COMMITMENTS AND CONTINGENCIES
|9 Months Ended|
Sep. 30, 2014
|Commitments and Contingencies Disclosure [Abstract]|
|Commitments Disclosure [Text Block]||
NOTE 16 COMMITMENTS AND CONTINGENCIES
The Company has employment agreements with certain employees that provided severance payments upon termination of employment under certain circumstances, as defined in the applicable agreements. The Company has estimated its possible severance payments of approximately $10,000 as of September 30, 2014 and December 31, 2013, which have not been reflected in its unaudited condensed consolidated financial statements.
See note 11 for related party operating lease commitment.
Rental payment and related administrative service charge
See note 11 for related party rental and related administrative service agreement commitment.
Share purchase agreement
Pursuant to the Shares Purchase Agreement dated December 4, 2013 (“the Share Purchase Agreement”), where the Company exited and sold CDGC to Hong Long, the Company is required to indemnify Hong Long and the same indemnification responsibility applies to the Hong Long for the events arising out of any breach of the Share Purchase Agreement or the memorandum of agreement in relation to the sale, purchase and delivery of the vessels for two years until December 3, 2015 and would be liable for the full amount of damages that exceed $1,000,000. The amount of damage shall be the amount finally determined by a court of competent jurisdiction or appropriate governmental administrative agency, or the amount agreed to upon settlement in accordance with the terms of the Share Purchase Agreement.
Guarantees and collaterals provided to related parties
In October 2012, Pingtan Fishing entered into two pledge contracts with China Minsheng Banking Corp., Ltd. Pursuant to the terms of the pledge contracts, Pingtan Fishing assigned 10 fishing vessels, as collateral to secure Hong Long’s long-term loans from the financial institution in amount of approximately $10.8 million, which are due on April 18, 2015. In addition to the collateral provided to Hong Long, Pingtan Fishing also guaranteed the repayment of $46.3 million for Hong Long’s long-term loans.
In December 2013, Pingtan Fishing entered into a guarantee agreement with Ping An Bank Co., Ltd. Pursuant to the terms of the guarantee agreement, Pingtan Fishing provide maximum guarantees approximately of $8.3 million to Hong Long’s credit line in amount of $16.5 million which is due on December 23, 2014.
As of the filing date of this report, Pingtan Fishing has not receive any demand from the lender that collateralized properties are intended to be disposed of or to make any payments under the guarantee.
Pursuant Accounting Standards Codification (“ASC”) 460-10-25-2, the guarantor is obligated in two aspects in every guarantee or indemnificationa noncontingent liability and a contingent liability. The noncontingent liability represents the guarantor's obligation to stand ready to perform under the terms of the guarantee in the event that the specified triggering events or conditions occur. The contingent liability represents the guarantor’s obligation to make future payments if those triggering events or conditions occur and based on the probability that the guaranteed party will not perform under the contractual terms of the guaranty agreement.
We have assessed the contingent liabilities arising from the above-described guarantees and have concluded that no liabilities in respect of the guarantees were required to be recognized as of September 30, 2014 and December 31, 2013.
Commercial retail space commitment
In June 2014, Pingtan Fishing entered into three commercial retail space purchase agreements with third parties property developers in order to purchase retail space located in Hubei and Anhui province, China. These retail spaces will be used for market expansion in the fishery product markets in central and western areas of China in order to capture more sales directly from final customers. The total consideration for these three commercial retail space purchase agreements is approximately $27 million (RMB 166,227,200). As of September 30, 2014, the Company has paid approximately $22.4 million (RMB of 138,042,604) of the total investment that was recorded as prepayment for long-term assets on the accompanying unaudited condensed consolidated balance sheets. Pingtan Fishing intends to use its working capital to fund the rest of related costs and plans to pay it in full by the end of fiscal 2014.
Joint venture commitment
On June 12, 2014, Pingtan Fishing incorporated a joint venture with two companies for the fishery processing purpose. Total registered capital of the joint venture is approximately $163 million (RMB 1 billion) and Pingtan Fishing accounted for 35% of the total ownership. Therefore, Pingtan Fishing has the obligation to contribute approximately $57 million (RMB 350 million) as the joint venture’s registered capital. As of September 30, 2014, the Pingtan Fishing has contributed approximately $16 million (RMB 98,000,000) as registered capital that was recorded as long-term investment on the accompanying unaudited condensed consolidated balance sheets. Pingtan Fishing intends to use its present working capital together with bank loans to fund the project cost.
The entire disclosure for significant arrangements with third parties, which includes operating lease arrangements and arrangements in which the entity has agreed to expend funds to procure goods or services, or has agreed to commit resources to supply goods or services, and operating lease arrangements. Descriptions may include identification of the specific goods and services, period of time covered, minimum quantities and amounts, and cancellation rights.
Reference 1: http://www.xbrl.org/2003/role/presentationRef