PINGTAN
MARINE ENTERPRISE LTD. AND SUBSIDIARIES
UNAUDITED
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(IN
U.S. DOLLARS)
|
|
For the Three Months Ended
September 30,
|
|
|
For the Nine Months Ended
September 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REVENUE
|
|
$
|
15,448,083
|
|
|
$
|
11,179,946
|
|
|
$
|
56,218,216
|
|
|
$
|
55,067,249
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COST
OF REVENUE
|
|
|
13,787,521
|
|
|
|
7,594,714
|
|
|
|
46,641,884
|
|
|
|
38,134,552
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GROSS
PROFIT
|
|
|
1,660,562
|
|
|
|
3,585,232
|
|
|
|
9,576,332
|
|
|
|
16,932,697
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling
|
|
|
1,333,927
|
|
|
|
650,786
|
|
|
|
3,282,097
|
|
|
|
1,895,991
|
|
General
and administrative
|
|
|
809,988
|
|
|
|
628,672
|
|
|
|
2,875,463
|
|
|
|
3,113,870
|
|
General
and administrative - depreciation
|
|
|
773,812
|
|
|
|
913,986
|
|
|
|
2,274,579
|
|
|
|
2,885,203
|
|
Subsidy
|
|
|
(4,440,731
|
)
|
|
|
(5,288,586
|
)
|
|
|
(12,778,819
|
)
|
|
|
(5,288,586
|
)
|
Impairment
loss
|
|
|
-
|
|
|
|
70,896
|
|
|
|
-
|
|
|
|
2,546,338
|
|
(Gain)
loss on fixed assets disposal
|
|
|
-
|
|
|
|
(1,777
|
)
|
|
|
-
|
|
|
|
164,375
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Operating Expenses
|
|
|
(1,523,004
|
)
|
|
|
(3,026,023
|
)
|
|
|
(4,346,680
|
)
|
|
|
5,317,191
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME
FROM OPERATIONS
|
|
|
3,183,566
|
|
|
|
6,611,255
|
|
|
|
13,923,012
|
|
|
|
11,615,506
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER
INCOME (EXPENSE):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
973,265
|
|
|
|
6,131
|
|
|
|
3,335,877
|
|
|
|
26,420
|
|
Interest
expense
|
|
|
(4,036,524
|
)
|
|
|
(776,569
|
)
|
|
|
(9,871,949
|
)
|
|
|
(2,903,816
|
)
|
Foreign
currency transaction gain (loss)
|
|
|
747,678
|
|
|
|
(340,012
|
)
|
|
|
402,987
|
|
|
|
(389,643
|
)
|
Gain
(loss) from cost method investment
|
|
|
764
|
|
|
|
(6,766
|
)
|
|
|
133,517
|
|
|
|
340,885
|
|
Loss
on equity method investment
|
|
|
(82,586
|
)
|
|
|
(96,129
|
)
|
|
|
(351,129
|
)
|
|
|
(477,972
|
)
|
Other
expense
|
|
|
(4,468
|
)
|
|
|
(987,517
|
)
|
|
|
(34,924
|
)
|
|
|
(735,359
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Other Expense, net
|
|
|
(2,401,871
|
)
|
|
|
(2,200,862
|
)
|
|
|
(6,385,621
|
)
|
|
|
(4,139,485
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME
BEFORE INCOME TAXES
|
|
|
781,695
|
|
|
|
4,410,393
|
|
|
|
7,537,391
|
|
|
|
7,476,021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME
TAXES
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
INCOME
|
|
$
|
781,695
|
|
|
$
|
4,410,393
|
|
|
$
|
7,537,391
|
|
|
$
|
7,476,021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LESS:
NET INCOME ATTRIBUTABLE TO THE NON-CONTROLLING INTEREST
|
|
|
92,511
|
|
|
|
377,859
|
|
|
|
759,527
|
|
|
|
751,682
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
INCOME ATTRIBUTABLE TO OWNERS OF THE COMPANY
|
|
$
|
689,184
|
|
|
$
|
4,032,534
|
|
|
$
|
6,777,864
|
|
|
$
|
6,724,339
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMPREHENSIVE
INCOME (LOSS):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
INCOME
|
|
|
781,695
|
|
|
|
4,410,393
|
|
|
|
7,537,391
|
|
|
|
7,476,021
|
|
OTHER
COMPREHENSIVE INCOME (LOSS)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized
foreign currency translation gain (loss)
|
|
|
5,700,836
|
|
|
|
(4,674,763
|
)
|
|
|
3,846,221
|
|
|
|
(4,842,207
|
)
|
COMPREHENSIVE
INCOME (LOSS)
|
|
$
|
6,482,531
|
|
|
$
|
(264,370
|
)
|
|
$
|
11,383,612
|
|
|
$
|
2,633,814
|
|
LESS:
COMPREHENSIVE INCOME ATTRIBUTABLE TO THE NON-CONTROLLING INTEREST
|
|
|
556,889
|
|
|
|
220,968
|
|
|
|
1,075,369
|
|
|
|
345,945
|
|
COMPREHENSIVE
INCOME (LOSS) ATTRIBUTABLE TO OWNERS OF THE COMPANY
|
|
$
|
5,925,642
|
|
|
$
|
(485,338
|
)
|
|
$
|
10,308,243
|
|
|
$
|
2,287,869
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME PER ORDINARY
SHARE ATTRIBUTABLE TO OWNERS OF THE COMPANY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted
|
|
$
|
0.01
|
|
|
$
|
0.05
|
|
|
$
|
0.09
|
|
|
$
|
0.09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED
AVERAGE ORDINARY SHARES OUTSTANDING:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted
|
|
|
79,071,363
|
|
|
|
79,055,053
|
|
|
|
79,060,490
|
|
|
|
79,055,053
|
|
See
condensed notes to unaudited consolidated financial statements
PINGTAN
MARINE ENTERPRISE LTD. AND SUBSIDIARIES
UNAUDITED
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
FOR
THE THREE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
(IN
U.S. DOLLARS)
|
|
Equity Attributable To Owners of The Company
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
Ordinary Shares
|
|
|
Additional
|
|
|
|
|
|
|
|
|
Other
|
|
|
Non-
|
|
|
Total
|
|
|
|
Number of
|
|
|
|
|
|
Paid-in
|
|
|
Retained
|
|
|
Statutory
|
|
|
Comprehensive
|
|
|
controlling
|
|
|
Shareholders’
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Earnings
|
|
|
Reserve
|
|
|
Loss
|
|
|
Interest
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2020 (Unaudited)
|
|
|
79,055,053
|
|
|
$
|
79,055
|
|
|
$
|
81,682,599
|
|
|
$
|
60,375,134
|
|
|
$
|
15,748,751
|
|
|
$
|
(17,786,987
|
)
|
|
$
|
19,880,385
|
|
|
$
|
159,978,937
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
689,184
|
|
|
|
-
|
|
|
|
-
|
|
|
|
92,511
|
|
|
|
781,695
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issuance for professional fee
|
|
|
247,375
|
|
|
|
247
|
|
|
|
363,394
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
363,641
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,236,458
|
|
|
|
464,378
|
|
|
|
5,700,836
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, September 30, 2020 (Unaudited)
|
|
|
79,302,428
|
|
|
$
|
79,302
|
|
|
$
|
82,045,993
|
|
|
$
|
61,064,318
|
|
|
$
|
15,748,751
|
|
|
$
|
(12,550,529
|
)
|
|
$
|
20,437,274
|
|
|
$
|
166,825,109
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2019 (Unaudited)
|
|
|
79,055,053
|
|
|
$
|
79,055
|
|
|
$
|
81,682,599
|
|
|
$
|
52,284,874
|
|
|
$
|
14,760,112
|
|
|
$
|
(13,576,052
|
)
|
|
$
|
19,226,706
|
|
|
$
|
154,457,294
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,032,534
|
|
|
|
-
|
|
|
|
-
|
|
|
|
377,859
|
|
|
|
4,410,393
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(4,308,465
|
)
|
|
|
(366,298
|
)
|
|
|
(4,674,763
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, September 30, 2019 (Unaudited)
|
|
|
79,055,053
|
|
|
$
|
79,055
|
|
|
$
|
81,682,599
|
|
|
$
|
56,317,408
|
|
|
$
|
14,760,112
|
|
|
$
|
(17,884,517
|
)
|
|
$
|
19,238,267
|
|
|
$
|
154,192,924
|
|
See
condensed notes to unaudited consolidated financial statements
PINGTAN
MARINE ENTERPRISE LTD. AND SUBSIDIARIES
UNAUDITED
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
(IN
U.S. DOLLARS)
|
|
Equity Attributable To Owners of The Company
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
Ordinary Shares
|
|
|
Additional
|
|
|
|
|
|
|
|
|
Other
|
|
|
Non-
|
|
|
Total
|
|
|
|
Number of
|
|
|
|
|
|
Paid-in
|
|
|
Retained
|
|
|
Statutory
|
|
|
Comprehensive
|
|
|
controlling
|
|
|
Shareholders’
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Earnings
|
|
|
Reserve
|
|
|
Loss
|
|
|
Interest
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2019
|
|
|
79,055,053
|
|
|
$
|
79,055
|
|
|
$
|
81,682,599
|
|
|
$
|
54,286,454
|
|
|
$
|
15,748,751
|
|
|
$
|
(16,080,908
|
)
|
|
$
|
19,361,905
|
|
|
$
|
155,077,856
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6,777,864
|
|
|
|
-
|
|
|
|
-
|
|
|
|
759,527
|
|
|
|
7,537,391
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issuance for professional fee
|
|
|
247,375
|
|
|
|
247
|
|
|
|
363,394
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
363,641
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,530,379
|
|
|
|
315,842
|
|
|
|
3,846,221
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, September 30, 2020 (Unaudited)
|
|
|
79,302,428
|
|
|
$
|
79,302
|
|
|
$
|
82,045,993
|
|
|
$
|
61,064,318
|
|
|
$
|
15,748,751
|
|
|
$
|
(12,550,529
|
)
|
|
$
|
20,437,274
|
|
|
$
|
166,825,109
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2018
|
|
|
79,055,053
|
|
|
$
|
79,055
|
|
|
$
|
81,682,599
|
|
|
$
|
49,593,069
|
|
|
$
|
14,760,112
|
|
|
$
|
(13,448,047
|
)
|
|
$
|
18,892,322
|
|
|
$
|
151,559,110
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6,724,339
|
|
|
|
-
|
|
|
|
-
|
|
|
|
751,682
|
|
|
|
7,476,021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(4,436,470
|
)
|
|
|
(405,737
|
)
|
|
|
(4,842,207
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, September 30, 2019 (Unaudited)
|
|
|
79,055,053
|
|
|
$
|
79,055
|
|
|
$
|
81,682,599
|
|
|
$
|
56,317,408
|
|
|
$
|
14,760,112
|
|
|
$
|
(17,884,517
|
)
|
|
$
|
19,238,267
|
|
|
$
|
154,192,924
|
|
See
condensed notes to unaudited consolidated financial statements
PINGTAN
MARINE ENTERPRISE LTD. AND SUBSIDIARIES
UNAUDITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN
U.S. DOLLARS)
|
|
For the Nine Months Ended
September 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
Net income
|
|
$
|
7,537,391
|
|
|
$
|
7,476,021
|
|
Adjustments to reconcile net income from operations to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
10,616,935
|
|
|
|
7,699,244
|
|
Increase in allowance for doubtful accounts
|
|
|
245,498
|
|
|
|
13,247
|
|
Increase (decrease) in reserve for inventories
|
|
|
1,711,666
|
|
|
|
(370,959
|
)
|
Loss on equity method investment
|
|
|
351,129
|
|
|
|
477,972
|
|
Common stock issuance for professional fee
|
|
|
25,974
|
|
|
|
-
|
|
Loss on disposal of fixed assets
|
|
|
-
|
|
|
|
164,375
|
|
Impairment loss of fishing vessels
|
|
|
-
|
|
|
|
2,533,091
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(5,191,192
|
)
|
|
|
4,170,551
|
|
Inventories
|
|
|
(35,027,650
|
)
|
|
|
(15,713,023
|
)
|
Prepaid expenses
|
|
|
(432,033
|
)
|
|
|
(332,644
|
)
|
Other receivables
|
|
|
(328,396
|
)
|
|
|
114,731
|
|
Other receivables - related party
|
|
|
-
|
|
|
|
(358,553
|
)
|
Accounts payable
|
|
|
(4,641,514
|
)
|
|
|
(3,965,580
|
)
|
Accounts payable - related parties
|
|
|
218,739
|
|
|
|
(2,919,909
|
)
|
Accrued liabilities and other payables
|
|
|
1,553,556
|
|
|
|
1,552,427
|
|
Advance from customers
|
|
|
(619,235
|
)
|
|
|
839,137
|
|
Accrued liabilities and other payables - related party
|
|
|
-
|
|
|
|
(1,290
|
)
|
Due to related parties
|
|
|
140,210
|
|
|
|
(9,432,979
|
)
|
|
|
|
|
|
|
|
|
|
NET CASH USED IN OPERATING ACTIVITIES
|
|
|
(23,838,922
|
)
|
|
|
(8,054,141
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Purchase of property, plant and equipment
|
|
|
(93,357,444
|
)
|
|
|
(105,567,685
|
)
|
Proceeds from government subsidies for fishing vessels
construction
|
|
|
28,962,913
|
|
|
|
33,128,784
|
|
|
|
|
|
|
|
|
|
|
NET CASH USED IN INVESTING ACTIVITIES
|
|
|
(64,394,531
|
)
|
|
|
(72,438,901
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Proceeds from short-term bank loans
|
|
|
81,811,291
|
|
|
|
|
|
Repayments of short-term bank loans
|
|
|
(42,908,020
|
)
|
|
|
-
|
|
Proceeds from long-term bank loans
|
|
|
104,640,414
|
|
|
|
163,551,743
|
|
Repayments of long-term bank loans
|
|
|
(46,325,253
|
)
|
|
|
(11,963,642
|
)
|
Repayments to related parties
|
|
|
-
|
|
|
|
(10,111,087
|
)
|
Loans issued to related parties
|
|
|
(160,070,480
|
)
|
|
|
(121,838,509
|
)
|
Repayments
of loans issued to related parties
|
|
|
157,692,576
|
|
|
|
80,170,667
|
|
|
|
|
|
|
|
|
|
|
NET CASH PROVIDED BY FINANCING ACTIVITIES
|
|
|
94,840,528
|
|
|
|
99,809,172
|
|
|
|
|
|
|
|
|
|
|
EFFECT OF EXCHANGE RATE ON CASH, CASH EQUIVALENTS AND RESTRICTED CASH
|
|
|
935,670
|
|
|
|
(862,543
|
)
|
|
|
|
|
|
|
|
|
|
NET INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH
|
|
|
7,542,745
|
|
|
|
18,453,587
|
|
|
|
|
|
|
|
|
|
|
CASH, CASH EQUIVALENTS AND RESTRICTED CASH - beginning of period
|
|
|
10,092,205
|
|
|
|
1,966,855
|
|
|
|
|
|
|
|
|
|
|
CASH, CASH EQUIVALENTS AND RESTRICTED - end of period
|
|
$
|
17,634,950
|
|
|
$
|
20,420,442
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
|
|
|
|
|
|
|
|
|
Cash paid for:
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
11,012,593
|
|
|
$
|
10,382,198
|
|
Income taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
RECONCILIATION TO AMOUNTS ON CONSOLIDATED BALANCE SHEETS:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
3,397,018
|
|
|
|
20,420,442
|
|
Restricted cash
|
|
|
14,237,932
|
|
|
|
-
|
|
TOTAL CASH, CASH EQUIVALENTS AND RESTRICTED CASH
|
|
$
|
17,634,950
|
|
|
$
|
20,420,442
|
|
NON-CASH INVESTING AND FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Acquisition of property and equipment by decreasing prepayment for long-term assets
|
|
$
|
(20,594,592
|
)
|
|
$
|
-
|
|
Property and equipment acquired on credit as payable
|
|
$
|
|
|
|
|
22,429,610
|
|
See
condensed notes to unaudited consolidated financial statements
PINGTAN
MARINE ENTERPRISE LTD. AND SUBSIDIARIES
CONDENSED
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(IN
U.S. DOLLARS)
SEPTEMBER 30, 2020
NOTE
1 – DESCRIPTION OF BUSINESS AND ORGANIZATION
Pingtan
Marine Enterprise Ltd. (the “Company” or “PME”), formerly China Growth Equity Investment Limited (“CGEI”),
incorporated in the Cayman Islands as an exempted limited liability company, was incorporated as a blank check company on January
18, 2010, with the purpose
of directly or indirectly acquiring, through a merger, share exchange, asset acquisition, plan of arrangement, recapitalization,
reorganization or similar business combination, an operating business, or control of such operating business through contractual
arrangements, that has its principal business and/or material operations located in the People’s Republic of China (“PRC”).
In connection with its initial business combination, in February 2013, CGEI changed its name to Pingtan Marine Enterprise Ltd.
On October 24, 2012, CGEI and China Dredging
Group Co., Ltd (“CDGC” or “China Dredging”) entered into a Merger Agreement providing for the combination
of CGEI and CDGC and on October 24, 2012, CGEI also acquired all of the outstanding capital shares and other equity interests of
Merchant Supreme Co., Ltd. (“Merchant Supreme”), a company incorporated on June 25, 2012, in the British Virgin Islands
(“BVI”), as per a Share Purchase Agreement. On February 25, 2013, the merger between the Company, CDGC and Merchant
Supreme became effective and has been accounted for as a “reverse merger” and recapitalization since the common shareholders
of CDGC and Merchant Supreme (i) owned a majority of the outstanding ordinary shares of the Company immediately following the completion
of the transaction, and (ii) have significant influence and the ability to elect or appoint or to remove a majority of the members
of the governing body of the combined entity. In accordance with the provision of Financial Accounting Standards Board (“FASB”)
Accounting Standards Codification (“ASC”) 805-40, CDGC and Merchant Supreme are deemed the accounting acquirers and
the Company is the legal acquirer in the transaction and, consequently, the transaction is treated as a recapitalization of the
Company. Accordingly, the assets and liabilities and the historical operations that are reflected in the consolidated financial
statements are those of CDGC, Merchant Supreme and their subsidiaries and are recorded at the historical cost basis. The Company’s
assets, liabilities and results of operations were consolidated with the assets, liabilities and results of operations of CDGC,
Merchant Supreme and their subsidiaries subsequent to the acquisition date of February 25, 2013. Following the completion of the
business combination, which became effective on February 25, 2013, CDGC and Merchant Supreme became the wholly-owned subsidiaries
of the Company. The Company’s ordinary shares, par value $0.001 per share, are listed on The NASDAQ Capital Market under
the symbol “PME”.
In
order to place increased focus on the fishing business and pursue more effective growth opportunities, the Company decided to
exit and sell the specialized dredging services operated by China Dredging. The Company completed the sale of CDGC and its subsidiaries
on December 4, 2013.
On February 9, 2015, the Company terminated
its existing Variable Interest Entity (“VIE”) agreements, pursuant to an Agreement of Termination dated February 9,
2015, entered into by and among Ms. Honghong Zhuo, Mr. Zhiyan Lin (each a shareholder of Fujian Provincial Pingtan County Ocean
Fishing Group Co., Ltd (“Pingtan Fishing”), and together the “Pingtan Fishing’s Shareholders”), Pingtan
Fishing and Pingtan Guansheng Ocean Fishing Co., Ltd. (“Pingtan Guansheng”). On February 9, 2015, the Pingtan Fishing’s
Shareholders transferred 100% of their equity interest in Pingtan Fishing to Fujian Heyue Marine Fishing Development Co., Ltd.
(“Fujian Heyue”), pursuant to an Equity Transfer Agreement dated February 9, 2015, entered into by and among the Pingtan
Fishing’s Shareholders, Pingtan Fishing and Fujian Heyue. On February 15, 2015, China Agriculture Industry Development Fund
Co., Ltd. (“China Agriculture”) invested Chinese Renmibi (“RMB”) 400 million (approximately $65 million)
into Pingtan Fishing for an 8% equity interest in Pingtan Fishing. After the restructuring transactions described above, Pingtan
Fishing and its entities became the 92% equity-owned subsidiaries of the Company and was no longer a VIE.
PINGTAN
MARINE ENTERPRISE LTD. AND SUBSIDIARIES
CONDENSED
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(IN
U.S. DOLLARS)
SEPTEMBER 30, 2020
NOTE
1 – DESCRIPTION OF BUSINESS AND ORGANIZATION (continued)
Details
of the Company’s subsidiaries, which are included in these consolidated financial statements as of September 30, 2020, are
as follows:
Name
of subsidiaries
|
|
Place
and date
of incorporation
|
|
Percentage
of
ownership
|
|
Principal
activities
|
Merchant
Supreme Co., Ltd.
(“Merchant Supreme”)
|
|
BVI,
June 25, 2012
|
|
100% held by PME
|
|
Intermediate holding company
|
|
|
|
|
|
|
|
Prime
Cheer Corporation Ltd.
(“Prime Cheer”)
|
|
Hong Kong,
May 3, 2012
|
|
100% held by Merchant Supreme
|
|
Intermediate holding company
|
|
|
|
|
|
|
|
Pingtan
Guansheng Ocean Fishing Co., Ltd.
(“Pingtan Guansheng”)
|
|
PRC,
October 12, 2012
|
|
100% held by Prime Cheer
|
|
Intermediate holding company
|
|
|
|
|
|
|
|
Fujian
Heyue Marine Fishing Development Co., Ltd.
(“Fujian Heyue”)
|
|
PRC,
January 27, 2015
|
|
100% held by Pingtan Guansheng
|
|
Intermediate holding company
|
|
|
|
|
|
|
|
Fujian
Provincial Pingtan County Fishing Group Co., Ltd.
(“Pingtan Fishing”)
|
|
PRC,
February 27, 1998
|
|
92% held by Fujian Heyue
|
|
Oceanic fishing
|
|
|
|
|
|
|
|
Pingtan
Dingxin Fishing Information Consulting Co., Ltd.
(“Pingtan Dingxin”)
|
|
PRC,
October 23, 2012
|
|
100% held by Pingtan Fishing
|
|
Dormant
|
|
|
|
|
|
|
|
Pingtan
Yikang Global Fishery Co., Ltd.
(“Yikang Fishery”)
|
|
PRC,
September 14, 2017
|
|
100% held by Pingtan Fishing
|
|
Dormant
|
|
|
|
|
|
|
|
Pingtan
Shinsilkroad Fishery Co., Ltd.
(“Shinsilkroad Fishery”)
|
|
PRC,
September 14, 2017
|
|
100% held by Pingtan Fishing
|
|
Dormant
|
|
|
|
|
|
|
|
Fuzhou
Howcious Investment Co., Ltd
(“Howcious Investment”)
|
|
PRC,
September 5, 2017
|
|
100% held by Pingtan Fishing
|
|
Dormant
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pingtan
Ocean Fishery Co., Ltd
(“Ocean Fishery”)
|
|
PRC,
July 21, 2017
|
|
100% held by Pingtan Fishing
|
|
Dormant
|
PINGTAN
MARINE ENTERPRISE LTD. AND SUBSIDIARIES
CONDENSED
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(IN
U.S. DOLLARS)
SEPTEMBER 30, 2020
NOTE
1 – DESCRIPTION OF BUSINESS AND ORGANIZATION (continued)
Fujian
Heyue, through its PRC subsidiary, Pingtan Fishing, engages in ocean fishing with its owned and controlled vessels within the
Indian Exclusive Economic Zone (“EEZ”), the international waters and Arafura Sea of Indonesia.
The
Company had a working capital of $4,416,384 as of September 30, 2020. In order to mitigate its liquidity risk, the Company plans
to rely on the proceeds from loans from banks and/or financial institutions to increase working capital in order to meet capital
demands, and the government subsidies for modification and rebuilding project and reimbursement of certain operating expenses.
In addition, Mr. Zhuo, the Chief Executive Officer and Chairman of the Board, will continue to provide financial support to the
Company when necessary.
The
Company meets its day-to-day working capital requirements through cash flow provided by operations, bank loans and related parties’
advances. The Indonesian government’s moratorium on fishing licenses renewals creates uncertainty over fishing operations
in Indonesian waters. The Company’s forecasts and projections show that the Company has adequate resources to continue in
operational existence to meet its obligations in the twelve months following the date of this filing, considering operations in
Indian waters and international waters and consideration of opportunities in new fishing territories. Also, in the past two years,
the Company has upgraded 71 fishing vessels and the deployment of these vessels into operation will generate more revenue and
cash inflows to the Company. In addition, the Company receives subsidies for modification and rebuilding projects and is reimbursed
for certain operating expenses from government entities, as an encouragement of the development of ocean fishing industry.
In December 2019, a novel strain of coronavirus (COVID-19) surfaced
in the PRC. In reaction to this outbreak, many provinces and municipalities in the PRC activated the highest Level-I Response to
the emergency public health incident. As a result, business activities in the PRC were significantly affected.
Emergency quarantine measures and travel restrictions
have had a significant impact on many sectors across the PRC, which has also adversely affected the Company’s operations.
To reduce the impact on its production and operation, the Company implemented certain safety measures to allow them to gradually
resume work in mid-February. For the employees who left Fuzhou during the Spring Festival holiday and could not return to Fuzhou
as scheduled, or those who could only resume work after satisfying the 14-day quarantine requirement, the Company provided paid
leave. Since resuming work in mid-February, the Company has been using a shift system and adopted additional health and safety
procedures to protect their employees. With these measures, the Company was able to maintain sales and operations from mid-February
to mid-March. On March 23, 2020, the Company resumed normal operations and is conducting business as usual with health and safety
procedures to protect employees. Management is focused on mitigating the effects of COVID-19 on the Company’s business operations
while protecting the employees’ health and safety. The Company will continue to actively monitor the situation and may take
further actions that alter the business operations, as may be required by local authorities, or that the Company determines are
in the best interests of its employees, customers, partners, suppliers and other stakeholders.
Some of the Company’s customers are fish
processing plants that export processed fish products to foreign countries. These customers reduced or postponed their purchases
from the Company in the initial stage of the pandemic, but since the middle of the second quarter, they have adjusted their business
strategies in relation to exportation or domestic sale Because of the reduction or postponement, our unit selling price decreased,
our inventory levels increased and our accounts receivables were not timely paid as anticipated.
The COVID-19 pandemic continues to cause major disruptions to businesses
and markets worldwide as the virus spreads or a resurgence in certain jurisdictions. The effects of the outbreak are still evolving,
and the ultimate severity and duration of the pandemic and the implications on global economic conditions remains uncertain. Therefore,
the extent of the impact of the pandemic on the Company’s financial condition and results of operations is still highly uncertain
and will depend on future developments, such as the ultimate duration and scope of the outbreak, its impact on the Company’s
customers and exporters, how quickly normal economic conditions, operations, and the demand for the Company’s products can
resume and whether the pandemic leads to recessionary conditions in the PRC.
While the Company anticipates that its
results of operations will continue to be impacted by this pandemic in the fourth quarter of 2020, the Company is unable to reasonably
estimate the extent of the impact on its full-year results of operations, its liquidity or its overall financial position.
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of presentation
These
interim consolidated financial statements of the Company and its subsidiaries are unaudited. In the opinion of management,
all adjustments (consisting of normal recurring accruals) and disclosures necessary for a fair presentation of these interim
consolidated financial statements have been included. The results reported in the unaudited consolidated financial statements
for any interim periods are not necessarily indicative of the results that may be reported for the entire year. The
accompanying unaudited consolidated financial statements have been prepared in accordance with the rules and regulations of
the U.S. Securities and Exchange Commission (“SEC”) and do not
include all information and footnotes necessary for a complete presentation of financial statements in conformity with
accounting principles generally accepted in the United States (“U.S. GAAP”).
The
Company’s unaudited consolidated financial statements include the accounts of the Company and its subsidiaries. All significant
intercompany accounts and transactions have been eliminated in consolidation.
PINGTAN
MARINE ENTERPRISE LTD. AND SUBSIDIARIES
CONDENSED
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(IN
U.S. DOLLARS)
SEPTEMBER 30, 2020
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
The accompanying consolidated balance sheet
as of December 31, 2019 is derived from the Company’s audited financial statements as of that date. Because certain information
and footnote disclosures have been condensed or omitted, these consolidated financial statements should be read in conjunction
with the audited consolidated financial statements and notes thereto as of and for the year ended December 31, 2019 contained
in the Company’s 2019 Annual Report on Form 10-K (the “2019 Form 10-K”).
Use
of estimates
The
preparation of the unaudited consolidated financial statements in conformity with U.S. GAAP requires management to make estimates
and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, and the related disclosures at the
date of the financial statements and during the reporting period. Actual results could materially differ from these estimates.
Significant estimates in the three and nine months ended September 30, 2020 and 2019 include allowance for doubtful accounts,
reserve for inventories, the useful life of property, plant and equipment, assumptions used in assessing impairment of long-term
assets and valuation of deferred tax assets and accruals for taxes due.
Cash
Cash
consists of cash on hand and cash in banks. The Company maintains cash with various financial institutions in the PRC and Hong
Kong and none of these deposits are covered by insurance. At September 30, 2020, and December 31, 2019, cash balances in the PRC
were $3,299,916 and $9,971,626, respectively, and cash balances in Hong Kong were $97,102 and $120,579, respectively, and are
uninsured. The Company has not experienced any losses in bank accounts and believes it is not exposed to any risks on its cash
in bank accounts.
Restricted
cash
Restricted cash consists of cash deposits
held by the Export Import Bank of China to secure its bank loans, the bank loans of Hong Long and Global Deep Ocean. At September
30, 2020 and December 31, 2019, restricted cash amounted to $14,237,932 and nil, respectively.
Fair
value of financial instruments
The
Company adopted the guidance of ASC Topic 820 for fair value measurements which clarifies the definition of fair value, prescribes
methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as
follows:
Level
1-Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.
Level
2-Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar
assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived
from or corroborated by observable market data.
Level
3-Inputs are unobservable inputs which reflect the reporting entity’s own assumptions on what assumptions the market participants
would use in pricing the asset or liability based on the best available information.
The
carrying amounts reported in the consolidated balance sheets for cash, restricted cash, accounts receivable, inventories, advances
to suppliers, prepaid expenses, prepaid expenses – related party, other receivables, other receivables – related party,
accounts payable, accounts payable – related parties, short-term bank loans, accrued liabilities and other payables, accrued
liabilities and other payables – related party, and due to related parties approximate their fair market value based on
the short-term maturity of these instruments. The fair value of the Company’s long-term bank loans under its agreements
approximates its carrying value at September 30, 2020. The fair value of the Company’s long-term bank loans under its agreements
were estimated using Level 2 inputs based on market data. As of September 30, 2020, the Company does not have any assets or liabilities
that are measured on a recurring basis at fair value.
ASC
Topic 825-10 “Financial Instruments” allows entities to voluntarily choose to measure certain financial assets and
liabilities at fair value (fair value option). The fair value option may be elected on an instrument-by-instrument basis and is
irrevocable, unless a new election date occurs. If the fair value option is elected for an instrument, unrealized gains and losses
for that instrument should be reported in earnings at each subsequent reporting date. The Company did not elect to apply the fair
value option to any outstanding instruments.
PINGTAN
MARINE ENTERPRISE LTD. AND SUBSIDIARIES
CONDENSED
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(IN
U.S. DOLLARS)
SEPTEMBER 30, 2020
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Accounts
receivable
Accounts
receivable are presented net of an allowance for doubtful accounts. The Company maintains an allowance for doubtful accounts for
estimated losses. The Company reviews the accounts receivable on a periodic basis and makes general and specific allowance when
there is doubt as to the collectability of individual balances. In evaluating the collectability of individual receivable balance,
the Company considers many factors, including the age of the balance, a customer’s historical payment history, its current
credit-worthiness and current economic trends. Accounts are written off after exhaustive efforts at collection. The Company only
grants credit terms to established customers who are deemed to be financially responsible. Credit periods to customers are within
180 days after customers received the purchased goods. At September 30, 2020 and December 31, 2019, the Company established, based
on a review of its outstanding balances, an allowance for doubtful accounts in the amounts of $260,199 and $7,960, respectively.
Inventories
Inventories,
consisting of frozen fish and marine catches, are stated at the lower of cost or net realizable value utilizing the weighted average
method. The cost of inventories is primarily comprised of fuel, freight, depreciation, direct labor, consumables, government levied
charges and taxes. Consumables include fishing nets and metal containers used by fishing vessels. The Company’s fishing
fleets in Indian waters and the international waters operate throughout the year, although the May to July period demonstrates
lower catch quantities compared to the October to January period, which is the peak season.
A
reserve is established when management determines that certain inventories may not be saleable. If inventory costs exceed net
realizable value due to obsolescence or quantities in excess of expected demand, the Company will record a reserve for the difference
between the cost and the market value. These reserves are recorded based on estimates. At September 30, 2020 and December 31,
2019, the Company recorded a reserve for inventories in the amount of $2,030,213 and $266,405, respectively.
When
recorded, inventory reserves are intended to reduce the carrying value of inventories to their net realizable value. The Company
regularly evaluates its ability to realize the value of inventories based on a combination of factors including the following:
forecasted sales and estimated current and future market value.
Fishing
licenses
Each of the Company’s fishing vessels
requires an approval from the Ministry of Agriculture and Rural Affairs of the PRC (“MARA”) to carry out ocean fishing
projects in international waters and foreign territories, and to the extent required, a fishing license in local fishing territory
where the vessel operates. These approvals are valid for a period from 3 to 12 months and are awarded to the Company at no cost.
The Company applies for the renewal of the license prior to expiration to avoid interruptions of fishing vessels’ operations.
Since 2014 there has been a moratorium on fishing in Indonesian waters. Each of our fishing vessels operating in Indonesian waters
requires a fishing license granted by the authority in Indonesia.
Investment
in unconsolidated company – Global Deep Ocean
The
Company uses the equity method of accounting for its investment in, and earning or loss of, companies that it does not control
but over which it does exert significant influence. The Company considers whether the fair value of its equity method investment
has declined below its carrying value whenever adverse events or changes in circumstances indicate that recorded value may not
be recoverable. The Company reviews its investments for other-than-temporary impairment whenever events or changes in business
circumstances indicate that the carrying value of the investment may not be fully recoverable. Investments identified as having
an indication of impairment are subject to further analysis to determine if the impairment is other-than-temporary and this analysis
requires estimating the fair value of the investment. The determination of fair value of the investment involves considering factors
such as current economic and market conditions, the operating performance of the entities including current earnings trends and
forecasted cash flows, and other company and industry specific information. If the Company considers any decline to be other than
temporary (based on various factors, including historical financial results and the overall health of the investee), then a write-down
would be recorded to estimated fair value. See Note 6 for discussion of equity method investment.
PINGTAN
MARINE ENTERPRISE LTD. AND SUBSIDIARIES
CONDENSED
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(IN
U.S. DOLLARS)
SEPTEMBER 30, 2020
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Property,
plant and equipment
Property,
plant and equipment are carried at cost and are depreciated on a straight-line basis over the estimated useful lives of the assets.
The cost of repairs and maintenance is expensed as incurred; major replacements and improvements are capitalized. When assets
are retired or disposed of, the cost and accumulated depreciation are removed from the accounts, and any resulting gains or losses
are included in income in the year of disposition. The Company examines the possibility of decreases in the value of fixed assets
when events or changes in circumstances reflect the fact that their recorded value may not be recoverable.
The
estimated useful lives of the assets are as follows:
|
|
Estimated useful life
|
Fishing vessels
|
|
10 - 20 Years
|
Vehicles
|
|
5 Years
|
Office and other equipment
|
|
3 - 5 Years
|
Expenditures
for repairs and maintenance, which do not extend the useful life of the assets, are expensed as incurred.
Capitalized
interest
Interest
associated with the construction of fishing vessels is capitalized and included in the cost of the fishing vessels. When no debt
is incurred specifically for the construction of a fishing vessel, interest is capitalized on amounts expended on the construction
using the weighted-average cost of the Company’s outstanding borrowings. Capitalization of interest ceases when the construction
is substantially complete or the construction activity is suspended for more than a brief period. The Company capitalized interest
of $183,747 and $213,514 for the three months ended September 30, 2020 and 2019, respectively, in the fishing vessels under construction.
The Company capitalized interest of $1,192,672 and $321,333 for the nine months ended September 30, 2020 and 2019, respectively,
in the fishing vessels under construction.
Impairment
of long-lived assets
In accordance with ASC Topic 360, the
Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount
of the assets may not be fully recoverable. The Company evaluates the impairment by comparing the carrying amount of the assets
to an estimate of future undiscounted cash flows expected to be generated from the use of the assets and their eventual disposition.
If the sum of the expected future undiscounted cash flows is less than the carrying amount of the assets, the Company recognizes
an impairment loss based on the excess of the carrying amount of the long-lived assets over their fair value. Impairment loss
represents the impairment loss on the vessels whenever events or changes in circumstances indicate that the carrying amount of
the assets might not be recovered. The Company recognized impairment loss of nil and $70,896 for the three months ended September
30, 2020 and 2019, respectively. The Company recognized impairment loss of nil and $2,546,338 for the nine months ended September
30, 2020 and 2019, respectively. During the nine months ended September 30, 2019, the Company dismantled 1 transport vessel and
deregistered 6 fishing vessels and applied to the MARA for rebuilding 7 new vessels. As a result of the rebuilding projects, the
Company assessed the recoverability of the 7 fishing vessels based on the undiscounted future cash flow that the fishing vessels
are expected to generate as less than the carrying amount, and recognized an impairment loss.
Revenue
recognition
The
Company catches different species of fish, ships them back to the PRC and sells the catches to distributors and retailers by acting
as a wholesaler. Marine catch is the Company’s one and only product line. The product type, contractual price and quantities
are identified in contracts. The Company does not offer promotional payments, customer coupons, rebates or other cash redemption
offers to its customers, and the Company does not accept returns from customers. The Company’s revenues are recorded at
a point in time. All of the operations are considered by the Company’s Chief Operating Decision Maker to be aggregated in
one reportable operating segment and the Company’s revenue is disaggregated by product type in terms of species of fish
sold pursuant to ASC Topic 606-10-55-91(a).
The
Company’s revenue is generated from the sale of frozen fish and other marine catches. The Company recognizes revenue at
the amount the Company expects to be entitled to be paid, determined when control of the products is transferred to its customers,
which occurs upon delivery of and acceptance of the frozen fish by the customer and the Company has a right to receive payment.
The
Company has identified one performance obligation as when the frozen fish and other marine catches identified in the contract
are picked up by the customers at cold storage warehouse, with revenue being recognized at a point in time. The Company
initially recognizes revenue in an amount which is estimated based on contractual prices. The receivables under contracts,
whereby pricing is based on contractual prices, are primarily collected within 180 days of completion of its performance
obligation.
PINGTAN
MARINE ENTERPRISE LTD. AND SUBSIDIARIES
CONDENSED
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(IN
U.S. DOLLARS)
SEPTEMBER 30, 2020
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Revenue
recognition (continued)
Disaggregation
of revenue
The
following tables disaggregate revenues under ASC Topic 606 by species of fish: For the three months ended September 30, 2020 and
2019, our revenue by species of fish was as follows (dollars in thousands, except for average price):
|
|
Three Months Ended September 30, 2020
|
|
|
|
Revenue
|
|
|
Volume
(KG)
|
|
|
Average
price
|
|
|
Percentage
of revenue
|
|
Indian Ocean squid
|
|
$
|
6,071
|
|
|
|
7,285,134
|
|
|
$
|
0.83
|
|
|
|
39.3
|
%
|
Peru squid
|
|
|
4,685
|
|
|
|
3,382,517
|
|
|
|
1.39
|
|
|
|
30.3
|
%
|
Chub mackerel
|
|
|
981
|
|
|
|
1,030,773
|
|
|
|
0.95
|
|
|
|
6.4
|
%
|
Tuna
|
|
|
662
|
|
|
|
184,867
|
|
|
|
3.58
|
|
|
|
4.3
|
%
|
Sardine
|
|
|
649
|
|
|
|
1,743,914
|
|
|
|
0.37
|
|
|
|
4.2
|
%
|
Others
|
|
|
2,400
|
|
|
|
1,070,101
|
|
|
|
2.24
|
|
|
|
15.5
|
%
|
Total
|
|
$
|
15,448
|
|
|
|
14,697,306
|
|
|
$
|
1.05
|
|
|
|
100.0
|
%
|
|
|
Three Months Ended September 30, 2019
|
|
|
|
Revenue
|
|
|
Volume
(KG)
|
|
|
Average
price
|
|
|
Percentage
of revenue
|
|
Indian Ocean squid
|
|
$
|
8,955
|
|
|
|
8,009,340
|
|
|
$
|
1.12
|
|
|
|
80.1
|
%
|
Cuttle fish
|
|
|
1,108
|
|
|
|
236,260
|
|
|
|
4.69
|
|
|
|
9.9
|
%
|
Argentina squid(whole)
|
|
|
455
|
|
|
|
110,726
|
|
|
|
4.11
|
|
|
|
4.0
|
%
|
Croaker fish
|
|
|
342
|
|
|
|
165,223
|
|
|
|
2.07
|
|
|
|
3.1
|
%
|
Ribbon fish
|
|
|
18
|
|
|
|
5,490
|
|
|
|
3.28
|
|
|
|
0.2
|
%
|
Others
|
|
|
302
|
|
|
|
154,428
|
|
|
|
1.96
|
|
|
|
2.7
|
%
|
Total
|
|
$
|
11,180
|
|
|
|
8,681,467
|
|
|
$
|
1.29
|
|
|
|
100.0
|
%
|
The
following tables disaggregate revenues under ASC Topic 606 by species of fish: For the nine months ended September 30, 2020 and
2019, our revenue by species of fish was as follows (dollars in thousands, except for average price):
|
|
Nine Months Ended September 30, 2020
|
|
|
|
Revenue
|
|
|
Volume
(KG)
|
|
|
Average
price
|
|
|
Percentage
of revenue
|
|
Indian Ocean squid
|
|
$
|
25,892
|
|
|
|
30,557,785
|
|
|
$
|
0.85
|
|
|
|
46.1
|
%
|
Peru squid
|
|
|
9,523
|
|
|
|
6,436,282
|
|
|
|
1.48
|
|
|
|
16.9
|
%
|
Chub mackerel
|
|
|
4,996
|
|
|
|
5,585,977
|
|
|
|
0.89
|
|
|
|
8.9
|
%
|
Cuttle fish
|
|
|
4,554
|
|
|
|
1,024,960
|
|
|
|
4.44
|
|
|
|
8.1
|
%
|
Croaker fish
|
|
|
3,367
|
|
|
|
1,861,511
|
|
|
|
1.81
|
|
|
|
6.0
|
%
|
Others
|
|
|
7,886
|
|
|
|
4,524,509
|
|
|
|
1.74
|
|
|
|
14.0
|
%
|
Total
|
|
$
|
56,218
|
|
|
|
49,991,024
|
|
|
$
|
1.12
|
|
|
|
100.0
|
%
|
|
|
Nine Months Ended September 30, 2019
|
|
|
|
Revenue
|
|
|
Volume
(KG)
|
|
|
Average
price
|
|
|
Percentage
of revenue
|
|
Indian Ocean squid
|
|
$
|
26,771
|
|
|
|
24,006,371
|
|
|
$
|
1.12
|
|
|
|
48.6
|
%
|
Ribbon fish
|
|
|
5,968
|
|
|
|
1,819,792
|
|
|
|
3.28
|
|
|
|
10.8
|
%
|
Argentina squid(whole)
|
|
|
4,234
|
|
|
|
1,000,671
|
|
|
|
4.23
|
|
|
|
7.7
|
%
|
Croaker fish
|
|
|
3,566
|
|
|
|
1,631,723
|
|
|
|
2.19
|
|
|
|
6.5
|
%
|
Cuttle fish
|
|
|
3,565
|
|
|
|
681,619
|
|
|
|
5.23
|
|
|
|
6.5
|
%
|
Others
|
|
|
10,963
|
|
|
|
3,712,634
|
|
|
|
2.95
|
|
|
|
19.9
|
%
|
Total
|
|
$
|
55,067
|
|
|
|
32,852,810
|
|
|
$
|
1.68
|
|
|
|
100.0
|
%
|
PINGTAN
MARINE ENTERPRISE LTD. AND SUBSIDIARIES
CONDENSED
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(IN
U.S. DOLLARS)
SEPTEMBER 30, 2020
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Government
subsidies
Government
subsidies are recognized when there is reasonable assurance that the subsidy will be received and all attaching conditions will
be satisfied. When the subsidy relates to an expense item, it is recognized as income over the periods necessary to match the
subsidy, on a systematic basis, to the costs that it is intended to compensate. Where the subsidy relates to an asset, it is credited
to the cost of the asset and is released to the income statement over the expected useful life in a consistent manner with the
depreciation method for the relevant asset.
Income
taxes
Under
the current laws of the Cayman Islands and British Virgin Islands, the Company and Merchant Supreme are not subject to any income
or capital gains tax, and dividend payments that the Company may make are not subject to any withholding tax in the Cayman Islands
or British Virgin Islands. Under the current laws of Hong Kong, Prime Cheer is not subject to any capital gains tax and dividend
payments are not subject to any withholding tax in Hong Kong.
The
Company is not incorporated nor does it engage in any trade or business in the United States and is not subject to United States
federal income taxes. The Company did not derive any significant amount of income subject to such taxes and accordingly, no relevant tax provision is made in the accompanying unaudited consolidated statements of operations
and comprehensive income (loss).
The Company’s subsidiary, Pingtan
Fishing, is a qualified ocean fishing enterprise certified by the MARA. The qualification renews on April 1 of each year. Pingtan
Fishing is exempt from income tax derived from its ocean fishing operations in the periods it processes a valid Ocean Fishing Enterprise
Qualification Certificate issued by the MARA.
The
China’s Enterprise Income Tax Law (“EIT Law”), which went into effect on January 1, 2018, also provides that
an enterprise established under the laws of foreign countries or regions but whose “de facto management body” is located
in the PRC be treated as a resident enterprise for PRC tax purposes and consequently be subject to the PRC income tax at the rate
of 25% for its worldwide income. The Implementing Rules of the new EIT Law merely define the location of the “de facto management
body” as “the place where the exercising, in substance, of the overall management and control of the production and
business operation, personnel, accounting, properties, etc., of a non-PRC company is located.” On April 22, 2009, the PRC
State Administration of Taxation further issued a notice entitled “Notice Regarding Recognizing Offshore-Established Enterprises
Controlled by PRC Shareholders as Resident Enterprises Based on Their Place of Effective Management.” Under this notice,
a foreign company controlled by a PRC company or a group of PRC companies shall be deemed as a PRC resident enterprise if (i)
the senior management and the core management departments in charge of its daily operations mainly function in the PRC; (ii) its
financial decisions and human resource decisions are subject to decisions or approvals of persons or institutions in the PRC;
(iii) its major assets, accounting books, company seals, minutes and files of board meetings and shareholders’ meetings
are located or kept in the PRC; and (iv) more than half of the directors or senior management personnel with voting rights reside
in the PRC. Based on a review of surrounding facts and circumstances, the Company does not believe that it is likely that its
operations outside of the PRC should be considered a resident enterprise for PRC tax purposes. However, due to limited guidance
and implementation history of the EIT Law, should the Company be treated as a resident enterprise for PRC tax purposes, the Company
will be subject to PRC tax on worldwide income at a uniform tax rate of 25% retroactive to May 3, 2012.
In
addition, Pingtan Fishing is not subject to foreign income taxes for its operations in either India or Indonesia Exclusive Economic
Zones or the Western and Central Pacific Fisheries Commission areas.
Deferred
income tax assets and liabilities are determined based upon differences between the financial reporting and tax bases of assets
and liabilities and are measured using the enacted tax rates and laws that will be effective when the differences are expected
to reverse.
PINGTAN
MARINE ENTERPRISE LTD. AND SUBSIDIARIES
CONDENSED
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(IN
U.S. DOLLARS)
SEPTEMBER 30, 2020
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Income
taxes (continued)
Deferred
tax assets are reduced by a valuation allowance to the extent that management concludes it is more likely than not that the assets
will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income
in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in the consolidated statements of operations and comprehensive income (loss)
in the period that includes the enactment date.
The
Company prescribes a more-likely-than-not threshold for financial statement recognition and measurement of a tax position taken
in the tax return. This interpretation also provides guidance on de-recognition of income tax assets and liabilities, classification
of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions,
accounting for income taxes in interim periods and income tax disclosures. As of September 30, 2020 and December 31, 2019, there
were no amounts that had been accrued with respect to uncertain tax positions.
Shipping
and handling costs
Shipping
and handling costs are included in selling expense and amounted to $35,397 and $147,926 for the three months ended September 30,
2020 and 2019, respectively. Shipping and handling costs amounted to $356,490 and $361,504 for the nine months ended September
30, 2020 and 2019, respectively.
Employee
benefits
The
Company makes mandatory contributions to the PRC government’s health, retirement benefit and unemployment funds in accordance
with the relevant Chinese social security laws. The costs of these payments are charged to the same accounts as the related salary
costs in the same period as the related salary costs incurred. Employee benefit costs amounted to $606,825 and $474,130 for the
three months ended September 30, 2020 and 2019, respectively. Employee benefit costs amounted to $1,795,348 and $1,690,484 for
the nine months ended September 30, 2020 and 2019, respectively.
PINGTAN
MARINE ENTERPRISE LTD. AND SUBSIDIARIES
CONDENSED
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(IN
U.S. DOLLARS)
SEPTEMBER 30, 2020
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Foreign
currency translation
The
reporting currency of the Company is the U.S. dollar. The functional currency of the Company and Merchant Supreme and Prime Cheer,
the Company’s subsidiaries, is the U.S. dollar. The functional currency of Pingtan Guansheng, Fujian Heyue and Pingtan Fishing,
the Company’s subsidiaries, is the RMB. For the Company’s subsidiaries Pingtan Guansheng,
Fujian Heyue and Pingtan Fishing, whose functional currencies are the RMB, results of operations and cash flows are translated
at average exchange rates during the period, assets and liabilities are translated at the unified exchange rate at the end of
the period, and equity is translated at historical exchange rates. As a result, amounts relating to assets and liabilities reported
on the statements of cash flows may not necessarily agree with the changes in the corresponding balances on the balance sheets.
Translation adjustments resulting from the process of translating the local currency financial statements into U.S. dollars are
included in determining comprehensive income. The cumulative translation adjustment and effect of exchange rate changes on cash
for the nine months ended September 30, 2020 and 2019 was $935,670 and $(862,543), respectively. Transactions denominated in foreign
currencies are translated into the functional currency at the exchange rates prevailing on the transaction dates. Assets and liabilities
denominated in foreign currencies are translated into the functional currency at the exchange rates prevailing at the balance
sheet date and any transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency
other than the functional currency are included in the results of operations as incurred.
All
of the Company’s revenue transactions are transacted in the functional currency of the operating subsidiaries. The Company
does not enter into any material transactions in foreign currencies. Transaction gains or losses have not had, and are not expected
to have, a material effect on the results of operations of the Company.
Asset
and liability accounts at September 30, 2020 and December 31, 2019 were translated at 6.8101 RMB to $1.00 and at 7.0729 RMB
to $1.00, respectively, which were the exchange rates on the balance sheet dates. Equity accounts were stated at their
historical rate. The average translation rates applied to the statements of operations for the nine months ended September
30, 2020 and 2019 were 6.9917 RMB to $1.00 and 6.8541 RMB to $1.00, respectively. Cash flows from the Company’s
operations are calculated based upon the local currencies using the average translation rate.
Earnings
per share
ASC
Topic 260 “Earnings per Share,” requires presentation of both basic and diluted earnings per share (“EPS”)
with a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted
EPS computation. Basic EPS excludes dilution. Diluted EPS reflects the potential dilution that could occur if securities or other
contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that
then shared in the earnings of the entity.
Basic
net income per share is computed by dividing net income available to ordinary shareholders by the weighted average number of ordinary
shares outstanding during the period. Diluted net income per share is computed by dividing net income by the weighted average
number of ordinary shares, ordinary share equivalents and potentially dilutive securities outstanding during each period. Potentially
dilutive ordinary shares consist of the ordinary shares issuable upon the exercise of ordinary share warrants (using the treasury
stock method). Ordinary share equivalents are not included in the calculation of diluted earnings per share if their effect would
be anti-dilutive. In a period in which the Company has a net loss, all potentially dilutive securities are excluded from the computation
of diluted shares outstanding as they would have had an anti-dilutive impact. The following table presents a reconciliation of
basic and diluted net income per share:
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Net income available to owners of the company for basic and diluted net income per share of ordinary stock
|
|
$
|
689,184
|
|
|
$
|
4,032,534
|
|
|
$
|
6,777,864
|
|
|
$
|
6,724,339
|
|
Weighted average ordinary stock outstanding - basic and diluted
|
|
|
79,071,363
|
|
|
|
79,055,053
|
|
|
|
79,060,490
|
|
|
|
79,055,053
|
|
Net income per ordinary share attributable to owners of the Company - basic and diluted
|
|
$
|
0.01
|
|
|
$
|
0.05
|
|
|
$
|
0.09
|
|
|
$
|
0.09
|
|
PINGTAN
MARINE ENTERPRISE LTD. AND SUBSIDIARIES
CONDENSED
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(IN
U.S. DOLLARS)
SEPTEMBER 30, 2020
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Non-controlling
interest
On
February 15, 2015, China Agriculture invested RMB 400 million (approximately $65 million) into Pingtan Fishing and acquired an
8% equity interest in Pingtan Fishing. As of September 30, 2020, China Agriculture owned 8% of the equity interest of Pingtan
Fishing, which was not under the Company’s control.
Related
parties
Parties
are considered to be related to the Company if the parties, directly or indirectly, through one or more intermediaries, control,
are controlled by, or are under common control with the Company. Related parties also include principal owners of the Company,
its management, members of the immediate families of principal owners of the Company and its management and other parties with
which the Company may deal with if one party controls or can significantly influence the management or operating policies of the
other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. The
Company discloses all significant related party transactions.
Comprehensive
income (loss)
Comprehensive
income (loss) is comprised of net income and all changes to the statements of stockholders’ equity, except those due to
investments by stockholders, changes in paid-in capital and distributions to stockholders. For the Company, comprehensive income
(loss) for the three and nine months ended September 30, 2020 and 2019 included net income and unrealized gain from foreign currency
translation adjustments.
Segment
information
ASC
Topic 280 “Segment reporting” establishes standards for reporting information on operating segments in interim and
annual financial statements. All of the Company’s operations are considered by the chief operating decision maker to be
aggregated in one reportable operating segment. All of the Company’s customers are in the PRC and all income is derived
from ocean fishery.
Commitments
and contingencies
In
the normal course of business, the Company is subject to contingencies, including legal proceedings and environmental claims,
arising out of the normal course of businesses that relate to a wide range of matters, including among others, liability for breaches
of contracts. The Company records accruals for such contingencies based upon the assessment of the probability of occurrence and,
where determinable, an estimate of the liability. Management may consider many factors in making these assessments, including
historical operations, scientific evidence and the specifics of each matter.
The
Company’s management has evaluated all such proceedings and claims that existed as of September 30, 2020. In the opinion
of management, the ultimate disposition of these matters will not have a material adverse effect on the Company’s financial
position, liquidity or results of operations.
Concentrations
of credit, economic and political risks
The
Company’s operations are carried out in the PRC. Accordingly, the Company’s business, financial condition and results
of operations may be influenced by the political, economic and legal environment in the PRC, and by the general state of the PRC’s
economy. The Company’s operation in the PRC is subject to special considerations and significant risks not typically associated
with companies in North America and Western Europe. These include risks associated with, among others, the political, economic
and legal environment and foreign currency exchange. The Company’s results may be adversely affected by changes in the political
and social conditions in the PRC, and by changes in governmental policies with respect to laws and regulations, anti-inflationary
measures, currency conversion, remittances aboard, and rates and methods of taxation, among other things.
Financial
instruments which potentially subject the Company to concentrations of credit risk consist principally of cash and trade accounts
receivable. All of the Company’s cash is maintained with state-owned banks within the PRC and Hong Kong, and none of these
deposits are covered by insurance. The Company has not experienced any losses in such accounts. A portion of the Company’s
sales are credit sales which are primarily to customers whose abilities to pay are dependent upon the industry economics prevailing
in these areas; however, concentrations of credit risk with respect to trade accounts receivables is limited due to generally
short payment terms. The Company also performs ongoing credit evaluations of its customers to help further reduce credit risk.
PINGTAN
MARINE ENTERPRISE LTD. AND SUBSIDIARIES
CONDENSED
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(IN
U.S. DOLLARS)
SEPTEMBER 30, 2020
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Concentrations
of credit, economic and political risks (continued)
According
to the sale agreement signed on December 4, 2013, the Company does not own 20 fishing vessels but has the operating rights to
operate these vessels which are owned by a related company, Fuzhou Hong Long Ocean Fishery Co., Ltd (“Hong Long”)
and the Company is entitled to 100% of the net profit (loss) of the vessels. The Company has latitude in establishing price and
discretion in supplier selection. There were no economic risks associated with the operating rights but the Company may need to
bear the operation risks and credit risks as aforementioned.
As
the Company has historically derived the majority of its revenue from Indonesian waters, the suspension of fishing operations
in this area has had and will continue to have a significant negative impact on the Company.
Recent
Adopted Accounting Standards
Codification
Improvements to Topic 842, Leases (“ASU 2018-10”) and ASU 2018-11, Leases (Topic 842), Targeted Improvements (“ASU
2018-11”). The amendments in ASU 2018-10 affect only narrow aspects of the guidance issued in the amendments in ASU 2016-02,
including but not limited to lease residual value guarantee, rate implicit in the lease and lease term and purchase option. The
amendments in ASU 2018-11 provide an optional transition method for adoption of the new standard, which will allow entities to
continue to apply the legacy guidance in ASC Topic 840, including its disclosure requirements, in the comparative periods presented
in the year of adoption.
Effective
January 1, 2019, we adopted the new standard using the modified retrospective approach and implemented internal controls to enable
the preparation of financial information upon adoption. We elected to adopt both the transition relief provided in ASU 2018-11
and the package of practical expedients which allowed us, among other things, to retain historical lease classifications and accounting
for any leases that existed prior to adoption of the standard. Additionally, we elected the practical expedients allowing us not
to separate lease and non-lease components and not record leases with an initial term of twelve months or less (“short-term
leases”) on the balance sheet across all existing asset classes. Adoption of the new standard resulted in the recording
of right use asset and lease liability of $0.77 million as of January 1, 2019, which primarily relates to our corporate office
leases. The standard did not materially impact our condensed consolidated statements of operations or cash flows. Adopting the
new standard did not have a material impact on the accounting for leases under which we are the lessee.
In
August 2018, the FASB issued ASU 2018-13, “Changes to the Disclosure Requirements for Fair Value Measurement.” This
standard eliminates the current requirement to disclose the amount or reason for transfers between level 1 and level 2 of the
fair value hierarchy and the requirement to disclose the valuation methodology for level 3 fair value measurements. The standard
includes additional disclosure requirements for level 3 fair value measurements, including the requirement to disclose the changes
in unrealized gains and losses in other comprehensive income during the period and permits the disclosure of other relevant quantitative
information for certain unobservable inputs. The new guidance is effective for interim and annual periods beginning after December
15, 2019. We applied the new standard beginning January 1, 2020.
Recent
accounting pronouncements
In
June 2016, the FASB issued ASU 2016-13, “Financial Instruments—Credit Losses (Topic 326), Measurement of Credit Losses
on Financial Instruments”, which will be effective for fiscal years beginning after December 15, 2019, including interim
periods within those fiscal years. The guidance replaces the incurred loss impairment methodology with an expected credit loss
model for which a company recognizes an allowance based on the estimate of expected credit loss. In November 2019, the FASB issued
ASU 2019-10. Financial Instruments — Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842):
Effective Dates, finalizes effective date delays for private companies, not-for-profit organizations, and certain smaller reporting
companies applying the credit losses, leases, and hedging standards. The effective date for SEC filers, excluding smaller reporting
companies as defined by the SEC, remains as fiscal years beginning after December 15, 2019. The new effective date for all other
entities is fiscal years beginning after December 15, 2022. The Company is currently evaluating the impact of adopting this standard
on its consolidated financial statements.
PINGTAN
MARINE ENTERPRISE LTD. AND SUBSIDIARIES
CONDENSED
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(IN
U.S. DOLLARS)
SEPTEMBER 30, 2020
NOTE
3 – ACCOUNTS RECEIVABLE
At
September 30, 2020 and December 31, 2019, accounts receivable consisted of the following:
|
|
September 30,
2020
|
|
|
December 31,
2019
|
|
Accounts receivable
|
|
$
|
14,837,404
|
|
|
$
|
9,281,406
|
|
Less: allowance for doubtful accounts
|
|
|
(260,199
|
)
|
|
|
(7,960
|
)
|
|
|
$
|
14,577,205
|
|
|
$
|
9,273,446
|
|
The
Company reviews the accounts receivable on a periodic basis and makes general and specific allowance when there is doubt as to
the collectability of an individual balance.
NOTE
4 – INVENTORIES
At
September 30, 2020 and December 31, 2019, inventories consisted of the following:
|
|
September 30,
2020
|
|
|
December 31,
2019
|
|
Frozen fish and marine catches work in progress
|
|
$
|
20,802,604
|
|
|
$
|
25,401,843
|
|
Frozen fish and marine catches in transit
|
|
|
20,726,990
|
|
|
|
3,459,004
|
|
Frozen fish and marine catches in warehouse
|
|
|
25,977,349
|
|
|
|
1,933,310
|
|
|
|
|
67,506,943
|
|
|
|
30,794,157
|
|
Less: reserve for inventories
|
|
|
(2,030,213
|
)
|
|
|
(266,405
|
)
|
|
|
$
|
65,476,730
|
|
|
$
|
30,527,752
|
|
Frozen fish and marine catches work in
progress represent fish inventory in vessels’ refrigerators, which has not been delivered to ports in the PRC, nor applied
for duty-exemption import into the PRC.
Frozen fish and marine catches in transit
represent fish inventory that obtained duty-exemption import permission and is in the process of being shipped to the PRC.
Frozen fish and marine catches in warehouse
represent fish inventory in cold storage warehouses located in the PRC.
As
of September 30, 2020, our total inventory balance was $65,476,730 compared to $30,527,752 as of December 31, 2019. The change
in the balance is mainly attributable to an increase in frozen fish and marine catches in warehouse by $24.04 million and an increase
in frozen fish and marine catches in transit by $17.27 million, a large portion of which was booked as frozen fish and marine
catches work in progress as of December 31, 2019.
A
reserve is established when management determines that certain inventories may not be saleable. If inventory costs exceed expected
market value due to obsolescence or quantities in excess of expected demand, the Company will record a reserve for the difference
between the cost and the market value. These reserves are recorded based on estimates.
PINGTAN
MARINE ENTERPRISE LTD. AND SUBSIDIARIES
CONDENSED
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(IN
U.S. DOLLARS)
SEPTEMBER 30, 2020
NOTE
5 – COST METHOD INVESTMENT
At
September 30, 2020 and December 31, 2019, cost method investment amounted to $3,083,655 and $3,010,235, respectively. The investment
represents Pingtan Fishing’s, the Company’s subsidiary, minority interest in Fujian Pingtan Rural-Commercial Bank
Joint-Stock Co., Ltd. (“Pingtan Rural-Commercial Bank”), a private financial institution. Pingtan Fishing completed
its registration as a shareholder on October 17, 2012 and paid RMB 21 million (approximately $3.0 million) to purchase 5% of the
common stock of Pingtan Rural-Commercial Bank. Pingtan Fishing held 15,113,250 shares and accounted for 4.8% investment in the
total equity investment of the bank as of September 30, 2020 and December 31, 2019.
In
according to ASC Topic 321, the Company elected to use the measurement alternative to measure such investments at cost, less any
impairment, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments
of the same issuer, if any. The Company monitors its investment in the non-marketable security and will recognize, if ever existing,
a loss in value which is deemed to be other than temporary. The Company determined that there was no impairment on this investment
as of September 30, 2020 and December 31, 2019.
NOTE
6 – EQUITY METHOD INVESTMENT
At September 30, 2020 and December 31,
2019, equity method investment amounted to $28,244,032 and $27,923,464, respectively. The investment represents the Company’s
subsidiary, Pingtan Fishing’s interest in Global Deep Ocean. On June 12, 2014, Pingtan Fishing incorporated Global Deep Ocean
with other two unrelated companies in PRC. In April 2017, these two companies sold their shares to another unrelated party, Zhen
Lin. On September 3, 2020, Zhen Lin sold his shares to Fujian Xinqiao Agricultural Development Group Co., Ltd. As of September
30, 2020, Pingtan Fishing and Fujian Xinqiao Agricultural Development Group Co., Ltd. accounted for 20% and 80% of the total ownership,
respectively.
Global Deep Ocean will process, cold storage,
and transport Deep Ocean fishing products. Total registered capital of Global Deep Ocean is RMB 1 billion (approximately $146.8
million) and as of September 30, 2020, Pingtan Fishing had contributed its share of registered capital of RMB 200 million (approximately
$29.4 million).
The
Company treats the equity investment in the consolidated financial statements under the equity method. Under the equity method,
the investment is initially recorded at cost, adjusted for any excess of the Company’s share of the incorporated-date fair
values of the investee’s identifiable net assets over the cost of the investment (if any). Thereafter, the investment is
adjusted for the post incorporation change in the Company’s share of the investee’s net assets and any impairment
loss relating to the investment. For the three months ended September 30, 2020 and 2019, the Company’s share of Global Deep
Ocean’s net loss was $82,586 and $126,848, respectively, which was included in loss on equity method investment in the accompanying
consolidated statements of operations and comprehensive income. For the nine months ended September 30, 2020 and 2019, the Company’s
share of Global Deep Ocean’s net loss was $351,129 and $364,676, respectively, which was included in loss on equity method
investment in the accompanying consolidated statements of operations and comprehensive income.
NOTE
7 – PREPAYMENT FOR LONG-TERM ASSETS
At September
30, 2020 and December 31, 2019, prepayment for long-term assets consisted of prepayment for fishing vessels’ construction.
The Company reclassifies the prepayment for fishing vessels’ construction to construction-in-progress using the percentage
of completion method. During the nine months ended September 30, 2020, the Company reclassified RMB 484,970,792 (approximately
$69.4 million) from prepayment for long-term assets to construction-in-progress.
PINGTAN
MARINE ENTERPRISE LTD. AND SUBSIDIARIES
CONDENSED
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(IN
U.S. DOLLARS)
SEPTEMBER 30, 2020
NOTE
7 – PREPAYMENT FOR LONG-TERM ASSETS (continued)
For the
nine months ended September 30, 2020, a summary of activities in prepayment for long-term assets was as follows:
|
|
Prepayment for fishing vessels’ construction
|
|
Balance - December 31, 2019
|
|
$
|
49,040,338
|
|
Prepayments made for fishing vessels’ construction
|
|
|
89,958,093
|
|
Reclassification to construction-in-progress
|
|
|
(69,363,787
|
)
|
Foreign currency fluctuation
|
|
|
1,745,573
|
|
Balance – September 30, 2020
|
|
$
|
71,380,217
|
|
NOTE
8 – PROPERTY, PLANT AND EQUIPMENT
At
September 30, 2020 and December 31, 2019, property, plant and equipment consisted of the following:
|
|
Useful life
|
|
September 30,
2020
|
|
|
December 31,
2019
|
|
Fishing vessels
|
|
10 - 20 Years
|
|
$
|
333,847,113
|
|
|
$
|
304,619,431
|
|
Vehicles
|
|
5 Years
|
|
|
22,359
|
|
|
|
21,826
|
|
Office and other equipment
|
|
3 – 5 Years
|
|
|
467,643
|
|
|
|
427,154
|
|
Construction-in-progress
|
|
-
|
|
|
22,495,143
|
|
|
|
-
|
|
|
|
|
|
|
356,832,258
|
|
|
|
305,068,411
|
|
Less: accumulated depreciation
|
|
|
|
|
(57,663,190
|
)
|
|
|
(45,690,682
|
)
|
|
|
|
|
$
|
299,169,068
|
|
|
$
|
259,377,729
|
|
During the nine months ended September
30, 2020, the Company received a government subsidy for 30 completed fishing vessels that amounted to RMB 202.5 million (approximately
$29.0 million). The subsidy is related to assets, which requires deducting it from the carrying amount of the asset.
For
the three months ended September 30, 2020 and 2019, depreciation expense amounted to $3,944,203 and $2,627,985, respectively,
of which $3,170,392 and $1,713,999, respectively, was included in cost of revenue and inventories, and the remainder was included
in general and administrative expense. For the nine months ended September 30, 2020 and 2019, depreciation expense amounted to
$10,616,935 and $7,699,244, of which $8,342,357 and $4,814,041, respectively, was included in cost of revenue and inventories,
and the remainder was included in general and administrative expense, respectively.
The
Company had 70 fishing vessels at September 30, 2020 and December 31, 2019, with net carrying amount of approximately $158.7 million
and $190.8 million, respectively, pledged as collateral for its bank loans.
Included in construction-in-progress are
fishing vessels under construction, which includes the costs of construction and any interest charges arising from borrowings used
to finance these assets during the period of construction of the assets. No provision for depreciation is made on fishing vessels
under construction until such time as the relevant assets are completed and ready for their intended use.
The Company recognized impairment loss
of nil and $70,896 for the three months ended September 30, 2020 and 2019, respectively. During the nine months ended September
30, 2019, the Company dismantled 1 transport vessel and deregistered 6 fishing vessels and applied to the MARA for rebuilding
7 new vessels. As a result of the rebuilding projects, the Company assessed the recoverability of the 7 fishing vessels based
on the undiscounted future cash flow that the fishing vessels are expected to generate as less than the carrying amount, and recognized
an impairment loss. The Company recognized impairment loss of nil and $2,546,338 for the nine months ended September 30, 2020
and 2019, respectively.
37 vessels in Indonesian waters, are not
in operation because the licenses are currently inactive due to a moratorium. The Indonesian government issued a moratorium on
fishing license renewals in 2014 that has had and will continue to have a significant negative impact on our results of operations
and financial condition. The net carrying amount of the 37 vessels were approximately $26.6 million at September 30, 2020.
Given the impact of the moratorium, the Company assessed the recoverability of these 37 vessels for the nine months ended 2020
and 2019 based on the undiscounted future cash flows, these vessels being available for fishing in other fisheries by redeployment,
the relevant operation data of the Company’s comparable vessels, and upgrading and improvement costs based on the Company’s
historical experience. As of the nine months ended September 30, 2020 and 2019, the payback period used in the undiscounted cash
flow analysis used in the recoverability assessment is less than its remaining useful life and the carrying value of the fishing
vessels are expected to be recoverable. Therefore, no impairment loss was recognized.
PINGTAN
MARINE ENTERPRISE LTD. AND SUBSIDIARIES
CONDENSED
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(IN
U.S. DOLLARS)
SEPTEMBER 30, 2020
NOTE
9 – RELATED PARTIES TRANSACTIONS
Due
from related party
At
September 30, 2020 and December 31, 2019, the due from related party amount consisted of the following:
|
|
September 30,
2020
|
|
|
December 31,
2019
|
|
Due from related party-Hong Long
|
|
$
|
15,223,427
|
|
|
$
|
12,477,777
|
|
Due
from related party-Hong Long will be repaid in the following installments, with an annual interest rate of 4.35%, guaranteed by
two land use rights owned jointly by two companies controlled by Zhuo's family.
The installments due from related party-Hong
Long are as follows:
Before
|
|
Installments
|
|
October 20, 2020
|
|
$
|
14,684,072
|
|
December 20, 2020
|
|
|
539,355
|
|
Total
|
|
$
|
15,223,427
|
|
During the three months ended September 30, 2020, the Company
received repayment of Hong Long amounted to $66.4 million according to the previous installments schedule. From October 1, 2020
to November 6, 2020, the Company received repayment of Hong Long amounted to $14.0 million.
Accounts
payable - related parties
At
September 30, 2020 and December 31, 2019, accounts payable - related parties consisted of the following:
Name of related party
|
|
September 30,
2020
|
|
|
December 31,
2019
|
|
Hong Long (1)
|
|
$
|
288,371
|
|
|
$
|
270,230
|
|
Huna Lin
|
|
|
1,685,057
|
|
|
|
1,436,987
|
|
|
|
$
|
1,973,428
|
|
|
$
|
1,707,217
|
|
(1)
|
Hong Long is an
affiliate company majority owned by a family member of the Company’s CEO.
|
These
accounts payable - related parties’ amounts are short-term in nature, non-interest bearing, unsecured and payable on demand.
Due
to related parties
At
September 30, 2020 and December 31, 2019, the due to related parties amount consisted of the following:
|
|
September 30,
2020
|
|
|
December 31,
2019
|
|
Accrued compensation for LiMing Yung, Chief Financial Officer
|
|
$
|
15,000
|
|
|
$
|
15,000
|
|
Accrued compensation for Xinrong Zhuo, Chief Executive Officer
|
|
|
3,354
|
|
|
|
3,328
|
|
Advance from Xinrong Zhuo
|
|
|
-
|
|
|
|
150,000
|
|
|
|
$
|
18,354
|
|
|
$
|
168,328
|
|
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, the spouse of the Company’s CEO (the “Office
Lease”). Pursuant to the Office Lease, the annual rent is RMB 84,000 (approximately $12,000) and the renewed Office Lease
expires on July 31, 2021.
For
the three months ended September 30, 2020 and 2019, rent expense related to the Office Lease amounted to $3,038 and $3,063, respectively.
For the nine months ended September 30, 2020 and 2019, rent expense related to the Office Lease amounted to $9,011 and $9,192,
respectively. The future minimum rental payment required under the Office Lease is as follows:
Twelve-month period Ending September 30:
|
|
Amount
|
|
2021
|
|
$
|
10,012
|
|
PINGTAN
MARINE ENTERPRISE LTD. AND SUBSIDIARIES
CONDENSED
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(IN
U.S. DOLLARS)
SEPTEMBER 30, 2020
NOTE
9 – RELATED PARTIES TRANSACTIONS (continued)
Selling
to related parties
During
the three and nine months ended September 30, 2020 and 2019 selling to related parties were as follows:
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
2020
|
|
|
Percentage
of revenue
|
|
|
2019
|
|
|
Percentage
of revenue
|
|
|
2020
|
|
|
Percentage
of revenue
|
|
|
2019
|
|
|
Percentage
of revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fuzhou Yahao Seafood Tesco Investment Co., Ltd.
|
|
$
|
2,104,460
|
|
|
|
14
|
%
|
|
$
|
1,466,831
|
|
|
|
13
|
%
|
|
$
|
5,972,420
|
|
|
|
11
|
%
|
|
$
|
3,017,216
|
|
|
|
5
|
%
|
Xiamen International Trade Honglong Industrial Co., Ltd.
|
|
|
695,958
|
|
|
|
5
|
%
|
|
|
-
|
|
|
|
-
|
|
|
|
695,510
|
|
|
|
1
|
%
|
|
|
-
|
|
|
|
-
|
|
Fuzhou Nantai Seafood Tesco Investment Co., Ltd.
|
|
|
206,651
|
|
|
|
1
|
%
|
|
|
1,922,881
|
|
|
|
17
|
%
|
|
|
3,994,592
|
|
|
|
7
|
%
|
|
|
3,266,706
|
|
|
|
6
|
%
|
Purchases
from related parties
During
the three and nine months ended September 30, 2020 and 2019 purchases from related parties were as follows:
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Purchase of fuel, fishing nets and other on board consumables
|
|
|
|
|
|
|
|
|
|
|
|
|
From Zhiyan Lin
|
|
$
|
2,769
|
|
|
$
|
1,033
|
|
|
$
|
2,769
|
|
|
$
|
1,577
|
|
from Fuzhou Honglong Ocean Fishery Co., Ltd.
|
|
|
255,736
|
|
|
|
953,274
|
|
|
|
1,320,456
|
|
|
|
3,622,460
|
|
|
|
|
258,505
|
|
|
|
954,307
|
|
|
|
1,323,225
|
|
|
|
3,624,037
|
|
Purchase of leasing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
From Ping Lin
|
|
|
3,038
|
|
|
|
2,998
|
|
|
|
9,011
|
|
|
|
9,192
|
|
|
|
|
3,038
|
|
|
|
2,998
|
|
|
|
9,011
|
|
|
|
9,192
|
|
Purchase of vessel maintenance service
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
From Huna Lin
|
|
|
3,851,681
|
|
|
|
2,388,862
|
|
|
|
7,262,932
|
|
|
|
2,795,429
|
|
|
|
$
|
3,851,681
|
|
|
$
|
2,388,862
|
|
|
$
|
7,262,932
|
|
|
$
|
2,795,429
|
|
NOTE
10 – BANK LOANS
Short-term
bank loans
Short-term
bank loans represent the amounts due to various banks that are due within one year. These loans can be renewed with the banks
upon maturities. At September 30, 2020 and December 31, 2019, short-term bank loans consisted of the following:
|
|
September 30,
2020
|
|
|
December 31,
2019
|
|
Loan from Fujian Haixia Bank, due on November 1, 2020 with annual interest rate of 6.0900% at September 30, 2020, collateralized by Hong Long’s 6 fishing vessels and 7 real estate properties of Ping Lin and Ying Liu, the debt ratio of borrower should not be higher than or equal to 100%.
|
|
$
|
4,405,222
|
|
|
$
|
4,300,335
|
|
Loan from Fujian Haixia Bank, due on November 6, 2020 with annual interest rate of 6.0900% at September 30, 2020, collateralized by Hong Long’s 6 fishing vessels and 7 real estate properties of Ping Lin and Ying Liu, the debt ratio of borrower should not be higher than or equal to 100%.
|
|
|
5,139,425
|
|
|
|
5,017,058
|
|
Loan from Fujian Haixia Bank, due on November 14, 2020 with annual interest rate of 6.0900% at September 30, 2020, collateralized by Hong Long’s 6 fishing vessels and 7 real estate properties of Ping Lin and Ying Liu, the debt ratio of borrower should not be higher than or equal to 100%.
|
|
|
734,204
|
|
|
|
716,723
|
|
Loan from The Export-Import Bank of China, due on January 21, 2021 with annual interest rate of 3.8800% at September 30, 2020, guaranteed by Pin Lin, Xinrong Zhuo and Hong Long, pledged deposits provided by Hong Long amounted to RMB 42 million, the Land Use Right of B2 plot in central business district on the north shore of Minjiang river.
|
|
|
39,940,676
|
|
|
|
-
|
|
|
|
$
|
50,219,527
|
|
|
$
|
10,034,116
|
|
PINGTAN
MARINE ENTERPRISE LTD. AND SUBSIDIARIES
CONDENSED
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(IN
U.S. DOLLARS)
SEPTEMBER 30, 2020
NOTE
10 – BANK LOANS (continued)
Long-term
bank loans
Long-term bank loans represent the amounts due to various banks lasting over one year. Usually, the long-term bank loans cannot be renewed with these banks upon maturities. The Company is in compliance with all long-term bank loan covenants. At September 30, 2020 and December 31, 2019, long-term bank loans consisted of the following:
|
|
September 30,
2020
|
|
|
December 31,
2019
|
|
Loan from The Export-Import Bank of China, due on various dates until August 28, 2020 with annual interest rate of 4.750% at December 31, 2019, guaranteed by Hong Long, Xinrong Zhuo and Ping Lin.
|
|
$
|
-
|
|
|
$
|
4,730,369
|
|
Loan from The Export-Import Bank of China, due on various dates until January 30, 2023 with annual interest rate of 4.900% at September 30, 2020 and December 31, 2019, guaranteed by Xinrong Zhuo and Ping Lin and collateralized by 2 fishing vessels and collateralized by two related parties’ investments in equity interest of one PRC local banks.
|
|
|
2,202,611
|
|
|
|
5,017,058
|
|
Loan from China Development Bank, due on various dates until November 27, 2023 with annual interest rate of 5.145% at September 30, 2020 and December 31, 2019, guaranteed by Xinrong Zhuo, Honghong Zhuo, Mr. and Mrs. Zhiyan Lin and 17 fishing vessels, the debt ratio of borrower should not be higher than 80%.
|
|
|
4,845,744
|
|
|
|
5,447,092
|
|
Loan from The Export-Import Bank of China, due on various dates until March 28, 2025 with annual interest rate of 4.949% at September 30, 2020 and December 31, 2019, guaranteed by Hong Long, Xinrong Zhuo, Ping Lin and collateralized by 20 fishing vessels.
|
|
|
55,799,474
|
|
|
|
65,938,477
|
|
Loan from The Export-Import Bank of China, due on various dates until September 30, 2020 with annual interest rate of 4.750% at December 31, 2019, guaranteed by Hong Long, Xinrong Zhuo, Ping Lin and collateralized by equity investment of 67 million shares of Hong Long in Xiamen International Bank.
|
|
|
-
|
|
|
|
16,484,619
|
|
Loan from The Export-Import Bank of China, due on various dates until August 21, 2026 with annual interest rate of 4.700% at September 30, 2020 and December 31, 2019, guaranteed by Pin Lin, Xinrong Zhuo and Yaohua Zhuo, 15 fishing vessels, the Land Use Right of B2 plot in central business district on the north shore of Minjiang river.
|
|
|
55,505,793
|
|
|
|
63,214,931
|
|
Loan from The Export-Import Bank of China, due on various dates until October 21, 2025 with annual interest rate of 4.700% at September 30, 2020 and December 31, 2019, guaranteed by Pin Lin, Xinrong Zhuo, Yaohua Zhuo and Hong Long, 15 fishing vessels and 1 transport vessel, the Land Use Right of B2 plot in central business district on the north shore of Minjiang river.
|
|
|
46,115,329
|
|
|
|
45,017,345
|
|
Loan from China Development Bank, due on various dates until July 30, 2026 with annual interest rate of 5.390% at September 30, 2020 and December 31, 2019, guaranteed by Xinrong Zhuo, 11 fishing vessels and 6 Hong Long’s fishing vessels, real estate of Mingguang Wanhao Property co., LTD., totalled area 22,123.50m2, the debt ratio of borrower should not be higher than 80%.
|
|
|
10,866,213
|
|
|
|
11,503,396
|
|
Loan from The Export-Import Bank of China, due on various dates until October 21, 2025 with annual interest rate of 4.700% at September 30, 2020, guaranteed by Pin Lin, Xinrong Zhuo, Yaohua Zhuo and Hong Long, 15 fishing vessels and 1 transport vessel, the Land Use Right of B2 plot in central business district on the north shore of Minjiang river.
|
|
|
8,364,048
|
|
|
|
-
|
|
Loan from The Export-Import Bank of China, due on various dates until April 21, 2028 with annual interest rate of 4.650% at September 30, 2020, guaranteed by Pin Lin, Xinrong Zhuo, Yaohua Zhuo, Hong Long and Huanghai Shipbuilding Co., Ltd., the Land Use Right of B2 plot in central business district on the north shore of Minjiang river, 1 vessel.
|
|
|
19,089,294
|
|
|
|
-
|
|
Loan from The Export-Import Bank of China, due on various dates until December 21, 2028 with annual interest rate of 4.650% at September 30, 2020, guaranteed by Pin Lin, Xinrong Zhuo, Yaohua Zhuo, Hong Long and Huanghai Shipbuilding Co., Ltd., the Land Use Right of B2 plot in central business district on the north shore of Minjiang river, 1 vessel.
|
|
|
20,557,701
|
|
|
|
-
|
|
Loan from The Export-Import Bank of China, due on various dates until August 21, 2022 with annual interest rate of 2.200% at September 30, 2020, guaranteed by Hong Long, Xinrong Zhuo and Pin Lin.
|
|
|
21,000,000
|
|
|
|
-
|
|
Loan from Bank of Communications, due on various dates until June 27, 2025 with annual interest rate of 4.650% at September 30, 2020, guaranteed by Xinrong Zhuo, Huanghai Shipbuilding Co., Ltd. and Fujian Jingfu Ocean Fishery Development Co., Ltd..
|
|
|
38,178,587
|
|
|
|
-
|
|
Total long-term bank loans
|
|
$
|
282,524,794
|
|
|
$
|
217,353,287
|
|
Less: current portion
|
|
|
(42,897,018
|
)
|
|
|
(57,122,789
|
)
|
Long-term bank loans, non-current portion
|
|
$
|
239,627,776
|
|
|
$
|
160,230,498
|
|
PINGTAN
MARINE ENTERPRISE LTD. AND SUBSIDIARIES
CONDENSED
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(IN
U.S. DOLLARS)
SEPTEMBER 30, 2020
NOTE
10 – BANK LOANS (continued)
Long-term
bank loans (continued)
The
future maturities of long-term bank loans are as follows:
Due in twelve-month periods ending September 30,
|
|
Principal
|
|
2021
|
|
$
|
42,897,018
|
|
2022
|
|
|
65,840,314
|
|
2023
|
|
|
54,698,169
|
|
2024
|
|
|
53,963,965
|
|
2025
|
|
|
45,294,489
|
|
Thereafter
|
|
|
19,830,839
|
|
|
|
$
|
282,524,794
|
|
Less: current portion
|
|
|
(42,897,018
|
)
|
Long-term liability
|
|
$
|
239,627,776
|
|
The
weighted average interest rate for short-term bank loans was approximately 4.0% and 6.6% for the nine months ended September 30,
2020 and 2019, respectively.
The
weighted average interest rate for long-term bank loans was approximately 4.8% and 4.9% for the nine months ended September 30,
2020 and 2019, respectively.
For the three months ended September 30,
2020 and 2019, interest expense related to bank loans amounted to $4,220,271 and $990,083, respectively, of which, $183,747 and
$213,514 was capitalized to construction-in-progress, respectively. For the nine months ended September 30, 2020 and 2019, interest
expense related to bank loans amounted to $11,064,621 and $3,225,149, respectively, of which $1,192,672 and $321,333 was capitalized
to construction-in-progress, respectively.
NOTE
11 – ACCRUED LIABILITIES AND OTHER PAYABLES
At September 30, 2020 and December 31, 2019, accrued liabilities and other payables consisted of the following:
|
|
September 30,
2020
|
|
|
December 31,
2019
|
|
Accrued salaries and related benefits
|
|
$
|
11,595,580
|
|
|
$
|
10,003,346
|
|
Accrued interest due
|
|
|
408,399
|
|
|
|
339,629
|
|
Other
|
|
|
661,783
|
|
|
|
1,085,043
|
|
|
|
$
|
12,665,762
|
|
|
$
|
11,428,018
|
|
PINGTAN
MARINE ENTERPRISE LTD. AND SUBSIDIARIES
CONDENSED
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(IN
U.S. DOLLARS)
SEPTEMBER 30, 2020
NOTE
12 – CERTAIN RISKS AND CONCENTRATIONS
Credit
risk
At
September 30, 2020 and December 31, 2019, the Company’s cash included bank deposits in accounts maintained within the PRC
and Hong Kong where there are currently no rules or regulations in place for obligatory insurance to cover bank deposits in event
of bank failure. However, the Company does not experience any losses in such accounts and believes it is not exposed to any significant
risks on its cash in bank accounts.
Major
customers
The
following table sets forth information as to each customer that accounted for 10% or more of the Company’s sales for the
three and nine months ended September 30, 2020 and 2019.
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
Customer
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
A
|
|
|
18
|
%
|
|
|
*
|
|
|
|
14
|
%
|
|
|
*
|
|
B
|
|
|
14
|
%
|
|
|
13
|
%
|
|
|
11
|
%
|
|
|
*
|
|
C
|
|
|
10
|
%
|
|
|
16
|
%
|
|
|
14
|
%
|
|
|
21
|
%
|
D
|
|
|
10
|
%
|
|
|
25
|
%
|
|
|
11
|
%
|
|
|
16
|
%
|
E
|
|
|
*
|
|
|
|
17
|
%
|
|
|
*
|
|
|
|
*
|
|
F
|
|
|
*
|
|
|
|
*
|
|
|
|
*
|
|
|
|
14
|
%
|
G
|
|
|
*
|
|
|
|
*
|
|
|
|
*
|
|
|
|
11
|
%
|
Five and three customers accounted for 10% or more of the Company’s
total outstanding accounts receivable at September 30, 2020 and December 31, 2019, respectively.
Major
suppliers
The
following table sets forth information as to each supplier that accounted for 10% or more of the Company’s purchases for
the three and nine months ended September 30, 2020 and 2019.
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
Supplier
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
A
|
|
|
54
|
%
|
|
|
35
|
%
|
|
|
44
|
%
|
|
|
53
|
%
|
B
|
|
|
*
|
|
|
|
*
|
|
|
|
24
|
%
|
|
|
*
|
|
C
|
|
|
14
|
%
|
|
|
*
|
|
|
|
*
|
|
|
|
*
|
|
D
|
|
|
*
|
|
|
|
30
|
%
|
|
|
*
|
|
|
|
13
|
%
|
Three
suppliers, whose outstanding accounts payable accounted for 10% or more of the Company’s total outstanding accounts payable
and accounts payable – related parties at September 30, 2020, accounted for 68.6% of the Company’s total outstanding
accounts payable and accounts payable – related parties at September 30, 2020.
One
supplier, whose outstanding accounts payable accounted for 10% or more of the Company’s total outstanding accounts payable
and accounts payable – related parties at September 30, 2019, accounted for 85.5% of the Company’s total outstanding
accounts payable and accounts payable – related parties at September 30, 2019.
NOTE
13 – COMMITMENTS AND CONTINGENCIES
Severance
payments
The
Company has employment agreements with certain employees that provide for severance payments to such employees upon termination
of employment under certain circumstances, as defined in the applicable agreements. The Company has estimated its possible severance
payments to be approximately $10,000 as of September 30, 2020 and December 31, 2019, which have not been reflected in its consolidated
financial statements.
Operating
lease
See
note 9 for related party operating lease commitment.
Rental
payment
On March 1, 2018, the Company entered into
a lease agreement (the “Lease Agreement”) for office space in Hong Kong. Pursuant to the Lease Agreement, the monthly
payments are HK$298,500 (approximately $38,000). The Lease Agreement expires on February 28, 2021.
For the three months ended September 30,
2020 and 2019, rent expense and the corresponding administrative service charge related to the Lease Agreement amounted to $18,048
and $17,956, respectively. For the nine months ended September 30, 2020 and 2019, rent expense and the corresponding administrative
service charge related to the Lease Agreement amounted to $248,776 and $246,315, respectively.
As of September
30, 2020, future minimum lease payments on operating leases were as follows:
|
|
September 30,
2020
|
|
Maturity of lease liabilities
|
|
|
|
2020
|
|
$
|
97,496
|
|
2021
|
|
|
32,499
|
|
Total minimum lease payments
|
|
$
|
129,995
|
|
Imputed interest
|
|
|
(1,377
|
)
|
Present value of minimum lease payments
|
|
$
|
128,618
|
|
The remaining
lease terms (in years) and discount rates consisted of the following:
|
|
September 30,
2020
|
|
Lease term and discount rate
|
|
|
|
Remaining operating lease term
|
|
|
0.42
|
|
Discount rate
|
|
|
5.13
|
%
|
NOTE
14 – SUBSEQUENT EVENTS
On October 19, 2020, the Company received repayment of Hong
Long amounted to $1.4 million.
On October 21, 2020, the Company repaid a long-term bank loan
of $9.54 million to The Export-Import Bank of China in accordance with the loan repayment schedule.
On October 29, 2020, the Company received a short-term bank
loan of $10.3 million from Fujian Haixia Bank.
On October 29, 2020, the Company repaid a short-term bank loan
of $10.3 million to Fujian Haixia Bank.
On
November 6, 2020, the Company received repayment of Hong Long amounted to $12.5 million.