NOTE 10 – RELATED PARTIES TRANSACTIONS

 

Prepaid expenses – related party

 

At September 30, 2017 and December 31, 2016, prepaid expenses – related party consisted of the following:

 

		September 30, 2017				December 31, 2016
Prepaid miscellaneous items to PT. Avona Mina Lestari (1)		$	776,871			$	522,337
		$	776,871			$	522,337

 

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

  

Other receivable – related party

 

 At September 30, 2017 and December 31, 2016, other receivable – related party consisted of the following:

 

		September 30, 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 September 30, 2017.

 

Accounts payable - related parties

 

At September 30, 2017 and December 31, 2016, accounts payable - related parties consisted of the following:

 

Name of related party		September 30, 2017				December 31, 2016
Hong Fa Shipping Limited (3)		$	2,241,138			$	1,740,000
Hong Long (1)			2,509,007				805,930
Huna Lin (2)			-				14,320
Hai Yi Shipping Limited (3)			-				510
		$	4,750,145			$	2,560,760

 

(1)	Hong Long is an affiliate company majority owned by a close 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 September 30, 2017 and December 31, 2016, the accrued liabilities and other payables – related party consisted of the following:

 

Name of related party		September 30, 2017				December 31, 2016
Hong Long		$	9,819,942			$	18,147,152
		$	9,819,942			$	18,147,152

 

The amount of accrued liabilities and other payables - Hong Long is short-term in nature, non-interest bearing, unsecured and payable on demand.

 

Due to related parties

 

At September 30, 2017 and December 31, 2016, the due to related parties amount consisted of the following:

 

		September 30, 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
Rent due to Hai Yi Shipping Limited			38,208				-
Advance from Xinrong Zhuo, Chief Executive Officer			2,979,066				-
		$	3,040,602			$	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 $12,300) and the renewed Office Lease expires on July 31, 2018. 

 

For the three months ended September 30, 2017 and 2016, rent expense related to the Office Lease amounted $3,153 and $3,149, respectively. For the nine months ended September 30, 2017 and 2016, rent expense related to the Office Lease amounted $9,267 and $9,576, respectively. Future minimum rental payment required under the Office Lease is as follows:

 

Twelve-month period Ending September 30:		Amount
2018		$	10,297

   

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 $38,300) and the renewed Service Agreement expires on December 31, 2017.

 

For the three months ended September 30, 2017 and 2016, rent expense and corresponding administrative service charge related to the Service Agreement amounted to $114,624 and $115,519, respectively. For the nine months ended September 30, 2017 and 2016, rent expense and corresponding administrative service charge related to the Service Agreement amounted to $344,768 and $346,379, respectively.

 

Twelve-month period Ending September 30:		Amount
2018		$	114,985

 

Purchases from related parties

 

During the three and nine months ended September 30, 2017 and 2016 purchases from related parties were as follows:

 

		Three Months Ended  September 30,								Nine Months Ended  September 30,
		2017				2016				2017				2016
Purchase of fuel, fishing nets and other on board consumables
from Hong Fa Shipping Limited		$	92,756			$	5,233			$	6,528,578			$	8,926,279
from Haifeng Dafu Enterprise Co., Ltd.			-				877,687				-				890,003
from PT. Avona Mina Lestari			12,671								837,668				-
from Hai Yi Shipping Ltd.			23,187				5,230,809				2,230,887				8,366,895
from Fuzhou Honglong Ocean Fishery Co., Ltd.			83,201				-				5,975,579				-
			211,815				6,113,729				15,572,712				18,183,177
Purchase of vessel maintenance service
from PT. Avona Mina Lestari			29,105				-				63,842				-
			29,105				-				63,842				-
Purchase of transportation service
from Fuzhou Honglong Ocean Fishery Co., Ltd.			186,297				-				608,117				-
from Hong Fa Shipping Limited			2,892				-				278,251				-
		$	189,189			$	-			$	886,368			$	-

 

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.