Annual report pursuant to Section 13 and 15(d)

Related Parties Transactions

v3.8.0.1
Related Parties Transactions
12 Months Ended
Dec. 31, 2017
Related Parties Transactions [Abstract]  
RELATED PARTIES TRANSACTIONS

NOTE 10 – RELATED PARTIES TRANSACTIONS

 

Prepaid expenses – related parties

 

At December 31, 2017 and December 31, 2016, prepaid expenses – related party consisted of the following:

 

    December 31,
2017
    December 31,
2016
 
Prepaid miscellaneous items to PT. Avona Mina Lestari (1)   $        -     $ 522,337  
    $ -     $ 522,337  

 

(1) PT. Avona Mina Lestari is an affiliate company controlled by Xinrong Zhuo family.

 

Other receivable – related party

 

 At December 31, 2017 and December 31, 2016, other receivable – related party consisted of the following:

 

    December 31,
2017
    December 31,
2016
 
Advance to Zhiyan Lin (1)   $                  -     $ 639,917  
    $ -     $ 639,917  

 

(1) Zhiyan Lin is the legal representative of Pingtan Fishing and a family member of the Company’s CEO.

 

In connection with the termination of the VIE structure and to comply with PRC regulation, the Company paid RMB83 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 were returned in full to the Company as of December 31, 2017.

 

Accounts payable - related parties

 

At December 31, 2017 and December 31, 2016, accounts payable - related parties consisted of the following:

 

Name of related party   December 31,
2017
    December 31,
2016
 
Hong Fa Shipping Limited (3)   $ 1,231,692     $ 1,740,000  
Hong Long (1)     572,006       805,930  
Huna Lin (2)     -       14,320  
Hai Yi Shipping Limited (3)     -       510  
    $ 1,803,698     $ 2,560,760  

 

(1) Hong Long is an affiliate company majority owned by an immediate family member of the Company’s CEO.
(2) Huna Lin is Zhiyan Lin’s daughter.
(3) An entity controlled by the Company’s CEO.

 

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, 2017 and December 31, 2016, the accrued liabilities and other payables – related party consisted of the following:

 

Name of related party   December 31,
2017
    December 31,
2016
 
Hong Long   $ -     $ 18,147,152  
Hai Yi     38,208       -  
    $ 38,208     $ 18,147,152  

 

The amount of accrued liabilities and other payables - Hong Long is short-term in nature, with interest bearing, unsecured and payable on demand and Hai Yi is rent due to Hai Yi Shipping Limited.

 

Due to related parties

 

At December 31, 2017 and December 31, 2016, the due to related parties amount consisted of the following:

 

    December 31,
2017
    December 31,
2016
 
Accrued compensation for Roy Yu, Chief Financial Officer   $ 20,000     $ 40,000  
Accrued compensation for Xinrong Zhuo     3,328       3,354  
Advance from Xinrong Zhuo, Chief Executive Officer     4,325,365       -  
    $ 4,348,693     $ 43,354  

 

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”). The Company renewed the Office Lease. Pursuant to the renewed Office Lease, the annual rent is RMB 84,000 (approximately $12,400) and the renewed Office Lease expires on July 31, 2018.

 

For the years ended December 31, 2017, 2016 and 2015, rent expense related to the Office Lease amounted $12,441, $12,646 and $13,510, respectively. Future minimum rental payment required under the Office Lease is as follows:

 

Year Ending December 31:   Amount  
2018   $ 7,257  

 

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”). 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. On January 1, 2018, the Services Agreement was renewed to February 28, 2018 under same conditions,

 

For the years ended December 31, 2017, 2016 and 2015, rent expense and corresponding administrative service charge related to the Service Agreement amounted to $459,392, $461,899 and $462,387, respectively. Future minimum rental and related administrative service charge payment required under the Service Agreement is as follows: 

 

Rental and related administrative service agreement (continued)

 

Year ending December 31:   Amount  
2018   $ 76,610  

 

Purchases from related parties

 

During the years ended December 31, 2017, 2016 and 2015, purchases from related parties were as follows:

 

    Year Ended December 31,  
    2017     2016     2015  
Purchase of fuel, fishing nets and other on-board consumables                  
from Hong Fa Shipping Limited   $ 6,560,972     $ 15,636,809     $ 11,328,966  
from Hai Yi Shipping Ltd.     2,246,251       8,853,657       4,739,278  
from Haifeng Dafu Enterprise Co., Ltd.     -       941,778       11,116  
from PT. Dwikarya Reksa Abadi     -       -       1,414,640  
from PT. Avona Mina Lestari     841,288       -       1,276,049  
from Fuzhou Honglong Ocean Fishery Co., Ltd.     6,820,539       -       -  
      16,469,050       25,432,244       18,770,049  
Purchase of vessel maintenance service                        
from PT. Avona Mina Lestari     1,450       674,360       6,529,495  
from PT. Dwikarya Reksa Abadi     -       -       3,207,011  
      1,450       674,360       9,736,506  
Purchase of transportation service                        
from Fuzhou Honglong Ocean Fishery Co., Ltd.     819,956       39,622       177,567  
from Hai Yi Shipping Limited     -       -       305,686  
from Hong Fa Shipping Limited     280,168       -       -  
      1,100,124       39,622       483,253  
Purchase of Indonesia vessel agent service                        
from PT. Avona Mina Lestari (1)     -       -       2,317  
    $ -     $ -     $ 2,317  

 

(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.

 

On March 28, 2017, the Company entered into a master agreement with Fuzhou Honglong Ocean Fishery Co., Ltd, (“Hong Long”) for the acquisition of 5 vessels with total consideration of approximately $38.5 million representing the fair market value on the date of acquisition. Based on Accounting Standards Codification (“ASC”) 805-50, the Company recorded the value of approximately $9.4 million as the cost of the 5 vessels which was the net book value of the 5 vessels in Hong Long’s book at the date of transfer. The balance of approximately $29.1 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.