Annual report pursuant to Section 13 and 15(d)

Related Parties Transactions

v3.6.0.2
Related Parties Transactions
12 Months Ended
Dec. 31, 2016
Related Parties Transactions [Abstract]  
RELATED PARTIES TRANSACTIONS

NOTE 10 – RELATED PARTIES TRANSACTIONS

 

Prepaid expenses – related parties

 

At December 31, 2016 and 2015, prepaid expenses – related parties consisted of the following:

 

    December 31, 2016     December 31, 2015  
Prepaid miscellaneous items to PT. Avona Mina Lestari (1)   $ 522,337     $ 1,127,257  
Prepaid fuel cost to Hai Yi Shipping Limited (2)     -       783,370  
Prepaid fuel cost to Haifeng Dafu Enterprise Company Limited (3)     -       868,668  
Prepaid fuel cost to Hong Fa Shipping Limited (4)     -       1,860,871  
    $ 522,337     $ 4,640,166  

 

(1) PT. Avona Mina Lestari is an affiliate company controlled by Xinrong Zhuo family.
(2) Hai Yi Shipping Limited is an affiliate company ultimately controlled by Xinrong Zhuo, CEO of the Company.
(3) Haifeng Dafu Enterprise Company Limited is an affiliate company ultimately controlled by Xinrong Zhuo, CEO of the Company.
(4) Hong Fa Shipping Limited is an affiliate company owned by Xinrong Zhuo, CEO of the Company.

 

Other receivable – related parties

 

At December 31, 2016 and 2015, other receivable– related parties consisted of the following:

 

    December 31, 2016     December 31, 2015  
Advance to Zhiyan Lin (1)   $ 639,917     $ 3,836,258  
Advance to Honghong Zhuo (2)     -       4,051,269  
    $ 639,917     $ 7,887,527  

 

(1) Zhiyan Lin is a shareholder and legal representative of Pingtan Fishing.
(2) Honghong Zhuo is daughter of Xinrong Zhuo.

 

In connection with the termination of VIE structure and to comply with PRC regulation, the Company paid RMB 83 million in total, which is Pingtan Fishing’s registered capital, to Pingtan Fishing’s Shareholders to transfer their 100% of equity interest of Pingtan Fishing to Fujian Heyue, the Company’s subsidiary pursuant to the Equity Transfer Agreement dated February 9, 2015. Those payments are expected to be returned in full to the Company by December 31, 2017.

 

Accounts payable - related parties

 

At December 31, 2016 and 2015, accounts payable - related parties consisted of the following:

 

Name of related party   December 31, 2016     December 31, 2015  
Hong Fa Shipping Limited   $ 1,740,000     $ -  
Hong Long (1)     805,930       408,631  
Huna Lin (2)     14,320       -  
Hai Yi Shipping Limited     510       -  
    $ 2,560,760     $ 408,631  

 

(1) Hong Long is an affiliate company majority owned and controlled by Ping Lin, spouse of the Company’s CEO.
(2) Huna Lin is Zhiyan Lin’s daughter.

 

These accounts payable – related parties’ amounts are short-term in nature, non-interest bearing, unsecured and payable on demand.

  

Accrued liabilities and other payables – related party

 

At December 31, 2016 and 2015, the accrued liabilities and other payables – related party consisted of the following:

 

Name of related party   December 31, 2016     December 31, 2015  
Hong Long   $ 18,147,152     $           -  
    $ 18,147,152     $ -  

 

The significant increase in other payables – Hong Long was primarily attributable to the prepayment for long-term assets made by Hong Long on behalf of the Company of approximately $13,220,000 and other miscellaneous payments made by Hong Long on behalf of the Company to the Company’s vendors of approximately $4,927,000. The amount of other payable – Hong Long is short-term in nature, non-interest bearing, unsecured and payable on demand.

 

Due to related parties

 

At December 31, 2016 and 2015, the due to related parties amount consisted of the following:

 

    December 31, 2016     December 31, 2015  
Accrued compensation for Roy Yu, Chief Financial Officer   $ 40,000     $ 20,000  
Accrued compensation for Xinrong Zhuo     3,354       3,354  
Advance from Xinrong Zhuo, Chief Executive Officer     -       1,361,290  
    $ 43,354     $ 1,384,644  

 

The advance from Xinrong Zhuo, the Company’s Chief Executive Officer, is for working capital purposes and short-term in nature, non-interest bearing, unsecured and payable on demand.

 

Operating lease

 

On July 31, 2012, the Company entered into a lease for office space with Ping Lin, spouse of the Company’s CEO, (the “Office Lease”). Pursuant to the Office Lease, annual payments of RMB 84,000 (approximately $13,000) were due for each year of the term. The term of the Office Lease was 3 years and expired on August 1, 2015. The Company renewed the Office Lease. Pursuant to the renewed Office Lease, the annual rent is RMB 84,000 (approximately $13,000) and the renewed Office Lease expires on July 31, 2017.

 

For the years ended December 31, 2016, 2015 and 2014, rent expense related to the Office Lease amounted $12,646, $13,510 and $13,674, respectively. Future minimum rental payment required under the Office Lease is as follows:

 

Year Ending December 31:   Amount  
2017   $ 7,377  

 

Rental and related administrative service agreement

 

On July 1, 2013, the Company entered into a service agreement with Hai Yi Shipping Limited that provided the Company a portion of use of premises located in Hong Kong as office and provided related administrative service (the “Service Agreement”). Pursuant to the Service Agreement, monthly payments of Hong Kong Dollar (“HK$”) HK$298,500 (approximately $38,000) were due for each month of the term. The term of the Service Agreement was 1.5 years and expired on December 31, 2014. The Company renewed the Service Agreement. Pursuant to the renewed Service Agreement, the monthly payments are HK$298,500 (approximately $38,000) and the renewed Service Agreement expires on December 31, 2017.

 

For the years ended December 31, 2016, 2015 and 2014, rent expense and corresponding administrative service charge related to the Service Agreement amounted to $461,899, $462,387 and $461,934, respectively. Future minimum rental and related administrative service charge payment required under the Service Agreement is as follows: 


Year ending December 31:   Amount  
2017   $ 461,899  

 

Purchases from related parties

 

During the years ended December 31, 2016, 2015 and 2014, purchases from related parties were as follows:

 

   

Year Ended December 31,

 
    2016     2015     2014  
Purchase of fuel, fishing nets and other on-board consumables                  
 from Hong Fa Shipping Limited   $ 15,636,809     $ 11,328,966     $ 30,996,630  
 from Hai Yi Shipping Ltd.     8,853,657       4,739,278       4,678,520  
 from Haifeng Dafu Enterprise Co., Ltd.     941,778       11,116       4,877,460  
 from PT. Dwikarya Reksa Abadi     -       1,414,640       -  
 From PT. Avona Mina Lestari     -       1,276,049       -  
 from Zhiyan Lin     -       -       34,230  
 from Fuzhou Honglong Ocean Fishery Co., Ltd.     -       -       45,409,020  
      25,432,244       18,770,049       85,995,860  
Purchase of vessel maintenance service                        
 from PT. Avona Mina Lestari     674,360       6,529,495       3,543,925  
 from PT. Dwikarya Reksa Abadi     -       3,207,011       3,385,466  
      674,360       9,736,506       6,929,391  
Purchase of transportation service                        
 from Fuzhou Honglong Ocean Fishery Co., Ltd.     39,622       177,567       9,925,585  
 from Haifeng Dafu Enterprise Company Limited     -       -       3,331,554  
 from Hai Yi Shipping Limited     -       305,686       1,695,132  
 from Hong Fa Shipping Limited     -       -       2,550,872  
      39,622       483,253       17,503,143  
Purchase of Indonesia vessel agent service                        
 from PT. Avona Mina Lestari (1)     -       2,317       1,225,000  
 from PT. Dwikarya Reksa Abadi (1)     -       -       1,298,329  
    $ -     $ 2,317     $ 2,523,329  

 

(1) PT. Avona Mina Lestari and PT. Dwikarya Reksa Abadi act as Pingtan Fishing’s agents to apply and renew Indonesia fishing licenses and Pingtan Fishing pays the agent service fees to them.

 

On June 26, 2015, the Company entered into a master agreement with each of Fuzhou Honglong Ocean Fishery Co., Ltd, (“Hong Long”) and Fuzhou Yishun Deep-Sea Fishing Co., Ltd. (“Yishun”), which are owned by the Company’s controlling shareholder and Chairman and CEO, Mr. Xinrong Zhuo, for the acquisition of 6 fishing vessels with total consideration of approximately $56.2 million representing the fair market value on the date of acquisition. The transaction between the Company and these two related companies was accounted as common control transaction. Based on Accounting Standards Codification (“ASC”) 805-50, the Company recorded the value of $0 as the cost of the vessels since the 6 vessels had been fully depreciated in Hong Long and Yishun’s books at the date of transfer. The balance of approximately $56.2 million above cost was treated as a return of capital in the equity accounts and was recorded as a reduction in additional paid-in capital.