UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
For period Q3 to ended
OR
For the transition period from 1st January 2021 to 30th September 2021.
Commission File Number:
(Exact Name of Registrant as Specified in its Charter)
| (State or Other Jurisdiction of Incorporation) | (IRS Employer Identification Number) |
(Address of principal executive offices, including zip code)
Registrant’s Telephone Number, including area code:
Securities registered pursuant to Section 12(b) of the Exchange Act: None
Securities registered pursuant to Section 12(g) of the Exchange
Act:
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Indicate by check mark whether the registrant
has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files).
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this annual report or any amendment to this annual report. ☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
| Large Accelerated Filer ☐ | Accelerated Filer ☐ |
| Smaller Reporting Company | |
| Emerging growth company |
If an emerging growth company, indicate by check
mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐
No
Securities registered pursuant to Section 12(b) of the Act: None
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| N/A | N/A | N/A |
The aggregate market value of the voting stock held by non-affiliates of the issuer on November 5th 2021, based upon the $0.070 per share closing price of such stock on that date, was in round figure of $4,166,149.00.
There were
Documents incorporated by reference: None
ITEM I: The consolidated financial statements:
SINO AGRO FOOD, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
i
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
There is no report from any independent registered public accounting firm for this 10 Q3 2021 financial report due to the Covid-19 events prevented our Hong Kong based auditor to be in China to do inspection at sites and verification of our China operations.
The 10 Q3 2021 financials report is an audited financial report.
F-1
SINO AGRO FOOD, INC.
CONSOLIDATED BALANCE SHEETS
| September 30, | December 31, | |||||||||
| Note | 2021 | 2020 | ||||||||
| (Unaudited) | (Unaudited) | |||||||||
| ASSETS | ||||||||||
| Current assets | ||||||||||
| Cash and cash equivalents | 5 | $ | $ | |||||||
| Inventories | 6 | |||||||||
| Costs and estimated earnings in excess of billings on uncompleted contracts | 18 | |||||||||
| Deposits and prepayments | 7 | |||||||||
| Accounts receivable, net of allowance for doubtful accounts | 8 | |||||||||
| Other receivables | 9 | |||||||||
| Total current assets | ||||||||||
| Non-current assets | ||||||||||
| Plant and equipment, net of accumulated depreciation | 10 | |||||||||
| Construction in progress | 11 | |||||||||
| Land use rights, net of accumulated amortization | 12 | |||||||||
| Total non-current assets | ||||||||||
| Other assets | ||||||||||
| Goodwill | 13 | |||||||||
| Proprietary technologies, net of accumulated amortization | 14 | |||||||||
| Interest in unconsolidated investees | 15 | |||||||||
| Total other assets | ||||||||||
| Total assets | $ | $ | ||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||
| Current liabilities | ||||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||||
| Billings in excess of costs and estimated earnings on uncompleted contracts | 18 | |||||||||
| Due to directors | ||||||||||
| Other payables | 19 | |||||||||
| Borrowings - Short term bank loan | 20 | |||||||||
| Derivative liability | 21 | |||||||||
| Convertible note payable | 21 | |||||||||
| Non-current liabilities | ||||||||||
| Other payables | 19 | |||||||||
| Borrowings - Long term debts and bank loan | 20 | |||||||||
| Stockholders’ equity | ||||||||||
| Common stock: = $ | 22 | |||||||||
| Additional paid - in capital | ||||||||||
| Retained earnings | ||||||||||
| Accumulated other comprehensive income | - | - | ||||||||
| Treasury stock | - | - | ||||||||
| Total Sino Agro Food, Inc. and subsidiaries stockholders’ equity | ||||||||||
| Non - controlling interest | ||||||||||
| Total stockholders’ equity | ||||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-2
SINO AGRO FOOD, INC.
CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME
| Nine months ended September 30, 2021 | Nine months ended September 30, 2020 | |||||||
| Revenue | ||||||||
| - Sale of goods | $ | $ | ||||||
| -Leasing & contracting income | ||||||||
| Cost of goods sold | ||||||||
| Cost of Leasing & contracting | ( | ) | ( | ) | ||||
| Gross profit | ||||||||
| General and administrative expenses | ( | ) | ( | ) | ||||
| Net income from operations | ||||||||
| Other income (expenses) | ||||||||
| Government grant | ||||||||
| Sharee of income from unconsolidated equity investee | ( | ) | ( | ) | ||||
| Impairment losses | ( | ) | ( | ) | ||||
| Interest expense | ||||||||
| Net income (expenses) | ( | ) | ( | ) | ||||
| Net income before income taxes | ( | ) | ( | ) | ||||
| Provision for income taxes | ||||||||
| Net income | ( | ) | ( | ) | ||||
| Less: Net (income) loss attributable to non - controlling interest | ( | ) | ||||||
| Net income attributable to Sino Agro Food Inc. and subsidiaries | ( | ) | ( | ) | ||||
| Other comprehensive income (loss) - Foreign currency translation gain (loss) | ||||||||
| Comprehensive income | ( | ) | ( | ) | ||||
| Less: Other comprehensive (income) loss attributable to non - controlling interest | ||||||||
| Comprehensive income attributable to the Sino Agro Food, Inc. and subsidiaries | ( | ) | $ | ( | ) | |||
| Earnings per share attributable to the Sino Agro Food, Inc. and subsidiaries common stockholders: | ||||||||
| Basic | ( | ) | $ | ( | ) | |||
| Diluted | ( | ) | $ | ( | ) | |||
| Weighted average number of shares outstanding: | ||||||||
| Basic | ||||||||
| Diluted | ||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-3
SINO AGRO FOOD, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
| 2021Q1-3 | 2020Q1-3 | |||||||
| Cash flows from operating activities | ||||||||
| Net income (loss) for the year | $ | ( | ) | ( | ) | |||
| Adjustments to reconcile net income for the year to net cash from operations: | ||||||||
| Depreciation | ||||||||
| Amortization | ||||||||
| Gain on deemed disposal of subsidiaries | ||||||||
| Impairment losses | ||||||||
| Share of unconsolidated equity investee | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Decrease in inventories | ||||||||
| (Increase) decrease in cost and estimated earnings in excess of billings on uncompleted contacts | ||||||||
| Increase in deposits and prepaid expenses | ( | ) | ( | ) | ||||
| (Decrease) increase in due to a director | ||||||||
| Increase/(decrease) in accounts payable and accrued expenses | ||||||||
| Increase in other payables | ||||||||
| Decrease (increase) in accounts receivable | ( | ) | ( | ) | ||||
| (Decrease) increase in tax payable | ||||||||
| Increase (decrease) in billings in excess of costs and estimated earnings on uncompleted contracts | ||||||||
| Decrease in other receivables | ( | ) | ||||||
| Net cash provided by operating activities | ||||||||
| Cash flows from investing activities | ||||||||
| Acquisition of plant, property and equipment | ||||||||
| Payment for construction in progress | ||||||||
| Proceed from disposal of a long term investee | ||||||||
| Proceed from disposal of plant, property and equipment | ||||||||
| Net cash used in investing activities | ||||||||
| Cash flows from financing activities | ||||||||
| -Proceeds from convertible bond payable | ||||||||
| Capital contribution from non-controling interest | ||||||||
| Proceeds from short term debts | ||||||||
| Long term debts repaid | ||||||||
| Short term bank loan repaid | ||||||||
| Net cash provided by financing activities | ||||||||
| Effects on exchange rate changes on cash | ( | ) | ( | ) | ||||
| (Decrease)/increase in cash and cash equivalents | ||||||||
| Cash and cash equivalents, beginning of year | ||||||||
| Cash and cash equivalents, end of year | $ | |||||||
| Notes: | ||||||||
| Non - cash transactions | ||||||||
| Impairment losses from account receivable | ||||||||
| Impairment losses from other receivable | ||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-4
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| 1. | CORPORATE INFORMATION |
Sino Agro Food, Inc. (the “ Company” or “SIAF”) (formerly known as Volcanic Gold, Inc. and A Power Agro Agriculture Development, Inc.) was incorporated on October 1, 1974 in the State of Nevada, United States of America.
The Company was engaged in the mining
and exploration business but ceased its mining and exploring business on October 14, 2005. On August 24, 2007, the Company entered
into a Merger and Acquisition Agreement with Capital Award Inc., a Belize corporation (“CA”) and its subsidiaries Capital
Stage Inc. (“CS”) and Capital Hero Inc. (“CH”). Effective the same date, CA completed a reverse
merger transaction with SIAF. SIAF acquired all the outstanding common stock of CA from Capital Adventure, a shareholder of CA, for
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 |
| (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 |
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
On November 26, 2008, SIAF established
Pretty Mountain Holdings Limited (“PMH”), a company incorporated in Hong Kong with an
| ● | 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
On September 9, 2010, an application was submitted by the Company to the Companies Registry of Hong Kong for deregistration of PMH under Section 291AA of the Hong Kong Companies Ordinance. On January 28, 2011, PMH was dissolved
On March 23, 2018, Qinghai Quanwang
Investment Management Company Limited (“Quanwang”) acquired
F-5
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
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
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
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
On July 18, 2011, the Company
formed Hunan Shenghua A Power Agriculture Co., Limited (“HSA”), in which the Company owns a
On November 12, 2013, the Company
acquired a shell company, Goldcup9203 AB, incorporated in Sweden, in which the Company owns a
SJAP formed Qinghai Zhong He Meat
Products Co., Limited (“QZH”) , with SJAP would owning
F-6
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| 1. | CORPORATE INFORMATION (CONTINUED) |
Up until September 30th 2019, revenues have been generated from activities that the Company divided into five stand-alone business divisions or units: (1) Fishery development (in consulting and services), (2) Cattle & Beef (fully integrated activity), (3) Organic Fertilizer, (4) HU Plantation, and (5) Marketing and Trading.
The fully integrated Cattle and Beef
business was gradually being scaled down from year 2016 onward after the China Government relaxed its importation policies to allow many
countries (i.e. Australia, NZ, Countries of South America and Canada etc.) to import beef into China affecting its domestic cattle rearing
and beef industry. SJAP lost in excessive of US$
From 1st October 2019 onward, SJAP contracted the said small maintaining operation to its existing management.
The Company currently maintains operations of its services in engineering consulting and specializing in the development of agriculture and aquaculture projects whereas operations of its HU Plantation, Asian “Yellow cattle” demonstration farm, and HSA’s manufacturing of fertilizer were contracted out to their respective farm’s management since 30th September 2019.
The Company is now the investor in two Associates originated from subsidiary status namely SJAP and Tri-way; whereas Tri-way is in the aquaculture segment contracting out it’s aqua-farms’ operations (inclusive Aqua-farm 1, 2 and 3 & b) to respective farm’s managements and JFD, it’s fully owned subsidiary in China, has the sole right to market and distribute the said Aqua-farms’ productions by buying from and selling all fishery productions of the said contracted aqua-farms. Operation of Aqua-farm 4 and 5 of the Zhongshen Mega Farm Development ceased since September 30th 2019 failing the Company’s original ambition to become one of the biggest prawn producers in the world by year end of 2024.
Therefore from 1st October 2019 onward, Revenues of the Company are generated from (i). Incomes derived from CA’s Engineering Consulting and services, (ii). Incomes derived from the contractual agreements of JHST, MEIJI and HSA, (iii). CA’s (or the Corporate) marketing and Trading business and (iv). Incomes generated from its investments in SJAP and Tri-way.
The Company’s principal executive office is located at Room 3520 Block A, China Shine Plaza, No. 9 Lin He Xi Road, Tianhe District, Guangzhou City, Guangdong Province, P.R.C., 510610.
The nature of the operations and principal activities of the Company and its subsidiaries are described in Note 2.2.
F-7
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| 2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
| 2.1 | FISCAL YEAR |
The Company has adopted December 31 as its fiscal year end.
| 2.2 | REPORTING ENTITIES |
| Name of subsidiaries | Place of incorporation | Percentage of interest* | Principal activities | |||
| Capital Award Inc. (“CA”) | ||||||
| Capital Hero Inc. (“CS”) | ||||||
| (“CH”)Capital Stage Inc. (CH) | ||||||
| Macau Eiji Company Limited (“MEIJI”) | ||||||
| Sino Agro Food Sweden AB (“SAFS”). | ||||||
| A Power Agro Agriculture Development (Macau) Limited (“APWAM”) | ||||||
| Jiang Men City Heng Sheng Tai Agriculture Development Co. Ltd (“JHST”) | ||||||
| Jiang Men City Hang Mei Cattle Farm Development Co., Limited (“JHMC”) | ||||||
| Hunan Shenghua A Power Agriculture Co., Limited (“HSA”) |
| Name of associate (investee) | Place of incorporation | Percentage of interest* | Principal activities | |||
| Qinghai Sanjiang A Power Agriculture Co., Ltd (“SJAP”) | ||||||
| Tri-way Industries Limited | ||||||
F-8
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| 2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) |
| 2.3 | BASIS OF PRESENTATION |
The consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”).
| 2.4 | BASIS OF CONSOLIDATION |
The consolidated financial statements include the financial statements of the Company, its subsidiaries CA, CS, CH, MEIJI, JHST, JHMC, HSA, APWAM, SAFS and its variable interest entity SJAP. All material inter-company transactions and balances have been eliminated in consolidation.
SIAF, CA, CS, CH, MEIJI, JHST, JHMC, HSA, APWAM, SAFS, and SJAP are hereafter referred to as (the “Company”).
| 2.5 | BUSINESS COMBINATION |
The Company adopted the accounting pronouncements relating to business combination (primarily contained in ASC Topic 805 “Business Combinations”), including assets acquired and liabilities assumed on arising from contingencies. These pronouncements established principles and requirement for how the acquirer of a business recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any non-controlling interest in the acquisition as well as provides guidance for recognizing and measuring the goodwill acquired in the business combination and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. In addition, these pronouncements eliminate the distinction between contractual and non-contractual contingencies, including the initial recognition and measurement criteria and require an acquirer to develop a systematic and rational basis for subsequently measuring and accounting for acquired contingencies depending on their nature. The Company’s adoption of these pronouncements will have an impact on the manner in which it accounts for any future acquisitions.
| 2.6 | NON - CONTROLLING INTEREST IN CONSOLIDATED FINANCIAL STATEMENTS |
The Company adopted the accounting pronouncement on non-controlling interests in consolidated financial statements, which establishes accounting and reporting standards for the non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary. This guidance is primarily contained in ASC Topic “Consolidation.” It clarifies that a non-controlling interest in a subsidiary is an ownership interest in the consolidated financial statements. The adoption of this standard has not had material impact on the Company’s consolidated financial statements.
| 2.7 | USE OF ESTIMATES |
The preparation of consolidated financial statements in conformity with US GAAP requires management to make assumptions and estimates that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods covered thereby. Actual results could differ from these estimates. Judgments and estimates of uncertainties are required in applying the Company’s accounting policies in certain areas. The following are some of the areas requiring significant judgments and estimates: determinations of the useful lives of assets, estimates of allowances for doubtful accounts, cash flow and valuation assumptions in performing asset impairment tests of long-lived assets, estimates of the realization of deferred tax assets and inventory reserves.
F-9
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| 2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) |
| 2.8 | REVENUE RECOGNITION |
In May 2014, the FASB issued Accounting Standard Update 2014-09, Revenue from Contracts with Customers (Topic 606), which replaces numerous requirements in U.S. GAAP, including industry specific requirements, and provides a single revenue recognition model for recognizing revenue from contracts with customers. The Company adopted this standard effective January 1, 2018.
The core principle of the new standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. This requires companies to identify contractual performance obligations and determine whether revenue should be recognized at a point in time or over time, based on when control of goods and services transfers to a customer. The Company’s revenues generated mainly from trading of frozen food and sales of agricultural products are recognized at a point in time.
The ASU requires the use of a new five-step model to recognize revenue from customer contracts. The five-step model requires that the Company (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, including variable consideration to the extent that it is probable that a significant future reversal will not occur, (iv) allocate the transaction price to the respective performance obligations in the contract, and (v) recognize revenue when (or as) the Company satisfies the performance obligation. The application of the five-step model to the revenue streams compared to the prior guidance did not result in significant changes in the way the Company records its revenues.
Multiple-Element Arrangements
To qualify as a separate unit of accounting under ASC 605-25 “Multiple Element Arrangements”, the delivered item must have value to the customer on a standalone basis. The significant deliverables under the Company’s multiple-element arrangements are consulting and service under development contract, commission and management service.
Revenues from the Company’s consulting and services under development contracts are performed under fixed-price contracts. Revenues under long-term contracts are accounted for under the percentage-of-completion method of accounting in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 605, Revenue Recognition (“ASC 605”). Under the percentage-of- completion method, the Company estimates profit as the difference between total estimated revenue and total estimated cost of a contract and recognize that profit over the contract term. The percentage of costs incurred determines the amount of revenue to be recognized. Payment terms are generally defined by the installation contract and as a result may not match the timing of the costs incurred by the Company and the related recognition of revenue. Such differences are recorded as either costs or estimated earnings in excess of billings on uncompleted contracts or billings in excess of costs and estimated earnings on uncompleted contracts. The Company determines a customer’s credit worthiness at the time an order is accepted. Sudden and unexpected changes in a customer’s financial condition could put recoverability at risk.
The percentage of completion method requires the ability to estimate several factors, including the ability of the customer to meet its obligations under the contract, including the payment of amounts when due. If the Company determines that collectability is not assured, the Company will defer revenue recognition and use methods of accounting for the contract such as the completed contract method until such time as the Company determines that collectability is reasonably assured or through the completion of the project.
For fixed-price contracts, the Company uses the ratio of costs incurred to date on the contract to management’s estimate of the contract’s total costs, to determine the percentage of completion on each contract. This method is used as management considers expended costs to be the best available measure of progression of these contracts. Contract costs include all direct material, subcontract and labor costs and those indirect costs related to contract performance, such as supplies, tool repairs and depreciation. The Company accounts for maintenance and repair services under the guidance of ASC 605 as the services provided relate to construction work. Contract costs incurred to date and expected total contract costs are continuously monitored during the term of the contract. Changes in job performance, job conditions, and estimated profitability arising from contract penalty, change orders and final contract settlements may result in revisions to the estimated profit ability during the contract. These changes, which include contracts with estimated costs in excess of estimated revenues, are recognized as contract costs in the period in which the revisions are determined. Profit incentives are included in revenues when their realization is reasonably assured. At the point the Company anticipates a loss on a contract, the Company estimates the ultimate loss through completion and recognizes that loss in the period in which the loss was identified.
The Company does not provide warranties to customers on a basis customary to the industry, however, customers can claim warranty directly from product manufacturers for defects in equipment or products. Historically, the Company has experienced no warranty claims.
The Company provides various management services to its customers in the P.R.C. based on a negotiated fixed-price contract. The clients usually pay the fees when the services contract is signed and services are rendered. The Company recognizes these services-based revenues from contracts when (i) management services are rendered; (ii) clients recognize the completion of services; and (iii) collectability is reasonably assured. Fees received in advance are recorded as deferred revenue under current liabilities.
F-10
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 $
| 2.11 | ADVERTISING |
Advertising costs are included in general
and administrative expenses, which totaled $
| 2.12 | RESEARCH AND DEVELOPMENT EXPENSES |
Research and development expenses are
included in general and administrative expenses, which totaled $
| 2.13 | FOREIGN CURRENCY TRANSLATION AND OTHER COMPREHENSIVE INCOME |
The reporting currency of the Company is the U.S. dollars. The functional currency of the Company is the Chinese Renminbi (RMB).
For those entities whose functional currency is other than the U.S. dollars, all assets and liabilities are translated into U.S. dollars at the exchange rate on the balance sheet date; shareholders’ equity is translated at historical rates and items in the statements of income and of cash flows are translated at the average rate for the period. Because cash flows are translated based on the average translation rate, amounts related to assets and liabilities reported in the statements of cash flows will not necessarily agree with changes in the corresponding balances in the balance sheets. Translation adjustments resulting from this process are included in accumulated other comprehensive income in the statements of shareholders’ equity. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the statements of income and comprehensive income, as incurred.
Accumulated other comprehensive income
in the consolidated statement of shareholders’ equity amounted to $ (
| 2.14 | CASH AND CASH EQUIVALENTS |
The Company considers all highly liquid securities with original maturities of three months or less when acquired to be cash equivalents. Cash and cash equivalents kept with financial institutions in the P.R.C. are not insured or otherwise protected. Should any of those institutions holding the Company’s cash become insolvent, or should the Company become unable to withdraw funds for any reason, the Company could lose the cash on deposit with that institution.
| 2.15 | ACCOUNTS RECEIVABLE |
The Company maintains reserves for potential credit losses on accounts receivable. Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves. Reserves are recorded primarily on a specific identification basis.
The standard credit period for most of the Company’s clients is three months. The collection period over 1 year is classified as long-term accounts receivable. Management evaluates the collectability of the receivables at least quarterly.
F-11
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| 2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) |
| 2.16 | INVENTORIES |
Inventories are valued at the lower of cost (determined on a weighted average basis) and net realizable value. Costs incurred in bringing each product to its location and conditions are accounted for as follows:
| (a) | raw materials - purchase cost on a weighted average basis; |
| (b) | manufactured finished goods and work-in-progress - cost of direct materials and labor and a proportion of manufacturing overhead based on normal operation capacity but excluding borrowing costs; and |
| (c) | retail and wholesale merchandise finished goods - purchase cost on a weighted average basis. |
Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs for completion and the estimated costs necessary to make the sale.
| 2.17 | PLANT AND EQUIPMENT |
Plant and equipment are stated at cost less accumulated depreciation and any accumulated impairment losses. Such costs include the cost of replacing parts that are eligible for capitalization when the cost of replacing the parts is incurred. Similarly, when each major inspection is performed, its cost is recognized in the carrying amount of the plant and equipment as a replacement only if it is eligible for capitalization. The assets’ residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each financial year end.
Depreciation is calculated on a straight-line basis over the estimated useful lives of the assets.
| Plant and machinery | ||||
| Structure and leasehold improvements | ||||
| Mature seeds and herbage cultivation | ||||
| Furniture and equipment | ||||
| Motor vehicles |
An item of plant and equipment is removed from the accounts upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on disposal of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the item) is included in the consolidated statements of income in the period the item is disposed.
| 2.18 | GOODWILL |
Goodwill is an asset representing the
fair economic benefits arising from other assets acquired in a business combination that are not individually identified or separately
recognized. Goodwill is tested for impairment on an annual basis at the end of the Company’s fiscal year, or when impairment indicators
arise. The Company uses a fair-value-based approach to test for impairment at the level of each reporting unit. The Company directly acquired
MEIJI, which is the holding company of JHST that operates the Hu Plantation. As a result of this acquisition, the Company recorded goodwill
in the amount of $
F-12
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| 2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) |
| 2.19 | PROPRIETARY TECHNOLOGIES |
A master license of stock feed manufacturing
technology was acquired and the costs of acquisition are capitalized as proprietary technologies when technological feasibility has been
established. Cost of acquisition of stock feed manufacturing technology master license is amortized using the straight-line method over
its estimated life of
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
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
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
The Company has determined that technological feasibility is established at the time a working model of products is completed. Proprietary technologies are intangible assets of finite lives. Management evaluates the recoverability of proprietary technologies on an annual basis at the end of the Company’s fiscal year, or when impairment indicators arise. As required by ASC Topic 350 “Intangible - Goodwill and Other”, the Company uses a fair-value-based approach to test for impairment.
| 2.20 | CONSTRUCTION IN PROGRESS |
Construction in progress represents direct costs of construction as well as acquisition and design fees incurred. Capitalization of these costs ceases and the construction in progress is transferred to property and equipment when substantially all the activities necessary to prepare the assets for their intended use are completed. No depreciation is provided until construction is completed and the asset is ready for its intended use.
| 2.21 | LAND USE RIGHTS |
Land use rights represent acquisition
of rights to agricultural land from farmers and are amortized on the straight-line basis over their respective lease periods. The lease
period of agricultural land is in the range from
| 2.22 | EQUITY METHOD INVESTMENTS |
Investee entities, in which the company can exercise significant influence, but not control, are accounted for under the equity method of accounting. Under the equity method of accounting, the company’s share of the earnings or losses of these companies is included in net income. A loss in value of an investment that is other than a temporary decline is recognized as a charge to operations. Evidence of a loss in value might include, but would not necessarily be limited to absence of an ability to recover the carrying amount of the investment or inability of the investee to sustain an earnings capacity that would justify the carrying amount of the investment.
| 2.23 | CORPORATE JOINT VENTURE |
A corporation formed, owned, and operated by two or more businesses as a separate and discrete business or project (venture) for their mutual benefit is considered to be a corporate joint venture. Investee entities, in which the Company can exercise significant influence, but not control, are accounted for under the equity method of accounting. Under the equity method of accounting, the Company’s share of the earnings or losses of these companies is included in net income.
A loss in value of an investment that is other than a temporary decline is recognized as a charge to operations. Evidence of a loss in value might include, but would not necessarily be limited to, the absence of an ability to recover the carrying amount of the investment or inability of the investee to sustain an earnings capacity that would justify the carrying amount of the investment.
F-13
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| 2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) |
| 2.24 | VARIABLE INTEREST ENTITY |
A variable interest entity (“VIE”) is an entity (investee) in which the investor has obtained less than a majority interest, according to the Financial Accounting Standards Board (FASB). A VIE is subject to consolidation if a VIE meets one of the following three criteria as elaborated in ASC Topic 810-10, Consolidation:
| (a) | equity-at-risk is not sufficient to support the entity’s activities; |
| (b) | as a group, the equity-at-risk holders cannot control the entity; or |
| (c) | the economics do not coincide with the voting interest. |
If a firm is the primary beneficiary of a VIE, the holdings must be disclosed on the balance sheet. The primary beneficiary is defined as the person or company with the majority of variable interests. A corporation formed, owned, and operated by two or more businesses (ventures) as a separate and discrete business or project (venture) for their mutual benefit is defined as a joint venture.
| 2.25 | TREASURY STOCK |
Treasury stock means shares of a corporation’s own stock that have been issued and subsequently reacquired by the corporation. Converting outstanding shares to treasury shares does not reduce the number of shares issued but does reduce the number of shares outstanding. These shares are not eligible to receive dividends. Accounting for excesses and deficiencies on treasury stock transactions is governed by ASC 505-30-30.
State laws and federal agencies closely regulate transactions involving a company’s own capital stock, so the purchase of outstanding shares must have a legitimate purpose. Some of the most common reasons for purchasing outstanding shares are as follows:
| (a) | to meet additional stock needs for various reasons, including newly implemented stock option plans, stock for convertible bonds or convertible preferred stock, or a stock dividend. |
| (b) | to make more shares available for acquisitions of other entities. |
The cost method of accounting for treasury shares has been adopted by the Company. The purchase of outstanding shares and thus converting them into treasury shares is treated as a temporary reduction in shareholders’ equity in view of the expectation to reissue the shares instead of retiring them. When the Company reissues the treasury shares, the temporary account is eliminated. The cost of acquiring outstanding shares for converting into treasury shares is charged to a contra account, in this case a contra equity account that reduces the stockholder equity balance.
| 2.26 | INCOME TAXES |
The Company accounts for income taxes under the provisions of ASC Topic 740 “Accounting for Income Taxes.” Under ASC Topic 740, deferred tax assets and liabilities are determined based on the difference between the financial statement carrying amounts and the tax bases of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse.
The provision for income tax is based on the results for the year as adjusted for items, which are non-assessable or disallowed. It is calculated using tax rates that have been enacted or substantively enacted at the balance sheet date. Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax basis used in the computation of assessable tax profit. In principle, deferred tax liabilities are recognized for all taxable temporary differences, and deferred tax assets are recognized to the extent that it is probable that taxable profit will be available against which deductible temporary differences can be utilized.
Deferred income taxes are calculated at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled. Deferred tax is charged or credited in the income statement, except when it related to items credited or charged directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis.
ASC Topic 740 also prescribes a more-likely-than-not threshold for financial statement recognition and measurement of a tax position taken, or for one expected to be taken, in a tax return. ASC Topic 740 also provides guidance related to, among other things, classification, accounting for interest and penalties associated with tax positions, and disclosure requirements. Any interest and penalties accrued related to unrecognized tax benefits will be recorded as tax expense.
F-14
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| 2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) |
| 2.27 | POLITICAL AND BUSINESS RISK |
The Company’s operations are carried out in the P.R.C. Accordingly, the political, economic and legal environment in the P.R.C. may influence the Company’s business, financial condition and results of operations by the general state of the P.R.C.’s economy. The Company’s operations in the P.R.C. are subject to specific considerations and significant risks not typically associated with companies in North America and Western Europe. The Company’s results may be adversely affected by changes in governmental policies with respect to laws and regulations, anti- inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things.
| 2.28 | CONCENTRATION OF CREDIT RISK |
Cash includes cash at banks and demand
deposits in accounts maintained with banks within the P.R.C. Total cash in these banks as of September 30, 2021 and December 31,
2020 amounted to $
The Company had
| 2021Q1-3 | 2020Q1-3 | |||||||
| Customer A | % | % | ||||||
| Customer B | % | % | ||||||
| Customer C | % | % | ||||||
| Customer D | % | |||||||
| Customer F | % | |||||||
| % | % | |||||||
| Percentage of revenue |
Amount | |||||||||
| Customer A | Organic fertilizer and Bread Grass Division | % | $ | |||||||
| Customer B | Cattle Farm Development and HU Plantation Division | % | $ | |||||||
| Customer C | Corporate Division | % | $ | |||||||
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
| September 30, 2021 | December 31, 2020 | |||||||
| Customer A | % | % | ||||||
| Customer B | % | % | ||||||
| Customer C | % | % | ||||||
| Customer D | % | % | ||||||
| Customer E | % | % | ||||||
| Customer F | % | |||||||
| % | % | |||||||
As of September 30, 2021, amounts
due from customers A, B and C are $
F-15
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| 2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) |
| 2.29 | IMPAIRMENT OF LONG-LIVED ASSETS AND INTANGIBLE ASSETS |
In accordance with ASC Topic 360, “Property,
Plant and Equipment,” long-lived assets to be held and used are analyzed for impairment whenever events or changes in circumstances
indicate that the related carrying amounts may not be recoverable. The Company reviews the carrying amount of its long-lived assets, including
intangibles, for impairment, during each reporting period. An asset is considered impaired when estimated future cash flows are less than
the carrying amount of the asset. In the event the carrying amount of such asset is considered not recoverable, the asset is adjusted
to its fair value. Fair value is generally determined based on discounted future cash flow. As of 31 December 2019, 2020 and 30 September
2021, the Company provided impairment losses of -$
| 2.30 | EARNINGS PER SHARE |
As prescribed in ASC Topic 260 “Earnings per Share,” Basic Earnings per Share (“EPS”) is computed by dividing net income available to common stockholders by the weighted average number of common stock shares outstanding during the year. Diluted EPS is computed by dividing net income available to common stockholders by the weighted-average number of common stock shares outstanding during the year plus potential dilutive instruments such as stock options and warrants. The effect of stock options on diluted EPS is determined through the application of the treasury stock method, whereby proceeds received by the Company based on assumed exercises are hypothetically used to repurchase the Company’s common stock at the average market price during the period.
ASC 260-10-55 requires that stock dividends or stock splits be accounted for retroactively if the stock dividends or stock splits occur during the year, or retroactively if the stock dividends or stock splits occur after the end of the period but before the release of the financial statements, by considering it outstanding of the entirety of each period presented. Dilution is computed by applying the treasury stock method. Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the year.
For the nine months ended September
30, 2021 and 2020, basic earnings (loss) per share attributable to Sino Agro Food, Inc. and subsidiaries common stockholders amounted
to $(
| 2.31 | ACCUMULATED OTHER COMPREHENSIVE INCOME |
ASC Topic 220 “Comprehensive Income” establishes standards for reporting and displaying comprehensive income and its components in financial statements. Comprehensive income is defined as the change in stockholders’ equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. The comprehensive income for all periods presented includes both the reported net income and net change in cumulative translation adjustments.
| 2.32 | RETIREMENT BENEFIT COSTS |
P.R.C. state managed retirement benefit programs are defined contribution plans and the payments to the plans are charged as expenses when employees have rendered service entitling them to the contribution made by the employer.
| 2.33 | STOCK-BASED COMPENSATION |
The Company has adopted both ASC Topic 718, “Compensation - Stock Compensation” and ASC Topic 505-50, “Equity-Based Payments to Non - Employees” using the fair value method in which an entity issues its equity instruments to acquire goods and services from employees and non- employees. Stock compensation for stock granted to non-employees has been determined in accordance with this accounting standard and the accounting standard regarding accounting for equity instruments that are issued to other than employees for acquiring, or in conjunction with selling goods or services, as the fair value of the consideration received or the fair value of equity instruments issued, whichever is more reliably measured. This accounting standard allows the “simplified” method to determine the term of employee options when other information is not available. Under ASC Topic 718 and ASC Topic 505-50, stock compensation expenses is measured at the grant date on the value of the option or restricted stock and is recognized as expenses, less expected forfeitures, over the requisite service period, which is generally the vesting period.
F-16
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| 2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) |
| 2.34 | FAIR VALUE OF FINANCIAL INSTRUMENTS |
The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value under U.S. GAAP, and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10- 35-37 establishes a fair value hierarchy, which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:
| Level 1 | Quoted market prices available in active markets for identical assets or liabilities as of the reporting date. |
| Level 2 | Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. |
| Level 3 | Pricing inputs that are generally observable inputs and not corroborated by market data. |
Financial instruments consist principally of cash, accounts receivable, Deposits and prepayments, accounts payable and accrued expenses, other payables, due to a director and income tax payables. The carrying amounts of such financial instruments in the accompanying condensed consolidated balance sheet approximate their fair values due to their relatively short-term nature. The Company’s long-term borrowing, promissory notes and convertible notes payable approximates the fair value of such instrument based upon management’s best estimate of interest rates that would be available to the Company for similar financial arrangement at December 31, 2019. It is management’s opinion that the Company is not exposed to any significant currency or credit risks arising from these financial instruments.
The Company revalues its derivative liability at every reporting period and recognizes gains or losses in the consolidated statement of income and other comprehensive income that are attributable to the change in the fair value of the derivative liability. The Company has no other assets or liabilities measured at fair value on a recurring basis.
| 2.35 | RECENT ACCOUNTING PRONOUNCEMENTS |
In February 2016, the FASB issued ASU 2016-02, Leases, which aims to make leasing activities more transparent and comparable and requires substantially all leases be recognized by lessees on their balance sheet as a right-of-use asset and corresponding lease liability, including leases currently accounted for as operating leases. This ASU is effective for all interim and annual reporting periods beginning after December 15, 2018, with early adoption permitted. The Company is currently evaluating the impact that the adoption of ASU 2016-02 will have on its consolidated financial statements and related disclosures.
In September 2018, the FASB issued ASU 2018-07—Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. This ASU is effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. The Company is currently evaluating the impact that the adoption of this ASU will have on its consolidated financial statements and related disclosures.
| 2.36 | RECLASSIFICATION |
Certain balances have been reclassified in the December 31, 2018 consolidated balance sheet and the consolidated statement of cash flows on a basis consistent with the financial statements as of and for the year ended December 31, 2019. There is no further reclassification since.
F-17
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| 3. | SEGMENT INFORMATION |
The Company establishes standards for reporting information about operating segments on a basis consistent with the Company’s internal organization structure as well as business segments and major customers in consolidated financial statements. The Company operates in five principal reportable segments: Fishery Development Division, HU Plantation Division, Organic Fertilizer and Bread Grass Division, Cattle Farm Development Division and Corporate and Others Division.
| For the nine months ended September 30, 2021 | ||||||||||||||||||||||||
| Fishery | Organic Fertilizer | Cattle Farm | Corporate | |||||||||||||||||||||
| Development | HU Plantation | and Bread Grass | Development | and | ||||||||||||||||||||
| Division(1) | Division (2) | Division (3) | Division (4) | others (5) | Total | |||||||||||||||||||
| Revenue | $ | $ | ||||||||||||||||||||||
| Net income (loss) | $ | ( | ) | ( | ) | $ | ( | ) | ||||||||||||||||
| Total assets | $ | $ | ||||||||||||||||||||||
| For the nine months ended September 30, 2020 | ||||||||||||||||||||||||
| Fishery | Organic Fertilizer | Cattle Farm | Corporate | |||||||||||||||||||||
| Development | HU Plantation | and Bread Grass | Development | and | ||||||||||||||||||||
| Division(1) | Division (2) | Division (3) | Division (4) | others (5) | Total | |||||||||||||||||||
| Revenue | $ | $ | ||||||||||||||||||||||
| Net income (loss) | $ | ( | ) | ( | ) | $ | ( | ) | ||||||||||||||||
| Total assets | $ | $ | ||||||||||||||||||||||
Note
| (1) | Operated by Capital Award, Inc. (“CA”). |
| (2) | Operated by Jiang Men City Heng Sheng Tai Agriculture Development Co., Limited (“JHST”). |
| (3) | Operated by Qinghai Sanjiang A Power Agriculture Co., Limited (“SJAP”), A Power Agro Agriculture Development (Macau) Limited (“APWAM”), and Hunan Shenghua A Power Agriculture Co., Limited (“HSA”). On December 30, 2018 QZH was disposed to third party and derecognized as variable interest entity on the same date. |
| (4) | Operated by Jiang Men City Hang Mei Cattle Farm Development Co. Limited (“JHMC”) and Macau Eiji Company Limited (“MEIJI”). |
| (5) | Operated by Sino Agro Food, Inc. (“SIAF”) and Sino Agro Food Sweden AB (“SAFS”) ----（Discontinued since 31st December 2019）. |
F-18
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| 3. | SEGMENT INFORMATION (CONTINUED) |
Further analysis of revenue:-
| For the nine months ended September 30, 2021 | ||||||||||||||||||||||||
| Organic Fertilizer | ||||||||||||||||||||||||
| Fishery | HU | and Bread | Cattle Farm | Corporate | ||||||||||||||||||||
| Development | Plantation | Grass | Development | and | ||||||||||||||||||||
| Division | Division | Division | Division | others | Total | |||||||||||||||||||
| Name of entity Capital Award, Inc. (CA) | ||||||||||||||||||||||||
| Jiang Men City Heng Sheng Tai Agriculture Development Co. Ltd (“JHST”) | ||||||||||||||||||||||||
| Qinghai Sanjiang A Power Agriculture Co., Ltd (“SJAP”) | ||||||||||||||||||||||||
| Hunan Shenghua A Power Agriculture Co., Limited (“HSA”) | ||||||||||||||||||||||||
| Macau Eiji Company Limited (“MEIJI”) | ||||||||||||||||||||||||
| Sino Agro Food, Inc. (“SIAF”) | ||||||||||||||||||||||||
| Consulting and service income for development contracts Capital Award, Inc. (CA”) | ||||||||||||||||||||||||
Further analysis of revenue:-
| For the nine months ended September 30, 2020 | ||||||||||||||||||||||||
| Organic Fertilizer | ||||||||||||||||||||||||
| Fishery | HU | and Bread | Cattle Farm | Corporate | ||||||||||||||||||||
| Development | Plantation | Grass | Development | and | ||||||||||||||||||||
| Division | Division | Division | Division | others | Total | |||||||||||||||||||
| Name of entity Capital Award, Inc. (CA) | ||||||||||||||||||||||||
| Jiang Men City Heng Sheng Tai Agriculture Development Co. Ltd (“JHST”) | ||||||||||||||||||||||||
| Qinghai Sanjiang A Power Agriculture Co., Ltd (“SJAP”) | ||||||||||||||||||||||||
| Hunan Shenghua A Power Agriculture Co., Limited (“HSA”) | ||||||||||||||||||||||||
| Macau Eiji Company Limited (“MEIJI”) | ||||||||||||||||||||||||
| Sino Agro Food, Inc. (“SIAF”) | ||||||||||||||||||||||||
| Consulting and service income for development contracts Capital Award, Inc. (CA”) | ||||||||||||||||||||||||
F-19
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| 3. | SEGMENT INFORMATION (CONTINUED) |
Further analysis of cost
| For the nine months ended September 30, 2021 | ||||||||||||||||||||||||
| Organic Fertilizer | ||||||||||||||||||||||||
| Fishery | HU | and Bread | Cattle Farm | Corporate | ||||||||||||||||||||
| Development | Plantation | Grass | Development | and | ||||||||||||||||||||
| Division | Division | Division | Division | others | Total | |||||||||||||||||||
| Name of entity Capital Award, Inc. (CA) | ||||||||||||||||||||||||
| Jiang Men City Heng Sheng Tai Agriculture Development Co. Ltd (“JHST”) | ||||||||||||||||||||||||
| Qinghai Sanjiang A Power Agriculture Co., Ltd (“SJAP”) | ||||||||||||||||||||||||
| Hunan Shenghua A Power Agriculture Co., Limited (“HSA”) | ||||||||||||||||||||||||
| Macau Eiji Company Limited (“MEIJI”) | ||||||||||||||||||||||||
| Sino Agro Food, Inc. (SIAF) | ||||||||||||||||||||||||
| Consulting and service income for development contracts Capital Award, Inc. (“CA”) | ||||||||||||||||||||||||
Further analysis of cost
| For the nine months ended September 30, 2020 | ||||||||||||||||||||||||
| Organic Fertilizer | ||||||||||||||||||||||||
| Fishery | HU | and Bread | Cattle Farm | Corporate | ||||||||||||||||||||
| Development | Plantation | Grass | Development | and | ||||||||||||||||||||
| Division | Division | Division | Division | others | Total | |||||||||||||||||||
| Name of entity Capital Award, Inc. (CA) | ||||||||||||||||||||||||
| Jiang Men City Heng Sheng Tai Agriculture Development Co. Ltd (“JHST”) | ||||||||||||||||||||||||
| Qinghai Sanjiang A Power Agriculture Co., Ltd (“SJAP”) | ||||||||||||||||||||||||
| Hunan Shenghua A Power Agriculture Co., Limited (“HSA”) | ||||||||||||||||||||||||
| Macau Eiji Company Limited (“MEIJI”) | ||||||||||||||||||||||||
| Sino Agro Food, Inc. (“SIAF”) | ||||||||||||||||||||||||
| Consulting and service income for development contracts Capital Award, Inc. (CA”) | ||||||||||||||||||||||||
F-20
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| 5. | INCOME TAXES |
United States of America
The Company was incorporated in the State of Nevada, in the United States of America. The Company has no trading operations in United States of America and no U.S. corporate tax has been provided for in the consolidated financial statements of the Company.
Undistributed Earnings of Foreign Subsidiaries
The Company intends to use the remaining accumulated and future earnings of foreign subsidiaries to expand operations outside the United States and accordingly, undistributed earnings of foreign subsidiaries are considered to be indefinitely reinvested outside the United States and no provision for
U.S. Federal and State income tax or applicable dividend distribution tax has been provided thereon.
As of 30 September 2021, the Company reviewed its tax position with the assistance US tax professionals and believed that there would be no taxes and no penalties assessed by the IRS in the United States of America.
China
The Enterprise Income Tax (“EIT”)
law replaced the existing laws for Domestic Enterprises (“DE’s ”) and Foreign Invested Enterprises (“FIE’s”).
The new standard EIT rate of
Under new tax legislation in China beginning in January 2008, the agriculture, dairy and fishery sectors are exempt from enterprise income taxes.
No EIT has been provided in the financial statements of SIAF, JHST, JHMC, HSA, and SJAP since they are exempt from EIT for the years ended December 31, 2019 and 2018 as they are within the agriculture, and cattle sectors.
No EIT has been provided in the financial statements of QZH since they are exempt from EIT for the period ended December 30, 2018 (date of de- recognition QZH as subsidiary) and as it is within the cattle sectors.
Belize
CA, CS and CH are international business companies incorporated in Belize, and are exempt from corporate tax in Belize.
Macau
No Macau Corporate income tax has been provided in the consolidated financial statements of APWAM and MEIJI since these entities did not earn any assessable profits for the years ended December 31, 2019 and 2018.
Sweden
Sweden Corporate income tax has been
provided at
No deferred tax assets and liabilities are of December 31, 2019 and 2018 since there was no difference between the financial statements carrying amounts and the tax bases of assets and liabilities using enacted tax rates in effect in the period in which the differences are expected to reverse.
Provision for income taxes is as follows:
| September 30, 2021 | December 31, 2020 | |||||||
| SIAF | $ | $ | ||||||
| SAFS | ||||||||
| CA, CH and CS | ||||||||
| MEIJI and APWAM | ||||||||
| JHST, JHMC, SJAP, QZH and HSA | ||||||||
| $ | ||||||||
The Company did not recognize any interest or penalties related to unrecognized tax benefits in the years ended December 31, 2020 and 2019. The Company had no uncertain positions that would necessitate recording of tax related liability. The Company is subject to examination by the respective tax authorities.
F-21
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| 6. | NET LOSS FROM DISPOSAL OF A VARIABLE INTEREST ENTITY |
Historical no longer applicable
| 7. | CASH AND CASH EQUIVALENTS |
| September 30, 2021 | December 31, 2020 | |||||||
| Cash and bank balances | $ | $ | ||||||
| 8. | INVENTORIES |
As of September 30,2021, inventories are as follows:
| September 30, 2021 | December 31, 2020 | |||||||
| Bread grass | $ | |||||||
| Beef cattle | ||||||||
| Organic fertilizer | ||||||||
| Forage for cattle and consumable | ||||||||
| Raw materials for bread grass and organic fertilizer | ||||||||
| Immature seeds | ||||||||
| $ | ||||||||
| 9. | DEPOSITS AND PREPAYMENTS |
| September 30, 2021 | December 31, 2020 | |||||||
| Deposits for | ||||||||
| - purchases of equipment | $ | |||||||
| - acquisition of land use rights | ||||||||
| - inventories purchases | ||||||||
| - construction in progress | ||||||||
| - issue of shares as collateral | ||||||||
| Shares issued for employee compensation and overseas professional and bond interest | ||||||||
| Others | ||||||||
| $ | ||||||||
| 10. | ACCOUNTS RECEIVABLE |
All accounts receivable are reflected as a current asset and no allowance for bad debt of September 30, 2021 and December 31, 2020, respectively.
Aging analysis of accounts receivable is as follows:
| September 30, 2021 | December 31, 2020 | |||||||
| 0 - 30 days | $ | |||||||
| 31 - 90 days | ||||||||
| 91 - 120 days | ||||||||
| over 120 days and less than 1 year | ||||||||
| over 1 year | ||||||||
| $ | $ | |||||||
F-22
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| 11. | OTHER RECEIVABLES |
| September 30, 2021 | December 31, 2020 | |||||||
| Advanced to employees | $ | $ | ||||||
| Advanced to suppliers | ||||||||
| Advanced to customers | ||||||||
| Advanced to developers | ||||||||
| Advanced to SJAP | ||||||||
| Others | ||||||||
| $ | $ | |||||||
Advanced to employees, suppliers, customers and developers are unsecured, interest free and with no fixed terms of repayment.
| 12. | PLANT AND EQUIPMENT |
| September 30, 2021 | December 31, 2020 | |||||||
| Plant and machinery | $ | $ | ||||||
| Structure and leasehold improvements | ||||||||
| Mature seeds and herbage cultivation | ||||||||
| Furniture and equipment | ||||||||
| Motor vehicles | ||||||||
| Less: Accumulated depreciation | ||||||||
| Net carrying amount | $ | $ | ||||||
| 13. | CONSTRUCTION IN PROGRESS |
| September 30, 2021 | December 31, 2020 | |||||||
| Construction in progress | ||||||||
| - Office, warehouse and organic fertilizer plant in HSA | $ | $ | ||||||
| - Oven room, road for production of dried flowers | ||||||||
| - Organic fertilizer and bread grass production plant and office building | ||||||||
| - Rangeland for beef cattle and office building | ||||||||
| - Fish pond and breeding factory | ||||||||
| $ | $ |
F-23
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| 14. | LAND USE RIGHTS |
| September 30, 2021 | December 31, 2020 | |||||||
| Cost | $ | $ | ||||||
| Less: Accumulated amortization | ( | ) | ( | ) | ||||
| Net carrying amount | $ | $ | ||||||
| 15. | GOODWILL |
Goodwill represents the fair value of the assets acquired the acquisitions over the cost of the assets acquired. It is stated at cost less accumulated impairment losses. Management tests goodwill for impairment on an annual basis or when impairment indicators arise. In these instances, the Company recognizes an impairment loss when it is probable that the estimated cash flows are less than the carrying value of the assets. To date, no such impairment loss has been recorded.
| September 30, 2021 | December 31, 2020 | |||||||
| Goodwill from acquisition | $ | $ | ||||||
| Less: Accumulated impairment losses | ||||||||
| Net carrying amount | $ | $ | ||||||
| 16. | PROPRIETARY TECHNOLOGIES |
| September 30, 2021 | December
31, 2020 | |||||||
| Cost | $ | |||||||
| Less: Accumulated amortization | ( | ) | ( | ) | ||||
| Net carrying amount | $ | |||||||
| 17. | INTERESTS IN UNCONSOLIDATED EQUITY INTERESTS |
| September
30, 2021 | December
31, 2020 | |||||||
| Investments at cost | $ | $ | ||||||
| - TRW | ||||||||
| - SJAP | ||||||||
| Cattle farm 2 | ||||||||
| Amount due from a consolidated equity investee | ||||||||
| $ | ||||||||
F-24
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| 18. | TEMPORARY DEPOSITS PAID TO ENTITIES FOR EQUITY INVESTMENTS IN FUTURE SINO JOINT VENTURE COMPANIES |
| Intended unincorporated Investee | Projects Engaged | September 30, 2021 | December 31, 2020 | |||||||
| A | $ | |||||||||
| B | ||||||||||
| C | ||||||||||
| $ | $ | |||||||||
| 19. | VARIABLE INTEREST ENTITY TO AN INVESTOR IN ASSOCIATE |
On September 28, 2009, APWAM acquired
the PMH’s
On September 30th 2020, Mr. Solomon Lee resigned as the Chairman of SJAP resulting in categorization of SJAP as an Investor in Associate from a subsidiary status.
| 21. | CONSTRUCTION CONTRACT |
| (i) | Costs and estimated earnings in excess of billings on uncompleted contracts |
| September 30, 2021 | December 31, 2020 | |||||||
| Costs | $ | |||||||
| Estimated earnings | ||||||||
| Less: Billings | ||||||||
| Costs and estimated earnings in excess of billings on uncompleted contracts | $ |
| (ii) | Billings in excess of costs and estimated earnings on uncompleted contracts |
| September 30, 2021 | December 31, 2020 | |||||||
| Billings | $ | |||||||
| Less: Costs | ||||||||
| Estimated earnings | ||||||||
| Billing in excess of costs and estimated earnings on uncompleted contracts | $ |
| 21. | OTHER PAYABLES |
| September 30, 2021 | December 31, 2020 | |||||||
| Due to third parties | $ | |||||||
| Straight note payable (note 23(i)) | ||||||||
| Promissory notes issued to third parties | ||||||||
| Due to local government | ||||||||
| $ | ||||||||
| Less: Amount classified as non-current liabilities | ||||||||
| Promissory notes issued to third parties | ||||||||
| Amount classified as current liabilities | $ | |||||||
| Due to third parties are unsecured, interest free and have no fixed terms of repayment. |
F-25
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| 22. | BORROWINGS |
As at 30th September 2021, the Company has no bank borrowing resulted from the categorization of SJAP as an Investor in Associate from a subsidiary status such that SJAP’s bank loans were no longer being consolidated into the Company’s financials.
| 23. |
CONVERTIBLE NOTE PAYABLES (OTHER PAYABLES) |
There are two convertible notes payable recorded under other payables shown in Table (E.) below:
| Due to | ||||
| ECAB | ||||
| UNRELATED THIRD PARTY | ||||
| Total due as at 30th September 2021 | ||||
| ● | Convertible Note Payables for ECAB: |
| (i) | On August 29, 2014, the Company completed the closing of a private placement financing transaction with an accredited investor, which purchased a |
Interest on the note shall accrue on the outstanding principal balance of this Note from August 29, 2014. Interest shall be payable quarterly on the last day of each of March, September, September and December commencing September 30, 2014 provided, however, that note holder may elect to require the Company to issue to the note holder a promissory note in lieu of cash in satisfaction of any interest due and payable at such time. Any interest payment note shall be subject to the same terms as the note. The note has a maturity date of February 28, 2020.
The note is convertible, at the discretion
of the note holder, into shares of the Company’s common stock (i) at any time following an Event of Default, or (ii) for
a period of thirty (30) calendar days following October 31, 2015 and each anniversary thereof, at an initial conversion price per
share of $
The Company and the note holder entered
into a restructuring agreement regarding the settlement of the Note 1. Both parties have agreed to restructure the indebtedness represented
by Note 1 as follows: (a) SIAF issues
As of December 31, 2020, as a
result, the amount outstanding under Note 1 was reclassified as other payables – straight note payable of $
Subsequently, Note 1 matured on February 28, 2020, the Company intends to offer the settlement of the note to the accredited investors based on the following understanding, terms and conditions:
(i). The earlier understanding of the
restructured indebtedness is to be carried as follows: (a) SIAF issues
(ii). It is the Company’s intension
for the said
(iii). There were
F-26
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
23. CONVERTIBLE NOTE PAYABLES (OTHER PAYABLES) (CONTINUED)
(iv). In order that the principal amount
of $
| ● | Convertible Note Payables for the unrelated third party: |
| (ii) | On October 20, 2019, the Company issued another Convertible Note (the “Note 2”) with a principal amount of $ |
Under the agreement, the Company shall
pay the note holder
Table (F) below shows the newly agreed principle terms and conditions of the newly revised Bod Subscription Agreement:
| # | Descriptions | Amounts in US$ | Notes and remarks | |||||
| 1 | ||||||||
| 2 | ||||||||
| 3 | ||||||||
| 3.1 | ||||||||
| 3.2 | ||||||||
| Note | If and when the said IPO of the preferred G series shares would happen in according to schedule, the note holders has the option to convert said minimum payables into the said preferred G Series shares as the subscription fees of said G Series shares at a pre-negotiated and pre-determined price prior to the said IPO. |
As such there will not be necessary to further evaluate the fair value of the conversion option and related derivative liability incurred in its original Bond Subscription Agreement dated October 20th 2019.
F-27
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| 24. | SHAREHOLDERS’ EQUITY |
The Group’s share capital as of December 31, 2020 and 2019 shown on the consolidated balance sheet represents the aggregate nominal value of the share capital of the Company as of that date.
Common Stock:
During
the year ended December 31, 2019, the Company (i) issued
During
the year ended December 31, 2020, the Company (i) issued
The Company has
| 25. | OBLIGATION UNDER OPERATING LEASES |
The Company leases (i)
Lease expenses were $
The future minimum lease payments as of December 31, 2021, are as follows:
| Within 1 year | $ | |||
| 2 to 5 years | ||||
| Over 5 years | ||||
| $ |
| 26. | STOCK BASED COMPENSATION |
On September 30, 2019, the Company
issued employees total of
As of September 30, 2021, the
deferred compensation balance for staff was $
F-28
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| 27. | CONTINGENCIES |
On March 26, 2020, a shareholder derivative complaint was filed in the United States District Court for the Southern District of New York against the Company, as well as four of its current directors. The Complaint alleges violations of securities law and state law, breaches of fiduciary duties (including gross mismanagement of the Company) by the individual defendants, a material default of its obligations under a commercial loan agreement, misleading and false statements (including material omissions) by the individual defendants, and unauthorized issuance of new shares of Common Stock to pay debts that, in the view of the plantiffs, has diluted shareholder ownership and oppressed shareholders of the Company. The Company and the individual defendants believe that these claims are without merit and intend to vigorously defend against the Complaint.
On July 23rd 2020 the settlement agreement between the plaintiffs and the Company to settle the shareholder derivate complaint was preliminary approved and final approval was granted on October 13th 2021 as such the case was closed on October 13th 2020 officially.
On September 22, 2015, the Company
entered into a trade facility agreement with two independent third parties. Pursuant to the agreement, the Company provides collateral
in the form of Company’s common shares to a PRC based lender (the “Lender”) and the Lender agrees to provide a revolving trade
facility loan up to $
As of December 31, 2020, the Company
has issued aggregate
| 28. | RELATED PARTY TRANSACTIONS |
In addition to the transactions and balances as disclosed elsewhere in these consolidated financial statements, during the years ended September 30, 2021 and December 31, 2020, the Company had the following significant related party transactions:-
| Name of related party | Nature of transactions | |
| Mr. Solomon Yip Kun Lee, Chairman | ||
| Tri-Way Industries Limited (“TRW”) Unconsolidated equity investee | ||
| SJAP |
F-29
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| 29. | EARNINGS PER SHARE |
Basic earnings per share is computed by dividing net income attributable to common shareholders by the weighted average number of common shares outstanding during the year. Diluted earnings per share reflects the potential dilution of securities by including other potential common stock, including convertible preferred stock, stock options and warrants, in the weighted average number of common shares outstanding for the year, if dilutive. The numerators and denominators used in the computations of basic and dilutive earnings per share are presented in the following table:
| Nine months ended September 30, 2021 | Nine months ended September 30, 2020 | |||||||
| BASIC | ||||||||
| Numerator for basic earnings per share attributable to the Company’s common stockholders: | ||||||||
| Net income used in computing basic earnings per share | ( | ) | $ | ( | ) | |||
| Basic earnings per share | ( | ) | $ | ( | ) | |||
| Basic weighted average shares outstanding | ||||||||
| Nine months ended September 30, 2021 | Nine months ended September 30, 2020 | |||||||
| DILUTED | ||||||||
| Numerator for basic earnings per share attributable to the Company’s common stockholders: | ||||||||
| Net income used in computing diluted earnings per share | ( | ) | $ | ( | ) | |||
| Diluted earnings per share | ( | ) | $ | ( | ) | |||
| Diluted weighted average shares outstanding | ||||||||
F-30
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Quarterly Report on Form 10-Q (the “Form 10-Q”) contains “forward-looking statements,” within the meaning of the Private Securities Litigation Reform Act of 1995 and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).The Company intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 21E of the Exchange Act. Forward-looking statements can be identified by the use of forward-looking terminology, such as “estimates,” “projects,” “plans,” “believes,” “expects,” “anticipates,” “intends,” or the negative thereof or other variations thereon, or by discussions of strategy that involve risks and uncertainties These statements reflect management’s current beliefs and are based on information now available to it. Accordingly, these statements are subject to certain risks, uncertainties and contingencies that could cause the Company’s actual results, performance or achievements in 2018 and beyond to differ materially from those expressed in, or implied by, such statements. Such statements, include, but are not limited to, statements contained in this Form 10-Q relating to the Company’s business, financial performance, business strategy, recently announced transactions and capital outlook. Important factors that could cause actual results to differ materially from those in the forward-looking statements include: a continued decline in general economic conditions nationally and internationally; decreased demand for our products and services; market acceptance of our products; the impact of any litigation or infringement actions brought against us; competition from other providers and products; the inability to raise capital to fund continuing operations; changes in government regulation; the ability to complete customer transactions, and other factors relating to our industry, our operations and results of operations and any businesses that may be acquired by us. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended or planned. Readers of this Form 10-Q should not place undue reliance on any forward-looking statements. Except as required by federal securities laws, the Company undertakes no obligation to update or revise these forward-looking statements to reflect new events or uncertainties.
You should read the following discussion and analysis of the financial condition and results of operations of the Company together with the financial statements and the related notes presented in Item 1 of this Form 10-Q.
| 1. | Consolidated revenues are generated from business activities as follows: |
| 1.1. | The Organic fertilizer of HSA |
From 1st October 2019, HSA leased its fertilizer operation to Mr. Lee Ping (the head of the existing management team) as such HSA’s revenues are derived from leasing contracts thereon.
So from 1st October 2020, there is no more sales revenue generated from HSA but leasing and contracting revenue of $2,653,964 representing 51% of the group’s revenue of $5,242,971 and gross profit of $2,653,964 compares to the group’s total gross profit of -4,021,315 for nine months ended 31.12.2021: whereas revenue for the nine months ended September 30, 2020 was USD 2.73 million or 55.18 percent of the Company’s total sales of goods revenue of USD 4.9 million in the same period. Gross profit for same division for the nine months ended September 30, 2020 was USD2.7million or 72% of the Company’s total gross profit in sales of goods of USD 3.78 million in the same period.
| 1.2 | Cattle farms (MEIJI) & (JHMC) |
From 1st October 2019, MEIJI leased its Cattle farms’ operation to Mr. Fan Xin September (the head of the existing management team) as such MEIJI’s revenues are derived from leasing contracts thereon.
So from 1st October 2020, there is no more sales revenue generated from MEIJI but leasing and contracting revenue of $1,280,674 representing 24% of the group total revenue of 5,242,971 and gross profit of $909,434 compares to the group’s total gross profit of -4,021,315 for nine months ended September 30,2021: whereas revenue for the nine months ended September 30,2020 was $0.97 million, or 19.69%, of the Company’s total sales of goods revenue of USD 4.95million in the same period. Gross profit for the Cattle Farm (MEIJI) division for the nine months ended September 30, 2020 was $0.76 million, or 19.98% percent of the Company’s total gross profit on sales of goods of $3.78 million in the same period.
| 1.3 | Plantation of (JHST) |
From 1st October 2019, JHST leased its Cattle farms’ operation to Mr. Fan Xin September (the head of the existing management team) as such MEIJI’s revenues are derived from leasing contracts thereon.
So from 1st October 2020, there is no more sales revenue generated from JHST but leasing and contracting revenue of $1,308,333 representing 28% of the group total revenue of 5,242,971 and gross profit of $457,917 compares to the group’s total gross profit of - of -4,021,315 for nine months ended September 30,2021: whereas revenue for the nine months ended September 30,2020 was $1.24 million, or 25.13%, of t the Company’s total sales of goods revenue of USD 4.95million in the same period. Gross profit for the plantation division for t the nine months ended September 30, 2020 was $0.30 million, or 7.88% percent of the Company’s total gross profit on sales of goods of $3.78 million in the same period.
1
| 1.4 | Marketing & Trading operation of The Corporate Sector |
$0 and 0for nine ended September 30, 2021, and 2020.
| 1.5 | Project Development of (CA) |
The project developments (or Technology engineering consulting and services) works are carried out by CA on aquaculture related projects and by SIAF and MEIJI on non-aquaculture and agriculture projects:
$0 and 0for nine ended September 30, 2021, and 2020.
Back Ground and history
A summary of each business division and operations is described below:
Businesses Division:
| ● | Fishery Division refers to the operations of Capital Award Inc. (“Capital Award” or “CA”) covering its engineering, technology and consulting service management of fishery farms, technology transfers and seafood sales and marketing, where; |
Capital Award generates revenues from providing engineering consulting services as turnkey contractors to owners and developers of fishery projects that are being designed and engineered into turnkey contracts by Capital Award in China using its A Power Module Technology Systems (“APM”) as follows:
(A). Engineering and Technology Services; via Consulting and Service Contracts (“CSC’s”) for the development, construction, and supply of plant and equipment, and management of fishery (and prawn or shrimp) farms and related business operations. From January 2020 up to the date of this annual report CA has not been able to do any fishery project or fishery project development due to the effects of the Pandemic COVID-19 as such, there was no revenue generated from January 2020 to September 30th 2021.
(B). Seafood Sales from CA’s projected farms; became a discontinued segment of operations from October 5, 2016 when Tri-way was disposed to other third parties in term Tri-way was reclassified as an unconsolidated equity investee on same date.
| ● | Corporate & Others Division refers to the trading segment of business operations of the Group named internally under corporate division of Sino Agro Food, Inc., including import/export business and consulting and service operations provided to projects that are not included in the above categories, and not limited to corporate affairs. Over the years up until end of fiscal year 2019 the corporate division imported mainly live seafood from South Africa countries, Vietnam, Thailand, Russian and other nearby countries and frozen beef from Australia and South America countries; however it is due to the interruptions and adverse impacts caused by the Pandemic COVID-19 made it impossible and unprofitable to continue the imports of live seafood, and the poor political relationship between China and Australia in 2020 induced high risks on the imports of Australian beef. The Corporate’s trading division based on standalone figures ended up with a loss of over $1.6 million and $ 0 as at 31.12 2020 and 30.09.2021 respectively. |
Leasing and subcontracting of operations:
Over the years, there has been significant capital expenditures (CPE) and working capital (WC) required for and employed on the developments, expansion and operations of the minor operational activities that we managed to fund while our two core businesses (in the Cattle and beef of SJAP and the Fishery of CA) were generating sufficient cash flows and incomes, however after the collapse of the SJAP’s business from 2016 and the poor performances of the Mega farms from 2017 (“Crises”) for reasons mentioned in the earlier
chapters and the previous Ks and Qs reports, the Company is no longer in the position to support and to finance the growth of these minor operational businesses in the way as they were before the Crises, therefore in order that capital spending could be kept within an affordable level, the Company decided to lease and sub-contract the following operations to their respective operational managements from 1st October 2019 as such there are no sales revenue and income derived from these operations but leasing and sub-contracting revenues and incomes thereon.
| ● | The operation of Hunan Shenghua A Power Agriculture Co. Ltd. (“HSA”) is in manufacturing and sales of organic fertilizer. From 1st October 2019 the Company contracted out its manufacturing and sales of organic fertilizer to its operational management; as such income of HSA is derived mainly from said management contract. |
| ● | Plantation Division refers to the operations of Jiangmen City Heng Sheng Tai Agriculture Development Co. Ltd. (“JHST”) in the HU Plantation business where dragon fruit flowers (dried and fresh), crops of vegetables and immortal vegetables (dried) are sold to wholesale and retail markets. JHST’s financial statements are consolidated into the financial statements of Macau EIJI Company Ltd. (“MEIJI”) as one entity. From 1st October 2019 the Company contracted out its plantation operation to its operational management; as such income of JHST is derived mainly from said management contract. |
2
| ● | Cattle Farm Division refers to the operations of Cattle Farm 1 under Jiangmen City Hang Mei Cattle Farm Development Co. Ltd (“JHMC”) where cattle are sold live to third party livestock wholesalers who sell them mainly to Guangzhou and Beijing livestock wholesale markets. The financial statements of JHMC are consolidated into MEIJI as one entity along with MEIJI’s operation in the consulting and service for development of other cattle farms (e.g., Cattle Farm 2) or related projects. From 1st October 2019 the Company contracted out its cattle operation to its operational management; as such incomes of JHMC are derived mainly from said management contract. |
Investments in equity investees:
SJAP: Up until 1st October 2019, cattle and beef divisional operation of our partially owned subsidiary Qinghai Sanjiang A Power Agriculture Co., Ltd. (“SJAP”) in manufacturing and sales of organic fertilizer, bulk livestock feed, concentrated livestock feed, and the sales of live cattle inclusive of: (a) cattle that are not being slaughtered in our own slaughter house operated by Qinghai Zhong He Meat Products Co., Limited (“QZH”) are sold live to third party livestock wholesalers, and (b) cattle that are sold to QZH and slaughtered and deboned and packed by QZH; and the sales of meats deboned and packed by QZH that are sold to various meat distributors, wholesalers and super market chains and our own retail butcher stores. QZH is a fully owned subsidiary of SJAP; as such, the financial statements of these three companies (SJAP, QZH and HSA) are consolidated into our wholly owned subsidiary, A Power Agro Agriculture Development (Macau) Limited (“APWAM”), as one entity. SJAP and QZH are both variable interest entities over which we exercise significant control. As of December 30, 2017, QZH was derecognized as variable interest entity and its operating profit and/or loss no longer accretive to the Company’s 41.25% holding in SJAP, a variable interest entity. On September 30th 2019, Mr. Solomon Lee resigned as the Chairman of SJAP resulting in categorization of SJAP as an Investor in Associate from a subsidiary status, and SJAP contracted out its business operations to its existing operational management, as such it is not a variable interest entity and SJAP was reclassified as an unconsolidated equity investee and SJAP’s cattle and beef operation is discontinued on same date.
TWL: Up until 5th October 2016, our divisional fishery production and sales operation was with our fully owned subsidiary Tri-way Industries Limited (TWL or Tri-way, a private company incorporated in Hong Kong ) and our 75% owned subsidiary Jiangman Fishery Development Co. Ltd. (JFD, a limited liability company incorporated in China) operating one indoor APM farm in Enping District, Enping City. On 5th October 2016 we carve out Tri-way that became an unconsolidated investee of the Company resulted with the Company owning 36.6% equity interest in Tri-way derived from (i) 23.89% as a result of retained interest in Tri-way, and (ii) 12.71% acquired in exchange for outstanding debt owed to the Company at the time.
Somehow, the extremely poor operational performances of its Mega Farm (AFF 4 & 5) and its incomes in 2017 to 2019 were generated mainly from the operations of AFF 1, 2 , 3a & 3b and other sub-contracted farms. Coupling the said poor performances of the Mega farm, impacts of the COVID-19 Pandemic of 2020 caused a complete write-off for AFF 1, 2,and 3 as well as to Tri-way’s sub-contracted farms incurring losses over $77 million for the fiscal year of 2020 causing all farms to stop work for over 7 months without sufficient workers, feed, supplementary, medications, transportation and maintenances etc. to keep the live stocks going and they all died during the period calculating to multiple million pieces (equivalent to multiple of thousand metric tons). Tri-way is in a very poor financial situation as such it is not practically possible for Tri-way to revitalize and to rebuild its operations in a hurry but to reduce its operations and to concentrate its efforts on rebuilding of brood stocks, the production of fingerling and nursery stocks and repairing the damages etc. It is anticipating that under current conditions, Tri-way will take a long period to recovery.
3
MD & A OF CONSOLIDATED RESULTS OF OPERATIONS
Part A. Unaudited Income Statements of Consolidated Results of Operations for the Nine months ended September 30,2021 compared to the nine months ended September 30,2020.
| Nine months ended | Nine months ended |
|||||||||||
| September 30, 2021 | September 30, 2020 | Difference | ||||||||||
| Revenue | ||||||||||||
| - Sale of goods | $ | - | $ | - | ||||||||
| - Leasing & contracting income | 7,864,457 | 7,394,568 | 469,889 | |||||||||
| 7,864,457 | 7,394,568 | 469,889 | ||||||||||
| Cost of goods sold | - | - | - | |||||||||
| Cost of Leasing & contracting | (1,832,486 | ) | (1,737,751 | ) | (94,734 | ) | ||||||
| Gross profit | 6,031,971 | 5,656,816 | 375,155 | |||||||||
| General and administrative expenses | -4,025,655 | -4,465,500 | 439,845 | |||||||||
| Net income from operations | 2,006,316 | 1,191,316 | 815,000 | |||||||||
| Other income (expenses) | ||||||||||||
| Government grant | - | |||||||||||
| Sharee of income from unconsolidated equity investee | -45,902,941 | -21,071,686 | -24,831,256 | |||||||||
| Impairment losses | -29,284,776 | -78,369,613 | 49,084,837 | |||||||||
| Interest expense | ||||||||||||
| Net income (expenses) | -75,187,717 | -99,441,298 | 24,253,581 | |||||||||
| Net income before income taxes | -73,181,401 | -98,249,982 | 25068581.02 | |||||||||
| Provision for income taxes | ||||||||||||
| Net income | (73,181,401 | ) | (98,249,982 | ) | 25,068,581 | |||||||
| Less: Net (income) loss attributable to non - controlling interest | (712,317 | ) | 5,651,472 | -6,363,789 | ||||||||
| Net income attributable to Sino Agro Food Inc. and subsidiaries | (73,893,718 | ) | (92,598,510 | ) | 18,704,792 | |||||||
| Other comprehensive income (loss) - Foreign currency translation gain (loss) | 2,914,559 | 4,625,468 | -1,710,909 | |||||||||
| Comprehensive income | (70,979,159 | ) | (87,973,042 | ) | 16,993,883 | |||||||
| Less: Other comprehensive (income) loss attributable to non - controlling interest | 481,362 | 654,754 | -173,392 | |||||||||
| Comprehensive income attributable to the Sino Agro Food, Inc. and subsidiaries | (70,497,797 | ) | $ | (87,318,288 | ) | 16,820,491 | ||||||
| Earnings per share attributable to the Sino Agro Food, Inc. and subsidiaries common stockholders: | ||||||||||||
| Basic | (1.23 | ) | $ | (1.57 | ) | 0.34 | ||||||
| Diluted | (1.23 | ) | $ | (1.57 | ) | 0.34 | ||||||
| Weighted average number of shares outstanding: | ||||||||||||
| Basic | 60,223,072 | 59,129,480 | 1,093,592 | |||||||||
| Diluted | 60,223,072 | 59,129,480 | 1,093,592 | |||||||||
4
Overall comparison of Q1-3 2021to Q1-3 2020
Note 1 and 2: The consolidated results of operation:
The Company’s revenues generated from the leasing & contracting activities were $7,864,457 for the period ended September 30, 2021 compared to $7,394,568 for the same period ended September 30,2020 representing a increase of 6% or $469,889 primarily due to gains in exchange rate of the RMB from the average of US$1=RMB6.99 in first half year of 2020 ended 30th September 2020 to US$6.47 as in the same period of 2021 ended 30 September 2021..
The Company’s cost of leasing and contracting activities were $1,832,486 for the period ended September 30, 2021 compared to $1,737,751 for the same period ended September 30,2020 due primarily for the gains in exchange rate of the RMB explained above. .
Gross profits of the Company generated from leasing and contracting activities were $6,031,971 for the period ended September 30, 2021compared to $5,656,816 for the same period ended September 30, 2020, representing an increase of 7% or $375,155.
The Company didn’t generate revenue neither from the sales of goods, the consulting and servicing nor from the corporate trading activities for the same period ended 30 September 2021 and 2020.
The Table below shows revenues, costs and gross profits generated from respective segmental operation referring to Note 1 and 2 above:
| Leasing & contracting | Revenues | Cost of revenues | Gross profits | References | |||||||||||||||||||||||||
| division of | 30.09.2021 | 30.09.2020 | 30.09.2021 | 30.09.2020 | 30.09.2021 | 30.09.2020 | Differences | to Notes | |||||||||||||||||||||
| JHST (the planation) | 2,024,944 | 1,814,589 | 1,382,426 | 1,307,694 | 642,518 | 506,895 | 65,417 | 1 | |||||||||||||||||||||
| HS.A (the fertilizer) | 4,281,688 | 4,091,391 | 4,281,688 | 4,091,391 | -75,366 | 1 | |||||||||||||||||||||||
| JHMC (MEIJI) (the cattle) | 1,557,825 | 1,488,588 | 450,060 | 430,058 | 1,107,764 | 1,058,531 | 3,228,580 | 1 | |||||||||||||||||||||
| 7,864,457 | 7,394,568 | 1,832,486 | 1,737,751 | 6,031,971 | 5,656,816 | 3,218,631 | 3 | ||||||||||||||||||||||
Note 4; the unconsolidated results from investees of the investment division;
For the 3 months ended 30 September 2021 netting a total loss of -$45,902,941 from the investees of the investment division compares to a total loss of -$21,071,686 for the 3 months period ended 30 September 2020。
Table（A）below shows the income data of SJAP (Investee 1):
| SJAP 3 months at 30.09.2021 | RMB | Equivalent in US$ | SIAF 45% share in US$ | |||||||||
| Revenues | 5,900,000 | 914,729 | ||||||||||
| Profit and (loss)(operation) | 930,000 | 144,186 | 64,884 | |||||||||
| Impairment losses | -49,250,000 | -7,635,659 | ||||||||||
| Net Income | -42,420,000 | -6,576,744 | -2,959,535 | |||||||||
| US$1=RMB6.45 | ||||||||||||
Table B below shows the income data of TWL (Investee 2).
| Triway for the 3months ended 30.09.2021 | HK$ | US$ | SIAF 36.6% | |||||||||
| Revenues | 1,622,093 | 209,302 | ||||||||||
| Operation Profit and (loss) | -47,161 | -6,085 | -2,227 | |||||||||
| Impairment losses | -910,895,695 | -117,534,928 | ||||||||||
| Net Income | -909,320,763 | -117,331,711 | -42,943,406 | |||||||||
| US$1=HK$7.73 | ||||||||||||
5
Table (C.) below shows the share of losses (incomes) of -US$45,902,941.00 from the unconsolidated investees for the 3 months ended 30th September 2021:
| Share of income from unconsolidated equity investee | US$ | |||
| Tri-way | -42,943,406 | |||
| SJAP | -2,959,535 | |||
| -45,902,941 | ||||
Table (D) below shows the interest in unconsolidated investees as at 30th September 2021
| September 30, 2021 | ||||
| Investments at cost | US$ | |||
| - TRW | 103,266,588 | |||
| - SJAP | 40,086,448 | |||
| Cattle farm 2 | 20,781,186 | |||
| Amount due from a consolidated equity investee | 21,511,994 | |||
| 185,646,216 | ||||
Note 5：Provision for impairment losses
The Company has made provision for bad debts being written off in amount of $49,084,837 thus reducing account receivable from -$78,369,613 as at 31.12.2020 to $29,284,776 as at 30 September 2021, the reason for the provision is due primarily to the continuing effects of the Covid-19 pandemic affecting operations of the down-stream businesses and associates of the Company that are suffering adverse consequences.
All provisional impairment losses of US$29,284,766.00 were written off from CA’s account receivables.
6
Note (3) : General and Administrative Expenses and Interest Expenses
General and administrative and interest expenses (including depreciation and amortization) decreased by $439,845 or -9.85% from $4,465,500 for Q1-3 2021 to $4,025,655 for Q1-3 2020. The decrease was primarily due to the overall decrease in corporate expenses.
| Category | 2021Q1-3 | 2020Q1-3 | Difference | |||||||||
| Office and corporate expenses | 99,486 | 154,567 | (55,082 | ) | ||||||||
| Wages and salaries | 611,503 | 894,629 | (283,126 | ) | ||||||||
| Traveling and related lodging | - | 10,733 | (10,733 | ) | ||||||||
| Motor vehicles expenses and local transportation | - | 4,103 | (4,103 | ) | ||||||||
| Entertainments and meals | - | - | - | |||||||||
| Others and miscellaneous | - | - | - | |||||||||
| Depreciation and amortization | 3,314,666 | 3,401,467 | (86,801 | ) | ||||||||
| Sub-total | 4,025,655 | 4,465,500 | -439,845 | |||||||||
| Interest expense | - | - | - | |||||||||
| Total | 4,025,655 | 4,465,500 | -439,845 | |||||||||
Note (5) to Table A 1 Non-controlling interests
Table (F) below shows the derivation of non-controlling interest
| Name of China subsidiaries | Jiangmen City Heng Sheng Tai Agriculture Development Co. Ltd.(China) | Jiangmen City Hang Mei Cattle Farm Development Co. Ltd.(China) | Hunan Shenghua A Power Agriculture Co., Limited (China) | Total | ||||||||||||
| Effective shareholding | 75 | % | 75 | % | 76 | % | ||||||||||
| Abbreviated names | (JHST | ) | (JHMC | ) | (HSA | ) | ||||||||||
| Net income (loss) of the P.R.C. subsidiaries for the year in $ | 458,747 | 897,988 | 1,554,724 | |||||||||||||
| % of profit sharing of non-controlling interest | 25 | % | 25 | % | 24 | % | ||||||||||
| Non-controlling interest’s shares of Net incomes in $ | 114,687 | 224,497 | 373,134 | 712,317 | ||||||||||||
The Net Income loss attributed to non-controlling interest is $712,317 shared by JHST, JHMC and HSA collectively for Q1-3 2021 as shown in Table (F) above.
Note (6) to Table A 1 Earnings per shares (EPS)
Earnings per share increased by0.34(basic) and 0.34(diluted) per share from EPS of -$1.57 (basic) and -$1.57 (diluted) for Q1-3 2020 to EPS of -$1.23 (basic) and $-$1.23 (diluted) for Q1-3 2021. The reason for the increase is primarily due to the net income attributed to the group increased by $18,704,792 from -$92,598,510 for the 9 months ended 30 September 2020 to -$73,893,718 for the 9 months ended 30 September 2021.
7
Part B. MD & A on Unaudited Consolidated Balance Sheet of Continued Operations for the nine months ended 30 September 2021 (Q3 2021) compared to the twelve months ended 31 December 2020 (fiscal year 2020)
| September 30, 2021 | December 31, 2020 | Changes | Notes | |||||||||||
| (Unaudited) | (Unaudited) | |||||||||||||
| ASSETS | ||||||||||||||
| Current assets | ||||||||||||||
| Cash and cash equivalents | $ | 271,743 | $ | 188,846 | 82,897 | 6 | ||||||||
| Inventories | - | - | - | 7 | ||||||||||
| Costs and estimated earnings in excess of billings on uncompleted contracts | - | - | - | |||||||||||
| Deposits and prepayments | 13,651,183 | 13,141,301 | 509,882 | 8 | ||||||||||
| Accounts receivable, net of allowance for doubtful accounts | 23,063,519 | 32,658,330 | -9,594,811 | 9 | ||||||||||
| Other receivables | 73,300,467 | 82,083,392 | -8,782,925 | |||||||||||
| Total current assets | 110,286,912 | 128,071,869 | -17,784,957 | |||||||||||
| Non-current assets | - | |||||||||||||
| Plant and equipment, net of accumulated depreciation | 95,083,386 | 97,879,543 | -2,796,157 | 10 | ||||||||||
| Construction in progress | - | |||||||||||||
| Land use rights, net of accumulated amortization | 51,967,143 | 52,482,217 | -515,074 | 11 | ||||||||||
| Total non-current assets | 147,050,529 | 150,361,760 | -3,311,231 | |||||||||||
| Other assets | - | |||||||||||||
| Goodwill | 724,940 | 724,940 | - | |||||||||||
| Proprietary technologies, net of accumulated amortization | 6,338,275 | 6,562,933 | -224,658 | |||||||||||
| Interest in unconsolidated investees | 185,646,216 | 232,100,046 | -46,453,830 | 12 | ||||||||||
| Total other assets | 192,709,431 | 239,387,919 | -46,678,488 | |||||||||||
| - | ||||||||||||||
| Total assets | $ | 450,046,872 | $ | 517,821,549 | -67,774,677 | |||||||||
| - | ||||||||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | - | |||||||||||||
| - | ||||||||||||||
| Current liabilities | - | |||||||||||||
| Accounts payable and accrued expenses | $ | 3,274,135 | $ | 2,665,150 | 608,985 | 13 | ||||||||
| Billings in excess of costs and estimated earnings on uncompleted contracts | - | - | - | |||||||||||
| Due to directors | 2,099,763 | 1,985,040 | 114,723 | |||||||||||
| Other payables | 38,252,484 | 36,542,468 | 1,710,016 | |||||||||||
| Borrowings - Short term bank loan | - | |||||||||||||
| Derivative liability | - | |||||||||||||
| Convertible note payable | - | |||||||||||||
| 43,626,382 | 41,192,658 | 2,433,724 | ||||||||||||
| - | ||||||||||||||
| Non-current liabilities | - | |||||||||||||
| Other payables | - | - | - | |||||||||||
| Borrowings - Long term debts and bank loan | - | |||||||||||||
| - | - | - | ||||||||||||
| - | ||||||||||||||
| Stockholders’ equity | - | |||||||||||||
| Common stock: = $0.001 par value (60,352,942 and 59,963,332 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively) | 60,353 | 59,963 | 390 | |||||||||||
| Additional paid - in capital | 135,722,286 | 135,664,235 | 58,051 | |||||||||||
| Retained earnings | 242,514,672 | 316,408,390 | -73,893,718 | |||||||||||
| Accumulated other comprehensive income | -51,601,624 | -54,997,545 | 3,395,921 | |||||||||||
| Treasury stock | -1,250,000 | -1,250,000 | - | |||||||||||
| Total Sino Agro Food, Inc. and subsidiaries stockholders’ equity | 325,445,687 | 395,885,043 | -70,439,356 | |||||||||||
| Non - controlling interest | 80,974,803 | 80,743,848 | 230,955 | |||||||||||
| Total stockholders’ equity | 406,420,490 | 476,628,891 | -70,208,401 | |||||||||||
| Total liabilities and stockholders’ equity | $ | 450,046,872 | $ | 517,821,549 | -67,774,677 | |||||||||
8
Note (6) Cash and Cash Equivalents
The change in cash and cash equivalent was $89,897 when comparing cash and cash equivalent of $271,743 and $188,846 as at September 30,2021 and December 31, 2020, respectively.
Note (7) Inventories
There was no inventory recorded as at ended September 30,2021 and 2020 respectively.
Note (9) Breakdown of Accounts receivable:
| As at 30.09.2021 | ||||||||||||||||||||||||
| Accounts | over 120 days and less than | |||||||||||||||||||||||
| receivable | 0-30 days | 31-90 days | 91-120 days | 1 year | Over 1 year | |||||||||||||||||||
| $ | ||||||||||||||||||||||||
| Engineering consulting service (CA) | ||||||||||||||||||||||||
| Sales of imported seafood (SIAF) | ||||||||||||||||||||||||
| Sales of Cattle and Beef Meats (MEIJI) | ||||||||||||||||||||||||
| Sales of HU Flowers (Fresh & Dried) (JHST) | 6,068,649 | 2,024,943 | 4,043,706 | |||||||||||||||||||||
| Sales of Cattle and Beef Meats (JHMC) | 5,515,603 | 1,557,825 | 3,957,778 | |||||||||||||||||||||
| Sales Fertilizer from (HSA) | 11,479,267 | 4,281,688 | 7,197,579 | |||||||||||||||||||||
| Total | 23,063,519 | 2,024,943 | 5,839,513 | 11,241,285 | 3,957,778 | - | ||||||||||||||||||
Information on Concentration of credit risk of revenue:
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 December 31, 2020 and September 30, 2021 amounted to $188,846 and $173,738, respectively, none of which is covered by insurance. The Company has not experienced any losses in such accounts and believes it is not exposed to any risks to its cash in bank accounts.
The Company had 5 major customers (A, B, C, D and E) whose business individually represented the following percentages of the Company’s total revenue for the period indicated:
| 30.09.2021 | 30.09.2020 | |||||||
| Customer A | 54.44 | % | 35.54 | % | ||||
| Customer B | 25.75 | % | 24.32 | % | ||||
| Customer C | 19.81 | % | 14.28 | % | ||||
| Customer D | 8.17 | % | ||||||
| Customer E | 2.74 | % | ||||||
| 100 | % | 85.05 | % | |||||
9
| Percentage of revenue | Amount | |||||||||
| Customer A | Organic fertilizer and Bread Grass Division | 53.22 | % | $ | 2,790,309 | |||||
| Customer B | Cattle Farm Development and HU Plantation Division | 28.71 | % | $ | 1,505,258 | |||||
| Customer C | Corporate Division | 18.07 | % | $ | 947,404 | |||||
| Percentage of revenue | Amount | |||||||||
| Customer A | Organic fertilizer and Bread Grass Division | 54.44 | % | $ | 4,281,410 | |||||
| Customer B | Cattle Farm Development and HU Plantation Division | 25.75 | % | $ | 2,025,098 | |||||
| Customer C | Corporate Division | 19.81 | % | $ | 1,557,949 | |||||
Accounts receivable are derived from revenue earned from customers located primarily in the P.R.C. The Company performs ongoing credit evaluations of customers and has not experienced any material losses to date.
The Company had 5 major customers whose accounts receivable balance individually represented the following percentages of the Company’s total accounts receivable:
| September 30, 2021 | December 31, 2020 | |||||||
| Customer A | 41.76 | % | 44.89 | % | ||||
| Customer B | 18.96 | % | 24.45 | % | ||||
| Customer C | 11.43 | % | 14.66 | % | ||||
| Customer D | 10.69 | % | 10.56 | % | ||||
| Customer E | 0.02 | % | ||||||
| Customer F | % | |||||||
| 82.84 | % | 99.63 | % | |||||
As of September 30, 2021, amounts due from customers A, B and C are $9,631,326, $4,372,843 and $2,636,160 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.
Note (10) Property and equipment, net of accumulated depreciation
| 30-Sep-21 | ||||
| (Unaudited) | ||||
| Plant and machinery | $ | 10,929,999 | ||
| Structure and leasehold improvements | 94,798,462 | |||
| Mature seeds and herbage cultivation | 19,089,306 | |||
| Furniture and equipment | 3,607,007 | |||
| Motor vehicles | 3,590,612 | |||
| 132,015,386 | ||||
| Less: Accumulated depreciation | 36,932,000 | |||
| Net carrying amount | $ | 95,083,386 | ||
10
Note (11) Land Use Rights, net of accumulated amortization
| Item | Owner | Location | Acres | Date Acquired | Tenure | Expiry dates | Cost
$ | Monthly amortization $ | 2021.9.30
Balance $ | Nature of ownership | Nature of project | |||||||||||||||||||||||
| Hunan lot 1 | HS.A | Ouchi Village, Fenghuo Town, Linli County | 31.92 | 4-5-2011 | 43 | 4-4-2054 | 242,703 | 470 | 183,438 | Lease | Fertilizer production | |||||||||||||||||||||||
| Hunan lot 2 | HS.A | Ouchi Village, Fenghuo Town, Linli County | 247.05 | 7-1-2011 | 60 | 6-30-2071 | 36,666,141 | 50,925 | 30,402,342 | Management Right | Pasture growing | |||||||||||||||||||||||
| Hunan lot 3 | HS.A | Ouchi Village, Fenghuo Town, Linli County | 8.24 | 5-24-2011 | 40 | 5-23-2051 | 378,489 | 789 | 279,924 | Land Use Rights | Fertilizer production | |||||||||||||||||||||||
| Hunan lot 4 | HS.A | Ouchi Village, Fenghuo Town, Linli County | 24.71 | 6-1-2018 | 50 | 5-31-2068 | 3,021,148 | 5,035 | 2,819,738 | Lease | Pasture growing | |||||||||||||||||||||||
| Guangdong lot 1 | JHST | Yane Village, Liangxi Town, Enping City | 8.23 | 8-10-2007 | 60 | 8-9-2067 | 1,064,501 | 1,478 | 813,160 | Management Right | HU Plantation | |||||||||||||||||||||||
| Guangdong lot 2 | JHST | Nandu Village of Yane Village, Liangxi Town, Enping City | 27.78 | 3-14-2007 | 60 | 3-13-2067 | 1,037,273 | 1,441 | 785,158 | Management Right | HU Plantation | |||||||||||||||||||||||
| Guangdong lot 3 | JHST | Nandu Village of Yane Village, Liangxi Town, Enping City | 60.72 | 3-14-2007 | 60 | 3-13-2067 | 2,267,363 | 3,149 | 1,716,268 | Management Right | HU Plantation | |||||||||||||||||||||||
| Guangdong lot 4 | JHST | Nandu Village of Yane Village, Liangxi Town, Enping City | 54.68 | 9-12-2007 | 60 | 9-11-2067 | 2,041,949 | 2,836 | 1,562,658 | Management Right | HU Plantation | |||||||||||||||||||||||
| Guangdong lot 5 | JHST | Jishilu Village of Dawan Village, Juntang Town, Enping City | 28.82 | 9-12-2007 | 60 | 9-11-2067 | 960,416 | 1,334 | 734,985 | Management Right | HU Plantation | |||||||||||||||||||||||
| Guangdong lot 6 | JHST | Liankai Village of Niujiang Town, Enping City | 31.84 | 1-1-2008 | 60 | 12-31-2068 | 821,445 | 1,141 | 633,197 | Management Right | Fish Farm | |||||||||||||||||||||||
| Guangdong lot 7 | JHST | Nandu Village of Yane Village, Liangxi Town, Enping City | 41.18 | 1-1-2011 | 26 | 12-31-2037 | 5,716,764 | 18,323 | 3,353,102 | Management Right | HU Plantation | |||||||||||||||||||||||
| Guangdong lot 8 | JHST | Shangchong Village of Yane Village, Liangxi Town, Enping City | 11.28 | 1-1-2011 | 26 | 12-31-2037 | 1,566,393 | 5,020 | 918,750 | Management Right | HU Plantation | |||||||||||||||||||||||
| Guangdong lot 9 | MEIJI | Xiaoban Village of Yane Village, Liangxi Town, Enping City | 41.18 | 4-1-2011 | 20 | 3-31-2031 | 5,082,136 | 21,176 | 2,414,015 | Management Right | Cattle Farm | |||||||||||||||||||||||
| Qinghai lot 1 | SJAP | No. 498, Bei Da Road, Chengguan Town of Huangyuan County,Xining City, Qinghai Province | 21.09 | 11-1-2011 | 40 | 10-30-2051 | 527,234 | 1,098 | 396,524 | Land Use Right & Building ownership | Cattle farm, fertilizer and livestock feed production | |||||||||||||||||||||||
| Guangdong lot 10 | JHST | Niu Jiang Town, Liangxi Town, Enping City | 6.27 | 3-4-2013 | 10 | 3-3-2023 | 489,904 | 4,083 | 69,403 | Management Right | Processing factory | |||||||||||||||||||||||
| Guangdong lot 11 | CA | Da San Dui Wei, You Nan Village, Conghua District of Guangzhou City | 33.28 | 10-28-2014 | 30 | 10-27-2044 | 4,453,665 | 12,371 | 3,414,477 | Management Right | Agriculture | |||||||||||||||||||||||
| JHST | Land improvement cost incurred | 12-1-2013 | 3,914,275 | 6,155 | 3,335,750 | Management Right | HU Plantation | |||||||||||||||||||||||||||
| Exchange difference | 1,901,819 | -1,865,747.00 | ||||||||||||||||||||||||||||||||
| 678 | 72,153,620 | 136,824 | 51,967,143 | |||||||||||||||||||||||||||||||
11
Note (12) Investment in unconsolidated equity investee
| September 30, 2021 | ||||
| Investments at cost | ||||
| - TRW | $ | 103,266,588 | ||
| - SJAP | 40,086,448 | |||
| Cattle farm 2 | 20,781,186 | |||
| Amount due from a consolidated equity investee | 21,511,994 | |||
| 185,646,216 | ||||
Note (13) Current Liabilities:
| September 30, 2021 | ||||
| Accounts payable and accrued expenses | 3,274,135 | |||
| Due to a director | 2,099,763 | |||
| Other payables | 38,252,484 | |||
| 43,626,382 | ||||
Note (14) Non-current liabilities
There was no outstanding other payments recorded as at 30.09.2021 and 31.12.2020.
Income Taxes
The Company accounts for income taxes under the provisions of ASC Topic 740 “Accounting for Income Taxes.” Under ASC Topic 740, deferred tax assets and liabilities are determined based on the difference between the financial statement carrying amounts and the tax bases of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse.
The provision for income tax is based on the results for the year as adjusted for items, which are non-assessable or disallowed. It is calculated using tax rates that have been enacted or substantively enacted at the balance sheet date. Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax basis used in the computation of assessable tax profit. In principle, deferred tax liabilities are recognized for all taxable temporary differences, and deferred tax assets are recognized to the extent that it is probable that taxable profit will be available against which deductible temporary differences can be utilized.
Deferred income taxes are calculated at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled. Deferred tax is charged or credited in the income statement, except when it related to items credited or charged directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis.
ASC Topic 740 also prescribes a more-likely-than-not threshold for financial statement recognition and measurement of a tax position taken, or for one expected to be taken, in a tax return. ASC Topic 740 also provides guidance related to, among other things, classification, accounting for interest and penalties associated with tax positions, and disclosure requirements. Any interest and penalties accrued related to unrecognized tax benefits will be recorded as tax expense
Off Balance Sheet Arrangements:
None.
12
Liquidity and Capital Resources
As of September 30 2021, unrestricted cash and cash equivalents amounted to $271,743 (see notes to the consolidated financial statements), and our working capital as of September 30, 2021 was $66,660,530.
| Contractual Obligations | Less than 1 year | 1-3 years | 3-5 years | More than 5 years | Total | |||||||||||||||
| Short Term Bank Loan | ||||||||||||||||||||
| Long Term Debts | 28,898,111 | 28,898,111 | ||||||||||||||||||
| Promissory Notes | ||||||||||||||||||||
Cash provided by operating activities amounted to $3,381,734 for Q1-3 2021. This compares with cash provided by operating activities totaling $1,269,940 for Q1-3 2020. The increase in cash flows from operations primarily resulted from the increase in deposits and prepaid expenses to $(10,058,643) for Q1-3 2021 from $(2,867,603) for Q1-3 2020.
Cash used in investing activities totaled $0for Q1-3 2020. This compares with cash used in investing activities totaling $0for Q1-3 2020.
Cash used in financing activities totaled $0 for Q1-3 2021. This compares with cash from financing activities totaling $0 for Q1-3 2020.
Part C. MD & A on Unaudited Consolidated cash flow statements of Continued Operations for the nine months ended 30 September 2021 (Q3 2021) compared to the nine months ended 30 September 2020.
| 2021Q1-3 | 2020Q1-3 | |||||||
| Cash flows from operating activities | ||||||||
| Net income (loss) for the year | $ | (73,181,401 | ) | (98,249,982 | ) | |||
| Adjustments to reconcile net income for the year to net cash from operations: | ||||||||
| Depreciation | 9,238,958 | 8,777,010 | ||||||
| Amortization | 5,239,285 | 4,924,928 | ||||||
| Gain on deemed disposal of subsidiaries | ||||||||
| Impairment losses | 29,284,776 | 78,369,613 | ||||||
| Share of unconsolidated equity investee | 45,902,941 | 21,071,686 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Decrease in inventories | - | - | ||||||
| (Increase) decrease in cost and estimated earnings in excess of billings on uncompleted contacts | - | - | ||||||
| Increase in deposits and prepaid expenses | (10,058,643 | ) | (2,867,603 | ) | ||||
| (Decrease) increase in due to a director | 114,723 | |||||||
| Increase/(decrease) in accounts payable and accrued expenses | 608,985 | 7,399,051 | ||||||
| Increase in other payables | 1,710,016 | 3,875,974 | ||||||
| Decrease (increase) in accounts receivable | (14,260,831 | ) | (3,071,560 | ) | ||||
| (Decrease) increase in tax payable | ||||||||
| Increase (decrease) in billings in excess of costs and estimated earnings on uncompleted contracts | ||||||||
| Decrease in other receivables | 8,782,925 | (18,959,177 | ) | |||||
| Net cash provided by operating activities | 3,381,734 | 1,269,940 | ||||||
| Cash flows from investing activities | ||||||||
| Acquisition of plant, property and equipment | - | |||||||
| Payment for construction in progress | - | |||||||
| Proceed from disposal of a long term investee | ||||||||
| Proceed from disposal of plant, property and equipment | - | |||||||
| Net cash used in investing activities | - | |||||||
| Cash flows from financing activities | ||||||||
| -Proceeds from convertible bond payable | - | |||||||
| Capital contribution from non-controlEng interest | - | |||||||
| Proceeds from short term debts | ||||||||
| Long term debts repaid | - | |||||||
| Short term bank loan repaid | ||||||||
| Net cash provided by financing activities | - | |||||||
| Effects on exchange rate changes on cash | (3,298,837 | ) | (1,251,257 | ) | ||||
| (Decrease)/increase in cash and cash equivalents | 82,897 | 18,683 | ||||||
| Cash and cash equivalents, beginning of year | 188,846 | 185,895 | ||||||
| Cash and cash equivalents, end of year | $ | 271,743 | 204,578 | |||||
| Non - cash transactions | ||||||||
| Impairment losses from account receivable | 29,284,776 | 55,799,164 | ||||||
| Impairment losses from other receivable | - | 22,570,449 | ||||||
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| 3. | CRITICAL ACCOUNTING POLICIES |
BASIS OF PRESENTATION
The audited consolidated financial statements for the twelve months ended December 31, 2019 are prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”).
BASIS OF CONSOLIDATION
The consolidated financial statements include the financial statements of SIAF, its subsidiaries Capital Award, CS, CH, TRW, MEIJI, JHST, JFD, JHMC, HSA, APWAM, SAFS and its variable interest entities SJAP and QZH. All material inter-company transactions and balances have been eliminated in consolidation. The results of companies acquired or disposed of during the year are included in the consolidated Financial Statements from the effective date of acquisition.
BUSINESS COMBINATIONS
The Company adopted the accounting pronouncements relating to business combinations (primarily contained in ASC Topic 805 “Business Combinations”), including assets acquired and liabilities assumed arising from contingencies. These pronouncements established principles and requirements for how the acquirer of a business recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any non-controlling interest in the acquire as well as provides guidance for recognizing and measuring the goodwill acquired in the business combination and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. In addition, these pronouncements eliminate the distinction between contractual and non-contractual contingencies, including the initial recognition and measurement criteria and require an acquirer to develop a systematic and rational basis for subsequently measuring and accounting for acquired contingencies depending on their nature. Our adoption of these pronouncements will have an impact on the manner in which we account for any future acquisitions.
NON - CONTROLLING INTEREST IN CONSOLIDATED FINANCIAL STATEMENTS
The Company adopted the accounting pronouncement on non-controlling interests in consolidated financial statements, which establishes accounting and reporting standards for the non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary. This guidance is primarily contained in ASC Topic “Consolidation”. It clarifies that a non-controlling interest in a subsidiary is an ownership interest in the consolidated financial statements. The adoption of this standard has not had material impact on our consolidated financial statements.
USE OF ESTIMATES
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make assumptions and estimates that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods covered thereby. Actual results could differ from these estimates. Judgments and estimates of uncertainties are required in applying the Company’s accounting policies in certain areas. The following are some of the areas requiring significant judgments and estimates: determinations of the useful lives of assets, estimates of allowances for doubtful accounts, cash flow and valuation assumptions in performing asset impairment tests of long-lived assets, estimates of the reliability of deferred tax assets and inventory reserves.
REVENUE RECOGNITION
The Company’s revenue recognition policies are in compliance with ASC 605. Sales revenue is recognized when all of the following have occurred: (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred or services have been rendered, (iii) the price is fixed or determinable, and (iv) the ability to collect is reasonably assured. These criteria are generally satisfied at the time of shipment when risk of loss and title passes to the customer. Service revenue is recognized when services have been rendered to a buyer by reference to the stage of completion. License fee income is recognized on the accrual basis in accordance with the underlying agreements.
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Government grants are recognized upon (i) the Company has substantially accomplished what we must be done pursuant to the terms of the policies and terms of the grant that are established by the local government; and (ii) the Company receives notification from the local government that the Company has satisfied all of the requirements to receive the government grants; and or (iii) the amounts are received.
Multiple-Element Arrangements
To qualify as a separate unit of accounting under ASC 605-25“Multiple Element Arrangements”, the delivered item must have value to the customer on a standalone basis. The significant deliverables under the Company’s multiple-element arrangements are consulting and service under development contract, commission and management service.
Revenues from the Company’s fishery development services contract are performed under fixed-price contracts. Revenues under long-term contracts are accounted for under the percentage-of-completion method of accounting in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 605, Revenue Recognition (“ASC 605”). Under the percentage-of-completion method, the Company estimates profit as the difference between total estimated revenue and total estimated cost of a contract and recognized that profit over the contract term. The percentage of costs incurred determines the amount of revenue to be recognized. Payment terms are generally defined by the installation contract and as a result may not match the timing of the costs incurred by the Company and the related recognition of revenue. Such differences are recorded as either costs or estimated earnings in excess of billings on uncompleted contracts or billings in excess of costs and estimated earnings on uncompleted contracts.
The Company determines a customer’s credit worthiness at the time an order is accepted. Sudden and unexpected changes in a customer’s financial condition could put recoverability at risk.
The percentage of completion method requires the ability to estimate several factors, including the ability of the customer to meet its obligations under the contract, including the payment of amounts when due. If the Company determines that collectability is not assured, we will defer revenue recognition and use methods of accounting for the contract such as the completed contract method until such time as the Company determines that collectability is reasonably assured or through the completion of the project.
For fixed-price contracts, the Company uses the ratio of costs incurred to date on the contract (excluding uninstalled direct materials) to management’s estimate of the contract’s total costs, to determine the percentage of completion on each contract. This method is used as management considers expended costs to be the best available measure of progression of these contracts. Contract costs included all direct material, subcontract and labor costs and those indirect costs related to contract performance, such as supplies, tool repairs and depreciation. The Company accounts for maintenance and repair services under the guidance of ASC 605 as the services provided relate to construction work. Contract costs incurred to date and expected total contract costs are continuously monitored during the term of the contract. Changes in job performance, job conditions, and estimated profitability arising from contract penalty, change orders and final contract settlements may result in revisions to the estimated profitability during the contract. These changes, which include contracts with estimated costs in excess of estimated revenues, are recognized as contract costs in the period in which the revisions are determined. Profit incentives are included in revenues when their realization is reasonably assured. At the point the Company anticipates a loss on a contract, the Company estimates the ultimate loss through completion and recognizes that loss in the period in which the possible loss was identified.
The Company does not provide warranties to customers on a basis customary to the industry; however, the customers can claim warranty directly from product manufacturers for defects in equipment or products. Historically, the Company has experienced no warranty claims.
The Company’s fishery development consultancy services revenues are recognized when the relevant services are rendered, and are subject to a Chinese business tax at a rate of 0% of the gross fishery development contract service income approved by the Chinese local government.
| 4. | COST OF GOODS SOLD AND SERVICES |
Cost of goods sold consists primarily of direct purchase cost of merchandise goods, and related levies. Cost of services consists primarily of direct cost and indirect cost incurred to date for development contracts and provision for anticipated losses on development contracts.
SHIPPING AND HANDLING
Shipping and handling costs related to cost of goods sold are included in general and administrative expenses, which totaled $0 and $0 for the nine months ended September 30, 2021 and 2020, respectively.
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ADVERTISING
Advertising costs are included in general and administrative expenses, which totaled $0, and $0 for the nine months ended September 30, 2021 and 2020, respectively.
RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses are included in general and administrative expenses, which totaled $0 and $0 for the nine months ended September 30, 2021 and 2020, respectively.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid securities with original maturities of three months or less when acquired to be cash equivalents. Cash and cash equivalents kept with financial institutions in the People’s Republic of China (“PRC”) are not insured or otherwise protected. Should any of those institutions holding the Company’s cash become insolvent, or the Company is unable to withdraw funds for any reason, the Company could lose the cash on deposit on that institution.
ACCOUNTS RECEIVABLE
The Company maintains reserves for potential credit losses on accounts receivable. Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves. Terms of the sales vary. Reserves are recorded primarily on a specific identification basis.
The standard credit period of the Company’s most of customers is three months. Any amount that has an extended settlement date of over one year is classified as a long term receivable. Management evaluates the collectability of the receivables at least quarterly.
INVENTORIES
Inventories are valued at the lower of cost (determined on a weighted average basis) and net realizable value. Costs incurred in bringing each product to its location and conditions are accounted for as follows:
| ● | raw materials - purchase cost on a weighted average basis; |
| ● | manufactured finished goods and work-in-progress - cost of direct materials and labor and a proportion of manufacturing overhead based on normal operation capacity but excluding borrowing costs; and |
| ● | retail and wholesale merchandise finished goods - purchase cost on a weighted average basis. |
Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost less accumulated depreciation and any accumulated impairment losses. Such costs include the cost of replacing parts that are eligible for capitalization when the cost of replacing the parts is incurred. The assets’ residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at the end of each year.
Depreciation is calculated on a straight-line basis over the estimated useful life of the assets.
| Milk cows | 10 years | |
| Plant and machinery | 5 - 10 years | |
| Structure and leasehold improvements | 10 - 30 years | |
| Mature seed and herbage cultivation | 20 years | |
| Furniture, fixtures and equipment | 2.5 - 10 years | |
| Motor vehicles | 4 - 10 years |
An item of property and equipment is removed from the accounts upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on disposal of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the item) is included in the consolidated statements of income in the period the item is disposed.
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GOODWILL
Goodwill is an asset representing the fair economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized. Goodwill is tested for impairment on an annual basis at the end of the company’s fiscal year, or when impairment indicators arise. The Company uses a fair-value-based approach to test for impairment at the level of each reporting unit. The Company directly acquired MEIJI, which is engaged in Hu Plantation. As a result of this acquisition, the Company recorded goodwill in the amount of $724,940. This goodwill represents the fair value of the assets acquired in these acquisitions over the cost of the assets acquired.
PROPRIETARY TECHNOLOGIES
The Company has determined that technological feasibility is established at the time a working model of products is completed. Master license of stock feed manufacturing technology was acquired and the costs of acquisition were capitalized as proprietary technologies when technological feasibility had been established. Proprietary technologies are intangible assets of finite lives. Proprietary technologies are amortized using the straight-line method over their estimated lives of 25 years.
An aromatic cattle-feeding formula was acquired and the costs of acquisition are capitalized as proprietary technologies when technological feasibility has been established. Cost of acquisition on aromatic cattle-feeding formula is amortized using the straight-line method over its estimated life of 20 years.
The cost of sleepy cod breeding technology license is capitalized as proprietary technologies when technological feasibility has been established. Cost of granting sleepy cod breeding technology license is amortized using the straight-line method over its entitled life of 25 years.
Bacterial cellulose technology license and related trademark are capitalized as proprietary technologies when technological feasibility has been established. Cost of license and related trademark is amortized using the straight-line method over its estimated life of 20 years.
Management evaluates the recoverability of proprietary technologies on an annual basis of the end of the company’s fiscal year, or when impairment indicators arise. As required by ASC Topic 350 “Intangible - Goodwill and Other”, the Company uses a fair-value-based approach to test for impairment.
CONSTRUCTION IN PROGRESS
Construction in progress represents direct costs of construction as well as acquisition and design fees incurred. Capitalization of these costs ceases and the construction in progress is transferred to property and equipment when substantially all the activities necessary to prepare the assets for their intended use are completed. No depreciation is provided until construction is completed and the asset is ready for its intended use.
LAND USE RIGHTS
Land use rights represent acquisition of land use right rights of agriculture land from farmers and are amortized on the straight line basis over the respective lease periods. The lease period of agriculture land is in the range from 10 years to 60 years. Land use rights purchase prices were determined in accordance with the PRC Government’s minimum lease payments of agriculture land and mutually agreed between the company and the vendors. No independent professional appraiser performed a valuation of land use rights at the balance sheet dates.
CORPORATE JOINT VENTURE
A corporation formed, owned, and operated by two or more businesses (ventures) as a separate and discrete business or project (venture) for their mutual benefit is considered to be a corporate joint venture. Investee entities, in which the company can exercise significant influence, but not control, are accounted for under the equity method of accounting. Under the equity method of accounting, the company’s share of the earnings or losses of these companies is included in net income.
A loss in value of an investment that is other than a temporary decline is recognized as a charge to operations. Evidence of a loss in value might include, but would not necessarily be limited to absence of an ability to recover the carrying amount of the investment or inability of the investee to sustain an earnings capacity that would justify the carrying amount of the investment.
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VARIABLE INTEREST ENTITY
An entity (investee) in which the investor has obtained less than a majority-owned interest, according to the Financial Accounting Standards Board (FASB). A variable interest entity (VIE) is subject to consolidation if a VIE is an entity meeting one of the following three criteria as elaborated in ASC Topic 810-10, Consolidation.
| (a) | the equity-at-risk is not sufficient to support the entity’s activities; |
| (b) | as a group, the equity-at-risk holders cannot control the entity; or |
| (c) | the economics do not coincide with the voting interests. |
If a firm is the primary beneficiary of a VIE, the holdings must be disclosed on the balance sheet. The primary beneficiary is defined as the person or company with the majority of variable interests.
TREASURY STOCK
Treasury stock consists of a Company’s own stock which has been issued, but is subsequently reacquired by the Company. Treasury stock does not reduce the number of shares issued but does reduce the number of shares outstanding. These shares are not eligible to receive cash dividends. Accounting for excesses and deficiencies on treasury stock transactions is governed by ASC 505-30-30.
State laws and federal agencies closely regulate transactions involving a company’s own capital stock, so the purchase of outstanding shares and converting them into treasury shares must have a legitimate purpose. Some of the most common reasons for purchasing outstanding shares are as follows:
| (i) | to meet additional stock needs for various reasons, including newly implemented stock option plans, the issuance stock for convertible bonds or convertible preferred stock, or a stock dividend; |
| (ii) | to eliminate the ownerships interests of a stockholder; |
| (iii) | to increase the market price of the stock that returns capital to shareholders; and |
| (iv) | to potentially increase earnings per share of the stock by decreasing the shares outstanding on the same earnings. |
The Company has adopted the cost method of accounting for treasury stock shares. The purchase of outstanding shares is treated as a temporary reduction in shareholders’ equity in view of the expectation to reissue the shares instead of retiring them. When the Company reissues the treasury shares, the temporary account is eliminated. The cost of treasury stock shares reacquired is charged to a contra account, in this case a contra equity account that reduces the stockholder equity balance.
INCOME TAXES
The Company accounts for income taxes under the provisions of ASC 740 “Accounting for Income Taxes.” Under ASC 740, deferred tax assets and liabilities are determined based on the difference between the financial statement carrying amounts and the tax bases of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse.
The provision for income tax is based on the results for the year as adjusted for items, which are non-assessable or disallowed. It is calculated using tax rates that have been enacted or substantively enacted at the balance sheet date. Deferred taxes area accounted for using the balance sheet liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax basis used in the computation of assessable tax profit. In principle, deferred tax liabilities are recognized for all taxable temporary differences, and deferred tax assets are recognized to the extent that it is probable that taxable profit will be available against which deductible temporary differences can be utilized.
Deferred income taxes are calculated at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled. Deferred tax is charged or credited in the income statement, except when it relates to items credited or charged directly to equity, in which case the deferred tax is also adjusted in the equity accounts. Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis. ASC 740 also prescribes a more-likely-than-not threshold for financial statement recognition and measurement of a tax position taken, or expected to be taken, in a tax return. ASC 740 also provides guidance related to, among other things, classification, accounting for interest and penalties associated with tax positions, and disclosure requirements. Any interest and penalties accrued related to unrecognized tax benefits will be recorded in tax expense.
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| 5. | POLITICAL AND BUSINESS RISK |
The Company’s operations are carried out in the PRC Accordingly, the Company’s business, financial condition and results of operations may be influenced by the political, economic and legal environment in the PRC, and by the general state of the PRC’s economy. The Company’s operations in the PRC are subject to specific considerations and significant risks not typically associated with companies in North America and Western Europe. The Company’s results may be adversely affected by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things.
IMPAIRMENT OF LONG-LIVED ASSETS AND INTANGIBLE ASSETS
In accordance with ASC 360, “Property, Plant and Equipment”, long-lived assets to be held and used are analyzed for impairment whenever events or changes in circumstances indicate that the related carrying amounts may not be recoverable. The Company reviews the carrying amount of its long-lived assets, including intangibles, for impairment, at the end of each fiscal year. An asset is considered impaired when estimated future cash flows are less than the carrying amount of the asset. In the event the carrying amount of such asset is considered not recoverable, the asset is adjusted to its fair value. Fair value is generally determined based on discounted future cash flow.
EARNINGS PER SHARE
As prescribed in ASC Topic 260 “Earning per Share,” Basic Earnings per Share (“EPS”) is computed by dividing net income available to common stockholders by the weighted average number of common stock shares outstanding during the year. Diluted EPS is computed by dividing net income available to common stockholders by the weighted-average number of common stock shares outstanding during the year plus potential dilutive instruments such as stock options and warrants. The effect of stock options on diluted EPS is determined through the application of the treasury stock method, whereby proceeds received by the Company based on assumed exercises are hypothetically used to repurchase the Company’s common stock at the average market price during the period.
For the nine months ended September 30, 2021 and 2020, basic (loss)/earnings per share attributable to Sino Agro Food, Inc. and subsidiaries common stockholders amounted to $(1.23) and $(1.58), respectively. For the nine months ended September 30, 2021 and 2020, diluted (loss)/earnings per share attributable to Sino Agro Food, Inc. and its subsidiaries’ common stockholders amounted to $(1.23) and $(1.58), respectively.
FOREIGN CURRENCY TRANSLATION
The reporting currency of the Company is the U.S. dollars. The functional currency of the Company is the Chinese Rimini (RMB). For those entities whose functional currency is other than the U.S. dollars, all assets and liabilities are translated into U.S. dollars at the exchange rate on the balance sheet date; shareholder equity is translated at historical rates and items in the statements of income and of cash flows are translated at the average rate for the period.
Because cash flows are translated based on the weighted average translation rate, amounts related to assets and liabilities reported in the statements of cash flows will not necessarily agree with changes in the corresponding balances in the balance sheets. Translation adjustments resulting from this process are included in accumulated other comprehensive income in the consolidated statements of equity.
For the nine months ended September 30, 2021
Translation gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the statements of income and comprehensive income as incurred. The balance sheet amounts with the exception of equity as of September 30, 2021 and December 31, 2020 were translated at RMB6.49 to $1.00 and RMB6.52 to $1.00, respectively. The average translation rates applied to the consolidated statements of income and comprehensive income and of cash flows f for the nine months ended September 30, 2021 and 2020 were RMB6.47 to $1.00 and RMB6.99 to $1.00, respectively.
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For the nine months ended September 30, 2020
Translation gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the statements of income and comprehensive income as incurred. The balance sheet amounts with the exception of equity as of September 30, 2020 and December 31, 2019 were translated at RMB6.81 to $1.00 and RMB6.98 to $1.00, respectively. The average translation rates applied to the consolidated statements of income and comprehensive income and of cash flows for the nine months ended September 30, 2020 and 2019 were RMB6.99 to $1.00 and RMB6.85 to $1.00, respectively.
ACCUMULATED OTHER COMPREHENSIVE INCOME
ASC Topic 220 “Comprehensive Income” establishes standards for reporting and displaying comprehensive income and its components in financial statements. Comprehensive income is defined as the change in stockholders’ equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. The comprehensive income for all periods presented includes both the reported net income and net change in cumulative translation adjustments.
RETIREMENT BENEFIT COSTS
PRC state managed retirement benefit programs are defined contribution plans and the payments to the plans are charged as expenses when employees have rendered service entitling them to the contribution.
STOCK-BASED COMPENSATION
The Company adopts both ASC Topic 718, “Compensation - Stock Compensation” and ASC Topic 505-50,“Equity-Based Payments to Non-Employees” using the fair value method in which an entity issues its equity instruments to acquire goods and services from employees and non-employees. Stock compensation for stock granted to non-employees has been determined in accordance with this accounting standard and the accounting standard regarding accounting for equity instruments that are issued to other than employees for acquiring, or in conjunction with selling goods or services, as the fair value of the consideration received or the fair value of equity instruments issued, whichever is more reliably measured. This accounting standard allows the “simplified” method to determine the term of employee options when other information is not available. Under ASC Topic 718 and ASC Topic 505-50, stock compensation expenses is measured at the grant date on the value of the option or restricted stock and is recognized as expenses, less expected forfeitures, over the requisite service period, which is generally the vesting period.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in accounting principles generally accepted in the United States of America (U.S. GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy, which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:
NEW ACCOUNTING PRONOUNCEMENTS
The Company does not expect any recent accounting pronouncements to have a material effect on the Company’s financial position, results of operations, or cash flows.
In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606) (ASU 2014-09), which amends the existing accounting standards for revenue recognition. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, which delays the effective date of ASU 2014-09 by one year. The FASB also agreed to allow entities to choose to adopt the standard as of the original effective date. In March 2016, the FASB issued Accounting Standards Update No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net) (ASU 2016-08) which clarifies the implementation guidance on principal versus agent considerations. The guidance includes indicators to assist an entity in determining whether it controls a specified good or service before it is transferred to the customers. The new standard further requires new disclosures about contracts with customers, including the significant judgments the company has made when applying the guidance. We will adopt the new standard effective January 1, 2018, using the modified retrospective transition method. We finalized our analysis and the adoption of this guidance will not have a material impact on our consolidated financial statements.
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In February 2016, the FASB issued Accounting Standards Update No. 2016-02, Leases (Topic 842) (ASU 2016-02), which generally requires companies to recognize operating and financing lease liabilities and corresponding right-of-use assets on the balance sheet. This guidance will be effective for us in the first quarter of 2019 on a modified retrospective basis and early adoption is permitted. We will adopt the new standard effective January 1, 2019. We have selected a lease accounting system and we are in the process of implementing such system as well as evaluating the use of the optional practical expedients. While we continue to evaluate the effect of adopting this guidance on our consolidated financial statements and related disclosures, we expect our operating leases, as disclosed in Note 9 - Commitments and Contingencies, will be subject to the new standard. We will recognize right-of-use assets and operating lease liabilities on our consolidated balance sheets upon adoption, which will increase our total assets and liabilities.
In October 2016, the FASB issued Accounting Standards Update No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers Other than Inventory (ASU 2016-16), which requires companies to recognize the income-tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs, rather than when the asset has been sold to an outside party. We will adopt the new standard effective January 1, 2018, using the modified retrospective transition approach through a cumulative-effect adjustment to retained earnings as of the effective date. A cumulative-effect adjustment will capture the write-off of income tax consequences deferred from past intra-entity transfers involving assets other than inventory, new deferred tax assets, and other liabilities for amounts not currently recognized under U.S. GAAP. Based on transactions up to December 31, 2017, we do not expect the adoption of this guidance to have a material impact on our consolidated financial statements.
In November 2016, the FASB issued Accounting Standards Update No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (ASU 2016-18), which requires companies to include amounts generally described as restricted cash and restricted cash equivalents in cash and cash equivalents when reconciling beginning-of-period and end-of-period total amounts shown on the statement of cash flows. We will adopt the new standard effective January 1, 2018, using the retrospective transition approach for all periods presented. We do not expect the adoption of this guidance to have a material impact on our consolidated financial statements.
In January 2017, the FASB issued Accounting Standards Update No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business (ASU 2017-01), which revises the definition of a business and provides new guidance in evaluating when a set of transferred assets and activities is a business. We will adopt the new standard effective January 1, 2018, on a prospective basis and do not expect the standard to have a material impact on our consolidated financial statements.
In January 2017, the FASB issued Accounting Standards Update No. 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment (ASU 2017-04), which eliminates step two from the goodwill impairment test. Under ASU 2017-04, an entity should recognize an impairment charge for the amount by which the carrying amount of a reporting unit exceeds its fair value up to the amount of goodwill allocated to that reporting unit. This guidance will be effective for us in the first quarter of 2020 on a prospective basis, and early adoption is permitted. We do not expect the standard to have a material impact on our consolidated financial statements.
Although there are several other new accounting pronouncements issued or proposed by the FASB, which the Company has adopted or will adopt, as applicable, the Company does not believe any of these accounting pronouncements has had or will have a material impact on its consolidated financial position, operating results or statements of cash flows.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Market risk is the risk of loss to future earnings, to fair values or to future cash flows that may result from changes in the price of a financial instrument. The value of a financial instrument may change as a result of changes in interest rates, exchange rates, commodity prices, equity prices and other market changes.
Foreign Currency Risk
Currency fluctuations and restrictions on currency exchange may adversely affect our business, including limiting our ability to convert Chinese Renminbi (RMB) into foreign currencies and, if the RMB were to decline in value, reducing our revenue in U.S. dollar terms.
The Chinese government currently manages the exchange rate of the RMB. The value of our common stock is indirectly affected by the foreign exchange rate between the U.S. dollar and the RMB. Appreciation or depreciation in the value of the RMB relative to the U.S. dollar does affect our financial results reported in U.S. dollar terms without giving effect to any underlying change in our business or results of operations.
Translation gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the statements of income and comprehensive income as incurred. The average translation rates applied to the consolidated statements of income and comprehensive income and of cash flows for nine months ended September 30, 2021 through 2020 were RMB6.47 and RMB6.87, respectively.
Depository Insurance Risk
Cash and cash equivalents are held for working capital purposes and consist primarily of bank deposits. We do not enter into investments for trading or speculative purposes.
Banks and other financial institutions in the PRC do not provide insurance for funds held on deposit. A portion of our assets are in the form of cash deposited with banks in the PRC, and in the event of bank failure, we may not have access to, or may lose entirely, our funds on deposit. This exposure could result in our inability to immediately access funds to pay our suppliers, employees and/or other creditors.
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ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”), that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. We conducted an evaluation (the “Evaluation”), under the supervision and with the participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of the design and operation of our disclosure controls and procedures (“Disclosure Controls”) as of the end of the period covered by this report pursuant to Rule 13a-15 of the Exchange Act. Based on this Evaluation, our CEO and CFO concluded that our Disclosure Controls were effective as of the end of the period covered by this report.
Changes in Internal Control over Financial Reporting
We have also evaluated our internal controls for financial reporting, and there has been no change in our internal control over financial reporting that occurred during the three months ended September 30, 2021 that has materially affected, or is reasonably likely to materially affect our internal control over financial reporting
Limitations on the Effectiveness of Controls
Our management, including our CEO and CFO, does not expect that our Disclosure Controls and internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management or board override of the control.
The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
ITEM 1. LEGAL PROCEEDINGS
As it was reported in Q1 2019:
In the ordinary course of business, we may be involved in legal proceedings from time to time. As of the date hereof, except as set forth herein, there are no known or contemplated proceedings that require disclosure under Item 103 of Regulation S-K.
On March 26, 2019, a shareholder derivative complaint was filed in the United States District Court for the Southern District of New York against the Company, as well as four of its current directors, styled Heng Ren Silk Road Investments LLC, Heng Ren Investments LP, derivatively on behalf of Sino Agro Food Inc. v. Sino Agro Food Inc., Lee Yip Kun Solomon, Tan Poay Teik, Chen Bor Hann, Lim Chang Soh, and Sino Agro Food Inc., as the nominal defendant (Case No.: 1:19-cv-02680) (the “Complaint”).
The Court granted approval to the settlement of the derivative complain between the plaintiff and the Company on October 13th 2019.
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ITEM 1A. RISK FACTORS
Not applicable
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
During the period covered by this report, there has not been any share issued.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS
| Exhibit No. | Description of Exhibits | |
| 31.1 | Section 302 Certification of Principal Executive Officer* | |
| 31.2 | Section 302 Certification of Principal Financial Officer* | |
| 32.1 | Section 906 Certification of Principal Executive Officer and Principal Financial Officer** | |
| 101.INS | Inline XBRL Instance Document* | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document* | |
| 101.CAL | Inline XBRL Taxonomy Calculation Linkbase Document* | |
| 101.LAB | Inline XBRL Taxonomy Labels Linkbase Document* | |
| 101.PRE | Inline XBRL Taxonomy Presentation Linkbase Document* | |
| 101.DEF | Inline XBRL Definition Linkbase Document* | |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).* |
| * | filed herewith |
| ** | furnished herewith |
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
| SINO AGRO FOOD, INC. | ||
| November 15, 2021 | By: | /s/ LEE YIP KUN SOLOMON |
| Lee Yip Kun Solomon Chief Executive Officer | ||
| (Principal Executive Officer) | ||
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| November 15, 2021 | By: | /s/ Lee Yip Kun Solomon |
| Lee Yip Kun Solomon | ||
| Chief Executive Officer, Director |
| November 15, 2021 | By: | /s/ Tan Poay Teik |
| Tan Poay Teik | ||
| Chief Marketing Officer and Director |
| November 15, 2021 | By: | /s/ Chen Bor Hann |
| Chen Bor Hann | ||
| Corporate Secretary and Director |
| November 15, 2021 | By: | /s/ COLANUKUDURU RAVINDRAN |
| Colanukuduru Ravindran Director |
| November 15, 2021 | By: | /s/ MUSON CHEUNG |
| Muson Cheung Director |
| November 15, 2021 | By: | /s/ HENRY SUN |
| Henry Sun Director |
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