Sino Agro Food Inc (fka SIAF)

[ValueInvestor01]

It appears that most of these allegations have already been refuted by SIAF in Document #44.


Document #44
https://www.docdroid.net/IgXuSTj/44.pdf

a.Revenue

The Complaint asserts that unspecified SAIC filings reported that the revenue from five Aqua Farms in 2017 was $447,080 and juxtaposes this information with SAFI’s SEC filing reporting $17 million in revenue for its subsidiary Capital Award Inc. (“CAI”), which provides technology services to Tri-way Industries Ltd. (“TRW”). Compl. ¶34. Plaintiffs are mixing Case 1:19-cv-02680-JMF Document 44 Filed 06/24/19 Page 12 of 31 7 apples with oranges. Neither SAFI nor CAI generated revenue from the sale of seafood from the Aqua Farms, which were discontinued as of October 5, 2016. RJB Decl. Ex. 2 at pp. 57-58. Rather, CAI generates revenue by providing engineering consulting services using it’s A Power Module Technology System, and SAFI reported $16,983,330 in income for CAI’s consulting services for development contracts. Id. at pp. 57-58, F-22. Thus, the Complaint does not set forth a misrepresentation.

b.Income

The Complaint alleges that SAFI reported, in a Press Release, a $12 million contribution from TRW to SAFI’s income (based on TRW’s total income of $32.8 million and SAFI’s 36.6% ownership). Compl. ¶34. Plaintiffs then argue, in contrast, that in its Form 10-K for the period ending December 31, 2017 (the “2017 Form 10-K”), SAFI reported that TRW was disposed from the Company in October 2016 and therefore generated no income in 2017. Id. Again, Plaintiffs have distorted what occurred and had been reported by SAFI. As set forth in the 2017 Form 10-K, as a result of a transaction in October 2016, SAFI’s ownership in TRW was diluted from 100% to 23.89% [at that time], which led to SAFI’s loss of control over TRW. RJB Decl. Ex. 2 at p. F-28. Consequently, SAFI’s investment in TRW was “reclassified from a subsidiary to investments in unconsolidated equity investees as of October 5, 2016.” Id. (emphasis added). The 2017 Form 10-K did not report any income from the disposed of subsidiary, but it reported $12,010,051 as other income from its “share of income from [an] unconsolidatedequity investee.” Id. at p. 59 (emphasis added). This is the same $12 million in income reported for TRW, as an “unconsolidated equity investee” referenced in the Press Release, which discussed SAFI’s results reported in its 2017 Form 10-K. Id. Ex. 3 at p. 1. Therefore, the Complaint does not set forth a misrepresentation. Case 1:19-cv-02680-JMF Document 44 Filed 06/24/19 Page 13 of 31
8

c.Total Asset Value

The Complaint asserts that, in 2017, SAFI reported the total asset value for TRW’s Aqua Farms 1-5 was approximately $310 million, based on an independent appraisal allegedly performed by Dun & Bradstreet. Compl. ¶35. There are no factual allegations that the appraisal was not conducted by an independent entity or that there was any fraud or misstatements in said appraisal. Rather, Plaintiffs use an incomplete data set to create the appearance of a discrepancy. Specifically, the Complaint alleges, in unspecified reports to SAIC, SAFI reported that, in 2017, the total asset value of TRW’s Aqua Farms 1-5 was $12.3 million. Id. To the contrary, SAFI reported in its 2017 Form 10-K that “[t]he company ownership in [TRW] has been valued at USD 124.7 million, equal to 36.6% of the enterprise value of USD 340.6. This includes (i) 23.89% (EV = USD 81.4 million) as a result of a retained interest in [TRW], and (ii) 12.71% (EV = USD 43.3 million) acquired in exchange for outstanding debt owed to the Company. These values result from Aqua Farm 1, assets held in Aqua F arms 2-5 and rights to technology licensed from Capital Award . . . . An independent appraisal was obtained to determine fair value, and this appraisal resulted in a one-time (deemed) gain of USD 56.9 million for SIAF . . . .” RJB Decl. Ex. 2, at p. 93. Thus, SAFI reported enterprise value – not total asset value – for TRW that was more expansive than just its Aqua Farms; consequently, Plaintiffs’ allegations are insufficient to explain how any such statement, which it took out of context, was fraudulent.

There's a lot of typos on these documents. They keep mentioning SAFI or SAIF instead of SIAF.

I might post the rest of the documents if I have time.