ITEM 1. FINANCIAL STATEMENTS
SINO AGRO FOOD, INC. AND SUBSIDIARIES
QUARTERLY FINANCIAL REPORT
FOR THE THREE MONTHS ENDED JUNE 30, 2019
INDEX TO QUARTERLY FINANCIAL REPORT
SINO AGRO FOOD, INC.
CONSOLIDATED BALANCE SHEETS
|
|
Note
|
|
June 30, 2019
|
|
|
December 31, 2018
|
|
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
5
|
|
$
|
925,220
|
|
|
$
|
4,950,799
|
|
Inventories
|
|
6
|
|
|
55,248,089
|
|
|
|
54,582,241
|
|
Costs and estimated earnings in excess of billings on uncompleted contracts
|
|
18
|
|
|
250,828
|
|
|
|
250,828
|
|
Deposits and prepayments
|
|
7
|
|
|
40,665,854
|
|
|
|
52,241,190
|
|
Accounts receivable, net of allowance for doubtful accounts
|
|
8
|
|
|
105,925,636
|
|
|
|
101,652,131
|
|
Other receivables
|
|
9
|
|
|
23,168,587
|
|
|
|
28,307,526
|
|
Total current assets
|
|
|
|
|
226,184,214
|
|
|
|
241,984,715
|
|
Non-current assets
|
|
|
|
|
|
|
|
|
|
|
Plant and equipment, net of accumulated depreciation
|
|
10
|
|
|
243,837,882
|
|
|
|
230,645,659
|
|
Construction in progress
|
|
11
|
|
|
11,000,995
|
|
|
|
12,515,527
|
|
Land use rights, net of accumulated amortization
|
|
12
|
|
|
52,912,958
|
|
|
|
53,814,281
|
|
Total non-current assets
|
|
|
|
|
307,751,835
|
|
|
|
296,975,467
|
|
Other assets
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
13
|
|
|
724,940
|
|
|
|
724,940
|
|
Proprietary technologies, net of accumulated amortization
|
|
14
|
|
|
8,647,017
|
|
|
|
8,937,071
|
|
Interest in unconsolidated investees
|
|
15
|
|
|
216,154,781
|
|
|
|
207,074,626
|
|
Temporary deposits paid to entities for investments in Sino joint venture companies
|
|
16
|
|
|
34,918,633
|
|
|
|
34,905,960
|
|
Total other assets
|
|
|
|
|
260,445,371
|
|
|
|
251,642,597
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
|
$
|
794,381,420
|
|
|
$
|
790,602,779
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
|
|
$
|
9,858,947
|
|
|
$
|
8,280,358
|
|
Billings in excess of costs and estimated earnings on uncompleted contracts
|
|
18
|
|
|
5,386,711
|
|
|
|
5,348,293
|
|
Due to a director
|
|
|
|
|
655,031
|
|
|
|
2,046,499
|
|
Other payables
|
|
19
|
|
|
46,463,420
|
|
|
|
42,523,811
|
|
Borrowings - Short term bank loan
|
|
20
|
|
|
4,654,544
|
|
|
|
4,589,828
|
|
Derivative liability
|
|
22
|
|
|
-
|
|
|
|
2,100
|
|
Convertible note payable
|
|
22
|
|
|
-
|
|
|
|
3,894,978
|
|
|
|
|
|
|
67,018,653
|
|
|
|
66,685,867
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current liabilities
|
|
|
|
|
|
|
|
|
|
|
Other payables
|
|
19
|
|
|
7,765,801
|
|
|
|
7,792,774
|
|
Borrowings - Long term debts and bank loan
|
|
20
|
|
|
5,381,818
|
|
|
|
5,536,938
|
|
|
|
|
|
|
13,147,619
|
|
|
|
13,329,712
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ equity
|
|
|
|
|
|
|
|
|
|
|
Common stock: $0.001 par value (50,000,000 shares authorized, 49,976,085 and 49,866,174 shares issued and outstanding as of June 30, 2019 and December 31, 2018, respectively)
|
|
22
|
|
|
49,977
|
|
|
|
49,866
|
|
Additional paid - in capital
|
|
|
|
|
181,533,918
|
|
|
|
181,501,056
|
|
Retained earnings
|
|
|
|
|
465,997,939
|
|
|
|
458,811,844
|
|
Accumulated other comprehensive income
|
|
|
|
|
(14,727,670
|
)
|
|
|
(10,415,786
|
)
|
Treasury stock
|
|
|
|
|
(1,250,000
|
)
|
|
|
(1,250,000
|
)
|
Total Sino Agro Food, Inc. and subsidiaries stockholders’ equity
|
|
|
|
|
631,604,164
|
|
|
|
628,696,980
|
|
Non - controlling interest
|
|
|
|
|
82,610,984
|
|
|
|
81,890,220
|
|
Total stockholders’ equity
|
|
|
|
|
714,215,148
|
|
|
|
710,587,200
|
|
Total liabilities and stockholders’ equity
|
|
|
|
$
|
794,381,420
|
|
|
$
|
790,602,779
|
|
The accompanying notes are an integral part
of these consolidated financial statements.
SINO AGRO FOOD, INC.
CONSOLIDATED STATEMENTS OF INCOME AND
OTHER COMPREHENSIVE INCOME
|
|
|
|
Three months
ended
|
|
|
Three months
ended
|
|
|
Six months
ended
|
|
|
Six months
ended
|
|
|
|
Note
|
|
June 30, 2019
|
|
|
June 30, 2018
|
|
|
June 30, 2019
|
|
|
June 30, 2018
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Sale of goods
|
|
|
|
$
|
37,872,933
|
|
|
$
|
32,932,737
|
|
|
$
|
66,140,582
|
|
|
$
|
64,191,597
|
|
- Consulting and service income from development contracts
|
|
|
|
|
728,245
|
|
|
|
1,061,986
|
|
|
|
1,719,247
|
|
|
|
3,534,390
|
|
|
|
3
|
|
|
38,601,178
|
|
|
|
33,994,723
|
|
|
|
67,859,829
|
|
|
|
67,725,987
|
|
Cost of goods sold
|
|
3
|
|
|
(31,084,220
|
)
|
|
|
(27,671,259
|
)
|
|
|
(54,394,432
|
)
|
|
|
(53,534,279
|
)
|
Cost of services
|
|
3
|
|
|
(650,333
|
)
|
|
|
(880,418
|
)
|
|
|
(1,590,017
|
)
|
|
|
(2,664,740
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
|
|
6,866,625
|
|
|
|
5,443,046
|
|
|
|
11,875,380
|
|
|
|
11,526,968
|
|
General and administrative expenses
|
|
|
|
|
(3,194,589
|
)
|
|
|
(4,133,054
|
)
|
|
|
(6,951,877
|
)
|
|
|
(7,795,783
|
)
|
Net income from operations
|
|
|
|
|
3,672,036
|
|
|
|
1,309,992
|
|
|
|
4,923,503
|
|
|
|
3,731,185
|
|
Other income (expenses)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government grant
|
|
|
|
|
-
|
|
|
|
132,847
|
|
|
|
292,419
|
|
|
|
132,847
|
|
Share of income from unconsolidated equity investee
|
|
|
|
|
3,569,337
|
|
|
|
1,549,960
|
|
|
|
5,959,791
|
|
|
|
5,331,971
|
|
Other income
|
|
|
|
|
-
|
|
|
|
58,860
|
|
|
|
-
|
|
|
|
59,738
|
|
Loss on restructuring
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,404,402
|
)
|
|
|
-
|
|
Non-operating expenses
|
|
|
|
|
-
|
|
|
|
(3,139,329
|
)
|
|
|
(218,642
|
)
|
|
|
(3,161,333
|
)
|
Interest expense
|
|
|
|
|
(133,593
|
)
|
|
|
(417,307
|
)
|
|
|
(611,033
|
)
|
|
|
(870,958
|
)
|
Net income (expenses)
|
|
|
|
|
3,435,744
|
|
|
|
(1,814,969
|
)
|
|
|
3,018,133
|
|
|
|
1,492,265
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income before income taxes
|
|
|
|
|
7,107,780
|
|
|
|
(504,977
|
)
|
|
|
7,941,636
|
|
|
|
5,223,450
|
|
Provision for income taxes
|
|
4
|
|
|
(3,905
|
)
|
|
|
-
|
|
|
|
(3,905
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
7,103,875
|
|
|
|
(504,977
|
)
|
|
|
7,937,731
|
|
|
|
5,223,450
|
|
Less: Net (income) loss attributable to non - controlling interest
|
|
|
|
|
(530,454
|
)
|
|
|
1,402,644
|
|
|
|
(751,636
|
)
|
|
|
746,936
|
|
Net income attributable to Sino Agro Food Inc. and subsidiaries
|
|
|
|
|
6,573,421
|
|
|
|
897,667
|
|
|
|
7,186,095
|
|
|
|
5,970,386
|
|
Other comprehensive income (loss) - Foreign currency translation gain
(loss)
|
|
|
|
|
(10,790,961
|
)
|
|
|
(20,442,164
|
)
|
|
|
(4,342,756
|
)
|
|
|
1,438,686
|
|
Comprehensive income
|
|
|
|
|
(4,217,540
|
)
|
|
|
(19,544,497
|
)
|
|
|
2,843,339
|
|
|
|
7,409,072
|
|
Less: Other comprehensive (income) loss attributable to non - controlling interest
|
|
|
|
|
1,379,296
|
|
|
|
10,403,204
|
|
|
|
30,872
|
|
|
|
(850,406
|
)
|
Comprehensive income attributable to the Sino Agro Food, Inc. and subsidiaries
|
|
|
|
$
|
(2,838,244
|
)
|
|
$
|
(9,141,293
|
)
|
|
$
|
2,874,211
|
|
|
$
|
6,558,666
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share attributable to the Sino Agro Food, Inc. and subsidiaries common stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
27
|
|
$
|
0.13
|
|
|
$
|
0.02
|
|
|
$
|
0.14
|
|
|
$
|
0.17
|
|
Diluted
|
|
27
|
|
$
|
0.13
|
|
|
$
|
0.02
|
|
|
$
|
0.14
|
|
|
$
|
0.17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
27
|
|
|
49,968,758
|
|
|
|
37,573,999
|
|
|
|
49,917,466
|
|
|
|
35,749,331
|
|
Diluted
|
|
27
|
|
|
49,968,758
|
|
|
|
37,573,999
|
|
|
|
49,917,466
|
|
|
|
35,749,331
|
|
The accompanying notes are an integral part
of these consolidated financial statements.
SINO AGRO FOOD, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
Six months
ended
June
30, 2019
|
|
|
Six months
ended
June
30, 2018
|
|
|
|
|
|
|
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
|
|
Net income
for the period
|
|
$
|
7,937,731
|
|
|
$
|
5,223,450
|
|
Adjustments to reconcile
net income for the period to net cash from operations:
|
|
|
|
|
|
|
|
|
Share of income
from unconsolidated equity investee
|
|
|
(5,959,791
|
)
|
|
|
(5,331,971
|
)
|
Depreciation
|
|
|
5,062,150
|
|
|
|
5,325,531
|
|
Amortization
|
|
|
991,004
|
|
|
|
1,134,904
|
|
Inventory written
off
|
|
|
-
|
|
|
|
3,139,356
|
|
Loss on restructuring
|
|
|
2,404,402
|
|
|
|
-
|
|
Share based compensation
cost
|
|
|
527,670
|
|
|
|
1,350,490
|
|
Changes in operating
assets and liabilities:
|
|
|
|
|
|
|
|
|
Increase in inventories
|
|
|
(665,848
|
)
|
|
|
(3,451,648
|
)
|
Decrease in cost
and estimated earnings in excess of billings on uncompleted contacts
|
|
|
-
|
|
|
|
998,359
|
|
Decrease in deposits
and prepaid expenses
|
|
|
11,067,966
|
|
|
|
4,001,896
|
|
(d
ecrease) in
due to a director
|
|
|
(1,391,467
|
)
|
|
|
(107,074
|
)
|
Increase in accounts
payable and accrued expenses
|
|
|
1,578,589
|
|
|
|
3,090,752
|
|
Increase in other
payables
|
|
|
(2,388,844
|
)
|
|
|
4,163,723
|
|
Increase in accounts
receivable
|
|
|
(4,273,505
|
)
|
|
|
(6,073,887
|
)
|
(Decrease) increase
in billings in excess of costs and estimated earnings on uncompleted contracts
|
|
|
38,418
|
|
|
|
(137,384
|
)
|
I
ncrease in other
receivables
|
|
|
5,138,939
|
|
|
|
(5,358,896
|
)
|
Decrease in amount
due from unconsolidated investee
|
|
|
(3,120,364
|
)
|
|
|
(2,600,812
|
)
|
Net cash (used in) provided by operating
activities
|
|
|
16,947,050
|
|
|
|
5,366,789
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
Purchases of property
and equipment
|
|
|
(5,931,338
|
)
|
|
|
(4,840,642
|
)
|
Investment
in unconsolidated equity investee
|
|
|
-
|
|
|
|
(52,258
|
)
|
Payment for construction
in progress
|
|
|
(9,733,795
|
)
|
|
|
(4,347,826
|
)
|
Net cash used in investing activities
|
|
|
(15,665,133
|
)
|
|
|
(9,240,726
|
)
|
Cash flows
from financing activities
|
|
|
|
|
|
|
|
|
Repayment of long term bank loan
|
|
|
(73,741
|
)
|
|
|
-
|
|
Net cash used in financing
activities
|
|
|
(73,741
|
)
|
|
|
-
|
|
Effects on exchange
rate changes on cash
|
|
|
(5,233,755
|
)
|
|
|
3,919,888
|
|
|
|
|
|
|
|
|
|
|
Increase in
cash and cash equivalents
|
|
|
(4,025,579
|
)
|
|
|
45,951
|
|
Cash and cash equivalents,
beginning of period
|
|
|
4,950,799
|
|
|
|
560,043
|
|
Cash and cash equivalents,
end of period
|
|
$
|
925,220
|
|
|
$
|
605,994
|
|
|
|
|
|
|
|
|
|
|
Supplementary disclosures of cash flow information:
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
$
|
260,715
|
|
|
$
|
297,926
|
|
Non - cash transactions
|
|
|
|
|
|
|
|
|
Common stock issued
for services and compensation
|
|
$
|
-
|
|
|
$
|
6,999,067
|
|
Common stock issued to secure
debts loan
|
|
$
|
32,973
|
|
|
$
|
-
|
|
Transfer to plant and equipment
from construction in progress
|
|
$
|
12,885,923
|
|
|
$
|
-
|
|
The accompanying notes are an integral part
of these consolidated financial statements.
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Sino Agro Food, Inc. (the “
Company
”
or “
SIAF
”) (formerly known as Volcanic Gold, Inc. and A Power Agro Agriculture Development, Inc.) was incorporated
on October 1, 1974 in the State of Nevada, United States of America.
The Company was engaged in the
mining and exploration business but ceased its mining and exploring business on October 14, 2005. On August 24, 2007, the Company
entered into a Merger and Acquisition Agreement with Capital Award Inc., a Belize corporation (“
CA
”) and its
subsidiaries Capital Stage Inc. (“
CS
”) and Capital Hero Inc. (“
CH
”). Effective the same date,
CA completed a reverse merger transaction with SIAF. SIAF acquired all the outstanding common stock of CA from Capital Adventure,
a shareholder of CA, for 3,232,323 shares of the Company’s common stock.
On August 24, 2007 the Company
changed its name from Volcanic Gold, Inc. to A Power Agro Agriculture Development, Inc. On December 8, 2007, the Company changed
its name to Sino Agro Food, Inc.
On September 5, 2007, the Company
acquired three existing businesses in the People’s Republic of China (the
“P.R.C.”
):
|
(a)
|
Hang Yu Tai Investment Limited (“
HYT
”), a company incorporated in Macau, the owner of 78% equity interest in ZhongXingNongMu Ltd (“
ZX
”), a company incorporated in the P.R.C.;
|
|
(b)
|
Tri-way Industries Limited (“
TRW
”), a company incorporated in Hong Kong; and
|
|
(c)
|
Macau Eiji Company Limited (“
MEIJI
”), a company incorporated in Macau, the owner of 75% equity interest in Enping City Juntang Town Hang Sing Tai Agriculture Co. Ltd. (“
HST
”), a P.R.C. corporate Sino-Foreign joint venture. HST was dissolved in 2010.
|
On November 27, 2007, MEIJI
and HST established a corporate Sino - Foreign joint venture, Jiang Men City Heng Sheng Tai Agriculture Development Co. Ltd. (“
JHST
”),
a company incorporated in the P.R.C. with MEIJI owning a 75% interest and HST owning a 25% interest.
On November 26, 2008, SIAF established
Pretty Mountain Holdings Limited (“
PMH
”), a company incorporated in Hong Kong with an 80% equity interest. On
May 25, 2009, PMH formed a corporate Sino-Foreign joint venture, Qinghai Sanjiang A Power Agriculture Co. Ltd. (“
SJAP
”), incorporated in the P.R.C., of which PMH owns a 45% equity interest. At the time, the remaining 55% equity interest
in SJAP was owned by the following entities:
|
·
|
Qinghai Province Sanjiang Group Company Limited (English translation) (“
Qinghai Sanjiang
”), a company incorporated in the P.R.C with major business activities in the agriculture industry; and
|
|
·
|
Guangzhou City Garwor Company Limited (English translation) (“
Garwor
”), a company incorporated in the P.R.C., specializing in sales and marketing.
|
SJAP is engaged in the business
of manufacturing bio-organic fertilizer, livestock feed and development of other agriculture projects in the County of Huangyuan,
in the vicinity of the Xining City, Qinghai Province, P.R.C.
In September 2009, the Company
carried out an internal reorganization of its corporate structure and business, and formed a 100% owned subsidiary, A Power Agro
Agriculture Development (Macau) Limited (“
APWAM
”), which was formed in Macau. APWAM then acquired PMH’s
45% equity interest in SJAP. By virtue of the acquisition, APWAM assumed all obligations and liabilities of PMH under the Sino
Foreign Joint Venture Agreement. On May 7, 2010, Qinghai Sanjiang sold and transferred its equity interest in SJAP to Garwor. The
State Administration for Industry and Commerce of Xining City Government of the PRC approved the sale and transfer. As a result,
APWAM owned 45% of SJAP and Garwor owned the remaining 55%.
On September 9, 2010, an application
was submitted by the Company to the Companies Registry of Hong Kong for deregistration of PMH under Section 291AA of the Hong Kong
Companies Ordinance. On January 28, 2011, PMH was dissolved.
On March 23, 2017, Qinghai Quanwang
Investment Management Company Limited (” Quanwang “) acquired 8.3% equity interest in SJAP for total cash consideration
of $459,137. As of June 30, 2019, APWAM owned 41.25% of SJAP, Garwor owned 50.45% and Quanwang owned the remaining 8.3%.
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
1.
|
CORPORATE INFORMATION
(CONTINUED)
|
On February 15, 2011 and March
29, 2011, the Company entered into an agreement and a memorandum of understanding (an “
MOU
”), respectively,
to sell 100% equity interest in HYT group (including HYT and ZX) to Mr. Xin Ming Sun, a director of ZhongXingNong Nu Co., Ltd for
$45,000,000, with effective date of January 1, 2011.
On February 28, 2011, the Company
applied to form Enping City Bi Tao A Power Prawn Culture Development Co Limited (“
EBAPCD
”) , and the Company
would indirectly own a 25% equity interest in future Sino Joint Venture Company (pending approval).
On February 28, 2011, TRW applied
to form a corporate joint venture, Enping City Bi Tao A Power Fishery Development Co., Limited (“
EBAPFD
”), incorporated
in the PRC. TRW owned a 25% equity interest in EBAPFD. On November 17, 2011, TRW formed Jiang Men City A Power Fishery Development
Co., Limited (“
JFD
”) in which it acquired a 25% equity interest, while withdrawing its 25% equity interest in
EBAPFD. As of December 31, 2011, the Company had invested for total cash consideration of $1,258,607 in JFD. JFD operates an indoor
fish farm. On January 1, 2012, the Company acquired an additional 25% equity interest in JFD for total cash consideration of $1,662,365.
As of January 1, 2012, the Company had consolidated the assets and operations of JFD. On April 1, 2012, the Company acquired an
additional 25% equity interest in JFD for the total cash consideration of $1,702,580. These acquisitions were at our option according
the terms of the original development agreement. The Company owned a 75% equity interest in JFD, representing majority of voting
rights and controls its board of directors. On August 15, 2016, the acquisition agreement was executed by TRW for acquiring the
other 25% equity in JFD which was a Sino Foreign Joint Venture Co. that TRW had 100% equity interest with effect on October 5,
2016. Upon the acquisitions of 3 additional prawn farms assets at fair value of $238.32 million from respective third parties and
the master technology license at fair value of $30 million from Capital Award, Inc. by JFD, and the consideration of the above
acquisitions were planned to be settled by the new issue shares of 99,990,000 TRW shares at $3.41 amounting to $340.53 million
on or before June 30, 2017. As a result, SIAF’s equity interest in TRW was diluted from 100% to 23.89% with effective on
October 5, 2016. The above transactions leaded the Company loss of control over TRW group, the Company’s investments in TRW
and JFD were reclassified from a subsidiary to investments in unconsolidated equity investees as of October 5, 2016. The dilution
of the Company’s investments in TRW group constituted a deemed disposal of the subsidiaries. The deemed gain on disposal
of $56,947,005 was recorded in net income from discontinued operations of the consolidated statements of income and other comprehensive
income of the Company for the year ended 31 December 2016. On October 1, 2016, SIAF took up all assets and liabilities of TRW and
JFD except fish farm. The Company converted the amount due from unconsolidated equity investee into equity interest during the
fourth quarter of 2017, which resulted in equity interest in TRW from 23.89% to 36.60%.
On April 15, 2011, MEIJI applied
to form Enping City A Power Cattle Farm Co., Limited (“
ECF
”), all of which the Company would indirectly own
a 25% equity interest on November 17, 2011. On January 1, 2012, the Company had invested $1,076,489 in ECF and the amount was settled
in contra against accounts receivable due from ECF. On September 17, 2012 MEIJI formed Jiang Men City Hang Mei Cattle Farm Development
Co., Limited (“
JHMC
”) and acquired additional 50% equity interest for the total cash consideration of $2,944,176
on September 30, 2012 while withdrawing its 25% equity interest in ECF. This acquisition was at our option according to the terms
of the original development agreement. The Company presently owns 75% equity interest in JHMC, representing majority of voting
right and controls its board of directors. As of September 30, 2012, the Company had consolidated the assets and operations of
JHMC. This remains the case as of the date of this report.
On July 18, 2011, the Company
formed Hunan Shenghua A Power Agriculture Co., Limited (“
HSA
”), in which the Company owns a 26% equity interest,
and SJAP owns a 50% equity interest with the Chinese partner owning the remaining 24%. On April 5, 2017, SJAP transferred all of
its equity interest to MEIJI. This remains the case of the date of this report.
On November 12, 2013, the Company
acquired a shell company, Goldcup9203 AB, incorporated in Sweden, in which the Company owns a 100% equity interest. Goldcup 9203
AB changed its name to Sino Agro Food Sweden AB (publ) (“
SAFS
”). As of June 30, 2017, the Company invested $77,664
in SAFS. During the year ended December 31, 2016, SAFS changed from a public to a private company.
SJAP formed Qinghai Zhong He
Meat Products Co., Limited (“
QZH
”) , with SJAP would owning 100% equity interest. On October 25, 2015, both
QZH and new stockholder, Qinghai Quanwang Investment Management Co., Ltd (“
QQI
”) contributed additional capital
of $4,157,682 and $769,941, respectively. As a result, SJAP decreased its equity interest from 100% to 85% and QQI owned a 14%
equity interest. In addition, according to investment agreement between QZH and QQI, (i) QQI only enjoy interest 6% annually on
its capital contribution and did not enjoy profit distribution; (ii) investment period was 3 years only, and (iii) SJAP shared
100% on profit or loss after deduction 6% interest to QQI and enjoyed 100% voting rights of QZH’s board and stockholders
meetings. SJAP disposed its 85% equity interest in QZH for RMB2 (equivalent to $0) for cash and completed on December 30, 2017.
As a result, QZH was derecognized as variable interest entity of the company.
The Company’s principal
executive office is located at Room 3801, Block A, China Shine Plaza, No. 9 Lin He Xi Road, Tianhe District, Guangzhou City, Guangdong
Province, P.R.C., 510610.
The nature of the operations
and principal activities of the Company and its subsidiaries are described in Note 2.2.
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
2.
|
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
|
The Company has adopted December
31 as its fiscal year end.
Name of subsidiaries
|
|
Place of incorporation
|
|
Percentage of interest
|
|
Principal activities
|
|
|
|
|
|
|
|
Capital Award Inc. (“CA”)
|
|
Belize
|
|
100% (12.31.2018: 100%) directly
|
|
Fishery development and holder of A-Power Technology master license.
|
|
|
|
|
|
|
|
Capital Stage Inc. (“CS”)
|
|
Belize
|
|
100% (12.31.2018: 100%) indirectly
|
|
Dormant
|
|
|
|
|
|
|
|
Capital Hero Inc. (“CH”)
|
|
Belize
|
|
100% (12.31.2018: 100%) indirectly
|
|
Dormant
|
|
|
|
|
|
|
|
Sino Agro Food Sweden AB (“SAFS”)
|
|
Sweden
|
|
100% (12.31.2018: 100%) directly
|
|
Dormant
|
|
|
|
|
|
|
|
Macau Eiji Company Limited (“MEIJI”)
|
|
Macau, P.R.C.
|
|
100% (12.31.2018: 100%) directly
|
|
Investment holding, cattle farm development, beef cattle and beef trading
|
|
|
|
|
|
|
|
A Power Agro Agriculture Development (Macau) Limited (“APWAM”)
|
|
Macau, P.R.C.
|
|
100% (12.31.2018: 100%) directly
|
|
Investment holding
|
|
|
|
|
|
|
|
Jiang Men City Heng Sheng Tai Agriculture Development Co. Ltd (“JHST”)
|
|
P.R.C.
|
|
75% (12.31.2018: 75%) indirectly
|
|
HylocereusUndatus Plantation (“HU Plantation”).
|
|
|
|
|
|
|
|
Jiang Men City Hang Mei Cattle Farm Development Co., Limited (“JHMC”)
|
|
P.R.C.
|
|
75% (12.31.2018:75%) indirectly
|
|
Beef cattle cultivation
|
|
|
|
|
|
|
|
Hunan Shenghua A Power Agriculture Co., Limited (“HSA”)
|
|
P.R.C.
|
|
76% (12.31.2018:76%) indirectly
|
|
Manufacturing of organic fertilizer, livestock feed, and beef cattle and sheep cultivation, and plantation of crops and pastures
|
|
|
|
|
|
|
|
Name of variable interest entity
|
|
Place of incorporation
|
|
Percentage of interest
|
|
Principal activities
|
|
|
|
|
|
|
|
Qinghai Sanjiang A Power Agriculture Co., Ltd (“SJAP”)
|
|
P.R.C.
|
|
41.25% (12.31.2018: 41.25%) indirectly
|
|
Manufacturing of organic fertilizer, livestock feed, and beef cattle and plantation of crops and pastures
|
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
2.
|
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
|
|
2.3
|
BASIS OF PRESENTATION
|
The
consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States
of America (“
US GAAP
”).
|
2.4
|
BASIS OF CONSOLIDATION
|
The consolidated financial statements
include the financial statements of the Company, its subsidiaries CA, CS, CH, MEIJI, JHST, JHMC, HSA, APWAM, SAFS and its variable
interest entity, SJAP. All material inter-company transactions and balances have been eliminated in consolidation.
SIAF, CA, CS, CH, MEIJI, JHST,
JHMC, HSA, APWAM, SAFS and SJAP are hereafter referred to as (the “Company”).
The Company adopted the accounting
pronouncements relating to business combination (primarily contained in ASC Topic 805 “Business Combinations”), including
assets acquired and liabilities assumed on arising from contingencies. These pronouncements established principles and requirement
for how the acquirer of a business recognizes and measures in its financial statements the identifiable assets acquired, the liabilities
assumed, and any non-controlling interest in the acquisition as well as provides guidance for recognizing and measuring the goodwill
acquired in the business combination and determines what information to disclose to enable users of the financial statements to
evaluate the nature and financial effects of the business combination. In addition, these pronouncements eliminate the distinction
between contractual and non-contractual contingencies, including the initial recognition and measurement criteria and require an
acquirer to develop a systematic and rational basis for subsequently measuring and accounting for acquired contingencies depending
on their nature. The Company’s adoption of these pronouncements will have an impact on the manner in which it accounts for
any future acquisitions.
|
2.6
|
NON - CONTROLLING INTEREST IN CONSOLIDATED FINANCIAL STATEMENTS
|
The Company adopted the accounting
pronouncement on non-controlling interests in consolidated financial statements, which establishes accounting and reporting standards
for the non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary. This guidance is primarily contained
in ASC Topic “Consolidation.” It clarifies that a non-controlling interest in a subsidiary is an ownership interest
in the consolidated financial statements. The adoption of this standard has not had material impact on the Company’s consolidated
financial statements.
The preparation of consolidated
financial statements in conformity with US GAAP requires management to make assumptions and estimates that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the consolidated financial
statements and the reported amounts of revenues and expenses during the reporting periods covered thereby. Actual results could
differ from these estimates. Judgments and estimates of uncertainties are required in applying the Company’s accounting policies
in certain areas. The following are some of the areas requiring significant judgments and estimates: determinations of the useful
lives of assets, estimates of allowances for doubtful accounts, cash flow and valuation assumptions in performing asset impairment
tests of long-lived assets, estimates of the realization of deferred tax assets and inventory reserves.
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
2.
|
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
|
On January 1, 2018, the Company
adopted Topic 606, using the modified retrospective transition method applied to those contracts which were not completed as of
January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under Topic 606, while prior period
amounts have not been adjusted and continue to be reported in accordance with our historic accounting under Topic 605. There was
no adjustment to beginning retained earnings on January 1, 2018.
Under Topic 606, revenue is recognized
when control of the promised goods or services is transferred to the customers, in an amount that reflects the consideration the
Company expect to be entitled to in exchange for those goods or services.
ASU 2014-09, “Revenue from
Contracts with Customers” outlines a single comprehensive model for entities to use in accounting for revenue arising from
contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. ASU 2014-09
outlines a five-step process for revenue recognition that focuses on transfer of control, as opposed to transfer of risk and rewards,
and also requires enhanced disclosures regarding the nature, amount, timing and uncertainty of revenues and cash flows from contracts
with customers. Major provisions include determining which goods and services are distinct and represent separate performance obligations,
how variable consideration (which may include change orders and claims) is recognized, whether revenue should be recognized at
a point in time or over time and ensuring the time value of money is considered in the transaction price.
ASU 2016-08, “Principal
versus Agent Considerations (Reporting Revenue Gross versus Net)” clarifies the principal versus agent guidance in ASU 2014-09.
ASU 2016-08 clarifies how an entity determines whether to report revenue gross or net based on whether it controls a specific good
or service before it is transferred to a customer. ASU 2016-08 also reframes the indicators to focus on evidence that an entity
is acting as a principal rather than as an agent.
ASU 2016-10, “Identifying
Performance Obligations and Licensing” amends certain aspects of ASU 2014-09. ASU 2016-10 amends how an entity should identify
performance obligations for immaterial promised goods or services, shipping and handling activities and promises that may represent
performance obligations. ASU 2016-10 also provides implementation guidance for determining the nature of licensing and royalties
arrangements.
ASU 2016-12, “Narrow-Scope
Improvements and Practical Expedients” also clarifies certain aspects of ASU 2014-09 including the assessment of collectability,
presentation of sales taxes, treatment of noncash consideration, and accounting for completed contracts and contract modifications
at transition.
ASU 2016-20, “Technical
Corrections and Improvements to Topic 606, Revenue from Contracts with Customers” allows an entity to determine the provision
for loss contracts at either the contract level or the performance obligation level as an accounting policy election. The company
determines its provision for loss contracts at the contract level.
ASU 2017-05, “Clarifying
the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets” clarifies that the scope
and application of ASC 610-20 on accounting for the sale or transfer of nonfinancial assets and in substance nonfinancial assets
to noncustomers, including partial sales, applies only when the asset (or asset group) does not meet the definition of a business.
ASU 2017-13, “Amendments
to SEC Paragraphs Pursuant to the Staff Announcement at the July 20, 2017 EITF Meeting and Rescission of Prior SEC Staff Announcements
and Observer Comments” provides guidance related to the effective dates of the ASUs noted above.
We determine revenue recognition
through the following steps:
|
l
|
identification of the contract, or contracts, with a customer;
|
|
l
|
identification of the performance obligations in the contract;
|
|
l
|
determination of the transaction price;
|
|
l
|
allocation of the transaction price to the performance obligations in the contract; and
|
|
l
|
recognition of revenue when, or as, we satisfy a performance obligation.
|
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
2.
|
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
|
|
2.8
|
REVENUE RECOGNITION (CONTINUED)
|
Consulting and service income
from development contracts
The company recognizes c
onsulting
and service income from development contracts
revenue over time, as performance obligations are satisfied, due to the continuous
transfer of control to the customer.
Consulting and service income from development contracts
are generally accounted for
as a single unit of account (a single performance obligation) and are not segmented between types of services. The company recognizes
revenue using the percentage-of-completion method, based primarily on contract cost incurred to date compared to total estimated
contract cost. The percentage-of-completion method (an input method) is the most faithful depiction of the company’s performance
because it directly measures the value of the services transferred to the customer. Cost of revenue includes an allocation of depreciation
and amortization. Customer-furnished materials, labor and equipment and, in certain cases, subcontractor materials, labor and equipment,
are included in revenue and cost of revenue when management believes that the company is acting as a principal rather than as an
agent (i.e., the company integrates the materials, labor and equipment into the deliverables promised to the customer). Customer-furnished
materials are only included in revenue and cost when the contract includes construction activity and the company has visibility
into the amount the customer is paying for the materials or there is a reasonable basis for estimating the amount. The company
recognizes revenue, but not profit, on certain uninstalled materials that are not specifically produced, fabricated, or constructed
for a project. Revenue on these uninstalled materials is recognized when the cost is incurred (when control is transferred). Changes
to total estimated contract cost or losses, if any, are recognized in the period in which they are determined as assessed at the
contract level. Pre-contract costs are expensed as incurred unless they are expected to be recovered from the client. Project mobilization
costs are generally charged to project costs as incurred when they are an integrated part of the performance obligation being transferred
to the client. Customer payments on consulting and service income from development contracts are typically due within 360 days
of billing, depending on the contract.
Variable Consideration
The nature of the company’s
contracts gives rise to several types of variable consideration, including claims and unpriced change orders; awards and incentive
fees; and liquidated damages and penalties. The company recognizes revenue for variable consideration when it is probable that
a significant reversal in the amount of cumulative revenue recognized will not occur. The company estimates the amount of revenue
to be recognized on variable consideration using the expected value (i.e., the sum of a probability-weighted amount) or the most
likely amount method, whichever is expected to better predict the amount. Factors considered in determining whether revenue
associated with claims (including change orders in dispute and unapproved change orders in regard to both scope and price) should
be recognized include the following: (a) the contract or other evidence provides a legal basis for the claim, (b) additional
costs were caused by circumstances that were unforeseen at the contract date and not the result of deficiencies in the company’s
performance, (c) claim-related costs are identifiable and considered reasonable in view of the work performed, and (d) evidence
supporting the claim is objective and verifiable. If the requirements for recognizing revenue for claims or unapproved change orders
are met, revenue is recorded only when the costs associated with the claims or unapproved change orders have been incurred. Back
charges to suppliers or subcontractors are recognized as a reduction of cost when it is determined that recovery of such cost is
probable and the amounts can be reliably estimated. Disputed back charges are recognized when the same requirements described above
for claims accounting have been satisfied.
The company generally provides
limited warranties for work performed under its engineering and construction contracts. The warranty periods typically extend for
a limited duration following substantial completion of the company’s work on a project. Historically, warranty claims have
not resulted in material costs incurred.
Revenue excludes sales and usage-based
taxes where it has been determined that the Company is acting as a pass-through agent.
Government grants are recognized
when (i) the Company has substantially accomplished what must be done pursuant to the terms of the grant that are established by
the local government; and (ii) the Company receives notification from the local government that the Company has satisfied all of
the requirements to receive the government grants; and (iii) the amounts are received.
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
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 $144,737 and $1,960, $144,737 and $2,745
for the three months and the six months ended June 30, 2019 and 2018, respectively.
Advertising costs are included
in general and administrative expenses, which totaled $213,146 and $399,749, $591,092 and $800,504 for the three months ended and
the six months ended June 30, 2019 and 2018, respectively.
|
2.12
|
RESEARCH AND DEVELOPMENT EXPENSES
|
Research and development expenses
are included in general and administrative expenses, which totaled $0 and $0, $426,115 and $0 for the three months ended and the six
months ended June 30, 2019 and 2018, 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 ($14,727,670) as of June 30,
2019 and ($10,415,786) as of December 31, 2018. The balance sheet amounts with the exception of equity as of June 30, 2019
and December 31, 2018 were translated using an exchange rate of RMB 6.875 to $1.00 and RMB 6.86 to $1.00, respectively. The
average translation rates applied to the statements of income and other comprehensive income and of cash flows for the six
months ended June 30, 2019, and 2018 were RMB 6.78 to $1.00 and RMB 6.37 to $1.00, respectively.
|
2.14
|
CASH AND CASH EQUIVALENTS
|
The Company considers all highly
liquid securities with original maturities of three months or less when acquired to be cash equivalents. Cash and cash equivalents
kept with financial institutions in the P.R.C. are not insured or otherwise protected. Should any of those institutions holding
the Company’s cash become insolvent, or should the Company become unable to withdraw funds for any reason, the Company could
lose the cash on deposit with that institution.
The Company maintains reserves
for potential credit losses on accounts receivable. Management reviews the composition of accounts receivable and analyzes historical
bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns
to evaluate the adequacy of these reserves. Reserves are recorded primarily on a specific identification basis.
The standard credit period for
most of the Company’s clients is three months. The collection period over 1 year is classified as long-term accounts receivable.
Management evaluates the collectability of the receivables at least quarterly. Provision for doubtful accounts as of June 30, 2019
and December 31, 2018 are $0.
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
2.
|
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
|
Inventories are valued at the
lower of cost (determined on a weighted average basis) and net realizable value. Costs incurred in bringing each product to its
location and conditions are accounted for as follows:
|
(a)
|
raw materials - purchase cost on a weighted average basis;
|
|
(b)
|
manufactured finished goods and work-in-progress - cost of direct materials and labor and a proportion of manufacturing overhead based on normal operation capacity but excluding borrowing costs; and
|
|
(c)
|
retail and wholesale merchandise finished goods - purchase cost on a weighted average basis.
|
Net realizable value is the estimated
selling price in the ordinary course of business, less estimated costs for completion and the estimated costs necessary to make
the sale.
Plant and equipment are stated
at cost less accumulated depreciation and any accumulated impairment losses. Such costs include the cost of replacing parts that
are eligible for capitalization when the cost of replacing the parts is incurred. Similarly, when each major inspection is performed,
its cost is recognized in the carrying amount of the plant and equipment as a replacement only if it is eligible for capitalization.
The assets’ residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each financial
year end.
Depreciation is calculated on
a straight-line basis over the estimated useful lives of the assets.
Plant and machinery
|
5 - 10 years
|
Structure and leasehold improvements
|
10 - 30 years
|
Mature seeds and herbage cultivation
|
20 years
|
Furniture and equipment
|
2.5 - 10 years
|
Motor vehicles
|
4 - 10 years
|
An item of plant and equipment
is removed from the accounts upon disposal or when no future economic benefits are expected to arise from the continued use of
the asset. Any gain or loss arising on disposal of the asset (calculated as the difference between the net disposal proceeds and
the carrying amount of the item) is included in the consolidated statements of income in the period the item is disposed.
Goodwill is an asset representing
the fair economic benefits arising from other assets acquired in a business combination that are not individually identified or
separately recognized. Goodwill is tested for impairment on an annual basis at the end of the Company’s fiscal year, or when
impairment indicators arise. The Company uses a fair-value-based approach to test for impairment at the level of each reporting
unit. The Company directly acquired MEIJI, which is the holding company of JHST that operates the Hu Plantation. As a result of
this acquisition, the Company recorded goodwill in the amount of
$724,940
. This goodwill
represents the fair value of the assets acquired in these acquisitions over the cost of the assets acquired.
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
2.
|
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
|
|
2.
19
|
PROPRIETARY TECHNOLOGIES
|
A master license of stock feed
manufacturing technology was acquired and the costs of acquisition are capitalized as proprietary technologies when technological
feasibility has been established. Cost of acquisition of stock feed manufacturing technology master license is amortized using
the straight-line method over its estimated life of 20 years.
An aromatic cattle-feeding
formula was acquired and the costs of acquisition are capitalized as proprietary technologies when technological feasibility has
been established. Cost of acquisition on aromatic cattle-feeding formula is amortized using the straight-line method over its estimated
life of 20 years.
The cost of sleepy cods breeding
technology license is capitalized as proprietary technologies when technological feasibility has been established. Cost of granting
sleepy cods breeding technology license is amortized using the straight-line method over its estimated life of 25 years.
Bacterial cellulose technology
license and related trade mark are capitalized as proprietary technologies when technological feasibility has been established.
Cost of license and related trade mark is amortized using the straight-line method over its estimated life of 20 years.
The Company has determined that
technological feasibility is established at the time a working model of products is completed. Proprietary technologies are intangible
assets of finite lives. Management evaluates the recoverability of proprietary technologies on an annual basis at the end of the
Company’s fiscal year, or when impairment indicators arise. As required by ASC Topic 350 “Intangible - Goodwill and
Other”, the Company uses a fair-value-based approach to test for impairment.
|
2.20
|
CONSTRUCTION IN PROGRESS
|
Construction in progress represents
direct costs of construction as well as acquisition and design fees incurred. Capitalization of these costs ceases and the construction
in progress is transferred to property and equipment when substantially all the activities necessary to prepare the assets for
their intended use are completed. No depreciation is provided until construction is completed and the asset is ready for its intended
use.
Land use rights represent acquisition
of rights to agricultural land from farmers and are amortized on the straight-line basis over their respective lease periods. The
lease period of agricultural land is in the range from 10 to 60 years. Land use rights purchase prices were determined in accordance
with the P.R.C. Government’s minimum lease payments on agricultural land and mutually agreed to terms between the Company
and the vendors.
|
2.22
|
EQUITY METHOD INVESTMENTS
|
Investee entities, in which the
company can exercise significant influence, but not control, are accounted for under the equity method of accounting. Under the
equity method of accounting, the company’s share of the earnings or losses of these companies is included in net income.
A loss in value of an investment that is other than a temporary decline is recognized as a charge to operations. Evidence of a
loss in value might include, but would not necessarily be limited to absence of an ability to recover the carrying amount of the
investment or inability of the investee to sustain an earnings capacity that would justify the carrying amount of the investment.
|
2.23
|
CORPORATE JOINT VENTURE
|
A corporation formed, owned,
and operated by two or more businesses as a separate and discrete business or project (venture) for their mutual benefit is considered
to be a corporate joint venture. Investee entities, in which the Company can exercise significant influence, but not control, are
accounted for under the equity method of accounting. Under the equity method of accounting, the Company’s share of the earnings
or losses of these companies is included in net income.
A loss in value of an investment
that is other than a temporary decline is recognized as a charge to operations. Evidence of a loss in value might include, but
would not necessarily be limited to, the absence of an ability to recover the carrying amount of the investment or inability of
the investee to sustain an earnings capacity that would justify the carrying amount of the investment.
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
2.
|
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
|
|
2.24
|
VARIABLE INTEREST ENTITY
|
A variable interest entity (“
VIE
”)
is an entity (investee) in which the investor has obtained less than a majority interest, according to the Financial Accounting
Standards Board (FASB). A VIE is subject to consolidation if a VIE meets one of the following three criteria as elaborated in ASC
Topic 810-10, Consolidation:
|
(a)
|
equity-at-risk is not sufficient to support the entity’s activities;
|
|
(b)
|
as a group, the equity-at-risk holders cannot control the entity; or
|
|
(c)
|
the economics do not coincide with the voting interest.
|
If a firm is the primary beneficiary
of a VIE, the holdings must be disclosed on the balance sheet. The primary beneficiary is defined as the person or company with
the majority of variable interests. A corporation formed, owned, and operated by two or more businesses (ventures) as a separate
and discrete business or project (venture) for their mutual benefit is defined as a joint venture.
Treasury stock means shares of
a corporation’s own stock that have been issued and subsequently reacquired by the corporation. Converting outstanding shares
to treasury shares does not reduce the number of shares issued but does reduce the number of shares outstanding. These shares are
not eligible to receive dividends. Accounting for excesses and deficiencies on treasury stock transactions is governed by ASC 505-30-30.
State laws and federal agencies
closely regulate transactions involving a company’s own capital stock, so the purchase of outstanding shares must have a
legitimate purpose. Some of the most common reasons for purchasing outstanding shares are as follows:
|
(a)
|
to meet additional stock needs for various reasons, including newly implemented stock option plans, stock for convertible bonds or convertible preferred stock, or a stock dividend.
|
|
(b)
|
to make more shares available for acquisitions of other entities.
|
The cost method of accounting
for treasury shares has been adopted by the Company. The purchase of outstanding shares and thus converting them into treasury
shares is treated as a temporary reduction in shareholders’ equity in view of the expectation to reissue the shares instead
of retiring them. When the Company reissues the treasury shares, the temporary account is eliminated. The cost of acquiring outstanding
shares for converting into treasury shares is charged to a contra account, in this case a contra equity account that reduces the
stockholder equity balance.
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
2.
|
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
|
The Company accounts for income
taxes under the provisions of ASC Topic 740 “Accounting for Income Taxes.” Under ASC Topic 740, deferred tax assets
and liabilities are determined based on the difference between the financial statement carrying amounts and the tax bases of assets
and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse.
The provision for income tax
is based on the results for the year as adjusted for items, which are non-assessable or disallowed. It is calculated using tax
rates that have been enacted or substantively enacted at the balance sheet date. Deferred tax is accounted for using the balance
sheet liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities
in the financial statements and the corresponding tax basis used in the computation of assessable tax profit. In principle, deferred
tax liabilities are recognized for all taxable temporary differences, and deferred tax assets are recognized to the extent that
it is probable that taxable profit will be available against which deductible temporary differences can be utilized.
Deferred income taxes are calculated
at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled. Deferred tax
is charged or credited in the income statement, except when it related to items credited or charged directly to equity, in which
case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset when they relate to income taxes
levied by the same taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis.
ASC Topic 740 also prescribes
a more-likely-than-not threshold for financial statement recognition and measurement of a tax position taken, or for one expected
to be taken, in a tax return. ASC Topic 740 also provides guidance related to, among other things, classification, accounting for
interest and penalties associated with tax positions, and disclosure requirements. Any interest and penalties accrued related to
unrecognized tax benefits will be recorded as tax expense.
|
2.27
|
POLITICAL AND BUSINESS RISK
|
The Company’s operations
are carried out in the P.R.C. Accordingly, the political, economic and legal environment in the P.R.C. may influence the Company’s
business, financial condition and results of operations by the general state of the P.R.C.’s economy. The Company’s
operations in the P.R.C. are subject to specific considerations and significant risks not typically associated with companies in
North America and Western Europe. The Company’s results may be adversely affected by changes in governmental policies with
respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of
taxation, among other things.
|
2.28
|
CONCENTRATION OF CREDIT RISK
|
Cash includes cash at banks
and demand deposits in accounts maintained with banks within the P.R.C. Total cash in these banks as of June 30, 2019 and
December 31, 2018 amounted to $923,875 and $4,720,793, 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 whose business individually represented the following percentages of the Company’s total revenue for the
period indicated:
|
|
Three months ended
June 30, 2019
|
|
|
Three months ended
June 30, 2018
|
|
|
Six months ended
June 30, 2019
|
|
|
Six months ended
June 30, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer A
|
|
|
29.04
|
%
|
|
|
35.13
|
%
|
|
|
29.79
|
%
|
|
|
33.40
|
%
|
Customer B
|
|
|
32.66
|
%
|
|
|
18.44
|
%
|
|
|
30.62
|
%
|
|
|
16.63
|
%
|
Customer C
|
|
|
16.21
|
%
|
|
|
18.38
|
%
|
|
|
14.80
|
%
|
|
|
17.73
|
%
|
Customer D
|
|
|
4.41
|
%
|
|
|
6.26
|
%
|
|
|
4.86
|
%
|
|
|
7.64
|
%
|
Customer E
|
|
|
4.28
|
%
|
|
|
4.62
|
%
|
|
|
4.59
|
%
|
|
|
-
|
%
|
Customer F
|
|
|
-
|
%
|
|
|
-
|
%
|
|
|
-
|
%
|
|
|
5.22
|
%
|
|
|
|
86.60
|
%
|
|
|
82.83
|
%
|
|
|
84.66
|
%
|
|
|
80.62
|
%
|
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
2.
|
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
|
|
2.29
|
CONCENTRATION OF CREDIT RISK (CONTINUED)
|
|
|
|
|
Percentage
of revenue
|
|
|
Amount
|
|
Customer A
|
|
Corporate and others Division
|
|
|
29.79
|
%
|
|
$
|
20,218,206
|
|
Customer B
|
|
Cattle Farm Development Division
|
|
|
30.62
|
%
|
|
$
|
20,776,978
|
|
Customer C
|
|
Corporate and others Division
|
|
|
14.80
|
%
|
|
$
|
10,045,356
|
|
Accounts receivable are derived
from revenue earned from customers located primarily in the P.R.C. The Company performs ongoing credit evaluations of customers
and has not experienced any material losses to date.
The Company had 5 major customers
whose accounts receivable balance individually represented the following percentages of the Company’s total accounts receivable:
|
|
June 30, 2019
|
|
|
December 31, 2018
|
|
|
|
|
|
|
|
|
Customer A
|
|
|
12.51
|
%
|
|
|
12.76
|
%
|
Customer B
|
|
|
10.24
|
%
|
|
|
9.67
|
%
|
Customer C
|
|
|
9.90
|
%
|
|
|
10.05
|
%
|
Customer D
|
|
|
-
|
%
|
|
|
1.8
|
%
|
Customer E
|
|
|
1.86
|
%
|
|
|
-
|
%
|
Customer F
|
|
|
59.06
|
%
|
|
|
59.81
|
%
|
|
|
|
93.57
|
%
|
|
|
94.09
|
%
|
As of June 30, 2019, amounts
due from customers A and B are $13,251,456 and $10,842,060, respectively. The Company has not experienced any significant difficulty
in collecting its accounts receivable in the past and is not aware of any financial difficulties of its major customers.
|
2.30
|
IMPAIRMENT OF LONG-LIVED ASSETS AND INTANGIBLE ASSETS
|
In accordance with ASC Topic
360, “Property, Plant and Equipment,” long-lived assets to be held and used are analyzed for impairment whenever events
or changes in circumstances indicate that the related carrying amounts may not be recoverable. The Company reviews the carrying
amount of its long-lived assets, including intangibles, for impairment, during each reporting period. An asset is considered impaired
when estimated future cash flows are less than the carrying amount of the asset. In the event the carrying amount of such asset
is considered not recoverable, the asset is adjusted to its fair value. Fair value is generally determined based on discounted
future cash flow. As of June 30, 2019 and December 31, 2018, the Company determined no impairment losses were necessary.
As prescribed in ASC Topic 260
”
Earnings per Share,
” Basic Earnings per Share (“
EPS
”) is computed by dividing net income
available to common stockholders by the weighted average number of common stock shares outstanding during the year. Diluted EPS
is computed by dividing net income available to common stockholders by the weighted-average number of common stock shares outstanding
during the year plus potential dilutive instruments such as stock options and warrants. The effect of stock options on diluted
EPS is determined through the application of the treasury stock method, whereby proceeds received by the Company based on assumed
exercises are hypothetically used to repurchase the Company’s common stock at the average market price during the period.
ASC 260-10-55 requires that stock
dividends or stock splits be accounted for retroactively if the stock dividends or stock splits occur during the year, or retroactively
if the stock dividends or stock splits occur after the end of the period but before the release of the financial statements, by
considering it outstanding of the entirety of each period presented. Dilution is computed by applying the treasury stock method.
Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance,
if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the year.
For the three months ended June
30, 2019 and 2018, basic earnings per share attributable to Sino Agro Food, Inc. and subsidiaries common stockholders amounted
to $0.13 and $0.02, respectively. For the three months ended June 30, 2019 and 2018, diluted earnings per share attributable to
Sino Agro Food, Inc. and its subsidiaries’ common stockholders amounted to $0.13 and $0.02, respectively.
For the six months
ended June 30, 2019 and 2018, basic earnings per share attributable to Sino Agro Food Inc. and subsidiaries common
stockholders amounted to $0.14 and $0.17, respectively. For the six months
ended June 30, 2019 and 2018, diluted earnings per share attributable to Sino Agro Food, Inc. and its
subsidiaries’ common stockholders amounted to $0.14 and $0.17, respectively.
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
2.
|
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
|
|
2.32
|
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.
|
2.33
|
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.
|
2.34
|
STOCK-BASED COMPENSATION
|
The Company has adopted both
ASC Topic 718, “Compensation - Stock Compensation” and ASC Topic 505-50, “Equity-Based Payments to Non - Employees”
using the fair value method in which an entity issues its equity instruments to acquire goods and services from employees and non-employees.
Stock compensation for stock granted to non-employees has been determined in accordance with this accounting standard and the accounting
standard regarding accounting for equity instruments that are issued to other than employees for acquiring, or in conjunction with
selling goods or services, as the fair value of the consideration received or the fair value of equity instruments issued, whichever
is more reliably measured. This accounting standard allows the “simplified” method to determine the term of employee
options when other information is not available. Under ASC Topic 718 and ASC Topic 505-50, stock compensation expenses is measured
at the grant date on the value of the option or restricted stock and is recognized as expenses, less expected forfeitures, over
the requisite service period, which is generally the vesting period.
|
2.35
|
FAIR VALUE OF FINANCIAL INSTRUMENTS
|
The Company follows paragraph
825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and paragraph
820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of
its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value under U.S. GAAP, and expands
disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures,
Paragraph 820-10-35-37 establishes a fair value hierarchy, which prioritizes the inputs to valuation techniques used to measure
fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active
markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value
hierarchy defined by Paragraph 820-10-35-37 are described below:
|
Level 1
|
Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.
|
|
Level 2
|
Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.
|
|
Level 3
|
Pricing inputs that are generally observable inputs and not corroborated by market data.
|
The carrying amounts of the Company’s
financial assets and liabilities, such as cash and accrued expenses, approximate their fair values because of the short maturity
of these instruments. The Company does not have any assets or liabilities measured at fair value on a recurring or a non-recurring
basis, consequently, the Company did not have any fair value adjustments for assets and liabilities measured at fair value as of
June 30, 2019 or December 31, 2018, nor gains or losses are reported in the statements of income and comprehensive income that
are attributable to the change in unrealized gains or losses relating to those assets and liabilities still held at the reporting
date for the fiscal period ended June 30, 2019 or 2018.
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
2.
|
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
|
|
2.36
|
NEW ACCOUNTING PRONOUNCEMENTS
|
In
August 2018, the FASB issued Accounting Standards Update (“ASU”) No. 2018-13,
Fair Value Measurement
(ASC
Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. This ASU eliminates,
modifies and adds disclosure requirements for fair value measurements. The amendments in this ASU are effective for fiscal years,
and for interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted. The Company
is currently evaluating the effects of this ASU on its financial statements and related disclosures and does not expect there to
be a material impact.
In
June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (ASC Topic 326): Measurement of Credit
Losses on Financial Instruments. This guidance will require Companies to recognize an allowance for credit losses on available-for-sale
debt securities rather than the current approach of recording a reduction to the carrying value of the asset. The ASU is effective
for fiscal years beginning after December 15, 2019 and interim periods therein. Early adoption is permitted for annual periods
beginning after December 15, 2018 and interim periods therein. The Company is currently evaluating the effects of this ASU on its
financial statements and related disclosures and does not expect there to be a material impact.
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company establishes standards for reporting
information about operating segments on a basis consistent with the Company’s internal organization structure as well as
business segments and major customers in consolidated financial statements. The Company operates in five principal reportable segments:
Fishery Development Division, HU Plantation Division, Organic Fertilizer and Bread Grass Division, Cattle Farm Development Division
and Corporate and Others Division. No geographic information is required as all revenue and assets are located in the P.R.C.
|
|
For
the three months ended June 30, 2019
|
|
|
|
Fishery
|
|
|
|
|
|
Organic Fertilizer
|
|
|
Cattle Farm
|
|
|
|
|
|
|
|
|
|
Development
|
|
|
HU Plantation
|
|
|
and Bread Grass
|
|
|
Development
|
|
|
Corporate and
|
|
|
|
|
|
|
Division(1)
|
|
|
Division (2)
|
|
|
Division (3)
|
|
|
Division (4)
|
|
|
others (5)
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
728,245
|
|
|
|
1,103,645
|
|
|
|
6,752,501
|
|
|
|
12,550,285
|
|
|
|
17,466,502
|
|
|
|
38,601,178
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(49,227
|
)
|
|
|
(187,887
|
)
|
|
|
382,591
|
|
|
|
1,824,091
|
|
|
|
4,603,853
|
|
|
|
6,573,421
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
90,585,166
|
|
|
|
42,622,970
|
|
|
|
317,330,315
|
|
|
|
46,029,429
|
|
|
|
297,813,540
|
|
|
|
794,381,420
|
|
|
|
For
the three months ended June 30, 2018
|
|
|
|
Fishery
|
|
|
|
|
|
Organic Fertilizer
|
|
|
Cattle Farm
|
|
|
|
|
|
|
|
|
|
Development
|
|
|
HU Plantation
|
|
|
and Bread Grass
|
|
|
Development
|
|
|
Corporate and
|
|
|
|
|
|
|
Division(1)
|
|
|
Division (2)
|
|
|
Division (3)
|
|
|
Division (4)
|
|
|
others (5)
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
1,061,986
|
|
|
$
|
1,044,245
|
|
|
$
|
7,624,303
|
|
|
$
|
6,073,838
|
|
|
$
|
18,190,351
|
|
|
$
|
33,994,723
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
54,428
|
|
|
|
(268,503
|
)
|
|
|
(689,227
|
)
|
|
|
409,794
|
|
|
|
1,391,175
|
|
|
|
897,667
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
81,997,442
|
|
|
|
46,569,574
|
|
|
|
341,912,724
|
|
|
|
41,143,209
|
|
|
|
278,634,636
|
|
|
|
790,257,585
|
|
|
|
For
the six months ended June 30, 2019
|
|
|
|
Fishery
|
|
|
|
|
|
Organic Fertilizer
|
|
|
Cattle Farm
|
|
|
|
|
|
|
|
|
|
Development
|
|
|
HU Plantation
|
|
|
and Bread Grass
|
|
|
Development
|
|
|
Corporate and
|
|
|
|
|
|
|
Division(1)
|
|
|
Division (2)
|
|
|
Division (3)
|
|
|
Division (4)
|
|
|
others (5)
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
1,719,247
|
|
|
|
2,010,448
|
|
|
|
13,155,585
|
|
|
|
20,719,988
|
|
|
|
30,263,561
|
|
|
|
67,859,829
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(125,048
|
)
|
|
|
(1,012,997
|
)
|
|
|
856,839
|
|
|
|
2,805,068
|
|
|
|
4,662,233
|
|
|
|
7,186,095
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
90,585,166
|
|
|
|
42,622,970
|
|
|
|
317,330,315
|
|
|
|
46,029,429
|
|
|
|
297,813,540
|
|
|
|
794,381,420
|
|
|
|
For
the six months ended June 30, 2018
|
|
|
|
Fishery
|
|
|
|
|
|
Organic Fertilizer
|
|
|
Cattle Farm
|
|
|
|
|
|
|
|
|
|
Development
|
|
|
HU Plantation
|
|
|
and Bread Grass
|
|
|
Development
|
|
|
Corporate and
|
|
|
|
|
|
|
Division(1)
|
|
|
Division (2)
|
|
|
Division (3)
|
|
|
Division (4)
|
|
|
others (5)
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
3,534,390
|
|
|
$
|
2,094,473
|
|
|
$
|
16,394,895
|
|
|
$
|
11,071,921
|
|
|
$
|
34,630,308
|
|
|
$
|
67,725,987
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
615,371
|
|
|
$
|
(523,627
|
)
|
|
$
|
(20,862
|
)
|
|
$
|
695,812
|
|
|
$
|
5,203,692
|
|
|
$
|
5,970,386
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
81,997,442
|
|
|
$
|
46,569,574
|
|
|
$
|
341,912,724
|
|
|
$
|
41,143,209
|
|
|
$
|
278,634,636
|
|
|
$
|
790,257,585
|
|
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
3.
|
SEGMENT INFORMATION (CONTINUED)
|
|
(1)
|
Operated by Capital Award, Inc. (“CA”).
|
|
(2)
|
Operated by Jiang Men City Heng Sheng Tai Agriculture Development Co., Limited (“JHST”).
|
|
(3)
|
Operated by Qinghai Sanjiang A Power Agriculture Co., Limited
(“SJAP”), A Power Agro Agriculture Development (Macau) Limited (“APWAM”), and Hunan Shenghua A Power
Agriculture Co., Limited (“HSA”).
|
|
(4)
|
Operated by Jiang Men City Hang Mei Cattle Farm Development Co. Limited (“JHMC”) and Macau Eiji Company Limited (“MEIJI”).
|
|
(5)
|
Operated by Sino Agro Food, Inc. (“SIAF”) and Sino Agro Food Sweden AB (“SAFS”).
|
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
3.
|
SEGMENT INFORMATION (CONTINUED)
|
Further analysis of revenue:-
|
|
For
the three ended June 30, 2019
|
|
|
|
Fishery
|
|
|
|
|
|
Organic Fertilizer
|
|
|
Cattle Farm
|
|
|
|
|
|
|
|
|
|
Development
|
|
|
HU Plantation
|
|
|
and Bread Grass
|
|
|
Development
|
|
|
Corporate and
|
|
|
|
|
|
|
Division (1)
|
|
|
Division (2)
|
|
|
Division (3)
|
|
|
Division (4)
|
|
|
others (6)
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name of entity Sale of goods Capital Award, Inc. (“CA”)
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jiang Men City Heng Sheng Tai Agriculture Development
Co., Limited (“JHST”)
|
|
|
|
|
|
|
1,103,645
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,103,645
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hunan Shenghua A Power Agriculture Co., Limited (“HSA”)
|
|
|
|
|
|
|
|
|
|
|
2,523,055
|
|
|
|
|
|
|
|
|
|
|
|
2,523,055
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Qinghai Sanjiang A Power Agriculture Co., Limited (“SJAP”)
|
|
|
|
|
|
|
|
|
|
|
4,229,446
|
|
|
|
|
|
|
|
|
|
|
|
4,229,446
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Qinghai Zhong He Meat Products Co., Limited (“QZH”)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Macau Eiji Company Limited (“MEIJI”)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,550,285
|
|
|
|
|
|
|
|
12,550,285
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sino Agro Food, Inc. (“SIAF”)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,466,502
|
|
|
|
17,466,502
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consulting and service income for development contracts Capital
Award, Inc. (“CA”)
|
|
|
728,245
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
728,245
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commission and management fee Capital Award,
Inc. (“CA”)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
728,245
|
|
|
|
1,103,645
|
|
|
|
6,752,501
|
|
|
|
12,550,285
|
|
|
|
17,466,502
|
|
|
|
38,601,178
|
|
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
3.
|
SEGMENT INFORMATION (CONTINUED)
|
Further analysis of revenue:-
|
|
For
the three months ended June 30, 2018
|
|
|
|
Fishery
|
|
|
|
|
|
Organic Fertilizer
|
|
|
Cattle Farm
|
|
|
|
|
|
|
|
|
|
Development
|
|
|
HU Plantation
|
|
|
and Bread Grass
|
|
|
Development
|
|
|
Corporate and
|
|
|
|
|
|
|
Division (1)
|
|
|
Division (2)
|
|
|
Division (3)
|
|
|
Division (4)
|
|
|
others (6)
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name of entity Sale of goods Capital Award, Inc. (“CA”)
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jiang Men City Heng Sheng Tai Agriculture Development
Co., Limited (“JHST”)
|
|
|
-
|
|
|
|
1,044,245
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,044,245
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hunan Shenghua A Power Agriculture Co., Limited (“HSA”)
|
|
|
-
|
|
|
|
-
|
|
|
|
2,499,490
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,499,490
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Qinghai Sanjiang A Power Agriculture Co., Limited (“SJAP”)
|
|
|
-
|
|
|
|
-
|
|
|
|
5,124,813
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,124,813
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Qinghai Zhong He Meat Products Co., Limited (“QZH”)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Macau Eiji Company Limited (“MEIJI”)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6,073,838
|
|
|
|
-
|
|
|
|
6,073,838
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sino Agro Food, Inc. (“SIAF”)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
18,190,351
|
|
|
|
18,190,351
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consulting and service income for development contracts Capital
Award, Inc. (“CA”)
|
|
|
1,061,986
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,061,986
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commission and management fee Capital Award,
Inc. (“CA”)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
$
|
1,061,986
|
|
|
$
|
1,044,245
|
|
|
$
|
7,624,303
|
|
|
$
|
6,073,838
|
|
|
$
|
18,190,351
|
|
|
$
|
33,994,723
|
|
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
3.
|
SEGMENT INFORMATION (CONTINUED)
|
Further analysis of revenue:-
|
|
For
the six months ended June 30, 2019
|
|
|
|
Fishery
|
|
|
|
|
|
Organic Fertilizer
|
|
|
Cattle Farm
|
|
|
|
|
|
|
|
|
|
Development
|
|
|
HU Plantation
|
|
|
and Bread Grass
|
|
|
Development
|
|
|
Corporate and
|
|
|
|
|
|
|
Division (1)
|
|
|
Division (2)
|
|
|
Division (3)
|
|
|
Division (4)
|
|
|
others (6)
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name of entity Sale of goods Capital Award, Inc. (“CA”)
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jiang Men City Heng Sheng Tai Agriculture Development
Co., Limited (“JHST”)
|
|
|
|
|
|
|
2,010,448
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,010,448
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hunan Shenghua A Power Agriculture Co., Limited (“HSA”)
|
|
|
|
|
|
|
|
|
|
|
5,050,328
|
|
|
|
|
|
|
|
|
|
|
|
5,050,328
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Qinghai Sanjiang A Power Agriculture Co., Limited (“SJAP”)
|
|
|
|
|
|
|
|
|
|
|
8,105,257
|
|
|
|
|
|
|
|
|
|
|
|
8,105,257
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Qinghai Zhong He Meat Products Co., Limited (“QZH”)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Macau Eiji Company Limited (“MEIJI”)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,710,988
|
|
|
|
|
|
|
|
20,710,988
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sino Agro Food, Inc. (“SIAF”)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,263,561
|
|
|
|
30,263,561
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consulting and service income for development contracts Capital
Award, Inc. (“CA”)
|
|
|
1,719,247
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,719,247
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commission and management fee Capital Award,
Inc. (“CA”)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,719,247
|
|
|
|
2,010,448
|
|
|
|
13,155,585
|
|
|
|
20,710,988
|
|
|
|
30,263,561
|
|
|
|
67,859,829
|
|
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
3.
|
SEGMENT INFORMATION (CONTINUED)
|
Further analysis of revenue:-
|
|
For
the six months ended June 30, 2018
|
|
|
|
Fishery
|
|
|
|
|
|
Organic Fertilizer
|
|
|
Cattle Farm
|
|
|
|
|
|
|
|
|
|
Development
|
|
|
HU Plantation
|
|
|
and Bread Grass
|
|
|
Development
|
|
|
Corporate and
|
|
|
|
|
|
|
Division (1)
|
|
|
Division (2)
|
|
|
Division (3)
|
|
|
Division (4)
|
|
|
others (6)
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name of entity Sale of goods Capital Award, Inc. (“CA”)
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jiang Men City Heng Sheng Tai Agriculture Development
Co., Limited (“JHST”)
|
|
|
-
|
|
|
|
2,094,473
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,094,473
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hunan Shenghua A Power Agriculture Co., Limited (“HSA”)
|
|
|
-
|
|
|
|
-
|
|
|
|
4,865,057
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,865,057
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Qinghai Sanjiang A Power Agriculture Co., Limited (“SJAP”)
|
|
|
-
|
|
|
|
-
|
|
|
|
11,529,838
|
|
|
|
-
|
|
|
|
-
|
|
|
|
11,529,838
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Qinghai Zhong He Meat Products Co., Limited (“QZH”)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Macau Eiji Company Limited (“MEIJI”)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
11,071,921
|
|
|
|
-
|
|
|
|
11,071,921
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sino Agro Food, Inc. (“SIAF”)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
34,630,308
|
|
|
|
34,630,308
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consulting and service income for development contracts Capital
Award, Inc. (“CA”)
|
|
|
3,534,390
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,534,390
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commission and management fee Capital Award,
Inc. (“CA”)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
$
|
3,534,390
|
|
|
$
|
2,094,473
|
|
|
$
|
16,394,895
|
|
|
$
|
11,071,921
|
|
|
$
|
34,630,308
|
|
|
$
|
67,725,987
|
|
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
3.
|
SEGMENT INFORMATION (CONTINUED)
|
Further analysis of cost of
goods sold and cost of services:-
COST OF GOODS SOLD
|
|
For
the three months ended June 30, 2019
|
|
|
|
Fishery
|
|
|
|
|
|
Organic Fertilizer
|
|
|
Cattle Farm
|
|
|
Corporate
|
|
|
|
|
|
|
Development
|
|
|
HU
Plantation
|
|
|
and Bread Grass
|
|
|
Development
|
|
|
and others
|
|
|
|
|
|
|
Division (1)
|
|
|
Division (2)
|
|
|
Division (3)
|
|
|
Division (4)
|
|
|
(5)
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name of entity Sale of goods Capital Award, Inc. (“CA”)
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jiang Men City Heng Sheng Tai Agriculture Development
Co., Limited (“JHST”)
|
|
|
|
|
|
|
784,238
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
784,238
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hunan Shenghua A Power Agriculture Co., Limited (“HSA”)
|
|
|
|
|
|
|
|
|
|
|
1,632,833
|
|
|
|
|
|
|
|
|
|
|
|
1,632,833
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Qinghai Sanjiang A Power Agriculture Co., Limited (“SJAP”)
|
|
|
|
|
|
|
|
|
|
|
3,017,183
|
|
|
|
|
|
|
|
|
|
|
|
3,017,183
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Qinghai Zhong He Meat Products Co., Limited (“QZH”)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Macau Eiji Company Limited (“MEIJI”)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,143,598
|
|
|
|
|
|
|
|
10,143,598
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sino Agro Food, Inc. (“SIAF”)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,517,368
|
|
|
|
15,517,368
|
|
|
|
$
|
-
|
|
|
|
784,238
|
|
|
|
4,639,016
|
|
|
|
10,143,598
|
|
|
|
15,517,368
|
|
|
|
31,084,220
|
|
COST OF SERVICES
|
|
For
the three months ended June 30, 2019
|
|
|
|
Fishery
|
|
|
|
|
|
Organic Fertilizer
|
|
|
Cattle Farm
|
|
|
Corporate
|
|
|
|
|
|
|
Development
|
|
|
HU Plantation
|
|
|
and Bread Grass
|
|
|
Development
|
|
|
and others
|
|
|
|
|
|
|
Division (1)
|
|
|
Division (2)
|
|
|
Division (3)
|
|
|
Division (4)
|
|
|
(5)
|
|
|
Total
|
|
Name of entity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consulting and service income for development contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Award, Inc. (“CA”)
|
|
|
650,333
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
650,333
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
650,333
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
650,333
|
|
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
3.
|
SEGMENT INFORMATION (CONTINUED)
|
Further analysis of cost of
goods sold and cost of services:-
COST OF GOODS SOLD
|
|
For
the three months ended June 30, 2018
|
|
|
|
Fishery
|
|
|
|
|
|
Organic Fertilizer
|
|
|
Cattle Farm
|
|
|
Corporate
|
|
|
|
|
|
|
Development
|
|
|
HU Plantation
|
|
|
and Bread Grass
|
|
|
Development
|
|
|
and others
|
|
|
|
|
|
|
Division (1)
|
|
|
Division (2)
|
|
|
Division (3)
|
|
|
Division (4)
|
|
|
(5)
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name of entity Sale of goods Capital Award, Inc. (“CA”)
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jiang Men City Heng Sheng Tai Agriculture Development
Co., Limited (“JHST”)
|
|
|
-
|
|
|
|
859,183
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
859,183
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hunan Shenghua A Power Agriculture Co., Limited (“HSA”)
|
|
|
-
|
|
|
|
-
|
|
|
|
1,645,595
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,645,595
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Qinghai Sanjiang A Power Agriculture Co., Limited (“SJAP”)
|
|
|
-
|
|
|
|
-
|
|
|
|
3,489,352
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,489,352
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Qinghai Zhong He Meat Products Co., Limited (“QZH”)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Macau Eiji Company Limited (“MEIJI”)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,507,928
|
|
|
|
-
|
|
|
|
5,507,928
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sino Agro Food, Inc. (“SIAF”)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
16,169,201
|
|
|
|
16,169,201
|
|
|
|
$
|
-
|
|
|
$
|
859,183
|
|
|
$
|
5,134,947
|
|
|
$
|
5,507,928
|
|
|
$
|
16,169,201
|
|
|
$
|
27,671,259
|
|
COST OF SERVICES
|
|
For
the three months ended June 30, 2018
|
|
|
|
Fishery
|
|
|
|
|
|
Organic Fertilizer
|
|
|
Cattle Farm
|
|
|
Corporate
|
|
|
|
|
|
|
Development
|
|
|
HU Plantation
|
|
|
and Bread Grass
|
|
|
Development
|
|
|
and others
|
|
|
|
|
|
|
Division (1)
|
|
|
Division (2)
|
|
|
Division (3)
|
|
|
Division (4)
|
|
|
(5)
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name of entity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consulting and service income for development contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Award, Inc. (“CA”)
|
|
|
880,418
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
880,418
|
|
|
|
$
|
880,418
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
880,418
|
|
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
3.
|
SEGMENT INFORMATION (CONTINUED)
|
Further analysis of cost of
goods sold and cost of services (Continued):-
COST OF GOODS SOLD
|
|
For
the six months ended June 30, 2019
|
|
|
|
Fishery
Development
Division (1)
|
|
|
HU
Plantation
Division
(2)
|
|
|
Organic Fertilizer
and
Bread Grass
Division (3)
|
|
|
Cattle Farm
Development
Division (4)
|
|
|
Corporate
and others
(5)
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name of entity Sale of goods Capital Award, Inc. (“CA”)
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jiang Men City Heng Sheng Tai Agriculture Development Co., Limited
(“JHST”)
|
|
|
|
|
|
|
1,497,205
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,497,205
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hunan Shenghua A Power Agriculture Co., Limited (“HSA “)
|
|
|
|
|
|
|
|
|
|
|
3,251,049
|
|
|
|
|
|
|
|
|
|
|
|
3,251,049
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Qinghai Sanjiang A Power Agriculture Co., Limited (“SJAP “)
|
|
|
|
|
|
|
|
|
|
|
5,789,537
|
|
|
|
|
|
|
|
|
|
|
|
5,789,537
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Qinghai Zhong He Meat Products Co., Limited (“QZH “)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Macau Eiji Company Limited (“MEIJI”)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,964,108
|
|
|
|
|
|
|
|
16,964,108
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sino Agro Food, Inc. (“SIAF”)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,892,533
|
|
|
|
26,892,533
|
|
|
|
$
|
-
|
|
|
|
1,497,205
|
|
|
|
9,040,586
|
|
|
|
16,964,108
|
|
|
|
26,892,533
|
|
|
|
54,394,432
|
|
COST OF SERVICES
|
|
For
the six months ended June 30, 2019
|
|
|
|
Fishery
Development
Division (1)
|
|
|
HU
Plantation
Division
(2)
|
|
|
Organic Fertilizer
and Bread Grass
Division (3)
|
|
|
Cattle Farm
Development
Division (4)
|
|
|
Corporate
and others
(5)
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name of entity Consulting and service income for development
contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Award, Inc. (“CA”)
|
|
|
1,590,017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,590,017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,590,017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,590,017
|
|
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
3.
|
SEGMENT INFORMATION (CONTINUED)
|
Further analysis of cost of
goods sold and cost of services (Continued):-
COST OF GOODS SOLD
|
|
For
the six months ended June 30, 2018
|
|
|
|
Fishery
Development
Division (1)
|
|
|
HU
Plantation
Division (2)
|
|
|
Organic
Fertilizer
and Bread Grass
Division (3)
|
|
|
Cattle
Farm
Development
Division (4)
|
|
|
Corporate
and others
(5)
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name of entity Sale of goods Capital Award, Inc. (“CA”)
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jiang Men City Heng Sheng Tai Agriculture Development
Co., Limited (“JHST”)
|
|
|
-
|
|
|
|
1,753,905
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,753,905
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hunan Shenghua A Power Agriculture Co., Limited (“HSA “)
|
|
|
-
|
|
|
|
-
|
|
|
|
3,259,280
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,259,280
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Qinghai Sanjiang A Power Agriculture Co., Limited (“SJAP “)
|
|
|
-
|
|
|
|
-
|
|
|
|
7,625,676
|
|
|
|
-
|
|
|
|
-
|
|
|
|
7,625,676
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Qinghai Zhong He Meat Products Co., Limited (“QZH “)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Macau Eiji Company Limited (“MEIJI”)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
10,036,426
|
|
|
|
-
|
|
|
|
10,036,426
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sino Agro Food, Inc. (“SIAF”)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
30,858,992
|
|
|
|
30,858,992
|
|
|
|
$
|
-
|
|
|
$
|
1,753,905
|
|
|
$
|
10,884,956
|
|
|
$
|
10,036,426
|
|
|
$
|
30,858,992
|
|
|
$
|
53,534,279
|
|
COST OF SERVICES
|
|
For
the six months ended June 30, 2018
|
|
|
|
Fishery
Development
Division (1)
|
|
|
HU
Plantation
Division (2)
|
|
|
Organic Fertilizer
and Bread Grass
Division (3)
|
|
|
Cattle
Farm
Development
Division (4)
|
|
|
Corporate
and others
(5)
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name of entity Consulting and service income for development
contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Award, Inc. (“CA”)
|
|
|
2,664,740
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,664,740
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,664,740
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
2,664,740
|
|
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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.
However,
see the discussion, below, under “Undistributed Earnings of Foreign Subsidiaries”.
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
but
some of these profits may have to be used to satisfy U.S. income tax liabilities based on the operations of its controlled foreign
subsidiaries. Prior to 2017, depending on how and where their controlled foreign corporations were operated, U.S. companies did
not always have to pay tax on the earnings of their controlled foreign corporations, and the Company believes that prior to 2017
the earnings of its controlled foreign corporations were not taxable in the United States until distributed to the Company. Accordingly,
the Company made no provision for U.S. Federal and State income tax. The Company filed yearly U.S. federal income tax returns from
2007 to 2017 on which it has reported that there was no tax due to the United States.
However,
the Tax Cuts and Jobs Act of 2017 (the “2017 Act”) now requires some U.S. companies (starting in 2018) to pay tax on
the earnings of their controlled foreign corporations based on complex formulas. The Company has not yet analyzed the impact of
these changes on the taxability in the United States of the earnings of its foreign subsidiaries and so does not know whether it
has for 2018, or will have for 2019 and future years, any earnings subject to U.S. federal income tax. In addition, the 2017 Act
required U.S. companies to repatriate, as of the end of 2017, their accumulated earnings to date. The Company has not yet determined
whether it incurred a U.S. tax liability as of the end of 2017 under this repatriation provision of the 2017 Act. The Company is
seeking professional advice from U.S. tax accountants as to the impact on the Company of the 2017 Act for 2017 and later years.
In fiscal year 2017 the Company had an operating loss of $30,102,943 based on the consolidated financials of its controlled foreign
corporations, but it has had operating profits in previous years.
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
4.
|
INCOME TAXES (CONTINUED)
|
China
Beginning January 1, 2008, the
new Enterprise Income Tax (“
EIT
”) law replaced the existing laws for Domestic Enterprises (“
DE’s
”)
and Foreign Invested Enterprises (“
FIE’s
”). The new standard EIT rate of 25% replaced the 33% rate currently
applicable to both DE’s and FIE’s. The Company is currently evaluating the impact that the new EIT will have on its
financial condition. Beginning January 1, 2008, China unified the corporate income tax rule on foreign invested enterprises and
domestic enterprises. The unified corporate income tax rate is 25%.
Under new tax legislation in
China beginning in January 2008, the agriculture, dairy and fishery sectors are exempt from enterprise income taxes.
No EIT has been provided in
the financial statements of SIAF, CA, JHST, JHMC, HSA and SJAP since they are exempt from EIT for the six months ended June 30,
2019 and 2018 as they are within the agriculture, and cattle sectors.
However, EIT has provide in
the
financial statements of SJAP since it has generated
income from trading of agricultural products for the six months ended June 30, 2019.
Belize
CA, CS and CH are international
business companies incorporated in Belize, and are exempt from corporate tax in Belize.
Macau
No Macau Corporate income tax
has been provided in the consolidated financial statements of APWAM and MEIJI since these entities did not earn any assessable
profits for the three months ended June 30, 2019 and 2018.
Sweden
No Sweden Corporate income tax
has been provided in the consolidated financial statements of SAFS since SAFS incurred a tax loss for the three months ended June
30, 2019 and 2018.
No deferred tax assets and liabilities
are of June 30, 2019 and December 31, 2018 since there was no difference between the financial statements carrying amounts and
the tax bases of assets and liabilities using enacted tax rates in effect in the period in which the differences are expected to
reverse.
Provision for income taxes is
as follows:
|
|
Six months ended
June 30, 2019
|
|
|
Six months ended
June 30, 2018
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
SIAF
|
|
$
|
-
|
|
|
$
|
-
|
|
SAFS
|
|
|
-
|
|
|
|
-
|
|
MEIJI and APWAM
|
|
|
-
|
|
|
|
-
|
|
JHST, JHMC, SJAP, HSA
|
|
|
3,905
|
|
|
|
-
|
|
|
|
$
|
3,905
|
|
|
$
|
-
|
|
The Company did not recognize
any interest or penalties related to unrecognized tax benefits in the six months ended June 30, 2019 and 2018. The Company had
no uncertain positions that would necessitate recording of tax related liability. The Company is subject to examination by the
respective tax authorities.
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
5.
|
CASH AND CASH EQUIVALENTS
|
|
|
June 30, 2019
|
|
|
December 31, 2018
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
|
|
|
|
|
|
|
|
|
Cash and bank balances
|
|
$
|
925,220
|
|
|
$
|
4,950,799
|
|
As of June 30, 2019, inventories
are as follows:
|
|
June 30, 2019
|
|
|
December 31, 2018
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
|
|
|
|
|
|
|
Bread grass
|
|
|
517,567
|
|
|
|
744,378
|
|
Beef cattle
|
|
|
15,031,225
|
|
|
|
11,561,117
|
|
Organic fertilizer
|
|
|
14,045,338
|
|
|
|
14,266,923
|
|
Forage for cattle and consumable
|
|
|
7,009,766
|
|
|
|
7,252,280
|
|
Raw materials for bread grass and organic fertilizer
|
|
|
16,399,277
|
|
|
|
18,885,258
|
|
Immature seeds
|
|
|
2,244,916
|
|
|
|
1,872,285
|
|
|
|
$
|
55,248,089
|
|
|
$
|
54,582,241
|
|
|
7.
|
DEPOSITS AND PREPAYMENTS
|
|
|
June 30, 2019
|
|
|
December 31, 2018
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
Deposits for
|
|
|
|
|
|
|
|
|
- purchases of equipment
|
|
$
|
1,228,990
|
|
|
$
|
2,158,867
|
|
- acquisition of land use rights
|
|
|
174,545
|
|
|
|
174,851
|
|
- inventories purchases
|
|
|
7,023,298
|
|
|
|
16,921,188
|
|
- construction in progress
|
|
|
3,730,063
|
|
|
|
4,789,035
|
|
- issue of shares as collateral
|
|
|
25,761,658
|
|
|
|
24,928,324
|
|
Shares issued for employee compensation and overseas professional and bond interest
|
|
|
115,787
|
|
|
|
643,457
|
|
Others
|
|
|
2,631,513
|
|
|
|
2,625,468
|
|
|
|
$
|
40,665,854
|
|
|
$
|
52,241,190
|
|
The Company has performed an
analysis on all of its accounts receivable and determined that all amounts are collectible by the Company. As such, all accounts
receivable are reflected as a current asset and no allowance for bad debt has been recorded as of June 30, 2019 and December 31,
2018.
Aging analysis of accounts receivable
is as follows:
|
|
June 30, 2019
|
|
|
December 31, 2018
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
0 - 30 days
|
|
$
|
3,574,696
|
|
|
$
|
7,447,269
|
|
31 - 90 days
|
|
|
32,213,709
|
|
|
|
22,684,605
|
|
91 - 120 days
|
|
|
8,790,824
|
|
|
|
16,456,895
|
|
over 120 days and less than 1 year
|
|
|
7,885,658
|
|
|
|
11,773,454
|
|
over 1 year
|
|
|
53,460,749
|
|
|
|
43,289,908
|
|
|
|
$
|
105,925,636
|
|
|
$
|
101,652,131
|
|
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
June 30, 2019
|
|
|
December 31, 2018
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
Advanced to employees
|
|
$
|
584,221
|
|
|
$
|
561,330
|
|
Advanced to suppliers
|
|
|
3,824,347
|
|
|
|
3,831,926
|
|
Advanced to customers
|
|
|
14,123,766
|
|
|
|
14,114,249
|
|
Advanced to developers
|
|
|
452,364
|
|
|
|
453,155
|
|
Others
|
|
|
4,183,889
|
|
|
|
9,346,866
|
|
|
|
$
|
23,168,587
|
|
|
$
|
28,307,526
|
|
Advanced to employees, suppliers,
customers and developers are unsecured, interest free and with no fixed terms of repayment.
|
|
June 30, 2019
|
|
|
December 31, 2018
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
|
|
|
|
|
|
|
Plant and machinery
|
|
$
|
18,010,611
|
|
|
$
|
5,299,631
|
|
Structure and leasehold improvements
|
|
|
200,408,657
|
|
|
|
200,734,812
|
|
Mature seeds and herbage cultivation
|
|
|
60,397,687
|
|
|
|
54,643,255
|
|
Furniture and equipment
|
|
|
695,284
|
|
|
|
695,461
|
|
Motor vehicles
|
|
|
589,570
|
|
|
|
590,416
|
|
|
|
|
280,101,809
|
|
|
|
261,963,575
|
|
|
|
|
|
|
|
|
|
|
Less: Accumulated depreciation
|
|
|
(36,263,927
|
)
|
|
|
(31,317,916
|
)
|
Net carrying amount
|
|
$
|
243,837,882
|
|
|
$
|
230,645,659
|
|
Depreciation expense was $2,542,874
and $2,667,023, $5,062,150 and $5,325,531 for the three months ended and the six months ended June 30, 2019 and 2018, respectively.
|
11.
|
CONSTRUCTION IN PROGRESS
|
|
|
June 30, 2019
|
|
|
December 31, 2018
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
Construction in progress
|
|
|
|
|
|
|
|
|
- Office, warehouse and organic fertilizer plant in HSA
|
|
|
|
|
|
|
7,285
|
|
- Organic fertilizer and bread grass production plant and office building
|
|
|
|
|
|
|
6,484,045
|
|
- Rangeland for beef cattle and office building
|
|
|
11,000,995
|
|
|
|
6,024,197
|
|
|
|
$
|
11,000,995
|
|
|
$
|
12,515,527
|
|
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
June 30, 2019
|
|
|
December 31, 2018
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
Cost
|
|
$
|
65,691,658
|
|
|
$
|
65,779,178
|
|
Less: Accumulated amortization
|
|
|
(12,778,700
|
)
|
|
|
(11,964,897
|
)
|
Net carrying amount
|
|
$
|
52,912,958
|
|
|
$
|
53,814,281
|
|
|
|
Amount
|
|
|
|
|
|
Balance @1.1.2018
|
|
$
|
65,573,223
|
|
Exchange difference
|
|
|
205,955
|
|
Balance @12.31.2018
|
|
$
|
65,779,178
|
|
Exchange difference
|
|
|
(87,520
|
)
|
Balance @6.30.2019
|
|
$
|
65,691,658
|
|
Land use rights are amortized
on the straight-line basis over their respective lease periods. The lease period of agriculture land is 10 to 60 years. Amortization
of land use rights was $281,881
, $418,873, $700,638 and
$841,453 for the three months and the six months ended June 30, 2019 and 2018 respectively.
Goodwill represents the fair
value of the assets acquired the acquisitions over the cost of the assets acquired. It is stated at cost less accumulated impairment
losses. Management tests goodwill for impairment on an annual basis or when impairment indicators arise. In these instances, the
Company recognizes an impairment loss when it is probable that the estimated cash flows are less than the carrying value of the
assets. To date, no such impairment loss has been recorded.
|
|
June 30, 2019
|
|
|
December 31, 2018
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
|
|
|
|
|
|
|
Goodwill from acquisition
|
|
$
|
724,940
|
|
|
$
|
724,940
|
|
Less: Accumulated impairment losses
|
|
|
-
|
|
|
|
-
|
|
Net carrying amount
|
|
$
|
724,940
|
|
|
$
|
724,940
|
|
|
14.
|
PROPRIETARY TECHNOLOGIES
|
By an agreement dated November
12, 2008, TRW acquired an enzyme technology master license, registered under a Chinese patent, for the manufacturing of livestock
feed and bioorganic fertilizer and its related labels for $8,000,000. On October 1, 2015, the Company took up such assets at $5,473,720.
On March 6, 2012, MEIJI acquired
an aromatic-feed formula technology for the production of aromatic cattle for $1,500,000. On October 1, 2013, SIAF was granted
a license to exploit sleepy cods breeding technology to grow out of sleepy cods for $2,270,000 for 50 years. SJAP booked bacterial
cellulose technology license and related trademark for $2,119,075 and amortized expenditures for 20 years starting from January
1, 2014.
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
14.
|
PROPRIETARY TECHNOLOGIES
(CONTINUED)
|
|
|
June 30, 2019
|
|
|
December 31, 2018
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
|
|
|
|
|
|
|
Cost
|
|
$
|
11,113,404
|
|
|
$
|
11,113,267
|
|
Less: Accumulated amortization
|
|
|
(2,466,387
|
)
|
|
|
(2,176,196
|
)
|
Net carrying amount
|
|
$
|
8,647,017
|
|
|
$
|
8,937,071
|
|
Amortization of proprietary technologies was $14
5,072
and $146,670, $290,366 and $293,451 for the three months and the six months ended June 30, 2019 and 2018, respectively. No
impairments of proprietary technologies have been identified for the three months and the six months ended June 30, 2019 and 2018.
|
15.
|
INTERESTS IN UNCONSOLIDATED
EQUITY INVESTEES
|
On February 28, 2011, TRW applied
to form a corporate joint venture, Enping City Bi Tao A Power Fishery Development Co., Limited (” EBAPFD “), incorporated
in the PRC. TRW owned a 25% equity interest in EBAPFD. On November 17, 2011, TRW formed Jiang Men City A Power Fishery Development
Co., Limited (“JFD”) in which it acquired a 25% equity interest, while withdrawing its 25% equity interest in EBAPFD.
As of December 31, 2011, the Company had invested for total cash consideration of $1,258,607 in JFD. JFD operates an indoor fish
farm. On January 1, 2012, the Company acquired an additional 25% equity interest in JFD for total cash consideration of $1,662,365.
As of January 1, 2012, the Company had consolidated the assets and operations of JFD. On April 1, 2012, the Company acquired an
additional 25% equity interest in JFD for the total cash consideration of $1,702,580. These acquisitions were at our option according
the terms of the original development agreement. The Company owned a 75% equity interest in JFD, representing majority of voting
rights and controls its board of directors.
On August 15, 2016, the acquisition
agreement was executed by TRW for acquiring the other 25% equity in JFD which was a Sino Foreign Joint Venture Co. that TRW had
100% equity interest with effect on October 5, 2016. Upon the acquisitions of 3 additional prawn farms assets at fair value of
$238.32 million from respective third parties and the master technology license at fair value of $30 million from Capital Award,
Inc. by JFD, and the consideration of the above acquisitions were planned to be settled by the new issue shares of 99,990,000 TRW
shares at $3.41 amounting to $340.53 million on or before June 30, 2017. As a result, SIAF’s equity interest in TRW was diluted
from 100% to 23.89% with effective on October 5, 2016. The above transactions leaded the Company loss of control over TRW group,
the Company’s investments in TRW and JFD were reclassified from a subsidiary to investments in unconsolidated equity investees
as of October 5, 2016. The dilution of the Company’s investments in TRW group constituted a deemed disposal of the subsidiaries.
The deemed gain on disposal of $56,947,005 was recorded in net income from discontinued operations of the consolidated statements
of income and other comprehensive income of the Company for the year ended December 31, 2016. On October 1, 2016, SIAF took up
all assets and liabilities of TRW and JFD except plant and equipment - fish farm. The Company converted the amount due from unconsolidated
equity investee into equity interest during the fourth quarter of 2017, which resulted in equity interest in TRW from 23.89% to
36.60%.
On May 6, 2016, SJAP invested
in 30% equity interest in Guangzhou Horan Taita Information Technology Co., Limited (“
HTIT
”), a company incorporated
in P.R.C. for RMB 1,000,000. The investment has been fully impaired on December 31, 2017.
|
|
June 30, 2019
|
|
|
December 31, 2018
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
Investments at cost
|
|
|
|
|
|
|
|
|
- TRW
|
|
$
|
156,878,648
|
|
|
$
|
149,720,418
|
|
Amount due from a consolidated equity investee - TRW
|
|
|
59,276,133
|
|
|
|
57,354,208
|
|
|
|
$
|
216,154,781
|
|
|
$
|
207,074,626
|
|
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
16.
|
TEMPORARY DEPOSITS PAID
TO ENTITIES FOR EQUITY INVESTMENTS IN FUTURE SINO JOINT VENTURE COMPANIES
|
Intended
|
|
|
|
|
|
|
|
|
|
|
unincorporated
|
|
Projects
|
|
|
|
|
|
|
|
|
Investee
|
|
Engaged
|
|
|
|
June 30, 2019
|
|
|
December 31, 2018
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
A
|
|
Trade center
|
|
*
|
|
$
|
12,000,000
|
|
|
$
|
12,000,000
|
|
B
|
|
Fish Farm 2 GaoQiqiang Aquaculture
|
|
*
|
|
|
17,403,959
|
|
|
|
17,403,959
|
|
C
|
|
Cattle farm 2
|
|
*
|
|
|
5,514,674
|
|
|
|
5,502,001
|
|
|
|
|
|
|
|
$
|
34,918,633
|
|
|
$
|
34,905,960
|
|
The Company made temporary deposits
paid to entities for equity investments in future Sino Joint Venture companies (“SJVCs”) engaged in projects development
of trade and seafood centers, fish, prawns and cattle farms. Such temporary deposits represented as deposits of the respective
consideration required for the purchase of equity stakes of respective future SJVCs. The amounts were classified as temporary because
legal procedures of formation of SJVCs have not yet been completed. As of June 30, 2019, the percentages of equity stakes of A
(trade and seafood centers), B (fish farm 2 GaoQiqiang Aquaculture Farm) and C (cattle farm 2) are 31%, 23% and 35% respectively.
|
*
|
The above amounts were subject to conversion to an additional equity investment in the investees upon the completion of legal procedures of formation of SJVCs.
|
|
17.
|
VARIABLE INTEREST ENTITY
|
On September 28, 2009, APWAM
acquired the PMH’s 45% equity interest in the Sino-Foreign joint venture company, Qinghai Sanjiang A Power Agriculture Co.
Limited (“
SJAP
”), which was incorporated in the P.R.C. As of June 30, 2019, the Company has invested $4,054,421
in this joint venture. SJAP is engaged in its business of the manufacturing of organic fertilizer, livestock feed, and beef cattle
and plantation of crops and pastures.
Continuous assessment of
the VIE relationship with SJAP
The Company may also have a
controlling financial interest in an entity through an arrangement that does not involve voting interests, such as a VIE. The Company
evaluates entities deemed to be VIE’s using a risk and reward model to determine whether to consolidate. A VIE is an entity
(1) that has total equity at risk that is not sufficient to finance its activities without additional subordinated financial support
from other entities, (2) where the group of equity holders does not have the power to direct the activities of the entity that
most significantly impact the entity’s economic performance, or the obligation to absorb the entity’s expected losses
or the right to receive the entity’s expected residual returns, or both, or (3) where the voting rights of some investors
are not proportional to their obligations to absorb the expected losses of the entity, their rights to receive the expected residual
returns of the entity, or both, and substantially all of the entity’s activities either involve or are conducted on behalf
of an investor that has disproportionately fewer voting rights.
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
17.
|
VARIABLE INTEREST ENTITY
(CONTINUED)
|
The Company also quantitatively
and qualitatively examined if SJAP is considered a VIE. Qualitative analyses considered the extent to which the nature of its variable
interest exposed the Company to losses. For quantitative analyses, the Company also used internal cash flow models to determine
if SJAP was a VIE and, if so, whether the Company was the primary beneficiary. The projection of these cash flows and probabilities
thereof requires significant managerial judgment because of the inherent limitations that relate to the use of historical data
for the projection of future events. On June 30, 2018, the Company evaluated the above VIE testing results and concluded that the
Company is the primary beneficiary of SJAP’s expected losses or residual returns and that SJAP qualifies as a VIE of the
Company. As result, the Company has consolidated SJAP as a VIE.
The reasons for the changes
are as follows:
|
·
|
Originally, the board of directors of SJAP consisted of 7 members; 3 appointees from Qinghai Sanjiang (one stockholder), 1 from Garwor (one stockholder), and 3 from the Company, such that the Company did not have majority interest represented on the board of directors of SJAP.
|
|
·
|
On May 7, 2010, Qinghai Sanjiang sold and transferred its equity interest in SJAP to Garwor. The State Administration for Industry and Commerce of Xining City Government of the P.R.C. approved the sale and transfer.
|
Consequently Garwor and the
Company agreed that the new board of directors of SJAP would consist of 3 members; 1 appointee from Garwor and 2 appointees from
the Company, such that the Company now had a majority interest in the board of directors of SJAP. Also, and in accordance with
the Company’s Sino Joint Venture Agreement, the Company’s management appointed the chief financial officer of SJAP.
As a result, the financial statements of SJAP were included in the consolidated financial statements of the Company.
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
18.
.
|
CONSTRUCTION CONTRACT
|
|
(i)
|
Costs and estimated earnings in excess of billings on uncompleted contracts
|
|
|
June 30, 2019
|
|
|
December 31, 2018
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
Costs
|
|
$
|
6,186,261
|
|
|
$
|
6,186,261
|
|
Estimated earnings
|
|
|
4,777,300
|
|
|
|
4,777,300
|
|
Less: Billings
|
|
|
(10,712,733
|
)
|
|
|
(10,712,733
|
)
|
Costs and estimated earnings in excess of billings on uncompleted contracts
|
|
$
|
250,828
|
|
|
$
|
250,828
|
|
|
(ii)
|
Billings in excess of costs and estimated earnings on uncompleted contracts
|
|
|
June 30, 2019
|
|
|
December 31, 2018
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
Billings
|
|
$
|
49,175,412
|
|
|
$
|
47,929,092
|
|
Less: Costs
|
|
|
(30,098,638
|
)
|
|
|
(29,094,568
|
)
|
Estimated earnings
|
|
|
(13,690,063
|
)
|
|
|
(13,486,231
|
)
|
Billing in excess of costs and estimated earnings on uncompleted contracts
|
|
$
|
5,386,711
|
|
|
$
|
5,348,293
|
|
|
|
June 30, 2019
|
|
|
December 31, 2018
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
Billings
|
|
$
|
59,888,145
|
|
|
$
|
58,641,825
|
|
Less: Costs
|
|
|
(36,284,899
|
)
|
|
|
(35,280,829
|
)
|
Estimated earnings
|
|
|
(18,467,363
|
)
|
|
|
(18,263,531
|
)
|
Billing in excess of costs and estimated earnings on uncompleted contracts
|
|
$
|
5,135,883
|
|
|
$
|
5,097,465
|
|
|
|
June 30, 2019
|
|
|
December 31, 2018
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
Due to third parties
|
|
$
|
10,793,941
|
|
|
$
|
13,068,387
|
|
Straight note payable (note 23(i))
|
|
|
35,669,479
|
|
|
|
29,367,999
|
|
Promissory notes issued to third parties
|
|
|
7,765,801
|
|
|
|
7,792,774
|
|
Due to local government
|
|
|
-
|
|
|
|
87,425
|
|
|
|
$
|
54,229,221
|
|
|
$
|
50,316,585
|
|
|
|
|
|
|
|
|
|
|
Less: Amount classified as non-current liabilities
|
|
|
|
|
|
|
|
|
Promissory notes issued to third parties
|
|
|
(7,765,801
|
)
|
|
|
(7,792,774
|
)
|
Amount classified as current liabilities
|
|
$
|
46,463,420
|
|
|
$
|
42,523,811
|
|
Due to third parties are unsecured,
interest free and have no fixed terms of repayment.
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
There are no provisions in the
Company’s bank borrowings and long term debts that would accelerate repayment of debt as a result of a change in credit ratings
or a material adverse change in the Company’s business. Under certain agreements, the Company has the option to retire debt
prior to maturity, either at par or at a premium over par.
Short term bank loan
Name of lender
|
|
Interest rate
|
|
|
Term
|
|
June 30, 2019
|
|
|
December 31, 2018
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
China Development Bank
Qinghai Province, the P.R.C
|
|
|
4.7306
|
%
|
|
December 27, 2018 -
December 27, 2019
|
|
$
|
4,363,635
|
|
|
$
|
4,371,265
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Add: current portion of long term
bank loan
|
|
|
|
|
|
|
|
$
|
290,909
|
|
|
$
|
218,563
|
|
|
|
|
|
|
|
|
|
|
4,654,544
|
|
|
|
4,589,828
|
|
Long term bank loan
Name of lender
|
|
Interest rate
|
|
|
Term
|
|
June 30, 2019
|
|
|
December 31, 2018
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
China Development Bank
|
|
|
|
|
|
December 16, 2016 -
|
|
|
|
|
|
|
|
|
Beijing City, the P.R,C.
|
|
|
5.39
|
%
|
|
December 15, 2026
|
|
$
|
5,672,727
|
|
|
$
|
5,755,501
|
|
Less: current portion of long term
bank loan
|
|
|
|
|
|
|
|
$
|
(290,909
|
)
|
|
$
|
(218,563
|
)
|
|
|
|
|
|
|
|
|
|
5,381,818
|
|
|
|
5,536,938
|
|
On December 16, 2016, the Company
obtained a 10-year long term loan of RMB40million (approximately $5.82million) from China Development Bank for the period from
December 16, 2016 to December 15, 2026, bearing an annual interest rate at 110% of the benchmark rate of PBOC on the date of the
loan agreement and will be adjusted in line with any adjustment of the benchmark rate which is 5.39% (12.31.2018: 5.39%). The
loan was guaranteed by Mr. Zhao Yilin and Ms. Song Haixian, Mr. Zhao Yilin’s wife. The loan was also secured by land use
right with net carrying amount of $390,537 as of June 30, 2019 (12.31.2018: 397,269) and a batch of plant, machinery and equipment
with net carrying amount of $5,147,062 (12.31.2018: 5,326,385). On May 20, 2019, RMB500,000 (approximately $73,741) was repaid.
According to the loan agreement, 2 partial payments of RMB1,000,000 each, totaling of RMB2,000,000 (approximately $290,909) were
scheduled to be repaid by November 20, 2019 and May 20, 2020 respectively.
On December 27, 2018, the Company
obtained a 1-year short term loan of RMB
30 million (approximately
$4.36million) from China Development Bank for the period from the December 27, 2018 to December 27, 2019, bearing fixed interest
at 4.7306% per annum. This loan was guaranteed by Xining City SME Guarantee Corporation.
The above note agreements contained
regular provisions requiring timely repayment of principals and accrued interests, payment of default interest in the event of
default, and without specific financial covenants. Management of the Company believes the Company is in material compliance with
the terms of the loan agreements.
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
21.
|
CONVERTIBLE NOTE PAYABLES
|
On August 29, 2014, the Company
completed the closing of a private placement financing transaction with an accredited investor, which purchased a 10.5% Convertible
Note (the “
Note 1
”) in the aggregate principal amount of up to $33,300,000. The Company received the total advance
of $11,632,450. The Company shall offer investor a discount equal to 25% of the amount of the principal advanced by the investor.
Interest on the note shall accrue
on the outstanding principal balance of this Note from August 29, 2014. Interest shall be payable quarterly on the last day of
each of March, June, September and December commencing September 30, 2014 provided, however, that note holder may elect to require
the Company to issue to the note holder a promissory note in lieu of cash in satisfaction of any interest due and payable at such
time. Any interest payment note shall be subject to the same terms as the note. The note has a maturity date of February 28, 2020.
The note is convertible, at
the discretion of the note holder, into shares of the Company’s common stock (i) at any time following an Event of Default,
or (ii) for a period of thirty (30) calendar days following October 31, 2015 and each anniversary thereof, at an initial conversion
price per share of $1.00, (price prior to reversed split) subject to adjustment for stock splits, reverse stock splits, stock dividends
and other similar transactions and subject to the terms of the note. As long as the note is outstanding, the investor shall have
a right of first refusal, exercisable for thirty (30) calendar days after notice to the note holder, to purchase securities proposed
to be offered and sold by the Company.
The Company and the note holder
entered into a restructuring agreement regarding the settlement of the Note 1. Both parties have agreed to restructure the indebtedness
represented by Note 1 as follows: (a) SIAF issues 5,196,333 shares of its common stock and transfer 400,000 shares of TRW to the
note holder; and (b) SIAF executes a new promissory note in the principal amount of $15,589,000 to the note holder to be paid in
installments over a period of time. However, both parties remain open to negotiate an all-cash settlement of the Note 1.
As a result, the amount outstanding
under Note 1 was reclassified as other payables – straight note payable of $29,367,999 (see Note 19).
On October 20, 2017, the Company
issued another Convertible Note (the
"Note 2"
) with a principal amount of $4,000,000 due on February 28, 2018.
The note holder had the option to convert all or any part of the outstanding note into the common stock of the Company (the "Primary
Optional Conversion") or TRW (the "Secondary Optional Conversion") at any time for a period of eight months from
the note's maturity date. The conversion price for Primary Optional Conversion is lesser of $1.5 per share or at 65% of the market
share price of the Company. While the conversion price for Secondary Optional Conversion is $3.41 per share subject to equitable
adjustment for stock split, stock dividend or right offerings.
Under the agreement, the Company
shall pay the note holder 120,000 common shares of SIAF or 32,000 common shres of TRW as an origination fee. The note bears a
flat interest payment which shall be settled by 200,000 common shares of SIAF or 55,000 common shares of TRW. As of June 30, 2019,
no settlement for both origination fee and interest payment.
The Company and the note holder
entered into a restructuring agreement regarding the settlement of the Note 2. Both parties have agreed to restructure the indebtedness
represented by Note 2 where SIAF executes a new promissory note in the principal amount of $6,301,480 to the note holder to be
paid in 3 installments by August 31, 2019, October 30, 2019 and December 31, 2019, respectively.
As a result, the amount outstanding
under Note 2 was reclassified as other payables – straight note payable of $6,301,480 (see Note 19) and a loss on restructuring
of $2,404,402 which representing the default interest incurred during the period.
|
|
June 30, 2019
|
|
|
December 31, 2018
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
|
|
|
|
|
|
|
Convertible note due December 31, 2018
|
|
$
|
-
|
|
|
$
|
3,894,978
|
|
Less: classified as current liabilities
|
|
|
-
|
|
|
|
(3,894,978
|
)
|
Non-current liabilities
|
|
$
|
-
|
|
|
$
|
-
|
|
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company estimated the fair
value of the derivative liabilities using the Binomial Option Pricing Model and the following key assumptions for the year ended
December 31, 2018
|
|
December
31, 2018
|
|
Expected dividends
|
|
|
-
|
|
Expected term (years)
|
|
|
0.34
|
|
Volatility
|
|
|
52.09% - 54.32%
|
|
Risk-free rate
|
|
|
1.65% - 1.9%
|
|
The following table sets forth,
by level within the fair value hierarchy, the Company’s financial liabilities that were accounted for at fair value as of
December 31, 2018.
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
LIABILITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities as of December 31, 2018
|
|
|
-
|
|
|
|
-
|
|
|
|
2,100
|
|
|
|
2,100
|
|
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Group’s share capital
as of June 30, 2019 and December 31, 2018 shown on the consolidated balance sheet represents the aggregate nominal value of the
share capital of the Company as of that date.
Common Stock:
On November 10, 2014, the Company
approved an amendment to the Corporation’s Articles of Incorporation to effectuate a reverse stock split (the “Reverse
Split”) of the Corporation’s common stock, par value $0.001 per share (the “Common Stock”) affecting both
the authorized and issued and outstanding number of such shares by a ratio of 9.9 for 1. The Reverse Split became effective in
the State of Nevada on December 16, 2014. Subsequent to the December 31, 2014, the Board of directors and the holders of a majority
of the voting power of our stockholders of the company have approved an amendment to articles of incorporation to increase its
authorized shares of Common Stock from 17,171,716 to 22,727,272.
The Board of directors and the
holders of a majority of the voting power of our stockholders of the company have approved an amendment to articles of incorporation
to increase its authorized shares of Common Stock from 22,727,272 to 27,000,000 and the amendment was filed on December 28, 2016.
The
Board of directors and the holders of a majority of the voting power of our stockholders of the company have approved an amendment
to articles of incorporation to increase its authorized shares of Common Stock from 27,000,000 to 50,000,000 and the amendment
was filed on August 24, 2017 with an effective date of August 25, 2017.
During
the year ended December 31, 2018, the Company (i) issued 535,598 shares of common stock valued to employees and directors at ranging
from $1 to $1.56 per share for $576,170 for employee compensation; (ii) issued 16,032,262 shares of common stock valued to professionals
and contractors ranging from $ 0.55 to $1.00 per share for $9,723,720 for service compensation; and (iii) issued 3,935,439 shares
of common stock valued at $ 0.30 to $ 0.50 per share for 1,478,029 for settlement of debts.
During the six
months
ended June 30, 2019, the Company (i) issued 109,911 shares of common stock valued at fair value of $0.3 per share for $32,973
for settling of debts; the shares issued by the Company were valued at the trading price of the stock on the date the shares were
issued.
The
Company has 4
9,976,085 and 49,866,174 shares of common
stock issued and outstanding as of June 30, 2019 and December 31, 2018 respectively.
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 $851 in Enping City, Guangdong Province,
P.R.C., its lease expiring on March 31, 2019. The lease was renewed on March 28, 2019 for a monthly rent of $844 expired on
March 31, 2022, and (ii) 5,081 square feet of office space in Guangzhou City, Guangdong Province, P.R.C. for a monthly rent
of $12,197, its lease expiring on July 8, 2018. The lease was renewed on July 9, 2018 for a 2,695 square feet of office space
for a monthly rent of $6,537 expired on July 8, 2020.
Lease expenses were $22,009
and $40,789, $44,287 and $81,547 for the three months ended and the six months ended June 30, 2019 and 2018, respectively.
.
The future minimum lease
payments as of June 30, 2019, are as follows:
Within 1 year
|
|
$
|
88,762
|
|
2 to 5 years
|
|
|
19,355
|
|
Over 5 years
|
|
|
-
|
|
|
|
$
|
108,117
|
|
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
25.
|
STOCK BASED COMPENSATION
|
The Company calculated stock-based
compensation of $643,457 and $2,489,179 and recognized $115,787, $1,124,377, $527,670 and $1,350,490 for the three months and
the six months ended June 30, 2018 and 2017, respectively. As of June 30, 2019, the deferred compensation balance for staff was
$115,787 and the deferred compensation balance of $115,787 was to be amortized over 3 months beginning on July 1, 2019. As of
June 30, 2018, the deferred compensation balance for staff was $1,138,689 and the deferred compensation balance of $250,400 and
$888,289 were to be amortized over 3 months and 9 months beginning on July 1, 2018, respectively.
On March 26, 2019, 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, styled
Heng Ren Silk Road Investments LLC, Heng Ren Investments LP, derivatively
on behalf of Sino Agro Food Inc. v. Sino Agro Food Inc., Lee Yip Kun Solomon, Tan Poay Teik, Chen Bor Hann, Lim Chang Soh, and
Sino Agro Food Inc.
, as the nominal defendant (Case No.: 1:19-cv-02680) (the “
Complaint
”). The
Company filed its Motion to Dismiss the Complaint on June 24, 2019. After the Company filed its Motion to Dismiss, the Court,
sue
sponte
, issued an Order requiring plaintiffs to either file an Amended Complaint by July 16, 2019 or serve their Opposition
to the Motion to Dismiss by that date. Subsequently, Plaintiffs informed the Court that they intend to file an Amended
Complaint and requested, and received, an extension of time to file their Amended Complaint, which was due on August 13, 2019.
On August 13, 2019, Plaintiffs
filed the Amended Complaint, which added an additional plaintiff and removed two parties that were initially named as Defendants
in the Complaint. The Amended Complaint alleges violations of the federal securities laws and breaches of fiduciary duties
(including gross mismanagement of the Company) by the individual defendants, based on allegations concerning,
inter alia,
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 believes that these claims are without
merit and intend to vigorously defend the action. Based on the Company’s assessment of the facts underlying the claims,
the uncertainty of litigation, and the preliminary stage of the case, the Company cannot estimate the reasonably possible loss
or range of loss that may result from this action. However, an unfavorable outcome may have a material adverse effect on our business,
financial condition and results of operations.
|
27.
|
RELATED PARTY TRANSACTIONS
|
In addition to the transactions
and balances as disclosed elsewhere in these consolidated financial statements, during the three months ended June 30, 2019 and
2018, the Company had the following significant related party transactions:-
Name of related party
|
|
Nature of transactions
|
|
|
|
Mr. Solomon Yip
Kun Lee,
Chairman
Tri-way Industries
Limited, (“TRW’)
Unconsolidated
equity investee
|
|
Included in due to a director,
due to Mr. Solomon Yip Kun Lee is $655,031 and $2,046,499 as of June 30, 2019 and December 31, 2018, respectively.
The amounts are unsecured, interest free and have no fixed terms of repayment.
Included in interest in unconsolidated
equity investee, due from Tri-way Industries Limited is $59,276,133 and $57,354,208 as of June 30, 2019 and December 31, 2018,
respectively. The amounts are unsecured, interest free and have no fixed terms of repayment.
Included in accounts receivable, due from
Tri-way Industries Limited is $62,557,029 and $60,799,365 as of June 30, 2019 and December 31, 2018, respectively. The amounts
are unsecured, interest free and have no fixed terms of repayment.
The Company has consulting and service
income from development contracts of $728,245 and $1,061,985, $1,719,247 and $3,534,390 from Tri-way Industries Limited for the
three months and the six months ended June 30, 2019 and 2018, respectively.
|
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Basic earnings per share is
computed by dividing net income attributable to common shareholders by the weighted average number of common shares outstanding
during the year. Diluted earnings per share reflects the potential dilution of securities by including other potential common stock,
including convertible preferred stock, stock options and warrants, in the weighted average number of common shares outstanding
for the year, if dilutive. The numerators and denominators used in the computations of basic and dilutive earnings per share are
presented in the following table:
|
|
Three months ended
June 30, 2019
|
|
|
Three months ended
June 30, 2018
|
|
|
|
|
|
|
|
|
BASIC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator for basic earnings per share attributable to the Company’s common stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income used in computing basic earnings per share -continuing and discontinued operations
|
|
$
|
6,573,421
|
|
|
$
|
897,667
|
|
Net income used in computing basic earnings per share -continuing operations
|
|
$
|
6,573,421
|
|
|
$
|
897,667
|
|
Basic earnings per share - continuing and discontinued operations
|
|
$
|
0.13
|
|
|
$
|
0.02
|
|
Basic earnings per share - continuing operations
|
|
$
|
0.13
|
|
|
$
|
0.02
|
|
Basic weighted average shares outstanding
|
|
|
49,968,758
|
|
|
|
37,573,999
|
|
|
|
Three months ended
June 30, 2019
|
|
|
Three months ended
June 30, 2018
|
|
|
|
|
|
|
|
|
DILUTED
|
|
|
|
|
|
|
|
|
Numerator for basic earnings per share attributable to the Company’s common stockholders:
|
|
|
|
|
|
|
|
|
Net income used in computing basic earnings per share - continuing and discontinued operations
|
|
$
|
6,573,421
|
|
|
$
|
897,667
|
|
Convertible note interest
|
|
|
-
|
|
|
|
-
|
|
Net income used in computing diluted earnings per share
|
|
$
|
6,573,421
|
|
|
$
|
897,667
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share - continuing and discontinued operations
|
|
$
|
0.13
|
|
|
$
|
0.02
|
|
|
|
Three months ended
June 30, 2019
|
|
|
Three months ended
June 30, 2018
|
|
|
|
|
|
|
|
|
Numerator for basic earnings per share attributable to the Company’s common stockholders:
|
|
|
|
|
|
|
|
|
Net income used in computing basic earnings per share - continuing operations
|
|
$
|
6,573,421
|
|
|
$
|
897,667
|
|
Convertible mote interest
|
|
|
-
|
|
|
|
-
|
|
Net income used in computing diluted earnings per share
|
|
$
|
6,573,421
|
|
|
$
|
897,667
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share - continuing operations
|
|
$
|
0.13
|
|
|
$
|
0.02
|
|
|
|
|
|
|
|
|
|
|
Basic weighted average shares outstanding
|
|
|
49,968,758
|
|
|
|
37,573,999
|
|
|
|
|
|
|
|
|
|
|
Add:
|
|
|
|
|
|
|
|
|
weight average of common stock convertible from convertible note payables
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted average shares outstanding
|
|
|
49,968,758
|
|
|
|
37,573,999
|
|
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
28.
|
EARNINGS PER SHARE (CONTINUED)
|
Basic earnings per share is
computed by dividing net income attributable to common shareholders by the weighted average number of common shares outstanding
during the year. Diluted earnings per share reflects the potential dilution of securities by including other potential common stock,
including convertible preferred stock, stock options and warrants, in the weighted average number of common shares outstanding
for the year, if dilutive. The numerators and denominators used in the computations of basic and dilutive earnings per share are
presented in the following table:
|
|
Six months ended
June 30, 2019
|
|
|
Six months ended
June 30, 2018
|
|
|
|
|
|
|
|
|
BASIC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator for basic earnings per share attributable to the Company’s common stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income used in computing basic earnings per share -continuing and discontinued operations
|
|
$
|
7,186,095
|
|
|
$
|
5,970,386
|
|
Net income used in computing basic earnings per share -continuing operations
|
|
$
|
7,186,095
|
|
|
$
|
5,970,386
|
|
Basic earnings per share - continuing and discontinued operations
|
|
$
|
0.14
|
|
|
$
|
0.17
|
|
Basic earnings per share - continuing operations
|
|
$
|
0.14
|
|
|
$
|
0.17
|
|
Basic weighted average shares outstanding
|
|
|
49,917,466
|
|
|
|
35,749,331
|
|
|
|
Six months ended
June 30, 2019
|
|
|
Six months ended
June 30, 2018
|
|
|
|
|
|
|
|
|
DILUTED
|
|
|
|
|
|
|
|
|
Numerator for basic earnings per share attributable to the Company’s common stockholders:
|
|
|
|
|
|
|
|
|
Net income used in computing basic earnings per share - continuing and discontinued operations
|
|
$
|
7,186,095
|
|
|
$
|
5,970,386
|
|
Convertible note interest
|
|
|
-
|
|
|
|
-
|
|
Net income used in computing diluted earnings per share
|
|
$
|
7,186,095
|
|
|
$
|
5,970,386
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share - continuing and discontinued operations
|
|
$
|
0.14
|
|
|
$
|
0.17
|
|
|
|
Six months ended
June 30, 2019
|
|
|
Six months ended
June 30, 2018
|
|
|
|
|
|
|
|
|
Numerator for basic earnings per share attributable to the Company’s common stockholders:
|
|
|
|
|
|
|
|
|
Net income used in computing basic earnings per share - continuing operations
|
|
$
|
7,186,095
|
|
|
$
|
5,970,386
|
|
Convertible mote interest
|
|
|
-
|
|
|
|
-
|
|
Net income used in computing diluted earnings per share
|
|
$
|
7,186,095
|
|
|
$
|
5, 970,386
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share - continuing operations
|
|
$
|
0.14
|
|
|
$
|
0.17
|
|
|
|
|
|
|
|
|
|
|
Basic weighted average shares outstanding
|
|
|
49,917,466
|
|
|
|
35,749,331
|
|
|
|
|
|
|
|
|
|
|
Add:
|
|
|
|
|
|
|
|
|
weight average of common stock convertible from convertible note payables
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted average shares outstanding
|
|
|
49,917,466
|
|
|
|
35,749,331
|
|
A (1) Income Statements (Unaudited)
In $
|
|
Three months ended
|
|
|
Three months ended
|
|
|
|
|
|
|
|
|
|
June 30, 2019
|
|
|
June 30, 2018
|
|
|
Difference
|
|
|
Note
|
|
Continuing operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
38,601,178
|
|
|
|
33,994,723
|
|
|
|
4,606,455
|
|
|
|
1
|
|
Sale of goods
|
|
|
37,872,933
|
|
|
|
32,932,737
|
|
|
|
4,940,196
|
|
|
|
|
|
Consulting, services, commission and management fee
|
|
|
728,245
|
|
|
|
1,061,986
|
|
|
|
(333,741
|
)
|
|
|
|
|
Cost of goods sold and services
|
|
|
31,734,553
|
|
|
|
28,551,677
|
|
|
|
3,182,876
|
|
|
|
2
|
|
Cost of goods sold
|
|
|
31,084,220
|
|
|
|
27,671,259
|
|
|
|
3,412,961
|
|
|
|
|
|
Cost of services
|
|
|
650,333
|
|
|
|
880,418
|
|
|
|
(230,085
|
)
|
|
|
|
|
Gross Profit
|
|
|
6,866,625
|
|
|
|
5,443,046
|
|
|
|
1,423,579
|
|
|
|
3
|
|
Other income (expenses)
|
|
|
3,435,744
|
|
|
|
(1,814,969
|
)
|
|
|
5,250,713
|
|
|
|
|
|
General and administrative expenses
|
|
|
(3,194,589
|
)
|
|
|
(4,133,054
|
)
|
|
|
938,465
|
|
|
|
4
|
|
Net income before income taxes
|
|
|
7,107,780
|
|
|
|
(504,977
|
)
|
|
|
7,612,757
|
|
|
|
|
|
EBITDA
|
|
|
10,187,602
|
|
|
|
3,144,896
|
|
|
|
7,042,706
|
|
|
|
|
|
Depreciation and amortization (D&A)
|
|
|
2,946,229
|
|
|
|
3,232,566
|
|
|
|
(286,337
|
)
|
|
|
5
|
|
EBIT
|
|
|
7,241,373
|
|
|
|
(87,670
|
)
|
|
|
7,329,043
|
|
|
|
|
|
Net Interest
|
|
|
133,593
|
|
|
|
417,307
|
|
|
|
(283,714
|
)
|
|
|
|
|
Tax
|
|
|
3,905
|
|
|
|
-
|
|
|
|
3,905.00
|
|
|
|
|
|
Net Income
|
|
|
7,103,875
|
|
|
|
(504,977
|
)
|
|
|
7,608,852
|
|
|
|
|
|
Less:Net( income) loss attributable to Non - controlling interest
|
|
|
(530,454
|
)
|
|
|
1,402,644
|
|
|
|
(1,933,098
|
)
|
|
|
7
|
|
Net income attributable to SIAF Inc. and subsidiaries
|
|
|
6,573,421
|
|
|
|
897,667
|
|
|
|
5,675,754
|
|
|
|
|
|
Weighted average number of shares outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Basic
|
|
|
49,968,758
|
|
|
|
37,573,999
|
|
|
|
12,394,759
|
|
|
|
|
|
- Diluted
|
|
|
49,968,758
|
|
|
|
37,573,999
|
|
|
|
12,394,759
|
|
|
|
|
|
Earnings per share attributable to Sino Agro Food, Inc. and subsidiaries common stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8
|
|
Basic
|
|
|
0.13
|
|
|
|
0.02
|
|
|
|
0.11
|
|
|
|
|
|
Diluted
|
|
|
0.13
|
|
|
|
0.02
|
|
|
|
0.11
|
|
|
|
|
|
Note (1, 2 & 3) Sales, cost of sales
and gross profit information and analysis:
|
•
|
The Company’s revenues were generated from (1)
Sale of Goods and (2) Consulting and Services provided in project and business developments covering engineering, construction,
supervision, training, management and technology etc.
|
The table below shows the segmental sales,
gross profit and corresponding cost of sales for the three months ended June 30, 2019 (Q2 2019) compared to the three months ended
June 30, 2018 (Q2 2018).
|
|
|
|
Sales of goods
|
|
|
Cost of Goods sold
|
|
|
Sales of Goods’ Gross profit
|
|
|
|
In US$
|
|
2019Q2
|
|
|
2018Q2
|
|
|
2019Q2
|
|
|
2018Q2
|
|
|
2019Q2
|
|
|
2018Q2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SJAP
|
|
Sales of live cattle
|
|
|
958,131
|
|
|
|
1,492,775
|
|
|
|
932,154
|
|
|
|
1,230,393
|
|
|
|
25,977
|
|
|
|
262,382
|
|
|
|
Sales of feedstock
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
Bulk Livestock feed
|
|
|
306,592
|
|
|
|
491,022
|
|
|
|
136,958
|
|
|
|
225,288
|
|
|
|
169,634
|
|
|
|
265,735
|
|
|
|
Concentrate livestock feed
|
|
|
1,704,201
|
|
|
|
2,165,423
|
|
|
|
944,130
|
|
|
|
1,192,662
|
|
|
|
760,071
|
|
|
|
972,761
|
|
|
|
Sales of fertilizer
|
|
|
1,260,522
|
|
|
|
975,592
|
|
|
|
1,003,941
|
|
|
|
841,009
|
|
|
|
256,581
|
|
|
|
134,583
|
|
|
|
SJAP Total
|
|
|
4,229,446
|
|
|
|
5,124,813
|
|
|
|
3,017,183
|
|
|
|
3,489,352
|
|
|
|
1,212,263
|
|
|
|
1,635,461
|
|
HSA
|
|
Sales of Organic fertilizer
|
|
|
870,390
|
|
|
|
927,067
|
|
|
|
677,453
|
|
|
|
766,897
|
|
|
|
192,936
|
|
|
|
160,170
|
|
|
|
Sales of Organic Mixed Fertilizer
|
|
|
1,652,665
|
|
|
|
1,572,423
|
|
|
|
944,380
|
|
|
|
878,698
|
|
|
|
708,286
|
|
|
|
693,725
|
|
|
|
HSA Total
|
|
|
2,523,055
|
|
|
|
2,499,490
|
|
|
|
1,621,833
|
|
|
|
1,645,595
|
|
|
|
901,222
|
|
|
|
853,895
|
|
|
|
SJAP’s & HS.A./Organic fertilizer total
|
|
|
6,752,501
|
|
|
|
7,624,303
|
|
|
|
4,639,016
|
|
|
|
5,134,947
|
|
|
|
2,113,485
|
|
|
|
2,489,356
|
|
JHST
|
|
Sales of Fresh HU Flowers
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
Sales of Dried HU Flowers
|
|
|
-
|
|
|
|
132,014.29
|
|
|
|
-
|
|
|
|
122,881
|
|
|
|
-
|
|
|
|
9,133
|
|
|
|
Sales of Dried Immortal vegetables
|
|
|
73,378
|
|
|
|
62,705.75
|
|
|
|
58,703
|
|
|
|
46,637
|
|
|
|
14,675
|
|
|
|
16,068
|
|
|
|
Sales of Vegetable products
|
|
|
1,030,267
|
|
|
|
849,525
|
|
|
|
725,535
|
|
|
|
689,665
|
|
|
|
304,732
|
|
|
|
159,860
|
|
|
|
JHST/Plantation Total
|
|
|
1,103,645
|
|
|
|
1,044,245
|
|
|
|
784,238
|
|
|
|
859,183
|
|
|
|
319,407
|
|
|
|
185,062
|
|
MEIJI
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
Sale of Live cattle (Aromatic)
|
|
|
12,550,285
|
|
|
|
6,073,838
|
|
|
|
10,143,598
|
|
|
|
5,507,928
|
|
|
|
2,406,687
|
|
|
|
565,910
|
|
|
|
MEIJI / Cattle farm Total
|
|
|
12,550,285
|
|
|
|
6,073,838
|
|
|
|
10,143,598
|
|
|
|
5,507,928
|
|
|
|
2,406,687
|
|
|
|
565,910
|
|
SIAF
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of goods through trading/import/export activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
on seafood
|
|
|
8,372,217
|
|
|
|
9,525,821
|
|
|
|
7,441,968
|
|
|
|
8,467,396
|
|
|
|
930,249
|
|
|
|
1,058,425
|
|
|
|
on imported beef and mutton
|
|
|
9,094,285
|
|
|
|
8,664,530
|
|
|
|
8,075,400
|
|
|
|
7,701,805
|
|
|
|
1,018,885
|
|
|
|
962,725
|
|
|
|
SIAF/ Others & Corporate total
|
|
|
17,466,502
|
|
|
|
18,190,351
|
|
|
|
15,517,368
|
|
|
|
16,169,201
|
|
|
|
1,949,134
|
|
|
|
2,021,150
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Group Total
|
|
|
37,872,933
|
|
|
|
32,932,737
|
|
|
|
31,084,220
|
|
|
|
27,671,259
|
|
|
|
6,788,713
|
|
|
|
5,261,478
|
|
Overall comparison of Q2 2019 to Q2 201
8
The Company’s revenues generated from the
sale of goods was $37,872,933 for the quarterly period ended June 30, 2019 compared to $32,932,737 for the same period ended June
30, 2018 representing a increase of 15% or $4,940,196.
The
Company’s cost of goods sold was $31,084,220 for the quarterly period ended June 30, 2019 compared to $27,671,259 for the
same period ended June 30, 2018.
Gross profits of the Company
generated from goods sold was $6,788,713 for the quarterly period ended June 30, 2019compared to $$5,261,478 for the same period
ended June 30, 2018, representing a increase of 29% or $1,527,235.
Details of each segment
are being described below:
|
•
|
1. (i) Beef and Organic Fertilizer Division refers
to operation of SJAP
|
In US$
|
|
|
|
Sales of goods
|
|
|
Cost of Goods sold
|
|
|
Gross profit
|
|
|
|
|
|
2019Q2
|
|
|
2018Q2
|
|
|
2019Q2
|
|
|
2018Q2
|
|
|
2019Q1
|
|
|
2018Q2
|
|
SJAP
|
|
Sales of live cattle
|
|
|
958,131
|
|
|
|
1,492,775
|
|
|
|
932,154
|
|
|
|
1,230,393
|
|
|
|
25,977
|
|
|
|
262,382
|
|
|
|
Sales of feedstock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bulk Livestock feed
|
|
|
306,592
|
|
|
|
491,022
|
|
|
|
136,958
|
|
|
|
225,288
|
|
|
|
169,634
|
|
|
|
265,735
|
|
|
|
Concentrate livestock feed
|
|
|
1,704,201
|
|
|
|
2,165,423
|
|
|
|
944,130
|
|
|
|
1,192,662
|
|
|
|
760,071
|
|
|
|
972,761
|
|
|
|
Sales of fertilizer
|
|
|
1,260,522
|
|
|
|
975,592
|
|
|
|
1,003,941
|
|
|
|
841,009
|
|
|
|
256,581
|
|
|
|
134,583
|
|
|
|
SJAP Total
|
|
|
4,229,446
|
|
|
|
5,124,813
|
|
|
|
3,017,183
|
|
|
|
3,489,352
|
|
|
|
1,212,263
|
|
|
|
1,635,461
|
|
|
|
% of increase (+) or decrease (-)
|
|
|
-17
|
%
|
|
|
|
|
|
|
-14
|
%
|
|
|
|
|
|
|
-26
|
%
|
|
|
|
|
As illustrated in the table
above, when comparing Q2 2019 to Q2 2018, the losses in revenue (negative variance of $0.9 million, or -17%) and gross profit (negative
variance of 0.4 million, or -26%) was primarily due to the decreased sales of live cattle (-$534,644 or -36%), Feed stock (-$184,430
or -38%) and Concentrate livestock feed (-$461,222 or -21%)
The table below shows
the itemized sales of goods and related cost of sales in quantity and unit price for the quarterly period ended June 30, 2019 compared
to the same period ended June 30, 2018 of the beef and organic fertilizer divisions.
|
|
|
|
|
|
|
2019Q2
|
|
|
2018Q2
|
|
|
Difference
|
|
SJAP
|
|
|
Production and Sales of live cattle
|
|
Heads
|
|
|
565
|
|
|
|
858
|
|
|
|
(293
|
)
|
|
|
|
Average Unit sales price
|
|
US$/head
|
|
|
1,696
|
|
|
|
1,740
|
|
|
|
(44
|
)
|
|
|
|
Unit cost prices
|
|
US$/head
|
|
|
1,650
|
|
|
|
1,434
|
|
|
|
216
|
|
|
|
|
Production and sales of feedstock
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
0
|
|
|
|
|
Bulk Livestock feed
|
|
MT
|
|
|
1,760
|
|
|
|
2,668
|
|
|
|
(908
|
)
|
|
|
|
Average Unit sales price
|
|
US$/MT
|
|
|
174
|
|
|
|
184
|
|
|
|
(10
|
)
|
|
|
|
Unit cost prices
|
|
US$/MT
|
|
|
78
|
|
|
|
84
|
|
|
|
(7
|
)
|
|
|
|
Concentrated livestock feed
|
|
MT
|
|
|
3,860
|
|
|
|
4,626
|
|
|
|
(766
|
)
|
|
|
|
Average Unit sales price
|
|
US$/MT
|
|
|
442
|
|
|
|
468
|
|
|
|
(27
|
)
|
|
|
|
Unit cost prices
|
|
US$/MT
|
|
|
260
|
|
|
|
258
|
|
|
|
2
|
|
|
|
|
Production and sales of fertilizer
|
|
MT
|
|
|
8,231
|
|
|
|
7,790
|
|
|
|
441
|
|
|
|
|
Average Unit sales price
|
|
US$/MT
|
|
|
153
|
|
|
|
125
|
|
|
|
28
|
|
|
|
|
Unit cost prices
|
|
US$/MT
|
|
|
122
|
|
|
|
108
|
|
|
|
14
|
|
The live cattle prices have not improve
d
during the quarter, thus the lower unit price / head was primarily due to smaller sized cattle being sold and the overall situation
of the local live cattle industry remaining depressed that also affected the sales of SJAP’s livestock feed, enhancing higher
inventories with less quantity of sales.
The
decrease in the sales of bulk livestock feed of 908 MT represents sales going from 2,668 MT in Q22018 to 1,760 MT in Q2 2019,
while at the same time a decrease of 766 MT in concentrated feed reflected going from 4,626 MT in Q2 2018 to 3,860 MT in Q2 2019,
again for the same reasons as mentioned, above.
However
the sales of fertilizer increased during the quarter from Q2 2018’s 7,790 MT to Q2 2019’s 8,231 MT reflecting district
farmers seeking other agricultural alternatives by planting other crops, which helped in increasing sale quantities of SJAP’s
fertilizer. Sales prices of fertilizer increased to $152 / MT compares to $125 / MT in Q2 2018 due primarily to the increase cost
of raw materials to $122 / MT compares to Q2 2018’s $108 / MT.
1.
(ii). The operations of HSA in manufacturing and sales of organic fertilizer itemizing unit sales, costs and quantity of sales:
In
US$
|
|
|
|
Sales
of goods
|
|
|
Cost
of Goods sold
|
|
|
Gross
profit
|
|
|
|
|
|
2019Q2
|
|
|
2018Q2
|
|
|
2019Q2
|
|
|
2018Q2
|
|
|
2019Q1
|
|
|
2018Q2
|
|
HSA
|
|
Sales
of Organic fertilizer
|
|
|
870,390
|
|
|
|
927,067
|
|
|
|
677,453
|
|
|
|
766,897
|
|
|
|
192,936
|
|
|
|
160,170
|
|
|
|
Sales
of Organic Mixed Fertilizer
|
|
|
1,652,665
|
|
|
|
1,572,423
|
|
|
|
944,380
|
|
|
|
878,698
|
|
|
|
708,286
|
|
|
|
693,725
|
|
|
|
HSA
Total
|
|
|
2,523,055
|
|
|
|
2,499,490
|
|
|
|
1,621,833
|
|
|
|
1,645,595
|
|
|
|
901,222
|
|
|
|
853,895
|
|
|
|
SJAP's
& HS.A./Organic fertilizer total
|
|
|
6,752,501
|
|
|
|
7,624,303
|
|
|
|
4,639,016
|
|
|
|
5,134,947
|
|
|
|
2,113,485
|
|
|
|
2,489,356
|
|
|
|
%
of increase (+) or decrease (-)
|
|
|
-11
|
%
|
|
|
|
|
|
|
-10
|
%
|
|
|
|
|
|
|
-15
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
2019Q2
|
|
|
2018Q2
|
|
|
Difference
|
|
HSA
|
|
|
Fertilizer operation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Organic Fertilizer
|
|
|
MT
|
|
|
|
3,500
|
|
|
|
3,717
|
|
|
|
(217
|
)
|
|
|
|
Average Unit sales price
|
|
|
$/MT
|
|
|
|
249
|
|
|
|
249
|
|
|
|
(1
|
)
|
|
|
|
Unit cost price
|
|
|
$/MT
|
|
|
|
194
|
|
|
|
202
|
|
|
|
(8
|
)
|
|
|
|
Organic Mixed Fertilizer
|
|
|
MT
|
|
|
|
4,111
|
|
|
|
3,690
|
|
|
|
421
|
|
|
|
|
Average Unit sales price
|
|
|
$/MT
|
|
|
|
402
|
|
|
|
426
|
|
|
|
(24
|
)
|
|
|
|
Unit cost price
|
|
|
$/MT
|
|
|
|
230
|
|
|
|
238
|
|
|
|
(8
|
)
|
|
|
|
Retailing packed fertilizer (for super market
sales)
|
|
|
MT
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
Average Unit sales price
|
|
|
$/MT
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
Unit cost price
|
|
|
$/MT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During
Q2 2019, HSA’s 2
nd
production plant sold 4,111 MT of Organic Mixed Fertilizer for $1.65 million (increased by
5% ) compared to Q2 2018’s sales of $1,572,423 of 3,690 MT primarily due to higher demands for the organic mixed fertilizer..
Plantation
Division
refers to the operations of JHST. JHST is engaged in the HU Plantation business where dragon fruit flowers (dried
and fresh), cash vegetable crops and immortal vegetables are sold to wholesale and retail markets.
|
|
In US$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of goods
|
|
|
Cost of Goods sold
|
|
|
Gross profit
|
|
|
|
|
|
2019Q2
|
|
|
2018Q2
|
|
|
2019Q2
|
|
|
2018Q2
|
|
|
2019Q2
|
|
|
2018Q2
|
|
JHST
|
|
Sales of Fresh HU Flowers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
Sales of Dried HU Flowers
|
|
|
|
|
|
|
132,014
|
|
|
|
|
|
|
|
122,881
|
|
|
|
-
|
|
|
|
9,133
|
|
|
|
% of increases (+) or decreases (-)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of Dried Immortal vegetables
|
|
|
73,378
|
|
|
|
62,706
|
|
|
|
58,703
|
|
|
|
46,637
|
|
|
|
14,675
|
|
|
|
16,069
|
|
|
|
% of increases (+) or decreases (-)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of Vegetable products
|
|
|
1,030,267
|
|
|
|
849,525
|
|
|
|
725,535
|
|
|
|
689,665
|
|
|
|
304,732
|
|
|
|
159,860
|
|
|
|
% of increases (+) or decreases (-)
|
|
|
21
|
%
|
|
|
|
|
|
|
5
|
%
|
|
|
|
|
|
|
91
|
%
|
|
|
|
|
|
|
JHST/Plantation Total
|
|
|
1,103,645
|
|
|
|
1,044,245
|
|
|
|
784,238
|
|
|
|
859,183
|
|
|
|
319,407
|
|
|
|
185,062
|
|
|
|
% of increases (+) or decreases (-)
|
|
|
6
|
%
|
|
|
|
|
|
|
-9
|
%
|
|
|
|
|
|
|
73
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
2019Q2
|
|
|
2018Q2
|
|
|
Difference
|
|
JHST
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fresh HU Flowers
|
|
|
Pieces
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
Average Unit sales price
|
|
|
US$/Pieces
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
Unit cost prices
|
|
|
US$/Pieces
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
Dried HU Flowers
|
|
|
MT
|
|
|
|
-
|
|
|
|
26
|
|
|
|
(26
|
)
|
|
|
|
Average Unit sales price
|
|
|
US$/MT
|
|
|
|
-
|
|
|
|
5,121
|
|
|
|
(5,121
|
)
|
|
|
|
Unit cost prices
|
|
|
US$/MT
|
|
|
|
-
|
|
|
|
4,767
|
|
|
|
(4,767
|
)
|
|
|
|
Dried Immortal vegetables
|
|
|
MT
|
|
|
|
2
|
|
|
|
1
|
|
|
|
1
|
|
|
|
|
Average Unit sales price
|
|
|
US$/MT
|
|
|
|
36,689
|
|
|
|
62,706
|
|
|
|
(26,017
|
)
|
|
|
|
Unit cost prices
|
|
|
US$/MT
|
|
|
|
29,352
|
|
|
|
46,637
|
|
|
|
(17,286
|
)
|
|
|
|
Vegetable products
|
|
|
MT
|
|
|
|
910
|
|
|
|
768
|
|
|
|
142
|
|
|
|
|
Average Unit sales price
|
|
|
US$/MT
|
|
|
|
1,132
|
|
|
|
1,106
|
|
|
|
26
|
|
|
|
|
Unit cost prices
|
|
|
US$/MT
|
|
|
|
797
|
|
|
|
898
|
|
|
|
(101
|
)
|
This quarter there was no
production or sales of HU flower However, sales volume of fresh vegetables increased by 142 MT at slightly better unit prices of
$1,132 / MT versus Q2 2018’s $1,106 / MT, helping to enhance sales by $1,030,267 (increased by 21% or $180,742 ) from Q2
2018’s $849,525 .
3. Cattle Farm Division
refers
to the operations of Cattle Farm 1 under JHMC where cattle are sold live to third party livestock wholesalers who resell them mainly
in Guangzhou and Beijing livestock wholesale markets. The financial statements of JHMC are consolidated into MEIJI as one entity
along with MEIJI’s operation in the consulting and service for development of other cattle farms, such as Cattle Farm 2,
or related projects.
In US$
|
|
Sales of goods
|
|
|
Cost of Goods sold
|
|
|
Gross profit
|
|
|
|
|
|
2019Q2
|
|
|
2018Q2
|
|
|
2019Q2
|
|
|
2018Q2
|
|
|
2019Q2
|
|
|
2018Q2
|
|
MEIJI
|
|
from Cattle farm 1 & 2
|
|
|
12,550,285
|
|
|
|
6,073,838
|
|
|
|
10,143,598
|
|
|
|
5,507,928
|
|
|
|
2,406,687
|
|
|
|
565,910
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MEIJI / Cattle farm
Total
|
|
|
12,550,285
|
|
|
|
6,073,838
|
|
|
|
10,143,598
|
|
|
|
5,507,928
|
|
|
|
2,406,687
|
|
|
|
565,910
|
|
|
|
% of increases (+) & decreases (-)
|
|
|
107
|
%
|
|
|
|
|
|
|
84
|
%
|
|
|
|
|
|
|
325
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
2019Q2
|
|
|
2018Q2
|
|
|
Difference
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MEIJI
|
|
|
Production and trading on sale of Live cattle
|
|
|
Head
|
|
|
|
3,269
|
|
|
|
1,799
|
|
|
|
1,470
|
|
|
|
|
Average Unit sales price
|
|
|
$/head
|
|
|
|
3,839
|
|
|
|
3,376
|
|
|
|
463
|
|
|
|
|
Unit cost prices
|
|
|
$/head
|
|
|
|
3,103
|
|
|
|
3,062
|
|
|
|
41
|
|
Revenue from the cattle farm
increased by $6,476,447 (or 107%) from $6,073,838 for the quarterly period ended June 30, 2018 compared to $12,550,285 for the
quarterly period ended June 30, 2019. The increase was primarily due to more “Yellow Cattle,” being sold from the increase
of production encouraged by the steady improved demands and market prices. .
|
•
|
4. Corporate & Others Division
refers to the
business operations of Sino Agro Food, Inc. / Capital Award Inc. mainly on the import/export (trading) business
|
|
|
|
In US$
|
|
Sales of goods
|
|
|
Cost of Goods sold
|
|
|
Gross profit
|
|
|
|
|
|
|
2019Q2
|
|
|
2018Q2
|
|
|
2019Q2
|
|
|
2018Q2
|
|
|
2019Q2
|
|
|
2018Q2
|
|
SIAF
|
|
|
Sales of goods through trading/import/export activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
on seafood (via imports)
|
|
|
8,372,217
|
|
|
|
9,525,821
|
|
|
|
7,441,968
|
|
|
|
8,467,396
|
|
|
|
930,249
|
|
|
|
1,058,425
|
|
|
|
|
% of increases (+) and decreases
(-)
|
|
|
-12
|
%
|
|
|
|
|
|
|
-12
|
%
|
|
|
|
|
|
|
-12
|
%
|
|
|
|
|
|
|
|
on imported beef mainly
|
|
|
9,094,285
|
|
|
|
8,664,530
|
|
|
|
8,075,400
|
|
|
|
7,701,805
|
|
|
|
1,018,885
|
|
|
|
962,725
|
|
|
|
|
% of increases
(+) and decreases (-)
|
|
|
5
|
%
|
|
|
|
|
|
|
5
|
%
|
|
|
|
|
|
|
6
|
%
|
|
|
|
|
|
|
|
SIAF/ Others & Corporate
total
|
|
|
17,466,502
|
|
|
|
18,190,351
|
|
|
|
15,517,368
|
|
|
|
16,169,201
|
|
|
|
1,949,134
|
|
|
|
2,021,150
|
|
|
|
|
% of increases (+) and decreases
(-)
|
|
|
-4
|
%
|
|
|
|
|
|
|
-4
|
%
|
|
|
|
|
|
|
-4
|
%
|
|
|
|
|
|
|
|
Description of items
|
|
2019Q2
|
|
|
2018Q2
|
|
|
Difference
|
|
SIAF
|
|
|
Seafood trading from imports
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mixed seafood
|
|
|
MT
|
|
|
|
427
|
|
|
|
524
|
|
|
|
(97
|
)
|
|
|
|
Average of sales price
|
|
|
$/MT
|
|
|
|
19,607
|
|
|
|
18,179
|
|
|
|
1,428
|
|
|
|
|
Average of cost prices
|
|
|
$/MT
|
|
|
|
17,428
|
|
|
|
16,159
|
|
|
|
1,269
|
|
|
|
|
Beef & Lamb trading from imports
|
|
|
MT
|
|
|
|
507
|
|
|
|
460
|
|
|
|
47
|
|
|
|
|
Average of sales price
|
|
|
$/MT
|
|
|
|
17,937
|
|
|
|
18,836
|
|
|
|
(898
|
)
|
|
|
|
Average of cost price
|
|
|
$/MT
|
|
|
|
15,928
|
|
|
|
16,743
|
|
|
|
(815
|
)
|
Revenue from the corporate division decreased by $723,849 (or
approximately-4%) from $18,190,352 for Q2 2018 to $17,466,502 for Q2 2019. The decrease was primarily due to less seafood being
imported.
|
•
|
5.A. Engineering technology consulting and services:
|
Notes to Table A (1) Note (1.1, 2.1 and 3.1)
Table (A.5) below shows the revenue, cost
of services and gross profit generated from Consulting, services, commission and management fees for the same period ended June
30, 2019and 2018.
|
|
2019Q2
|
|
|
2018Q2
|
|
|
Difference
|
|
|
Description of work
|
|
Service revenues (Consulting and Services)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CA
|
|
|
728,245
|
|
|
|
1,061,986
|
|
|
|
(333,741
|
)
|
|
|
|
|
Group Total Revenues
|
|
|
728,245
|
|
|
|
1,061,986
|
|
|
|
(333,741
|
)
|
|
|
|
|
Cost of service
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CA
|
|
|
650,333
|
|
|
|
880,418
|
|
|
|
(230,085
|
)
|
|
|
|
|
Group Total Cost of Consulting and Services
|
|
|
650,333
|
|
|
|
880,418
|
|
|
|
(230,085
|
)
|
|
|
|
|
Gross Profit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CA
|
|
|
77,912
|
|
|
|
181,568
|
|
|
|
(103,656
|
)
|
|
|
|
|
Group Total Gross Profit
|
|
|
77,912
|
|
|
|
181,568
|
|
|
|
(103,656
|
)
|
|
|
|
|
Revenues (consulting, service, commission and
management fee):
Revenues decreased by $333,741 from $1,061,986 for
the quarterly period ended June 30, 2018 to $727,245 for the same period ended June 30, 2019.
Correspondingly, the cost
of services for consulting, service, commission and management fees decreased by $230,085 from $880,418 for the quarterly period
ended June 30, 2018 to $650,333 for the same period ended June 30, 2019. The decrease was primarily due to lower revenues during
the quarter. Gross profit from consulting, service, commission and management fees decreased by $103,656 from $181,568 for the
quarter period ended June 30, 2018 to $77,912 for the same period ended June 30, 2019.
Note
(4) to Table A 1 General and Administrative Expenses and Interest Expenses
General and administrative and interest expenses
(including depreciation and amortization) decreased by $1,822,545 or -35% from $5,150,361 for Q2 2018 to $3,327,816 for Q2
2019. The decrease was primarily due to a decrease in operational expenses of $815,054 from $1,819,700 expended during Q22018
to $1,004,646 expended during Q2 2019nand interest expenses reduced from Q2 2018’s $1,017,307 to Q2 2019’s
$133,227 collectively.
Category
|
|
2019Q2
|
|
|
2018Q2
|
|
|
Difference
|
|
Office and corporate expenses
|
|
|
1,004,646
|
|
|
|
1,819,700
|
|
|
|
(815,054
|
)
|
Wages and salaries
|
|
|
399,642
|
|
|
|
554,416
|
|
|
|
(154,774
|
)
|
Traveling and related lodging
|
|
|
4,175
|
|
|
|
8,039
|
|
|
|
(3,863
|
)
|
Motor vehicles expenses and local transportation
|
|
|
8,397
|
|
|
|
21,976
|
|
|
|
(13,579
|
)
|
Entertainments and meals
|
|
|
5,405
|
|
|
|
10,207
|
|
|
|
(4,802
|
)
|
Others and miscellaneous
|
|
|
277,590
|
|
|
|
159,272
|
|
|
|
118,318
|
|
Depreciation and amortization
|
|
|
1,494,733
|
|
|
|
1,559,444
|
|
|
|
(64,711
|
)
|
Sub-total
|
|
|
3,194,589
|
|
|
|
4,133,054
|
|
|
|
(938,465
|
)
|
Interest expenses
|
|
|
133,227
|
|
|
|
1,017,307
|
|
|
|
(884,080
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
3,327,816
|
|
|
|
5,150,361
|
|
|
|
(1,822,545
|
)
|
Note (5) to Table A 1 Non-controlling
interests
Table (F) below shows the derivation
of non-controlling interest
|
|
|
|
|
Jiangmen City
|
|
|
|
|
|
|
|
|
|
|
|
|
Jiangmen City Heng
|
|
|
Hang Mei Cattle
|
|
|
Hunan Shenghua
|
|
|
Qinghai Sanjiang
|
|
|
|
|
|
|
Sheng Tai Agriculture
|
|
|
Farm
|
|
|
A Power
|
|
|
A Power
|
|
|
|
|
|
|
Development Co.
|
|
|
Development Co.
|
|
|
Agriculture Co.,
|
|
|
Agriculture Co
|
|
|
|
|
Name of China subsidiaries
|
|
Ltd.(China)
|
|
|
Ltd.(China)
|
|
|
Limited (China)
|
|
|
Ltd (China)
|
|
|
Total
|
|
Effective shareholding
|
|
|
75
|
%
|
|
|
75
|
%
|
|
|
76
|
%
|
|
|
41.25
|
%
|
|
|
|
|
Abbreviated names
|
|
|
(JHST)
|
|
|
|
(JHMC)
|
|
|
|
(HSA)
|
|
|
|
(SJAP)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) of the P.R.C. subsidiaries for the year in $
|
|
|
(1,345,455
|
)
|
|
|
2,860,498
|
|
|
|
1,005,992
|
|
|
|
223,723
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% of profit sharing of non-controlling interest
|
|
|
25
|
%
|
|
|
25
|
%
|
|
|
24
|
%
|
|
|
58.75
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-controlling interest's shares of Net incomes in $
|
|
|
(336,364
|
)
|
|
|
715,125
|
|
|
|
241,438
|
|
|
|
131,437
|
|
|
|
751,636
|
|
The
Net Income attributed to non-controlling interest is $751,636 shared by JHST, JHMC, HSA, SJAP and JFD, collectively for Q1-2
2019 as shown in Table (F) above.
Note (6) to Table A 1 Earnings per shares
(EPS)
Earnings per share increased by 0.11 (basic) and 0.11 (diluted)
per share from EPS of $0.02 (basic) and $0.02 (diluted) for Q2 2018 to EPS of $0.13 (basic) and $0.13 (diluted) for Q2 2019. The
reason for the increase is primarily due to the net income attributed to the group increased by $5,675,754 (or 632%)
Part B. MD & A on Unaudited Consolidated
Balance Sheet of Continued Operations for the six months ended 30 June 2019 (Q2 2019) compared to the twelve months ended 31 December
2018 (fiscal year 2018)
Consolidated Balance sheets
|
|
June 30, 2019
|
|
|
December 31, 2018
|
|
|
Changes
|
|
|
Note
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
925,220
|
|
|
|
4,950,799
|
|
|
|
(4,025,579
|
)
|
|
|
8
|
|
Inventories
|
|
|
55,248,089
|
|
|
|
54,582,241
|
|
|
|
665,848
|
|
|
|
9
|
|
Costs and estimated earnings in excess of billings on uncompleted contracts
|
|
|
250,828
|
|
|
|
250,828
|
|
|
|
-
|
|
|
|
|
|
Deposits and prepaid expenses
|
|
|
40,665,854
|
|
|
|
52,241,190
|
|
|
|
(11,575,336
|
)
|
|
|
10.1
|
|
Accounts receivable
|
|
|
105,925,636
|
|
|
|
101,652,131
|
|
|
|
4,273,505
|
|
|
|
11
|
|
Other receivables
|
|
|
23,168,587
|
|
|
|
28,307,526
|
|
|
|
(5,138,939
|
)
|
|
|
15
|
|
Total current assets
|
|
|
226,184,214
|
|
|
|
241,984,715
|
|
|
|
(15,800,501
|
)
|
|
|
|
|
Property and equipment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net of accumulated depreciation
|
|
|
243,837,882
|
|
|
|
230,645,659
|
|
|
|
13,192,223
|
|
|
|
12
|
|
Construction in progress
|
|
|
11,000,995
|
|
|
|
12,515,527
|
|
|
|
(1,514,532
|
)
|
|
|
13
|
|
Land use rights, net of accumulated amortization
|
|
|
52,912,958
|
|
|
|
53,814,281
|
|
|
|
(901,323
|
)
|
|
|
14
|
|
Total property and equipment
|
|
|
307,751,835
|
|
|
|
296,975,467
|
|
|
|
10,776,368
|
|
|
|
|
|
Other assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
724,940
|
|
|
|
724,940
|
|
|
|
-
|
|
|
|
|
|
Proprietary technologies, net of accumulated amortization
|
|
|
8,647,017
|
|
|
|
8,937,071
|
|
|
|
(290,054
|
)
|
|
|
|
|
Investment in unconsolidated equity investee
|
|
|
216,154,781
|
|
|
|
207,074,626
|
|
|
|
9,080,155
|
|
|
|
|
|
Temporary deposit paid to entities for investments in future Sino Joint Venture companies
|
|
|
34,918,633
|
|
|
|
34,905,960
|
|
|
|
12,673
|
|
|
|
10.2
|
|
Total other assets
|
|
|
260,445,371
|
|
|
|
251,642,597
|
|
|
|
8,802,774
|
|
|
|
|
|
Total assets
|
|
|
794,381,420
|
|
|
|
790,602,779
|
|
|
|
3,778,641
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
|
9,858,947
|
|
|
|
8,280,358
|
|
|
|
1,578,589
|
|
|
|
|
|
Billings in excess of costs and estimated earnings on uncompleted contracts
|
|
|
5,386,711
|
|
|
|
5,348,293
|
|
|
|
38,418
|
|
|
|
|
|
Due to a director
|
|
|
655,031
|
|
|
|
2,046,499
|
|
|
|
(1,391,468
|
)
|
|
|
|
|
Other payables
|
|
|
46,463,420
|
|
|
|
42,523,811
|
|
|
|
3,939,609
|
|
|
|
16A
|
|
Borrowings-Short term bank loan
|
|
|
4,654,544
|
|
|
|
4,589,828
|
|
|
|
64,716
|
|
|
|
|
|
Derivative liability
|
|
|
-
|
|
|
|
2,100
|
|
|
|
(2,100
|
)
|
|
|
|
|
Convertible note payable
|
|
|
-
|
|
|
|
3,894,978
|
|
|
|
(3,894,978
|
)
|
|
|
|
|
Income tax payable
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
67,018,653
|
|
|
|
66,685,867
|
|
|
|
332,786
|
|
|
|
16
|
|
Non-current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other payables
|
|
|
7,765,801
|
|
|
|
7,792,774
|
|
|
|
(26,973
|
)
|
|
|
|
|
Borrowing-Long term debt
|
|
|
5,381,818
|
|
|
|
5,536,938
|
|
|
|
(155,120
|
)
|
|
|
|
|
Total non-current liabilities
|
|
|
13,147,619
|
|
|
|
13,329,712
|
|
|
|
(182,093
|
)
|
|
|
|
|
Stockholders’ equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
49,977
|
|
|
|
49,866
|
|
|
|
111
|
|
|
|
|
|
Additional paid-in capital
|
|
|
181,533,918
|
|
|
|
181,501,056
|
|
|
|
32,862
|
|
|
|
|
|
Retained earnings
|
|
|
465,997,939
|
|
|
|
458,811,844
|
|
|
|
7,186,095
|
|
|
|
|
|
Accumulated other comprehensive income
|
|
|
(14,727,670
|
)
|
|
|
(8,443,123
|
)
|
|
|
(6,284,547
|
)
|
|
|
|
|
Treasury stock
|
|
|
(1,250,000
|
)
|
|
|
(1,250,000
|
)
|
|
|
-
|
|
|
|
|
|
Total SIAF Inc. and subsidiaries' equity
|
|
|
631,604,164
|
|
|
|
630,669,643
|
|
|
|
934,521
|
|
|
|
|
|
Non-controlling interest
|
|
|
82,610,984
|
|
|
|
81,890,220
|
|
|
|
720,764
|
|
|
|
|
|
Total stockholders' equity
|
|
|
714,215,148
|
|
|
|
712,559,863
|
|
|
|
1,655,285
|
|
|
|
|
|
Total liabilities and stockholders' equity
|
|
|
794,381,420
|
|
|
|
793,552,597
|
|
|
|
828,823
|
|
|
|
|
|
Part B discusses and analyzes certain items
(marked with notes) to assist stakeholders in obtaining a better understanding of the Company’s results from operations and
overall financial condition:
Note (8) Cash and
Cash Equivalents
The change in cash and cash equivalent
was $(4,025,579) when comparing cash and cash equivalent of $925,220 and $4,950,799 as at June 30, 2019 and December 31, 2018,
respectively.
Note (9) Break down
on inventories
|
|
June 30, 2019
|
|
|
December 31, 2018
|
|
|
Difference
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
Bread grass
|
|
|
517,567
|
|
|
|
744,378
|
|
|
|
(226,811
|
)
|
Beef cattle
|
|
|
15,031,225
|
|
|
|
11,561,117
|
|
|
|
3,470,108
|
|
Organic fertilizer
|
|
|
14,045,338
|
|
|
|
14,266,923
|
|
|
|
(221,585
|
)
|
Forage for cattle and consumables
|
|
|
7,009,766
|
|
|
|
7,252,280
|
|
|
|
(242,514
|
)
|
Raw materials for bread grass and organic fertilizer
|
|
|
16,399,277
|
|
|
|
18,885,258
|
|
|
|
(2,485,981
|
)
|
Immature seeds
|
|
|
2,244,916
|
|
|
|
1,872,285
|
|
|
|
372,631
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
55,248,089
|
|
|
|
54,582,241
|
|
|
|
665,848
|
|
The main increase in inventories came from
beef cattle (up $3.5 m) primarily due to the increase of Yellow Cattle being grown in the Cattle farm (1 & 2) under MEIJI..
Note (10) Breakdown of Deposits and Prepaid Expenses
|
|
June 30, 2019
|
|
|
December 31, 2018
|
|
|
Difference
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
Deposits for
|
|
|
|
|
|
|
|
|
|
|
|
|
- purchases of equipment
|
|
|
1,228,990
|
|
|
|
2,158,867
|
|
|
|
(929,877
|
)
|
- acquisition of land use rights
|
|
|
174,545
|
|
|
|
174,851
|
|
|
|
(306
|
)
|
- inventories purchases
|
|
|
7,023,298
|
|
|
|
16,921,188
|
|
|
|
(9,897,890
|
)
|
- construction in progress
|
|
|
3,730,063
|
|
|
|
4,789,035
|
|
|
|
(1,058,972
|
)
|
- issue of shares as collateral
|
|
|
25,761,658
|
|
|
|
24,928,324
|
|
|
|
833,334
|
|
Shares issued for employee compensation and overseas professional and bond interest
|
|
|
115,787
|
|
|
|
643,457
|
|
|
|
(527,670
|
)
|
Others
|
|
|
2,631,513
|
|
|
|
2,625,468
|
|
|
|
6,045
|
|
|
|
|
40,665,854
|
|
|
|
52,241,190
|
|
|
|
(11,575,336
|
)
|
Note (11) Breakdown of Accounts receivable:
|
|
June 30,2019
|
|
|
|
Accounts
receivable
|
|
|
0-30 days
|
|
|
31-90 days
|
|
|
91-120 days
|
|
|
over 120 days and
less than 1 year
|
|
|
Over 1 year
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Engineering consulting service (CA)
|
|
|
62,557,029
|
|
|
|
707,819
|
|
|
|
-
|
|
|
|
1,757,664
|
|
|
|
6,630,797
|
|
|
|
53,460,749
|
|
Sales of imported seafood (SIAF)
|
|
|
23,736,298
|
|
|
|
-
|
|
|
|
17,466,502
|
|
|
|
6,269,796
|
|
|
|
-
|
|
|
|
-
|
|
Sales of Cattle and Beef Meats (MEIJI)
|
|
|
10,769,333
|
|
|
|
-
|
|
|
|
10,769,333
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Sales of HU Flowers (Fresh & Dried) (JHST)
|
|
|
982,061
|
|
|
|
325,108
|
|
|
|
653,070
|
|
|
|
-
|
|
|
|
3,883
|
|
|
|
-
|
|
Sales Fertilizer, Bulk Stock feed and Cattle by (SJAP)
|
|
|
4,225,559
|
|
|
|
1,725,823
|
|
|
|
1,494,573
|
|
|
|
294,044
|
|
|
|
711,119
|
|
|
|
-
|
|
Sales Fertilizer from (HSA)
|
|
|
3,456,219
|
|
|
|
815,945
|
|
|
|
1,631,094
|
|
|
|
469,320
|
|
|
|
539,860
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
105,726,500
|
|
|
|
3,574,696
|
|
|
|
32,014,573
|
|
|
|
8,790,824
|
|
|
|
7,885,658
|
|
|
|
53,460,749
|
|
% of total receivables
|
|
|
100
|
%
|
|
|
3
|
%
|
|
|
30
|
%
|
|
|
8
|
%
|
|
|
7
|
%
|
|
|
51
|
%
|
The accounts receivable of CA’s C&S
services totals US$62,557,029 made up of $707,819 (0 – 30 days), $8,388,4611 (over 90-days & less than one-year), and
$53,460,749(over one year).
|
•
|
$53,460,749 is to be settled by Tri-way’s shares included in the 36.6% equity shares that
the Company received from the “Carve-out” exercise as discussed in the Company’s 2017 10K filing.
|
|
•
|
$1,757,664 (91 – 120 days) and $6,630,797 (over 120 days & less than one-year) is AR
that will be settled within trading terms of 360 days.
|
|
•
|
The other account receivables are spread among 5 main subsidiaries and their respective subsidiaries
within their own organization (i.e. SJAP has 5 and JHST has 2 subsidiaries for example) and their respective accounts receivable
aging period is less than 12 months old and within normal trading terms, therefore no diminution in value is required, as the credit
quality of the receivables is not in doubt.
|
Information on Concentration of credit
risk of revenue:
We have 4 major long-term customers (referring
to Customer A, B, C and D mentioned in the Financial Statement of this report under Note), who have accounted for 78.21% or more
of our consolidated revenues for Q2 2019 as shown in the table below:
|
|
2019Q2
|
|
|
|
% of total Revenue
|
|
|
Customer's Total Revenue
|
|
Customer A
|
|
|
32.66
|
%
|
|
|
12,605,535
|
|
Customer B
|
|
|
29.04
|
%
|
|
|
11,208,185
|
|
Customer C
|
|
|
16.21
|
%
|
|
|
6,258,317
|
|
Customer D
|
|
|
4.41
|
%
|
|
|
1,704,201
|
|
|
|
|
82.32
|
%
|
|
|
31,776,238
|
|
Customer A is Cattle Wholesale represented
by Mr. Zhen Runchi who buys our fattened cattle to sell them in the Guangdong and Beijing cattle markets and at the same time supplies
us with young cattle. During Q2 2019, transactions through Mr. Zhen Runchi generated 32.66 % of our total consolidated revenue
(equivalent to $12,605,535 of total revenue of $38,601,178).
Customer B is ShangHai Virgo
Trading co. Ltd, which is one of our major distributors of imported beef and seafood as well as our farmed seafood. We
sold $11,208,185 of goods to Virgo during Q2 2019 representing 29.04% of our total revenue of $ 38,601,178 during the
quarter.
Customer C is WSC 1, which is owned and
operated by Guangzhou City A Power NaWei Trading Co. Ltd (“APNW”). APNW distributes seafood to other wholesalers in
various cities in China. WSC 1 is ideally situated at the center of all interprovincial logistic services. At the same time, APNW
has obtained all relevant Import Quotas and Permits as of September 30, 2014. As such, SIAF relies on APNW’s import permits
for its import and export trades to be carried out in China. Sales affected through WSC-1 contribute 16.21% of our total consolidated
revenue (equivalent to $6,258,317 of total revenue of $38,601,178).
Customer D is Zhang Zhijie (
张志杰
-SJAP
销售精饲料
),
during which Q2 2019 we sold $1,704,201 of goods representing 4.41% of total revenue of $38,601,178.
The Company had 4 major customers whose
accounts receivable balance individually represented the following percentages of the Company’s total accounts receivable
during Q2 2019:
|
|
June 30, 2019
|
|
|
% of total
Accounts
receivables
|
|
|
Accounts
receivables
|
|
Customer A
|
|
|
59.06
|
%
|
|
|
62,559,681
|
|
Customer B
|
|
|
12.51
|
%
|
|
|
13,251,297
|
|
Customer C
|
|
|
10.24
|
%
|
|
|
10,846,785
|
|
Customer D
|
|
|
9.90
|
%
|
|
|
10,486,638
|
|
|
|
|
91.71
|
%
|
|
|
97,144,401
|
|
Note (12) Property and equipment, net of accumulated depreciation
|
|
30-Jun-19
|
|
|
|
(Unaudited)
|
|
|
|
|
|
Plant and machinery
|
|
$
|
18,010,611
|
|
Structure and leasehold improvements
|
|
|
200,408,657
|
|
Mature seeds and herbage cultivation
|
|
|
60,397,687
|
|
Furniture and equipment
|
|
|
695,284
|
|
Motor vehicles
|
|
|
589,570
|
|
|
|
|
280,101,809
|
|
|
|
|
|
|
Less: Accumulated depreciation
|
|
|
(36,263,927
|
|
Net carrying amount
|
|
$
|
243,837,882
|
|
Note (13) Construction in progress
|
|
30-Jun-19
|
|
|
|
(Unaudited)
|
|
Construction in progress
|
|
|
|
|
- Office, warehouse and organic fertilizer plant in HSA
|
|
|
|
|
- Organic fertilizer and bread grass production plant and office building
|
|
|
|
|
- Rangeland for beef cattle and office building
|
|
|
11,000,995
|
|
|
|
$
|
11,000,995
|
|
Note (14) Land Use Rights, net of accumulated
amortization
Item
|
|
Owner
|
|
Location
|
|
Acres
|
|
Date
Acquired
|
|
Tenure
|
|
Expiry
dates
|
|
Cost $
|
|
|
Monthly
amortization
$
|
|
|
2019.06.30
Balance $
|
|
|
Nature of
ownership
|
|
Nature of
project
|
Hunan lot1
|
|
HS.A
|
|
Ouchi Village, Fenghuo Town, Linli County
|
|
31.92
|
|
4/5/2011
|
|
43
|
|
4/4/2054
|
|
|
242,703
|
|
|
|
470
|
|
|
|
196,138
|
|
|
Lease
|
|
Fertilizer production
|
Hunan lot2
|
|
HS.A
|
|
Ouchi Village, Fenghuo Town, Linli County
|
|
247.05
|
|
7/1/2011
|
|
60
|
|
6/30/2071
|
|
|
36,666,141
|
|
|
|
50,925
|
|
|
|
31,777,322
|
|
|
Management Right
|
|
Pasture growing
|
Hunan lot3
|
|
HS.A
|
|
Ouchi Village, Fenghuo Town, Linli County
|
|
8.24
|
|
5/24/2011
|
|
40
|
|
5/23/2051
|
|
|
378,489
|
|
|
|
789
|
|
|
|
301,214
|
|
|
Land Use Rights
|
|
Fertilizer production
|
Hunan lot4
|
|
HS.A
|
|
Ouchi Village, Fenghuo Town, Linli County
|
|
24.71
|
|
6/1/2018
|
|
50
|
|
5/31/2068
|
|
|
3,021,148
|
|
|
|
5,035
|
|
|
|
2,955,690
|
|
|
Lease
|
|
Pasture growing
|
Guangdong lot 1
|
|
JHST
|
|
Yane Village, Liangxi Town, Enping City
|
|
8.23
|
|
8/10/2007
|
|
60
|
|
8/9/2067
|
|
|
1,064,501
|
|
|
|
1,478
|
|
|
|
853,079
|
|
|
Management Right
|
|
HU Plantation
|
Guangdong lot 2
|
|
JHST
|
|
Nandu Village of Yane Village, Liangxi Town, Enping City
|
|
27.78
|
|
3/14/2007
|
|
60
|
|
3/13/2067
|
|
|
1,037,273
|
|
|
|
1,441
|
|
|
|
824,056
|
|
|
Management Right
|
|
HU Plantation
|
Guangdong lot 3
|
|
JHST
|
|
Nandu Village of Yane Village, Liangxi Town, Enping City
|
|
60.72
|
|
3/14/2007
|
|
60
|
|
3/13/2067
|
|
|
2,267,363
|
|
|
|
3,149
|
|
|
|
1,801,294
|
|
|
Management Right
|
|
HU Plantation
|
Guangdong lot 4
|
|
JHST
|
|
Nandu Village of Yane Village, Liangxi Town, Enping City
|
|
54.68
|
|
9/12/2007
|
|
60
|
|
9/11/2067
|
|
|
2,041,949
|
|
|
|
2,836
|
|
|
|
1,639,231
|
|
|
Management Right
|
|
HU Plantation
|
Guangdong lot 5
|
|
JHST
|
|
Jishilu Village of Dawan Village,Juntang Town, Enping City
|
|
28.82
|
|
9/12/2007
|
|
60
|
|
9/11/2067
|
|
|
960,416
|
|
|
|
1,334
|
|
|
|
771,001
|
|
|
Management Right
|
|
HU Plantation
|
Guangdong lot 6
|
|
JHST
|
|
Liankai Village of Niujiang Town, Enping City
|
|
31.84
|
|
1/1/2008
|
|
60
|
|
12/31/2068
|
|
|
821,445
|
|
|
|
1,141
|
|
|
|
664,001
|
|
|
Management Right
|
|
Fish Farm
|
Guangdong lot 7
|
|
JHST
|
|
Nandu Village of Yane Village, Liangxi Town, Enping City
|
|
41.18
|
|
1/1/2011
|
|
26
|
|
12/31/2037
|
|
|
5,716,764
|
|
|
|
18,323
|
|
|
|
3,847,822
|
|
|
Management Right
|
|
HU Plantation
|
Guangdong lot 8
|
|
JHST
|
|
Shangchong Village of Yane Village, Liangxi Town, Enping City
|
|
11.28
|
|
1/1/2011
|
|
26
|
|
12/31/2037
|
|
|
1,566,393
|
|
|
|
5,020
|
|
|
|
1,054,303
|
|
|
Management Right
|
|
HU Plantation
|
Guangdong lot 9
|
|
MEIJI
|
|
Xiaoban Village of Yane Village, Liangxi Town, Enping City
|
|
41.18
|
|
4/1/2011
|
|
20
|
|
3/31/2031
|
|
|
5,082,136
|
|
|
|
21,176
|
|
|
|
2,985,755
|
|
|
Management Right
|
|
Cattle Farm
|
Qinghai lot 1
|
|
SJAP
|
|
No. 498, Bei Da Road, Chengguan Town of Huangyuan County,Xining
City, Qinghai Province
|
|
21.09
|
|
11/1/2011
|
|
40
|
|
10/30/2051
|
|
|
527,234
|
|
|
|
1,098
|
|
|
|
426,181
|
|
|
Land Use Right & Building ownership
|
|
Cattle farm, fertilizer and livestock feed production
|
Guangdong lot 10
|
|
JHST
|
|
Niu Jiang Town, Liangxi Town, Enping City
|
|
6.27
|
|
3/4/2013
|
|
10
|
|
3/3/2023
|
|
|
489,904
|
|
|
|
4,083
|
|
|
|
179,631
|
|
|
Management Right
|
|
Processing factory
|
Guangdong lot 11
|
|
CA
|
|
Da San Dui Wei ,You Nan Village, Conghua District of Guangzhou
City
|
|
33.28
|
|
10/28/2014
|
|
30
|
|
10/27/2044
|
|
|
4,453,665
|
|
|
|
12,371
|
|
|
|
3,748,502
|
|
|
Management Right
|
|
Agriculture
|
|
|
JHST
|
|
Land improvement cost incurred
|
|
|
|
12/1/2013
|
|
|
|
|
|
|
3,914,275
|
|
|
|
6,155
|
|
|
|
3,501,922
|
|
|
Management Right
|
|
HU Plantation
|
Exchange difference
|
|
|
|
|
|
|
|
|
|
|
|
|
-4,560,143
|
|
|
|
|
|
|
|
-4,614,185
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
678
|
|
|
|
|
|
|
|
|
65,691,658
|
|
|
|
136,824
|
|
|
|
52,912,958
|
|
|
|
|
|
Note (15) Current Liabilities:
Accounts payable and accrued expenses
|
|
|
9,858,947
|
|
Billings in excess of costs and estimated earnings on uncompleted contracts
|
|
|
5,386,711
|
|
Due to a director
|
|
|
655031
|
|
Other payables
|
|
|
46,463,420
|
|
Borrowings - Short term bank loan
|
|
|
4,654,544
|
|
|
|
|
67,018,653
|
|
Note (16) Non-current liabilities
Other payables of $7,765,801: During Q2
2019, the Company issued promissory notes amounting to $0 to unrelated third parties for advances granted by third parties collectively
to the Company (and/or to its subsidiaries). During Q2 2019 we redeemed $0 of Promissory Notes for advances granted by third parties
in past fiscal years to be settled by the issuance of shares and / or cash leaving a balance of $7,765,801 of promissory notes
still due and outstanding as of June 30, 2019.
Part C. Six Months
Ended June 30, 2019 Compared to Six Months Ended June 30, 2017 (presented in summarized Charts below);
Revenue:
Revenues increased by $133,842 or 0.2%
to $67,859,829 for the six months ended June 30, 2019 from $67,725,987 for the six months ended June 30, 2018. The increase was
minor that has no significant effect.
The following chart illustrates the changes
by category from the six months ended June 30, 2019 to June 30, 2018.
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
Category
|
|
Q1 - Q2
|
|
|
Q1 - Q2
|
|
|
Difference
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
Fishery
|
|
|
1,719,247
|
|
|
|
3,534,390
|
|
|
|
(1,815,143
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plantation
|
|
|
2,010,448
|
|
|
|
2,094,473
|
|
|
|
(84,025
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beef
|
|
|
2,729,897
|
|
|
|
11,529,838
|
|
|
|
(8,799,941
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Organic fertilizer
|
|
|
10,425,688
|
|
|
|
4,865,057
|
|
|
|
5,560,631
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cattle farm
|
|
|
20,710,988
|
|
|
|
11,071,921
|
|
|
|
9,639,067
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate and others
|
|
|
30,263,561
|
|
|
|
34,630,308
|
|
|
|
(4,366,747
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
67,859,829
|
|
|
|
67,725,987
|
|
|
|
133,842
|
|
Cost of goods sold and services
Cost of goods sold and services decreased
by $214,570 or 0.4% to $55,984,449 for the six months ended June 30, 2019 from $56,199,019 for the six months ended June 30, 2018.
The decrease was minor that has no significant effect.
The following chart illustrates
the changes by category from the six months ended June 30, 2019 to June 30, 2018.
Cost of goods sold and services
|
|
|
|
|
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
Category
|
|
Q1 - Q2
|
|
|
Q1 - Q2
|
|
|
Difference
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
Fishery
|
|
|
1,590,017
|
|
|
|
2,664,740
|
|
|
|
(1,074,723
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plantation
|
|
|
1,497,205
|
|
|
|
1,753,905
|
|
|
|
(256,700
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beef
|
|
|
2,498,752
|
|
|
|
7,625,676
|
|
|
|
(5,126,924
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Organic fertilizer
|
|
|
6,541,834
|
|
|
|
3,259,280
|
|
|
|
3,282,554
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cattle farm
|
|
|
16,964,108
|
|
|
|
10,036,426
|
|
|
|
6,927,682
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate and others
|
|
|
26,892,533
|
|
|
|
30,858,992
|
|
|
|
(3,966,459
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
55,984,449
|
|
|
|
56,199,019
|
|
|
|
(214,570
|
)
|
Gross Profit
Gross profit increased
by $618,412 or 5% to $11,875,380 for the six months ended June 30, 2019 from $11,526,968 for the six months ended June 30, 2018.
The increase was primarily due to the corresponding increases in the operation revenues of sales
The following chart illustrates
the changes by category from the six months ended June 30, 2019 to June 30, 2018. The gross profit by category is as follows:
Gross Profit
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
Category
|
|
Q1 - Q2
|
|
|
Q1 - Q2
|
|
|
Difference
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
Fishery
|
|
|
129,230
|
|
|
|
869,650
|
|
|
|
(740,420
|
)
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
Plantation
|
|
|
513,243
|
|
|
|
340,568
|
|
|
|
172,675
|
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
Beef
|
|
|
231,145
|
|
|
|
3,634,162
|
|
|
|
(3,403,017
|
)
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
Organic fertilizer
|
|
|
3,883,854
|
|
|
|
1,605,777
|
|
|
|
2,278,077
|
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
Cattle farm
|
|
|
3,746,880
|
|
|
|
1,035,495
|
|
|
|
2,711,385
|
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
Corporate and others
|
|
|
3,371,028
|
|
|
|
3,771,316
|
|
|
|
(400,288
|
)
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
Total
|
|
|
11,875,380
|
|
|
|
11,256,968
|
|
|
|
618,412
|
|
General and Administrative Expenses and Interest
Expenses
General and administrative
expenses and interest expenses (including depreciation and amortization) decreased by $1,103,831 or 34% to $7,562,910 for the six
months ended June 30, 2019 from $8,666,741 for the six months ended June 30, 2018. The decrease was primarily due to the decrease
in office and corporate expenses of $2,050,392 for the six months ended June 30, 2019 from $3,123,845 for the six months ended
June 30, 2018.
|
|
2019
|
|
|
2018
|
|
|
|
|
Category
|
|
Q1 - Q2
|
|
|
Q1 - Q2
|
|
|
Difference
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
Office and corporate expenses
|
|
|
2,050,392
|
|
|
|
3,123,845
|
|
|
|
(1,073,453
|
)
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
Wages and salaries
|
|
|
830,265
|
|
|
|
1,101,058
|
|
|
|
(270,793
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Traveling and related lodging
|
|
|
11,965
|
|
|
|
11,581
|
|
|
|
384
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Motor vehicles expenses and local transportation
|
|
|
20,762
|
|
|
|
31,882
|
|
|
|
(11,120
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Entertainments and meals
|
|
|
31,117
|
|
|
|
27,783
|
|
|
|
3,334
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Others and miscellaneous
|
|
|
929,425
|
|
|
|
758,135
|
|
|
|
171,290
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
3,077,952
|
|
|
|
2,741,499
|
|
|
|
336,453
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sub-total
|
|
|
6,951,877
|
|
|
|
7,795,783
|
|
|
|
(843,906
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expenses
|
|
|
611,033
|
|
|
|
870,958
|
|
|
|
(259,925
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
7,562,910
|
|
|
|
8,666,741
|
|
|
|
(1,103,831
|
)
|
Depreciation and Amortization
Depreciation and amortization
decreased by $407,281 or -6% to $6,053,154 for the six months ended June 30, 2019 from $6,460,435 for the six months ended June
30, 2018. The decrease was primarily due to the decrease of depreciation by $263,381 to $5,959,791 for the six months ended June
30, 2019 from depreciation of $5,325,531 for the six months ended June 30, 2018, and the decrease of amortization by $143,900 to
$991,004 for six months ended June 30, 2019 from amortization of $1,134,904 for the six months ended June 30, 2018.
In this respect, total
depreciation and amortization amounted to $6,053,154 for the six months ended June 30, 2019, out of which $3,077,952 was booked
under General and administration expenses and $2,975,202 was booked under cost of goods sold; and whereas, total depreciation and
amortization amounted to $6,460,435 for the six months ended June 30, 2018, out of which $2,741,499 was booked under General and
administration expenses and $3,718,936 was booked under cost of goods sold.
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
Off Balance Sheet Arrangements:
None.
Liquidity and Capital Resources
As of June 30 2019, unrestricted cash and
cash equivalents amounted to $925,220 (see notes to the consolidated financial statements), and our working capital as of June
30, 2019 was $161,165,561.
Contractual Obligations
|
|
Less than 1 year
|
|
|
1-3years
|
|
|
3-5 years
|
|
|
More than 5 years
|
|
|
Total
|
|
Short Term Bank Loan
|
|
|
4,654,544
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,654,544
|
|
Long Term Debts
|
|
|
|
|
|
|
5,381,818
|
|
|
|
|
|
|
|
|
|
|
|
5,381,818
|
|
Promissory Notes
|
|
|
|
|
|
|
7,765,801
|
|
|
|
|
|
|
|
|
|
|
|
7,765,801
|
|
Cash provided by operating activities amounted
to $16,947,050 for Q1-2 2019. This compares with cash provided by operating activities totaling $5,366,789 for Q1-2 2018. The decrease
in cash flows from operations primarily resulted from the decrease in deposits and prepaid expenses to $11,067,966 for Q1-2 2019
from $4,001,896 for Q1-2 2018.
Cash used in investing activities totaled
$(15,665,133) for Q1-2 2019. This compares with cash used in investing activities totaling $(9,240,726 ) for Q1-2 2018. The decrease
in cash balance resulting from less investing activities primarily resulted from payment for construction in progress of $(9,733,795)
in Q1-2 2019 compared to $(4,347,826) expended in Q1-2 2018.
Cash used in financing activities totaled
$(73,741) for Q1-2 2019. This compares with cash from financing activities totaling $0 for Q1-2 2018.
Acquisition of
SFJVC’s and further acquisition plan:
An SFJVC agreement typically contains an
option clause for further investment. Initially, the China Developer of project companies invites us to invest in their venture.
If management feels compelled it carries out an in-depth study of the target company including legal due diligence, business plan,
budget and projected financial information. The final decision is made through the resolution of the Company’s Board of Directors.
If the decision is made to proceed with an investment, there is first formed an SFJVC, within which in turn the Company acquires
further equity interest. The acquisition price of such interest is determined in accordance to the book value of the SFJVC as of
the acquisition date. Consideration generally consists in part of cash and in part of contract against trade debts owed by the
China Developer due to Consulting & Services fees charged to the China Developer by the Company in accordance with the Consulting
& Services agreement. Project companies’ record development cost as construction in progress and treat the amount due
to us as partial investment in the new SFJVC.
The Company’s expenditures as the
consulting and service provider providing turnkey services to the China Developer for the development of the project include (i)
administrative and operational expenses provided for and incurred in the project (charged and recorded under general and administrative
operation expenses), billable to the China Developer, (ii) other development expenditures (inclusive of subcontractors’ and
sub-suppliers’ cost plus mark-up) billable to the Developer, as well. Consulting & Services fees are exclusively billed
to the 3rdparty China Developer, and not to the future SFJVC companies.
We plan to acquire further SFJVC’s
at the time they will be formed officially after their approval by relevant Chinese Authorities with details shown in the Table
below:
|
|
|
|
Estimated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition
|
|
time of
|
|
|
|
|
|
|
|
|
|
Deposit paid
|
|
|
|
|
|
by
|
|
SFJVC
|
|
Estimated time of
|
|
Estimated
|
|
|
|
|
|
is equivalent
|
|
|
Estimated time
|
|
|
which
|
|
being
|
|
completion of
|
|
Total
|
|
|
Deposit paid
|
|
|
to % of
|
|
|
of progress
|
|
|
subsidiary
|
|
formed
|
|
acquisition
|
|
consideration
|
|
|
up
to date
|
|
|
equity
|
|
|
payments
|
Enping Prawn PF1
|
|
CA
|
|
June 2014
|
|
August 2014
|
|
$
|
20.94
|
m
|
|
$
|
14.45
|
m
|
|
|
56
|
%
|
|
Q1 to Q2 2014
|
|
|
|
|
Phase 3 Work still in progress, targeting completion
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q4 2013 & all year round
|
Zhongshan Prawn PF2
|
|
CA
|
|
Q3 2014
|
|
August 2015
|
|
$
|
26.20
|
m
|
|
$
|
9.88
|
m
|
|
|
33
|
%
|
|
2014
|
|
|
|
|
Phase 3 & 4 work are in progress targeting completion
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q4 2013 & all year round
|
Fish & eel Farm 2
|
|
CA
|
|
Q4 2015
|
|
August. 2017
|
|
$
|
26.22
|
m
|
|
$
|
6.0
|
m
|
|
|
23
|
%
|
|
2014 & 2015
|
Cattle Farm 2
|
|
MEIJI
|
|
Final work is still in progress
|
|
August 2014
|
|
$
|
15.88
|
m
|
|
$
|
5.58
|
m
|
|
|
35
|
%
|
|
On or before June 30 2014
|
WXC businesses
|
|
SIAF
|
|
Work is in progress until end 2015
|
|
Not yet determined
|
|
|
Not fully determined
|
|
|
$
|
4.08
|
m
|
|
|
Not yet know
|
|
|
Partially in 2014.
|
NaWei wholesale centers
|
|
SIAF
|
|
Work is in progress until end 2015
|
|
Phase (1) March 2014, new Phases are pending
|
|
|
Not fully determined
|
|
|
$
|
1.03
|
m
|
|
|
Not yet know
|
|
|
Partially in 2014.
|
In accordance with our contract, prior
to the official formation of the SFJVC’s the Company will pay an initial deposit and additional deposits as pre- payments
to the developer (or owner) of the project as consideration toward future acquisition of the SFJVC upon its official formation.
The total consideration for each purchase
of SFJVC is based on its book value at that time of official formation having injected all of the related project’s development
assets and liabilities into the SFJVC. As such, the required acquisition cost is funded partly by cash and partly by the set-off
receivable due on the consulting and service fee.
CRITICAL ACCOUNTING POLICIES
BASIS OF PRESENTATION
The unaudited consolidated financial statements
for the three months ended June 30, 2019 have been prepared in accordance with generally accepted accounting principles in the
United States of America (“
US GAAP
”).
The unaudited quarterly financial statements
for the three months ended June 30, 2019 results are for the period then ended and do not necessarily indicate the results for
a full year. The information included in this interim report should be read in conjunction with the information included in the
Company’s annual report on Form 10-K for the fiscal year ended December 31, 2018.
BASIS OF CONSOLIDATION
The consolidated financial statements include
the financial statements of SIAF, its subsidiaries Capital Award, CS, CH, TRW, MEIJI, JHST, JFD, JHMC, HSA, APWAM, SAFS and its
variable interest entities SJAP and QZH. All material inter-company transactions and balances have been eliminated in consolidation.
The results of companies acquired or disposed of during the year are included in the consolidated financial statements from the
effective date of acquisition.
BUSINESS COMBINATIONS
The Company adopted the accounting pronouncements
relating to business combinations (primarily contained in ASC Topic 805 “Business Combinations”), including assets
acquired and liabilities assumed arising from contingencies. These pronouncements established principles and requirements for how
the acquirer of a business recognizes and measures in its financial statements the identifiable assets acquired, the liabilities
assumed, and any non-controlling interest in the acquire as well as provides guidance for recognizing and measuring the goodwill
acquired in the business combination and determines what information to disclose to enable users of the financial statements to
evaluate the nature and financial effects of the business combination. In addition, these pronouncements eliminate the distinction
between contractual and non-contractual contingencies, including the initial recognition and measurement criteria and require an
acquirer to develop a systematic and rational basis for subsequently measuring and accounting for acquired contingencies depending
on their nature. Our adoption of these pronouncements will have an impact on the manner in which we account for any future acquisitions.
NON - CONTROLLING INTEREST IN CONSOLIDATED
FINANCIAL STATEMENTS
The Company adopted the accounting pronouncement
on non-controlling interests in consolidated financial statements, which establishes accounting and reporting standards for the
non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary. This guidance is primarily contained in ASC
Topic “Consolidation”. It clarifies that a non-controlling interest in a subsidiary is an ownership interest in the
consolidated financial statements. The adoption of this standard has not had material impact on our consolidated financial statements.
USE OF ESTIMATES
The preparation of consolidated financial
statements in conformity with accounting principles generally accepted in the United States requires management to make assumptions
and estimates that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at
the dates of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods
covered thereby. Actual results could differ from these estimates. Judgments and estimates of uncertainties are required in applying
the Company’s accounting policies in certain areas. The following are some of the areas requiring significant judgments and
estimates: determinations of the useful lives of assets, estimates of allowances for doubtful accounts, cash flow and valuation
assumptions in performing asset impairment tests of long-lived assets, estimates of the reliability of deferred tax assets and
inventory reserves.
REVENUE RECOGNITION
The Company’s revenue recognition
policies are in compliance with ASC 605. Sales revenue is recognized when all of the following have occurred: (i) persuasive evidence
of an arrangement exists, (ii) delivery has occurred or services have been rendered, (iii) the price is fixed or determinable,
and (iv) the ability to collect is reasonably assured. These criteria are generally satisfied at the time of shipment when risk
of loss and title passes to the customer. Service revenue is recognized when services have been rendered to a buyer by reference
to the stage of completion. License fee income is recognized on the accrual basis in accordance with the underlying agreements.
Government grants are recognized upon (i)
the Company has substantially accomplished what we must be done pursuant to the terms of the policies and terms of the grant that
are established by the local government; and (ii) the Company receives notification from the local government that the Company
has satisfied all of the requirements to receive the government grants; and or (iii) the amounts are received.
Multiple-Element Arrangements
To qualify as a separate unit of accounting
under ASC 605-25“
Multiple Element Arrangements
”, the delivered item must have value to the customer on a standalone
basis. The significant deliverables under the Company’s multiple-element arrangements are consulting and service under development
contract, commission and management service.
Revenues from the Company's fishery development
services contract are performed under fixed-price contracts. Revenues under long-term contracts are accounted for under the percentage-of-completion
method of accounting in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification
(“ASC”) Topic 605,
Revenue Recognition
(“ASC 605”). Under the percentage-of-completion method, the
Company estimates profit as the difference between total estimated revenue and total estimated cost of a contract and recognized
that profit over the contract term. The percentage of costs incurred determines the amount of revenue to be recognized. Payment
terms are generally defined by the installation contract and as a result may not match the timing of the costs incurred by the
Company and the related recognition of revenue. Such differences are recorded as either costs or estimated earnings in excess of
billings on uncompleted contracts or billings in excess of costs and estimated earnings on uncompleted contracts.
The Company determines a customer’s
credit worthiness at the time an order is accepted. Sudden and unexpected changes in a customer’s financial condition could
put recoverability at risk.
The percentage of completion method requires
the ability to estimate several factors, including the ability of the customer to meet its obligations under the contract, including
the payment of amounts when due. If the Company determines that collectability is not assured, we will defer revenue recognition
and use methods of accounting for the contract such as the completed contract method until such time as the Company determines
that collectability is reasonably assured or through the completion of the project.
For fixed-price contracts, the Company
uses the ratio of costs incurred to date on the contract (excluding uninstalled direct materials) to management's estimate of the
contract's total costs, to determine the percentage of completion on each contract. This method is used as management considers
expended costs to be the best available measure of progression of these contracts. Contract costs included all direct material,
subcontract and labor costs and those indirect costs related to contract performance, such as supplies, tool repairs and depreciation.
The Company accounts for maintenance and repair services under the guidance of ASC 605 as the services provided relate to construction
work. Contract costs incurred to date and expected total contract costs are continuously monitored during the term of the contract.
Changes in job performance, job conditions, and estimated profitability arising from contract penalty, change orders and final
contract settlements may result in revisions to the estimated profitability during the contract. These changes, which include contracts
with estimated costs in excess of estimated revenues, are recognized as contract costs in the period in which the revisions are
determined. Profit incentives are included in revenues when their realization is reasonably assured. At the point the Company anticipates
a loss on a contract, the Company estimates the ultimate loss through completion and recognizes that loss in the period in which
the possible loss was identified.
The Company does not provide warranties
to customers on a basis customary to the industry; however, the customers can claim warranty directly from product manufacturers
for defects in equipment or products. Historically, the Company has experienced no warranty claims.
The Company’s fishery development
consultancy services revenues are recognized when the relevant services are rendered, and are subject to a Chinese business tax
at a rate of 0% of the gross fishery development contract service income approved by the Chinese local government.
COST OF GOODS SOLD AND SERVICES
Cost of goods sold consists primarily of
direct purchase cost of merchandise goods, and related levies. Cost of services consists primarily of direct cost and indirect
cost incurred to date for development contracts and provision for anticipated losses on development contracts.
SHIPPING AND HANDLING
Shipping and handling costs related to
cost of goods sold are included in general and administrative expenses, which totaled $144,737, $1,960, $144,737 and $2,745 for
the three months and the six months ended June 30, 2019 and 2018, respectively.
ADVERTISING
Advertising costs are included in general
and administrative expenses, which totaled $213,146, $399,749, $591,092 and $800,504 for the three months ended and the six months
ended June 30, 2019 and 2018, respectively.
RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses costs
are included in general and administrative expenses, which totaled $0, $0, $426,115 and $0 for the three months ended and the six
months ended June 30, 2019 and 2018, respectively.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid
securities with original maturities of three months or less when acquired to be cash equivalents. Cash and cash equivalents kept
with financial institutions in People’s Republic of China (“P.R.C.”) are not insured or otherwise protected.
Should any of those institutions holding the Company’s cash become insolvent, or the Company is unable to withdraw funds
for any reason, the Company could lose the cash on deposit on that institution.
ACCOUNTS RECEIVABLE
The Company maintains reserves for potential
credit losses on accounts receivable. Management reviews the composition of accounts receivable and analyzes historical bad debts,
customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate
the adequacy of these reserves. Terms of the sales vary. Reserves are recorded primarily on a specific identification basis.
The standard credit period of the Company’s
most of customers is three months. Any amount that has an extended settlement date of over one year is classified as a long term
receivable. Management evaluates the collectability of the receivables at least quarterly. There were no bad debts written off
for the twelve months ended June 30, 2019 or December 31, 2018.
INVENTORIES
Inventories are valued at the lower of
cost (determined on a weighted average basis) and net realizable value. Costs incurred in bringing each product to its location
and conditions are accounted for as follows:
|
•
|
raw materials - purchase cost on a weighted average basis;
|
|
•
|
manufactured finished goods and work-in-progress - cost of direct materials and labor and a proportion of manufacturing overhead
based on normal operation capacity but excluding borrowing costs; and
|
|
•
|
Retail and wholesale merchandise finished goods - purchase cost on a weighted average basis.
|
Net realizable value is the estimated selling price in the ordinary
course of business, less estimated costs of completion and the estimated costs necessary to make the sale.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost
less accumulated depreciation and any accumulated impairment losses. Such costs include the cost of replacing parts that are eligible
for capitalization when the cost of replacing the parts is incurred. The assets’ residual values, useful lives and depreciation
methods are reviewed, and adjusted if appropriate, at the end of each year.
Depreciation is calculated on a straight-line
basis over the estimated useful life of the assets.
Milk cows
|
10 years
|
Plant and machinery
|
5 - 10 years
|
Structure and leasehold improvements
|
10 -30 years
|
Mature seed and herbage cultivation
|
20 years
|
Furniture, fixtures and equipment
|
2.5 - 10 years
|
Motor vehicles
|
4-10 years
|
An item of property and equipment is removed
from the accounts upon disposal or when no future economic benefits are expected to arise from the continued use of the asset.
Any gain or loss arising on disposal of the asset (calculated as the difference between the net disposal proceeds and the carrying
amount of the item) is included in the consolidated statements of income in the period the item is disposed.
GOODWILL
Goodwill is an asset representing the fair
economic benefits arising from other assets acquired in a business combination that are not individually identified and separately
recognized. Goodwill is tested for impairment on an annual basis at the end of the company’s fiscal year, or when impairment
indicators arise. The Company uses a fair-value-based approach to test for impairment at the level of each reporting unit. The
Company directly acquired MEIJI, which is engaged in Hu Plantation. As a result of this acquisition, the Company recorded goodwill
in the amount of $724,940. This goodwill represents the fair value of the assets acquired in these acquisitions over the cost of
the assets acquired.
PROPRIETARY TECHNOLOGIES
The Company has determined that technological
feasibility is established at the time a working model of products is completed. Master license of stock feed manufacturing technology
was acquired and the costs of acquisition were capitalized as proprietary technologies when technological feasibility had been
established. Proprietary technologies are intangible assets of finite lives. Proprietary technologies are amortized using the straight-line
method over their estimated lives of 25 years.
An aromatic cattle-feeding formula was
acquired and the costs of acquisition are capitalized as proprietary technologies when technological feasibility has been established.
Cost of acquisition on aromatic cattle-feeding formula is amortized using the straight-line method over its estimated life of 25
years.
The cost of sleepy cod breeding technology
license is capitalized as proprietary technologies when technological feasibility has been established. Cost of granting sleepy
cod breeding technology license is amortized using the straight-line method over its entitled life of 25 years.
Bacterial cellulose technology license
and related trademark are capitalized as proprietary technologies when technological feasibility has been established. Cost of
license and related trademark is amortized using the straight-line method over its estimated life of 20 years.
Management evaluates the recoverability
of proprietary technologies on an annual basis of the end of the company’s fiscal year, or when impairment indicators arise.
As required by ASC Topic 350 “Intangible - Goodwill and Other”, the Company uses a fair-value-based approach to test
for impairment.
CONSTRUCTION IN PROGRESS
Construction in progress represents direct
costs of construction as well as acquisition and design fees incurred. Capitalization of these costs ceases and the construction
in progress is transferred to property and equipment when substantially all the activities necessary to prepare the assets for
their intended use are completed. No depreciation is provided until construction is completed and the asset is ready for its intended
use.
LAND USE RIGHTS
Land use rights represent acquisition of
land use right rights of agriculture land from farmers and are amortized on the straight-line basis over the respective lease periods.
The lease period of agriculture land is in the range from 10 years to 60 years. Land use rights purchase prices were determined
in accordance with the P.R.C Government’s minimum lease payments of agriculture land and mutually agreed between the company
and the vendors. No independent professional appraiser performed a valuation of land use rights at the balance sheet dates.
CORPORATE JOINT VENTURE
A corporation formed, owned, and operated
by two or more businesses (ventures) as a separate and discrete business or project (venture) for their mutual benefit is considered
to be a corporate joint venture. Investee entities, in which the company can exercise significant influence, but not control, are
accounted for under the equity method of accounting. Under the equity method of accounting, the company’s share of the earnings
or losses of these companies is included in net income.
A loss in value of an investment that is
other than a temporary decline is recognized as a charge to operations. Evidence of a loss in value might include, but would not
necessarily be limited to absence of an ability to recover the carrying amount of the investment or inability of the investee to
sustain an earnings capacity that would justify the carrying amount of the investment.
VARIABLE INTEREST ENTITY
An entity (investee) in which the investor
has obtained less than a majority-owned interest, according to the Financial Accounting Standards Board (FASB). A variable interest
entity (VIE) is subject to consolidation if a VIE is an entity meeting one of the following three criteria as elaborated in ASC
Topic 810-10,
Consolidation
.
(a) The
equity-at-risk is not sufficient to support the entity's activities
(b) As
a group, the equity-at-risk holders cannot control the entity; or
(c) The
economics do not coincide with the voting interests.
If a firm is the primary beneficiary of
a VIE, the holdings must be disclosed on the balance sheet. The primary beneficiary is defined as the person or company with the
majority of variable interests.
TREASURY STOCK
Treasury stock consists of a Company’s
own stock which has been issued, but is subsequently reacquired by the Company. Treasury stock does not reduce the number of shares
issued but does reduce the number of shares outstanding. These shares are not eligible to receive cash dividends. Accounting for
excesses and deficiencies on treasury stock transactions is governed by ASC 505-30-30. State laws and federal agencies closely
regulate transactions involving a company’s own capital stock, so the purchase of outstanding shares and converting them
into treasury shares must have a legitimate purpose. Some of the most common reasons for purchasing outstanding shares are as follows:
(i) to
meet additional stock needs for various reasons, including newly implemented stock option plans, the issuance stock for convertible
bonds or convertible preferred stock, or a stock dividend;
(ii) to
eliminate the ownership interests of a stockholder;
(iii) to
increase the market price of the stock that returns capital to shareholders; and
(iv) To
potentially increase earnings per share of the stock by decreasing the shares outstanding on the same earnings.
The Company has adopted the cost method
of accounting for treasury stock shares. The purchase of outstanding shares is treated as a temporary reduction in shareholders’
equity in view of the expectation to reissue the shares instead of retiring them. When the Company reissues the treasury shares,
the temporary account is eliminated. The cost of treasury stock shares reacquired is charged to a contra account, in this case
a contra equity account that reduces the stockholder equity balance.
INCOME TAXES
The Company accounts for income taxes under
the provisions of ASC 740 “Accounting for Income Taxes”. Under ASC 740, deferred tax assets and liabilities are determined
based on the difference between the financial statement carrying amounts and the tax bases of assets and liabilities using enacted
tax rates in effect in the years in which the differences are expected to reverse.
The provision for income tax is based on
the results for the year as adjusted for items, which are non-assessable or disallowed. It is calculated using tax rates that have
been enacted or substantively enacted at the balance sheet date. Deferred taxes area accounted for using the balance sheet liability
method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the
financial statements and the corresponding tax basis used in the computation of assessable tax profit. In principle, deferred tax
liabilities are recognized for all taxable temporary differences, and deferred tax assets are recognized to the extent that it
is probable that taxable profit will be available against which deductible temporary differences can be utilized.
Deferred income taxes are calculated at
the tax rates that are expected to apply to the period when the asset is realized or the liability is settled. Deferred tax is
charged or credited in the income statement, except when it relates to items credited or charged directly to equity, in which case
the deferred tax is also adjusted in the equity accounts. Deferred tax assets and liabilities are offset when they relate to income
taxes levied by the same taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis.
ASC 740 also prescribes a more-likely-than-not threshold for financial statement recognition and measurement of a tax position
taken, or expected to be taken, in a tax return. ASC 740 also provides guidance related to, among other things, classification,
accounting for interest and penalties associated with tax positions, and disclosure requirements. Any interest and penalties accrued
related to unrecognized tax benefits will be recorded in tax expense.
POLITICAL AND BUSINESS RISK
The Company's operations are carried out
in the P.R.C. Accordingly, the Company's business, financial condition and results of operations may be influenced by the political,
economic and legal environment in the P.R.C., and by the general state of the P.R.C.'s economy. The Company's operations in the
P.R.C. are subject to specific considerations and significant risks not typically associated with companies in North America and
Western Europe. The Company's results may be adversely affected by changes in governmental policies with respect to laws and regulations,
anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things.
IMPAIRMENT OF LONG-LIVED ASSETS AND
INTANGIBLE ASSETS
In accordance with ASC 360, “Property,
Plant and Equipment”, long-lived assets to be held and used are analyzed for impairment whenever events or changes in circumstances
indicate that the related carrying amounts may not be recoverable. The Company reviews the carrying amount of its long-lived assets,
including intangibles, for impairment, at the end of each fiscal year. An asset is considered impaired when estimated future cash
flows are less than the carrying amount of the asset. In the event the carrying amount of such asset is considered not recoverable,
the asset is adjusted to its fair value. Fair value is generally determined based on discounted future cash flow. As of June 30,
2018 and 2015, the Company determined no impairment losses were necessary
EARNINGS PER SHARE
As prescribed in ASC Topic 260 “
Earning
per Share
,” Basic Earnings per Share (“
EPS
”) is computed by dividing net income available to common
stockholders by the weighted average number of common stock shares outstanding during the year. Diluted EPS is computed by dividing
net income available to common stockholders by the weighted-average number of common stock shares outstanding during the year plus
potential dilutive instruments such as stock options and warrants. The effect of stock options on diluted EPS is determined through
the application of the treasury stock method, whereby proceeds received by the Company based on assumed exercises are hypothetically
used to repurchase the Company’s common stock at the average market price during the period.
For the three months ended June 30, 2019
and 2018, basic earnings per share attributable to Sino Agro Food, Inc. and subsidiaries’ common stockholders amounted to
$0.13 and $0.02, respectively. For the three months ended June 30, 2019 and 2018, diluted earnings per share attributable to Sino
Agro Food, Inc. and its subsidiaries’ common stockholders amounted to $0.13 and $0.02, respectively.
For the six months ended June 30, 2019
and 2018, basic earnings per share attributable to Sino Agro Food, Inc. and subsidiaries common stockholders amounted to $0.14
and $0.17, respectively. For the six months ended June 30, 2019 and 2018, diluted earnings per share attributable to Sino Agro
Food, Inc. and its subsidiaries’ common stockholders amounted to $0.14 and $0.17, respectively.
FOREIGN CURRENCY TRANSLATION
The reporting currency of the Company is
the U.S. dollars. The functional currency of the Company is the Chinese Renminbi (RMB). For those entities whose functional currency
is other than the U.S. dollars, all assets and liabilities are translated into U.S. dollars at the exchange rate on the balance
sheet date; shareholder equity is translated at historical rates and items in the statements of income and of cash flows are translated
at the average rate for the period.
Because cash flows are translated based
on the weighted average translation rate, amounts related to assets and liabilities reported in the statements of cash flows will
not necessarily agree with changes in the corresponding balances in the balance sheets. Translation adjustments resulting from
this process are included in accumulated other comprehensive income in the consolidated statements of equity.
For the six months ended June 30, 2019
Translation gains and losses that arise
from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the
statements of income and comprehensive income as incurred. The balance sheet amounts with the exception of equity as of June 30,
2019 and December 31, 2018 were translated at RMB6.88 to $1.00 and RMB6.86 to $1.00, respectively. The average translation rates
applied to the consolidated statements of income and comprehensive income and of cash flows for the six months ended June 30, 2019
and June 30, 2018 were RMB6.78 to $1.00 and RMB6.37 to $1.00, respectively.
For the six months ended June 30, 2019
Translation gains and losses that arise
from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the
statements of income and comprehensive income as incurred. The balance sheet amounts with the exception of equity as of June 30,
2018 and December 31, 2017 were translated at RMB6.77 to $1.00 and RMB6.94 to $1.00, respectively. The average translation rates
applied to the consolidated statements of income and comprehensive income and of cash flows for the six months ended June 30, 2018
and June 30, 2017 were RMB6.87 to $1.00 and RMB6.53 to $1.00, respectively
.
ACCUMULATED OTHER COMPREHENSIVE INCOME
ASC Topic 220 “
Comprehensive Income”
establishes standards for reporting and displaying comprehensive income and its components in financial statements. Comprehensive
income is defined as the change in stockholders’ equity of a business enterprise during a period from transactions and other
events and circumstances from non-owner sources. The comprehensive income for all periods presented includes both the reported
net income and net change in cumulative translation adjustments.
RETIREMENT BENEFIT COSTS
P.R.C. state
managed retirement benefit programs are defined contribution plans and the payments to the plans are charged as expenses when employees
have rendered service entitling them to the contribution.
STOCK-BASED COMPENSATION
The Company adopts both ASC Topic 718,
“Compensation - Stock Compensation” and ASC Topic 505-50,”Equity-Based Payments to Non-Employees” using
the fair value method in which an entity issues its equity instruments to acquire goods and services from employees and non-employees.
Stock compensation for stock granted to non-employees has been determined in accordance with this accounting standard and the accounting
standard regarding accounting for equity instruments that are issued to other than employees for acquiring, or in conjunction with
selling goods or services, as the fair value of the consideration received or the fair value of equity instruments issued, whichever
is more reliably measured. This accounting standard allows the “simplified” method to determine the term of employee
options when other information is not available. Under ASC Topic 718 and ASC Topic 505-50, stock compensation expenses is measured
at the grant date on the value of the option or restricted stock and is recognized as expenses, less expected forfeitures, over
the requisite service period, which is generally the vesting period.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company follows paragraph 825-10-50-10
of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and paragraph 820-10-35-37
of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial
instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in accounting principles generally accepted
in the United States of America (U.S. GAAP), and expands disclosures about fair value measurements. To increase consistency and
comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy, which
prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy
gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority
to unobservable inputs. The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:
NEW ACCOUNTING PRONOUNCEMENTS
The Company does not expect any recent
accounting pronouncements to have a material effect on the Company’s financial position, results of operations, or cash flows.
In February 2017, the Financial Accounting
Standards Board (FASB) issued Accounting Standards Update No. 2017-02,
Leases (Topic 842)
(ASU 2017-02), which generally
requires companies to recognize operating and financing lease liabilities and corresponding right of-use assets on the balance
sheet. This guidance will be effective for us in the first quarter of 2019 on a modified retrospective basis and early adoption
is permitted. We are still evaluating the effect that this guidance will have on our consolidated financial statements and related
disclosures.
In March 2017, the FASB issued Accounting
Standards Update No. 2017-08,
Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting
Revenue Gross versus Net)
(ASU 2017-08) which clarifies the implementation guidance on principal versus agent considerations.
The guidance includes indicators to assist an entity in determining whether it controls a specified good or service before it is
transferred to the customers. This guidance will be effective for us in the first quarter of 2018, with the option to adopt it
in the first quarter of 2018. We are still evaluating the effect that this guidance will have on our consolidated financial statements
and related disclosures.
In March 2017, the FASB issued Accounting
Standards Update No. 2017-09,
Compensation-Stock Compensation (Topic 718): Improvement to Employee Share-based Payment Accounting
(ASU 2017-09) to simplify the accounting for share-based payment transactions, including the income tax consequences, an option
to recognize gross share-based compensation expense with actual forfeitures recognized as they occur, as well as certain classifications
on the statement of cash flows. This guidance will be effective for us in the first quarter of 2018, and early adoption is permitted.
We are still evaluating the effect that this guidance will have on our consolidated financial statements and related disclosures.
In October 2017, the FASB issued Accounting
Standards Update No. 2017-16,
Income Taxes (Topic 740): Intra-Entity Transfers Other than Inventory
(ASU 2017-16), which
requires companies to recognize the income-tax consequences of an intra-entity transfer of an asset other than inventory. This
guidance will be effective for us in the first quarter of 2018, with the option to adopt it in the first quarter of 2018. We currently
anticipate adopting the new standard effective January 1, 2018, and do not expect the standard to have a material impact on our
consolidated financial statements.
In November 2017, the FASB issued Accounting
Standards Update No. 2017-18,
Statement of Cash Flows (Topic 230): Restricted Cash
(ASU 2017-18), which requires companies
to include amounts generally described as restricted cash and restricted cash equivalents in cash and cash equivalents when reconciling
beginning-of-period and end-of-period total amounts shown on the statement of cash flows. This guidance will be effective for us
in the first quarter of 2018 and early adoption is permitted. We are still evaluating the effect that this guidance will have on
our consolidated financial statements and related disclosure
In January 2018, the FASB issued Accounting
Standards Update No. 2018-01,
Business Combinations (Topic 805): Clarifying the Definition of a Business
(ASU 2018-01),
which revises the definition of a business and provides new guidance in evaluating when a set of transferred assets and activities
is a business. This guidance will be effective for us in the first quarter of 2018 on a prospective basis, and early adoption is
permitted. We do not expect the standard to have a material impact on our consolidated financial statements.
In January 2018, the FASB issued Accounting
Standards Update No. 2018-04,
Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment
(ASU
2018-04), which eliminates step two from the goodwill impairment test. Under ASU 2018-04, an entity should recognize an impairment
charge for the amount by which the carrying amount of a reporting unit exceeds its fair value up to the amount of goodwill allocated
to that reporting unit. This guidance will be effective for us in the first quarter of 2020 on a prospective basis, and early adoption
is permitted. We do not expect the standard to have a material impact on our consolidated financial statements.
Other accounting standards that have been
issued or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the consolidated
financial statements upon adoption.