Sino Agro Food Inc (fka SIAF)

[jyyoo]

You can read the email from Dan:

Hi Xxxxxxxx,

I usually refrain from responding directly to shareholder questions, especially throughout this period when we’ve passed the end of a reporting period and have yet to file the 10K.

That said, I know you’ve been a long-time shareholder and I trust when you say you’ve never sold a share (although, if you had that would not prejudice me in any way), but I do know you’re interest and hope is in seeing the company succeed, otherwise you likely would have sold your position by now and no longer be interested in how things go from here.

Please understand that my remarks might not be as specific or complete as you’d like for them to be, but during this period I can only provide general clarification.

First, why do you assume that the TRW loan is predicated on the performance of SIAF’s share price? SIAF, for all intents and purposes, only represents 36.6% of the ownership in TRW. What of the other 63.4% ownership? Their personal assets and/or guarantees certainly carry value. Also, SIAF as an OTC stock is “non-marginable” when it comes to conventional lending. Even if the banking syndicate were willing to accept SIAF shares as collateral, what value would they possibly hold? In light of the drop in PPS, maybe 40% LTV? And even then, possibly only on a small portion of the LOC? It’s because of having sufficient resources from partners that loan approval remains positive. Someone else had asked me why not reduce the loan-ask? One must remember revenue projections are part and parcel of why the loan is even being considered in the first place. To reduce the loan-ask, means reducing build-out time, sales projections, etc. and therefore increasing exposure on whatever (reduced) loan amount is made available, even though one typically tends to think that reducing the ask would be a quick fix, when, in actuality, could mean a more protracted process due to adjusting the metrics so as to maintain the syndicate’s interest in TRW.

You asked about “top-up” and collateral shares. As a reminder there are 2 purposes for collateral share backed loans. One for SIAF (overall) and the other for a Trade Facility (backed by SIAF) for the Shanghai Distribution Center ( www.sinoagrofood.com/content/shanghai-distribution-center ). The trade facility (revolving line) represents about 70% of the collateral shares outstanding. Because of the drop in SIAF share price, the TF line has been reduced rather than attempting to issue additional “top-up” shares to maintain the maximum line allowable; last top-up on the TF occurred in Q3. The other 30% of collateral shares are held on third party loans, which currently represent around 2.7m shares outstanding. Again, the Company’s intends to see these 3rd party loans paid off and shares returned either by their respective due dates, or sooner if funds become available.

Regarding the SEC review. You asked what red-flags were raised for the SEC to audit the 2016 10K. There were no red-flags. The audit/review is simply SOP for the SEC in conducting a triennial review of registered publicly traded companies. Once completed, a final 10-K/A will be uploaded. You also mentioned the annual meeting, which frankly is predicated on receiving no further comments from the SEC. In other words, you cannot distribute an “incomplete” 10K with your proxy, which until any/all matters are reconciled and a final 2016 10-K/A filed, is essentially the case when it comes to how the SEC would view the 10K at this stage, i.e. not in “final form”. Being required to hold an annual meeting is not an SEC issue. Rather an OTC issue, and more specifically an OTC-QX issue. Worst case scenario is that SIAF reverts back to OTC-QB, but I’ve been in contact with OTC and they’ve been very accommodating to allow the extension, thus far.

I know you had other questions, but those will need to wait until the 2017 10K is filed before we can expound on them. Some of them will be answered in the annual CC.

Hope this has helped answer your questions in some way. As I said, further details will be made available in the 10K and/or via PR as they materialize.

Please remember I’m just as much of an investor in SIAF as you are and wish to see SIAF succeed in every respect, like you.

Thanks,

As I've said before fundamentally, things have only changed for the better in the recent months (tax liability on Tri-way share dividend was significantly reduced from $10 mil to $3-4 mil, EPS should be improving, boiler installed, continued positive progression on financing efforts etc.), particularly with management actively trying to correct the collateral share financing (they've already reduced the Trade Facility revolving line rather than attempting to issue additional “top-up” shares to maintain the maximum line allowable; last top-up on the TF occurred in Q3).