NOTE 10 – PROPERTY, PLANT AND EQUIPMENT

At September 30, 2015 and December 31, 2014, property, plant and equipment consisted of the following:

For the three months ended September 30, 2015 and 2014, depreciation expense amounted to $773,310 and $753,519, respectively, of which $765,704 and $746,155, respectively, was included in cost of revenue and inventories, and the remainder was included in general and administrative expense, respectively. For the nine months ended September 30, 2015 and 2014, depreciation expense amounted to $4,360,186 and $4,022,232, respectively, of which $4,337,007 and $4,000,510, respectively, was included in cost of revenue and inventories, and the remainder was included in general and administrative expense, respectively.

The vessels under construction are not subject to depreciation. Upon completion of the construction, fishing vessel under construction balances will be reclassified to fishing vessels.

On June 26, 2015, the Company acquired 6 fishing vessels for the appraised fair market value of approximately $56.2 million from Fuzhou Yishun Deep-Sea Fishing Co., Ltd. (“Yishun”) and Fuzhou Honglong Ocean Fishery Co., Ltd. (“Hong Long”), two related parties under common control. Accordingly, the transaction between the Company and these two related parties was accounted as a common control transaction pursuant to ASC 805-50 and it related subsections. 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. These vessels are currently licensed and sanctioned by the Chinese Fisheries Management Bureau under the Ministry of Agriculture of China, which allows these vessels to operate and fish in the Western and Central Pacific Ocean of the international waters. These vessels are primarily focused on the catch of tuna and squid. These 6 vessels will be dismantled and replaced by 6 newly-built vessels to continue fishing in the international waters. We expect that the expansions of our fleet will greatly increase our fish harvest volume and revenue.

At September 30, 2015 and December 31, 2014, the Company had 34 and 43 fishing vessels with net carrying amount of approximately $28.3 million and $37.5 million, respectively, pledged as collateral for its bank loans.