                    
   Depreciation     (2,159,054 )     (340,009 )   Depreciation and Amortization charges are being deduct directly from JHST’s leasing account
   Amortization     (862,008 )     (135,749 )    
   Others & miscellaneous     (1,290,000 )     (203,150 )   Others and miscellaneous expenses are being billed to SIAF’s account
Leasing net incomes     (80,627 )     (12,697 )    

 

The cattle farms operation of (MEIJI) & (JHMC)

 

Cattle Farm Division refers to the operations of Cattle Farm 1 under Jiangmen City Hang Mei Cattle Farm Development Co. Ltd (“JHMC”) where cattle are being grown, fatten and sold live to third party livestock wholesalers who sell them mainly to Guangzhou and Beijing livestock wholesale markets. The financial statements of JHMC are consolidated into MEIJI as one entity along with MEIJI’s operation in the consulting and service for development of other cattle farms (e.g., Cattle Farm 2) or related projects. From 1st October 2019 the Company contracted out its cattle operation to its operational management; as such incomes of JHMC are derived mainly from said leasing contract.

 

The table (C) below shows MEIJI’s 2021 leasing contract’s financial results:

 

    RMB   US$
equivalent
  Notes
Leasing revenue   3,423,752   539,174    
Administration  expenses            
Depreciation   (989,133 ) (155,769 ) Depreciation and Amortization charges are being deduct directly from MEIJI’s leasing account
Amortization   0   0  
Others & miscellaneous   (399,780 ) (62,957 ) Others and miscellaneous expenses are being billed to SIAF’s account
Leasing net incomes   2,034,839   320,447    

 

The total leasing revenues and gross profits for fiscal year ended 31st March 2022 are $2,687,305 and $1,099,447 respectively representing 100% of the Group’s total consolidated revenue and gross profit comparing to fiscal year ended 31st March 2021 revenue of $2,633,393 and gross profit of $1,077,390. The differences of the two years revenues and gross profits are primarily due to the appreciation of RMB averaging from 2021Q1’s US$1 = RMB 6.48 to 2022Q’s US$1=RMB6.35.

 

Whereas the general expenses and costs of the leasing contracts are recorded in others and miscellaneous expenses consisting cost items of maintenances, replacements, security, legal, services, Government levies and taxes and the group’s corporate management of the leasing contracts etc.

 

8

 

 

Other divisions

 

C.1. Division (3) of the Marketing & Trading operation of The Corporate Sector

 

This division is referring to the trading segment of business operations of the Group named internally under corporate division of Sino Agro Food, Inc., including import/export business, corporate affairs and consulting and service operations provided to projects that are not included in CA’s fishery development activities. Over the years up until end of fiscal year 2019 the corporate division imported mainly live seafood from South Africa countries, Vietnam, Thailand, Russian and other nearby countries and frozen beef from Australia and South America countries; however it is due to the interruptions and adverse impacts caused by the Pandemic COVID-19 made it impossible and unprofitable to continue the imports of live seafood, and the poor political relationship between China and Australia in 2020 induced high risks on the imports of Australian beef. However, over the years the Company has built up a strong base of connections and customers in China that provides an unique opportunity to the Company to develop an additional Trading Platform aiming to generate additional revenues, profits and most importantly positive cash flows, so from July 2020 onward, the corporate division started to explore the opportunities of importing some of the China markets’ niche products. Although in so far the Company achieved minimal financial impacts due mainly to the adversities caused by the impacts of Covid-19 limiting oversea and domestic logistic, air flights and shipping services, restricting custom clearing services, inconstancy of supplies and deliveries and increasing costs and expenses of sales etc. making it extremely difficult to perform the trading activity effectively.

 

Therefore, there was no sales revenue generated in fiscal year 2020, 2021 and up to 31st March 2022 (Q1 2022) for Division (3).

 

Nevertheless presently the Company has registered in its book multiple of US$ hundred millions of supplies and sales in locally produced corns (for China domestic end users), imported sugars from Brazil, rape seed oil from Russia and coals from Indonesia for sales in China etc. that will be initiated as soon as the Company will finalize the seed capital needed for the establishment of bank instruments to generate the sizable trades. Once when these trading will be started, collectively they will bring in multiple of US$ tens of millions in gross profit per year to support the Company’s cash flows at reasonable high levels. In this respect, the Company is optimist that the said seed capital will be materialized within a further reasonable period on or before the end of Q2 2022.

 

C.2. Division (4) of the Project Development of (CA)

 

This is referring to the fishery operations of Capital Award Inc. (“Capital Award” or “CA”) covering its engineering, technology and consulting service management of fishery and agriculture farms, technology transfers and seafood sales and marketing, where;

 

Capital Award generated revenues from providing engineering consulting services as turnkey contractors to owners and developers of fishery projects that are being designed and engineered into turnkey contracts by Capital Award in China using its A Power Module Technology Systems (“APM”) as follows:

 

Engineering and Technology Services; via Consulting and Service Contracts (“CSC’s”) for the development, construction, and supply of plant and equipment, and management of fishery (and prawn or shrimp) farms and related business operations.

 

Seafood Sales from CA’s projected farms; became a discontinued segment of operations from October 5, 2016 when Tri-way was disposed to other third parties in term Tri-way was reclassified as an unconsolidated equity investee on same date.

 

From January 2020 up to the date of this annual report CA has not been able to do any fishery project or fishery project development due to the effects of the Pandemic COVID-19 as such, there was no revenue generated for fiscal year 2020 and 2021 for Division (4).

 

CA’s Potential project in 2022:

 

In July 2020 SIAF became the joint venture partner of the China Africa Joint Chamber of Commerce and Industries (CAJCCI) which is a non-profit organization established in November 2016 by the China and Africa Governments to plan and to implement agriculture projects and related developments in Africa through development fund of US$60 Billion every three years provided by and granted by the China Government to Africa Nations in Agriculture industry projects and developments etc. In March 2021, development project papers in (i). Development of Trading of exporting dried cassavas to China and exporting of plant and equipment from China to Madagascar and developments of cassavas plantations and related value added processing and drying of cassavas on 100,000 acres of land in Madagascar and (ii). Development of goat farms and related value added processing in Madagascar were submitted to CAJCCI and Government of Madagascar; by early May 2021, both CAJCCI and the Government of Madagascar gave consents to both projects. Up until the date of this report, stringent traveling restriction between China and Madagascar has not been relaxed such that we have not been able to send our team members (including various professionals and professionals from CAJCCI) to assist our current Madagascar management teams of two members in Madagascar to start up the Projects but to wait until such time the said traveling restriction can be relaxed before sending staffs to Madagascar hopefully from June 2022 to start up the trading of cassavas and the development of cassavas farms etc.

 

9

 

 

3. CONSOLIDATED RESULTS OF OPERATIONS

 

2.1. Part A. Audited Income Statements of Consolidated Results of Operations for the three months ended March 31,2022, compared to the three months ended March 31,2021

 

A (1) Income Statements (unaudited)

 

    Three months ended,
March 31,
2022
    Three months ended,
March 31,
2021
    Difference     Note
Revenue                      
- Sale of goods                      
- Leasing & contracting income     2,687,305       2,633,393       53,912     1
      2,687,305       2,633,393       53,912      
Cost of goods sold                            
Cost of Leasing & contracting     (1,587,858 )     (1,556,003 )     (31,855 )   1
                             
Gross profit     1,099,447       1,077,390       22,057      
General and administrative expenses     (1,134,168 )     (1,204,508 )     70,340     2
Net income from operations     (34,721 )     (127,118 )     92,397      
Other income (expenses)                            
                             
Government grant                            
Share of income from unconsolidated equity investee     (2,856,624 )     (8,547,517 )     5,690,893     3
Non-operating expenses                     -      
Interest expense                     -      
Net income (expenses)     (2,856,624 )     (8,547,517 )     5,690,893      
                             
Net income  before income taxes     (2,891,345 )     (8,674,635 )     5,783,290      
Provision for income taxes                            
                             
Net income     (2,891,345 )     (8,674,635 )     5,783,290      
Less: Net (income) loss attributable to  non - controlling interest     (128,585 )     357,842       (486,427 )   4
Net income attributable to Sino Agro Food Inc. and subsidiaries     (3,019,930 )     (8,316,793 )     5,296,863      
Other comprehensive income (loss) - Foreign currency translation gain (loss)     179,739       (195,746 )     375,485      
Comprehensive income     (2,840,191 )     (8,512,539 )     5,672,348      
Less: Other comprehensive (income) loss attributable to  non - controlling interest     85,642       (116,387 )     202,029      
Comprehensive income attributable to the Sino Agro Food, Inc. and subsidiaries     (2,754,549 )     (8,628,926 )     5,874,377      
                             
Earnings per share attributable to the Sino Agro Food, Inc. and subsidiaries common stockholders:                            
Basic     (0.05 )     (0.14 )     0.09      
Diluted     (0.05 )     (0.14 )     0.09      
                             
Weighted average number of shares outstanding:                            
                             
Basic     60,352,492       60,093,202       259,290      
Diluted     60,352,492       60,093,202       259,290      

 

10

 

 

Note 1: The leasing contracts’ incomes:

 

The Company’s revenues generated from the leasing & contracting activities were $2,687,305 for the three months ended March 31, 2022 compared to $2,633,393for the three months ended March 31, 2021 representing a increase of 2% or $53,912. primarily due to gains in exchange rate of the RMB from the average of US$1=RMB6.48 for the three months ended 31st March 2021 to US$6.35 as in the same period of ended 31st March 2022..

 

The Company’s cost of leasing and contracting activities were $1,587,858 for the three months ended March 31, 2022 compared to $1,556,003 for the three months ended March 31, 2021 due primarily for the gains in exchange rate of the RMB explained above..

 

Gross profits of the Company generated from leasing and contracting activities were $1,099,447 for the three months ended March 31, 2022compared to $1,077,390 for the same period ended March 31, 2021, representing an increase of 2% or $22,057.

 

The Company didn’t generate revenue neither from the sales of goods, the consulting and servicing nor from the corporate trading activities for the three months ended March 31, 2022 and 2021.

 

Please refer to Table (a), (b) and (C) in page 1 and 2 of this report for further details of the leasing division’s financial results.

 

Note 2: Administrative and general expenses (inclusive interest Expenses):

 

Table (7)

 

Category                  
    2022Q1     2021Q1     Difference  
Office and corporate expenses     561,431       640,031       (78,600 )
Wages and salaries     147,224       164,891       (17,667 )
Traveling and related lodging     5,014       5,364       (351 )
Motor vehicles expenses and local transportation     1,021       1,266       (245 )
Entertainments and meals     4,800       5,976       (1,176 )
Others and miscellaneous     195,675       180,021       15,654  
Depreciation and amortization     219,003       206,958       12,045  
Interest expenses                        
Total     1,134,168       1,204,508       (70,340 )

 

General and administrative (including depreciation and amortization) and interest expenses decreased by $70,340 from a total of $1,204,508 for the three months ended March 31, 2021 to $1,134,168 for the three months ended March 31, 2022. The increase was mainly due to the appreciation of RMB against USD during the period.

 

Note on depreciation and amortization:

 

The total depreciation and amortization for the three months ended March 31, 2022 were $1,806,861 whereas $219,003 are reported in the Group’s Administration and general expenses shown in Table (7) above while the balance of $1,578,858 are reported in the leasing contracts’ costs of sales.

 

11

 

 

Note 3: Share of income from unconsolidated equity investees

 

Table 8

 

    2022Q1     2021Q1  
Share of incomes from Tri-way     (2,824,015 )     (7,292,096 )
Share of incomes from SJAP     (32,609 )     (1,255,421 )
Total     (2,856,624 )     (8,547,517 )

 

Share of incomes from Tri-way are $(2,824,015) and $(7,292,096) for the three months ended March 31, 2022 and 2021 respectively.

 

Share of incomes from SJAP are $(32,609) and (1,255,421) for the three months ended March 31, 2022and 2021 respectively.

 

The Company’s total investment incomes are loses of $2,856,624 and $8,547,517 for the three months ended March 31, 2022 and 2021 respectively.

 

Note 4 Non-controlling interest:

 

Table (9) below shows the derivation of non-controlling interest

 

Name of China subsidiaries   Jiangmen City Heng  Sheng Tai Agriculture  Development Co. Ltd.
(China)
    Jiangmen City  Hang Mei Cattle Farm Development Co. Ltd.
(China)
    Hunan Shenghua  A Power  Agriculture Co., Limited
(China)
    Total  
Effective shareholding     75 %     75 %     76 %        
Abbreviated names     (JHST )     (JHMC )     (HSA )        
                                 
Net income (loss) of the P.R.C. subsidiaries for the year in $     (12,697 )     320,447       215,196          
                                 
% of profit sharing of non-controlling  interest     25 %     25 %     24 %        
                                 
Non-controlling interest’s shares of Net incomes in $     (3,174 )     80,112       51,647       128,585  

 

The Net Loss attributed to non-controlling interest is $128,585 shared by (JHST, JHMC and HSA for the three months ended March 31, 2022 as shown in Table (12) above.

 

12

 

 

3.2. Part B. MD &A on Audited Consolidated Balance Sheet as of March 31,2022 compared to year 2021

 

    March  31,
2022
    December 31,
2021
     Difference     Note
    (Unaudited)     (Unaudited)            
ASSETS                      
Current assets                      
Cash and cash equivalents   $ 191,448     $ 189,444       2,004     8
Inventories                     -     9
Costs and estimated earnings in excess of billings on uncompleted contracts                            
Deposits and prepayments     9,171,856       9,141,301       30,555     10
Accounts receivable, net of allowance for doubtful accounts     12,100,674       9,605,260       2,495,414     11
Other receivables     83,395,963       83,460,514       (64,551 )   16
Total current assets     104,859,941       102,396,519       2,463,422      
Non-current assets                            
Plant and equipment, net of accumulated depreciation     87,738,484       86,667,799       1,070,685     12
Construction in progress                     -     13
Land use rights, net of accumulated amortization     51,521,934       50,777,067       744,867     14
Total non-current assets     139,260,418       137,444,866       1,815,552      
Other assets                     0      
Goodwill     724,940       724,940       0      
Proprietary technologies, net of accumulated amortization     5,947,389       6,071,691       (124,302 )    
Interest in unconsolidated investees     145,244,914       148,101,538       (2,856,624 )   15
Total other assets     151,917,243       154,898,169       (2,980,926 )    
Total assets   $ 396,037,602     $ 394,739,554       1,298,048      
                             
LIABILITIES  AND STOCKHOLDERS’ EQUITY                            
Current liabilities                            
Accounts payable and accrued expenses   $ 373,732     $ 458,140       (84,408 )    
Billings in excess of costs and estimated earnings on uncompleted contracts                            
Due to directors     2,257,927       1,919,393       338,534      
Other payables     11,626,649       9,231,613       2,395,036     18
Borrowings - Short term bank loan                     -      
      14,258,308       11,609,146       2,649,162     17
                             
Non-current liabilities                            
Other payables                            
Borrowings - Long term debts and bank loan     -       -              
                             
Stockholders’ equity                            
Common stock: = $0.001 par value ( 60,352,492  and                            
60,352,492  shares issued  and outstanding as of March 31, 2022 and  December 31, 2021, respectively)     60,353       60,353       0      
Additional paid - in capital     135,722,287       135,722,287       0      
Retained earnings     222,846,563       225,866,493       (3,019,930 )    
Accumulated other comprehensive income     (49,394,494 )     (51,277,535 )     1,883,041      
Treasury stock     (1,250,000 )     (1,250,000 )     -      
Total Sino Agro Food, Inc. and subsidiaries stockholders’ equity     307,984,709       309,121,597       (1,136,888 )    
Non - controlling interest     73,794,585       74,008,811       (214,226 )    
Total stockholders’ equity     381,779,294       383,130,408       (1,351,114 )    
Total liabilities and stockholders’ equity   $ 396,037,602     $ 394,739,554       1,298,048      

 

13

 

 

Note (8) Cash and Cash Equivalents

 

Cash and cash equivalents increased by $2,004 from $189,444 to $191,448 between December 31,2021 and March 31, 2022 respectively..

 

Note (9) Break down on Inventories:

 

    March 31,
2022
 
    $  
Bread grass                 
Beef cattle        
Organic fertilizer        
Forage for cattle and consumables        
Raw materials for bread grass and organic fertilizer        
Immature seeds        
         
                  

 

Note (10) Breakdown of Deposits and Prepaid Expenses: 

 

    March 31,
2022
 
    $  
Deposits for        
-  purchases of equipment        
-  acquisition of land use rights        
- inventories purchases     9,171,856  
- construction in progress        
- issue of shares as collateral        
Shares issued for employee compensation and overseas professional and bond interest        
Others        
      9,171,856  

 

14

 

 

Note (11): Aging and breakdown of Accounts receivable:

 

    March 31,2022  
    Accounts receivable     0-30 days     31-90 days     91-120 days     over 120 days and less than
1 year
    Over 1 year  
    $                                
Sales of imported seafood (SIAF) pending on impairments under consideration     3,447,374                               3,447,374          
Leasing fees  due from lease of (JHMC)     2,534,533       785,705       1,748,828                          
Leasing fees due from lease of (JHST)     1,502,704       210,379       1,292,325                          
Leasing fees due from lease of (HSA)     4,616,063       877,052       969,373       369,285       2,400,353          
Total     12,100,674       1,873,136       4,010,526       369,285       5,847,727       0  
% of total receivables     100 %     15 %     33 %     3 %     48 %     0 %

 

The normal credit period granted to the customers is 90 to 120 days. The Company will quarterly evaluate the recoverability of the over 120-day balance.

 

Information on Concentration of credit risk of revenue:

 

A. 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 March 31, 2022 and December 31, 2021 amounted to $191,448 and $1$189,444, respectively, none of which is covered by insurance.

 

B. the Company has not experienced any losses in any accounts receivables and other receivable during 2022 Q1and 2021 Q1; therefore the Company has made provision of $0 as bad debts being written off for the period ended March 31, 2022 and March 31, 2021 although certain provisional impairments are under consideration presently.

 

C. The Company had 3 major customers (A, B and C) whose business individually represented the following percentages of the Company’s total revenue for the period indicated:

 

      2022Q1       2021Q1  
Customer A     55.15 %     55.15 %
Customer B     24.79 %     24.79 %
Customer C     20.06 %     20.06 %
                 
      100 %     100 %

 

Account receivables are derived from revenues earned from customers located primarily in the P.R.C. The Company performs ongoing credit evaluations of the customers and made provisions for bad debts mentioned in section B above.

 

15

 

 

The Company had 5 major customers whose accounts receivable balance individually represented the following percentages of the Company’s total accounts receivable:

 

    March,31,
2022
    December 31,
2021
 
Customer A     38.15 %     35.89 %
Customer B     28.49 %     35.69 %
Customer C     17.60 %     17.13 %
Customer D     12.42 %     10.77 %
Customer E     3.35 %     0.52 %
Customer F               %
      100 %     100 %

 

$2,129,250 respectively. The Company has not experienced any significant difficulty in collecting its accounts receivable in the past and has made provisions for bad debts mentioned in section B above.

 

Note (12) Property and equipment, (P&E) net of accumulation depreciation:

 

    March,31,
2022
 
Plant and machinery   $ 8,841,367  
Structure and leasehold improvements     89,054,451  
Mature seeds and herbage cultivation     17,664,989  
Furniture and equipment     2,591,393  
Motor vehicles     1,528,690  
      119,680,890  
Less: Accumulated depreciation     31,942,406  
Net carrying amount   $ 87,738,484  

 

As of March 31, 2022 and December 31, 2021 amounts due from customers A, B and C are $4,616,063, $3,447,374 and Depreciation expenses were $1,249,555 and $557,306 for the three months ended March 31, 2022 and 2021, respectively.

 

Note (13) Construction in progress (CIP):

 

    March,31,
2022
 
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     -  
    $ -  

 

16

 

 

Note (14): Land Use Rights, net of accumulated amortization:

 

Item   Owner   Location   Acres     Date
Acquired
  Tenure   Expiry dates   Cost 
$
    Monthly
amortization
$
    2022.03.31
Balance
$
    Nature of
ownership
  Nature of
project
Hunan lot 1   HS.A   Ouchi Village, Fenghuo Town, Linli County     31.92     2011-4-5   43   2054-4-4     242,703       470       180,616     Lease   Fertilizer production
Hunan lot 2   HS.A   Ouchi Village, Fenghuo Town, Linli County     247.05     2011-7-1   60   2071-6-30     36,666,141       50,925       30,096,791     Management Right   Pasture growing
Hunan lot 3   HS.A   Ouchi Village, Fenghuo Town, Linli County     8.24     2011-5-24   40   2051-5-23     378,489       789       275,193     Land Use Rights   Fertilizer production
Hunan lot 4   HS.A   Ouchi Village, Fenghuo Town, Linli County     24.71     2018-6-1   50   2068-5-31     3,021,148       5,035       2,789,527     Lease   Pasture growing
Guangdong
lot 1
  JHST   Yane Village, Liangxi Town, Enping City     8.23     2007-8-10   60   2067-8-9     1,064,501       1,478       804,290     Management Right   HU Plantation
Guangdong
lot 2
  JHST   Nandu Village of Yane Village, Liangxi Town, Enping City     27.78     2007-3-14   60   2067-3-13     1,037,273       1,441       776,514     Management Right   HU Plantation
Guangdong 
lot 3
  JHST   Nandu Village of Yane Village, Liangxi Town, Enping City     60.72     2007-3-14   60   2067-3-13     2,267,363       3,149       1,697,373     Management Right   HU Plantation
Guangdong
 lot 4
  JHST   Nandu Village of Yane Village, Liangxi Town, Enping City     54.68     2007-9-12   60   2067-9-11     2,041,949       2,836       1,545,642     Management Right   HU Plantation
Guangdong
lot 5
  JHST   Jishilu Village of Dawan Village,Juntang Town, Enping City     28.82     2007-9-12   60   2067-9-11     960,416       1,334       726,982     Management Right   HU Plantation
Guangdong 
lot 6
  JHST   Liankai Village of Niujiang Town, Enping City     31.84     2008-1-1   60   2068-12-31     821,445       1,141       626,351     Management Right   Fish Farm
Guangdong 
lot 7
  JHST   Nandu Village of Yane Village, Liangxi Town, Enping City     41.18     2011-1-1   26   2037-12-31     5,716,764       18,323       3,243,164     Management Right   HU Plantation
Guangdong 
lot 8
  JHST   Shangchong Village of Yane Village, Liangxi Town, Enping City     11.28     2011-1-1   26   2037-12-31     1,566,393       5,020       888,627     Management Right   HU Plantation
Guangdong 
lot 9
  MEIJI   Xiaoban Village of Yane Village, Liangxi Town, Enping City     41.18     2011-4-1   20   2031-3-31     5,082,136       21,176       2,286,961     Management Right   Cattle Farm
Qinghai 
lot 1
  SJAP   No. 498, Bei Da Road, Chengguan Town of Huangyuan County,Xining City, Qinghai Province     21.09     2011-11-1   40   2051-10-30     527,234       1,098       389,934     Land Use Right & Building ownership   Cattle farm, fertilizer and livestock feed production
Guangdong
lot 10
  JHST   Niu Jiang Town, Liangxi Town, Enping City     6.27     2013-3-4   10   2023-3-3     489,904       4,083       44,908     Management Right   Processing factory
Guangdong
lot 11
  CA   Da San Dui Wei ,You Nan Village, Conghua District of Guangzhou City     33.28     2014-10-28   30   2044-10-27     4,453,665       12,371       3,340,249     Management Right   Agriculture
    JHST   Land improvement cost incurred           2013-12-1             3,914,275       6,155       3,298,823     Management Right   HU Plantation
Exchange difference                           320,439             (1,490,011 )                
              678                   70,572,240       136,824       51,521,934          

 

17

 

 

Note 15 Investment in unconsolidated equity investees

 

    March 31,
2022
 
Investments at cost      
- TRW     131,251,600  
- SJAP     21,398,361  
Cattle farm 2     -  
Amount due from a consolidated equity investee     (9,405,947 )
      145,244,914  

 

Note (16) Other Receivables

 

    March,31,
2022
 
Advanced to employees      
Advanced to suppliers     2,028,907  
Advanced to customers        
Advanced to developers     -  
Advanced to SJAP     76,404,954  
Others     4,962,102  
    $ 83,395,963  

 

Note (17) Current Liabilities:

 

    March 31,
2022
    Note
Current liabilities            
Accounts payable and accrued expenses     373,732      
Billings in excess of costs and estimated earnings on uncompleted contracts            
Due to a director     2,257,927      
Other payables     11,626,649     16A
Borrowings - Short term bank loans            
      14,258,308      

 

Note (18): Analysis of other payables (current liabilities):

 

As of March 31, 2022, we have other payables totaling $10,482,027, comprised of the following shown in Table 13.a. below:

 

Table 13.a. below shows summarized details of the Other Payables:

 

Other payables as at   31.03.2022     Note
      Principal       Outstanding      
Convertible Note 1     33,000,000       -     Transferred to Suspend accont 31.12.2021
Convertible Note 2     4,000,000       -     Fully paid on January 20, 2021
Loan 1     6,000,000       9,000,000     Intending to be fully paid within year 2022.
Loan 2                    
Friendly party 1     900,000       900,000      
                    Intending to be fully paid on or before June 30th, 2022
Friendly party 2     582,027       582,027      
                     
Total Other Payables as at             10,482,027      

 

18

 

 

Note to Convertible Note 1 (CP 1):

 

History of CP1

 

On August 29, 2014, the Company completed the closing of a private placement financing transaction with an accredited investor, which purchased a 10.5% Convertible Note (the “Note 1”) in the aggregate principal amount of up to $33,300,000. The Company received the total advance of $11,632,450. The Company shall offer investor a discount equal to 25% of the amount of the principal advanced by the investor.

 

Interest on the note shall accrue on the outstanding principal balance of this Note from August 29, 2014. Interest shall be payable quarterly on the last day of each of March, June, September and December commencing September 30, 2014 provided, however, that note holder may elect to require the Company to issue to the note holder a promissory note in lieu of cash in satisfaction of any interest due and payable at such time. Any interest payment note shall be subject to the same terms as the note. The note has a maturity date of February 28, 2020.

 

The note is convertible, at the discretion of the note holder, into shares of the Company’s common stock (i) at any time following an Event of Default, or (ii) for a period of thirty (30) calendar days following October 31, 2015 and each anniversary thereof, at an initial conversion price per share of $1.00, subject to adjustment for stock splits, reverse stock splits, stock dividends and other similar transactions and subject to the terms of the note. As long as the note is outstanding, the investor shall have a right of first refusal, exercisable for thirty (30) calendar days after notice to the note holder, to purchase securities proposed to be offered and sold by the Company. 

 

The Company and the note holder entered into a restructuring agreement regarding the settlement of the Note 1. Both parties have agreed to restructure the indebtedness represented by Note 1 as follows: (a) SIAF issues 5,196,333 shares of its common stock and transfer 400,000 shares of TRW to the note holder; and (b) SIAF executes a new promissory note in the principal amount of $15,589,000 to the note holder to be paid in installments over a period of time. However, both parties remain open to negotiate an all-cash settlement of the Note 1. 

 

As of December 31, 2020, as a result, the amount outstanding under Note 1 was reclassified as other payables – straight note payable of $29,367,999 (see Note 21) and a loss on restructuring of $6,225,204 which representing the non-amortized part of the discount upon the issuing of the convertible bond incurred during the year. 

 

Subsequently, Note 1 matured on February 28, 2020, the Company intends to offer the settlement of the note to the accredited investors based on the following understanding, terms and conditions: 

 

(i). The earlier understanding of the restructured indebtedness is to be carried as follows: (a) SIAF issues 5,196,333 shares of its common stock and transfer 400,000 shares of TRW to the note holder; and (b) SIAF is to pay the revised promissory note in the principal amount of $15,589,000 to the note holder.

 

(ii). It is the Company’s intension for the said 5,196,333 shares of its common stocks to be converted into the G Series Preferred Stocks at conversion ratio of the offer of the Initial Public Offer stated in the registration statement (i.e. S1 and S4 registration statement) filed with SEC on or before June 30, 2021. However it was due primarily to the effects of the Covid-19 delayed the completion of the said filing of the said registration statements until such time a comprehensive re-statement of financials of (2019 to present date ) of the Company will be filed targeting on or before May 15, 2022. The repayment of Note 1 is subjecting to the below stated item (iii) being satisfied and resolved.

 

(iii). There were 500,050 Common Shares of the Company loaned to the said accredited investor on (Date: July 22, 2014) valued at US$18.10 / share as security for the accredited investors to secure their investors to invest on the Bond prior to the completion of a registration statement filed with SEC on June 2014 to allow the official issuing of additional common stocks to ECAB’s BOND investors, and that ECAB would return back the loaned stocks back to the Company upon the time the said accredited investor invested the balance of the Note 1 proceed of (US$ 13,362,550) needed to complete the disbursement of the total loan proceed of US$25,000,000 on or before (Date: February 28th 2015). However the said investor sold the said loaned 500,050 common stocks of the Company in between the period (Date: February to March 2015) and invested part or the full sum from the sales proceeds of said 500,050 common stock of the Company (of US$10,500,000) back to the Company as part of the Note 1’s disbursement to the Company making total disbursement sum of US$22,137,450.00 being advanced to the Company on or before 30th June 2015, and in turn, the investor did not return the said 500,050 common stocks of the Company to the Company and didn’t help the Company to complete the said registration statement by not giving the Company the Debenture Agreement needed to complete said registration statement with the SEC.

 

19

 

 

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 resolved satisfactorily to the Company this CP 1 can be fully settled.

 

Income Taxes

 

The Company was incorporated in the State of Nevada, in the United States of America. The Company has no operations in United States of America and no US corporate tax has been provided for in the consolidated financial statements of the Company.

 

Undistributed Earnings of Foreign Subsidiaries

 

The Company intends to use the remaining accumulated and future earnings of foreign subsidiaries to expand operations outside the United States of America and, accordingly, undistributed earnings of foreign subsidiaries are considered to be indefinitely reinvested outside the United States and no provision for U.S. Federal and State income tax or applicable dividend distribution tax has been provided thereon.

 

The Company filed USA tax returns for all previous year inclusive year 2016 to 2021.

 

As of March 31, 2022, the Company reviewed its tax position with the assistance of US tax professionals and believed that there would be no taxes and no penalties assessed by the IRS in the United States of America.

 

No EIT has been provided in the financial statements of SIAF, CA, JHST, JHMC, JFD, HSA, QZH and SJAP since they are exempt from EIT for the twelve months ended March 31, 2022 and 2021 as they are within the agriculture, dairy and fishery sectors.

 

CA, CS and CH are international business companies incorporated in Belize, and are exempt from corporate tax in Belize.

 

No Hong Kong profits tax has been provided in the consolidated financial statements, since TRW did not earn any assessable profits arising in Hong Kong for the 3 months ended March 31, 2022.

 

No Macau corporate income tax has been provided in the consolidated financial statements, since APWAM and MEIJI did not earn any assessable profits in Macau for the 3 months ended March 31, 2022 and 2021.

 

No deferred tax assets and liabilities are payable as of March 31, 2021 and March 31, 2020 since there was no difference between the financial statements carrying amounts, and the tax basis of assets and liabilities using enacted tax rates in effect for the period in which the differences are expected to reverse.

 

Off Balance Sheet Arrangements:

 

None.

 

Liquidity and Capital Resources

 

As of March 31 2022, unrestricted cash and cash equivalents amounted to $191,448 (see notes to the consolidated financial statements), and our net working capital was $90,601,633.

 

Cash provided by operating activities amounted to $1,959,884 for the three months ended March 31, 2022. This compared with cash provided by operating activities totaled $(396,380) for the three months ended March 31, 2021. The increase in cash provided by operations is mainly due to the increase in other payables from $(5,478,353) for the three months ended March 31, 2021 to $2,395,036 for the three months ended March 31, 2022.

 

Cash used in investing activities totaled $0 for the three months ended March 31, 2022. This compares with cash used in investing activities totaling $0 for the three months ended March 31, 2021.

 

Cash provided by financing activities totaled $0 for the three months ended March 31, 2022 compared with cash used in financing activities totaling $0 for the three months ended March 31, 2021.

 

20

 

 

CRITICAL ACCOUNTING POLICIES

 

BASIS OF PRESENTATION

 

The audited consolidated financial statements for the twelve months ended December 31, 2019 are prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”).

 

BASIS OF CONSOLIDATION

 

The consolidated financial statements include the financial statements of SIAF, its subsidiaries Capital Award, CS, CH, TRW, MEIJI, JHST, JFD, JHMC, HSA, APWAM, SAFS and its variable interest entities SJAP and QZH. All material inter-company transactions and balances have been eliminated in consolidation. The results of companies acquired or disposed of during the year are included in the consolidated Financial Statements from the effective date of acquisition.

 

BUSINESS COMBINATIONS

 

The Company adopted the accounting pronouncements relating to business combinations (primarily contained in ASC Topic 805 “Business Combinations”), including assets acquired and liabilities assumed arising from contingencies. These pronouncements established principles and requirements for how the acquirer of a business recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any non-controlling interest in the acquire as well as provides guidance for recognizing and measuring the goodwill acquired in the business combination and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. In addition, these pronouncements eliminate the distinction between contractual and non-contractual contingencies, including the initial recognition and measurement criteria and require an acquirer to develop a systematic and rational basis for subsequently measuring and accounting for acquired contingencies depending on their nature. Our adoption of these pronouncements will have an impact on the manner in which we account for any future acquisitions.

 

NON - CONTROLLING INTEREST IN CONSOLIDATED FINANCIAL STATEMENTS

 

The Company adopted the accounting pronouncement on non-controlling interests in consolidated financial statements, which establishes accounting and reporting standards for the non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary. This guidance is primarily contained in ASC Topic “Consolidation”. It clarifies that a non-controlling interest in a subsidiary is an ownership interest in the consolidated financial statements. The adoption of this standard has not had material impact on our consolidated financial statements.

 

USE OF ESTIMATES

 

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make assumptions and estimates that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods covered thereby. Actual results could differ from these estimates. Judgments and estimates of uncertainties are required in applying the Company’s accounting policies in certain areas. The following are some of the areas requiring significant judgments and estimates: determinations of the useful lives of assets, estimates of allowances for doubtful accounts, cash flow and valuation assumptions in performing asset impairment tests of long-lived assets, estimates of the reliability of deferred tax assets and inventory reserves.

 

REVENUE RECOGNITION

 

The Company’s revenue recognition policies are in compliance with ASC 605. Sales revenue is recognized when all of the following have occurred: (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred or services have been rendered, (iii) the price is fixed or determinable, and (iv) the ability to collect is reasonably assured. These criteria are generally satisfied at the time of shipment when risk of loss and title passes to the customer. Service revenue is recognized when services have been rendered to a buyer by reference to the stage of completion. License fee income is recognized on the accrual basis in accordance with the underlying agreements.

 

Government grants are recognized upon (i) the Company has substantially accomplished what we must be done pursuant to the terms of the policies and terms of the grant that are established by the local government; and (ii) the Company receives notification from the local government that the Company has satisfied all of the requirements to receive the government grants; and or (iii) the amounts are received.

 

21

 

 

Multiple-Element Arrangements

 

To qualify as a separate unit of accounting under ASC 605-25“Multiple Element Arrangements”, the delivered item must have value to the customer on a standalone basis. The significant deliverables under the Company’s multiple-element arrangements are consulting and service under development contract, commission and management service.

 

Revenues from the Company’s fishery development services contract are performed under fixed-price contracts. Revenues under long-term contracts are accounted for under the percentage-of-completion method of accounting in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 605, Revenue Recognition (“ASC 605”). Under the percentage-of-completion method, the Company estimates profit as the difference between total estimated revenue and total estimated cost of a contract and recognized that profit over the contract term. The percentage of costs incurred determines the amount of revenue to be recognized. Payment terms are generally defined by the installation contract and as a result may not match the timing of the costs incurred by the Company and the related recognition of revenue. Such differences are recorded as either costs or estimated earnings in excess of billings on uncompleted contracts or billings in excess of costs and estimated earnings on uncompleted contracts.

 

The Company determines a customer’s credit worthiness at the time an order is accepted. Sudden and unexpected changes in a customer’s financial condition could put recoverability at risk.

 

The percentage of completion method requires the ability to estimate several factors, including the ability of the

customer to meet its obligations under the contract, including the payment of amounts when due. If the Company determines that collectability is not assured, we will defer revenue recognition and use methods of accounting for the contract such as the completed contract method until such time as the Company determines that collectability is reasonably assured or through the completion of the project.

 

For fixed-price contracts, the Company uses the ratio of costs incurred to date on the contract (excluding uninstalled

direct materials) to management’s estimate of the contract’s total costs, to determine the percentage of completion on each contract. This method is used as management considers expended costs to be the best available measure of progression of these contracts. Contract costs included all direct material, subcontract and labor costs and those indirect costs related to contract performance, such as supplies, tool repairs and depreciation. The Company accounts for maintenance and repair services under the guidance of ASC 605 as the services provided relate to construction work. Contract costs incurred to date and expected total contract costs are continuously monitored during the term of the contract. Changes in job performance, job conditions, and estimated profitability arising from contract penalty, change orders and final contract settlements may result in revisions to the estimated profitability during the contract. These changes, which include contracts with estimated costs in excess of estimated revenues, are recognized as contract costs in the period in which the revisions are determined. Profit incentives are included in revenues when their realization is reasonably assured. At the point the Company anticipates a loss on a contract, the Company estimates the ultimate loss through completion and recognizes that loss in the period in which the possible loss was identified.

 

The Company does not provide warranties to customers on a basis customary to the industry; however, the customers can claim warranty directly from product manufacturers for defects in equipment or products. Historically, the Company has experienced no warranty claims.

 

The Company’s fishery development consultancy services revenues are recognized when the relevant services are rendered, and are subject to a Chinese business tax at a rate of 0% of the gross fishery development contract service income approved by the Chinese local government.

 

COST OF GOODS SOLD AND SERVICES

 

Cost of goods sold consists primarily of direct purchase cost of merchandise goods, and related levies. Cost of services consists primarily of direct cost and indirect cost incurred to date for development contracts and provision for anticipated losses on development contracts.

 

SHIPPING AND HANDLING

 

Shipping and handling costs related to cost of goods sold are included in general and administrative expenses, which totaled $0 and $0 for the three months ended March 31, 2022 and 2021, respectively.

 

22

 

 

ADVERTISING

 

Advertising costs are included in general and administrative expenses, which totaled $0 and $0 or the three months ended March 31, 2022 and 2021, respectively.

 

RESEARCH AND DEVELOPMENT EXPENSES

 

Research and development expenses are included in general and administrative expenses, which totaled $0 and $0 for the three months ended March 31, 2022 and 2021, respectively.

 

CASH AND CASH EQUIVALENTS

 

The Company considers all highly liquid securities with original maturities of three months or less when acquired to be cash equivalents. Cash and cash equivalents kept with financial institutions in the People’s Republic of China (“PRC”) are not insured or otherwise protected. Should any of those institutions holding the Company’s cash become insolvent, or the Company is unable to withdraw funds for any reason, the Company could lose the cash on deposit on that institution.

 

ACCOUNTS RECEIVABLE

 

The Company maintains reserves for potential credit losses on accounts receivable. Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves. Terms of the sales vary. Reserves are recorded primarily on a specific identification basis.

 

The standard credit period of the Company’s most of customers is three months. Any amount that has an extended settlement date of over one year is classified as a long term receivable. Management evaluates the collectability of the receivables at least quarterly.

 

INVENTORIES

 

Inventories are valued at the lower of cost (determined on a weighted average basis) and net realizable value. Costs incurred in bringing each product to its location and conditions are accounted for as follows:

 

raw materials - purchase cost on a weighted average basis;

 

manufactured finished goods and work-in-progress - cost of direct materials and labor and a proportion of manufacturing overhead based on normal operation capacity but excluding borrowing costs; and

 

retail and wholesale merchandise finished goods - purchase cost on a weighted average basis.

 

Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.

 

PROPERTY AND EQUIPMENT

 

Property and equipment are stated at cost less accumulated depreciation and any accumulated impairment losses. Such costs include the cost of replacing parts that are eligible for capitalization when the cost of replacing the parts is incurred. The assets’ residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at the end of each year.

 

Depreciation is calculated on a straight-line basis over the estimated useful life of the assets.

 

Milk cows   10 years
Plant and machinery   5 - 10 years
Structure and leasehold improvements   10 - 30 years
Mature seed and herbage cultivation   20 years
Furniture, fixtures and equipment   2.5 - 10 years
Motor vehicles   4 - 10  years

 

An item of property and equipment is removed from the accounts upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on disposal of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the item) is included in the consolidated statements of income in the period the item is disposed.

 

23

 

 

GOODWILL

 

Goodwill is an asset representing the fair economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized. Goodwill is tested for impairment on an annual basis at the end of the company’s fiscal year, or when impairment indicators arise. The Company uses a fair-value-based approach to test for impairment at the level of each reporting unit. The Company directly acquired MEIJI, which is engaged in Hu Plantation. As a result of this acquisition, the Company recorded goodwill in the amount of $724,940. This goodwill represents the fair value of the assets acquired in these acquisitions over the cost of the assets acquired.

 

PROPRIETARY TECHNOLOGIES

 

The Company has determined that technological feasibility is established at the time a working model of products is completed. Master license of stock feed manufacturing technology was acquired and the costs of acquisition were capitalized as proprietary technologies when technological feasibility had been established. Proprietary technologies are intangible assets of finite lives. Proprietary technologies are amortized using the straight-line method over their estimated lives of 25 years.

 

An aromatic cattle-feeding formula was acquired and the costs of acquisition are capitalized as proprietary technologies when technological feasibility has been established. Cost of acquisition on aromatic cattle-feeding formula is amortized using the straight-line method over its estimated life of 20 years.

 

The cost of sleepy cod breeding technology license is capitalized as proprietary technologies when technological feasibility has been established. Cost of granting sleepy cod breeding technology license is amortized using the straight-line method over its entitled life of 25 years.

 

Bacterial cellulose technology license and related trademark are capitalized as proprietary technologies when technological feasibility has been established. Cost of license and related trademark is amortized using the straight-line method over its estimated life of 20 years.

 

Management evaluates the recoverability of proprietary technologies on an annual basis of the end of the company’s fiscal year, or when impairment indicators arise. As required by ASC Topic 350 “Intangible - Goodwill and Other”, the Company uses a fair-value-based approach to test for impairment.

 

CONSTRUCTION IN PROGRESS

 

Construction in progress represents direct costs of construction as well as acquisition and design fees incurred. Capitalization of these costs ceases and the construction in progress is transferred to property and equipment when substantially all the activities necessary to prepare the assets for their intended use are completed. No depreciation is provided until construction is completed and the asset is ready for its intended use.

 

LAND USE RIGHTS

 

Land use rights represent acquisition of land use right rights of agriculture land from farmers and are amortized on the straight line basis over the respective lease periods. The lease period of agriculture land is in the range from 10 years to 60 years. Land use rights purchase prices were determined in accordance with the PRC Government’s minimum lease payments of agriculture land and mutually agreed between the company and the vendors. No independent professional appraiser performed a valuation of land use rights at the balance sheet dates.

 

CORPORATE JOINT VENTURE

 

A corporation formed, owned, and operated by two or more businesses (ventures) as a separate and discrete business or project (venture) for their mutual benefit is considered to be a corporate joint venture. Investee entities, in which the company can exercise significant influence, but not control, are accounted for under the equity method of accounting. Under the equity method of accounting, the company’s share of the earnings or losses of these companies is included in net income.

 

A loss in value of an investment that is other than a temporary decline is recognized as a charge to operations. Evidence of a loss in value might include, but would not necessarily be limited to absence of an ability to recover the carrying amount of the investment or inability of the investee to sustain an earnings capacity that would justify the carrying amount of the investment.

 

24

 

 

VARIABLE INTEREST ENTITY

 

An entity (investee) in which the investor has obtained less than a majority-owned interest, according to the Financial Accounting Standards Board (FASB). A variable interest entity (VIE) is subject to consolidation if a VIE is an entity meeting one of the following three criteria as elaborated in ASC Topic 810-10, Consolidation.

 

(a) the equity-at-risk is not sufficient to support the entity’s activities;

 

(b) as a group, the equity-at-risk holders cannot control the entity; or

 

(c) the economics do not coincide with the voting interests.

 

If a firm is the primary beneficiary of a VIE, the holdings must be disclosed on the balance sheet. The primary beneficiary is defined as the person or company with the majority of variable interests.

 

TREASURY STOCK

 

Treasury stock consists of a Company’s own stock which has been issued, but is subsequently reacquired by the Company. Treasury stock does not reduce the number of shares issued but does reduce the number of shares outstanding. These shares are not eligible to receive cash dividends. Accounting for excesses and deficiencies on treasury stock transactions is governed by ASC 505-30-30.

 

State laws and federal agencies closely regulate transactions involving a company’s own capital stock, so the purchase of outstanding shares and converting them into treasury shares must have a legitimate purpose. Some of the most common reasons for purchasing outstanding shares are as follows:

 

(i) to meet additional stock needs for various reasons, including newly implemented stock option plans, the issuance stock for convertible bonds or convertible preferred stock, or a stock dividend;

 

(ii) to eliminate the ownerships interests of a stockholder;

 

(iii) to increase the market price of the stock that returns capital to shareholders; and

 

(iv) to potentially increase earnings per share of the stock by decreasing the shares outstanding on the same earnings.

 

The Company has adopted the cost method of accounting for treasury stock shares. The purchase of outstanding shares is treated as a temporary reduction in shareholders’ equity in view of the expectation to reissue the shares instead of retiring them. When the Company reissues the treasury shares, the temporary account is eliminated. The cost of treasury stock shares reacquired is charged to a contra account, in this case a contra equity account that reduces the stockholder equity balance.

 

INCOME TAXES

 

The Company accounts for income taxes under the provisions of ASC 740 “Accounting for Income Taxes.” Under ASC 740, deferred tax assets and liabilities are determined based on the difference between the financial statement carrying amounts and the tax bases of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse.

 

The provision for income tax is based on the results for the year as adjusted for items, which are non-assessable or disallowed. It is calculated using tax rates that have been enacted or substantively enacted at the balance sheet date. Deferred taxes area accounted for using the balance sheet liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax basis used in the computation of assessable tax profit. In principle, deferred tax liabilities are recognized for all taxable temporary differences, and deferred tax assets are recognized to the extent that it is probable that taxable profit will be available against which deductible temporary differences can be utilized.

 

25

 

 

Deferred income taxes are calculated at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled. Deferred tax is charged or credited in the income statement, except when it relates to items credited or charged directly to equity, in which case the deferred tax is also adjusted in the equity accounts. Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis. ASC 740 also prescribes a more-likely-than-not threshold for financial statement recognition and measurement of a tax position taken, or expected to be taken, in a tax return. ASC 740 also provides guidance related to, among other things, classification, accounting for interest and penalties associated with tax positions, and disclosure requirements. Any interest and penalties accrued related to unrecognized tax benefits will be recorded in tax expense.

 

POLITICAL AND BUSINESS RISK

 

The Company’s operations are carried out in the PRC Accordingly, the Company’s business, financial condition and results of operations may be influenced by the political, economic and legal environment in the PRC, and by the general state of the PRC’s economy. The Company’s operations in the PRC are subject to specific considerations and significant risks not typically associated with companies in North America and Western Europe. The Company’s results may be adversely affected by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things.

 

IMPAIRMENT OF LONG-LIVED ASSETS AND INTANGIBLE ASSETS

 

In accordance with ASC 360, “Property, Plant and Equipment”, long-lived assets to be held and used are analyzed for impairment whenever events or changes in circumstances indicate that the related carrying amounts may not be recoverable. The Company reviews the carrying amount of its long-lived assets, including intangibles, for impairment, at the end of each fiscal year. An asset is considered impaired when estimated future cash flows are less than the carrying amount of the asset. In the event the carrying amount of such asset is considered not recoverable, the asset is adjusted to its fair value. Fair value is generally determined based on discounted future cash flow.

 

EARNINGS PER SHARE

 

As prescribed in ASC Topic 260 “Earning per Share,” Basic Earnings per Share (“EPS”) is computed by dividing net income available to common stockholders by the weighted average number of common stock shares outstanding during the year. Diluted EPS is computed by dividing net income available to common stockholders by the weighted-average number of common stock shares outstanding during the year plus potential dilutive instruments such as stock options and warrants. The effect of stock options on diluted EPS is determined through the application of the treasury stock method, whereby proceeds received by the Company based on assumed exercises are hypothetically used to repurchase the Company’s common stock at the average market price during the period.

 

For the three months ended March 31, 2021 and 2021, basic (loss)/earnings per share attributable to Sino Agro Food, Inc. and subsidiaries common stockholders amounted to $(0.05) and $(0.14) respectively. For the three months ended March 31, 2022 and 2021, diluted (loss)/earnings per share attributable to Sino Agro Food, Inc. and its subsidiaries’ common stockholders amounted to $(0.05) and $(0.14) respectively.

 

FOREIGN CURRENCY TRANSLATION

 

The reporting currency of the Company is the U.S. dollars. The functional currency of the Company is the Chinese Renminbi (RMB). For those entities whose functional currency is other than the U.S. dollars, all assets and liabilities are translated into U.S. dollars at the exchange rate on the balance sheet date; shareholder equity is translated at historical rates and items in the statements of income and of cash flows are translated at the average rate for the period.

 

Because cash flows are translated based on the weighted average translation rate, amounts related to assets and liabilities reported in the statements of cash flows will not necessarily agree with changes in the corresponding balances in the balance sheets. Translation adjustments resulting from this process are included in accumulated other comprehensive income in the consolidated statements of equity.

 

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For the three months ended March 31, 2022 and 2021; Translation gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the statements of income and comprehensive income as incurred. The balance sheet amounts with the exception of equity as of March 31 2022 and December 31, 2021 were translated at RMB6.35 to $1.00 and RMB6.38 to $1.00, respectively. The average translation rates applied to the consolidated statements of income and comprehensive income and of cash flows for the three months ended March 31, 2022 and 2021 were RMB6.35 to $1.00 and RMB6.45 to $1.00, respectively.

 

For the three months ended March 31, 2021and 2020; Translation gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the statements of income and comprehensive income as incurred. The balance sheet amounts with the exception of equity s of March 31 2021 and December 31, 2020 were translated at RMB6.57 to $1.00 and RMB6.54 to $1.00, respectively. The average translation rates applied to the consolidated statements of income and comprehensive income and of cash flows for the three months ended March 31, 2021 and 2020 were RMB6.45 to $1.00 and RMB6.98 to $1.00, respectively.

 

ACCUMULATED OTHER COMPREHENSIVE INCOME

 

ASC Topic 220 “Comprehensive Income” establishes standards for reporting and displaying comprehensive income and its components in financial statements. Comprehensive income is defined as the change in stockholders’ equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. The comprehensive income for all periods presented includes both the reported net income and net change in cumulative translation adjustments.

 

RETIREMENT BENEFIT COSTS

 

PRC state managed retirement benefit programs are defined contribution plans and the payments to the plans are charged as expenses when employees have rendered service entitling them to the contribution.

 

STOCK-BASED COMPENSATION

 

The Company adopts both ASC Topic 718, “Compensation - Stock Compensation” and ASC Topic 505-50,“Equity-Based Payments to Non-Employees” using the fair value method in which an entity issues its equity instruments to acquire goods and services from employees and non-employees. Stock compensation for stock granted to non-employees has been determined in accordance with this accounting standard and the accounting standard regarding accounting for equity instruments that are issued to other than employees for acquiring, or in conjunction with selling goods or services, as the fair value of the consideration received or the fair value of equity instruments issued, whichever is more reliably measured. This accounting standard allows the “simplified” method to determine the term of employee options when other information is not available. Under ASC Topic 718 and ASC Topic 505-50, stock compensation expenses is measured at the grant date on the value of the option or restricted stock and is recognized as expenses, less expected forfeitures, over the requisite service period, which is generally the vesting period.

  

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FAIR VALUE OF FINANCIAL INSTRUMENTS

 

The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in accounting principles generally accepted in the United States of America (U.S. GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy, which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:

 

NEW ACCOUNTING PRONOUNCEMENTS

 

The Company does not expect any recent accounting pronouncements to have a material effect on the Company’s financial position, results of operations, or cash flows.

 

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606) (ASU 2014-09), which amends the existing accounting standards for revenue recognition. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, which delays the effective date of ASU 2014-09 by one year. The FASB also agreed to allow entities to choose to adopt the standard as of the original effective date. In March 2016, the FASB issued Accounting Standards Update No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net) (ASU 2016-08) which clarifies the implementation guidance on principal versus agent considerations. The guidance includes indicators to assist an entity in determining whether it controls a specified good or service before it is transferred to the customers. The new standard further requires new disclosures about contracts with customers, including the significant judgments the company has made when applying the guidance. We will adopt the new standard effective January 1, 2018, using the modified retrospective transition method. We finalized our analysis and the adoption of this guidance will not have a material impact on our consolidated financial statements.

 

In February 2016, the FASB issued Accounting Standards Update No. 2016-02, Leases (Topic 842) (ASU 2016-02), which generally requires companies to recognize operating and financing lease liabilities and corresponding right-of-use assets on the balance sheet. This guidance will be effective for us in the first quarter of 2019 on a modified retrospective basis and early adoption is permitted. We will adopt the new standard effective January 1, 2019. We have selected a lease accounting system and we are in the process of implementing such system as well as evaluating the use of the optional practical expedients. While we continue to evaluate the effect of adopting this guidance on our consolidated financial statements and related disclosures, we expect our operating leases, as disclosed in Note 9 - Commitments and Contingencies, will be subject to the new standard. We will recognize right-of-use assets and operating lease liabilities on our consolidated balance sheets upon adoption, which will increase our total assets and liabilities.

 

In October 2016, the FASB issued Accounting Standards Update No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers Other than Inventory (ASU 2016-16), which requires companies to recognize the income-tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs, rather than when the asset has been sold to an outside party. We will adopt the new standard effective January 1, 2018, using the modified retrospective transition approach through a cumulative-effect adjustment to retained earnings as of the effective date. A cumulative-effect adjustment will capture the write-off of income tax consequences deferred from past intra-entity transfers involving assets other than inventory, new deferred tax assets, and other liabilities for amounts not currently recognized under U.S. GAAP. Based on transactions up to December 31, 2017, we do not expect the adoption of this guidance to have a material impact on our consolidated financial statements.

 

In November 2016, the FASB issued Accounting Standards Update No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (ASU 2016-18), which requires companies to include amounts generally described as restricted cash and restricted cash equivalents in cash and cash equivalents when reconciling beginning-of-period and end-of-period total amounts shown on the statement of cash flows. We will adopt the new standard effective January 1, 2018, using the retrospective transition approach for all periods presented. We do not expect the adoption of this guidance to have a material impact on our consolidated financial statements.

 

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In January 2017, the FASB issued Accounting Standards Update No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business (ASU 2017-01), which revises the definition of a business and provides new guidance in evaluating when a set of transferred assets and activities is a business. We will adopt the new standard effective January 1, 2018, on a prospective basis and do not expect the standard to have a material impact on our consolidated financial statements.

 

In January 2017, the FASB issued Accounting Standards Update No. 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment (ASU 2017-04), which eliminates step two from the goodwill impairment test. Under ASU 2017-04, an entity should recognize an impairment charge for the amount by which the carrying amount of a reporting unit exceeds its fair value up to the amount of goodwill allocated to that reporting unit. This guidance will be effective for us in the first quarter of 2020 on a prospective basis, and early adoption is permitted. We do not expect the standard to have a material impact on our consolidated financial statements.

 

Although there are several other new accounting pronouncements issued or proposed by the FASB, which the Company has adopted or will adopt, as applicable, the Company does not believe any of these accounting pronouncements has had or will have a material impact on its consolidated financial position, operating results or statements of cash flows.

 

GOVERNMENT REGULATION

 

Regulation of M&A and Overseas Listings

 

On August 8, 2006, six PRC regulatory agencies, including the Ministry of Commerce (the “MOFCOM”), the State Assets Supervision and Administration Commission, the State Administration of Taxation (“SAT”), the State Administration of Industry and Commerce (the “SAIC”), the China Securities Regulatory Commission (“CSRC”), and the State Administration of Foreign Exchange (the “SAFE”), jointly issued the Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors (the “M&A Rules”), which became effective on September 8, 2006 and was amended on June 22, 2009. The M&A Rules include provisions that purport to require that an offshore special purpose vehicle formed for purposes of the overseas listing of equity interests in PRC companies and controlled directly or indirectly by PRC companies or individuals obtain the approval of the CSRC prior to the listing and trading of such special purpose vehicle’s securities on an overseas stock exchange.

 

On September 21, 2006, the CSRC published on its official Website procedures regarding its approval of overseas listings by special purpose vehicles. The CSRC approval procedures require the filing of a number of documents with the CSRC. The application of this new PRC regulation remains unclear, with no consensus currently existing among leading PRC law firms regarding the scope of the applicability of the CSRC approval requirement.

 

The M&A Rules also establish procedures and requirements that could make some acquisitions of Chinese companies by foreign investors more time-consuming and complex, including requirements in some instances that the MOFCOM be notified in advance of any change-of-control transaction in which a foreign investor takes control of a Chinese domestic enterprise.

 

In February 2011, the General Office of the State Council promulgated a Notice on Establishing the Security Review System for Mergers and Acquisitions of Domestic Enterprises by Foreign Investors (“Circular 6”), which established a security review system for mergers and acquisitions of domestic enterprises by foreign investors. Under Circular 6, a security review is required for mergers and acquisitions by foreign investors having “national defense and security” concerns and mergers and acquisitions by which foreign investors may acquire “de facto control” of domestic enterprises with “national security” concerns. In August 2011, the MOFCOM promulgated the Rules on Implementation of Security Review System (the “MOFCOM Security Review Rules”), to replace the Interim Provisions of the Ministry of Commerce on Matters Relating to the Implementation of the Security Review System for Mergers and Acquisitions of Domestic Enterprises by Foreign Investors promulgated by the MOFCOM in March 2011. The MOFCOM Security Review Rules, which came into effect on September 1, 2011, provide that the MOFCOM will look into the substance and actual impact of a transaction and prohibit foreign investors from bypassing the security review requirement by structuring transactions through proxies, trusts, indirect investments, leases, loans, control through contractual arrangements or offshore transactions.

 

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Regulation of Foreign Currency Exchange and Dividend Distribution

 

The principal regulations governing foreign currency exchange in China are the Foreign Exchange Administration Regulations (the “FX Regulations”), which were last amended in August 2008. Under the

 

FX Regulations, the RMB is freely convertible for current account items, including the distribution of dividends, interest payments, trade and service-related foreign exchange transactions, but not for capital account items, such as direct investments, loans, repatriation of investments and investments in securities outside of China, unless the prior approval of the SAFE is obtained and prior registration with the SAFE is made. On August 29, 2008, the SAFE issued a notice, Circular 142, regulating the conversion by a foreign-invested company of foreign currency into RMB by restricting how the converted RMB may be used. Circular 142 requires that the registered capital of a foreign-invested company settled in RMB converted from foreign currencies may only be used for purposes within the business scope approved by the applicable governmental authority and may not be used for equity investments within the PRC. In addition, the SAFE increased its oversight of the flow and use of the registered capital of a foreign-invested company settled in RMB converted from foreign currencies. The use of such RMB capital may not be changed without the SAFE’s approval, and may not in any case be used to repay RMB loans if the proceeds of such loans have not been used. Violations of Circular 142 will result in severe penalties, such as heavy fines. As a result, Circular 142 may significantly limit our ability to transfer cash or other assets from The Company and/or our other non-PRC subsidiaries into our subsidiaries in the PRC, which may adversely affect our business expansion and we may not be able to convert the net proceeds into RMB to invest in or acquire any other PRC companies, or establish other variable interest entities (“VIEs”) in the PRC.

 

Dividends paid by a PRC subsidiary to its overseas shareholder are deemed income of the shareholder and are taxable in the PRC. Pursuant to the Administration Rules of the Settlement, Sale and Payment of Foreign Exchange (1996), foreign-invested enterprises in the PRC may purchase or remit foreign currency, subject to a cap approved by the SAFE, for settlement of current account transactions without the approval of the SAFE. Foreign currency transactions under the capital account are still subject to limitations and require approvals from, or registration with, the SAFE and other relevant PRC governmental authorities.

 

In October 2005, the SAFE promulgated the Relevant Issues Concerning Foreign Exchange Control on Domestic Residents’ Corporate Financing and Round trip Investment through Offshore Special Purpose Vehicles (“Circular 75”). Under Circular 75, which was issued by SAFE effective November 1, 2005, prior registration with the local SAFE branch is required for PRC residents to establish or to control an offshore company for the purposes of financing that offshore company with assets or equity interests in an onshore enterprise located in the PRC. An amendment to the registration or filing with the local SAFE branch by such PRC resident is also required for the injection of equity interests or assets of an onshore enterprise in the offshore company or overseas funds raised by such offshore company, or any other material change involving a change in the capital of the offshore company. Moreover, Circular 75 applies retroactively. As a result, PRC residents who, prior to November 1, 2005, had established or acquired control of offshore companies that had made onshore investments in the PRC prior to were required to complete the relevant registration procedures with the local SAFE branch by March 31, 2006.

 

Since May 2007, the SAFE has issued a series of guidance to its local branches with respect to the operational process for the SAFE registration under Circular 75. The guidance provides more specific and stringent supervision of the registration required by Circular 75. For example, the guidance imposes obligations on onshore subsidiaries of an offshore entity to make true and accurate statements to the local SAFE authorities regarding any shareholder or beneficial owner of the offshore entity who is a PRC citizen or resident. Untrue statements by the onshore subsidiaries will lead to potential liability for the subsidiaries and, in some instances, for their legal representatives and other related individuals.

 

Under the relevant rules, failure to comply with the registration procedures set forth in Circular 75 may result in restrictions being imposed on the foreign exchange activities of the relevant onshore company, including increases in its registered capital, payment of dividends and other distributions to its offshore parent or affiliate and capital inflows from the offshore entity, and may also subject relevant PRC residents to penalties under PRC foreign exchange administration regulations. PRC residents who control our company from time to time are required to register with the SAFE in connection with their investments in us.

 

On December 25, 2006, the People’s Bank of China (the “PBOC”) issued the Administration Measures on Individual Foreign Exchange Control and related Implementation Rules were issued by the SAFE on January 5, 2007. Both became effective on February 1, 2007. Under these regulations, all foreign exchange transactions involving an employee share incentive plan, share option plan, or similar plan participated in by onshore individuals may be conducted only with approval from the SAFE or its authorized branch. Under the Notice of Issues Related to the Foreign Exchange Administration for Domestic Individuals Participating in Stock Incentive Plan of Overseas Listed Company (“Offshore Share Incentives Rules”), which was issued by the SAFE on February 15, 2012, PRC citizens who are granted share options, restricted share units or restricted shares by an overseas publicly listed company are required to register with the SAFE or its authorized branch and to comply with a series of other requirements. If we, or the PRC employees of ours who hold options, restricted share units or restricted shares fail to comply with these registration or other procedural requirements, we, and/or such employees may be subject to fines and other legal sanctions.

 

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The principal regulations governing distribution of dividends of foreign holding companies include the Foreign Investment Enterprise Law (1986), which was amended in October 2000, and the Administrative Rules under the Foreign Investment Enterprise Law (2001). Under these regulations, foreign investment enterprises in China may pay dividends only out of their accumulated profits, if any, determined in accordance with PRC accounting standards and regulations. In addition, foreign investment enterprises in China are required to allocate at least 10% of their accumulated profits each year, if any, to fund certain reserve funds unless these reserves have reached 50% of the registered capital of the enterprises. These reserves are not distributable as cash dividends.

 

Laws and Regulations Related to Employment and Labor Protection

 

On June 29, 2007, the National People’s Congress promulgated the Employment Contract Law of PRC (“Employment Contract Law”), which became effective as of January 1, 2008, and was amended on December 28, 2012. The Employment Contract Law requires employers to provide written contracts to their employees, restricts the use of temporary workers and aims to give employees long-term job security.

  

Pursuant to the Employment Contract Law, employment contracts lawfully concluded prior to the implementation of the Employment Contract Law and continuing as of the date of its implementation shall continue to be performed. Where an employment relationship was established prior to the implementation of the Employment Contract Law but no written employment contract was concluded, a contract must be concluded within one month after its implementation.

 

On September 18, 2008, the State Council promulgated the Implementing Regulations for the PRC Employment Contract Law which came into effect immediately. These regulations interpret and supplement the provisions of the Employment Contract Law.

 

As of December 31, 2015, we had entered written employment contracts with three of our employees.

 

Income Tax

 

On March 16, 2007, the National People’s Congress approved and promulgated the Enterprise Income Tax Law (the “EIT Law”). On December 6, 2007, the State Council approved the Implementing Rules. Both the EIT Law and its Implementing Rules became effective on January 1, 2008. Under the EIT Law and the Implementing Rules, which superseded the previous Income Tax Law, the enterprise income tax rate for both domestic companies and foreign invested enterprises is unified at 25%. On December 26, 2007, the State Council promulgated the Circular on Implementation of Enterprise Tax Transition Preferential Policy, or the Preferential Policy Circular. The EIT Law, its Implementing Rules and the Preferential Policy Circular provide a five-year transitional period for certain entities that had enjoyed a favorable income tax rate of less than 25% under the previous Income Tax Law and were established before March 16, 2007, during which period the applicable enterprises income tax rate shall gradually increase to 25%.

 

On April 14, 2008, the Administration Measures for Recognition of High and New Technology Enterprises, or the Recognition Measures, were jointly promulgated by the Ministry of Science and Technology, the Ministry of Finance, and the SAT, which sets out the standards and process for granting the high and new technology enterprises status. According to the EIT Law and its Implementing Rules as well as the Recognition Measures, enterprises which have been granted the high and new technology enterprises status shall enjoy a favorable income tax rate of 15%. The new EIT Law and its Implementation Rules also provide that “software enterprises” enjoy a two-year income tax exemption starting from the first profit making year, followed by a reduced tax rate of 12.5% for the subsequent three years.

 

The EIT Law also provides that an enterprise established under the laws of a foreign country or region but whose “de facto management body” is in the PRC be treated as a resident enterprise for PRC tax purposes and consequently be subject to the PRC income tax at the rate of 25% for its global income. The Implementing Rules merely defines the location of the “de facto management body” as “the place where the exercising, in substance, of the overall management and control of the production and business operation, personnel, accounting, properties, etc., of a non-PRC company is located.” The SAT issued the Circular regarding the Determination of Chinese-Controlled Offshore Incorporated Enterprises as PRC Tax Resident Enterprises on the Basis of De Facto Management Bodies, or Circular 82, on April 22, 2009. Circular 82 provides certain specific criteria for determining whether the “de facto management body” of a Chinese-controlled offshore-incorporated enterprise is located in China. The SAT issued the Bulletin regarding the Administrative Measures on the Income Tax of Chinese-Controlled Offshore Incorporated Resident Enterprises (Interim) on July 27, 2011, which became effective on September 1, 2011, providing more guidance on the implementation of Circular 82. This bulletin clarifies matters including resident status determination, post-determination administration and competent tax authorities. Although both Circular 82 and the bulletin only apply to offshore enterprises controlled by PRC enterprises, not companies like us, the determining criteria set forth in Circular 82 and the bulletin may reflect the SAT’s general position on how the “de facto management body” test should be applied in determining the tax resident status of offshore enterprises, regardless of whether they are controlled by PRC enterprises or individuals. Based on a review of surrounding facts and circumstances, the Company does not believe that it is likely that its operations outside of the PRC should be considered a resident enterprise for PRC tax purposes. However, due to limited guidance and implementation history of the EIT Law, should the Company be treated as a resident enterprise for PRC tax purposes, the Company will be subject to PRC tax on worldwide income at a uniform tax rate of 25% retroactive to January 1, 2008.

 

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The EIT Law also imposes a withholding income tax of 10% on dividends distributed by a Foreign Invested Enterprise (an “FIE”) to its immediate holding company outside of China if such immediate holding company is considered a non-resident enterprise without any establishment or place within China or if the received dividends have no connection with the establishment or place of such immediate holding company within China, unless such immediate holding company’s jurisdiction of incorporation has a tax treaty with China that provides for a different withholding arrangement. Such withholding income tax was exempted under the previous law. The State of Nevada, where the Company is incorporated, does not have such tax treaty with China. The SAT further promulgated a circular, or Circular 601, on October 27, 2009, which provides that the tax treaty benefits will be denied to “conduit” or shell companies without business substance and that a beneficial ownership analysis will be used based on a “substance-over-form” principle to determine whether to grant the tax treaty benefits. Most our subsidiaries in China are directly held by our non-Chinese subsidiaries. If we are regarded as a non-resident enterprise and our non-Chinese subsidiaries are regarded as resident enterprises, then our non-Chinese subsidiaries may be required to pay a 10% withholding tax on any dividends payable to us. If our non-Chinese subsidiaries are regarded as non-resident enterprises, then our PRC subsidiaries may be required to pay a 5% withholding tax for any dividends payable to our non-Chinese subsidiaries, however, it is still unclear at this stage whether Circular 601 applies to dividends from our PRC subsidiaries paid to our non-Chinese subsidiaries, and if our non-Chinese subsidiaries were not considered as “beneficial owners” of any dividends from their PRC subsidiaries, whether the dividends payable to our non-Chinese subsidiaries would be subject to withholding tax at a rate of 10%.

  

The EIT Law and its Implementation Rules have tried to scrutinize transactions between related parties. Pursuant to the EIT Law and its Implementation Rules, the tax authorities may impose mandatory adjustment on tax due to the extent a related party transaction is not in line with arm’s-length principle or was entered with a purpose to reduce, avoid or delay the payment of tax. On January 8, 2009, the SAT issued the Implementation Measures for Special Tax Adjustments (Trial), which clarifies the definition of “related party” and sets forth the tax-filing disclosure and documentation requirements, the selection and application of transfer pricing methods, and transfer pricing investigation and assessment procedures.

 

On December 10, 2009, the SAT issued a circular on Strengthening the Administration of Enterprise Income Tax Collection on Income Derived from Equity Transfer by Non-resident Enterprise, or Circular 698. Pursuant to Circular 698, non-resident enterprises should declare any direct transfer of equity interest of PRC resident enterprises and pay taxes in accordance with the EIT Law and relevant laws and regulations. For an indirect transfer, if the effective tax rate for the transferor (a non-PRC-resident enterprise) is lower than 12.5% under the law of the jurisdiction of the direct transferred target, the transferor is required to submit relevant transaction materials to PRC tax authorities for review. If such indirect transfer is determined by PRC tax authorities to be a transaction without any reasonable business purpose other than for tax avoidance, the gains derived from such transfer will be subject to PRC income tax.

 

In addition to the above, after the EIT Law and its Implementing Rules were promulgated, the SAT released several regulations to stipulate more details for carrying out the EIT Law and its Implementing Rules. These regulations include:

 

Notice of the State Administration of Taxation on the Issues Concerning the Administration of Enterprise Income Tax Deduction and Exemption (2008);

 

Notice of the State Administration of Taxation on Strengthening the Withholding of Enterprise Income Tax on Non-resident Enterprises’ Interest Income Sourcing from China (2008);

 

Notice of the State Administration of Taxation on Several Issues Concerning the Recognition of Incomes Subject to the Enterprise Income Tax (2008);

 

Opinion of the State Administration of Taxation on Strengthening the Administration of Enterprise Income Tax (2008);

 

Notice of the Ministry of Finance and State Administration of Taxation on Several Preferential Policies in Respect of Enterprise Income Tax (2008);

 

Interim Measures for the Administration of Collection of Enterprise Income Tax on the Basis of Consolidation of Trans-regional Business Operations (2008);

 

Several Issues Concerning the Enterprise Income Tax Treatment on Enterprise Reorganization (2009);

 

Circular of the State Council on Printing and Distributing Policies for Further Encouraging the Development of the Software Industry and the Integrated Circuit Industry (2011); and

 

Circular on Income Tax Policies for Further Encouraging the Development of Software Industry and Integrated Circuit Industry (2012).

 

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QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 

 

Not applicable

 

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 

 

The financial statements required by this item are located following the signature page of this Annual Report.

 

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 

 

Not applicable.

 

CONTROLS AND PROCEDURES 

 

Evaluation of Disclosure Controls and Procedures

 

Our Chief Executive Officer and Chief Financial Officer has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act) as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer, has concluded that our disclosure controls and procedures have improved but yet were not deemed effective at a reasonable assurance level as of the end of such period. This conclusion was based on the material weakness identified in our internal control over financial reporting related, but which may or may not be entirely exclusive, to our accounting for disposal of assets resulting from discontinued operations, as described below.

 

Limitations on the Effectiveness of Controls

 

Our Chief Executive Officer and Chief Financial Officer does not expect that our Disclosure Controls and internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management or board override of the control.

 

The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

 

Management’s Report on Internal Control over Financial Reporting

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)). Our system of internal control over financial reporting is designed to provide reasonable assurance to our management and Board of Directors regarding the preparation and fair presentation of our consolidated and combined financial statements for external purposes in accordance with generally accepted accounting principles.

 

Our Chief Executive Officer and Chief Financial Officer assessed the effectiveness of our internal control over financial reporting as of December 31, 2017 and December 31, 2018. In making this assessment, he used the framework included in Internal Control — Integrated 2013 Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the criteria set forth in Internal Control — Integrated 2013 Framework, our Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2016, our internal control over financial reporting had not been effective due to the identification of a material weakness related, but which may or may not be entirely exclusive, to our controls over our accounting for disposal of assets related to discontinued operations. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.

 

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Remediation Efforts to Address Material Weakness

 

To remediate the material weakness in our internal control over financial reporting described above, that Company has initiated implementing new control procedures regarding our accounting for reporting discontinued operations and disclosures of disposal of asset components, specifically regarding ‘timely disclosure’ on matters related to Discontinued Operations. The changes to the control environment include, but are not limited to, the following:

 

For future disposition of assets and / or discontinued operations, the Company has retained ECOVIS Financial Accounting specialists to augment internal resources utilized for due diligence and analysis of the technical accounting aspects of the transaction. Such resources will be retained by management at the direction of the audit committee.

 

For future disposition of assets and / or discontinued operations, the Company will prepare an accounting memorandum for each disposal to address the guidance outlined in ASC 205-20 ‘Presentation of Financial Statements — Discontinued Operations’ as necessary, as well as further educate itself regarding matters of disposition / discontinued operations through related accounting literature, that will be reviewed by the Chief Financial Officer and presented to the audit committee.

 

We recently appointed two new directors, both of whom will serve on the Audit Committee. We expect appointing these individuals will augment our ability to ameliorate any weaknesses in our internal control over financial reporting.

 

Presently, Solomon Lee serves as both our Chief Executive Officer and our interim Chief Financial Officer due to the unfortunate passing of Daniel Ritchey, our former Chief Financial Officer, as reported in a Current Report on Form 8-K filed with the Commission on December 4, 2018. We are conducting a search for a suitable replacement for Mr. Ritchey but have not yet identified a candidate. We expect that appointing a new chief financial officer will augment our ability to ameliorate any weaknesses in our internal control over financial reporting.

 

These remediation initiatives are intended to enhance the Company’s timely disclosure by establishing a formal process and specific control activities regarding disposition of assets / discontinued operations. Management believes that these measures, currently being implemented, will remediate the deficiency identified. Other than as noted above, other changes may be implemented in the future to enhance and improve the Company’s ICFR measures to prevent this deficiency from recurring.

 

However, the material weakness will not be considered remediated until the applicable remedial controls operate for a sufficient period and the Chief Executive Officer and Chief Financial Officer, Independent Audit Committee, and Independent Auditor have concluded, through testing, that these controls are operating effectively.

 

Changes in Internal Control over Financial Reporting

 

Except as described above, there were no other deficiencies discovered in our internal control over financial reporting during the fourth quarter period ended December 31, 2016 and throughout all periods of FY2017 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

 

Attestation Report of the Registered Public Accounting Firm

 

This annual report includes an attestation report of our independent registered public accounting firm regarding internal control over financial reporting.

 

OTHER INFORMATION

 

None.

 

34

 

 

DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE

 

The Board of Directors elects our executive officers annually. A majority vote of the directors who are in office is required to fill vacancies. Each director shall be elected for the term of one year and until his successor is elected and qualified or until his earlier resignation or removal. Our directors and executive officers are as follows:

 

Name   Age   Position
Lee Yip Kun Solomon   78   CEO, Interim CFO and Chairman of the Board
Tan PoayTeik   62   Chief Marketing Officer and Director
Chen BorHann   56   Secretary and Director
ColanukuduruRavindran   64   Independent Director

Muson Cheung

 

49

 

 Independent Director

Lau Fuk Kwan   58   Independent Director

 

Lee Yip Kun Solomon. Mr. Lee has been a Director and our Chief Executive Officer since August 2007. From March 2004 to date he has been Company Managing Director of Capital Award Inc. Since May, 1993, he has been the CEO of IramaEdaranSdn. Bhd. (Malaysia), a modern fishery developer. There was no formal relationship between Sino Agro Food and IramaEdaran. He received a B.A. Major in Accounting and Economics from Monash University, Australia in July 1972. As a member of the board, Mr. Solomon contributes his knowledge of our company and a deep understanding of all aspects of our business, products and markets, as well substantial experience developing corporate strategy, assessing emerging industry trends, and business operations.

 

Tan PaoyTeik. Mr. Tan has been a Director and our Chief Marketing Officer since August 2007. Since July, 2005, he has been Company Managing Director of Milux Corporation Bhd. (Malaysia), a manufacturer of home and gas appliances. He received an MBA from South Pacific University in 2005. Mr. Tan is currently the Managing Director of Milux Corporation Bhd; as such, he spends half of his working time with Milux and half with our company. As a member of the board, Mr. Tan contributes his knowledge of the company and a deep understanding of all aspects of our business, products and markets, as well substantial experience developing corporate strategy, assessing emerging industry trends, and business operations.

 

Chen BorHann. Mr. Chen has been a Director and Secretary since August 2007. Since March, 2004, he has been Director and Business Development Manager of Capital Award Inc. From September 1995 to March 2004, he was Fishery Supervisor of IramaEdaranSdn. Bhd. (Malaysia). As a member of the board, Mr. Chen contributes his knowledge of the company and a deep understanding of all aspects of our business, products and markets, as well substantial experience developing corporate strategy, assessing emerging industry trends, and business operations.

 

ColanukuduruRavindran. Mr. Ravindran has been serving as a director and as an executive in a variety of industries including energy (e.g. oil & gas) and information technology with 36 years of experience in strategy, finance, fundraising, and “techno commercial”, in the U.S., India and Singapore. From 2011 to 2015, Mr. Ravindran served as the Chief Executive Officer of Terrasoft, a software development and services company. Beginning in 2015 through the present, Mr. Ravindran has acted as the Director at Union King Corporation and Atlantic Resources, a company based out of Hong Kong that is involved in worldwide trading of garments, electronic household goods, seafood etc. IN addition, in 2016 he was appointed as Director of Tri-way Industries Ltd, an independent private limited company based in Hong Kong. Mr. Ravindran received a Bachelor’s degree in Chemical Technology from Annamalai University in Tamilnadu, India in 1978 and subsequently obtained a post graduate degree in Plastics as well as in International Trade from the Indian Institute of Foreign Trade.

 

Muson Cheung. Mr. Cheung’s high credential is including Doctor of Business and Administration and Master of Finance, over 10 years experiences as lecturer of tertiary educationresponsible for risk and security management and investment and he has more than 15 years of experiences in financial markets, wasthe pioneer of and is a director in MC Financial Services Limited, and was the vise-president of Tiger Securities Asset Management Limited and holder of Security Broker License (Hong Kong Stock Exchange).

 

Lau Fuk Kwan. Mr. LAU Fuk Kwan, aged 58, has been engaging as the chief finance and accounting manager of the Tri-Way Industries Limited since 2019. He was also director of Weiwang Yunchuang (Shenzhen) Networking Technology Co., Limited. He had solid experience in finance, auditing, internal control and taxation from auditing firms in Hong Kong over twenty years

Mr. Lau obtained his Bachelor of Science degree in Applied Computing from Hong Kong Metropolitan University. He was also associate member of Hong Kong Institute of Certified Public Accountants.

 

Family Relationships

 

There are no family relationships among our officers or directors.

 

35

 

 

Directors’ Involvement in Certain Legal Proceedings

 

None of the director(s) or executive officers of the Company: (i) has been involved as a general partner or executive officer of any business which has filed a bankruptcy petition; (ii) has been convicted in any criminal proceeding nor is subject to any pending criminal proceeding; (iii) has been subjected to any order, judgment or decree of any court permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; and (iv) has been found by a court, the United States Securities and Exchange Commission or the Commodities Futures Trading Commission to have violated a federal or state securities or commodities law.

 

Board Committees:

 

Audit Committee

 

Our Audit Committee currently consists of Mr.Ravindran, Mr. Muson Cheung and Mr. LAU Fuk Kwan

 

The Board has determined that:

 

all members of the Audit Committee (i) are “independent” under the independence requirements of Marketplace Rule 5605(a)(2) of the NASDAQ Stock Market, Inc., (ii) meet the criteria for independence as set forth in the Exchange Act, (iii) have not participated in the preparation of our financial statements at any time during the past three years and (iv) are financially literate and have accounting and finance experience.

 

Compensation Committee

 

Our Compensation Committee currently consists of Mr.Muson Cheung. The Board has determined that:

 

  all members of the Compensation Committee qualify as “independent” under the independence requirements of Marketplace Rule 5605(a)(2) of the NASDAQ Stock Market, Inc.;

 

  all members of the Compensation Committee qualify as “non-employee directors” under Exchange Act Rule 16b-3; and

 

  all members of the Compensation Committee qualify as “outside directors” under Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”).

 

Compensation Committee Interlocks and Insider Participation

 

None of the members of our Compensation Committee is an officer or employee of our company. None of our executive officers currently serves, or in the past year has served, as a member of the board of directors or compensation committee of any entity that has one of more executive officers serving on our Board or Compensation Committee.

 

Code of Conduct

 

The Board has established a corporate Code of Conduct which qualifies as a “code of ethics” as defined by Item 406 of Regulation S-K of the Exchange Act. Among other matters, the Code of Conduct is designed to deter wrongdoing and to promote:

 

honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;

 

full, fair, accurate, timely and understandable disclosure in our SEC reports and other public communications;

 

compliance with applicable governmental laws, rules and regulations;

 

prompt internal reporting of violations of the Code of Conduct to appropriate persons identified in the code; and

 

accountability for adherence to the Code of Conduct.

 

Waivers to the Code of Conduct may be granted only by the Board. In the event that the Board grants any waivers of the elements listed above to any of our officers, we expect to announce the waiver within four business days on a Current Report on Form 8-K.

 

The Code of Conduct applies to all of the Company’s employees, including our principal executive officer, the principal financial and accounting officer, and all employees who perform these functions. If we amend our Code of Conduct as it applies to the principal executive officer, principal financial officer, principal accounting officer or controller (or persons performing similar functions), we shall disclose such amendment through the filing of a Current Report on Form 8-K.

 

36

 

 

EXECUTIVE COMPENSATION

 

Summary Compensation Table

 

The table below summarizes all compensation awarded to, earned by and yet to be paid not been paid to our Principal Executive Officers and independent directors:

 

Name   Principal position   Year     Salaries /
year in $
    Bonus(s)     Option / Awards     Non-equity
incentive plan
compensation
    All other
compensation (s)
    Total
(un-paid)
 $
 
                                               
Solomon Lee   Chief Executive Officer     2019 to 2021       336,000       0       0       0       0       1,092,000  
                                                             
Tan Paoy Teik   Chief Marketing Officer     2019 to 2021       174,000       0       0       0       0       565,500  
                                                             
Chen Bor Hann   Secretary     2019 to 2021       60,000       0       0       0       0       195,000  
                                                             
Muson Cheung   Independent director     2019 to 2021       60,000       0       0       0       0       195,000  
                                                             
Colanukuduru Ravindran.   Independent director     2019 to 2021       60,000       0       0       0       0       195,000  
                                                             
Lau Fuk Kwan   Independent director     2022 to 2023       120,000       0       0       0       0       10,000  

 

Summary Equity Awards or payments for remuneration

 

There has been no equity incentive award made to any of our executive officers as of three months ended March 31,2022.

 

Employment Agreements

 

Lee Yip Kun Solomon. On December 29, 2021, we renewed the three-year employment agreement effective and continuing as of January 1, 2022 with Lee Yip Kun Solomon, our Chief Executive Officer and President (the “Lee Agreement”). Pursuant to the Lee Agreement, Mr. Lee is entitled to an annual base salary of $336,000 and to receive a certain number of our common stock per year calculated in accordance with a formula of (Number of shares (X) = $336,000 / $ / share($Y) at time of settlement). Such shares have not been issued to Mr. Lee. Mr. Lee shall also be eligible for discretionary performance bonus payments; no such bonus has been paid. The Lee Agreement provides for Mr. Lee to be eligible to participate in any incentive compensation established by the Company; no such plan has been established. The Lee Agreement also includes confidentiality obligations to which Mr. Lee must adhere.

 

Tan PaoyTeik. On December 29, 2021, we renewed the three-year employment agreement effective and continuing as of January 1, 2022 with Tan PaoyTeik, our Chief Marketing Officer (the “Tan Agreement”).

 

Pursuant to the Tan Agreement, Mr. Tan is entitled to an annual base salary of $174,000 and to receive a certain number of our common stock per year calculated in accordance with a formula of (Number of shares (T) = $174,000 / $ / share($Y) at time of settlement). Such shares have not been issued to Mr. Tan. Mr. Tan shall also be eligible for discretionary performance bonus payments; no such bonus has been paid. The Tan Agreement provides for Mr. Tan to be eligible to participate in any incentive compensation established by the Company; no such plan has been established. The Tan Agreement also includes confidentiality obligations to which Mr. Tan must adhere.

 

37

 

 

Chen BorHann. On December 29, 2021, we renewed the three-year employment agreement effective and continuing as of January 1, 2022 with Chen BorHann, our Secretary (the “Hann Agreement”). Pursuant to the Hann Agreement, Mr. Hann is entitled to an annual base salary of $60,000 and to receive a certain number of our common stock per year calculated in accordance with a formula of (Number of shares (W) = $60,000 / $ / share($Y) at time of settlement). Such shares have not been issued to Mr. Hann. Mr. Hann shal1 also be eligible for discretionary performance bonus payments; no such bonus has been paid. The Hann Agreement provides for Mr. Hann to be eligible to participate in any incentive compensation established by the Company; no such plan has been established. The Hann Agreement also includes confidentiality obligations to which Mr. Hann must adhere.

 

Muson Cheung’s independent directorship was renewed on December 2021 to December 31, 2022 for a further one year.

 

Colanukuduru Ravindran’s independent directorship was renewed on December 2021 to December 31, 2022 for a further one year.

 

Lau Fuk Kwan was appointed as independent director of the Company on March 1st 2022. Pursuant to the Lau Fuk Kwan Agreement, Mr. Lau is entitled to an annual base salary of $120,000 and to receive a certain number of our common stock per year calculated in accordance with a formula of (Number of shares (W) = $120,000 / $ / share($Y) at time of settlement). Such shares have not been issued to Mr. Lau. Mr. Lau shal1 also be eligible for discretionary performance bonus payments; no such bonus has been paid. The Lau Agreement provides for Mr. Lau to be eligible to participate in any incentive compensation established by the Company; no such plan has been established. The Lau Agreement also includes confidentiality obligations to which Mr. Lau must adhere and Mr. Lau agrees to be nominated and represent the Company as director in the Board of directors of and as an executive officer of Tri-way Industries Limited (Hong Kong) (TWL) and A Power Agro Agriculture Development Limited (Macau) (APWAM) to look after the affairs of the Company for the best interest of the Company and its shareholders..

 

General

 

At no time during the last fiscal year with respect to any person listed in the table above was there:

 

 

any outstanding option or other equity-based award re-priced or otherwise materially modified (such as by extension of exercise periods, the change of vesting or forfeiture conditions, the change or elimination of applicable performance criteria, or the change of the bases upon which returns are determined;

 

 

any waiver or modification of any specified performance target, goal or condition to payout with respect to any amount included in non-stock incentive plan compensation or payouts;

 

 

any option or equity grant;

 

 

any non-equity incentive plan award made to a named executive officer

 

 

any nonqualified deferred compensation plans including nonqualified defined contribution plans; or

 

 

any payment for any item that should be included as All Other Compensation in a Summary Compensation Table.

 

We have no compensation arrangements (such as fees for retainer, committee service, service as chairman of the board or a committee, and meeting attendance) with directors. Directors did not receive any compensation except for that received as executive officers as set forth above.

 

38

 

 

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

 

The following table sets forth certain information concerning the number of shares of our common stock owned beneficially based on 60,352,942 issued and outstanding shares of common stock as of December 31, 2021 by: (i) each of our directors; (ii) each of our named executive officers; and (iii) each person or Company known by us to beneficially own more than 5% of our outstanding shares of common stock.

 

Beneficial ownership is determined in accordance with SEC rules and generally includes voting or investment power with respect to securities. Other than as described in the notes to the table, we believe that all persons named in the table have sole voting and investment power with respect to shares beneficially owned by them. All share ownership figures include shares issuable upon exercise of options or warrants exercisable within 60 days of the date of this Annual Report, which are deemed outstanding and beneficially owned by such person for purposes of computing his or her percentage ownership, but not for purposes of computing the percentage ownership of any other person.

 

Name and address   Shares of Common Stock     Percent of Common Stock     Shares of Series A Preferred Stock     Percent of Series A Preferred Stock    

Percent of Capital Stock (1)

 
Directors and Officers (2):                              
Lee Yip Kun Solomon     2,459,697       4.93 %     75       75 %     60.99 %
Tan PoayTeik     220,000       *       20       20 %     16.09 %
Chen BorHann     82,787       *       5       5 %     4.03 %
Anthony Soh     14,887       *       - - -       0       *  
ColanukuduruRavindran     - - -       *                          
                                         
All Officers and Directors as a Company (5 persons)     2,777,371       5.57 %     100       100 %     81.11 %
                                         
5% or Greater Beneficial Owners                                        
                                         
Iliad Research & Trading, LP (3)     4,736,292       7.85 %     - - -       0       1.76 %
Garrett R. D’Alessandro     2,821,458       5.66 %     - - -       0       1.13 %

 

* Less than one percent

 

(1) Includes the voting power of the 100 shares of Series A Preferred Stock issued and outstanding, which in the aggregate carry the voting power of eighty percent (80%) of all votes entitled to be voted at any annual or special meeting of shareholders of our company or action by written consent of our shareholders. Each outstanding share of the Series A Preferred Stock shall represent its proportionate share of the 80%, which is allocated to the outstanding shares of Series A Preferred Stock.

 

(2) The address for each of the officers and directors is c/o Sino Agro Food, Inc., Room 3520, Block A, China Shine Plaza, No. 9 Lin He Xi Road, Tianhe District, Guangzhou City, P.R.C.

 

(3) We believe, based on a Schedule 13G filed with the SEC on January 4, 2019, that the reporting person Iliad Management, LLC is the General Partner of reporting person Iliad. Iliad has rights, under a convertible promissory note, to own an aggregate number of shares of our common stock which, except for a contractual cap on the amount of outstanding shares that Iliad may own, would exceed such a cap. Iliad’s current ownership in % of common stocks is 7.83% after the equivalent of US$236,815.00 in cash and / or shares for repayments during year 2022. Thus, the number of shares of our common stock beneficially owned by Iliad as of 31st March 2022 was 4,736,292 shares, which is 7.85% of the 60,356,776 shares outstanding on March 31, 2022.

 

Equity Compensation Plan Information

 

The following table sets forth certain information as of December 31, 2017, with respect to compensation plans under which the Company’s equity securities are authorized for issuance:

 

    (a)     (b)     (c)  
    Number of 
securities
 to be
issued upon 
exercise of
outstanding 
options, 
warrants
and rights
    The weighted-average
 exercise
price of outstanding
 options, warrants 
and rights
    Number of 
securities 
remaining
available for 
future issuance
 under equity
 compensation plans
 (excluding
securities 
reflected in column (a))
 
                   
Equity compensation     1,000,000                -       1,000,000  
Plans approved by                        
Security holders                        
                         
Equity compensation     None       -       None  
Plans not approved                        
By security holders                        
Total     1,000,000               1,000,000  

 

39

 

 

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

 

On March 31, 202, the Company was indebted to Mr. Lee in the amount of $2,257,927, and on March 31, 2021 is indebted to Mr. Lee in the amount of $1,919,392. These amounts are unsecured, interest free and have no fixed term of repayment.

 

PRINCIPAL ACCOUNTING FEES AND SERVICES 

 

(1) Principal Audit Fees

 

The aggregate fees have not been billed for each of the last two fiscal years for professional services rendered by any principal accountants for our audit of annual financial statements and review of financial statements included in our quarterly reports or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years; however provisions are being reserved as follows:

 

NO AUDITOR (DUE TO COVID-19)     2021 (Provision)     $ 180,000  
NO AUDITOR (DUE TO COVID-19)     2020 (Provision)     $ 180,000  

 

(2) Audit-Related Fees

 

The provisional aggregate fees for billing in each of the last two fiscal years for assurance and related services by the principal accountants that are reasonably related to the performance of the audit or review of our financial statements are being estimated as follows::

 

NO AUDITOR (DUE TO COVID-19)     2021 (Provision)     $ 24,000  
NO AUDITOR (DUE TO COVID-19)     2020 (Provision)     $ 24,000  

 

40

 

 

 

EXHIBITS, FINANCIAL STATEMENT SCHEDULES

 

(A) Financial Statements

 

See index to Financial Statements on Page F-1

 

(B) Exhibits.

 

Exhibit No.   Exhibit Description
     
2.1   Stock Purchase Agreement and Share Exchange - Volcanic Gold and Capital Award. Incorporated herein by reference to the Registration Statement on Form 10 filed on November 19, 2010 as Exhibit 2.1 thereto.
     
2.2   Acquisition Agreement - Hang Yu Tai Investment Limited. Incorporated herein by reference to the Registration Statement on Form 10 filed on November 19, 2010 as Exhibit 2.2 thereto.
     
2.3   Acquisition Agreement - Macau Eiji Company Limited. Incorporated herein by reference to the Registration Statement on Form 10 filed on November 19, 2010 as Exhibit 2.3 thereto.
     
2.4   Acquisition Agreement - Tri-way Industries Limited. Incorporated herein by reference to the Registration Statement on Form 10 filed on November 19, 2010 as Exhibit 2.4 thereto.
     
2.5   Disposition Agreement - Tri-way selling equity interest in TianQuan Science. Incorporated herein by reference to the Registration Statement on Form 10 filed on November 19, 2010 as Exhibit 2.5 thereto.
     
2.6   Acquisition Agreement - A Power Agro Agriculture Development (Macau) Limited acquired the Pretty Mountains’ 45% equity interest in Sanjiang A Power.  Incorporated herein by reference to the Registration Statement on Form 10 filed on November 19, 2010 as Exhibit 2.6 thereto.
     
3.1   Articles of Incorporation of Volcanic Gold, Inc. Incorporated herein by reference to the Registration Statement on Form 10 filed on November 19, 2010 as Exhibit 3.1 thereto.
     
3.2   Amendment to Articles of Incorporation - Name Change: Volcanic Gold, Inc. to A Power Agro Agriculture Development, Inc. Incorporated herein by reference to the Registration Statement on Form 10 filed on November 19, 2010 as Exhibit 3.2 thereto.
     
3.3   Certificate of Correction. Incorporated herein by reference to the Registration Statement on Form 10 filed on November 19, 2010 as Exhibit 3.3 thereto.
     
3.4   Amendment to Articles of Incorporation - Name Change: A Power Agro Agriculture Development, Inc. to Sino Agro Food, Inc. Incorporated herein by reference to the Registration Statement on Form 10 filed on November 19, 2010 as Exhibit 3.4 thereto.
     
3.5   Bylaws of Volcanic Gold, Inc. Incorporated herein by reference to the Registration Statement on Form 10 filed on November 19, 2010 as Exhibit 3.5 thereto.
     
3.6   Organizational Documents: Capital Award, Inc. Incorporated herein by reference to the Registration Statement on Form 10 filed on November 19, 2010 as Exhibit 3.6 thereto.
     
3.7   Organizational Documents: Hang Yu Tai Investment Limited. Incorporated herein by reference to the Registration Statement on Form 10 filed on November 19, 2010 as Exhibit 3.7 thereto.
     
3.8   Organizational Documents: ZhongXingNongMu Co. Ltd. Incorporated herein by reference to the Registration Statement on Form 10 filed on November 19, 2010 as Exhibit 3.8 thereto.

 

41

 

 

3.9   Organizational Documents: Macau Eiji Company Limited. Incorporated herein by reference to the Registration Statement on Form 10 filed on November 19, 2010 as Exhibit 3.9 thereto.
     
3.10   Organizational Documents: Jiang Men City Heng Sheng Tai Agriculture Development Co. Ltd. Incorporated herein by reference to the Registration Statement on Form 10 filed on November 19, 2010 as Exhibit 3.10 thereto.
     
3.11   Organizational Documents: Tri-way Industries Limited. Incorporated herein by reference to the Registration Statement on Form 10 filed on November 19, 2010 as Exhibit 3.11 thereto.
     
3.12   Organizational Documents: A Power Agro Agriculture Development (Macau) Limited. Incorporated herein by reference to the Registration Statement on Form 10 filed on November 19, 2010 as Exhibit 3.12 thereto.
     
3.13   Bylaws. Incorporated herein by reference to the Current Report on Form 8-K filed on November 28, 2012 as Exhibit 3.1 thereto.
     
3.14   Certificate of Amendment to Articles of Incorporation. Incorporated herein by reference to the Current Report on Form 8-K filed on January 30, 2013 as Exhibit 3.1 thereto.
     
3.15   Certificate of Amendment to Articles of Incorporation. Incorporated herein by reference to the Current Report on Form 8-K filed on November 1, 2013 as Exhibit 3.1 thereto.
     
3.16   Certificate of Amendment to Articles of Incorporation. Incorporated herein by reference to the Current Report on Form 8-K filed on June 12, 2014 as Exhibit 3.1 thereto.
     
3.17   Certificate of Amendment to Articles of Incorporation. Incorporated herein by reference to the Current Report on Form 8-K filed on November 10, 2014 as Exhibit 3.1 thereto.
     
3.18   Certificate of Amendment to Articles of Incorporation. Incorporated herein by reference to the Current Report on Form 8-K filed on December 17, 2014 as Exhibit 3.1 thereto.
     
4.1   Form of common stock Certificate of Sino Agro Foods, Inc. Incorporated herein by reference to the Registration Statement on Form 10 filed on November 19, 2010 as Exhibit 4.1 thereto.
     
4.2   Form of Certificate of Series A Preferred. Incorporated herein by reference to the Registration Statement on Form 10 filed on November 19, 2010 as Exhibit 4.2 thereto.
     
4.3   Form of Certificate of Series B Preferred. Incorporated herein by reference to the Registration Statement on Form 10 filed on November 19, 2010 as Exhibit 4.3 thereto.
     
4.4   Certificate of Rights and Preferences - Series A Preferred. Incorporated herein by reference to the Registration Statement on Form 10 filed on April 25, 2011 as Exhibit 4.4 thereto.
     
4.5   Certificate of Rights and Preferences - Series B Preferred. Incorporated herein by reference to the Registration Statement on Form 10 filed on April 25, 2011 as Exhibit 4.5 thereto.
     
4.6   Certificate of Designation of the Series F Non-Convertible Preferred Stock. Incorporated herein by reference to the Current Report on Form 8-K filed on November 16, 2012 as Exhibit 3.1 thereto.
     
4.7   Amended and Restated Certificate of Designation of the Series F Non-Convertible Preferred Stock. Incorporated herein by reference to the Current Report on Form 8-K filed on June 12, 2014 as Exhibit 3.1 thereto.
     
4.8   Promissory Note dated August 29, 2014. Incorporated herein by reference to the Current Report on Form 8-K filed on September 5, 2014 as Exhibit 4.1 thereto.

 

42

 

 

4.9   Certificate of Amendment to Certificate of Designation of the Series B Convertible Preferred Stock. Incorporated herein by reference to the Current Report on Form 8-K filed on December 17, 2014 as Exhibit 3.2 thereto.
     
14   Code of Ethics. Incorporated herein by reference to the Registration Statement on Form S-1 filed on March 28, 2013 as Exhibit 14 thereto.
     
21   List of subsidiaries. Incorporated herein by reference to the Registration Statement on Form S-1 filed on September 23, 2013 as Exhibit 21 thereto.
     
31.1   Certification pursuant to Section 302 of the Sarbanes-Oxley Act*
     
31.2   Certification pursuant to Section 302 of the Sarbanes-Oxley Act*
     
32.1   Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002**
     
101 .INS   Inline XBRL Instance Document*
     
101.SCH   Inline XBRL Taxonomy Extension Schema Document*
     
101.CAL   Inline XBRL Taxonomy Calculation Link base Document*
     
101.DEF   Inline XBRL Taxonomy Extension Definition Link base Document*
     
101.LAB   Inline XBRL Taxonomy Label Link base Document*
     
101.PRE   Inline XBRL Taxonomy Presentation Link base Document*

 

* Filed herewith
** Furnished herewith

 

FORM 10–Q SUMMARY.

 

None.

 

43

 

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

    SINO AGRO FOOD, INC.
     
May 16, 2022 By: /s/ LEE YIP KUN SOLOMON
    Lee Yip Kun Solomon
    Chief Executive Officer and Interim Chief Financial Officer
    (Principal Executive Officer and Principal Financial Officer)

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

May 16, 2022 By: /s/ LEE YIP KUN SOLOMON
    Lee Yip Kun Solomon
    Chief Executive Officer and Interim Chief Financial Officer
    (Principal Executive Officer and Principal Financial Officer)

 

May 16, 2022 By: /s/ TAN POAY TEIK
    Tan Poay Teik
    Chief Officer, Marketing

 

May 16, 2022 By: /s/ CHEN BOR HANN
    Chen Bor Hann
    Corporate Secretary

 

May 16, 2022 By: /s/ MUSON CHEUNG
    Muson Cheung
    Director

 

May 16, 2022 By: /s/ COLANUKUDURU RAVINDRAN
    Colanukuduru Ravindran
 

 

Director

 

May 16, 2022 By: /s/ LAU FUK KWAN
    LAU FUK KWAN

 

 

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Sino Agro Food, Inc CN 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. Operated by Capital Award, Inc. (“CA”). Operated by Jiang Men City Heng Sheng Tai Agriculture Development Co., Limited (“JHST”). Operated by Sino Agro Food, Inc. (“SIAF”) and Sino Agro Food Sweden AB (“SAFS”) ----(Discontinued since 31st December 2019). Operated by Jiang Men City Hang Mei Cattle Farm Development Co. Limited (“JHMC”) and Macau Eiji Company Limited (“MEIJI”). 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Sino Agro Food (CE) (USOTC:SIAF)
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