Sino Agro Food, Inc. - Annual Report: 2011 (Form 10-K)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

For the fiscal year ended: December 31, 2011

For the transition period from ________ to ________

Commission File No. 000-54191

SINO AGRO FOOD, INC.

(Exact name of registrant as specified in its charter)

Room 3711, China Shine Plaza

No. 9 Lin He Xi Road

Tianhe County

Guangzhou City

P.R.C. 510610

(Address of principal executive offices)

Issuer’s telephone number: (860) 20 22057860

N/A

(Former name, former address and former

fiscal year, if changed since last report)

Securities registered under Section 12(b) of the Exchange Act:

None

Securities registered under Section 12(g) of the Exchange Act:

Common Stock, $0.001 par value per share

(Title of Class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes ¨ No x

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 x

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes ¨ No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

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,” “non-accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ Nox

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed fiscal quarter.

As of April 9, 2012, the aggregate market value of voting common equity held by non-affiliates was approximately $49,948,068 based on approximately 59,818,046 shares outstanding held by non-affiliates and a closing price of  $0.8350.

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date:

As of April 9, 2012, there were 72,718,046 shares of Common Stock issued and outstanding.

DOCUMENTS INCORPORATED BY REFERENCE:

None

Table of Contents

PART I

FORWARD-LOOKING STATEMENTS

Certain statements made in this Annual Report on Form 10-K are “forward-looking statements” (within the meaning of the Private Securities Litigation Reform Act of 1995) regarding the plans and objectives of management for future operations. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements of the Registrant to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The forward-looking statements included herein are based on current expectations that involve numerous risks and uncertainties. The Registrant’s plans and objectives are based, in part, on assumptions involving the continued expansion of business. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of the Registrant. Although the Registrant believes its assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate and, therefore, there can be no assurance the forward-looking statements included in this Report will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by the Registrant or any other person that the objectives and plans of the Registrant will be achieved.

Item 1. Description of Business

General:

Sino Agro Food, Inc., a Nevada corporation (hereinafter “Sino Agro,” “SIAF,” “the Company,” “we,” “us,” “our” or similar words), is an integrated developer, producer and distributor of organic food and agricultural products with its subsidiaries operating in the People’s Republic of China (the “PRC”). The Company is focused on developing, producing and distributing higher margin agricultural and aquaculture products to meet what it believes is the increasing demand from the growing middle class consumers of the PRC for gourmet and higher quality food items.

Summary Financial Information:

The table below summarizes the audited consolidated financial statements of Sino Agro Food, Inc. for the fiscal years ended December 31, 2011 and December 31, 2010:

Balance Sheet Summary:

* The auditors did not audit the contents of this table.

Statement of Operations Summary:

* The auditors did not audit the contents of this table.

PRINCIPAL EXECUTIVE OFFICES

The address for our principal executive offices and telephone number are:

Room 3711, China Shine Plaza

No. 9 Lin He Xi Road

Tianhe County

Guangzhou City

P.R.C. 510610

(860) 20 22057860

Overview:

Business History

Our Company was initially incorporated as Volcanic Gold, Inc. (“Volcanic Gold”) on October 1, 1974 under the laws of the State of Nevada. Prior to October 14, 2005, the Company operated as a mining and exploration company. Due to the fact that the Company was unable to generate sufficient cash flows from operations, obtain funding to sustain operations or reduce or stabilize expenses to the point where it could have realized a net positive cash flow, management and the board of directors determined that it was in the best interests of the stockholders to seek a strategic alternative so that the Company could continue to operate.

On August 24, 2007, we entered into a series of agreements to effect a “reverse merger transaction” via a share exchange with Capital Award, Inc. (“Capital Award”), a Belize Corporation incorporated on November 26, 2004. These documents included a Stock Purchase Agreement, pursuant to which Volcanic Gold issued 32,000,000 shares to stockholders of Capital Award in exchange for all of the shares of Capital Award. On August 24, 2007 the Company changed its name from Volcanic Gold, Inc. to A Power Agro Agriculture Development, Inc.

On September 5, 2007 we purchased 100% equity interest in Hang Yu Tai Investment Limited (“Hang Yu Tai”) that was incorporated in Macau on September 21, 2006 from two non-affiliated shareholders of Hang Yu Tai. Hang Yu Tai had a 78% equity interest in ZhongXingNongMu Co. Ltd. (“ZhongXing”) that was incorporated in China on March 1, 2006. The purchase price was $26,910,000, satisfied by: cash payment of $10,000,000 and the issuance of 7,000,000 shares of our common stock.

On September 5, 2007 we purchased 100% equity interest in Macau Eiji Company Limited, (“Macau Eiji”),which was incorporated in Macau on September 5, 2005 from non-affiliated shareholders of Macau Eiji. Macau Eijihad a 75% equity interest in Jiang Men City Heng Sheng Tai Agriculture Development Co. Ltd., which was incorporated in China on November 27, 2007. The purchase price was $6.75 million, satisfied by cash payment of $2,000,000 and the issuance of 2 million shares of our common stock valued at $3,878,739 of $1.939 per share.

On September 5, 2007 we purchased 100% equity interest in Tri-way Industries Limited (“Triway”) that was incorporated in Hong Kong on October 28, 2005. Triway controlled a 30% equity interest in TianQuan Science and Technology, Ltd. (“TianQuan Science”) that was incorporated in China on April 4, 1999. The purchase price was $3.25 million, satisfied by: cash payment of US $1,000,000 and the issuance of one million shares of our common stock. On October 9, 2007 the Company changed its name from A Power Agro Agriculture Development, Inc. to Sino Agro Food, Inc.

By an agreement dated October 29, 2008, Triway sold its 30% equity interest in TianQuan Science to an unrelated party for consideration of $4,500,000 that was satisfied by the payment of $4,500,000 on December 18, 2008 plus our share of TianQuan Science’s profits in 2008, which amounted to $1.25 million and was paid on November 15, 2008.

By an agreement dated November 12, 2008, Triway purchased a patented “Intellectual Property” namely “Zhi Wu JeiGan Si Liao Chan Ye Hua Chan Pin Ji Qi Zhi Bei Fang Fa” registered under the Patent Number “ZL2005 10063039.9” and Certificate number “329722” of China, (Livestock feed Manufacturing Technology) for the manufacturing of Livestock feed designed and applied for the consumption of beef cattle, cows, sheep and other animals from a non-affiliated owner of the Intellectual Property. As consideration for the transaction we paid $8,000,000 that had been satisfied with $4,500,000 paid on December 18, 2008. The remaining balance $3,500,000 to be paid by cash or the issuance of our shares in three installments. The first installment of $1,000,000 was due on December 31, 2009. The second installment was due December 31, 2010 for $1,000,000 and a third and final installment is due December 31, 2012 for $1,500,000. If the payment is made in our shares, the price per share will be valued at a three months weighted average as quoted on the OTC Pink Markets prior to the date of settlement. Currently, the entire $8,000,000 has been paid as follows:

The total settlement debt of US $3,573,530 was credited into common stock capital of US $4,771 based at par of US$0.001 each and additional capital for an amount of US $3,910,665, respectively. A loss of $73,950 has been recorded on the transaction calculated between the fair value of the shares at respective issuance date and their respective consideration received.

On December 28, 2008, the Company, through its then subsidiary Pretty Mountain Holdings Limited (“Pretty Mountain”), a company incorporated in Hong Kong, the Special Administrative Region of the PRC, entered into a Sino-foreign joint venture agreement with the following parties for the setting up of a Sino-foreign joint venture company to be named as Qinghai Sanjiang A Power Agriculture Co. Ltd. (translation in English) (“Sanjiang A Power”) in the PRC, to manufacture bio-organic fertilizer, livestock feed and to develop other agriculture projects in the County of Huangyuan, in the vicinity of the City of Xining, Qinghai Province :

Upon completion of this exercise and the subsequent reorganization, Pretty Mountain Holdings, Inc. was dissolved on January 28, 2011.

In September, 2009, SIAF carried out an internal re-organization of its corporate structure and businesses, and on September 28, 2009, SIAF’s subsidiary A Power Agro Agriculture Development (Macau) Limited (“APWAM”) acquired the Pretty Mountain’s 45% equity interest in Sanjiang A Power by way of an assignment (“Assignment”).Application was subsequently made by the Company to the Companies Registry of Hong Kong for deregistration of Pretty Mountain under Section 291AA of the Companies Ordinance. By virtue of the Assignment, APWAM assumed all obligations and liabilities of Pretty Mountain under the SFJVA. APWAM is a 100% owned subsidiary incorporated in the Special Administrative Region of Macau, the PRC. Ten-percent (10%) of the equity interest in APWAM has been registered in the name of one Mr. HUNG Moon Cheung in compliance with the requirements of the laws of Macau on ownership of a company incorporated in Macau by non citizens of Macau, and the same is being held by Mr. HUNG in trust for and, for the benefit of, Sino Agro Food Inc. pursuant to a Deed of Trust duly executed by Mr. HUNG on December 20, 2007 in favor of Sino Agro Food, Inc.

In January 2010, Pan Shi Fang and DengJie Min (“Chinese Businessmen”) and Capital Award have entered into a Consulting Service Agreement (“the Consulting Service Agreement”), wherein Capital Award would supply the equipment and provide consulting services for the installation and construction of the fish farm and the related supporting services in Enping City, Guangdong Province of the People’s Republic of China. It was a term of the Consulting Service Agreement that the parties thereto would form a Sino-foreign joint venture company (SFJVC) to own and operate the fish farm, and that Capital Award would have the right to nominate its associate company or a company within its group of companies to substitute Capital Award as a party to the SFJVC. Upon the nomination of Capital Award, Tri-Way entered into a joint venture agreement with the Chinese Businessmen to incorporate the SFJVC to be named as Enping City Bi Tao A Power Fishery Development Co., Ltd. to own and operate the fish farm. On February 28, 2011, the Company applied to form Enping City Bi Tao A Power Fishery Development Co. Limited (EBAPFD), of which the Company would own a 25% equity interest. The approvals of the formation of EBAPFD by the relevant authorities of the PRC Government are pending.

In February 2011, we as Vendor sold our 78% interest in ZhongXing to Ximin SUN (“Purchaser”) on the following terms:

1. Total purchase price was RMB 204,600,000 (USD $31,000,000) which is equivalent to 78% of the net assets of ZhongXing plus a surplus sum of US $4,937,000 as reflected in the ZhongXing’s Management Accounts upon the terms hereinafter provided.

2. A deposit of RMB 5,011,000 (USD $759,242.50) was paid by the Purchaser upon execution of this Agreement to the Vendor by way of deposit and part payment towards the purchase price for the Vendor’s Shares.

3. Payment of the Balance of the Purchase Price:

Our Current Business and Corporate Structure:

Our executive offices in the PRC is located at Room 3711, China Shine Plaza, No. 9 Lin He Xi Road, Tianhe District, Guangzhou City, the People’s Republic of China 510610, Tel: (86) 20 22057860, 22057870.,Fax:(86) 20 22057863, 22057873. We maintain a website at www.sinoagrofood.com. The contents of our website are not incorporated by reference, herein.

Note to Chart: Jiangman City A Power Fishery Development Co. Ltd, (JCAP) has been called Enping City Bi Tao Fishery Development Co. (ECBTAP) previously before the name JCAP was officially approved, such that JCAP and ECBTAP referred to in this 10K Form is the same company.

Revenues and Income Generating Businesses:

We conduct our operations through the following primary subsidiaries and joint ventures, as set forth below:

Subsidiary I.

Capital Award Inc.:

Capital Award Inc. (“Capital Award”) is currently engaged in modern fishery project management and consultancy services. We provide consulting and management services to fish farms that are adopting the “A Power Technology” and for the development of fish farms using A Power Technology systems. Capital Award commenced engaging in the marketing and sale of fish and seafood in 2011.

The A-Power Technology

A-Power Technology (“APT”) is an engineered, self-contained water treatment and re-circulating aquaculture system (“RAS”) for the growing of aquatic animals on a commercial scale. It mainly consists of the A-Power Grow Out Basin and the A-Power Treatment Stack equipment, and operating techniques and procedures, which Capital Award has established as essential or desirable for the establishment, development, and operation of the A-Power aquaculture system.

In an APT designed fish growing system; fish produced are free from diseases commonly associated withoutdoors aquaculture methods. The system is fully integrated, automated and climate-controlled, and with strict water quality management, the APT fish growing system creates a stress-free environment for the fish. These ideal growing conditions enable improved productivity, mortality rates of less than 8% and a feed-to-fish conversion ratio of 1:1 for pallet feed and 2:1 for non-pallet feed.

The system is housed on land in an enclosed environment under fully controlled conditions, and by avoiding contact with any outdoor contamination and using treated water; APT RAS produces healthy farmed fish guaranteed free of antibiotics and other pollutants.

It is an environmentally friendly system that recycles all water used in the farm. It enables the consistent year round production and supply of fish in the vicinity of urban areas. The RAS has been commercially applied in Europe and Australia for the past 30 years and APT has been commercially developed and used in Australia since 1998. However the RAS and APT are relatively new to Asian countries, including China.

APT is not a patented technology as it was developed upon the platform and principles of the RAS, but many component parts of the APT fish farms or the improved version thereof were designed and/or developed by Capital Award, such as the

APT is a unique system as it is coupled with the farm operation’s management system and support services developed by Capital Award, which include

A standard A-Power Module has a surface area of 70 square meters and contains approximately 145 cubic meters of water.

The APT system is designed to attain economic efficiencies in the areas of reduced energy requirement, water usage, labor cost, low fish mortality rates and good feed-to-fish conversion rate, as compared to the conventional methods of fish farming.

Fish Farm Development

As of February 29, 2012, Capital Award has three fishery development projects in progress; their status summarized as follows:

(1) 1^st Demonstration fish farm is situated at district of Enping City, it was built and completed for operation since February 2011 and is now in production operation.

(2) 1^st Demonstration prawn farm is also situated at District of Enping City. Its development was started in June 2011and expecting completion for production operation on or before July 2012.

(3) 2^nd Fish (and Eel)Farm is situated at District of Jiangman City. Its development was started in May 2011and is expecting its Phase (1) to be completed within year 2012, and Phase (2) development starting in January 2013 with production operation beginning by year-end 2013.

(4) 2^ndprawn farm is situated at District of Zhong Shan City. Its development was started in November 2011 and is expecting its Phase (1) to be completed for production operation by the end of April 2012, and Phase (2) will be completed for partial production operation on or before the end of December 2012.

(1) 1^st Demonstration fish farm development

On January 15, 2010, we executed a service and consulting contract with a group of Chinese businessmen (“Chinese Businessmen”), wherein Capital Award would supply the equipment and provide consulting services for the installation and construction of the fish farm and the related supporting services in Enping City, Guangdong Province of the People’s Republic of China. It was a term of the Consulting Service Agreement that the parties thereto would form a Sino-foreign joint venture company (SFJVC) for the operation and management of the fish farm, and that Capital Award would have the right to nominate its associate company or a company within its group of companies to substitute Capital Award as a party to the SFJVC. Upon the nomination of Capital Award, Tri-Way entered into a joint venture agreement with the Chinese Businessmen to incorporate SFJVC to be named as Enping City Bi Tao A Power Fishery Development Co., Ltd. to own and operate the fish farm in accordance with the terms and conditions as prescribed therein.

The farm in Enping is being designed to have a production capacity of 500 metric tons of fish per year. We agreed to provide services amounting to about $3.5 million, which included APT sub-license fees of $400,000, part of the plant and equipment costs up to $2,500,000 including grow-out tanks and related installation, supervision and consultancy in the building of the farm structure, training of workers and other associated professional services amounting to $600,000. The Chinese Businessmen are funding this capital development. The species of fish intended to be grown in the Farm will be the “Sleepy Cod”, a Chinese species which we believe is in demand in the local market. It commands, on average, a wholesale price of US $23.00 (live fish) to US$27.00 (live fish) per kilogram, based on recorded prices as of December 31, 2011 and June 21, 2011, respectively.

The current progress report on the fish farm development as of December 31, 2011 is as follows:

As of December 31, 2010 the Chinese Businessmen had funded just under US $3.9 Million for the development of the Fishery, which covered the cost of the following:

At January 31, 2011, all developments mentioned above were completed and the fish farm in operation.

Subsequently the Chinese Businessmen needed to provide a further sum, estimated at up to US $1.3 million, as working capital to cover the following items within an 8 month period before incomes could be generated from the sale of fish:

Production activities of this fish farm started from February 2011.

Between March to June, 2011, collectively the farm was stocked with over 120,000 pieces of fingerlings (measuring from 20mm up to 30mm / pieces), and in between time, the farm also was stocked with larger sized fingerlings and fish stocks of various sizes.

Commencing from June 2011, the farm has been consistently and on a monthly basis producing and selling fish that have been grown to marketable sizes (from 450g/fish and larger).

In this respect, Capital Award is the marketing and sales agent of the farm such that Capital Award supplied fish (and fingerling) stocks to the farm, and, in turn, generated fish sale revenue by buying all of the marketable sized fish produced by the farm and reselling them to wholesalers.

Supplies of Fingerling Stocks and Feed Stocks, in general;

Presently, fingerling stocks of Sleepy Cod are readily available in the PRC, but they are not disease free (DF) fingerlings. However, a nursery, quarantine station, and laboratory have been developed on the fish farm in Enping. Capital Award provides the training of and education for the farm staff for the development of DF fingerlings so that the Sleepy Cods fingerlings will be DF certified before being released into the grow-out tanks. A farm of annual capacity of 500 MT when fully developed will require over one million fingerlings within one full year of operation.

“Blue bait,” which is an ocean captured small baitfish available in the PRC, is used as the raw feed material for Sleepy Cod. Capital Award’s personnel on the preparation and formulation of the fish feed train workers at the farm.

With respect to the Supplies of Fingerling Stocks and Feed Stocks of 1^st Demonstration fish farm:

From the experience gained in 2011, we discovered that this farm has the ability to grow-out larger sleepy cods (i.e. from 250g/fish and larger) to marketable sized fish efficiently and economically (i.e. better feed conversion rate, growth rate and less risk of disease, etc.). The table below reflects our recorded growth and feed conversion rates as of December 31, 2011.

Therefore a supply contract was executed with Guangzhou Jingyang Aquaculture Co. Ltd. on November 17^, 2011 to supply the farm with SPF sleepy cod stock (from 250g/fish and larger) and blue baitfish from April 2012 to March 2014.

This in turn provides the foundation to achieve targeted sales revenue of $13.5M and $21.5M based on the output of 500 MT and 800 MT in 2012 and 2013, respectively.

Sales of Fish

Sleepy Cod, especially being supplied live, have good niche markets in the local Chinese markets as well in other Asian markets. As such, Capital Award aims at mainly selling live fish, anticipating that local wholesalers and distributors will pick up their purchase orders directly at the farm, eliminating the farm’s concern with issues of delivery and logistics. All fish produced from the farm will have uniform quality standards, i.e. they will be free of any chemical and other pollutants, and will be marketed and promoted accordingly.

Currently, Capital Award has sold all of the 1^st Demonstration Farm’s production to a few wholesalers in the Guangzhou Fish Market. Therefore, it is not necessary at this juncture to carry out any promotional programs, although samples of fish had been sent to a few well-known restaurants and marketing outlets in other big cities in China on a trial basis with positive reception.

As of December 31, 2011, the 1^st Demonstration farm has produced and sold over 191 MT of marketable sized fish based on the rotational stocking system (i.e. stocking larger sized fish and turning them back out into the market at a faster rate).

(2) 1^st Demonstration Prawn Farm Developments

Enping City A Power Prawn Culture Development Co., Ltd (Name of the SJVC, pending approval)

On February 11, 2011, Wei Da Xing and Capital Award Inc. entered into a joint venture agreement, in accordance with the laws of Sino Foreign Joint Venture Enterprises of the People’s Republic of China and other relevant regulations to incorporate a Sino-foreign joint venture company at No. 1-5, 1^st Floor, JiangzhouShuiZha Office Building, No 19, Jiang Jun Road Jiangzhou, Juntang Town, Enping City, Guangdong Province of the People’s Republic of China, to be tentatively named as Enping City Bi Tao A Power Prawn Culture Development Co., Ltd (“SFJVC”).

The Parties’ purpose in establishing the SFJVC is to develop a prawn farm that produces high quality fresh prawns and products through the application of modern aquaculture technology and related management systems, developing a competitive edge toward sustained international markets while providing economic benefit to the Parties and generating socioeconomic benefits to the surrounding communities, as a whole.

The production capacity will be 2,000 MT of quality fish and prawns per year.

The tenure of the SFJVC shall be for a period of 50 years. The SFJVC’s Board of Directors may decide to extend the tenure of the SFJVC by applying to the China Business Registration Department (or its related authorized approving authority) within 6 months from the day of expiry, thereof.

The total investment capital of the SFJVC is US$5 million to be invested over a period of 5 years, whereas the Registered Capital of the SFJVC shall be US$100,000 for the first year and be increased gradually to US$5 million by the fifth year subject to the decision made by the Board of Directors of the SFJVC at the time.

The parties’ respective capital contribution in the 5 years is as follows:

First Year

Second Year Onward

Schedule of Registered Capital Payments:

In the first year, the Parties hereto shall pay US$100,000 in Registered Capital to the SFJVC in accordance with their respective share of equity interest in the SFJVC within 6 months from date of issuance of the business license of the SFJVC. From the second year onward, the Parties shall pay their respective share of contribution of the Registered capital in the manner as mentioned above and in accordance with the time schedule as set forth by the Board of Directors of the SFJVC as and when it shall be necessary.

If either of the Parties hereto shall decide to sell all or part of its equity in the SFJVC to any third party, the selling party is required to obtain consent of the other party before such sale, and shall grant the first right of refusal to the other party on similar terms under the intended sale.

The responsibilities of Wei Ds Xing:

The responsibilities of Capital Award:

Consulting Agreement

An AP Technology Consulting Services Agreement between Capital Award and a Group of China Parties represented by Mr. Wei Da Xing (“Employer”) was executed on February 11, 2011 under which the parties agreed to build and develop a prawn farm using the AP Technology System at a site in Enping District, Guangdong Province within close proximity to the HangSingTai HU Plantation, Enping with the exact location to be determined after inflow water quality and quantity, and soil testing that will be carried out on various blocks of land in the Enping District.

The Parties agreed to apply to the China Authorities to form a Sino Foreign Joint Venture Company (hereinafter called “SFJVC”) to develop the Project. Prior to the official approval of the SFJVC the Employer shall be responsible to provide funding for the development needs of the Project, and, upon the official establishment of the SFJVC, the Parties agree to transfer this Agreement to the SFJVC wherein the SFJVC will become responsible to fund the required development of the Project. The Parties further agreed that after the official formation of the SFJVC, the SFJVC would reimburse the Employer for amounts paid by the Employer on the Project prior to its official formation. Capital Award shall provide technical service to the Employer prior to the official formation of SFJVC for the development of the Project.

Progress report of the 1^st Demonstration prawn farm development (as of December 31, 2011):

(3) 2^nd Fish (and Eel) Farm Development

On May 18, 2011, a consulting and servicing contract was executed between CA and GaoQiang Aquaculture Farm of Jiangman City for the construction and development of an APT Fish and Eel farm at a 60 Mu (about 9.5 acre) block of land situated at XinHin District, Nan Zhu Village, Qi Bao County, Xinhui District, and Jiangman City, Guangdong Province. The development will be built-out in two phases.

* Phase (1) involves the development of a fish farm based on 16 APMs, staff quarters, an office, dried goods and refrigerated storage, processing facilities, etc. Current status as of March 1, 2012:

Among other terms and conditions of this contract, options have been granted to Capital Award:

* Phase (2) of the development will involve the development and construction of an additional 16 APMs and other processing facilities; expected to commence after the completion of Phase (1).

(4) 2^ndPrawn Farm development

On November 18^th 2011, Capital Award has been awarded a two phase service and consulting contract to develop a second prawn farm valued at up to $21M in San Jiao Town, Zhong Shan City, Guangdong Province, PRC.

The servicing and consulting contract is to develop and construct a Prawn Hatchery and Nursery station on a six-acre block of land with the capacity to produce some 2.8 billion Prawn Fingerlings in its first year of operation.

The project is divided into two phases with the first phase approved. Phase one construction has already commenced with completion expected in early April 2012. Construction under phase one includes infrastructure development, utilities, staff quarters, office and Prawn hatchery and nursery construction. Phase one of the project is expected to generate approximately $8.08M in revenue for the Company.

Phase two of the project, which requires additional approval, includes the development and construction of a Prawn Grow-out Farm consisting of 16 APM indoor units and the conversion of twelve acres of outdoor ponds for use with the APM technology. Phase two is expected to start in mid-2012 and be completed by year-end 2012. The contract is expected to generate revenue up to $21M for 2012, which represents almost 85% of our revenue generated from Capital Award’s consulting and servicing contracts in 2011. We expect this trend to continue as more interest develops for this technology in China.

On March 1, 2012 a Form 8K (SEC) had been filed with the Servicing and Consulting Contract as attachment. Among other terms and conditions of this contract, options have been granted to Capital Award, namely:

As of March 1, 2012 the progress report on this development is reflected in the Table below:

Supplies of Brood stocks

In recent years the prawn aquaculture industry in China has been curtailed for the following reasons:

Our AP Technology has the ability to overcome these problems, except for inbreeding. Therefore we have obtained freshly supplied brood stock from Vietnam and Cambodia to develop into second generation breeding stock, insofar that reports from our laboratory show that our second-generation breeding stocks are producing healthy flies. Management is confident that this farm will supply the local market with good healthy prawn flies for the local farmers to reliably grow into adult prawns acceptable to the local market.

Sales of Prawns and prawn flies (or fingerlings)

There is huge demand in the China local markets for both prawns (live and frozen) (tens of millions MT/year) and prawns flies (hundreds of billion pieces/year), and their wholesale price is very seasonal (i.e. small sized prawns counting from 80 to 100 pieces per kg vary from US$2/kg during heavy supply season (July to October) to US$7/kg during short-supply season (November to June). Large sized prawns counting from 10 to 15 pieces/Kg vary from US$8/kg to US$24/kg during said respective seasons.

However, sales of prawn flies are basically timed between April to October during the late spring to mid Autumn of every year (except the supplies to our APT farms, which would be all year round), and this year their wholesale prices are anticipated to be much higher than in 2011(estimating at least 35% more or higher). The average 2011 prices were for 80 to 100 count sizes at US$28 to US$38.3/10,000 pieces of first generation Mexican White; US$11.65 to US$21.6/10,000 pieces of 2^nd generation Mexican White flies; and US$59/10,000 pieces of well known Asian species.

Management is targeting to generate upwards of US $10M in prawn flies sales revenue supplied by this farm in 2012.

Other Fish sales of Capital Award:

On March 3^rd, 2011 a contract was executed between Capital Award and GaoQiang Aquaculture Co. located adjacent to the 2^nd Fish Farm specified above at XinHin District, Nan Zhu Village, Qi Bao County, Xinhui District, Jiangmen City, Guangdong Province, for the growing of 600,000 pieces of sleepy cod from fingerlings (average sizes of 30mm/piece upward) to marketable sized fish (minimum of 500g/fish) within two years.

The contracted grow-out cost including cost of fingerlings or fish stocks, all feed, medication, supplementary, labor and all other associated growing costs is based on RMB40 (US$6.50) per 500g grown fish for a total contractual cost of RMB24 million (US$3.85M), payable evenly and monthly at RMB4 million (US$650K) per month commencing from March 15, 2011.

Between December 15 to 23, 2011, there were almost 60,000 fish (total weight around 30 MT) sold by Capital Award at an average of RMB150 (US$24.20)/Kg from this contract. Due to a winter spell the growth rate of the fish was negatively impacted for two months, such that, the next fish sales from this contract is anticipated to resume sometime in March 2012.

Future Sale of Fishery Plant and Equipment and Consulting Services

In 2008, management of Capital Award studied the feasibility and viability of engaging a number of the Chinese manufacturers and factories to manufacture the main parts and components of the APT Module in the PRC and then assemble the parts and component by Capital Award’s own team of workers. The finished plants and equipment were found to be comparable to most imports in terms of quality standard, but at a cost savings of up to 55% less. Based upon this experience, Capital Award committed to having up to 60% of the plant and equipment required for the farms manufactured in the PRC, and assembled by its own team of workers at the fishery project sites as required by the purchasers of the fish farms.

In 2011 we experienced having up to 90% of the APT farms’ plant and equipment supplied and sourced from local manufacturers, and, thus far, their performance has been comparable to the quality standard of similar imports.

Order Backlog

There is no backlog of orders at present in respect of any of Capital Award’s sales and services.

Competition

Many of our existing and potential competitors have substantially greater financial, marketing and distribution resources than we do. Many of these companies have greater name recognition and more established relationships with our target customers. Furthermore, these competitors may be able to adopt more aggressive pricing policies and offer customers more attractive terms than we can. If we are unable to compete successfully, our business may suffer and our sales cycles could lengthen, resulting in a loss of market share or revenues.

We believe that competition within the industry is based principally on a combination of quality, price, design, responsiveness, reputation, production capacity, and follow-up customer service. We distinguish ourselves from our competitors by being focused on RAS technology.

There are really no competitors in the PRC as far as RAS farms are concerned. We provide and support the APT fishery development with complete services from the design of a farm’s lay-out and farm building’s structure to all filtration systems; from the supplies of core plants and equipment to their maintenance services; from training of workers to full management of operation services; and from the development of SPF fingerlings to the sales and marketing of the farmed fish and fish products. There are no other RAS suppliers in the PRC providing what we have provided for our clients in the PRC. Our teams of management have significant experience in the industry that covers all aspects of the industry, including RAS technologies know-how, management of farm operation, training of operators and extensive knowledge of the markets and sales.

With respect to fish sales, we are competing against growers/suppliers of fish and fish products of sub-standard quality, estimated as supplied to the local markets in the tens of millions metric tons per year. There is in fact no commercial farm in the PRC producing chemical and pollution free fish. Our quality fish and fish products will be competing against high quality imports, consisting of mostly frozen items, which are being sold at premium prices. We are confident that our live or fresh chilled fish and fish products will have a competitive edge as logistic/transportation costs will be less, allowing us to pass on the cost savings.

We also believe that by building the APT farms in the PRC, it will significantly reduce the investment capital required, as it would be costlier to have them built in other countries. By reducing demand for development capital, the cost of production and sales of the fish will be reduced, wherein the competitive advantage of our fish and fish products will dramatically increase..

Patents, Trademarks & Licenses

We do not have ownership of any patented or trademarked intellectual property. The APT was designed and developed by Infinity Environmental Group, a Belize corporation. Capital Award was granted a Master License for APT for the territory of the PRC on August 1, 2006 for a term of 60 years. Pursuant to an agreement dated August 1, 2006 between Infinity Environmental Group Limited (“Infinity”) and the Company, the Company was granted an A Power Technology License with a condition that the Company was required to pay the license fee covering 500 units of APM as performance payment to Infinity on or before July 31, 2008. This license allows the Company to develop, service, manage, and supply A Power Technology Farms in the PRC using the A Power Technology. The Company has met all payment obligations to Infinity as follows:

We also have rights to a different RAS Technology, which we don’t intend to use in our fishery developments in China, however, it still may be useful and applicable in other countries, (i.e. Vietnam or Indonesia etc.), so we have left these rights on our balance sheet at minimal value. They are not the same as the rights we are using as described above.

Capital Award subsequently has made many improvements to the plant and equipment to suit the conditions in the PRC, and has developed operating techniques and procedures, which Capital Award has established as essential or desirable for the establishment development and operation of the APT farms.

Our APT prawn farm technology was expanded from the similar basic principle of the RAS technology. All related improvements and designs and operation procedures and techniques were uniquely developed and fine tuned by the Company with many practical applications, especially when used for the growing of prawns, eliminating many problems associated with in the prawn aquaculture industry compared to when using the old and traditional technology systems.

Environmental Matters

All new developments such as the fish farm in the PRC are required to furnish an Environmental Impact Assessment (“EIA”) Report to the local authorities. The Environmental Impact Analysis (EIA) was submitted together with the aforesaid SFJVC agreement to the relevant PRC Authorities on October 29, 2010 in application for the formation of the SFJVC. Normally, the approval process takes up to eight months from the date of submission.

As of 12/31/2011 the relevant authorities have approved our APT farm development, and we do not expect any issues rose regarding our future submissions for APT farms and projects.

Significant Events that may affect Fishery Operational Cash Flow:

A. Quoting from the Q2, 2011 Financial Report:

“However result from the application of the Joint Venture Company of the Enping Fish Farm, we received a notice from the tax department that only 50% of its income tax would be exempted regulated by the local Province Government. In this respect we are appealing this out-come with the local Province Government.”

Due to a contradiction in uniformly applying the tax, i.e. in Q3 authorities granted a 100% tax exemption for fish sales generated by the Open Dam Farm, the Company is intensifying its efforts seeking uniform exemption for ALL fish sales, regardless of their source. Short of obtaining the exemption, the Company will incur tax charges on 50% of its income derived from the Enping Fish Farm.

This appeal is still pending as of March 01, 2012.

B. CA does not carry a Builder or a Developer license in China, and as a result, its contracts are structured based on it providing consulting services, and subcontracting with licensed builders and developers to handle construction and payment of capital improvement taxes.

The profit CA derives from these contracts is retained in China and is recorded as payable to CA by the SJVC, by which CA may later elect to exchange for equity interest in the SJVC as provided within the terms and conditions of each contract. At such time, if and when CA decides to exercise its option to secure equity in the SJVC, certain tax implications might be triggered and have to be accounted for, accordingly.

Business Plan and Direction of Capital Award: (Please refer to the MD&A section).

Subsidiary II.

Jiang Men City Heng Sheng Tai Agriculture Development Co. Ltd.:

Macau Eiji Company Limited (“Macau Eiji”) is a 100% owned subsidiary incorporated in the Special Administrative Region of Macau, the PRC. Ten-percent (10%) of the equity interest in Macau Eiji has been registered in the name of Mr. HUNG Moon Cheung in compliance with the requirements of the laws of Macau on ownership of a company incorporated in Macau by non citizens of Macau, and the same is being held by Mr. HUNG Moon Cheung in trust for and, for the benefit of, Sino Agro Food, Inc. pursuant to a Deed of Trust duly executed by said Mr. HUNG on December 20, 2007 in favor of Sino Agro Food, Inc.

Macau Eiji entered into a Sino-foreign joint venture agreement with Enping City Juntang Town Hang Sing Tai Agriculture Co. Ltd. on September 5, 2007, for the setting up of a Sino-foreign joint venture company known as Jiang Men Shi Heng Sheng Tai Nong Ye You Xian Gong Si (English translation: Jiang Men City Heng Sheng Tai Agriculture Development Co. Ltd.) in China.

Jiang Men City Heng Sheng Tai Agriculture Development Co. Ltd. (“HST”), in which we have a 75% equity interest pursuant to the aforesaid Sino-foreign joint venture agreement, was incorporated in China on November 27, 2007.

HST is engaged in farming of HylocereusUndatus, commonly known as Bean Capers or Pitaya or Dragon Fruit(“HU Plants”), at Juntang Town, in the City of Enping, Guangdong Province of the PRC.

We currently generate revenue by:

All dried, processed and packaged green flowers are to be sold throughout the year, even after the HU Plants’ flowering season, which runs from July through October.

Harvesting and Sales of HU Plant Green Flowers

HST has over 1,095.58 mu (Chinese acre), equivalent to approximately 181.79 acres of land available for growing and processing HU Plants under Land Usage Rights granted for a term of 60 years having commenced in May 2007. The land is located in the City of Enping in the southwest of Guangdong Province situated in the Zhujiang Delta Region. It is 150km from the Guangzhou City and 250km from Hong Kong and Macau with good freeway access to/from these cities.

Enping is ideally suited for growing HU Plants because it has a tropical monsoon climate with short winters and long summers. It is warm in the winter and cool in the summer with abundant rainfall. It is one of the few areas, which have not been overtaken by the progress of industrialization. Before 1989, there were over 100,000 mu of HU plantation, situated among the fast growing districts in Guangdong Province, supplying HU flowers and products to the local and South East Asian markets. Now there are less than 3,000 mu of HU Plantation left of the old growing districts due to the industrialization progress of recent years.

A HU Plant normally takes three years to reach maturity, which means that:

The harvesting period of HU Plants in Enping region is between middle of June to end of October each year, divided into approximately 14 harvesting intervals during the period. During the harvesting period, HU plants naturally start to blossom with green flowers the following day after a rain, and the green flowers must be harvested right away before they bloom into colorful flowers, which are not marketable as vegetables.

Out of HST’s land holding, 187 acres were planted with HU Plants from late 2007 to current day consisting of 47 acres of 3 year-old and 88 acres of 2 year-old plants with the balance in new and 1 year-old plants.

In 2008, the Year 2007 planting showed a yield average of 7,500 flowers per mu in a year, resulting in a total yield of over 2.15 million pieces of flowers harvested and sold as fresh flowers. In 2009, Year 2007’s planting yielded over 16.5 million pieces of fresh flowers, whereas Year 2008’s planting showed a total yield of 2.5 million pieces of fresh flowers. Total harvesting for the season of 2010 was at about 31.5 million pieces of fresh flowers.

Sales of Dried Flowers Products after the Installation of the Drying and Processing Facilities

HST began in 2009 to develop the facilities for the drying and processing of the green flowers into value added products such as portion packed “Steamed and dried flowers,” “Naturally dried flowers,” and “Favorite dried flowers.”In mid June, 2009, the construction and fitting out of drying houses, for drying up to five metric tons of fresh green flowers per day, was completed on a 6,600 square meter plot. The cool room facility and the associated packaging facility were completed in March 2010. Thus, the drying and processing facilities should be fully operational for the 2011 season’s harvest.

All of our drying and processing facilities were developed using the traditional drying and processing systems and methods that have been used in the industry in the PRC for decades. The traditional drying and processing methods are simply straightforward processes as follows:

Although these traditional facilities are less expensive to build than facilities using more modern dryers and processors, they are more labor intensive. We’ve chosen the more traditional method because of:

At present, all dried flowers are being sold locally to the regional wholesalers and distributors. They practically purchase the dried flowers from our factory as soon as our products are ready for distribution, with any stock of dried flowers hardly remaining by the end of December, each year.

Marketing and Sales

Fresh and dried flowers of HU Plants have been marketed in the PRC as well as in other Asian countries as a form of traditional health food for the Chinese population for many centuries.

However, the shelf-life of fresh flowers is very short; maximum shelf life of about 3 days in non-refrigerated condition, and of about 7 days when stored at temperature of 15 Degrees Celsius. In most wet markets in the PRC, the distributors normally do not have refrigerated facilities, and, as such, during the harvesting seasons the distributors do not have the capacity to sell all fresh flowers being produced across the country.

It is therefore essential for bigger growers, such as us, to equip the farm with drying, cooling and packaging facilities capable of spacing out product all year round.

We had enough drying, cooling and processing facilities to handle the processing of fresh flowers produced on our own farm for 2010. However, as we plant more acres of HU Plants, we will need to increase the capacities of our drying and process facilities, accordingly.

Fresh green flowers of HU Plants are normally sold as fresh vegetables to more than 25 wholesale markets around the City of Guangzhou. There are many wholesalers buying dried and processed flowers directly from the processing factories, eliminating the need to sell them directly to wholesale markets.

The wholesale prices for the dried HU flowers have risen from an average price of US$4.68 per kilogram in 2007 to US$5.85 per kilogram in 2008. In 2009, our average selling price was at US $7.06 per kilogram. As of December 31, 2010, the average wholesale price was recorded at US$7.23per kilogram.

Progress report of HST 2011 quoted earlier in our Q2 and Q3 2011 reports:

The 2011 season started very nicely having harvested over 11 million pieces of fresh flowers during the month of June, which is exceptional compared to the previous year, and this trend continued into late August producing over 29.5 million pieces of fresh flowers during the quarter; making a total harvest exceeding 40.5 million pieces for the June through August period. Larger volume of production during this quarter attributed to lowering the cost of production to RMB0.125/piece of fresh flowers and RMB11.95/Kg of dried flowers compared to June’s cost at RMB0.18/piece of fresh flowers and RMB13.63/Kg of dried flowers.

During the third quarter there were about 10 million pieces of fresh flowers and 357 tons of dried flowers sold resulting in over RMB20.77 million (US$3.29M) of revenue generated for this Quarter.

However, the region experienced extremely dry weather conditions throughout September resulting in a scarce harvest throughout the months of September and October.

Therefore, although performance of this year is about 25% better than in 2010, it falls short of our earlier harvest projection (60 million to 75 million pieces of fresh flowers) for 2011.

This experience confirms the management’s opinion quoted in its Q2 2011 report that:

“the Company is convinced that the harvested quantity of HU flowers will be increased rapidly if the plantation can be semi-green housed (meaning enclosed environment during winter months and open top conditions during summer months), because under semi-green house conditions, we can eliminate most of the seasonal factors, achieving easier disease control, grow healthier plants to achieve better yearly yields. Therefore, the Company is intending to green house the plantation within 2011, however cost of building materials are increasing progressively in China in 2011 such that the Company may need to use the combination of used and new building materials in order that the green houses can be constructed within a capped budget of around US$7 million.”

As such, management is more determined than ever to complete the seasonal greenhouse plan for the plantation before the start of next year’s growing season. However, due to the cost of building materials on the rise in China, the budget of US$7 million outlaid for development costs likely will be increased to US$8.5-$9.0 million.

Significant Event that may affect HST Fiscal Year 2011 Operational Cash Flow and FY 2012 Sales Revenue:

The new processing and drying facility for the HU flowers and a nursery station for seedlings of the intended asparagus farm situated on a block of land measuring up to 40 Mu (26,400 M2) was temporarily halted due to the Company’s permit application to the Land Authority of Enping City having not been completed. Based on advice from our attorneys, the development was put on hold in late September pending negotiations between the Company and the Enping Authority.

This event may affect HST’s FY2011 Cash Flow and FY 2012 Sales Revenue, if unresolved by the end of 2012.

Report as of March 1, 2012:

Future Sales and Marketing of Value Added Products

Between March and June of 2010, we processed our dried flowers into salted and pickled vegetable and in- brine. These value added flowers were packaged regionally into jars, cans and vacuum pack. We carried out sample trial sales of such value added products in the PRC, Singapore and Malaysia in late May and early June of 2010 and found that the market reception was promising.

We are negotiating an agreement with a Singaporean trading company to export these value added products to Singapore and Malaysia. However, we do not have a binding agreement with any potential sales agents, at this time.

Due to the delay of constructing the aforementioned processing facility, our plan of selling and processing additional value-added products of the dried HU flowers is temporarily on hold.

Order Backlog

There is no backlog of orders at present.

Competition

The market in the PRC for HU Plant products is extremely competitive. According to the Chinese government statistics, at peak time there are more than 100 companies engaged in HU Plant product production in China and most of these operators source their flowers from their neighboring growers and their own farms.

Our major competitors are Zhao Qing Branch of Guangdong Zhong Dian Import & Export Inc. and He Yuan Livestock Import & Export Co. Ltd. There are other smaller operators namely Qing Xiang Agricultural Product Co. Ltd., Sheng Yi Food Co. Ltd., Shi Feng Food Development Co. Ltd. and Hua Yao Business Farm. At this juncture, we rank in the bottom level of these competitors. These larger corporations, in general, have greater financial and personnel resources and have achieved greater market penetration than we have. We compete by producing quality products for a market, which we believe supersedes supply for our product for the foreseeable future.

Patents, Trademarks & Licenses

We do not own any patented or trademarked technology or design.

Environmental Matters

There are no material effects that compliance with national, regional or and local provisions, which have been enacted or adopted regulating the discharge of materials into the environment, or otherwise relating to the protection of the environment, have on our capital expenditures, earnings and competitive position.

We do not anticipate any capital expenditures for environmental control facilities for the remainder of our fiscal year or any future periods.

Research and Development

We have no research and development expenditures.

Government Regulation Specific to our Business

One of the incentives granted by the PRC Government to the agriculture industry, which is applicable to HST, is that the transportation of our fresh flowers to the markets are exempted from paying highway toll-fees.

Subsidiary III.

ZhongXingNongMu Co. Ltd.: (This subsidiary was sold in February 2011)

·

In February 2011, we as a vendor sold our 78% interest in ZhongXing to Ximin SUN (“Purchaser”) on the following terms:

1. Total purchase price was RMB 204,600,000 (US $31,000,000) which is equivalent to 78% of the net assets of ZhongXing plus a surplus sum of US $4,937,000 as reflected in the ZhongXing’s Management Accounts upon the terms hereinafter provided.

2. A deposit of RMB 5,011,000 (US $759,243) was paid by the Purchaser upon execution of this Agreement to the Vendor by way of deposit and part payment towards the purchase price for the Vendor’s shares.

3. Payment of the Balance of the Purchase Price

On 29 March, 2011, an MOU was executed between SIAF and Mr. Sun Ximin to effect the cancellation of the Sales and Purchase Agreement of ZX mentioned under Subsidiary III above, and to effect the Sale and Purchase of shares of Hang Yu Tai Investment Limited (“HYT”), a company incorporated in Macau, the owner of a 78% equity interest in ZhongXingNongMu Ltd with SIAF under the following terms and conditions:

Deposit payable by Mr. Sun of RMB 5,011,000 (US $759,242).

The Balance of the Purchase consideration amounting to RMB 287,489,000 (US $44,240,758) (hereinafter called the “Balance of Purchase Consideration”) shall be paid by Mr. Sun in the manner set forth below:

A sum of RMB 25,055,000 (US $3,796,213) (hereinafter called “Further Payments”) in cash shall be paid by Mr. Sun to SIAF by ways of 5 equal installments of RMB 5,011,000 (US $759,243) each, on or before April 30, 2011; June 30, 2011; August 31^,, 2011; October 31, 2011; and December 31, 2011.

The remainder of the Balance Consideration in the amount of RMB 262,434,000 (US $40,374,461) (hereinafter called the “Final Payment”) settled by Mr. Sun by ways of cash contribution toward part or full payment of the Land Price as defined in the ZX Sales and Purchase Agreement.

Report as of March 1, 2012:

A total sum of US $39,613,768.18 was collected out of the total purchase consideration of US$45,000,000 leaving a balance of US $5,386,231.82 outstanding as of December 31, 2011. We are expecting the balance to be received on or before June 30, 2012, completing the transaction.

Variable Interest Entity.

Qinghai Sanjiang A Power Agriculture Co. Ltd.:

On December 28, 2008, through its then subsidiary Pretty Mountain Holdings Limited (“Pretty Mountain”), a company incorporated in Hong Kong, the Special Administrative Region of the PRC, the Company entered into a Sino-foreign joint venture agreement with the following parties for the setting up of a Sino-foreign joint venture company to be named as Qinghai Sanjiang A Power Agriculture Co. Ltd.(translation in English) (“Sanjiang A Power”) in the PRC, to manufacture bio-organic fertilizer, livestock feed, and to develop other agriculture projects in the County of Huangyuan, in the vicinity of the City of Xining, Qinghai Province:

Upon completion of this exercise and the subsequent reorganization, Pretty Mountain Holdings, Inc. was dissolved on January 28, 2011.

Sino-Foreign Joint Venture Agreement

The principal terms of the Sino-Foreign Joint Venture Agreement dated December 28, 2008 (“SFJVA”) are as follows:

The objectives of the joint venture are to employ modern technologies to undertake projects relating to organic fertilizer, organic livestock feed, aquaculture and agriculture waste treatment, which include:

The total investment for the joint venture shall be US $2,000,000 allocated as follows:

The Registered capital for Sanjiang A Power shall be US $1,400,000, which US $630,000 (45%) shall be contributed by Qinghai Sanjiang, US $140,000 (10%) by Garwor, and US $630,000 (45%) by Pretty Mountain. The tenure for the joint venture shall be 30 years. The respective responsibilities of the parties are as follows:

Qinghai Sanjiang is to provide:

Garwor is to provide:

Pretty Mountain is to provide:

If any of the technologies, techniques, systems, designs, brands and trademarks mentioned above are the properties of Pretty Mountain, Sanjiang A Power shall have no ownership right to any of them except in the circumstances if they would be developed and/or invented by Sanjiang A Power during the course of its development and operation. In these events if anyone of the joint venture parties should use any of the new inventions, such party shall pay Sanjiang A Power compensation, the values of which will be determined in accordance with the international market values at the time of usage.

Pretty Mountain shall conduct feasibility studies on the projects, in coordination with Qinghai Sanjiang, and such feasibility studies reports shall be the properties of Sanjiang A Power. In the event if any one of the Joint Venture partners should use any of the referred studies, such party shall pay Sanjiang A Power compensation, the values of this will be determined in accordance with the international market values at the time of usage.

Sanjiang A Power will appoint Sino Agro Food, Inc. as its consultant for the purpose of applying the necessary treatment to make its group and organization structures, business strategies and operation on par with international corporate standards, to facilitate its planned listing exercise on overseas bourses.

If any of the assets, plant and equipment are required to be purchased by Pretty Mountain for and on behalf of Sanjiang A Power, they shall be verified and approved by the relevant authority. Within three months after verification and approval of the relevant authority, the personnel of Sanjiang A Power shall inspect and verify the purchased items and execute the necessary letters of credit. Pretty Mountain shall ship all of the purchased goods to a seaport directed by Sanjiang A Power within 6 months calculated from the date of issuance of the letter of credit.

The Board of directors of Sanjiang A Power shall consist of 7 members; 3 appointees from Qinghai Sanjiang, 1 from Garwor, and 3 from Pretty Mountain, and the Board shall meet once a month. The term of the Chairmanship of the Board will be for 3 years; the chairman selected by its board of directors. It is agreed that a director appointed by Qinghai Sanjiang shall be made the first term Chairman, whereas a director appointed by Pretty Mountain shall be made the first term Finance Director cum Chief Financial Officer.

Should the shareholders decide to continue with the joint venture 6 months before its expiration, the shareholders may apply to the relevant authorities to extend its validity period.

Sanjiang A Power may be dissolved during the term of this joint venture if:

Formation of Sanjiang A Power

Qinghai Sanjiang submitted the application for the incorporation of Sanjiang A Power to the relevant authorities on March 11, 2009. The relevant Authorities in this instance consist of various governmental departments covering the business registration, project evaluation, technology assessment, custom, imports and exports, environment, foreign trade, foreign exchange control, agriculture, industrial, commerce and local departments of town planning and public health.

On May 8, 2009, the Business Registration Department of Xining City Government approved the terms and conditions of the SFJVA and the constitution for the formation of Sanjiang A Power on the following terms:

On May 25, 2009, Sanjiang A Power was formally established. In September, 2009, SIAF carried out an internal re-organization of its corporate structure and businesses, and on September 28, 2009, SIAF’s subsidiary A Power Agro Agriculture Development (Macau) Limited (“APWAM”) acquired the Pretty Mountain’s 45% equity interest in Sanjiang A Power by way of an assignment (“Assignment”).Application was subsequently made by the Company to the Companies Registry of Hong Kong for deregistration of Pretty Mountain under Section 291AA of the Companies Ordinance. By virtue of the Assignment, APWAM assumed all obligations and liabilities of Pretty Mountain under the SFJVA.

APWAM is a 100% owned subsidiary incorporated in the Special Administrative Region of Macau, the PRC. 10% of the equity interest in APWAM has been registered in the name of one Mr. HUNG Moon Cheung in compliance with the requirements of the laws of Macau on ownership of a company incorporated in Macau by non citizens of Macau, and the same is being held by Mr. HUNG in trust for and, for the benefit of, Sino Agro Food, Inc. pursuant to a Deed of Trust duly executed by Mr. HUNG on December 20, 2007 in favor of Sino Agro Food, Inc.

In December 2009, Sanjiang A Power applied to local government of the County of Huangyuan to:

The Progress of Sanjiang A Power and the Development Projects

While pending the official approvals for the incorporation of Sanjiang A Power, the joint venture partners of Sanjiang A Power had commenced work on the planned projects since early March 2009.

In April 2009, a team of Sanjiang A Power’s personnel, who were mainly staffed by the technical people from SIAF, set up a temporary bio-organic fertilizer manufacturing factory at a rented building (“Temporary Site”) located near Qinghai Sanjiang’s operation in the vicinity of Xining, to deal with the problem of disposal of accumulating potato wastes generated by Qinghai Sanjiang’s starch manufacturing factory in an environmentally friendly manner. On June 16, 2009, Sanjiang A Power produced its first batch of bio-organic fertilizer of 200 metric tons, the samples of which were applied in one of the Sanjiang Agriculture’s farm for purposes of evaluation. Laboratory testing, which was simultaneously carried out by Professor Yu of Xining University, showed that the fertilizer was of the country’s quality standard set for bio-organic fertilizer, that is, the content of composed fiber is>25%, nutrient elements (consisting of N, P & K) are >6% at ratio of 3:1:3, moisture content is <15%, a PH value of 5.8 to 8.5, micro-organism count is >20 million units per gram, and the ratio of bacterial infection is <20% and odorless.

From April through December 2009, Sanjiang A Power has carried out pre-mobilization and pre-development works as follows:

On December 9, 2009, a co-operation agreement (“Development Agreement”) was entered into by the Department of Trade and Commerce of the County Government of Huangyuan (“Huangyuan Government”) and Sanjiang A Power for development of agricultural projects in the County of Huangyuan. The principal terms and conditions of the Development Agreement are as follows:

The time frame for the development shall be 3 years, covering the following projects:

As and to whenever the fixed assets of Sanjiang A Power shall amount to RMB 20 million (US $2.941M) (to be jointly appraised by the valuation department of the Huangyuan Government and an independent firm of professional appraisers), Sanjiang A Power will apply to the Huangyuan Government for a grant of the “Land Usage Right” over the Project Site for a tenure of 50 years at a minimal consideration in accordance with the provisions of the Municipal Regulation No. 2009 (89) (estimated to be RMB3 million maximum, or US $441,176).

Sanjiang A Power shall carry out the projects on the Project Site in accordance with the terms of the Development Agreement and the proposal submitted, and shall not alter the nature and purpose of the projects without the prior consent of the Huangyuan Government. Sanjiang A Power shall not vary the usage of the Project Site, nor shall the company transfer or sublease the same during the term of development.

Sanjiang A Power shall not without good reason delay the development, and shall accept the supervision and inspection of Huangyuan Government and adhere to the rules and regulations of the relevant local policies.

In the event of occurrence of Force Majeure, natural disaster or change in the Central Government’s policies and regulations, resulting in any of the parties not being able to implement or partially implement the terms of the Development Agreement, then both parties may mutually agree to terminate this Agreement in accordance with the relevant policies or regulations.

In the event that if Sanjiang A Power shall fail to comply with the requirement as stated in the agreement, that is, within 6 months after the signing of the Development Agreement to register its place of registration or in other form setting up branch office, subsidiary or other company in the County of Huangyuan to replace Sanjiang A Power in carrying out the terms of the Development Agreement, then it will be deemed a breach by Sanjiang A Power of the Development Agreement, and Huangyuan Government shall have the right to terminate this Agreement if the value of Sanjiang A Power’s fixed assets has not reached RMB20 million and above within 2 years from the date of the Development Agreement. In addition, the Huangyuan Government will have the right to take back the Project Site, and in such case, all fixed assets on the Project Site will become the properties of the Huangyuan Government.

Any dispute will be referred to arbitration or the local court of law for adjudication if the parties fail to reach an amicable settlement.

Any subsequent agreements executed by the parties shall have equitable legal force of law.

From November 2009 to December 31, 2010, Sanjiang A Power had carried out the following works on the Project Site:

At a promotional campaign organized by the Huangyuan Government at the Project Site in early January 2010, all trial samples of 1,000 tons of livestock feed and 700 tons of bio-organic fertilizer manufactured by Sanjiang A Power were sold to regional farmers. The Huangyuan Government made available two specialists and Sanjiang A Power provided 15 technicians to take daily records of the growth of the crops planted in the regional farms that were applying Sanjiang A Power’s trial fertilizer products. Performance data collection and analysis of the trial livestock feed, which was distributed to the 15 regional farmers having 800 heads of cattle and cows collectively, was undertaken for over a period of 3 months under the supervision of the Huangyuan Government’s Agriculture Department commencing January 2010. By the end of March 2010, the results were recorded as follows:

In mid January 2010, the Huangyuan Government obtained a central grant of RMB 500,000 (US $73,357) to assist Sanjiang A Power to meet its pre-development expenditures.

In early February 2010, Sanjiang A Power started planting cash crops on various parcels totaling approximately 10,000 mu (1,650 acres), verbally granted by the Huangyuan Government to Sanjiang A Power for its use to grow raw material for its livestock feed and bioorganic fertilizer operations.

On April 22, 2010, Sanjiang A Power’s application to the Huangyuan Government to change its place of business from the City of Xining to the County of Huangyuan, and to effect the registration of APWAM as a shareholder of Sanjiang A Power, replacing Pretty Mountain, was approved by the Huangyuan Government, and a business license was issued to Sanjiang A Power, accordingly.

On May 7, 2010, Qinghai Sanjiang sold and transferred its shareholder in Sanjiang A Power to Garwor. The aforesaid sale and transfer was approved by the “State Administration for Industry and Commerce of PRC” of Xining City Government, and an amended Certificate of Approval for the incorporation of Sanjiang A Power as a Sino-foreign joint venture company was subsequently issued on July 20, 2010.

Subsequently, on November 5, 2010 the Authority of Business Registration Department of Xining City, PRC approved SJAP’s application to increase its Registered Capital to US$5,000,000.

The Business Plan of Sanjiang A Power

Sanjiang A Power started to generate revenues from some of the following activities from July 2010, and we expect that the other activities will generate revenue from April 2011 onward as described below:

Manufacturing of Livestock Feed

We use raw material consisting of crop wastes as well as locally grown and available wild wheat plus wild wheat sterns, wild peas with sterns and leaves, and selective pastures grown in the wild.

These raw materials will be finely cut and put through a number of aging and fermentation processes by adopting a technology and method called “Stock Feed Manufacturing Technology”, duly licensed by Tri-Way Industries Limited, a 100% owned subsidiary of SIAF, and catalyzed by the Enzyme developed by Sanjiang A Power as described above. Thereafter, the end materials will be packed and sealed in airtight and weatherproof packaging ready for storage.

At our trials carried out in November 2009, we packed the feed into bags of various weight to suit the farms’ needs (i.e. if a farm has 5 head of cattle or 10 head of cattle, then the weight of the feed in the bag was at 240kg or 480kg, respectively), such that the respective farm would only need to store 2 bags of feed at a time in their cattle houses to have enough feed for 7 days, and by such time the next two bags would be fermented and ready to be used for the next 7 days, etc. As most cattle houses even in a very cold winter would have a room temperature above 4° Celsius, the farmers would not need to provide additional heat to ferment the feed.

We believe that the price of our livestock feed is and will be comparable to traditional livestock feed, which is being sold in Huangyuan currently at the Huangyuan Government’s recommended introductory price of US$76.50 per ton to the regional farmers, while the Huangyuan Government has agreed to grant incentives to us by subsiding it at US$29.40 per ton making total revenue generated per ton of livestock feed at US $105.90 per ton. Subsequently, we sold over 2,000 tons of our livestock feed in November 2010 at an average price of US $114.25/MT, and as such are anticipating that there may not be a need to continue obtaining the government subsidy, although it is currently still being made available.

We also intend to manufacture a specifically formulated livestock feed as developed under the above mentioned “Stock Feed Manufacturing Technology” catered for milking cows with added nutrients to suit each stage of the cows’ growth cycles (i.e. from conceiving, carrying to weaning, and to commercial milking period).

The first seven demonstration farms were constructed at the Project Site by the end of August 2010; three of which are being used to house the newly acquired 500 head of cattle, with the others to be filled on or before May 1, 2011.

Manufacturing of Bio-Organic Fertilizer Using the Enzyme

Sanjiang A Power has completed the development of manufacturing plants and facilities for bioorganic fertilizer with a production capacity of 20,000 tons per year (“Fertilizer Factory) in accordance with design parameters of energy usage cost saving (by up to 300%) and reduced production days (by more than 300%) in mind. By using the Enzyme as invented by Sanjiang A Power, the fermentation process of the fertilizer from raw materials to ready-to-mix materials is being achieved in 7 days at 4° Celsius, instead of the previous requirement of 15° Celsius within 15 days. This Fertilizer Factory is now in operation having met its purchase orders of 2500 tons for delivery on or before the end of November 2010. It currently has a production volume of 60 tons per day.

The bioorganic fertilizer produced is designed to revitalize and improve the soil environment by:

The Physical Development Plan on Sanjiang A Power’s Property

At present, Sanjiang A Power’s property consists of over 170 mu of land, on which there is over 21,000 mІ of built up areas provided for in 39 buildings with an average size of about 538 m2 each (“Property”). This Property was used as an army railway station previously, and therefore they were built to last for decades with all basic infrastructure in place (i.e. underground water connections, electrical connections, communication connections, fencings, internal roads, drainage, etc).

The Business Development Plan of Sanjiang A Power

Sanjiang A Power will have the capacity to fatten up to 5,000 head of beef cattle per year based on a growth period of 6 months per head within Sanjiang A Power’s existing property, meaning the maximum housing capacity will be at 2,500 head in six month intervals.

We anticipate that in Year 3 of operation, Sanjiang A Power will need to have enough external breeders to help rear the extra 5,000 head of beef cattle.

Sanjiang A Power’s strategic plan for the fattening of beef cattle is such that within Year 2 of operation the fattening portion of its operation will be leased out to regional farmers under the following terms and conditions:

By Year 3 of operation, it is anticipated that a similar concept will be adopted with the external breeders. However, the selected external breeders must build their cattle houses in accordance with our designs and guidelines and manage the grow-out operation under our designed management system to be qualified. We plan to grant financial assistance to the qualified breeders, if necessary. Currently our cattle houses are built in accordance with the designs as advised by some of the country’s cattle growing professionals from the Agricultural Department and the Research and Development Department of the PRC Government. Such designs are believed by us to be the best designs for cattle houses suitable for the Qinghai Province. Our module of operation is designed to enhance economic benefits to the regional farmers and growers and the local communities as a whole, as evidenced by our trials recorded from November 2009 to March 2010, for instance:

Potentially, once our modules are fully implemented in the Huangyuan County, we believe that it will have significant impact on the communities of the Qinghai Province (a northwestern region of China) as a whole if one were to consider that Huangyuan County, beingjust a very small County of Qinghai, produces on average 55,000 heads of cattle and milking cows collectively per year while the whole of Qinghai County is estimated to have more than 2.5 million heads of cattle and milking cows growing on an annual basis in all of its districts.

Recently the Huangyuan Government has just completed a road bypassing the main city center of Huangyuan, thereby providing easier accessibility to the Sanjiang A Power property by good freeway connection.

Progress report on SanJiang A Power

SJAP consists of three (3) profit centers:

Update as of October 31, 2011:

Update as of March 1, 2012:

Subsidiary IV.

Tri-way Industries Limited:

Tri-way Industries Limited (“Tri-Way”), a company incorporated in Hong Kong the Special Administrative Region of the PRC and a 100% owned subsidiary of the Company, by an agreement dated November 12, 2008, purchased the license to use and exploit the intellectual property of a technology and method for the manufacturing of livestock feed for the consumption of beef cattle, cows, sheep and other animals, known as “Zhi Wu JieGan Si Liao Chan Ye Hua Chan Pin Ji Qi ZhiBei Fang Fa” (Stock Feed Manufacturing Technology) (“SFMT”) registered under the Patent Number “ZL2005 1 0063039.9” under the Invention Patent Certificate No: 3297232 issued by National Registry of Intellectual Property of China, from Mr. Shan Dezhang, the inventor of SFMT.

The consideration for the purchase amounting to US$8,000,000 was satisfied by cash payment of US$4,500,000, which was paid on December 18, 2008, and the balance of U.S.$3,500,000 to be paid either by cash payment or by issuance of our shares at our discretion in three tranches as follows:

If any of the payments is settled by way of issuance of shares, the shares issued will be valued at a three months weighted average of the OTC Pink sheets price index counting backward from the date of settlement. (Subsequently, the remaining tranches were fully paid on or before December 31, 2010 by the issuance of common shares at an average price of US $0.75 / share).

Tri-way intends to generate operation revenues by engaging in the following operations:

Tri-way has not generated any revenues through these services.

In addition, we also anticipate that Tri-way will generate revenues through participation in a fish farm project to be developed in the City of Enping, Guangdong Province, under the supervision and consultancy of Capital Award using the APT RAS, by taking up to 25% equity interest in a newly formed SFJVC for the purposes of development, operation and ownership of the fish farm.

SFMT, the Technology

Traditionally in China, livestock feed for cattle, sheep and cows is processed and stored in the following manner:

The large concrete yards to store the livestock feed have little economic efficiency due to its high cost of construction, maintenance and upkeep cost, and exposure to seasonal weather variation that causes deterioration to the quality of the livestock feed. Feed stored in this traditional manner is subject to the following problems:

This can result in adverse economic impact through waste of natural resources and loss of animals through sickness and diseases enhancing higher cost of production.

Using our technology, we intend to produce two types of livestock feed through SFJVCs’ operations with Sanjiang A Power for the China markets:

Manufacturing of Type One Livestock Feed

Unlike the raw materials used in the traditional process, the raw materials we use will consist mainly of crop wastes such as corn stems without the corn, wheat sterns without the wheat, sunflower stems without the sunflowers, peanut leaves without the peanuts and sugar beets leaves without the sugar beets.

These raw materials will be finely cut and put through a number of aging and fermentation processes. Thereafter, the end materials will be packed and sealed in airtight and weatherproof packaging ready for storage.

The Type One feed is designed to help:

Manufacturing of Type Two Livestock Feed

Initially, we intend to test Type Two livestock feed on small demonstration farms that may be owned by the SFJVCs or contracted with local farmers to demonstrate the economic viability of its use in dairies. The first batch of demonstration farms are being constructed in Sanjiang A Power’s Huangyuan project.

Government Approvals

We do not require any authorizations from any Government authorities to sell our sublicenses of our stock feed manufacturing technology and associated services.

Tri-way’s future business

In January 2010, Pan Shi Fang and DengJie Min (“Chinese Businessmen”) and Capital Award have entered into a Consulting Service Agreement (“the Consulting Service Agreement”), wherein Capital Award would supply the equipment and provide consulting services for the installation and construction of a fish farm and the related supporting services in Enping City, Guangdong Province of the People’s Republic of China.

Under the Consulting Service Agreement the parties thereto would form a sino foreign joint venture company (SFJVC) to own and operate the fish farm, and Capital Award would have the right to nominate its associate company or a company within its group of companies to substitute Capital Award as a party to the SFJVC.

Upon the nomination of Capital Award, Tri-Way entered into a joint venture agreement with the Chinese Businessmen to incorporate SFJVC to be named as Enping City Bi Tao A Power Fishery Development Co. Ltd. to own and operate the fish farm in accordance with the terms and conditions as prescribed therein. The documents related to the application for setting up of the SFJVC as provided in the joint venture agreement, have been finalized by the Chinese party’s lawyer, and the above mentioned application was submitted to the relevant Authorities on October 29, 2010.

Principal terms and conditions of the aforesaid joint venture agreement are as follows:

Additional shareholders paid-in capital will be funded in cash by Triway and by the Chinese businessmen in form of cash and/or by converting some of the assets in the manner described below:

First Year

Second Year Onward

The responsibilities of the Chinese Businessmen:

The responsibilities of Tri-way:

The Board of directors shall consist of 3 members; 1 appointee from Chinese Businessmen and 2 from Tri-way. The director appointed by Chinese Businessmen shall be made the Chairperson, whereas 1 director appointed by Tri-way shall be made the Deputy Chairperson. The tenure of the Chairperson and the Deputy Chairperson shall be 3 years, renewable at the discretion of the appointing party.

Intellectual Property

We own a patented “Intellectual Property” namely “Zhi Wu JeiGan Si Liao Chan Ye Hua Chan Pin Ji Qi ZhiBei Fang Fa” registered under the Patent Number “ZL2005 10063039.9” and Certificate number “329722” of China. These patents were granted on 18 October 2008 for duration of 30 years.

Progress of the 1^st Demonstration Farm: (Please refer to Capital Award’s write up above).

Unconsolidated Equity Interest:

Enping City Cattle Farm Development Co. Ltd (name pending on approval)

Agreements Concerning Livestock Feed involving ENPING CITY JUNTANG TOWN HANG SING TAI AGRICULTURE CO. LTD.

Organic Premium Beef Cattle (Fragrant Beef) Breeding and Feed Production Technology Cooperation Agreement

An Organic Premium Beef Cattle (Fragrant Beef) Breeding and Feed Production Technology Cooperation Agreement between ENPINGCITY JUNTANG TOWNHANG SING TAI AGRICULTURE CO. LTD. (“Enping Sing Tai”) and Mr.LIU XUESONG was entered into between the parties on March 21, 2011. The basis for the agreement was that Enping Sing Taiintends to develop a sizeable beef cattle breeding farm in Enping City, Guangdong Province of the PRC, utilizing and developing locally available resources.

Mr. Liu Xuesong is the expert and the inventor of a domestically developed premium beef cattle nutritional feed recipe and technology (hereafter, “Technology”).Mr. Liu Xuesong shall provide technical services to Enping Sing Tai on the organic premium beef cattle breeding technology and product development. Both parties shall jointly notify the State on the deployment of the Technology in any development projects in any provincial cities and collectively promote such development projects and the advancement of the Technology, in order to attain mutual benefit on a win-win basis in development of value added agricultural products.

The rights and obligations of Enping Sing Tai are:

The rights and obligations of Mr. Liu Xuesong are:

Organic Premium Beef Cattle (Fragrant Beef) Breeding and Feed Production Technology Sale and Transfer Agreement:

On March 25, 2011 an Organic Premium Beef Cattle (Fragrant Beef) Breeding and Feed Production Technology Sale and Transfer Agreement was entered into between Enping Sing Tai and HANG YU TAI INVESTIMENTO LIMITADA (“Hang Yu”).

Upon the principles of strategic cooperation, and for the purpose of improving the competitiveness of Enping Sing Tai’s said Technology and enhancing Hang Yu’s economic benefits, the parties entered into this Agreement for the deployment of said Technology, wherein Enping Sing Tai shall provide technical services to Hang Yu on the organic premium beef cattle breeding technology and product development.

Both parties shall jointly notify the State on the deployment of said Technology regarding any development projects in any provincial cities, and shall collectively promote such development projects and the advancement of the Technology in order to attain mutual benefit from value added agricultural products.

The rights and obligations of Enping Sing Tai are as follows:

The rights and obligations of Hang Yu are as follows:

Progress of the Fragrant Beef Development:

On April 15, 2011 the following agreements were executed between Macau EIJI Company Limited (a fully owned subsidiary of SIAF) and a group of Chinese Businessmen (represented by Mr. Wei Daxing);

A. A Joint Venture Agreement for the development of a cattle farm at a 250 Mu (41.25 acre) site situated at YaneXiaoban Village, LiangXi Town, Enping City for the growing of Cattle and sheep using our Fragrant Beef feeding technology and system, under the following terms and conditions:

B. Consulting and Servicing Contract was awarded to Macau EIJI to provide services to build a cattle and sheep farm at the said site based on following principal terms and conditions:

Updated report as of March 1, 2012:

Subsidiary V:

Hunan Shanghua A Power Agriculture Co. Ltd.(Hunan A Power)

As filed per10-Q3 2011 (SEC):

This subsidiary was officially approved on July 15, 2011 with total registered capital of US$2.5 Million invested and owned by Macau EIJI, a group of Chinese businessmen, and SanJiang A Power at 26%, 24%, and 50% ownership interests, respectively.

The business activities of Hunan A Power are similar to Sanjiang A Power, which includes the manufacturing of fertilizer (consisting mainly of organic and mixed fertilizer), growing of pasture grasses that will be manufactured into live-stock feed, and cattle rearing (using our rotation system) under a three year development plan, estimated to cost US$5 million.

Pending Authority approval, its first (fertilizer) factory (8,000 m2) is scheduled to commence construction sometime in November 2011.

As of October 31, 2011, 2,000 MT of organic fertilizer were in transit from SJAP (Xining) to Hunan A Power where the local Government is providing rental free storage. Management is currently forming a marketing team to begin selling its fertilizer product, and to receive feedback that can be incorporated into its factory operations to meet standards based on local market conditions. In addition, this will provide HSA a means to raise revenue before its factory commences operations.

As of October 31^st, most of the permit process on the land purchased by Hunan A Power has been completed, including the rezoning of 50Mu into commercial property, allowing Hunan A Power to move forward with its construction and development plan.

The 50 Mu industrial land granted by the Government was purchased at the lowest price rate permitted by the Central Government at RMB 40, 000/Mu, totaling ~RMB2 million (US$320K). Current appraised market value of the 50Mu industrial property in this region stands at RMB188, 000/Mu. Upon completing land transfer and commercial rezoning, SHAPA will realize an immediate capital gain in an amount of no less than RMB7.4 Million (US$1.175 Million).

Updated report as of March 1, 2012:

Business Synergies: The interrelationship of the activities of our various subsidiaries:

Our four technologies, including the Enzyme technology developed by Sanjiang A Power in 2009 and designed for the manufacturing of bio-organic fertilizer coupled with the A-Power Technology, the Fragrant Beef Feed technology, and the Livestock Feed Manufacturing Technology gives us the potential to develop a number of synergistic opportunities for our existing and potential future business activities.

A-Power Technology for fish farming – Capital Award

Capital Award holds a Master License for A-Power Technology, or “APT,” which is a fish growing system and technology including the designs of A-Power Integrated Water Treatment System covering all related parts and components and the A-Power farm operation’s management systems and procedures. Infinity Environmental Group, or Infinite, an Australian company, is the inventor and developer of the APT Technology. We were granted our Mater License by Infinite for the territory of China on August 1, 2005 for a term of 55 years, subsequently amended to 60 years in a supplemental agreement dated December 19, 2005.

This technology can be applied in the business operation of future SFJVCs in which we will have an interest.

At the same time, all insoluble wastes from the fish farms will be collected and processed into one of the raw materials needed for the manufacturing of fertilizer that will be applied to our HU plantations and other cash crops that the HU plantations or Sanjiang A Power will produce in the future.

In addition, we intend to establish and develop distribution centers in countries where we shall sell the fish raised at our farms, the HU plant product of Hang Sing Tai Agriculture Development Co. Ltd., and the beef and beef by-products of Sanjiang A Power.

A Power Technology for Prawn farming – Capital Award

In relation to our Fish Technology we have developed a unique prawn growing technology and system expanded from our APT fish growing system. In 2012 we shall complete the development and construction of our 1^st and 2^nd prawn farms that will have the capacity and facilities to grow prawn within fully controlled and enclosed environments covering most aspects of the prawn culture business from brood stock, breeding, and flies, to grow-out, marketing, etc.

The Enzyme Technology for Livestock Feed & Bio-Organic Fertilizer – Sanjiang A Power

Sanjiang A Power, as the owner of this invention, will apply this technology in the business operation of future SFJVCs in which we have an interest.

SFMT, the Stock Feed Manufacturing Technology – Tri-way

Tri-way owns a patented SFMT, the Stock Feed Manufacturing Technology, registered under the Patent Number “ZL2005 10063039.9” and Certificate number “329722” of China, for the manufacturing of livestock feed designed and applied for the consumption of beef cattle, cows, sheep and other animals.

This technology is being applied in the business operation of Sanjiang A Power and will be applied in the business operation of future SFJVCs in which we have an interest.

Capital Award has over the years improved and refined the application of the A-Power Technology, in particular the design and functionality of the component parts and equipment, to the extent that the present form of A-Power Technology is very much different from its original form, although it is still named as A-Power Technology. Capital Award has control over the manufacturing rights to its re-designed plants and equipment, including some of the parts and components. Therefore, it is no longer valid whether the original tenure of the Master License obtained was for 60 years or more, as Capital Award in fact is the inventor and designer of the present form of A-Power Technology and the essential plant and equipment.

It is the same scenario for the Stock Feed Manufacturing Technology, as evidenced by the fact that in a short span of time of its application, Sanjiang A Power already managed to develop the new Enzyme Technology, the introduction of which has brought changes to the livestock feed manufacturing method.

The Result of the Synergistic Operation:

The Company’s ultimate aims and directions are as follows:

Our bioorganic fertilizer will start the food chain in the right direction by reconditioning the soil to an organic state providing organic produce, which will be fed to the animals to produce organic products.

All chains of our operation will be under the control of our Company, ensuring the best quality and quantity of production on a uniform basis, made possible by the application of our technologies.

Regulatory Environment in China:

China is in a state of transition, transitioning from a planned economy to a market economy. While the Chinese government has pursued economic reforms since its adoption of the open-door policy in 1978, a large portion of the Chinese economy is still operating under five-year plans and annual state plans. Through these plans and other economic measures, such as control on foreign exchange, taxation and restrictions on foreign participation in the domestic market of various industries, the Chinese government exerts considerable direct and indirect influence on the economy. Many of the economic reforms carried out by the Chinese government are unprecedented or experimental, and expected to be refined and improved. Other political, economic and social factors can also lead to further readjustment of such reforms. This refining and readjustment process may not necessarily have a positive effect on our operations or future business development. Our operating revenues may be reduced by changes in China’s economic and social conditions as well as by changes in the policies of the Chinese government, such as changes in laws and regulations (or the official interpretation thereof), measures which may be introduced to control inflation, changes in the interest rate or method of taxation, and the imposition of additional restrictions on currency conversion.

China’s legal system is a civil law system. Unlike the common law system, the civil law system is based on written statutes in which decided legal cases have little value as precedents. In 1979, China began to promulgate a comprehensive system of laws and has since introduced many laws and regulations to provide general guidance on economic and business practices in China and to regulate foreign investment. Progress has been made in the promulgation of laws and regulations dealing with economic matters such as corporate organization and governance, foreign investment, commerce, taxation and trade. The promulgation of new laws, changes of existing laws and the abrogation of local regulations by national laws could have a negative impact on our business and business prospects. In addition, as these laws, regulations and legal requirements are relatively recent, their interpretation and enforcement involve significant uncertainty.

We are subject to many general regulations governing business entities and their behavior in China and in any other jurisdiction in which we have operations. In particular, we are subject to laws and regulations covering food, dietary supplements and pharmaceutical products. Such regulations typically deal with licensing, approvals and permits. Any change in product licensing may make our products more or less available on the market. Such changes may have a positive or negative impact on the sale of our products and may directly impact the associated costs of compliance, and our operational and financial viability. Such regulatory environment also covers any existing or potential trade barriers in the form of import tariff and taxes that may make it difficult for us to export our products to certain countries and regions, such as Japan, South Korea and Hong Kong, which would limit our international expansion.

We are subject to the law on foreign investment enterprises in China, and the foreign company provisions of the Company Law of China, which governs the conduct of our wholly owned subsidiary and its officers and directors. Additionally, we are also subject to varying degrees of regulations and permit system by the Chinese government.

Regulation of Sino-Foreign Joint Venture Companies in China

We are conducting and intend in the future to conduct some of our business operations in China through ownership interests in Sino-Foreign Joint Venture Companies.

A Sino-Foreign Joint Venture Company (SFJVC) is a joint venture between a Chinese and a foreign company within the territory of China. The Chinese company usually provides the labor, land use rights and factory buildings, while the foreign company brings in the necessary technology and key equipment, as well as the capital. This joint venture is based on a cooperative joint venture contract in which matters like the terms of cooperation, the division of earnings, the ownership of property upon the termination of the contract term of the SFJVC, the sharing of risks and losses, and other matters governing the operations of the SFJVC are set forth.

A SFJVC is entitled to all tax benefits and incentives granted by the China Government to domestic entities in the agricultural industry. Thus, operating as an SFJVC allows us to take advantage of China Government agriculture industry exemptions including:

The foreign partners of the SFJVCs are allowed by the Foreign Investment Department of China to repatriate their investment capital returns.

The application of the formation of any SFJVC must be submitted to and approved by 15 authorities of the local County and Provincial government that require different kind of information must be compiled in accordance with all local laws and regulation, as follows:

Provincial Government departments covering:

County Government bodies covering:

Regulations Concerning Land Ownership and Usage in China

Under the 1982 Constitution, urban land in China is owned by the State and collectives own the rural land. Since the local and central governments administer the rural collectives, it can be construed that all land ownership is under control of the State. However, the Constitution’s Amendment Act of 1988 to Article 10 adopted on April 12, 1988, states that a land use right may be transferred in accordance to law. Based on this statement, a land use right becomes divisible from land ownership, thus making land use right likely to be privatized. Individuals, including foreigners can hold long-term leases for land use. They also can own buildings, apartments, and other structures on land, as well as personal property.

Real estate transfers in China take place in the form of transfer of right to use land. To obtain land-use rights, the land user must sign a land-grant contract with the local land authority and pay a land-grant fee up front. The grantee will enjoy a fixed land-grant term and must use the land for the purpose specified in the land-grant contract. Depending on the type and purposes of land use, the maximum term of a land grant ranges from 40 years for commercial usage, 50 years for industrial purpose, to 70 years for residential use.

The application of “Land Usage Right” on any leased land must be submitted to and approved by many authorities of the local and central government supported by a minimum of 80% of the signatories of its original land leasers who had leased the land from the government before they transfer the land to the new leasers.

Employees

The Table below shows our current employees for every sector of the businesses:

Item 1A. Risk Factors

Smaller reporting companies are not required to provide the information required by this item.

Item 1B. Unresolved Staff Comments

None.

Item 2. Description of Properties

Rented Property:

Adequate for current needs: Yes

Properties that we have “Land Use Right”:

Land Use Rights All lands held under “Land Use Right” are zoned agriculture lands, as such and under current Land Law of China, these lands are not permitted for use of any other purpose (i.e. industrial, residential or commercial development) except for the purpose of agriculture development.

All improvements to the lands and development of non-cultivated facilities (i.e. storages, plants and machinery buildings, primary workshops, workers quarters, farm offices etc) thereon for the purpose of farm application are permitted and are regarded as “Temporary Built Up”, which are not subject to the current town planning and building laws and regulations of the district governments. Only the consent of the local village’s committee concerned is required for such purpose.

We do not intend to renovate, improve, or develop properties for any other purposes other than for the purpose of agriculture development. We are not subject to competitive conditions for real estate property development and currently we have no property to insure. We have no policy with respect to investments in real estate or interests in real estate and no policy with respect to investments in real estate mortgages. Further, we have no policy with respect to investments in securities of or interests in persons primarily engaged in real estate activity.

Item 3. Legal Proceedings

We are not currently a party to any legal proceedings nor do we have knowledge of any pending or threatened legal claims.

No officer, director, or persons nominated for such positions, promoter or significant employee has been involved in the last ten years in any of the following:

Item 4. Submission of Matters to a Vote of Security Holders

None.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market for Common Stock

Since January 5^th, 2012, our common stock has been quoted on OTC Bulletin Board (OTCBB) under the symbol of “SIAF.OB”, prior to that on July 24, 2007, our Common Stock was quoted on the Pink OTC Markets under the symbol “SIAF.PK.” also, prior to that, our Common Stock was quoted on the Pink OTC Markets under the symbol “VOLG.PK.” The following table lists the high and low bid price for our Common Stock as quoted, in U.S. dollars, by the Pink then BB OTC Markets during each quarter within the last two fiscal years. These quotations reflect inter-dealer prices, without retail mark-up, markdown, or commission and may not represent actual transactions.

Holders of Our Common Stock

As of March 31, 2012 there were approximately 5356 shareholders of record holding shares of common stock.

The holders of the common stock are entitled to one vote for each share held of record on all matters submitted to a vote of stockholders. Holders of the common stock have no preemptive rights and no right to convert their common stock into any other securities. There are no redemption or sinking fund provisions applicable to the common stock.

Dividends

On August 27, 2010, we declared cash dividends of US $0.01 per each of our common stock with recorded date on August 31, 2010, and payment date of October 15, 2010. Subsequently the said dividends were fully paid on October 15, 2010.

On October 2, 2011, we declared cash dividends of US $0.01 per each of our common stock with a record date of October 31, 2010, and payment date of November 15, 2011. Subsequently, the dividend was fully paid to shareholders of record on November 15, 2011.

Stock Re-Purchases

We do not currently have any publicly-announced repurchase plans in effect. However we did re-purchase shares of our common stock and re-issued them out for purposes of debt settlements as shown below:

Table (2)

Recent Sales of Unregistered Securities

Total Number of common shares issued: 67,034,262.

Total Number of Preference A shares issued: 100

Total Number of Preference B shares issued: 7,000,000

Total Issuance of shares (including Series A & B) shares: 74,034,362

Total Consideration received: $73,092,193.

Total Number of USA investors: 5,139.

Total number of Non-USA investors: 217.

Total Number of shareholders: 5,356.

Basic number of shares Issued and outstanding (Weighted average as at 31.12.2011):60,158,210

Fully Diluted number of shares issued and outstanding (weighted average as at 31.12.2011): 67,158,210.

We relied upon Section 4(2)of the Securities Act of 1933, as amended for the above issuances to US citizens or residents.

We believed that Section 4(2) of the Securities Act of 1933 was available because:

We relied upon Regulation S of the Securities Act of 1933, as amended for the above issuances to non-US citizens or residents.

We believed that Regulation S was available because:

In connection with the above transactions, although some of the investors may have also been accredited, we provided the following to all investors:

Prospective investors were invited to review at our offices at any reasonable hour, after reasonable advance notice, any materials available to us concerning our business. Prospective Investors were also invited to visit our offices.

EXPERTS

The Sourlis Law Firm has assisted us in the preparation of this Report and will provide counsel with respect to other legal matters concerning the Company and its securities law compliance. The Sourlis Law Firm has consented to being named as an expert in this Report.

Madsen & Associates CPA’s, Inc., our certified public accountants, have audited our financial statements included in this Report to the extent and for the periods set forth in their audit reports. Madsen & Associates CPA’s, Inc. has presented its report with respect to our audited financial statements. The report of Madsen & Associates CPA’s, Inc. is included in reliance upon their authority as experts in accounting and auditing.

DISCLOSURE OF COMMISSION POSITION OF

INDEMNIFICATION FOR SECURITIES ACT LIABILITIES

Our Certificate of Incorporation and Bylaws provide no director shall be liable to the corporation or any of its stockholders for monetary damages for breach of fiduciary duty as a director, except with respect to (1) a breach of the director’s duty of loyalty to the corporation or its stockholders, (2) acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (3) liability which may be specifically defined by law or (4) a transaction from which the director derived an improper personal benefit, it being the intention of the foregoing provision to eliminate the liability of the corporation’s directors to the corporation or its stockholders to the fullest extent permitted by law. The corporation shall indemnify to the fullest extent permitted by law each person that such law grants the corporation the power to indemnify.

We have been advised that, in the opinion of the SEC, indemnification for liabilities arising under the Securities Act is against public policy as expressed in the Securities Act, and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities is asserted by one of our directors, officers, or controlling persons in connection with the securities being registered, we will, unless in the opinion of our legal counsel, submit the question of whether such indemnification is against public policy to a court of appropriate jurisdiction.

Item 6. Selected Financial Data

Not applicable.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion together with “Selected Historical Financial Data” and our consolidated financial statements and the related notes included elsewhere in this Report. This discussion contains forward-looking statements, which involve risks and uncertainties. Our actual results may differ materially from those we currently anticipate as a result of many factors, including the factors we describe under “Risk Factors,” “Special Note Regarding Forward-Looking Statements” and elsewhere in this Report.

Forward Looking Statements

Some of the information in this section contains forward-looking statements that involve substantial risks and uncertainties. You can identify these statements by forward-looking words such as “may,” “will,” “expect,” “anticipate,” “believe,” “estimate” and “continue,” or similar words. You should read statements that contain these words carefully because they:

We believe it is important to communicate our expectations. However, there may be events in the future that we are not able to accurately predict or over which we have no control. Our actual results and the timing of certain events could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth under “Risk Factors,” “Business” and elsewhere in this Report. See “Risk Factors.”

Unless stated otherwise, the words “we,” “us,” “our,” “the Company” or “Sino Agro” in this Report collectively refers to the Company, Sino Agro Food, Inc.

The following discussion of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes, and other financial information included in this Form 10.

Our Management’s Discussion and Analysis contains not only statements that are historical facts, but also statements that are forward-looking (within the meaning of section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934).The Private Securities Litigation Reform Act of 1995 is not available to us as a non-reporting issuer. Further, Section 27A(b)(2)(D) of the Securities Act and Section 21E(b)(2)(D) of the Securities Exchange Act expressly state that the safe harbor for forward looking statements does not apply to statements made in connection with an initial public offering.

Forward-looking statements are, by their very nature, uncertain and risky. These risks and uncertainties include international, national, and local general economic and market conditions; our ability to sustain, manage, or forecast growth; our ability to successfully make and integrate acquisitions; new product development and introduction; existing government regulations and changes in, or the failure to comply with, government regulating statements are inherently subject to risks and uncertainties, the actual results and outcomes may differ materially from the results and outcomes discussed in the forward-looking statements. You are urged to carefully review and consider the various disclosures made by us in this report and in our other reports as we attempt to advise interested parties of the risks and factors that may affect our business, financial condition, and results of operations and prospects.

Overview

We are an integrated developer, producer and distributor of organic produce and agricultural / aquaculture products of high quality standard, with our subsidiaries operating in China.

Currently we are generating revenues from four divisional businesses, namely:

Consolidated Results of Operations Fiscal Year 2011 Compared to Fiscal Year 2010

Revenues

Revenues including continued and discontinued operations increased by $11,328,837 or 27.94% to $51,879,903 for the year ended December 31, 2011 from $40,551,066 for the year ended December 31, 2010. The increase was primarily due to maturity of all sectors of the businesses (i.e. the fishery, the plantation organic fertilizer and the cattle farm) as they gradually move into operational stages instead of developing stages.

The following chart illustrates the changes by category from the year-ended December 31, 2011to December 31, 2010.

Revenue – Fishery: Revenue from fishery increased by $22,258,292 or 534.56% from $4,163,833 for the year ended December 31, 2010 to $26,422,125 for the year ended December 31, 2011. The increase in fishery was primarily due to our increase in revenue from the sale of sleepy cods and baits and development contracting services for the year ended December 31, 2011 compared to the sale of fingerlings and consulting income for the year ended December 31, 2010.

Revenue – Dairy: Revenue from dairy decreased by $29,632,300 from $29,632,300 for the year ended December 31, 2010 to $0 for the year ended December 31, 2011. The decrease in dairy was primarily due to the sale of our dairy segment sold in January 2011.

Revenue – Plantation: Revenue from our plantation increased by $1,338,301 from $4,774,854 for the year ended December 31, 2010 to $6,113,155 for the year ended December 31, 2011 due to a better than average harvest in 2011.

Revenue – Beef: Revenue from beef increased by $13,202,143 from $1,980,079 for the year ended December 31, 2010 to $15,182,222 for the year ended December 31, 2011 as they gradually move into operational stages instead of developing stages.

Revenue – Cattle farm: Revenue from cattle farm development increased by $4,159,921 from $0 for the year ended December 31, 2010 to $4,159,921. The increase in cattle farm revenue was primarily due to the commencement of our contracting services in the cattle farming industry for the year ended December 31, 2011.

Revenue – Organic fertilizer: Revenue from Organic fertilizer increased by $2,480 from $0 for the year ended December 31, 2010 to $2,480. The increase in organic fertilizer was primarily due to the commencement of our production of organic fertilizer for the year ended December 31, 2011.

Cost of Goods Sold

Cost of goods sold increased by $8,854,233 or 48.92% to $18,097,641 for the year ended December 31, 2010 from $26,951,874 for the year ended December 31, 2011. The increase primarily due to increase of sales revenue thus in turn increases on direct production cost proportionately as our operations are gradually moving into scale of operation.

The following chart illustrates the changes by category from the year-ended December 31, 2011 to December 31, 2010.

Cost of goods sold – Fishery. Cost of goods sold from fishery increased by $14,337,189 from $1,055,089 for the year ended December 31, 2010 to $15,392,278 for the year ended December 31, 2011. The increase in fishery was primarily due to cost of goods sold from the sale of sleepy cods and baits and development contracting services for the year ended December 31, 2011 compared to the cost of goods sold of fingerlings and consulting income for the year ended December 31, 2010.

Cost of goods sold – Dairy. Cost of goods sold from dairy decreased by $14,366,437 for the year ended December 31, 2010 to $0 for the year ended December 31, 2001. The decrease in dairy was primarily due to the sale of our dairy segment in January 2011.

Cost of goods sold – Plantation. Cost of goods sold from our plantation increased slightly by $242,511 from $1,828,324 for the year ended December 31, 2010 to $2,070,835 for the year ended December 31, 2011 due to good harvest in 2011. The increase primarily due to increase of sale’s revenue thus in turn increases on direct production cost proportionately. 

Cost of goods sold – Beef. Cost of goods sold from beef increased by $6,127,056 from $847,791 for the year ended December 31, 2010 to $6,937,847 for the year ended December 31, 2011 as they gradually move into operational stages instead of developing stages.

Cost of goods sold – Cattle farm. Cost of goods sold from cattle farm development increased by $2,511,508 from $0 for the year ended December 31, 2010 to $2,511,508 for the year ended December 31, 2011. The increase in cattle farm was primarily due to the commencement of our contracting services in the cattle farming industry for the year ended December 31, 2011.

Cost of goods sold – Organic fertilizer. Cost of goods sold from organic fertilizer increased by $2,406 from $0 for the year ended December 31, 2010 to $2,406 for the year ended December 31, 2011. The increase in cattle farm was primarily due to the commencement of our business of organic fertilizer for the year ended December 31, 2011.

Gross Profit

Gross Profit increased by $2,474,604 or 10.21% from $22,453,425 for the year ended December 31, 2010 to $24,928,029 for the year ended December 31, 2011. The increase was primarily due to discontinuation of dairy segment due to maturity of all sectors of the businesses (i.e. the fishery, the plantation organic fertilizer and the cattle farm) as they gradually move into operational stages instead of developing stages even though the sale of diary sector on January 2011.

The gross profit by category is as follows:

Gross profit – Fishery: Gross profit from fishery increased by $7,921,103 from $3,108,744 for the year ended December 31, 2010 to $11,029,847 for the year ended December 31, 2011. The increase in fishery was primarily due to an increase in the volume of contract service income from fishery and prawn development contracts for the year ended December 31, 2011 compared to the sale of fingerlings and consulting income for the year ended December 31, 2010.

Gross profit –Dairy: Gross profit from dairy decreased by $15,265,863 for the year ended December 31, 2010 to $0 for the year ended December 31, 2011. The decrease in dairy was primarily due to the sale of our dairy segment in January 2011.

Gross profit – Plantation: Gross profit from our plantation increased by $1,095,790 from $2,946,530 for the year ended December 31, 2010 to $4,042,320 for the year ended December 31, 2011. The decrease in plantation was primarily due to the decrease in the harvest in 2011.

Gross profit – Beef: Gross profit from beef increased by $7,075,087 from $1,132,288 for the year ended December 31, 2010 to $8,207, 375 for the year ended December 31, 2011 as they gradually move into operational stages instead of developing stages.

Gross profit – Cattle farm: Gross profit from cattle farm development increased by $1,648,413 from $0 for the year ended December 31, 2010 to $1,648,413 for the year ended December 31, 2011. The increase in cattle farm was primarily due to the commencement of our contracting services in the cattle farming industry for the year ended December 31, 2011.

Gross profit – Organic fertilizer. Organic fertilizer increased by $74 from $0 for the year ended December 31, 2010 to $74 for the year ended December 31, 2011. The increase in cattle farm was primarily due to the commencement of our business of organic fertilizer for the year ended December 31, 2011.

General and Administrative Expenses and Interest Expenses

General and administrative and interest expenses from continuing and discontinued operation (including depreciation and amortization) increased by $1,397,036 or 35.77% from $3,905,701 for the year ended December 31, 2010 to $5,302,737 for the year ended December 31, 2011. The increase was primarily due to increase on the depreciation and amortization amounting to $936,509 for the year ended December 31, 2011 from $244,177 for the year ended December 31, 2010, and the increase in wages and salaries of $2,122,975 for year ended December 31, 2011 from $1,403,102 for the year ended December 31, 2010.

In this respect, total depreciation and amortization amounted to $1,475,450 for the year ended December 31, 2011, out of which amount, $936,509 was booked under General and administration expenses and $538,941 was booked under cost of goods sold; whereas total depreciation and amortization was at $2,212,106 for the year ended December 31, 2010 and out of which amount, $244,177 was booked under General and Administration expenses and $1,967,929 was booked under cost of goods sold.

Income Taxes

No EIT has been provided in the financial statements of CA, ZX, JHST, and SJAP since they are exempted from EIT for the years ended December 31, 2011 and December 31, 2010 as they are within the agriculture, dairy and fishery sectors.

EIT has been provided in the financial statements of HSA at 25% for the income for the years ended December 31, 2011 and December 31, 2010 as it is not within the agriculture, dairy and fishery sectors.

Off Balance Sheet Arrangements

As of December 31, 2011, there is no long-term loan debt.

Liquidity and Capital Resources

As of December 31, 2011, we had unrestricted cash and cash equivalents of $1,387,908 (see notes to the consolidated accounts), and our working capital as of December 31, 2011 was at $57,744,328.

As of December 31,2011, our total long term debts are as follows:

Cash provided by operating activities from continuing operation totaled $3,222,375 for the year ended December 31, 2011. This compares with cash provided by operating activities from continuing operations totaled $1,427,977 for the year ended December 31, 2010. The increase in cash flows from operations primarily resulted from net cash provided by net income for the year after adjustments of non-cash items.

Cash used in investing activities from continuing operations totaled ($2,299,647) for the year ended December 31, 2011. This compares with cash used in investing activities from continuing operations totaled ($3,928,156) for the year ended December 31, 2010. The decrease in cash used in investing activities primarily resulted from the receipts of proceeds of disposal of subsidiaries of $557,700 and payment for construction in progress of $1,346,394, investment in unconsolidated equity of $1,258,607, as compared with payment for construction in progress of $0, and investment in unconsolidated equity of $2,739,881 for the year ended December 31, 2010.

Cash used in financing activities from continuing operations totaled $573,814 for the year December 31, 2011. This compares with cash used in financing activities from continuing operations totaling $357,438 for the year ended December 31, 2010.

Cash provided by operating activities from discontinued operation totaled $0 for the year ended December 31, 2011. This compares with cash provided by operating activities from discontinued operations totaling $11,930,533 for the year ended December 31, 2010. The decrease in cash flows from operations primarily resulted from there is no cash generated from the discontinued operations of Dairy Production Division since January 1, 2011.

Cash used in investing activities from discontinued operation totaled $3,137,885 for the year ended December 31, 2011. This compares with cash used in investing activities totaling $6,759,822 for the year ended December 31, 2010 due to withdrawal of cash and cash equivalents of discontinued dairy segment of $3,137,885 in 2011 and resulting in the decrease in cash used in investing activities by $3,621,937.

Cash provided by financing activities from discontinued operation totaled $0 for the year ended December 31, 2011. This compares with cash used in financing activities from discontinued operations totaling $3,059,788 for the year ended December 31, 2010.

OTHER SIGNIFICANT TRANSACTIONS THAT AFFECT CASH/LIQUIDITY:

Seasonal Factors Affecting our Operations

In China, winter season is from mid-November to mid-March. The Chinese lunar year holiday falls during this period in February each year. During the Chinese lunar holiday, Chinese workers take a 30-day holiday (although the Government’s official holiday period is for 10 days). The months of March and April are the times for ground preparation and seedling for the new season.

These seasonal factors have certain influences on our overall operations explained as follows:

The Plantation - The HU flowers’ harvesting season is from July to the end of October. During this time, the bulk of our freshly harvested flowers are dried and stored. Although the dried flowers are sold year round, the bulk of sales are from November to June each year. In general, we sell the dried flowers at their highest prices from April through June. During 2009, we did not have enough dried flowers to store and sell throughout the entire year and our harvest was sold by the end of December. However, our 2010 harvest was at 31.5 million pieces, which is twice the volume of our 2009 harvest of 16.5 million pieces. This harvest of 31.5 million is still an insufficient number of flowers to be processed, dried, stored, and sold through to June 2011 to even out our annual sales through the year of 2011.

Progress report of HST 2011 quoted earlier in our Q2 and Q3 2011 reports:

The 2011 season started very nicely having harvested over 11 million pieces of fresh flowers during the month of June, which is exceptional compared to the previous year, and this trend continued into late August producing over 29.5 million pieces of fresh flowers during the quarter; making a total harvest exceeding 40.5 million pieces for the June through August period. Larger volume of production during this quarter attributed to lowering the cost of production to RMB0.125/piece of fresh flowers and RMB11.95/Kg of dried flowers compared to June’s cost at RMB0.18/piece of fresh flowers and RMB13.63/Kg of dried flowers.

During the quarter there were about 10 million pieces of fresh flowers and 357 tons of dried flowers sold resulting in over RMB20.77 million (US $3.29 million) of revenue generated for the Quarter.

However, the region experienced extremely dry weather conditions throughout September resulting in a scarce harvest throughout the months of September and October.

Therefore, although performance of this year is about 25% better than in 2010, it falls short of our earlier harvest projection (60 million to 75 million pieces of fresh flowers) for 2011.

This experience confirms the management’s opinion quoted in its Q2 2011 report that:

“the Company is convinced that the harvested quantity of HU flowers will be increased rapidly if the plantation can be semi-green housed (meaning enclosed environment during winter months and open top conditions during summer months), because under semi-green house conditions, we can eliminate most of the seasonal factors, achieving easier disease control, grow healthier plants to achieve better yearly yields. Therefore the Company is intending to green house the plantation within 2011, however cost of building materials are increasing progressively in China in 2011 such that the Company may need to use the combination of used and new building materials in order that the green houses can be constructed within a capped budget of around US$7 million.”

As such, management is more determined than ever to complete the seasonal greenhouse plan for the plantation before the start of next year’s growing season. However, due to the cost of building materials on the rise in China, the budget of US $7 million outlaid for development costs will likely be increased to US$8.5/9.0 million.

Significant Event that may affect HST FY 2011 Operational Cash Flow and FY 2012 Sales Revenue:

The new processing and drying facility for the HU flowers and a nursery station for seedlings of the intended asparagus farm on a block of land measuring up to 40 Mu or equivalent to 26,400 M2 has been temporarily halted due to the Company’s permit application to the Land Authority of Enping City having not yet been granted. Based on advice from our attorneys, the Development was put on hold in late September pending negotiations between the Company and the Enping Authority.

This event may affect HST’s FY 2011 Cash Flow and FY 2012 Sales Revenue, if unresolved by the end of 2011.

Report as of March 1, 2012;

Significant Events that may affect Fishery Operations’ Cash Flow:

Quoting from the Q2, 2011 Financial Report:

“However result from the application of the Joint Venture Company of the Enping Fish Farm, we received a notice from the tax department that only 50% of its income tax would be exempted regulated by the local Province Government. In this respect we are appealing this out-come with the local Province Government.”

Due to a contradiction in uniformly applying the tax, i.e. in Q3 authorities granted a 100% tax exemption for fish sales generated by the Open Dam Farm, the Company is intensifying its efforts seeking uniform exemption for ALL fish sales, regardless of their source. Short of obtaining the exemption, the Company will incur tax charges on 50% of its income derived from the Enping Fish Farm.

This appeal is still pending as of March 1, 2012.

CA does not carry a Builder or a Developer license in China, and as a result, its contracts are structured based on it providing consulting services, and subcontracting with licensed builders and developers to handle construction and payment of capital improvement taxes.

The profit CA derives from these contracts is retained in China and is recorded as payable to CA by the SJVC, by which CA may later elect to exchange for equity interest in the SJVC as provided within the terms and conditions of each contract. At such time, if and when CA decides to exercise its option to secure equity in the SJVC, certain tax implications might be triggered and have to be accounted for, accordingly.

As of December 31, 2011, we had no other significant transactions that may affect our cash/liquidity other than the seasonal variation effects mentioned earlier and the effects stated herein: “The Company considers all highly liquid securities with original maturities of three months or less when acquired to be cash equivalents. Cash and cash equivalents kept with financial institutions in People’s Republic of China (“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.”

Banking Regulations and tax laws in China and the trading habits of the farming society are in general rather different to many other Western Developing Countries, (i.e. Maximum daily Cash withdrawn from banks is limited to RMB50,000/consecutive day without having to go through regulatory application processes, a company is not allowed to issue paid-cheque to a person with its current bank account, in the agriculture sector, growers and suppliers would deal mainly in cash transactions, and most of the taxes for goods sold and purchased are to be paid up-front by buying the tax coupons in advance and others etc.). Due to these reasons, it is necessary for the company to keep certain cash balances under the accounts of respective directors to be able to operate efficiently.

The Company needs to bring cash directly to the farmers and some suppliers to buy material and other goods from the farmers as well as to buy some of capital expenditure items from suppliers (i.e.) building and construction materials and locally manufacturing plants and equipment. Usually cash is given to the Directors or advanced by the directors personally for these purposes. These cash transactions are being booked temporarily under the Director’s individual accounts “due from directors” or when the goods or materials are being delivered, we booked in the said director’s account as “Due to the director”, such that these types of entries were primarily to make for easier bookkeeping, and that we don’t regard the referred transactions as personal loans to the directors for the purpose of Section 13(k) of the Exchange Act.

OTHER SIGNIFICANT TRANSACTIONS THAT AFFECT CASH/LIQUIDITY:

As of December 31, 2011, we had no other significant transactions that may affect our cash/liquidity other than the seasonal variation effects mentioned earlier and the effects stated herein: “The Company considers all highly liquid securities with original maturities of three months or less when acquired to be cash equivalents. Cash and cash equivalents kept with financial institutions in People’s Republic of China (“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.”

BASIS OF PRESENTATION

The consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”). All material inter-company transactions and balances have been eliminated in consolidation.

The Renminbi of the People’s Republic of China (RMB) has been determined to be the Company’s functional currency. The balance sheets were translated at year end exchange rates. Expenses were translated at moving average exchange rates in effect during the years. The effects of rate changes on assets and liabilities are recorded as accumulated other comprehensive income.

BASIS OF CONSOLIDATION

The consolidated financial statements include the financial statements of SIAF, its subsidiaries CA, CS, CH, TRW, MEIJI, HJST, HSA, and APWAM and its variable interest entity SJAP. 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.

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

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 realizability of deferred tax assets and inventory reserves.

REVENUE RECOGNITION

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

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

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

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

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

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

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

COST OF GOODS SOLD

Cost of goods sold consists primarily of direct purchase cost of merchandise goods, and related levies.

SHIPPING AND HANDLING

Shipping and handling costs related to cost of goods sold are included in general and administrative expenses which totaled $58,096 and $0 for the years ended December 31, 2011 and December 31, 2010, respectively.

ADVERTISING

Advertising costs are included in general and administrative expenses which totaled $99,526 and $0 for the years ended December 31, 2011 and December 31, 2010, respectively.

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 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 statements of equity amounted to $3,446,838 as of December 31, 2011 and $3,804,116 as of December 31, 2010. The balance sheet amounts with the exception of equity at December 31, 2011 and December 31, 2010 were translated at RMB 6.30 to $1.00 and RMB 6.62 to $1.00, respectively. The average translation rates applied to the statements of income and comprehensive income and of cash flows for the years ended December 31, 2011 and December 31, 2011 were RMB 6.33 to $1.00 and RMB 6.73 to $1.00, respectively.

CASH AND CASH EQUIVALENTS

The Company considers all highly liquid securities with original maturities of three months or less when acquired to be cash equivalents. Cash and cash equivalents kept with financial institutions in People’s Republic of China (“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. Provision for doubtful accounts as of December 31, 2011 and December 31, 2010 are $0. Bad debts written off for the years ended December 31, 2011 and December 31, 2010.

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:

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 years.

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

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

GOODWILL

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

PROPRIETARY TECHNOLOGIES

The Company has determined that technological feasibility is established at the time a working model of products is completed. Master license of stock feed manufacturing technology was acquired and the cost 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. 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 30 years to 60 years. Land use rights purchase prices were determined in accordance with the 2007 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.

VARIABLE INTEREST ENTITY

An entity (investee) in which the investor has obtained less than a majority- owned interest, according to the Financial Accounting Stadards 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 as 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 promarary 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, are subsequently reacquired by the Company. Treasury stock does not reduce the number of shares issued but doe 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 treasury shares must have a legitimate purpose. Some of the most common reasons for purchasing treasury share are as follows

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

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

a. to make more shares available for a merger.

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

INCOME TAXES

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

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

Deferred income taxes are calculated at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled. Deferred tax is charged or credited in the income statement, except when it relates to items credited or charged directly to equity, in which case the deferred tax is also adjusted in the equity accounts. Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis.

ASC 740 also prescribes a more-likely-than-not threshold for financial statement recognition and measurement of a tax position taken, or expected to be taken, in a tax return. ASC 740 also provides guidance related to, among other things, classification, accounting for interest and penalties associated with tax positions, and disclosure requirements. Any interest and penalties accrued related to unrecognized tax benefits will be recorded in tax expense.

POLITICAL AND BUSINESS RISK

The Company’s operations are carried out in the 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. As of December 31, 2011 and December 31, 2010, the Company determined no impairment charges were necessary.

EARNINGS PER SHARE

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

For the years ended December 31, 2011 and 2010, basic earnings (loss) per share from continuing operations attributable to Sino Agro Food, Inc. and subsidiaries common stockholders amount to $0.26 and $(0.05), respectively. For the years ended December 31, 2011 and 2010, diluted earnings (loss) per share from continuing operations attributable to Sino Agro Food, Inc. and subsidiaries common stockholders amount to $0.23 and $(0.05), respectively..

For the years ended December 31, 2011 and 2010, basic earnings per share from continuing and discontinued operations attributable to Sino Agro Food, Inc. and subsidiaries common stockholders amount to $0.43 and $0.16, respectively. For the years ended December 31, 2011 and 2010, diluted earnings (loss) per share from continuing operations attributable to Sino Agro Food, Inc. and subsidiaries common stockholders amount to $0.39 and $0.14, respectively.

FOREIGN CURRENCY TRANSLATION

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

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

Because cash flows are translated based on the 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 shareholder 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 other comprehensive income as incurred.

The balance sheet amounts with the exception of equity at December 31, 2011 and December 31, 2010 were translated at RMB6.30 to $1.00 and RMB6.62 to $1.00, respectively.

The average translation rates applied to the statements of income and other comprehensive income and of cash flows for the years ended December 31, 2011 and December 31, 2010 were RMB6.33 to $1.00 and RMB6.73 to $1.00, respectively.

Non-GAAP financial measure can represent our actual U.S. dollars reported earnings per share including foreign exchange gain of net assets denominated in RMB as the underlying trend shows Chinese Renminibi appreciates steadily against United States dollars. As such, we measure diluted earnings per share growth rate using comprehensive income divided by weighted average numbers of shares outstanding, and provide guidance on comprehensive income per shares.

Below is a reconcilation of reported EPS to non- GAAP measure EPS for the fiscal years 2011 and 2010:

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 the 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:

The carrying amounts of the Company’s financial assets and liabilities, such as cash and accrued expenses, approximate their fair values because of the short maturity of these instruments.

The Company does not have any assets or liabilities measured at fair value on a recurring or a non-recurring basis, consequently, the Company did not have any fair value adjustments for assets and liabilities measured at fair value at December 31, 2011 or December 31, 2010, nor gains or losses are reported in the statements of income and other comprehensive income that are attributable to the change in unrealized gains or losses relating to those assets and liabilities still held at the reporting date for the fiscal year ended December 31, 2011 or December 31, 2010.

NEW ACCOUNTING PRONOUNCEMENTS

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

In January 2011, the FASB issued an Accounting Standard Update (ASU”) No, 2011-01, Receivables Topic 310): Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses, to be concurrent with the effective date of the guidance for determining what constitutes a troubled debt restructuring, as presented in proposed Accounting Standards Update, Receivables (Topic 310): Clarifications to Accounting for Troubled Debt Restructurings by Creditors. The amendments in this Update apply to all public-entity creditors that modify financing receivables within the scope of the disclosure requirements about troubled debt restructurings in Update 2010-20. Under the existing effective date in Update 2010-20, public-entity creditors would have provided disclosures about troubled debt restructurings for periods beginning on or after December 15, 2010. The amendments in this Update temporarily defer that effective date, enabling public-entity creditors to provide those disclosures after the Board clarifies the guidance for determining what constitutes a troubled debt restructuring. The deferral in this Update will result in more consistent disclosures about troubled debt restructurings. This amendment does not defer the effective date of the other disclosure requirements in Update 2010-20. In the proposed Update for determining what constitutes a troubled debt restructuring, the Board proposed that the clarifications would be effective for interim and annual periods ending after June 15, 2011. For the new disclosures about troubled debt restructurings in Update 2010-20, those clarifications would be applied retrospectively to the beginning of the fiscal year in which the proposal is adopted. The Company does not expect the adoption of ASU 2011-01 to have a significant impact on its consolidated financial statements.

In April 2011, the FASB issued ASU No. 2011-03, Transfers and Servicing (Topic 860): Reconsideration of Effective Control for Repurchase Agreements (ASU 2011-03), intended to improve financial reporting of repurchase agreements and refocus the assessment of effective control on a transferor’s contractual rights and obligations rather than practical ability to perform those rights and obligations. The guidance in ASU 2011-03 is effective for the first interim or annual period beginning on or after December 15, 2011.The Company does not expect the adoption of ASU 2011-03 to have a significant impact on its consolidated financial statements.

In May 2011, the FASB issued ASU No. 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs (ASU 2011-04). ASU 2011-04 represents the converged guidance of the FASB and the International Accounting Standards Board (IASB) on fair value measurement. A variety of measures are included in the update intended to either clarify existing fair value measurement requirements, change particular principles requirements for measuring fair value or for disclosing information about fair value measurements. For many of these requirements, the FASB does not intend to change the application of existing requirements under Accounting Standards Codification (ASC) Topic 820, Fair Value Measurements. ASU2011-04 is effective for interim and annual periods beginning after December 15, 2011 and early application is not permitted. The Company does not expect the adoption of ASU 2011-04 to have a significant impact on its consolidated financial statements.

In June 2011, the FASB issued ASU No. 2011-05, Presentation of Comprehensive Income (ASU 2011-05), intended to increase the prominence of items reported in other comprehensive income and to facilitate convergence of accounting guidance in this area with that of the IASB. The amendments require that all non-owner changes in stockholders’ equity be presented in a single continuous statement of comprehensive income or in two separate but consecutive statements. Amendments under ASU 2011-05 for public entities should be applied retrospectively for fiscal years, and interim periods within those years, beginning December 15, 2011. The Company does not expect the adoption of ASU 2011-05 to have a significant impact on its consolidated financial statements.

In July 2011, the FASB issued accounting guidance on disclosures about the credit quality of financing receivables and the allowance for credit losses. The guidance expands disclosures for the allowance for credit losses and financing receivables by requiring entities to disclose information at disaggregated levels. It also requires disclosure of credit quality indicators, past due information and modifications of financing receivables. The Company does not expect the adoption of this guidance to have a significant impact on its consolidated financial statements.

In September 2011, the FASB issued Intangibles – Goodwill and Other (Topic 350)– Testing Goodwill for Impairment (ASU No. 2011-08), which amends ASC 350 to first assess qualitative factors before performing the quantitative goodwill impairment testing. The ASU provides the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the results of the qualitative analysis indicate it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, the quantitative two-step impairment test, which is required under current U.S.GAAP, would not be necessary. The ASU is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. The Company does not expect the adoption of ASU 2011-08 to have a significant impact on its consolidated financial statements.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Not applicable.

Item 8. Financial Statements and Supplementary Data

SINO AGRO FOOD, INC. AND SUBSIDIARIES

(Incorporated in the State of Nevada, United States of America)

CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2011 AND DECEMBER 31, 2010

SINO AGRO FOOD, INC. AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

Sino Agro Food, Inc.

(Incorporated in the State of Nevada, United States of America)

We have audited the accompanying consolidated balance sheets of Sino Agro Food, Inc. and subsidiaries as of December 31, 2011 and December 31, 2010, and the consolidated statements of income and other comprehensive income, the consolidated statements of stockholders’ equity, and the consolidated statements of cash flows for the years ended December 31, 2011 and December 31, 2010. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor have we been engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statements presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Sino Agro Food, Inc. and subsidiaries as of December 31, 2011, and December 31, 2010, and the results of its operations and its cash flows for each of the years ended December 31, 2011 and December 31, 2010, in conformity with accounting principles generally accepted in the United States of America.

SINO AGRO FOOD, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

AS OF DECEMBER 31, 2011 AND DECEMBER 31, 2010