PINGTAN MARINE ENTERPRISE LTD. AND SUBSIDIARIES
(IN U.S. DOLLARS)
PINGTAN MARINE ENTERPRISE LTD. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME
(IN U.S. DOLLARS)
|
|
For the Three Months Ended
March 31,
|
|
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
REVENUE
|
|
$
|
28,307,138
|
|
|
$
|
17,307,000
|
|
COST OF REVENUE
|
|
|
34,553,495
|
|
|
|
11,554,443
|
|
GROSS (LOSS) PROFIT
|
|
|
(6,246,357
|
)
|
|
|
5,752,557
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES:
|
|
|
|
|
|
|
|
|
Selling
|
|
|
1,543,889
|
|
|
|
901,651
|
|
General and administrative
|
|
|
1,768,098
|
|
|
|
1,270,143
|
|
General and administrative - depreciation
|
|
|
72,286
|
|
|
|
711,433
|
|
Impairment loss
|
|
|
484,046
|
|
|
|
-
|
|
Subsidy
|
|
|
(2,029,820
|
)
|
|
|
(7,773,993
|
)
|
Total Operating (Income) Expenses
|
|
|
1,838,499
|
)
|
|
|
(4,890,766
|
)
|
|
|
|
|
|
|
|
|
|
(LOSS) INCOME FROM OPERATIONS
|
|
|
(8,084,856
|
)
|
|
|
10,643,323
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSE):
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
28,131
|
|
|
|
1,200,126
|
|
Interest expense
|
|
|
(3,800,136
|
)
|
|
|
(2,898,896
|
)
|
Foreign currency transaction (loss)
|
|
|
(550,293
|
)
|
|
|
(366,409
|
)
|
Loss on equity method investment
|
|
|
(211,867
|
)
|
|
|
(125,528
|
)
|
Other income (expense)
|
|
|
102
|
|
|
|
(35,540
|
)
|
Total Other Expense Income, net
|
|
|
(4,534,063
|
)
|
|
|
(2,226,247
|
)
|
|
|
|
|
|
|
|
|
|
(LOSS) INCOME BEFORE INCOME TAXES
|
|
|
(12,618,919
|
)
|
|
|
8,417,076
|
|
INCOME TAXES
|
|
|
-
|
|
|
|
-
|
|
NET (LOSS) INCOME
|
|
$
|
(12,618,919
|
)
|
|
$
|
8,417,076
|
|
|
|
|
|
|
|
|
|
|
LESS: NET (LOSS) INCOME ATTRIBUTABLE TO THE NON-CONTROLLING INTEREST
|
|
|
(972,470
|
)
|
|
|
752,386
|
|
NET (LOSS) INCOME ATTRIBUTABLE TO ORDINARY SHAREHOLDERS OF THE COMPANY BEFORE PREFERRED DIVIDENDS
|
|
|
(11,646,449
|
)
|
|
$
|
7,664,690
|
|
LESS: PREFERRED SHARE DIVIDENDS
|
|
|
(260,000
|
)
|
|
|
-
|
|
NET (LOSS) INCOME ATTRIBUTABLE TO ORDINARY SHAREHOLDERS OF THE COMPANY
|
|
$
|
(11,906,449
|
)
|
|
$
|
7,664,690
|
|
|
|
|
|
|
|
|
|
|
COMPREHENSIVE (LOSS) INCOME:
|
|
|
|
|
|
|
|
|
NET (LOSS) INCOME
|
|
|
(12,618,919
|
)
|
|
|
8,417,076
|
|
OTHER COMPREHENSIVE (LOSS) GAIN
|
|
|
|
|
|
|
|
|
Unrealized foreign currency translation (loss) gain
|
|
|
(1,465,867
|
)
|
|
|
(1,688,439
|
)
|
COMPREHENSIVE (LOSS) INCOME
|
|
|
(14,084,786
|
)
|
|
|
6,728,637
|
|
LESS: COMPREHENSIVE (LOSS) INCOME ATTRIBUTABLE TO THE NON-CONTROLLING INTEREST
|
|
|
(1,079,994
|
)
|
|
|
617,214
|
|
COMPREHENSIVE (LOSS) INCOME ATTRIBUTABLE TO ORDINARY SHAREHOLDERS OF THE COMPANY
|
|
$
|
(13,004,792
|
)
|
|
$
|
6,111,423
|
|
|
|
|
|
|
|
|
|
|
NET (LOSS) INCOME PER ORDINARY SHARE ATTRIBUTABLE TO ORDINARY
SHAREHOLDERS OF THE COMPANY
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
$
|
(0.15
|
)
|
|
$
|
0.10
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE ORDINARY SHARES OUTSTANDING:
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
|
81,291,531
|
|
|
|
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 MARCH 31, 2020 AND 2021
(IN U.S. DOLLARS)
|
|
Equity Attributable To Owners of The Company
|
|
|
|
|
|
|
|
|
|
Preferred shares
|
|
|
Ordinary Shares
|
|
|
Additional
|
|
|
|
|
|
|
|
|
Accumulated Other
|
|
|
Non-
|
|
|
Total
|
|
|
|
Number of
|
|
|
|
|
|
Number of
|
|
|
|
|
|
Paid-in
|
|
|
Retained
|
|
|
Statutory
|
|
|
Comprehensive
|
|
|
controlling
|
|
|
Shareholders’
|
|
|
|
Shares
|
|
|
Amount
|
|
|
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
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
7,664,690
|
|
|
|
-
|
|
|
|
-
|
|
|
|
752,386
|
|
|
|
8,417,076
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividend declared
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,553,267
|
)
|
|
|
(135,172
|
)
|
|
|
(1,688,439
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 31, 2020 (Unaudited)
|
|
|
-
|
|
|
$
|
-
|
|
|
|
79,055,053
|
|
|
$
|
79,055
|
|
|
$
|
81,682,599
|
|
|
$
|
61,951,144
|
|
|
$
|
15,748,751
|
|
|
$
|
(17,634,175
|
)
|
|
$
|
19,979,119
|
|
|
$
|
161,806,493
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2020
|
|
|
-
|
|
|
$
|
-
|
|
|
|
79,302,428
|
|
|
$
|
79,302
|
|
|
$
|
82,045,993
|
|
|
$
|
(18,594,755
|
)
|
|
$
|
15,751,712
|
|
|
$
|
(9,568,873
|
)
|
|
$
|
15,266,311
|
|
|
$
|
84,979,690
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(11,646,449
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(972,470
|
)
|
|
|
(12,618,919
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issue of preferred shares
|
|
|
4,000,000
|
|
|
|
4,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,694,273
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,698,273
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issue of ordinary shares
|
|
|
-
|
|
|
|
-
|
|
|
|
3,625,954
|
|
|
|
3,626
|
|
|
|
4,347,616
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,351,242
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividend payments for preferred shares
|
|
|
-
|
|
|
|
-
|
|
|
|
238,865
|
|
|
|
239
|
|
|
|
259,761
|
|
|
|
(260,000
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Converted Series A Preferred Shares into ordinary shares
|
|
|
(2,954,534
|
)
|
|
|
(2,955
|
)
|
|
|
2,985,814
|
|
|
|
2,986
|
|
|
|
(31
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,358,343
|
)
|
|
|
(107,524
|
)
|
|
|
(1,465,867
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 31, 2021 (Unaudited)
|
|
|
1,045,466
|
|
|
$
|
1,045
|
|
|
|
86,153,061
|
|
|
$
|
86,153
|
|
|
$
|
90,347,612
|
|
|
$
|
(30,501,204
|
)
|
|
$
|
15,751,712
|
|
|
$
|
(10,927,216
|
)
|
|
$
|
14,186,317
|
|
|
$
|
78,944,419
|
|
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 Three Months Ended
March 31,
|
|
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
Net (loss) income
|
|
$
|
(12,618,919
|
)
|
|
$
|
8,417,076
|
|
Adjustments to reconcile net income from operations to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
3,499,224
|
|
|
|
3,378,428
|
|
Increase in allowance for doubtful accounts
|
|
|
(95,231
|
)
|
|
|
107,542
|
|
Increase (decrease) in reserve for inventories
|
|
|
2,820,090
|
|
|
|
(266,298
|
)
|
Loss on equity method investment
|
|
|
211,867
|
|
|
|
125,528
|
|
Impairment loss of fishing vessels
|
|
|
484,046
|
|
|
|
-
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
9,721,649
|
|
|
|
(1,227,791
|
)
|
Inventories
|
|
|
(6,043,375
|
)
|
|
|
(20,751,500
|
)
|
Prepaid expenses
|
|
|
(183,953
|
)
|
|
|
376,068
|
|
Prepaid expenses - related party
|
|
|
(2,311,941
|
)
|
|
|
-
|
|
Other receivables
|
|
|
757,321
|
|
|
|
566,339
|
|
Accounts payable
|
|
|
3,752,392
|
|
|
|
(4,837,739
|
)
|
Accounts payable - related parties
|
|
|
(4,767,309
|
)
|
|
|
(38,188
|
)
|
Advance from customers
|
|
|
233,182
|
|
|
|
(821,178
|
)
|
Accrued liabilities and other payables
|
|
|
2,217,848
|
|
|
|
(615,618
|
)
|
Due from related parties
|
|
|
-
|
|
|
|
(1,165,502
|
)
|
Due to related parties
|
|
|
(89,819
|
)
|
|
|
(332,844
|
)
|
NET CASH PROVIDED (USED IN) BY OPERATING ACTIVITIES
|
|
|
(2,412,928
|
)
|
|
|
(17,085,677
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Prepayment made for long-term assets
|
|
|
(35,596,474
|
)
|
|
|
|
|
Purchase of property, plant and equipment
|
|
|
(484,046
|
)
|
|
|
(8,709,670
|
)
|
Proceeds from government subsidies for fishing vessels construction
|
|
|
-
|
|
|
|
21,051,727
|
|
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
|
|
|
(36,080,520
|
)
|
|
|
12,342,057
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Proceeds from short-term bank loans
|
|
|
44,722,719
|
|
|
|
81,960,166
|
|
Repayments of short-term bank loans
|
|
|
(41,946,826
|
)
|
|
|
-
|
|
Proceeds from long-term bank loans
|
|
|
45,703,933
|
|
|
|
8,161,628
|
|
Repayments of long-term bank loans
|
|
|
(11,500,721
|
)
|
|
|
(10,961,456
|
)
|
Proceeds from issuance of ordinary shares
|
|
|
4,351,242
|
|
|
|
-
|
|
Proceeds from Issue of preferred shares
|
|
|
3,698,273
|
|
|
|
-
|
|
Advance to related party-HL
|
|
|
-
|
|
|
|
(45,721,566
|
)
|
NET CASH PROVIDED BY FINANCING ACTIVITIES
|
|
|
45,024,620
|
|
|
|
33,438,772
|
|
|
|
|
|
|
|
|
|
|
EFFECT OF EXCHANGE RATE ON CASH, CASH EQUIVALENTS AND RESTRICTED CASH
|
|
|
(1,009,483
|
)
|
|
|
195,545
|
|
NET INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH
|
|
|
5,525,689
|
|
|
|
28,890,697
|
|
CASH, CASH EQUIVALENTS AND RESTRICTED CASH - beginning of period
|
|
|
10,604,599
|
|
|
|
10,092,205
|
|
CASH, CASH EQUIVALENTS AND RESTRICTED CASH - end of period
|
|
$
|
16,130,288
|
|
|
$
|
38,982,902
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
|
|
|
|
|
|
|
|
|
Cash paid for:
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
4,217,799
|
|
|
$
|
3,059,072
|
|
Income taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
RECONCILIATION TO AMOUNTS ON CONSOLIDATED BALANCE SHEETS:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
6,362,874
|
|
|
|
32,763,999
|
|
Restricted cash
|
|
|
9,767,414
|
|
|
|
6,218,903
|
|
TOTAL CASH, CASH EQUIVALENTS AND RESTRICTED CASH
|
|
$
|
16,130,288
|
|
|
$
|
38,982,902
|
|
|
|
|
|
|
|
|
|
|
NON-CASH INVESTING AND FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Acquisition of property and equipment by decreasing prepayment for long-term assets
|
|
$
|
(35,596,474
|
)
|
|
$
|
(15,705,688
|
)
|
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)
MARCH 31, 2021
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 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 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”), 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
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)
MARCH 31, 2021
NOTE 1 – DESCRIPTION OF BUSINESS AND
ORGANIZATION (continued)
Details of the Company’s subsidiaries which
are included in these consolidated financial statements as of March 31, 2021 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
|
Fujian Heyue, through its PRC subsidiary, Pingtan
Fishing, engages in ocean fishing with its owned and controlled vessels within the Indian Exclusive Economic Zone, the international waters
and Arafura Sea of Indonesia.
The Company had a working capital deficit of $23,133,367
as of March 31, 2021. 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 recent years, the Company has upgraded 57 fishing vessels and 3 transport vessels, the deployment
of more vessels in operation will generate more revenue and cash inflows to the Company. In addition, the Company receives subsidy for
modification and rebuilding project and reimbursement of certain operating expenses from government, as an encouragement of the development
of ocean fishing industry.
PINGTAN MARINE ENTERPRISE LTD. AND SUBSIDIARIES
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
(IN U.S. DOLLARS)
MARCH 31, 2021
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 Securities and Exchange Commission 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.
Certain information and footnote disclosures normally
included in the annual consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. These unaudited
financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto
included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 filed with the Securities and Exchange
Commission on October 13, 2021.
Use of estimates
The preparation of the unaudited consolidated
financial statements in conformity with accounting principles generally accepted in the U.S. 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 months ended March 31, 2021 and 2020 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. At March 31, 2021 and December 31, 2020, cash
balances in the PRC are $5,670,273 and $468,273, respectively, and cash balances in Hong Kong are $692,601 and $223,660, 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 short term bank loans for Hong Long. At March 31, 2021 and December 31, 2020, restricted
cash amounted to $9,767,414 and $9,912,666, respectively.
PINGTAN MARINE ENTERPRISE LTD. AND SUBSIDIARIES
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
(IN U.S. DOLLARS)
MARCH 31, 2021
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (continued)
Fair value of financial instruments
The Company utilizes
the guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“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 March 31, 2021. 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 March 31, 2020, the Company does not have any assets or liabilities that are measured on a recurring basis at fair value.
PINGTAN MARINE ENTERPRISE LTD. AND SUBSIDIARIES
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
(IN U.S. DOLLARS)
MARCH 31, 2021
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (continued)
Fair value of financial instruments (continued)
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.
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 March 31,
2021 and December 31, 2020, the Company has established, based on a review of its outstanding balances, an allowance for doubtful accounts
in the amounts of $314,256 and $411,131, 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.
An allowance 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 or price decreases, the Company will record reserve for the difference between the cost and
the market value. These reserves are recorded based on estimates. At March 31, 2021 and December 31, 2020, the Company has a reserve for
inventories in the amount of $18,794,681 and $16,125,748, respectively.
When recorded, inventory
reserves are intended to reduce the carrying value of inventories to their net realizable value. The Company regularly evaluates the 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 the 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 approval prior to expiration to
avoid interruptions of the fishing vessels’ operations. Since no fishing and using in other areas after making required
changes.
PINGTAN MARINE ENTERPRISE LTD. AND SUBSIDIARIES
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
(IN U.S. DOLLARS)
MARCH 31, 2021
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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.
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 $0 and $1,476,240 for the three months ended March 31,
2021 and 2020, respectively, for the fishing vessels under construction.
PINGTAN MARINE ENTERPRISE LTD. AND SUBSIDIARIES
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
(IN U.S. DOLLARS)
MARCH 31, 2021
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (continued)
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 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 impairment loss on vessels was $484,046
and nil for the three months ended March 31, 2021 and 2020, respectively.
Revenue recognition
The Company recognizes revenue from product sales
in accordance with ASC Topic 606, “Revenue from Contracts with Customers.” Revenue is recognized when control of the promised
goods or services, through performance obligations by the Company, is transferred to the customer in an amount that reflects the consideration
it expects to be entitled to in exchange for the performance obligations.
The revenue is generated from the sale of frozen
fish and other marine catches. We recognize revenue at the amount we expect to be entitled to be paid, determined when control of the
products is transferred to our customers, which occurs upon delivery of and acceptance of the frozen fish by the customer and we have
a right to payment.
We have identified one performance obligation
as the frozen fish and other marine catches identified in the contract are picked up by the customers at our cold storage warehouse, with
revenue being recognized at a point in time. We initially recognize 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. The Company
does not offer promotional payments, customer coupons, rebates or other cash redemption offers to its customers. The Company does not
accept returns from customers.
Disaggregation of revenue
The following tables disaggregate revenues under ASC 606 by species
of fish. For the three months ended March 31, 2021 and 2020, our revenue by species of fish was as follows (dollars in thousands, except
for average price):
|
|
Three Months Ended March 31, 2021
|
|
|
|
Revenue
|
|
|
Volume
(KG)
|
|
|
Average
price
|
|
|
Percentage
of revenue
|
|
Argentina squid
|
|
$
|
7,554
|
|
|
|
2,294,050
|
|
|
$
|
3.29
|
|
|
|
26.7
|
%
|
Peru squid
|
|
|
4,545
|
|
|
|
3,394,278
|
|
|
|
1.34
|
|
|
|
16.1
|
%
|
South American white shrimp
|
|
|
4,542
|
|
|
|
565,212
|
|
|
|
8.04
|
|
|
|
16.0
|
%
|
Indian Ocean squid
|
|
|
3,306
|
|
|
|
3,467,580
|
|
|
|
0.95
|
|
|
|
11.7
|
%
|
South American white shrimp (whole)
|
|
|
3,080
|
|
|
|
604,560
|
|
|
|
5.09
|
|
|
|
10.9
|
%
|
Others
|
|
|
5,280
|
|
|
|
6,605,092
|
|
|
|
0.80
|
|
|
|
18.7
|
%
|
Total
|
|
$
|
28,307
|
|
|
|
16,930,772
|
|
|
$
|
1.67
|
|
|
|
100.0
|
%
|
|
|
Three Months Ended March 31, 2020
|
|
|
|
Revenue
|
|
|
Volume
(KG)
|
|
|
Average
price
|
|
|
Percentage
of revenue
|
|
Indian Ocean squid
|
|
$
|
7,713
|
|
|
|
8,302,140
|
|
|
$
|
0.93
|
|
|
|
44.6
|
%
|
Cuttle fish
|
|
|
2,450
|
|
|
|
526,900
|
|
|
|
4.65
|
|
|
|
14.2
|
%
|
Peru squid
|
|
|
1,983
|
|
|
|
1,104,450
|
|
|
|
1.80
|
|
|
|
11.5
|
%
|
Chub mackerel
|
|
|
1,951
|
|
|
|
2,269,869
|
|
|
|
0.86
|
|
|
|
11.3
|
%
|
Croaker fish
|
|
|
1,257
|
|
|
|
692,789
|
|
|
|
1.81
|
|
|
|
7.3
|
%
|
Others
|
|
|
1,953
|
|
|
|
643,135
|
|
|
|
3.04
|
|
|
|
11.1
|
%
|
Total
|
|
$
|
17,307
|
|
|
|
13,539,283
|
|
|
$
|
1.28
|
|
|
|
100.0
|
%
|
PINGTAN MARINE ENTERPRISE LTD. AND SUBSIDIARIES
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
(IN U.S. DOLLARS)
MARCH 31, 2021
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 after completion of the Share Exchange 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 new China’s Enterprise Income Tax Law
(“EIT Law”) 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 new 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 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.
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.
PINGTAN MARINE ENTERPRISE LTD. AND SUBSIDIARIES
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
(IN U.S. DOLLARS)
MARCH 31, 2021
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Income taxes (continued)
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 March 31, 2021 and December 31, 2020, 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 totaled $333,339 and $276,141 for the three months ended March 31, 2021 and 2020, 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 totaled $735,184 and $1,268,805 for the three months ended March 31, 2021 and 2020, respectively.
Foreign currency translation
The reporting currency
of the Company is the U.S. dollar. The functional currency of the parent company and subsidiaries of Merchant Supreme and Prime Cheer
is the U.S. dollar and the functional currency of the Company’s subsidiaries of Pingtan Guansheng, Fujian Heyue and Pingtan Fishing
is the Chinese Renminbi (“RMB”). For the subsidiaries of 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 three months ended March 31, 2021 and 2020 was $1,009,483 and $195,545, 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 with 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.
PINGTAN MARINE ENTERPRISE LTD. AND SUBSIDIARIES
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
(IN U.S. DOLLARS)
MARCH 31, 2021
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Foreign currency translation (continued)
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
transaction 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 March 31, 2021 and December 31, 2020 were translated at 6.5713 RMB to $1.00 and at 6.5249 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 three months ended March 31, 2021 and 2020 were 6.4844 RMB and 6.9790 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 (loss) income
per share are computed by dividing net (loss) income available to ordinary shareholders adjusted for preferred stock dividends accumulated
by the weighted average number of ordinary shares outstanding during the period. Diluted net income per share is computed by dividing
net (loss) income adjusted for preferred stock dividends accumulated 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
March 31,
|
|
|
|
2021
|
|
|
2020
|
|
Net (loss) income attributable to ordinary shareholders of the Company
|
|
|
(11,646,449
|
)
|
|
|
7,664,690
|
|
Preferred Share Dividends
|
|
|
(260,000
|
)
|
|
|
-
|
|
Net (loss) income available to ordinary shareholders of the Company for basic and diluted net income per share of ordinary share
|
|
$
|
(11,906,449
|
)
|
|
$
|
7,664,690
|
|
Weighted average ordinary shares outstanding
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
|
81,291,531
|
|
|
|
79,055,053
|
|
Net (loss) income per ordinary share attributable to ordinary shareholders of the Company
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
$
|
(0.15
|
)
|
|
$
|
0.10
|
|
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 March 31,
2021, 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.
PINGTAN MARINE ENTERPRISE LTD. AND SUBSIDIARIES
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
(IN U.S. DOLLARS)
MARCH 31, 2021
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Comprehensive (loss) income
Comprehensive (loss)
income 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 for the three months
ended March 31, 2021 and 2020 included net income and unrealized gain from foreign currency translation adjustments.
Segment information
ASC 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, contracts breach liability. 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 past history, scientific evidence and the specifics of each
matter.
The Company’s management
has evaluated all such proceedings and claims that existed as of March 31, 2021 and December 31, 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.
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 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.
PINGTAN MARINE ENTERPRISE LTD. AND SUBSIDIARIES
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
(IN U.S. DOLLARS)
MARCH 31, 2021
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Recently 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.
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)
MARCH 31, 2021
NOTE 3 – ACCOUNTS RECEIVABLE
At March 31, 2021 and December 31, 2020, accounts receivable consisted
of the following:
|
|
March 31,
2021
|
|
|
December 31,
2020
|
|
|
|
(Unaudited)
|
|
|
|
|
Accounts receivable
|
|
$
|
22,536,126
|
|
|
$
|
32,357,692
|
|
Less: allowance for doubtful accounts
|
|
|
(314,256
|
)
|
|
|
(411,131
|
)
|
|
|
$
|
22,221,870
|
|
|
$
|
31,946,561
|
|
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
balance.
Bad
debt expense was $(95,231) and $107,542 for the three
months ended March 31, 2021 and 2020, respectively.
NOTE 4 – INVENTORIES
At March 31, 2021 and December 31, 2020, inventories consisted of the
following:
|
|
March 31,
2021
|
|
|
December 31,
2020
|
|
|
|
(Unaudited)
|
|
|
|
|
Frozen fish and marine catches in warehouse
|
|
$
|
47,919,372
|
|
|
$
|
44,272,021
|
|
Frozen fish and marine catches work in progress
|
|
|
39,859,763
|
|
|
|
20,702,914
|
|
Frozen fish and marine catches in transit
|
|
|
1,329,940
|
|
|
|
18,761,950
|
|
|
|
|
89,109,075
|
|
|
|
83,736,885
|
|
Less: reserve for inventories
|
|
|
(18,794,681
|
)
|
|
|
(16,125,748
|
)
|
|
|
$
|
70,314,394
|
|
|
$
|
67,611,136
|
|
Frozen fish and marine catches in warehouse represents fish inventory
in cold storage warehouses located in China.
Frozen fish and marine catches work in progress
represents fish inventory in vessels’ refrigerators, which has not been delivered to ports in China, nor applied for duty-exemption
import into China.
Frozen fish and marine catches in transit represents
fish inventory that obtained duty-exemption import permission and is in the process of being shipped to China.
As of March 31, 2021, our total inventory balance
was $70,314,394 compared to $67,611,136 as of December 31, 2020. The change in the balance is mainly attributable to an increase in frozen
fish and marine catches in warehouse by $3.65 million and an increase in frozen fish and marine catches work in progress by $19.16 million,
a large portion of which was booked as frozen fish and marine catches in transit as of December 31, 2020.
An allowance 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 reserve for the difference between the cost and the market value. These reserves are recorded
based on estimates.
The Company recorded a provision for inventory
of $2,820,090 and $(266,298) for the three months ended March 31, 2021 and 2020, respectively.
NOTE 5 – OTHER
RECEIVABLES
At March 31, 2021 and
December 31, 2020, other receivables consisted of the following:
|
|
March 31,
2021
|
|
|
December 31,
2020
|
|
|
|
(Unaudited)
|
|
|
|
|
VAT recoverable (1)
|
|
$
|
823,021
|
|
|
$
|
1,520,501
|
|
Other
|
|
|
317,344
|
|
|
|
380,593
|
|
|
|
$
|
1,140,365
|
|
|
$
|
1,901,094
|
|
|
(1)
|
The balance of recoverable VAT represents input VAT available to offset the amount of VAT to be paid in the future.
|
PINGTAN MARINE ENTERPRISE LTD. AND SUBSIDIARIES
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
(IN U.S. DOLLARS)
MARCH 31, 2021
NOTE 6 – COST METHOD INVESTMENT
At March 31, 2021 and
December 31, 2020, cost method investment amounted to $3,195,715 and $3,218,440, respectively. The investment represents the Company’s
subsidiary, Pingtan Fishing’s 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 subscribe 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 March 31, 2021 and December 31, 2020.
In accordance with ASC
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 March 31, 2021 and December 31, 2020.
NOTE 7 – EQUITY METHOD INVESTMENT
At March 31, 2021 and
December 31, 2020, equity method investment amounted to $29,271,108 and $29,689,813, 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. On April 12, 2017, another unrelated party, Zhen Lin, purchased shares from existing shareholders.
As of March 31, 2021, Pingtan Fishing and Zhen Lin 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
$152.2 million) and as of March 31, 2021, Pingtan Fishing had contributed its share of registered capital of RMB 200 million (approximately
$30.4 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 March 31, 2021
and 2020, the Company’s share of Global Deep Ocean’s net loss was $211,867 and $125,528, respectively, which was included
in loss on equity method investment in the accompanying consolidated statements of operations and comprehensive income (loss).
PINGTAN MARINE ENTERPRISE LTD. AND SUBSIDIARIES
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
(IN U.S. DOLLARS)
MARCH 31, 2021
NOTE 8 – PREPAYMENT
FOR LONG-TERM ASSETS
At March 31, 2021
and December 31, 2020, 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 three months ended March 31, 2021, the Company reclassified nil from prepayment
for long-term assets to construction-in-progress.
For the three months
ended March 31, 2021, a summary of activities in prepayment for long-term assets was as follows:
|
|
Prepayment
for fishing
vessels’
construction
|
|
Balance - December 31, 2020
|
|
$
|
66,083,041
|
|
Prepayments made for fishing vessels’ construction
|
|
|
35,596,474
|
|
Reclassification to construction-in-progress
|
|
|
-
|
|
Foreign currency fluctuation
|
|
|
(937,347
|
)
|
Balance – March 31, 2021-unaudited
|
|
$
|
100,742,168
|
|
NOTE 9 – PROPERTY, PLANT AND EQUIPMENT
|
|
Useful life
|
|
March 31,
2021
|
|
|
December 31,
2020
|
|
|
|
(Unaudited)
|
|
|
|
Fishing vessels
|
|
10 - 20 Years
|
|
$
|
302,626,346
|
|
|
$
|
304,764,105
|
|
Vehicles
|
|
5 Years
|
|
|
23,171
|
|
|
|
23,336
|
|
Office and other equipment
|
|
3 – 5 Years
|
|
|
484,638
|
|
|
|
488,084
|
|
|
|
|
|
|
303,134,155
|
|
|
|
305,275,525
|
|
Less: accumulated depreciation
|
|
|
|
|
(58,187,562
|
)
|
|
|
(55,120,514
|
)
|
|
|
|
|
$
|
244,946,593
|
|
|
$
|
250,155,011
|
|
On January 19, 2021, the Company received government
subsidy for a batch of fishing vessels amounting to RMB 13.2 million (approximately $2.0 million), the subsidy is related to assets requiring
it to be deducted from the carrying amount of the asset.
For the three months ended March 31, 2021 and
2020, depreciation expense amounted to $3,499,224 and $3,378,428, respectively, of which $3,426,938 and $2,666,995, respectively, was
included in cost of revenue, and the remainder was included in general and administrative expense.
PINGTAN MARINE ENTERPRISE
LTD. AND SUBSIDIARIES
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
(IN U.S. DOLLARS)
MARCH 31, 2021
NOTE 9 – PROPERTY, PLANT AND EQUIPMENT
(continued)
The Company had 81 and 82 fishing vessels at March 31, 2021 and December
31, 2020, with net carrying amount of approximately $2522.7 million and $227.3 million, respectively, pledged as collateral for its bank
loans.
In the first quarter of 2021, the Company assessed the recoverability
of 1 krill fishing vessel that was in the building stage based on the undiscounted future cash flow that the fishing vessel is expected
to generate as less than the carrying amount, and recognized an impairment loss. The impairment loss on vessels was $484,046 and nil for
the three months ended March 31, 2021 and 2020, respectively.
NOTE 10 – RELATED PARTIES TRANSACTIONS
Accounts payable - related parties
At March 31, 2021 and December 31, 2020, accounts
payable - related parties consisted of the following:
Name of related party
|
|
March 31,
2021
|
|
|
December 31,
2020
|
|
|
|
(Unaudited)
|
|
|
|
|
Hong Long (1)
|
|
$
|
4,159,603
|
|
|
$
|
781,225
|
|
Global Deep Ocean
|
|
|
-
|
|
|
|
7,602,944
|
|
Fujian Jingfu Ocean Fishery Development Co., Ltd. (2)
|
|
|
-
|
|
|
|
1,327
|
|
Huna Lin
|
|
|
1,032,465
|
|
|
|
1,581,212
|
|
|
|
$
|
5,192,068
|
|
|
$
|
9,966,708
|
|
(1)
|
Hong Long is an affiliate company majority owned by an immediate family member of the Company’s CEO.
|
(2)
|
Fujian Jingfu Ocean Fishery Development Co., Ltd. is a subsidiary of Hong Long
|
These accounts payable - related parties’
amounts are short-term in nature, non-interest bearing, unsecured and payable on demand.
PINGTAN MARINE ENTERPRISE LTD. AND SUBSIDIARIES
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
(IN U.S. DOLLARS)
MARCH 31, 2021
NOTE 10 – RELATED PARTIES TRANSACTIONS
(continued)
Due to related parties
At March 31, 2021 and
December 31, 2020, the due to related parties amount consisted of the following:
|
|
March 31,
2021
|
|
|
December 31,
2020
|
|
|
|
(Unaudited)
|
|
|
|
|
Accrued compensation for LiMing Yung, Chief Financial Officer
|
|
$
|
15,000
|
|
|
$
|
15,000
|
|
Accrued compensation for Xinrong Zhuo, Chief Executive Officer
|
|
|
3,354
|
|
|
|
3,354
|
|
|
|
$
|
18,354
|
|
|
$
|
18,354
|
|
The balance represents accrued compensation for
CEO and CFO.
Operating lease
On July 31, 2012, the
Company entered into a lease for office space with Ping Lin, spouse of the Company’s CEO (the “Office Lease”). Pursuant
to the Office Lease, 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 March 31, 2021 and 2020, rent expense related
to the Office Lease amounted to $3,239 and $3,009, respectively. The future minimum rental payment required under the Office Lease is
as follows:
Twelve-month period Ending March 31:
|
|
Amount
|
|
2022
|
|
$
|
4,318
|
|
PINGTAN MARINE ENTERPRISE LTD. AND SUBSIDIARIES
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
(IN U.S. DOLLARS)
MARCH 31, 2021
NOTE 10 – RELATED PARTIES TRANSACTIONS
(continued)
Purchases from related parties
During the three months ended March 31, 2021 and
2020, purchases from related parties were as follows:
|
|
Three Months Ended
March 31,
|
|
|
|
2021
|
|
|
2020
|
|
(Unaudited)
|
|
(Unaudited)
|
|
Purchase of fuel, fishing nets and other on-board consumables
|
|
|
|
|
|
|
Fuzhou Hong Long Ocean Fishery Co., Ltd
|
|
$
|
647,560
|
|
|
$
|
428,190
|
|
Fujian Jingfu Ocean Fishery Development Co., Ltd.
|
|
|
461,913
|
|
|
|
-
|
|
|
|
|
1,109,473
|
|
|
|
428,190
|
|
Purchase of leasing
|
|
|
|
|
|
|
|
|
Ping Lin
|
|
|
3,239
|
|
|
|
3,009
|
|
|
|
|
|
|
|
|
|
|
Purchase of labor, parking, freight and other on-board consumables service
|
|
|
|
|
|
|
|
|
Huna Lin
|
|
|
3,080,682
|
|
|
|
2,989,329
|
|
NOTE 11 – 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. The Company is in compliance
with all debt covenants. At March 31, 2021 and December 31, 2020, short-term bank loans consisted of the following:
|
|
March 31,
2021
|
|
|
December 31,
2020
|
|
|
|
(Unaudited)
|
|
|
|
|
Loan from The Export-Import Bank of China, due on January 21, 2021 with annual interest rate of 3.8800% at December 31, 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.
|
|
$
|
-
|
|
|
$
|
41,686,462
|
|
Loan from Fujian Haixia Bank, due on October 29, 2021 with annual interest rate of 6.0900% at March 31, 2021 and December 31, 2020, collateralized by Hong Long’s 5 fishing vessels, the Company’s 1 fishing vessel 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%.
|
|
|
10,652,382
|
|
|
|
10,728,134
|
|
Loan from Fujian Haixia Bank, due on January 19, 2022 with annual interest rate of 6.0900% at March 31, 2021, guaranteed by Pin Lin, Xinrong Zhuo, Longxiong Zhuo, Longjie Zhuo, Longhao Zhuo and Hong Long, collateralized by three land use rights of old city reconstruction plots west of Baima Road, Gulou District, east of Liuhe Road, north of Daoshan Road, the debt ratio of borrower should not be higher than or equal to 80%.
|
|
|
28,913,609
|
|
|
|
-
|
|
Loan from Fujian Haixia Bank, due on January 20, 2022 with annual interest rate of 6.0900% at March 31, 2021, guaranteed by Pin Lin, Xinrong Zhuo, Longxiong Zhuo, Longjie Zhuo, Longhao Zhuo and Hong Long, collateralized by three land use rights of old city reconstruction plots west of Baima Road, Gulou District, east of Liuhe Road, north of Daoshan Road, the debt ratio of borrower should not be higher than or equal to 80%.
|
|
|
15,217,690
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
54,783,681
|
|
|
$
|
52,414,596
|
|
PINGTAN MARINE ENTERPRISE LTD. AND SUBSIDIARIES
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
(IN U.S. DOLLARS)
MARCH 31, 2021
NOTE 11 – 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 March 31, 2021 and December 31, 2020, long-term bank loans consisted of the
following:
|
|
March 31,
2021
|
|
|
December 31,
2020
|
|
|
|
(Unaudited)
|
|
Loan from The Export-Import Bank of China, due on various dates until January 30, 2023 with annual interest rate of 4.900% at March 31, 2021 and December 31, 2020, 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.
|
|
$
|
2,282,653
|
|
|
$
|
2,298,886
|
|
Loan from China Development Bank, due on various dates until November 27, 2023 with annual interest rate of 5.145% at March 31, 2021 and December 31, 2020, 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%.
|
|
|
4,260,953
|
|
|
|
4,291,254
|
|
Loan from The Export-Import Bank of China, due on various dates until March 28, 2025 with annual interest rate of 4.949% at March 31, 2021 and December 31, 2020, guaranteed by Hong Long, Xinrong Zhuo, Ping Lin and collateralized by 20 fishing vessels.
|
|
|
51,740,143
|
|
|
|
58,238,440
|
|
Loan from The Export-Import Bank of China, due on various dates until August 21, 2026 with annual interest rate of 4.700% at March 31, 2021 and December 31, 2020, 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.
|
|
|
52,729,293
|
|
|
|
57,931,922
|
|
Loan from The Export-Import Bank of China, due on various dates until October 21, 2025 with annual interest rate of 4.700% at March 31, 2021 and December 31, 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.
|
|
|
49,457,489
|
|
|
|
49,809,192
|
|
Loan from China Development Bank, due on various dates until July 30, 2026 with annual interest rate of 5.390% at March 31, 2021 and December 31, 2020, guaranteed by Xinrong Zhuo, 11 fishing vessels and 6 Hong Long’s fishing vessels, real estate of Mingguang Wanhao Property co., LTD., totaled area 22,123.50m2, the debt ratio of borrower should not be higher than 80%.
|
|
|
10,309,984
|
|
|
|
10,383,301
|
|
Loan from The Export-Import Bank of China, due on various dates until April 21, 2028 with annual interest rate of 4.650% at March 31, 2021 and December 31, 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.
|
|
|
19,782,996
|
|
|
|
19,923,677
|
|
Loan from The Export-Import Bank of China, due on various dates until December 21, 2028 with annual interest rate of 4.650% at March 31, 2021 and December 31, 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.
|
|
|
21,304,765
|
|
|
|
21,456,268
|
|
Loan from The Export-Import Bank of China, due on various dates until January 15, 2023 with annual interest rate of 4.000% at March 31, 2021, guaranteed by Pin Lin, Xinrong Zhuo and Hong Long, and collateralized by two related parties’ investments in equity interest of one PRC local banks.
|
|
|
33,783,270
|
|
|
|
-
|
|
Loan from The Export-Import Bank of China, due on various dates until August 21, 2022 with annual interest rate of 2.200% at March 31, 2021 and December 31, 2020, guaranteed by Hong Long, Xinrong Zhuo and Pin Lin.
|
|
|
20,700,000
|
|
|
|
21,000,000
|
|
Loan from The Export-Import Bank of China, due on various dates until February 21, 2023 with annual interest rate of 2.200% at March 31, 2021, guaranteed by Hong Long, Xinrong Zhuo and Pin Lin and collateralized by two related parties’ investments in equity interest of one PRC local banks and the Land Use Right of B2 plot in central business district on the north shore of Minjiang river.
|
|
|
11,000,000
|
|
|
|
-
|
|
Loan from Bank of Communications, due on various dates until June 27, 2025 with annual interest rate of 4.650% at March 31, 2021 and December 31, 2020, guaranteed by Xinrong Zhuo, Huanghai Shipbuilding Co., Ltd. and Fujian Jingfu Ocean Fishery Development Co., Ltd.
|
|
|
39,489,903
|
|
|
|
39,770,725
|
|
Total long-term bank loans
|
|
$
|
316,841,449
|
|
|
$
|
285,103,665
|
|
Less: current portion
|
|
|
(40,363,729
|
)
|
|
|
(39,987,577
|
)
|
Long-term bank loans, non-current portion
|
|
$
|
276,477,720
|
|
|
$
|
245,116,088
|
|
PINGTAN MARINE ENTERPRISE LTD. AND SUBSIDIARIES
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
(IN U.S. DOLLARS)
MARCH 31, 2021
NOTE 11 – 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 March 31,
|
|
Principal
|
|
2022
|
|
$
|
40,363,729
|
|
2023
|
|
|
118,708,329
|
|
2024
|
|
|
55,164,123
|
|
2025
|
|
|
55,011,946
|
|
2026
|
|
|
36,065,923
|
|
Thereafter
|
|
|
11,527,399
|
|
|
|
$
|
316,841,449
|
|
Less: current portion
|
|
|
40,363,729
|
|
Long-term liability
|
|
$
|
276,477,720
|
|
The weighted average
interest rate for short-term bank loans was approximately 5.7% and 4.3% for the three months ended March 31, 2021 and 2020, respectively.
The weighted average
interest rate for long-term bank loans was approximately 4.1% and 4.8% for the three months ended March 31, 2021 and 2020, respectively.
For the three months ended March 31, 2021 and 2020, interest expense
related to bank loans amounted to $ 4,217,799 and $3,142,755, respectively, of which $0 and $243,859 was capitalized to construction-in-progress,
respectively.
NOTE 12 – ACCRUED LIABILITIES AND OTHER PAYABLES
At March 31, 2021 and December 31, 2020, accrued liabilities and other
payables consisted of the following:
|
|
March 31,
2021
|
|
|
December 31,
2020
|
|
|
|
(Unaudited)
|
|
|
|
|
Accrued salaries and related benefits
|
|
$
|
13,552,896
|
|
|
$
|
11,440,174
|
|
Accrued interest due
|
|
|
524,875
|
|
|
|
462,304
|
|
Other
|
|
|
406,742
|
|
|
|
249,155
|
|
|
|
$
|
14,484,513
|
|
|
$
|
12,151,633
|
|
NOTE 13 – SHARE
CAPITAL
|
|
Number of
shares
|
|
|
Total
|
|
Balance, December 31, 2020
|
|
|
79,302,428
|
|
|
$
|
79,302
|
|
Issuance of shares*
|
|
|
3,224,679
|
|
|
|
3,225
|
|
Issuance of shares**
|
|
|
3,625,954
|
|
|
|
3,626
|
|
Balance, March 30, 2021
|
|
|
86,153,061
|
|
|
$
|
86,153
|
|
|
*
|
On
January 8, 2021, the Company issued 4,000,000 of its Series A Convertible Preferred Shares, par value $0.001 per share (“Series
A Preferred Shares”), at a purchase price of $1.00 per share and a stated value of $1.10 per share, in a registered direct offering.
During the three months ended March 30, 2021, 2,954,534 of Series A Convertible Preferred Shares were converted to 3,224,679 ordinary
shares.
|
|
**
|
On March 8, 2021, the Company sold 3,625,954 ordinary shares at
a price of $1.31 per share, and 2,719,464 five-year warrants to purchase ordinary shares at an exercise price of $1.31 per share, in
a registered direct offering.
|
On January 8, 2021, the Company received $4 million investment through
issuing 4,000,000 of its Series A Convertible Preferred Shares, par value $0.001 per share (“Series A Preferred Shares”),
in a registered direct offering. Each Series A Preferred Share is convertible into the Company’s ordinary shares at a conversion
price per share equal to the lesser of (i) $2.00 and (ii) 90% of the lowest volume weighted average price of the ordinary shares on a
trading day during the ten trading days prior to the conversion date, but not lower than $0.44, subject to certain adjustments. Holders
of Series A Preferred Shares are entitled to receive dividends of 8.0% per annum. In connection with the offering, the Company engaged
Spartan Capital Securities, LLC to act as its exclusive placement agent. In consideration for its placement agent services, the Company
paid Spartan Capital Securities, in addition to certain other fees and expenses, a number of warrants to purchase 149,733 ordinary shares
of the Company at an exercise price per share of $1.87, subject to adjustment. The warrants are exercisable, in whole or in part, commencing
on a date that is six months and one day after the closing of the offering and expire on the five-year anniversary of the closing.
PINGTAN MARINE ENTERPRISE LTD. AND SUBSIDIARIES
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
(IN U.S. DOLLARS)
MARCH 31, 2021
NOTE 13 – SHARE
CAPITAL (continued)
On March 8, 2021, the Company sold 3,625,954 ordinary
shares at a price of $1.31 per share, and 2,719,464 five-year warrants to purchase ordinary shares at an exercise price of $1.31 per share,
in a registered direct offering. The net proceeds to the Company from this offering were approximately $4.35 million. In connection with
the offering, the Company engaged Spartan Capital Securities, to act as its exclusive placement agent. In consideration for its placement
agent services, the Company paid Spartan Capital Securities, in addition to certain other fees and expenses, a number of warrants to purchase
253,816 ordinary shares of the Company at an exercise price per share of $1.31, subject to adjustment. The warrants are exercisable, in
whole or in part, commencing on a date that is six months and one day after the closing of the offering and expire on the five-year anniversary
of the closing.
NOTE 14 – CERTAIN RISKS AND CONCENTRATIONS
Credit risk
At March 31, 2021 and December 31, 2020, the Company’s
cash included bank deposits in accounts maintained within the PRC and Hong Kong. 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 months ended March 31, 2021 and 2020.
|
|
Three Months Ended
March 31,
|
|
Customer
|
|
2021
|
|
|
2020
|
|
A
|
|
|
18
|
%
|
|
|
*
|
|
B
|
|
|
16
|
%
|
|
|
*
|
|
C
|
|
|
11
|
%
|
|
|
*
|
|
D
|
|
|
*
|
|
|
|
14
|
%
|
E
|
|
|
*
|
|
|
|
13
|
%
|
F
|
|
|
*
|
|
|
|
10
|
%
|
G
|
|
|
*
|
|
|
|
10
|
%
|
Six suppliers, whose
outstanding accounts receivable accounted for 10% or more of the Company’s total outstanding accounts receivable at March 31, 2021,
accounted for 90.1% of the Company’s total outstanding accounts receivable at March 31, 2021.
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 months ended March 31, 2021 and 2020.
|
|
Three Months Ended
March 31,
|
|
Supplier
|
|
2021
|
|
|
2020
|
|
A
|
|
|
71
|
%
|
|
|
46
|
%
|
B
|
|
|
*
|
|
|
|
30
|
%
|
Two suppliers, whose
outstanding accounts payable accounted for 83.5% or more of the Company’s total outstanding accounts payable and accounts payable
– related parties at March 31, 2021, accounted for 83.5% of the Company’s total outstanding accounts payable and accounts
payable – related parties at March 31, 2021.
Four suppliers, whose
outstanding accounts payable accounted for 10% or more of the Company’s total outstanding accounts payable and accounts payable
– related parties at March 31, 2020, accounted for 89.0% of the Company’s total outstanding accounts payable and accounts
payable – related parties at March 31, 2020.
NOTE 15 – COMMITMENTS AND CONTINGENCIES
Severance payments
The Company has employment agreements with certain
employees that provided severance payments upon termination of employment under certain circumstances, as defined in the applicable agreements.
The Company has estimated its possible severance payments of approximately $10,000 as of March 31, 2021 and December 31, 2020, which have
not been reflected in its consolidated financial statements.
Operating lease
See note 10 for related party operating lease
commitment.
NOTE 16 – SUBSEQUENT
EVENTS
On April 21, 2021, the Company repaid a long-term
bank loan of $4.9 million to The Export-Import Bank of China in accordance with the loan repayment schedule.
On May 12, 2021, the Company repaid a long-term
bank loan of $0.8 million to The China Development Bank in accordance with the loan repayment schedule.
From January 8, 2021 until May 27, 2021, the purchaser
converted 3,409,078 Series A Preferred Shares into 3,805,775 ordinary shares of the Company pursuant to the terms of the certificate of
designation of the Preferred Shares (the “Certificate of Designation”).
On May 27, 2021, the Company redeemed 590,922
Series A Preferred Shares and repurchased 793,192 ordinary shares that were converted following the failure to file the 10-K from the
purchaser. The total consideration was $1,450,000, which includes the dividend payable of the preferred shares redeemed. On May 28, 2021,
the Company sent an instruction letter to its transfer agent to retire the repurchased ordinary shares and resume the preferred shares
to authorized but unissued preferred shares of the Company.
On June 18, 2021, the Company repaid a long-term
bank loan of $1.0 million to The China Development Bank in accordance with the loan repayment schedule.
On June 17, 2021, the Company received a government
subsidy of $386,529.
On June 21, 2021, the Company repaid a long-term
bank loan of $3.7 million to The Bank of Communications in accordance with the loan repayment schedule.
On June 29, 2021, the Company received a loan
of $22.4 million from The Export-Import Bank of China. The loan is due on June 21, 2028 with interest of 4.65%.
On July 21, 2021, the Company repaid a long-term
bank loan of $0.1 million to The Bank of Communications in accordance with the loan repayment schedule.
On August 19, 2021, the Company received a subsidy
of $228,265.
On August 21, 2021, the Company repaid a short-term
loan and a long-term bank loan of $0.4 million and $4.8 million to The Export-Import Bank of China in accordance with the loan repayment
schedule, respectively.
On September 2, 2021, the Company received a loan
of $4.3 million from The Export-Import Bank of China. The loan is due on July 1, 2023 with annual interest rate of 2.20%.
On September 10, 2021, the Company received a
loan of $1.1 million from The Export-Import Bank of China. The loan is due on July 1, 2023 with annual interest rate of 2.20%.
On September 10, 2021, the Company repaid a long-term
bank loan of $1.2 million to The Export-Import Bank of China in accordance with the loan repayment schedule.
On September 15, 2021, the Company received a
loan of $4.4 million from The Export-Import Bank of China. The loan is due on July 1, 2023 with annual interest rate of 2.20%.
On September 15, 2021, the Company repaid a long-term
bank loan of $4.4 million to The Export-Import Bank of China in accordance with the loan repayment schedule.
On September 21, 2021, the Company repaid a long-term
bank loan of $6.1 million to The Export-Import Bank of China in accordance with the loan repayment schedule.
On September 8, 2021, the Company’s Board of Directors consented
the Unanimous Written Resolutions for the suspension of the construction of a krill fishing vessel and the initiation of negotiations
with the shipbuilding company for the purpose of vessel construction contract termination on the basis that the construction progress
of the vessel continued to be behind schedule during 2021 and the shipbuilding company may not be able to deliver the vessel as agreed.
The Company recorded an impairment charge associated with the construction-in-progress of approximately $24,472,000 from this vessel in
December 2020, which was included in the total impairment of assets of approximately $66,694,000. Through September 30, 2021, the Company
has impaired approximately $1,471,000 of the construction costs related to the krill vessel. Although management believes this amount
should be adequate, based upon further negotiation with Huanghai Shipbuilding Co., Ltd, an additional impairment charge might be necessary.
On September 30, 2021, the Company received a
subsidy of $17,382,557.