SINO AGRO FOOD, INC. AND SUBSIDIARIES
The accompanying
notes are an integral part of these consolidated financial statements.
The accompanying notes
are an integral part of these consolidated financial statements.
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, F-8 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%. This remains the case as of the date of this report (the “
Report
”).
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.
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 presently owns a 75% equity interest in JFD, representing
majority of voting rights and controls its board of directors.
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. Up to March 31, 2016, total investment in HJMC was $4,420,665.
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%. As of March 31, 2016, MEIJI and SJAP total
investment in HSA were $857,808 and 629,344, respectively.
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 March 31, 2016, the Company invested
$77,664 in SAFS.
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 of result, SJAP decreased its equity interest from 100% to 85% and QQI owned a 14%
equity interest. As of December 31, 2015, the SJAP’s total investment in QZH was $4,645,487. 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.
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 $150,806.
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.
|
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
|
The Company has adopted December
31 as its fiscal year end.
SINO AGRO FOOD,
INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Name
of subsidiaries
|
|
Place
of incorporation
|
|
Percentage
of interest
|
|
Principal
activities
|
|
|
|
|
|
|
|
Capital
Award Inc. (“CA”)
|
|
Belize
|
|
100%
(12.31.2015: 100%) directly
|
|
Fishery
development and holder of A-Power Technology master license.
|
|
|
|
|
|
|
|
Capital
Stage Inc. (“CS”)
|
|
Belize
|
|
100%
(12.31.2015: 100%) indirectly
|
|
Dormant
|
|
|
|
|
|
|
|
Capital
Hero Inc. (“CH”)
|
|
Belize
|
|
100%
(12.31.2015: 100%) indirectly
|
|
Dormant
|
|
|
|
|
|
|
|
Sino
Agro Food Sweden AB (“SAFS”)
|
|
Sweden
|
|
100%
(12.31.2015: 100%) directly
|
|
Dormant
|
|
|
|
|
|
|
|
Tri-way
Industries Limited (“TRW”)
|
|
Hong
Kong, P.R.C.
|
|
100%
(12.31.2015: 100%) directly
|
|
Investment
holding, holder of enzyme technology master license for manufacturing of livestock feed and bio-organic fertilizer and has
not commenced its planned business of fish farm operations.
|
|
|
|
|
|
|
|
Macau
Eiji Company Limited (“MEIJI”)
|
|
Macau,
P.R.C.
|
|
100%
(12.31.2015: 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%
(12.31.2015: 100%) directly
|
|
Investment
holding
|
|
|
|
|
|
|
|
Jiang
Men City Heng Sheng Tai Agriculture Development Co. Ltd (“JHST”)
|
|
P.R.C.
|
|
75%
(12.31.2015: 75%) indirectly
|
|
HylocereusUndatus
Plantation (“HU Plantation”).
|
|
|
|
|
|
|
|
Jiang
Men City A Power Fishery Development Co., Limited (“JFD”)
|
|
P.R.C.
|
|
75%
(12.31.2015: 75%) indirectly
|
|
Fish
cultivation
|
|
|
|
|
|
|
|
Jiang
Men City Hang Mei Cattle Farm Development Co., Limited (“JHMC”)
|
|
P.R.C.
|
|
75%
(12.31.2015: 75%) indirectly
|
|
Beef
cattle cultivation
|
|
|
|
|
|
|
|
Hunan
Shenghua A Power Agriculture Co., Limited (“HSA”)
|
|
P.R.C.
|
|
76%
(12.31.2015: 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.
|
|
45%
(12.31.2015: 45%) indirectly
|
|
Manufacturing
of organic fertilizer, livestock feed, and beef cattle and plantation of crops and pastures
|
|
|
|
|
|
|
|
Qinghai
Zhong He Meat Products Co., Ltd (“QZH”)
|
|
P.R.C.
|
|
*86%
(12.31.2015:86%) indirectly
|
|
Cattle
slaughter
|
Name of unconsolidated equity investee
|
|
Place of incorporation
|
|
Percentage of interest
|
|
Principal activities
|
|
|
|
|
|
|
|
Guangzhou Horan Taita Information Technology Co., Limited
|
|
P.R.C.
|
|
30% (12.31.2015: Nil%) indirectly
|
|
Software development
|
*
This represents stockholding
percentage of total equity.
In addition, according to investment
agreement between QZH and QQI, (i) QQI only enjoyed interest 6% annually on its capital contribution and did not enjoy any profit
distribution; (ii) investment period was 3 years only, and (iii) SJAP shared 100% (2015: 100%) on profit or loss after deduction
6% interest to QQI and enjoyed 100% (2015: 100%) voting rights of QZH’s board and stockholders meetings.
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
”).
Reverse stock split and new
conversion rate of Series B preferred stock to share of common stock on December 16, 2014, the Company implemented a 9.9-for-1
reverse stock split. On December 17, 2014, the Company implemented new conversion rate of 9.9 for 1 share of common stock. All
share information contained within this report, including consolidated balance sheets, consolidated statements of income and other
comprehensive income, and footnotes have been retroactively adjusted for the effects of reverse stock split and new conversion
rate of Series B preferred stock to share of common stock.
|
2.4
|
BASIS OF CONSOLIDATION
|
The consolidated financial statements
include the financial statements of the Company, its subsidiaries CA, CS, CH, TRW, MEIJI, JHST, JFD, JHMC, HSA, APWAM, SAFS and
its variable interest entity SJAP and QZH. All material inter-company transactions and balances have been eliminated in consolidation.
SIAF, CA, CS, CH, TRW, MEIJI,
JHST, JFD, JHMC, HSA, APWAM, SAFS, SJAP and QZH 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)
|
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.
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.
Multiple-Element Arrangements
To qualify as a separate unit
of accounting under ASC 605-25 “
Multiple Element Arrangements
”, the delivered item must have value to the
customer on a standalone basis. The significant deliverables under the Company’s multiple-element arrangements are consulting
and service under development contract, commission and management service.
Revenues from the Company’s
consulting and services under development contracts are performed under fixed-price contracts. Revenues under long-term contracts
are accounted for under the percentage-of-completion method of accounting in accordance with the Financial Accounting Standards
Board (“
FASB
”) Accounting Standards Codification (“
ASC
”) Topic 605,
Revenue Recognition
(“ASC 605”). Under the percentage-of-completion method, the Company estimates profit as the difference between
total estimated revenue and total estimated cost of a contract and recognize that profit over the contract term. The percentage
of costs incurred determines the amount of revenue to be recognized. Payment terms are generally defined by the installation contract
and as a result may not match the timing of the costs incurred by the Company and the related recognition of revenue. Such differences
are recorded as either costs or estimated earnings in excess of billings on uncompleted contracts or billings in excess of costs
and estimated earnings on uncompleted contracts. The Company determines a customer’s credit worthiness at the time an order
is accepted. Sudden and unexpected changes in a customer’s financial condition could put recoverability at risk.
The percentage of completion
method requires the ability to estimate several factors, including the ability of the customer to meet its obligations under the
contract, including the payment of amounts when due. If the Company determines that collectability is not assured, the Company
will defer revenue recognition and use methods of accounting for the contract such as the completed contract method until such
time as the Company determines that collectability is reasonably assured or through the completion of the project.
For fixed-price contracts, the
Company uses the ratio of costs incurred to date on the contract to management’s estimate of the contract’s total
costs, to determine the percentage of completion on each contract. This method is used as management considers expended costs
to be the best available measure of progression of these contracts. Contract costs include all direct material, subcontract and
labor costs and those indirect costs related to contract performance, such as supplies, tool repairs and depreciation. The Company
accounts for maintenance and repair services under the guidance of ASC 605 as the services provided relate to construction work.
Contract costs incurred to date and expected total contract costs are continuously monitored during the term of the contract.
Changes in job performance, job conditions, and estimated profitability arising from contract penalty, change orders and final
contract settlements may result in revisions to the estimated profit ability during the contract. These changes, which include
contracts with estimated costs in excess of estimated revenues, are recognized as contract costs in the period in which the revisions
are determined. Profit incentives are included in revenues when their realization is reasonably assured. At the point the Company
anticipates a loss on a contract, the Company estimates the ultimate loss through completion and recognizes that loss in the period
in which the loss was identified.
The Company does not provide
warranties to customers on a basis customary to the industry, however, customers can claim warranty directly from product manufacturers
for defects in equipment or products. Historically, the Company has experienced no warranty claims.
The Company provides various
management services to its customers in the P.R.C. based on a negotiated fixed-price contract. The clients usually pay the fees
when the services contract is signed and services are rendered. The Company recognizes these services-based revenues from contracts
when (i) management services are rendered; (ii) clients recognize the completion of services; and (iii) collectability is reasonably
assured. Fees received in advance are recorded as deferred revenue under current liabilities.
SINO AGRO FOOD,
INC.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
|
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 $8,392, $1,260, $14,284 and $9,952
for the three months and the six months ended June 30, 2016 and 2015, respectively.
Advertising costs are included
in general and administrative expenses, which totaled $665,952, $712,614, $1,332,210 and $1,421,458 for the three months ended
and the six months ended June 30, 2016 and 2015, respectively.
|
2.12
|
RESEARCH AND
DEVELOPMENT EXPENSES
|
Research and development expenses
are included in general and administrative expenses, which totaled $0, $549,020, $0 and $549,020 for the three months ended and
the six months ended June 30, 2016 and 2015, 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 $(1,018,494) as of June 30, 2016 and $1,427,638
as of December 31, 2015. The balance sheet amounts with the exception of equity as of June 30, 2016 and December 31, 2015 were
translated using an exchange rate of RMB 6.63 to $1.00 and RMB 6.49 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, 2016 and 2015 were
RMB 6.53 to $1.00 and RMB 6.13 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 for sale of goods and commission income and six months for consulting
and service income from development contracts. 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,
2016 and December 31, 2015 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 - 20 years
|
Mature seeds and herbage cultivation
|
|
20 years
|
Furniture and equipment
|
|
2.5 - 10 years
|
Motor vehicles
|
|
5 - 10 years
|
An item of plant and equipment
is removed from the accounts upon disposal or when no future economic benefits are expected to arise from the continued use of
the asset. Any gain or loss arising on disposal of the asset (calculated as the difference between the net disposal proceeds and
the carrying amount of the item) is included in the consolidated statements of income in the period the item is disposed.
Goodwill is an asset representing
the fair economic benefits arising from other assets acquired in a business combination that are not individually identified or
separately recognized. Goodwill is tested for impairment on an annual basis at the end of the Company’s fiscal year, or
when impairment indicators arise. The Company uses a fair-value-based approach to test for impairment at the level of each reporting
unit. The Company directly acquired MEIJI, which is the holding company of JHST that operates the Hu Plantation. As a result of
this acquisition, the Company recorded goodwill in the amount of $724,940. This goodwill represents the fair value of the assets
acquired in these acquisitions over the cost of the assets acquired.
|
2.19
|
LONG TERM INVESTMENT
|
On October 29, 2014, the Company
invested in Huangyuan County Rural Credit Union (“RCU”), Huangyuan County , Xining City, Qinghai Province, the P.R.C.
RCU is engaged in the financing and crediting business to agricultural projects for local farmers. The Company has a 5% equity
stake in RCU. The Company has no representative on the board of directors to oversee corporate operations. The Company accounts
for its long term investment at cost.
SINO AGRO FOOD,
INC.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
|
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
|
|
2.20
|
PROPRIETARY
TECHNOLOGIES
|
A master license of stock feed
manufacturing technology was acquired and the costs of acquisition are capitalized as proprietary technologies when technological
feasibility has been established. Cost of acquisition of stock feed manufacturing technology master license is amortized using
the straight-line method over its estimated life of 20 years.
An aromatic cattle-feeding
formula was acquired and the costs of acquisition are capitalized as proprietary technologies when technological feasibility has
been established. Cost of acquisition on aromatic cattle-feeding formula is amortized using the straight-line method over its
estimated life of 25 years.
The cost of sleepy cods breeding
technology license is capitalized as proprietary technologies when technological feasibility has been established. Cost of granting
sleepy cods breeding technology license is amortized using the straight-line method over its estimated life of 25 years.
Bacterial cellulose technology
license and related trade mark are capitalized as proprietary technologies when technological feasibility has been established.
Cost of license and related trade mark is amortized using the straight-line method over its estimated life of 20 years.
The Company has determined
that technological feasibility is established at the time a working model of products is completed. Proprietary technologies are
intangible assets of finite lives. Management evaluates the recoverability of proprietary technologies on an annual basis at the
end of the Company’s fiscal year, or when impairment indicators arise. As required by ASC Topic 350 “Intangible -
Goodwill and Other”, the Company uses a fair-value-based approach to test for impairment.
|
2.21
|
CONSTRUCTION
IN PROGRESS
|
Construction in progress represents
direct costs of construction as well as acquisition and design fees incurred. Capitalization of these costs ceases and the construction
in progress is transferred to property and equipment when substantially all the activities necessary to prepare the assets for
their intended use are completed. No depreciation is provided until construction is completed and the asset is ready for its intended
use.
Land use rights represent acquisition
of rights to agricultural land from farmers and are amortized on the straight-line basis over their respective lease periods.
The lease period of agricultural land is in the range from 10 to 60 years. Land use rights purchase prices were determined in
accordance with the P.R.C. Government’s minimum lease payments on agricultural land and mutually agreed to terms between
the Company and the vendors.
|
2.23
|
EQUITY
METHOD INVESTMENTS
|
Investee entities in which
the company can exercise significant influence, but not control, are accounted for under the equity method of accounting. Under
the equity method of accounting, the company’s share of the earnings or losses of these companies is included in net income.
A loss in value of an investment that is other than a temporary decline is recognized as a charge to operations. Evidence of a
loss in value might include, but would not necessarily be limited to absence of an ability to recover the carrying amount of the
investment or inability of the investee to sustain an earnings capacity that would justify the carrying amount of the investment.
|
2.24
|
CORPORATE JOINT
VENTURE
|
A corporation formed, owned,
and operated by two or more businesses as a separate and discrete business or project (venture) for their mutual benefit is considered
to be a corporate joint venture. Investee entities, in which the Company can exercise significant influence, but not control,
are accounted for under the equity method of accounting. Under the equity method of accounting, the Company’s share of the
earnings or losses of these companies is included in net income.
A loss in value of an investment
that is other than a temporary decline is recognized as a charge to operations. Evidence of a loss in value might include, but
would not necessarily be limited to, the absence of an ability to recover the carrying amount of the investment or inability of
the investee to sustain an earnings capacity that would justify the carrying amount of the investment.
SINO AGRO FOOD,
INC.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
|
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
|
|
2.25
|
VARIABLE INTEREST
ENTITY
|
A variable interest entity
(“
VIE
”) is an entity (investee) in which the investor has obtained less than a majority interest, according
to the Financial Accounting Standards Board (FASB). A VIE is subject to consolidation if a VIE meets one of the following three
criteria as elaborated in ASC Topic 810-10, Consolidation:
|
(a)
|
equity-at-risk
is not sufficient to support the entity’s activities;
|
|
(b)
|
as
a group, the equity-at-risk holders cannot control the entity; or
|
|
(c)
|
the
economics do not coincide with the voting interest.
|
If a firm is the primary beneficiary
of a VIE, the holdings must be disclosed on the balance sheet. The primary beneficiary is defined as the person or company with
the majority of variable interests. A corporation formed, owned, and operated by two or more businesses (ventures) as a separate
and discrete business or project (venture) for their mutual benefit is defined as a joint venture.
Treasury stock means shares
of a corporation’s own stock that have been issued and subsequently reacquired by the corporation. Converting outstanding
shares to treasury shares does not reduce the number of shares issued but does reduce the number of shares outstanding. These
shares are not eligible to receive dividends. Accounting for excesses and deficiencies on treasury stock transactions is governed
by ASC 505-30-30.
State laws and federal agencies
closely regulate transactions involving a company’s own capital stock, so the purchase of outstanding shares must have a
legitimate purpose. Some of the most common reasons for purchasing outstanding shares are as follows:
|
(a)
|
to
meet additional stock needs for various reasons, including newly implemented stock option plans, stock for convertible bonds
or convertible preferred stock, or a stock dividend.
|
|
(b)
|
to
make more shares available for acquisitions of other entities.
|
The cost method of accounting
for treasury shares has been adopted by the Company. The purchase of outstanding shares and thus converting them into treasury
shares is treated as a temporary reduction in shareholders’ equity in view of the expectation to reissue the shares instead
of retiring them. When the Company reissues the treasury shares, the temporary account is eliminated. The cost of acquiring outstanding
shares for converting into treasury shares is charged to a contra account, in this case a contra equity account that reduces the
stockholder equity balance.
The Company accounts for income
taxes under the provisions of ASC Topic 740 “Accounting for Income Taxes.” Under ASC Topic 740, deferred tax assets
and liabilities are determined based on the difference between the financial statement carrying amounts and the tax bases of assets
and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse.
The provision for income tax
is based on the results for the year as adjusted for items, which are non-assessable or disallowed. It is calculated using tax
rates that have been enacted or substantively enacted at the balance sheet date. Deferred tax is accounted for using the balance
sheet liability method in respect of temporary differences arising from differences between the carrying amount of assets and
liabilities in the financial statements and the corresponding tax basis used in the computation of assessable tax profit. In principle,
deferred tax liabilities are recognized for all taxable temporary differences, and deferred tax assets are recognized to the extent
that it is probable that taxable profit will be available against which deductible temporary differences can be utilized.
Deferred income taxes are calculated
at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled. Deferred tax
is charged or credited in the income statement, except when it related to items credited or charged directly to equity, in which
case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset when they relate to income
taxes levied by the same taxation authority and the Company intends to settle its current tax assets and liabilities on a net
basis.
ASC Topic 740 also prescribes
a more-likely-than-not threshold for financial statement recognition and measurement of a tax position taken, or for one expected
to be taken, in a tax return. ASC Topic 740 also provides guidance related to, among other things, classification, accounting
for interest and penalties associated with tax positions, and disclosure requirements. Any interest and penalties accrued related
to unrecognized tax benefits will be recorded as tax expense.
SINO AGRO FOOD,
INC.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
|
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
|
|
2.28
|
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.
|
2.29
|
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, 2016 and December
31, 2015 amounted to $3,220,620 and $7,022,695, respectively, none of which is covered by insurance. The Company has not experienced
any losses in such accounts and believes it is not exposed to any risks to its cash in bank accounts.
The Company had 5 major customers
(A, B, C, D & E) whose business individually represented the following percentages of the Company’s total revenue for
the year indicated:
|
|
Three month
ended
June 30, 2016
|
|
|
Three months ended
June 30, 2015
|
|
|
Six month
ended
June 30, 2016
|
|
|
Six months
ended
June 30, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer A
|
|
|
18.45
|
%
|
|
|
-
|
|
|
|
19.39.39
|
%
|
|
|
-
|
%
|
Customer B
|
|
|
13.99
|
%
|
|
|
11.45
|
%
|
|
|
13.24
|
%
|
|
|
10.49
|
%
|
Customer C
|
|
|
13.97
|
%
|
|
|
9.18
|
%
|
|
|
12.64
|
%
|
|
|
14.42
|
%
|
Customer D
|
|
|
11.61
|
%
|
|
|
15.20
|
%
|
|
|
8.11
|
%
|
|
|
18.25
|
%
|
Customer E
|
|
|
8.61
|
%
|
|
|
-
|
|
|
|
-
|
%
|
|
|
11.00
|
%
|
Customer F
|
|
|
-
|
|
|
|
14.65
|
%
|
|
|
-
|
%
|
|
|
-
|
|
Customer G
|
|
|
-
|
|
|
|
14.52
|
%
|
|
|
8.06
|
%
|
|
|
-
|
|
Customer H
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
%
|
|
|
12.13
|
%
|
|
|
|
66.63
|
%
|
|
|
65.00
|
%
|
|
|
61.44
|
%
|
|
|
66.29
|
%
|
|
|
|
|
Percentage
of revenue
|
|
|
Amount
|
|
Customer A
|
|
Fishery Development and Organic Fertilizer and
Bread Grass Divisions
|
|
|
19.39
|
%
|
|
$
|
38,050,425
|
|
Customer B
|
|
Fishery Development Division
|
|
|
13.24
|
%
|
|
$
|
25,981,877
|
|
Customer C
|
|
Fishery Development Division
|
|
|
12.64
|
%
|
|
$
|
24,806,201
|
|
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,
2016
|
|
|
December
31,
2015
|
|
Customer A
|
|
|
14.34
|
%
|
|
|
-
|
|
Customer B
|
|
|
13.70
|
%
|
|
|
10.12
|
%
|
Customer C
|
|
|
8.81
|
%
|
|
|
13.71
|
%
|
Customer D
|
|
|
6.99
|
%
|
|
|
11.31
|
%
|
Customer E
|
|
|
6.19
|
%
|
|
|
9.31
|
%
|
Customer F
|
|
|
-
|
%
|
|
|
8.45
|
%
|
|
|
|
50.03
|
%
|
|
|
52.90
|
%
|
As of June 30, 2016 amounts
due from customers A and B are $18,443,674 and $17,612,139, respectively. The Company has not experienced any significant difficulty
in collecting its accounts receivable in the past and is not aware of any financial difficulties of its major customers.
SINO AGRO FOOD,
INC.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
|
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
|
|
2.30
|
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, 2016 and December 31, 2015, 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, 2016 and 2015, basic earnings per share attributable to Sino Agro Food, Inc. and subsidiaries’ common stockholders
amount to $0.90 and $0.51 respectively. For the three months ended June 30, 2016 and 2015, diluted earnings per share attributable
to Sino Agro Food, Inc. and its subsidiaries’ common stockholders amounted to $0.82 and $0.51, respectively.
For the six months ended June
30, 2016 and 2015, basic earnings per share attributable to Sino Agro Food, Inc. and subsidiaries’ common stockholders amount
to $1.34 and $1.87 respectively. For the six months ended June 30, 2016 and 2015, diluted earnings per share attributable to Sino
Agro Food, Inc. and its subsidiaries’ common stockholders amounted to $1.24 and $1.87, respectively.
|
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.
SINO AGRO FOOD,
INC.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
|
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
|
|
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, 2016 or December 31, 2015, 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 six months ended June 30, 2016 or 2015.
|
2.36
|
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 January 2015, FASB issued
ASU No. 2015-01,
Income Statement—Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation
by Eliminating the Concept of Extraordinary Items
. This Update eliminates from GAAP the concept of extraordinary items. The
amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December
15, 2015. A reporting entity may apply the amendments prospectively. A reporting entity also may apply the amendments retrospectively
to all prior periods presented in the financial statements. Early adoption is permitted provided that the guidance is applied
from the beginning of the fiscal year of adoption. The Company does not expect the adoption of ASU 2015-01 to have material impact
on the Company’s consolidated financial statements.
In February 2015, the FASB
issued Accounting Standards Update ("ASU") No. 2015-02,
Consolidation (Topic 810): Amendments to the Consolidation
Analysis.
The new consolidation standard changes the way reporting enterprises evaluate whether (a) they should consolidate
limited partnerships and similar entities, (b) fees paid to a decision maker or service provider are variable interests in a variable
interest entity ("VIE"), and (c) variable interests in a VIE held by related parties of the reporting enterprise require
the reporting enterprise to consolidate the VIE. The guidance is effective for public business entities for annual and interim
periods in fiscal years beginning after December 15, 2015. Early adoption is allowed, including early adoption in an interim period.
A reporting entity may apply a modified retrospective approach by recording a cumulative-effect adjustment to equity as of the
beginning of the fiscal year of adoption or may apply the amendments retrospectively. The adoption of ASU 2015-02 did not have
a material impact on the Company’s consolidated financial statements.
In April 2015, the Financial
Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2015-03, which simplifies
presentation of debt issuance costs. The amendments in this update require that debt issuance costs related to a recognized debt
liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent
with debt discounts. ASU No. 2015-03 will be effective for fiscal years beginning after December 15, 2015, with early adoption
permitted. The adoption of ASU 2015-03 did not have a material impact on the Company’s consolidated financial statements.
In November 2015, the FASB
issued Accounting Standards Update No. 2015-17,
Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes
(ASU
2015-17), which simplifies the presentation of deferred income taxes by requiring deferred tax assets and liabilities be classified
as noncurrent on the balance sheet. The updated standard is effective for us beginning on January 1, 2017 with early application
permitted as of the beginning of any interim or annual reporting period. The adoption of ASU 2015-17 did not have a material impact
on the Company’s consolidated financial statements.
SINO AGRO FOOD,
INC.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
|
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
|
|
2.36
|
NEW ACCOUNTING
PRONOUNCEMENTS (CONTINUED)
|
In February 2016, the Financial
Accounting Standards Board (FASB) issued Accounting Standards Update No. 2016-02,
Leases (Topic 842)
(ASU 2016-02),
which generally requires companies to recognize operating and financing lease liabilities and corresponding right-of-use assets
on the balance sheet. This guidance will be effective for us in the first quarter of 2019 on a modified retrospective basis and
early adoption is permitted. We are still evaluating the effect that this guidance will have on our consolidated financial statements
and related disclosures.
In March 2016, the FASB issued
Accounting Standards Update No. 2016-08,
Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations
(Reporting Revenue Gross versus Net)
(ASU 2016-08) which clarifies the implementation guidance on principal versus agent
considerations. The guidance includes indicators to assist an entity in determining whether it controls a specified good or service
before it is transferred to the customers. This guidance will be effective for us in the first quarter of 2018, with the option
to adopt it in the first quarter of 2017. We are still evaluating the effect that this guidance will have on our consolidated
financial statements and related disclosures.
In March 2016, the FASB issued
Accounting Standards Update No. 2016-09,
Compensation-Stock Compensation (Topic 718): Improvement to Employee Share-based
Payment Accounting
(ASU 2016-09) 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 2017, and early adoption is permitted. We are still evaluating the effect that this guidance will have on our consolidated
financial statements and related disclosures.
Other accounting standards
that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material
impact on the consolidated financial statements upon adoption.
SINO AGRO FOOD,
INC.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
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, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
Organic
|
|
|
|
|
|
|
|
|
|
|
|
|
Fishery
|
|
|
|
|
|
Fertilizer and
|
|
|
Cattle Farm
|
|
|
|
|
|
|
|
|
|
Development
|
|
|
HU Plantation
|
|
|
Bread Grass
|
|
|
Development
|
|
|
Corporate and
|
|
|
|
|
|
|
Division (1)
|
|
|
Division (2)
|
|
|
Division (3)
|
|
|
Division (4)
|
|
|
Others Division (5)
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
48,154,472
|
|
|
$
|
5,502,259
|
|
|
$
|
43,880,876
|
|
|
$
|
7,079,763
|
|
|
$
|
19,664,885
|
|
|
$
|
124,282,255
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
11,823,978
|
|
|
$
|
1,550,172
|
|
|
$
|
5,387,193
|
|
|
$
|
714,750
|
|
|
$
|
(679,801
|
)
|
|
$
|
18,796,292
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
157,197,464
|
|
|
$
|
50,725,055
|
|
|
$
|
335,772,525
|
|
|
$
|
41,281,206
|
|
|
$
|
98,777,042
|
|
|
$
|
683,753,292
|
|
|
|
For the three months ended June 30, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
Organic
|
|
|
|
|
|
|
|
|
|
|
|
|
Fishery
|
|
|
|
|
|
Fertilizer and
|
|
|
Cattle Farm
|
|
|
|
|
|
|
|
|
|
Development
|
|
|
HU Plantation
|
|
|
Bread Grass
|
|
|
Development
|
|
|
Corporate and
|
|
|
|
|
|
|
Division (1)
|
|
|
Division (2)
|
|
|
Division (3)
|
|
|
Division (4)
|
|
|
Others Division (5)
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
27,976,873
|
|
|
$
|
4,193,013
|
|
|
$
|
41,427,182
|
|
|
$
|
9,497,684
|
|
|
$
|
7,758,976
|
|
|
$
|
90,853,728
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
5,735,532
|
|
|
$
|
1,537,297
|
|
|
$
|
4,732,684
|
|
|
$
|
620,338
|
|
|
$
|
(3,315,649
|
)
|
|
$
|
9,310,202
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
131,773,709
|
|
|
$
|
55,812,249
|
|
|
$
|
299,867,901
|
|
|
$
|
33,714,325
|
|
|
$
|
84,384,397
|
|
|
$
|
605,552,581
|
|
|
|
For the six months ended June
30, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
Organic
|
|
|
|
|
|
|
|
|
|
|
|
|
Fishery
|
|
|
|
|
|
Fertilizer and
|
|
|
Cattle Farm
|
|
|
|
|
|
|
|
|
|
Development
|
|
|
HU Plantation
|
|
|
Bread Grass
|
|
|
Development
|
|
|
Corporate and
|
|
|
|
|
|
|
Division (1)
|
|
|
Division (2)
|
|
|
Division (3)
|
|
|
Division (4)
|
|
|
Others Division (5)
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
77,418,513
|
|
|
$
|
5,502,259
|
|
|
$
|
75,306,596
|
|
|
$
|
11,896,647
|
|
|
$
|
26,071,294
|
|
|
$
|
196,195,309
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
18,346,079
|
|
|
$
|
1,132,208
|
|
|
$
|
10,155,689
|
|
|
$
|
1,061,419
|
|
|
$
|
(3,292,419
|
)
|
|
$
|
27,402,976
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
157,197,464
|
|
|
$
|
50,725,055
|
|
|
$
|
335,772,525
|
|
|
$
|
41,281,206
|
|
|
$
|
98,777,042
|
|
|
$
|
683,753,292
|
|
|
|
For the six months ended June
30, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
Organic
|
|
|
|
|
|
|
|
|
|
|
|
|
Fishery
|
|
|
|
|
|
Fertilizer and
|
|
|
Cattle Farm
|
|
|
|
|
|
|
|
|
|
Development
|
|
|
HU Plantation
|
|
|
Bread Grass
|
|
|
Development
|
|
|
Corporate and
|
|
|
|
|
|
|
Division (1)
|
|
|
Division (2)
|
|
|
Division (3)
|
|
|
Division (4)
|
|
|
Others Division (5)
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
81,313,647
|
|
|
$
|
4,193,013
|
|
|
$
|
81,803,771
|
|
|
$
|
17,787,670
|
|
|
$
|
21,232,077
|
|
|
$
|
206,330,178
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
23,099,982
|
|
|
$
|
949,281
|
|
|
$
|
10,391,789
|
|
|
$
|
974,518
|
|
|
$
|
(2,350,527
|
)
|
|
$
|
33,065,043
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
131,773,709
|
|
|
$
|
55,812,249
|
|
|
$
|
299,867,901
|
|
|
$
|
33,714,325
|
|
|
$
|
84,384,397
|
|
|
$
|
605,552,581
|
|
SINO AGRO FOOD,
INC.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
|
3.
|
SEGMENT
INFORMATION (CONTINUED)
|
Note
|
(1)
|
Operated
by Capital Award, Inc. (“CA”) and Jiang Men City A Power Fishery Development
Co., Limited (“JFD”).
|
|
(2)
|
Operated
by Jiang Men City Heng Sheng Tai Agriculture Development Co., Limited (“JHST”).
|
|
(3)
|
Operated
by Qinghai Sanjiang A Power Agriculture Co., Limited (“SJAP”), Qinghai Zhong
He Meat Products Co., Limited (“QZH”), A Power Agro Agriculture Development
(Macau) Limited (“APWAM”), and Hunan Shenghua A Power Agriculture Co., Limited
(“HSA”).
|
|
(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 (publ) (“SAFS”).
|
SINO AGRO FOOD,
INC.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
|
3.
|
SEGMENT
INFORMATION (CONTINUED)
|
Further analysis of revenue:-
|
|
For the three
months ended June 30, 2016
|
|
|
|
|
|
|
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”)
|
|
$
|
28,881,464
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
28,881,464
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jiang Men City Heng Sheng Tai Agriculture Development Co., Limited(“JHST”)
|
|
|
-
|
|
|
|
5,502,259
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,502,259
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Human Shenghua A Power Agriculture Co., Limited(“HSA”)
|
|
|
-
|
|
|
|
-
|
|
|
|
5,200,220
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,200,220
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Qinghai Sanjiang A Power Agriculture Co., Limited (“SJAP”)
|
|
|
-
|
|
|
|
-
|
|
|
|
12.774,901
|
|
|
|
-
|
|
|
|
-
|
|
|
|
12,774,901
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Qinghai Zhong He Meat Products Co., Limited (“QZH”)
|
|
|
-
|
|
|
|
-
|
|
|
|
25,905,755
|
|
|
|
-
|
|
|
|
-
|
|
|
|
25,905,755
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Macau Eiji Company Limited (“MEIJI”)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
7,079,763
|
|
|
|
-
|
|
|
|
7,079,763
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sino Agro Food, Inc. (“SIAF”)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
19,664,885
|
|
|
|
19,664,885
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consulting and service income for development contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Award, Inc. (“CA”)
|
|
|
18,945,280
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
18,945,280
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sino Agro Food, Inc. (“SIAF”)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commission and management fee
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Award, Inc. (“CA”)
|
|
|
327,728
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
327,728
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Macau Eiji Company Limited (“MEIJI”)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
$
|
48,154,472
|
|
|
$
|
5,502,259
|
|
|
$
|
43,880,876
|
|
|
$
|
7,079,763
|
|
|
$
|
19,664,885
|
|
|
$
|
124,282,255
|
|
SINO AGRO FOOD,
INC.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
|
3.
|
SEGMENT
INFORMATION (CONTINUED)
|
Further analysis of revenue
(Continued):-
|
|
For the three
months ended June 30, 2015
|
|
|
|
|
|
|
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”)
|
|
$
|
19,143,447
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
19,143,447
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jiang Men City Heng Sheng Tai Agriculture Development Co., Limited(“JHST”)
|
|
|
-
|
|
|
|
4,193,013
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,193,013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Human Shenghua A Power Agriculture Co., Limited(“HSA”)
|
|
|
-
|
|
|
|
-
|
|
|
|
4,908,734
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,908,734
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Qinghai Sanjiang A Power Agriculture Co., Limited (“SJAP”)
|
|
|
-
|
|
|
|
-
|
|
|
|
19,786,896
|
|
|
|
-
|
|
|
|
-
|
|
|
|
19,786,896
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Qinghai Zhong He Meat Products Co., Limited (“QZH”)
|
|
|
-
|
|
|
|
-
|
|
|
|
16,731,552
|
|
|
|
-
|
|
|
|
-
|
|
|
|
16,731,552
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Macau Eiji Company Limited (“MEIJI”)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
9,497,684
|
|
|
|
-
|
|
|
|
9,497,684
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sino Agro Food, Inc. (“SIAF”)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
7,758,976
|
|
|
|
7,758,976
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consulting and service income for development contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Award, Inc. (“CA”)
|
|
|
8,343,423
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
8,343,423
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sino Agro Food, Inc. (“SIAF”)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commission and management fee
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Award, Inc. (“CA”)
|
|
|
490,003
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
490,003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Macau Eiji Company Limited (“MEIJI”)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
$
|
27,976,873
|
|
|
$
|
4,193,013
|
|
|
$
|
41,427,182
|
|
|
$
|
9,497,684
|
|
|
$
|
7,758,976
|
|
|
$
|
90,853,728
|
|
SINO AGRO FOOD,
INC.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
|
3.
|
SEGMENT
INFORMATION (CONTINUED)
|
Further analysis of revenue:-
|
|
For the six months
ended June 30, 2016
|
|
|
|
|
|
|
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”)
|
|
$
|
45,019,454
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
45,019,454
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jiang Men City Heng Sheng Tai Agriculture Development Co., Limited(“JHST”)
|
|
|
-
|
|
|
|
5,502,259
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,502,259
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Human Shenghua A Power Agriculture Co., Limited(“HSA”)
|
|
|
-
|
|
|
|
-
|
|
|
|
10,313,770
|
|
|
|
-
|
|
|
|
-
|
|
|
|
10,313,770
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Qinghai Sanjiang A Power Agriculture Co., Limited (“SJAP”)
|
|
|
-
|
|
|
|
-
|
|
|
|
21,430,449
|
|
|
|
-
|
|
|
|
-
|
|
|
|
21,430,449
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Qinghai Zhong He Meat Products Co., Limited (“QZH”)
|
|
|
-
|
|
|
|
-
|
|
|
|
43,562,377
|
|
|
|
-
|
|
|
|
-
|
|
|
|
43,562,377
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Macau Eiji Company Limited (“MEIJI”)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
11,896,647
|
|
|
|
-
|
|
|
|
11,896,647
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sino Agro Food, Inc. (“SIAF”)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
26,071,294
|
|
|
|
26,071,294
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consulting and service income for development contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Award, Inc. (“CA”)
|
|
|
31,664,377
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
31,664,377
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sino Agro Food, Inc. (“SIAF”)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commission and management fee
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Award, Inc. (“CA”)
|
|
|
734,682
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
734,682
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Macau Eiji Company Limited (“MEIJI”)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
$
|
77,418,513
|
|
|
$
|
5,502,259
|
|
|
$
|
75,306,596
|
|
|
$
|
11,896,647
|
|
|
$
|
26,071,294
|
|
|
$
|
196,195,309
|
|
SINO AGRO FOOD,
INC.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
|
3.
|
SEGMENT
INFORMATION (CONTINUED)
|
Further analysis of revenue
(Continued):-
|
|
For the six months
ended June 30, 2015
|
|
|
|
|
|
|
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”)
|
|
$
|
46,362,288
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
46,362,288
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jiang Men City Heng Sheng Tai Agriculture Development Co., Limited(“JHST”)
|
|
|
-
|
|
|
|
4,193,013
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,193,013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Human Shenghua A Power Agriculture Co., Limited(“HSA”)
|
|
|
-
|
|
|
|
-
|
|
|
|
9,091,174
|
|
|
|
-
|
|
|
|
-
|
|
|
|
9,091,174
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Qinghai Sanjiang A Power Agriculture Co., Limited (“SJAP”)
|
|
|
-
|
|
|
|
-
|
|
|
|
43,825,169
|
|
|
|
-
|
|
|
|
-
|
|
|
|
43,825,169
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Qinghai Zhong He Meat Products Co., Limited (“QZH”)
|
|
|
-
|
|
|
|
-
|
|
|
|
28,887,428
|
|
|
|
-
|
|
|
|
-
|
|
|
|
28,887,428
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Macau Eiji Company Limited (“MEIJI”)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
17,787,670
|
|
|
|
-
|
|
|
|
17,787,670
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sino Agro Food, Inc. (“SIAF”)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
17,446,103
|
|
|
|
17,446,103
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consulting and service income for development contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Award, Inc. (“CA”)
|
|
|
33,927,288
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
33,927,288
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sino Agro Food, Inc. (“SIAF”)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,785,974
|
|
|
|
3,785,974
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commission and management fee
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Award, Inc. (“CA”)
|
|
|
490,003
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
490,003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Macau Eiji Company Limited (“MEIJI”)
|
|
|
534,068
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
534,068
|
|
|
|
$
|
81,313,647
|
|
|
$
|
4,193,013
|
|
|
$
|
81,803,771
|
|
|
$
|
17,787,670
|
|
|
$
|
21,232,077
|
|
|
$
|
206,330,178
|
|
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, 2016
|
|
|
|
|
|
|
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”)
|
|
$
|
22,812,060
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
22,812,060
|
|
Jiang Men City Heng Sheng Tai Agriculture Development Co., Limited
(“JHST”)
|
|
|
-
|
|
|
|
2,654,717
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,654,717
|
|
Hunan Shenghua A Power Agriculture Co., Limited (“HSA”)
|
|
|
-
|
|
|
|
-
|
|
|
|
3,152,363
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,152,363
|
|
Qinghai Sanjiang A Power Agriculture Co., Limited (“SJAP”)
|
|
|
-
|
|
|
|
-
|
|
|
|
8,890,553
|
|
|
|
-
|
|
|
|
-
|
|
|
|
8,890,553
|
|
Qinghai Zhong He Meat Products Co., Limited (“QZH”)
|
|
|
-
|
|
|
|
-
|
|
|
|
19,300,064
|
|
|
|
-
|
|
|
|
-
|
|
|
|
19,300,064
|
|
Macau Eiji Company Limited (“MEIJI”)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6,682,424
|
|
|
|
-
|
|
|
|
6,682,424
|
|
Sino Agro Food, Inc. (“SIAF”)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
17,409,408
|
|
|
|
17,409,408
|
|
|
|
$
|
22,812,060
|
|
|
$
|
2,654,717
|
|
|
$
|
31,342,980
|
|
|
$
|
6,682,424
|
|
|
$
|
17,409,408
|
|
|
$
|
80,901,589
|
|
COST
OF SERVICES
|
|
For the three months
ended June 30, 2016
|
|
|
|
|
|
|
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”)
|
|
$
|
13,416,468
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
13,416,468
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Macau Eiji Company Limited
(“MEIJI”)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
$
|
13,416,468
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
13,416,468
|
|
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 three months
ended June 30, 2015
|
|
|
|
|
|
|
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”)
|
|
$
|
14,657,975
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
14,657,975
|
|
Jiang Men City Heng Sheng Tai Agriculture
Development Co., Limited (“JHST”)
|
|
|
-
|
|
|
|
1,144,755
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,144,755
|
|
Hunan Shenghua A Power Agriculture Co., Limited
(“HSA”)
|
|
|
-
|
|
|
|
-
|
|
|
|
2,841,873
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,841,873
|
|
Qinghai Sanjiang A Power Agriculture Co.,
Limited (“SJAP”)
|
|
|
-
|
|
|
|
-
|
|
|
|
15,284,738
|
|
|
|
-
|
|
|
|
-
|
|
|
|
15,284,738
|
|
Qinghai Zhong He Meat Products Co., Limited
(“QZH”)
|
|
|
-
|
|
|
|
-
|
|
|
|
12,244,885
|
|
|
|
-
|
|
|
|
-
|
|
|
|
12,244,885
|
|
Macau Eiji Company Limited (“MEIJI”)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
9,137,304
|
|
|
|
-
|
|
|
|
9,137,304
|
|
Sino Agro Food, Inc.
(“SIAF”)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6,896,868
|
|
|
|
6,896,868
|
|
|
|
$
|
14,657,975
|
|
|
$
|
1,144,755
|
|
|
$
|
30,371,496
|
|
|
$
|
9,137,304
|
|
|
$
|
6,896,868
|
|
|
$
|
62,208,398
|
|
COST OF SERVICES
|
|
For the three months
ended June 30, 2015
|
|
|
|
|
|
|
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”)
|
|
$
|
6,708,419
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
6,708,419
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Macau Eiji
Company Limited (“MEIJI”)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
$
|
6,708,419
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
6,708,419
|
|
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 six months
ended June 30, 2016
|
|
|
|
|
|
|
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”)
|
|
$
|
35,109,739
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
35,109,739
|
|
Jiang Men City Heng Sheng Tai Agriculture
Development Co., Limited (“JHST”)
|
|
|
-
|
|
|
|
2,654,717
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,654,717
|
|
Hunan Shenghua A Power Agriculture Co.,
Limited (“HSA”)
|
|
|
-
|
|
|
|
|
|
|
|
6,309,822
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6,309,822
|
|
Qinghai Sanjiang A Power Agriculture Co.,
Limited (“SJAP”)
|
|
|
-
|
|
|
|
-
|
|
|
|
14,169,177
|
|
|
|
-
|
|
|
|
-
|
|
|
|
14,169,177
|
|
Qinghai Zhong He Meat Products Co.,
Limited (“QZH”)
|
|
|
-
|
|
|
|
-
|
|
|
|
32,055,852
|
|
|
|
-
|
|
|
|
-
|
|
|
|
32,055,852
|
|
Macau Eiji Company Limited (“MEIJI”)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
11,272,835
|
|
|
|
-
|
|
|
|
11,272,835
|
|
Sino Agro Food, Inc.
(“SIAF”)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
22,876,211
|
|
|
|
22,876,211
|
|
|
|
$
|
35,109,739
|
|
|
$
|
2,654,717
|
|
|
$
|
52,534,851
|
|
|
$
|
11,272,835
|
|
|
$
|
22,876,811
|
|
|
$
|
124,448,353
|
|
COST OF SERVICES
|
|
For the six months ended June 30, 2016
|
|
|
|
|
|
|
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”)
|
|
$
|
22,927,340
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
22,927,340
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Macau Eiji Company Limited (“MEIJI”)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
$
|
22,927,340
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
22,927,340
|
|
SINO AGRO FOOD,
INC.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE SIX MONTHS
ENDED JUNE 30, 2016 AND 2015
|
3.
|
SEGMENT
INFORMATION (CONTINUED)
|
Further analysis of cost of
goods sold and cost of services:-
COST OF GOODS SOLD
|
|
For
the six months ended June 30, 2015
|
|
|
|
|
|
|
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”)
|
|
$
|
34,759,972
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
34,759,972
|
|
Jiang Men City Heng
Sheng Tai Agriculture Development Co., Limited (“JHST”)
|
|
|
-
|
|
|
|
1,144,755
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,144,755
|
|
Hunan Shenghua A
Power Agriculture Co., Limited (“HSA”)
|
|
|
-
|
|
|
|
-
|
|
|
|
5,232,471
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,232,471
|
|
Qinghai Sanjiang
A Power Agriculture Co., Limited (“SJAP”)
|
|
|
-
|
|
|
|
-
|
|
|
|
31,848,569
|
|
|
|
-
|
|
|
|
-
|
|
|
|
31,848,569
|
|
Qinghai Zhong He
Meat Products Co., Limited (“QZH”)
|
|
|
-
|
|
|
|
-
|
|
|
|
20,416,253
|
|
|
|
-
|
|
|
|
-
|
|
|
|
20,416,253
|
|
Macau Eiji
Company Limited (“MEIJI”)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
17,125,423
|
|
|
|
-
|
|
|
|
17,125,423
|
|
Sino Agro Food,
Inc. (“SIAF”)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
14,970,943
|
|
|
|
14,970,943
|
|
|
|
$
|
34,759,972
|
|
|
$
|
1,144,755
|
|
|
$
|
57,497,293
|
|
|
$
|
17,125,423
|
|
|
$
|
14,970,943
|
|
|
$
|
125,498,386
|
|
COST
OF SERVICES
|
|
For the six
months ended June 30, 2015
|
|
|
|
|
|
|
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”)
|
|
$
|
21,911,617
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
21,911,617
|
|
Sino Agro Food, Inc.(“SIAF”)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,404,813
|
|
|
|
1,404,813
|
|
|
|
$
|
21,911,617
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,404,813
|
|
|
$
|
23,316,430
|
|
SINO AGRO FOOD,
INC.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
United States of America
The Company was incorporated
in the State of Nevada, in the United States of America. The Company has no trading operations in United States of America and
no U.S. corporate tax has been provided for in the consolidated financial statements of the Company.
Undistributed Earnings of Foreign
Subsidiaries
The Company intends to use
the remaining accumulated and future earnings of foreign subsidiaries to expand operations outside the United States and accordingly,
undistributed earnings of foreign subsidiaries are considered to be indefinitely reinvested outside the United States and no provision
for U.S. Federal and State income tax or applicable dividend distribution tax has been provided thereon.
The Company appointed US tax
professionals to assist in filing income tax returns for the years ended December 31, 2015, 2014 and 2013 in compliance with US
Treasury Internal Revenue Code and we had already filed our 2014 and 2013 Tax returns with the Internal Revenue Service (“
IRS
”) of USA Government.
As of June 30, 2016, the Company
reviewed its tax position with the assistance US tax professionals and believed that there would be no taxes and no penalties
assessed by the IRS in the United States of America.
China
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, JFD, HSA, SJAP and QZH since they are exempt from EIT for the six months ended
June 30, 2016 and 2015 as they are within the agriculture, dairy and fishery sectors.
Belize
CA, CS and CH are international
business companies incorporated in Belize, and are exempt from corporate tax in Belize.
Hong Kong
No Hong Kong profits tax has
been provided in the consolidated financial statements of TRW, since these entities did not earn any assessable profits arising
in Hong Kong for the six months ended June 30, 2016, and 2015.
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 six months ended June 30, 2016 and 2015.
Sweden
No Sweden Corporate income
tax has been provided in the consolidated financial statements of SAFS since SAFS did not earn any profits for the six months
ended June 30, 2016 and 2015.
No deferred tax assets and
liabilities are of June 30, 2016 and December 31, 2015 since there was no difference between the financial statements carrying
amounts and the tax bases of assets and liabilities using enacted tax rates in effect in the period in which the differences are
expected to reverse.
Provision for income taxes is as
follows:
|
|
Three months
ended June
30, 2016
|
|
|
Three months
ended June
30, 2015
|
|
|
Six months
ended June
30, 2016
|
|
|
Six months
ended June
30, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SIAF
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
SAFS
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
TRW
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
MEIJI and APWAM
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
JHST, JFD, JHMC, SJAP, QZH and HSA
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
|
|
|
$
|
-
|
|
The
Company did not recognize any interest or penalties related to unrecognized tax benefits in the six months ended June 30, 2016
and 2015. 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,
|
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
Cash and bank balances
|
|
$
|
3,320,287
|
|
|
$
|
7,229,197
|
|
As of June 30, 2016, inventories are as follows:
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
Sleepy cods, prawns, eels and marble goby
|
|
$
|
8,441,993
|
|
|
$
|
4,053,458
|
|
Beef and mutton
|
|
|
135,696
|
|
|
|
14,593,458
|
|
Bread grass
|
|
|
4,832,611
|
|
|
|
1,207,260
|
|
Beef cattle
|
|
|
12,619,418
|
|
|
|
5,026,404
|
|
Organic fertilizer
|
|
|
14,797,299
|
|
|
|
10,815,983
|
|
Forage for cattle and consumable
|
|
|
12,191,803
|
|
|
|
10,328,365
|
|
Raw materials for bread grass and organic fertilizer
|
|
|
11,331,154
|
|
|
|
15,440,348
|
|
Immature seeds
|
|
|
1,322,123
|
|
|
|
1,383,431
|
|
|
|
$
|
65,672,097
|
|
|
$
|
62,848,707
|
|
7.
|
DEPOSITS AND
PREPAYMENTS
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
Deposits for
|
|
|
|
|
|
|
|
|
- purchases of equipment
|
|
$
|
6,975,629
|
|
|
$
|
4,963,245
|
|
- acquisition of land use rights
|
|
|
3,373,110
|
|
|
|
3,373,110
|
|
- inventories purchases
|
|
|
18,440,747
|
|
|
|
19,948,867
|
|
- aquaculture contracts
|
|
|
2,261,538
|
|
|
|
4,340,741
|
|
- consulting service providers and others
|
|
|
8,632,259
|
|
|
|
9,197,796
|
|
- construction in progress
|
|
|
22,354,658
|
|
|
|
20,243,172
|
|
- issue of shares as collateral
|
|
|
11,281,100
|
|
|
|
11,281,100
|
|
Prepayments - debts discounts and others
|
|
|
14,216,699
|
|
|
|
9,919,126
|
|
Shares issued for employee compensation and overseas professional and bond
interest
|
|
|
7,963,889
|
|
|
|
544,772
|
|
|
|
$
|
95,499,629
|
|
|
$
|
83,811,929
|
|
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, 2016 and December 31, 2015. Bad
debts written off for the three months and the six months ended June 30, 2016, and 2015 are $0.
Aging
analysis of accounts receivable is as follows:
|
|
June 30,
2016
|
|
|
December 31,
2015
|
|
|
|
|
|
|
|
|
0 - 30 days
|
|
$
|
66,669,797
|
|
|
$
|
49,190,282
|
|
31 - 90 days
|
|
|
30,918,910
|
|
|
|
29,280,990
|
|
91 - 120 days
|
|
|
15,064,480
|
|
|
|
19,838,792
|
|
over 120 days and less than 1 year
|
|
|
15,934,472
|
|
|
|
37,364,354
|
|
over 1 year
|
|
|
-
|
|
|
|
-
|
|
|
|
$
|
128,587,659
|
|
|
$
|
135,674,418
|
|
SINO AGRO FOOD,
INC.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
|
|
June 30,
2016
|
|
|
December 31,
2015
|
|
|
|
|
|
|
|
|
Advanced to employees
|
|
$
|
532,148
|
|
|
$
|
169,369
|
|
Advanced to suppliers
|
|
|
13,977,318
|
|
|
|
8,052,235
|
|
Advanced to customers
|
|
|
28,003,006
|
|
|
|
20,696,433
|
|
Advanced to developers
|
|
|
28,000,000
|
|
|
|
28,000,000
|
|
Advanced to convertible bond holder
|
|
|
2,862,550
|
|
|
|
2,862,550
|
|
|
|
$
|
73,375,022
|
|
|
$
|
59,780,587
|
|
Advanced to employees, suppliers,
customers and developers are unsecured, interest free and with no fixed terms of repayment.
The Company entered friendly
loan agreements with suppliers, customers and developers to assist them to procure project loans.
|
|
June 30,
2016
|
|
|
December 31,
2015
|
|
|
|
|
|
|
|
|
Plant and machinery
|
|
$
|
6,481,690
|
|
|
$
|
5,889,915
|
|
Structure and leasehold improvements
|
|
|
90,612,871
|
|
|
|
90,612,871
|
|
Mature seeds and herbage cultivation
|
|
|
18,737,643
|
|
|
|
14,122,937
|
|
Furniture and equipment
|
|
|
704,153
|
|
|
|
704,153
|
|
Motor vehicles
|
|
|
790,434
|
|
|
|
790,434
|
|
|
|
|
117,326,791
|
|
|
|
112,120,310
|
|
|
|
|
|
|
|
|
|
|
Less: Accumulated depreciation
|
|
|
(10,125,160
|
)
|
|
|
(7,861,231
|
)
|
Net carrying amount
|
|
$
|
107,201,631
|
|
|
$
|
104,259,079
|
|
Depreciation expense was $995,317,
$804,535, $2,263,929 and $1,606,873 for the three months ended and the six months ended June 30, 2016 and 2015, respectively.
|
11.
|
CONSTRUCTION
IN PROGRESS
|
|
|
June 30,
2016
|
|
|
December 31,
2015
|
|
|
|
|
|
|
|
|
Construction in progress
|
|
|
|
|
|
|
|
|
- Office, warehouse and organic fertilizer plant in HSA
|
|
$
|
32,139,090
|
|
|
$
|
26,158,968
|
|
- Oven room, road for production of dried flowers
|
|
|
3,016,136
|
|
|
|
3,079,766
|
|
- Organic fertilizer and bread grass production plant and office building
|
|
|
19,340,652
|
|
|
|
11,746,949
|
|
- Rangeland for beef cattle and office building
|
|
|
31,620,384
|
|
|
|
26,463,249
|
|
- Fish pond
|
|
|
12,867,276
|
|
|
|
5,339,837
|
|
|
|
$
|
98,983,538
|
|
|
$
|
72,788,769
|
|
Private ownership of agricultural
land is not permitted in the P.R.C. Instead, the Company has leased seven lots of land. The cost of the first lot of land use
rights acquired in 2007 in Guangdong Province, the P.R.C. was $6,408,289 and consists of 180.23 acres with the lease expiring
in 2067. The cost of the second lot of land use rights acquired in 2008 in Guangdong Province, the P.R.C. was $764,128, which
consists of 31.84 acres with the lease expiring in 2068. The cost of the third lot of land use rights acquired in 2011 was $12,040,571,
which consists of 79.48 acres in Guangdong Province, the P.R.C. with the lease expires in 2037. The cost of the fourth lot of
land use rights acquired in 2011 was $35,405,750 which consisted of 287.21 acres in the Hunan Province, the P.R.C. and the leases
expire in 2051, 2054 and 2071. The cost of the fifth lot of land use rights acquired in 2012 was $528,240 which consisted of 21.09
acres in Qinghai Province, the P.R.C. and the lease expires in 2051. The cost of the sixth lot of land use rights acquired in
2013 was $489,904 which consisted of 6.27 acres in Guangdong Province, the P.R.C. and the lease expires in 2023. The cost of the
seventh lot of land use rights acquired in 2014 was $4,453,665 which consisted of 33.28 acres in Guangdong Province, the P.R.C.
and the lease expires in 2044.
SINO AGRO FOOD,
INC.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
|
12.
|
LAND
USE RIGHTS (CONTINUED)
|
|
|
June 30,
2016
|
|
|
December 31,
2015
|
|
|
|
|
|
|
|
|
Cost
|
|
$
|
64,785,941
|
|
|
$
|
65,961,071
|
|
Less: Accumulated amortization
|
|
|
(8,167,450
|
)
|
|
|
(7,475,396
|
)
|
Net carrying amount
|
|
$
|
56,618,491
|
|
|
$
|
58,485,675
|
|
|
|
Expiry date
|
|
|
Description
|
|
|
Amount
|
|
|
|
|
|
|
|
|
|
|
|
Balance @1.1.2015
|
|
|
|
|
|
|
|
|
|
$
|
69,428,143
|
|
Exchange difference
|
|
|
|
|
|
|
|
|
|
|
(3,467,072
|
)
|
Balance @12.31.2015
|
|
|
|
|
|
|
|
|
|
|
65,961,071
|
|
Exchange difference
|
|
|
|
|
|
|
|
|
|
|
(1,175,130
|
)
|
Balance @6.30.2016
|
|
|
|
|
|
|
|
|
|
$
|
64,785,941
|
|
Land use rights are amortized
on the straight-line basis over their respective lease periods. The lease period of agriculture land is 30 to 60 years. Amortization
of land use rights was $241,952, $461,711, $692,054 and $797,551 for the three months and the six months ended June 30, 2016 and
2015, 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,
2016
|
|
|
December 31,
2015
|
|
|
|
|
|
|
|
|
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 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 $2,270,968 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.
|
|
June 30,
2016
|
|
|
December 31,
2015
|
|
|
|
|
|
|
|
|
Cost
|
|
$
|
13,720,616
|
|
|
$
|
13,771,527
|
|
Less: Accumulated amortization
|
|
|
(3,272,051
|
)
|
|
|
(2,987,169
|
)
|
Net carrying amount
|
|
$
|
10,448,565
|
|
|
$
|
10,784,358
|
|
Amortization of proprietary
technologies was $119,168, $119,168, $284,882 and $297,449 for the three months and the six months ended June 30, 2016 and 2015,
respectively. No impairments of proprietary technologies have been identified for the three months and the six months ended
June 30, 2016 and 2015.
15.
|
INVESTMENT IN UNCONSOLIDATED EQUITY INVESTEE
|
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 $150,806.
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
Investment at cost
|
|
$
|
150,806
|
|
|
$
|
-
|
|
Share of post acquisition profits
|
|
|
-
|
|
|
|
-
|
|
|
|
$
|
150,806
|
|
|
$
|
-
|
|
SINO AGRO FOOD,
INC.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
|
|
June 30,
2016
|
|
|
December 31,
2015
|
|
|
|
|
|
|
|
|
Investment in Huangyuan County Rural Credit Union
|
|
$
|
754,034
|
|
|
$
|
769,941
|
|
Less: Accumulated impairment losses
|
|
|
-
|
|
|
|
-
|
|
|
|
$
|
754,034
|
|
|
$
|
769,941
|
|
17.
|
TEMPORARY DEPOSITS PAID TO ENTITIES FOR
EQUITY INVESTMENTS IN FUTURE SINO JOINT VENTURE COMPANIES
|
Intended
|
|
|
|
|
|
|
|
|
|
|
unincorporated
|
|
Projects
|
|
|
|
June 30,
|
|
|
December 31,
|
|
Investee
|
|
Engaged
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
A
|
|
Trade center
|
|
*
|
|
$
|
4,086,941
|
|
|
$
|
4,086,941
|
|
A
|
|
Seafood center
|
|
*
|
|
|
1,032,914
|
|
|
|
1,032,914
|
|
B
|
|
Fish Farm 2 GaoQiqiang Aquaculture
|
|
*
|
|
|
6,000,000
|
|
|
|
6,000,000
|
|
C
|
|
Prawn farm 1
|
|
*
|
|
|
14,554,578
|
|
|
|
14,554,578
|
|
D
|
|
Prawn farm 2
|
|
*
|
|
|
9,877,218
|
|
|
|
9,877,218
|
|
E
|
|
Cattle farm 2
|
|
*
|
|
|
5,558,057
|
|
|
|
5,558,057
|
|
|
|
|
|
|
|
$
|
41,109,708
|
|
|
$
|
41,109,708
|
|
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, 2016, the percentages of
equity stakes of A (trade and seafood centers), B ( fish farm 2 GaoQiqiang Aquaculture Farm ), C (prawn farm 1), D (pawn farm
2) and E (cattle farm 2) are 31%, 23%, 56%, 29% 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.
|
|
18.
|
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, 2016, the Company has invested $2,251,359
in this joint venture. SJAP is engaged in its business of the manufacturing of organic fertilizer, livestock feed, and beef cattle
and plantation of crops and pastures.
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
|
18.
|
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, 2016, 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 SJAP qualified
as a VIE are as follows:
|
·
|
Originally,
the board of directors of SJAP consisted of 7 members; 3 appointees from Qinghai Sanjiang
(one stockholder), 1 from Garwor (one stockholder), and 3 from the Company, such that
the Company did not have majority interest represented on the board of directors of SJAP.
|
|
·
|
On
May 7, 2010, Qinghai Sanjiang sold and transferred its equity interest in SJAP to Garwor.
The State Administration for Industry and Commerce of Xining City Government of the P.R.C.
approved the sale and transfer.
|
Consequently Garwor and the
Company agreed that the new board of directors of SJAP would consist of 3 members; 1 appointee from Garwor and 2 appointees from
the Company, such that the Company now had a majority interest in the board of directors of SJAP. Also, and in accordance with
the Company’s Sino Joint Venture Agreement, the Company’s management appointed the chief financial officer of SJAP.
As a result, the financial statements of SJAP were included in the consolidated financial statements of the Company.
Continuous assessment of the VIE relationship
with QZH
The Company may also have a
controlling financial interest in an entity through an arrangement that does not involve voting interests, such as a VIE. The
Company evaluates entities deemed to be VIE’s using a risk and reward model to determine whether to consolidate. A VIE is
an entity (1) that has total equity at risk that is not sufficient to finance its activities without additional subordinated financial
support from other entities, (2) where the group of equity holders does not have the power to direct the activities of the entity
that most significantly impact the entity’s economic performance, or the obligation to absorb the entity’s expected
losses or the right to receive the entity’s expected residual returns, or both, or (3) where the voting rights of some investors
are not proportional to their obligations to absorb the expected losses of the entity, their rights to receive the expected residual
returns of the entity, or both, and substantially all of the entity’s activities either involve or are conducted on behalf
of an investor that has disproportionately fewer voting rights.
The Company also quantitatively
and qualitatively examined if QZH is considered a VIE. Qualitative analyses considered the extent to which the nature of its variable
interest exposed the Company to losses. For quantitative analyses, the Company also used internal cash flow models to determine
if QZH was a VIE and, if so, whether the Company was the primary beneficiary. The projection of these cash flows and probabilities
thereof requires significant managerial judgment because of the inherent limitations that relate to the use of historical data
for the projection of future events. On June 30, 2016, the Company evaluated the above VIE testing results and concluded that
the Company is the primary beneficiary of QZH’s expected losses or residual returns and that QZH qualifies as a VIE of the
Company. As result, the Company has consolidated QZH as a VIE.
The reasons for the QZH qualified
as a VIE are as follows:
|
·
|
Originally,
SJAP was sole stockholder of QZH, owned 100% equity interest in QZH and controlled directorship
of QZH.
|
|
·
|
On
October 25, 2015, both QZH and new stockholder, Qinghai Quanwang Investment Management
Co., Ltd (“
QQI
”) contributed additional capital of $4,157,682 and
$769,941, respectively. As of result, SJAP decreased its equity interest from 100% to
86% and QQI owned 14% equity interest. In addition, according to investment agreement
between QZH and QQI, (i) QQI only enjoyed interest 6% annually on its capital contribution
and did not enjoy any profit distribution; (ii) investment period was 3 years only, and
(iii) SJAP shared 100% on profit or loss after deduction 6% interest to QQI and enjoyed
100% voting rights of QZH’s board and stockholders meetings. As of June
30, 2016, the SJAP’s total investment in QZH was $4,645,487.
|
|
·
|
Consequently,
the Company still indirectly control directorship of QZH, such that the Company now had
a majority interest in the directorship of QZH. Also, and in accordance with the Company’s
Sino Joint Venture Agreement, the Company’s controlled QZH’s chief financial
officer appointment. As a result, the financial statements of QZH were included in the
consolidated financial statements of the Company.
|
SINO AGRO FOOD,
INC.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
|
19.
|
CONSTRUCTION
CONTRACT
|
|
(i)
|
Costs
and estimated earnings in excess of billings on uncompleted contracts
|
|
|
June
30,
2016
|
|
|
December
31,
2015
|
|
|
|
|
|
|
|
|
Costs
|
|
$
|
6,487,032
|
|
|
$
|
6,487,032
|
|
Estimated
earnings
|
|
|
10,995,534
|
|
|
|
10,995,534
|
|
Less: Billings
|
|
|
(16,175,681
|
)
|
|
|
(16,175,681
|
)
|
Costs
and estimated earnings in excess of billings on uncompleted contracts
|
|
$
|
1,306,885
|
|
|
$
|
1,306,885
|
|
|
(ii)
|
Billings in excess
of costs and estimated earnings on uncompleted contracts
|
|
|
June 30,
2016
|
|
|
December 31,
2015
|
|
|
|
|
|
|
|
|
Billings
|
|
$
|
177,525,551
|
|
|
$
|
146,830,043
|
|
Less: Costs
|
|
|
(108,020,199
|
)
|
|
|
(85,092,860
|
)
|
Estimated earnings
|
|
|
(61,773,51
5
|
)
|
|
|
(53,036,477
|
)
|
Billing in excess of costs and estimated earnings on uncompleted contracts
|
|
$
|
7,731,837
|
|
|
$
|
8,700,706
|
|
|
|
June 30,
2016
|
|
|
December 31,
2015
|
|
|
|
|
|
|
|
|
Billings
|
|
$
|
193,701,232
|
|
|
$
|
163,005,724
|
|
Less: Costs
|
|
|
(114,507,231
|
)
|
|
|
(91,579,892
|
)
|
Estimated earnings
|
|
|
(72,769,049
|
)
|
|
|
(64,032,011
|
)
|
Billing in excess of costs and estimated earnings on uncompleted contracts
|
|
$
|
6,424,952
|
|
|
$
|
7,393,821
|
|
|
|
June 30,
2016
|
|
|
December 31,
2015
|
|
|
|
|
|
|
|
|
Due to third parties
|
|
$
|
3,980,766
|
|
|
$
|
312,782
|
|
Due to debts loan
|
|
|
4,797,332
|
|
|
|
4,797,332
|
|
Promissory notes issued to third parties
|
|
|
2,200,000
|
|
|
|
2,200,000
|
|
Due to local government
|
|
|
746,494
|
|
|
|
2,279,797
|
|
|
|
$
|
11,724,592
|
|
|
$
|
9,589,911
|
|
|
|
|
|
|
|
|
|
|
Less: Amount classified as non-current liabilities
|
|
|
|
|
|
|
|
|
Due to debts loan
|
|
|
(4,797,332
|
)
|
|
|
(4,797,332
|
)
|
Amount classified as current liabilities
|
|
$
|
6,927,260
|
|
|
$
|
4,792,579
|
|
Due to third
parties are unsecured, interest free and have no fixed terms of repayment.
The Company
issued 753,304 shares of common stock ranging from $6.96 to $8.91 as collateral to secure debts loan of $4,797,332 from third
party. The shares issued by the Company were valued at the trading price of the stock on the date the shares were issued.
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 loans
Name of lender
|
|
Interest rate
|
|
|
Term
|
|
June 30,
2016
|
|
|
December 31,
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agricultural Development Bank of China
|
|
|
6.4
|
%
|
|
January 3, 2014 - December 17, 2018
|
|
$
|
619,195
|
^*
|
|
$
|
616,333
|
^*
|
Huangyuan County Branch,
Xining City, Qinghai Province, the P.R.C.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agricultural Development Bank of China
|
|
|
4.785
|
%
|
|
October 28, 2015 - October 27, 2016
|
|
|
3,770,170
|
^*
|
|
|
3,849,707
|
^*
|
Huangyuan County Branch,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Xining City, Qinghai Province, the P.R.C.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
4,389,365
|
|
|
$
|
4,466,040
|
|
Long term debts
Name of lender
|
|
Interest rate
|
|
|
Term
|
|
June 31,
2016
|
|
|
December 31,
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GanGuo Village Committee
|
|
|
12.22
|
%
|
|
June 2012 - June 2017
|
|
$
|
-
|
|
|
$
|
169,387
|
|
Bo Huang Town
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Huangyuan County,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Xining City, Qinghai Province, the P.R.C.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agricultural Development Bank of China
|
|
|
6.4
|
%
|
|
January 3, 2014 - December 17, 2018
|
|
|
1,658,875
|
^*#
|
|
|
2,001,848
|
^*#
|
Huangyuan County Branch,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Xining City, Qinghai Province, the P.R.C.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: The current portion
reclassified as short term debts
|
|
|
|
|
|
|
|
|
(619,195
|
)
|
|
|
(616,333
|
)
|
|
|
|
|
|
|
|
|
$
|
1,039,680
|
|
|
$
|
1,554,902
|
|
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.
|
^
|
personal and corporate
guaranteed by third parties.
|
|
*
|
secured by land use rights with net carrying amount of $442,476 (12.31.2015:
$471,048).
|
|
#
|
repayable $619,195 and $769,182 in 2017 and 2018, respectively.
|
SINO AGRO FOOD,
INC.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
|
22.
|
NEGOTIABLE
PROMISSORY NOTES
|
In August and October 2015,
TRW issued negotiable promissory notes to fund companies and individuals for $3,854,550 and the company acted as guarantor for
repayment. During the six months ended June 30, 2016, no promissory notes were repaid and negotiated into shares of the Company.
|
|
June30,
2016
|
|
|
December 31,
2015
|
|
|
|
|
|
|
|
|
|
|
Negotiable promissory notes
|
|
$
|
879,321
|
|
|
$
|
865,968
|
|
Issuer:
|
Tri-way
Industries Limited ("TRW")
|
Principal
amount:
|
$814,500
|
Interest
payable:
|
$58,144
|
Interest
rate:
|
2.50%
- 2.6% per month on principal amount. Interest shall be calculated on the basis of a 30/360 day count convention.
|
Default
interest rate:
|
15%
per month on principal amount. Interest shall be calculated on the basis of a 30/360 day count convention.
|
Interest
payment:
|
Accrued
interest on the principal amount shall be paid by cash in arrears on each interest payment date.
|
Issue
date:
|
August
29, 2015 and October 12, 2015.
|
Repayment
date:
|
Repaid
in full within 283 calendar days from the issue of notes.
|
Conversion
option:
|
Notes
holders can exercise at any time from and including the day falling 60 calendar days from the date of the notes, upon the
note holders giving not less than 5 business day prior written notices to TRW and the Company. the principal amount shall
be converted to shares of the Company. The TRW may at their own discretion choose to settle such conversion option with newly
issue shares or existing shares, at their sole discretion. In the event a dividend, share split or consolidation or spin-off
(each a Corporate Event") from the Company, the conversion price shall be adjusted to provide the same economic value
to the notes holders as if such Corporate Event did not occur. To the maximum, the above notes can be negotiated for 104,642
shares of Common Stock.
|
Security:
|
Corporate
guarantee by the Company.
|
SINO AGRO FOOD,
INC.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
23.
|
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
”) in the aggregate principal amount of up to $33,300,000. The Company received the total advance
of $11,632,450. The Company shall offer investor a discount equal to 25% of the amount of the principal advanced by the investor.
Interest on the note shall
accrue on the outstanding principal balance of this Note from August 29, 2014. Interest shall be payable quarterly on the last
day of each of March, June, September and December commencing September 30, 2014 provided, however, that note holder may elect
to require the Company to issue to the note holder a promissory note in lieu of cash in satisfaction of any interest due and payable
at such time. Any interest payment note shall be subject to the same terms as the note. The note has a maturity date of February
28, 2020.
The note is convertible, at
the discretion of the note holder, into shares of the Company’s common stock (i) at any time following an Event of Default,
or (ii) for a period of thirty (30) calendar days following October 31, 2015 and each anniversary thereof, at an initial conversion
price per share of $1.00, subject to adjustment for stock splits, reverse stock splits, stock dividends and other similar transactions
and subject to the terms of the note. As long as the note is outstanding, the investor shall have a right of first refusal, exercisable
for thirty (30) calendar days after notice to the note holder, to purchase securities proposed to be offered and sold by the Company.
|
|
June 30,
2016
|
|
|
December 31,
2015
|
|
|
|
|
|
|
|
|
|
|
10.50% convertible note of maturity date February 28, 2020
|
|
$
|
28,289,106
|
|
|
$
|
34,904,739
|
|
The Company calculated the
fair value of the convertible note and the beneficial conversion feature utilizing the Discounted Cash Flows model at the date
of the issuance of convertible note. The relative fair values were allocated to the liability and equity components of the debt.
Accordingly, a discount was created on the debt and this discount will be amortized to interest expense over the life of the debt.
Debt premium of $244,964, $3,891 $489,929 and $276,013 was amortized for the three months and the six months ended June 30, 2016
and 2015, respectively.
As of June 30, 2016, there
was $24,989,906 (December 31, 2015: $32,666,666) principal outstanding and accrued interest in the amount of $3,299,200 (December
31, 2015: 2,238,073) that was owed under the terms of the convertible note.
The above note agreement contained
regular provisions requiring timely repayment of principals and accrued interests, payment of default interest in the event of
default, default and optional conversion and without specific financial covenants. Management of the Company believes the Company
is in material compliance with the terms of the convertible note agreement.
The Company calculated professional
service compensation of $1,500,000 in respect of convertible note issue, and recognized $0, $375,000, $0 and $750,000 for the
three months and the six months ended June 30, 2016 and 2015. As of June 30, 2016 and December 31, 2015, the deferred compensation
balance was $0.
SINO AGRO FOOD,
INC.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
The Group’s share capital
as of June 30, 2016 and December 31, 2015 shown on the consolidated balance sheet represents the aggregate nominal value of the
share capital of the Company as of that date.
On March 22, 2010, the Company
designated 100 shares of Series A preferred stock at a par value per share of $0.001. As of the same date, 100 shares of Series
A preferred stock were issued at $1 per share for cash in the amount of $100.
The Series A preferred stock:
|
(i)
|
does not pay a dividend;
|
|
(ii)
|
votes together with
the shares of Common Stock of the Corporation as a single class and, regardless of the number of shares of Series A Preferred
Stock outstanding and as long as at least one of such shares of Series A Preferred Stock is outstanding, shall represent eighty
percent (80%) of all votes entitled to be voted at any annual or special meeting of shareholders of the Corporation or action
by written consent of shareholders. Each outstanding share of the Series A Preferred Stock shall represent its proportionate
share of the 80%, which is allocated to the outstanding shares of Series A Preferred Stock; and
|
|
(ii)
|
ranks senior to
common stockholders, holders of Series B convertible preferred stockholders and any other stockholders on liquidation.
|
The Company has designated
100 shares of Series A preferred stock with 100 shares issued and outstanding as of June 30, 2016 and December 31, 2015, respectively.
The Series B convertible preferred
stock:
On March 22, 2010, the Company
designated 7,000,000 shares of Series B convertible preferred stock at a par value per share of $0.001. The Series B convertible
preferred stock is redeemable, the stockholders are not entitled to receive any dividend and voting rights but rank senior over
common stockholders on liquidation, and can convert to common stock on a one for one basis at any time. On June 26, 2010, 7,000,000
shares of common stock were surrendered for cancellation and the Company issued 7,000,000 shares of Series B convertible preferred
stock at $9.90 per share. Pursuant to share exchange agreement made as of December 22, 2012, between the Company and a stockholder,
Capital Adventure Inc., a holder of 3,000,000 shares of common shares, with the consent of Board of Directors, to exchange for
3,000,000 shares of Series B convertible preferred stock on a one-for-one basis. As of December 23, 2012, 3,000,000 shares of
Series B convertible preferred stock were issued to Capital Adventure Inc., for the exchange of its holding of 3,000,000 shares
of common stocks. As of December 31, 2012, 3,000,000 shares of common stocks were still not returned to the Company. On March
27, 2013, 3,000,000 Series B convertible preferred stock were cancelled. On December 17, 2014, the Company approved an amendment
to certificate designation in respect of Series B preferred stock. Pursuant to the above new amendment, each holder of Series
B preferred stock shall have the rights, at any time or from time to time, to convert each 9.9 shares of Series B preferred to
one fully paid and non-assessable share of common stock of par value $0.001 per share. On June 15, 2015, Series B preferred stockholder
exercised at the above conversion ratio to convert 7,000,000 shares of Series B preferred stock to 707,070 shares of common stock.
There were 0 shares of Series
B convertible preferred stock issued and outstanding as of June 30, 2016 and December 31, 2015, respectively.
SINO AGRO FOOD,
INC.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
24.
|
SHAREHOLDERS’
EQUITY (CONTINUED)
|
The Series F Non-Convertible
Preferred Stock:
|
(i)
|
is not redeemable
subject to (iv);
|
|
(ii)
|
except for (iv),
with respect to dividend rights, rights on liquidation, winding up and dissolution, rank junior and subordinate to ( a) all
classes of Common Stock,(b) all other classes of Preferred Stock and (c) any class or series of capital securities of the
Company.
|
|
(iii)
|
Shall not entitled
to receive any further dividend; and
|
|
(iv)
|
on May 30, 2014,
the holders of shares of Series F Non-Convertible Preferred Stock with coupon shall be entitled to a coupon payment directly
from the Company at the redemption rate of $3.40 per share. Upon redemption, the Holder shall no longer own any shares of
Series F with coupon that have been redeemed, and all such redeemed shares shall disappear and no longer exist on the books
and records of the Company; redeemed shares of Series F which no longer exist upon redemption shall thereafter be counted
toward the authorized but unissued “blank check” preferred stock of the Company.
|
On August 22, 2012, the Company’s
Board of Directors declared that the Company’s stockholders were entitled to receive one share of restricted Series F Non-convertible
Preferred Stock for every 100 shares of Common Stock owned by the stockholders as of September 28, 2012, with lesser or greater
amounts being rounded up to the nearest 100 shares of Common Stock for purpose of the computing the dividend. The holders of record
of shares of Series F Non-Convertible Preferred Stock shall be entitled to a coupon payment directly from the Company at the redemption
rate of $3.40 per share and be payable on May 30, 2014. However, the Company was unable to issue the Series F Non-convertible
Preferred Stock as originally contemplated. Consequently, The Company’s transfer agent was instructed to note in its record
date rather than actual issue the Preferred F shares. On June 14, 2014, the Company announced the delay in payment of the coupon
until May 30, 2015. The company reserved the excess over the nominal amount of the Series F Non-convertible Preferred Stock of
$3,124,737 as Series F Non-convertible Preferred Stock redemption payable. As of May 30, 2015, payment on the F series shares
has been made, and respective shares cancelled, accordingly.
As a result, total issued and
outstanding of Series F Non-Convertible Preferred Stock as of June 30, 2016 and December 31, 2015 are 0 shares and grand total
issued and outstanding preferred stock as of June 30, 2016 and December 31, 2015 are 100 shares, respectively.
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 22,727,273.
During the year ended December
31, 2015, the Company issued (i) 100,000 shares of common stock for $868,000 at $8.68 per share to settle debts due to third parties.
The Company executed several agreements with third parties to raise debts loan by issuance of the Company’s common stock.
The shares issued by the Company were valued at the trading price of the stock on the date the shares were issued. Any excess
of the fair value of the shares over the carrying cost of the debt has been reported as a gain on the extinguishment of debts
of 132,000, $270,586 and $1,318,947 has been credited to consolidated statements of income as other income for the years ended
December 31, 2015, 2014 and 2013, respectively; (ii) 753,304 shares of common stock ranging from $6.96 to $8.91 as collateral
to secure debts loan of $4,797,332, and the shares issued by the Company were valued at the trading price of the stock on the
date the shares were issued; (iii) 1,135,000 shares of common stock ranging from $8.75 to $12.50 as collateral to secure trade
finance facility amounting to the extent of $11,281,100, and the shares issued by the Company were valued at the trading price
of the stock on the date the shares were issued and such shares returned to treasury stock after the contract period of three
years (iv) 153,392 shares at $11.13 per share and 75,002 shares at $14.20 per share were issued for reverse split adjustments;
(v) 47,787 shares of common stock valued to employees and directors at fair value of $15.20 per share for $726,315 for employee
compensation; 7,000,000 shares of Series B preferred stock were converted into 707,070 shares under terms of issue; and (vi) cancelled
514 shares for $10.97 per share for reverse splits adjustments.
During the six months ended
June 30, 2016, the Company issued (i) 1,198,778 shares of common stock valued to employees and directors at fair value of
$5.98 per share for $7,169,823 for employee compensation; and (ii) 132,787 shares of common stock valued to professionals at fair
value of $5.98 per share for $794,066 for service compensation.
The Company has 21,465,322
and 20,133,757 shares of common stock issued as of June 30, 2016 and December 31, 2015, respectively.
SINO AGRO FOOD,
INC.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
25.
|
OBLIGATION UNDER
OPERATING LEASES
|
The Company leases (i) 2,178
square feet of agriculture space used for offices for a monthly rent of $634 in Enping City, Guangdong Province, P.R.C., its lease
expiring on March 31, 2017; (ii) 5,081 square feet of office space in Guangzhou City, Guangdong Province, P.R.C. for a monthly
rent of $12,733, its lease expiring on July 8, 2018; (iii) 1,555 square feet of staff quarters in Linli District, Hunan Province,
P.R.C. for a monthly rent of $163, its lease expiring on May 1, 2016; and (iv) 430 square feet of shared office in Stockholm,
Sweden, for a monthly rent of $11,800, its lease expiring on December 31, 2020.
Lease expense was $75,991,
$40,771, $116,528 and $81,182 for the three months and the six months ended June 30, 2016 and 2015, respectively.
The future minimum lease payments
as of June 30, 2016, are as follows:
Year ending December 31, 2016
|
|
$
|
78,409
|
|
Thereafter
|
|
|
225,268
|
|
|
|
$
|
303,677
|
|
26.
|
STOCK BASED COMPENSATION
|
On May 6, 2015, the Company
issued directors and employees a total of 47,787 shares of common stock valued at fair value of $15.20 per share for services
rendered to the Company. The fair values of the common stock issued were determined by using the trading price of the Company’s
common stock on the date of issuance of $15.20 per share.
The Company calculated stock
based compensation of 3,486,428 and recognized $3,123,247 for the year ended December 31, 2015. As of December 31, 2015, the deferred
compensation balance for staff was $363,181 and the deferred compensation balance of $363,181 was to be amortized over 6 months
beginning on January 1, 2016.
On May 10, 2016, the Company
issued directors and employees a total of 1,198,778 shares of common stock valued at fair value of $5.98 per share for services
rendered to the Company. The fair values of the common stock issued were determined by using the trading price of the Company’s
common stock on the date of issuance of $5.98 per share. On the same date , the Company issued professionals a total of 132,787
shares of common stock valued at fair value of $5.98 per share for services rendered to the Company. The fair values of the common
stock issued were determined by using the trading price of the Company’s common stock on the date of issuance of $5.98 per
share.
The Company calculated stock
based compensation of $8,325,940 for the six months ended June 30, 2015.
The Company recognized $181,590,
$880,033, $363,181 and $1,760,066 for the three months and the six months ended June 30, 2016 and 2015, respectively. As of June
30, 2016, the deferred compensation balance for staff was $7,962,759 and the deferred compensation balances of $7,962,759 were
to be amortized over 12 months respectively beginning on July 1, 2016.
As of June 30, 2016 and December
31, 2015, the Company did not have any pending claims, charges, or litigation that it expects would have a material adverse effect
on its consolidated balance sheets, consolidated statements of income and other comprehensive income, and consolidated statements
of cash flows.
In December 31, 2015 the Company
entered into loan and pledge agreement with a Shanghai, P.R.C. based lender (the “lender”) The lender has various
trading facilities and has agreed to allow the Company or its nominee to use parts of trading facilities up to an amount of $20
million (31.12.2015: $20million) to be used in tranches and revolved up to a period of three years, and as of June 30, 2016 of
which $0 (31.12.2015: $7,478,375) was utilized. The trade finance agreement 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 trade finance agreement.
28.
|
RELATED PARTY
TRANSACTIONS
|
In addition to the transactions
and balances as disclosed elsewhere in these consolidated financial statements, during the six months ended June 30, 2016 and
2015, the Company had the following significant related party transactions:-
Basic earnings per share is
computed by dividing net income attributable to common shareholders by the weighted average number of common shares outstanding
during the year. Diluted earnings per share reflects the potential dilution of securities by including other potential common
stock, including convertible preferred stock, stock options and warrants, in the weighted average number of common shares outstanding
for the year, if dilutive. The numerators and denominators used in the computations of basic and dilutive earnings per share are
presented in the following table:
For the three months ended
June 30, 2016, full dilution effect of convertible note of $28,289,106 was taken into account for calculation of the diluted earnings
per share because convertible note holder can exercise the right to exercise to convert to common stock by giving 1 month notice
after October 1, 2015 under terms of convertible note agreement.
For the three months ended
June 30, 2015, full dilution effect of convertible note of $16,286,754 was not taken into account for calculation of the diluted
earnings per share because convertible note holder is restricted the right to exercise to convert to common stock before October
1, 2015 under terms of convertible note agreement.
For the six months ended June
30, 2016, full dilution effect of convertible note of $28,289,106 was taken into account for calculation of the diluted earnings
per share because convertible note holder can exercise the right to exercise to convert to common stock by giving 1 month notice
after October 1, 2015 under terms of convertible note agreement.
For the six months ended June
30, 2015, full dilution effect of convertible note of $34,870,297 was not taken into account for calculation of the diluted earnings
per share because convertible note holder is restricted the right to exercise to convert to common stock before October 1, 2015
under terms of convertible note agreement.