NOTE 10 – RELATED PARTIES TRANSACTIONS

 

Prepaid expenses – related parties

 

At September 30, 2016 and December 31, 2015, prepaid expenses – related parties consisted of the following:

 

		September 30, 2016				December 31, 2015
Prepaid miscellaneous items to PT. Avona Mina Lestari (1)		$	1,128,172			$	1,127,257
Prepaid fuel cost to Hai Yi Shipping Limited (2)			-				783,370
Prepaid fuel cost to Haifeng Dafu Enterprise Company Limited (3)			-				868,668
Prepaid fuel cost to Hong Fa Shipping Limited (4)			-				1,860,871
		$	1,128,172			$	4,640,166

 

(1)

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

(2)

Hai Yi Shipping Limited is an affiliate company ultimately controlled by Xinrong Zhuo, CEO of the Company.

(3)

Haifeng Dafu Enterprise Company Limited is an affiliate company ultimately controlled by Xinrong Zhuo, CEO of the Company.

(4)

Hong Fa Shipping Limited is an affiliate company owned by Xinrong Zhuo, CEO of the Company.

 

Other receivable – related parties

 

At September 30, 2016 and December 31, 2015, other receivable – related parties consisted of the following:

 

		September 30, 2016				December 31, 2015
Advance to Zhiyan Lin (1)		$	2,429,988			$	3,836,258
Advance to Honghong Zhuo (2)			-				4,051,269
		$	2,429,988			$	7,887,527

 

(1)

Zhiyan Lin is a shareholder and legal representative of Pingtan Fishing.

(2)

Honghong Zhuo is daughter of Xinrong Zhuo.

 

In connection with the termination of VIE structure and to comply with PRC regulation, the Company paid RMB 83 million in total, which is Pingtan Fishing’s registered capital, to Pingtan Fishing’s Shareholders to transfer their 100% of equity interest of Pingtan Fishing to Fujian Heyue, the Company’s subsidiary pursuant to the Equity Transfer Agreement dated February 9, 2015. Those payments are expected to be returned in full to the Company before September 30, 2017.

 

Accounts payable - related parties

 

At September 30, 2016 and December 31, 2015, accounts payable - related parties consisted of the following:

 

Name of related party		September 30, 2016				December 31, 2015
Hai Yi Shipping Limited		$	511			$	-
Ping Lin (1)			1,050				-
Hong Long			103,463				408,631
		$	105,024			$	408,631

 

(1)

Ping Lin is the spouse 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, 2016 and December 31, 2015, the due to related parties amount consisted of the following:

 

		September 30, 2016				December 31, 2015
Other payable – Hong Long		$	8,591,477			$	-
Accrued compensation for Roy Yu, Chief Financial Officer			20,000				20,000
Accrued compensation for Xinrong Zhuo			3,354				3,354
Advance from Xinrong Zhuo, Chief Executive Officer			-				1,361,290
		$	8,614,831			$	1,384,644

  

The amount of other payable – Hong Long represents the payments made by Hong Long on behalf of the Company to the Company’s vendors and is short-term in nature, non-interest bearing, unsecured and payable on demand.

 

The advance from Xinrong Zhuo, the Company’s Chief Executive Officer, is for working capital purposes and short-term in nature, non-interest bearing, unsecured and payable on demand.

 

Operating lease

 

On July 31, 2012, the Company entered into a lease for office space with Ping Lin, spouse of the Company’s CEO, (the “Office Lease”). Pursuant to the Office Lease, annual payments of RMB 84,000 (approximately $13,000) were due for each year of the term. The term of the Office Lease was 3 years and expired on August 1, 2015. The Company renewed the Office Lease. Pursuant to the renewed Office Lease, the annual rent is RMB 84,000 (approximately $13,000) and the renewed Office Lease expires on July 31, 2017.

 

For the three months ended September 30, 2016 and 2015, rent expense related to the Office Lease amounted $3,149 and $3,355, respectively. For the nine months ended September 30, 2016 and 2015, rent expense related to the Office Lease amounted $9,576 and $10,226, respectively.

 

Future minimum rental payment required under the Office Lease is as follows:

 

Twelve-month period Ending September 30:		Amount
2017		$	10,640

 

Rental and related administrative service agreement

 

On July 1, 2013, the Company entered into a service agreement with Hai Yi Shipping Limited that provided the Company a portion of use of premises located in Hong Kong as office and provided related administrative service (the “Service Agreement”). Pursuant to the Service Agreement, monthly payments of Hong Kong Dollar (“HK$”) HK$298,500 (approximately $38,000) were due for each month of the term. The term of the Service Agreement was 1.5 years and expired on December 31, 2014. The Company renewed the Service Agreement. Pursuant to the renewed Service Agreement, the monthly payments are HK$298,500 (approximately $38,000) and the renewed Service Agreement expires on December 31, 2016.

 

For the three months ended September 30, 2016 and 2015, rent expense and corresponding administrative service charge related to the Service Agreement amounted to $115,519 and $115,594, respectively. For the nine months ended September 30, 2016 and 2015, rent expense and corresponding administrative service charge related to the Service Agreement amounted to $346,379 and $346,847, respectively..

 

Future minimum rental and related administrative service charge payment required under the Service Agreement is as follows:

 

Twelve-month period ending September 30:		Amount
2017		$	115,477

 

Purchases from related parties

 

During the three and nine months ended September 30, 2016 and 2015, purchases from related parties were as follows: 

 

		Three Months Ended September 30,								Nine Months Ended  September 30,
		2016				2015				2016				2015
Purchase of fuel, fishing nets and other on board consumables
from PT Avona Mina Lestari		$	-			$	5,482			$	-			$	13,426
from Hong Fa Shipping Limited			5,233				2,562,540				8,926,279				8,402,618
from Haifeng Dafu Enterprise Co., Ltd.			877,687				3,901				890,003				9,554
from Hai Yi Shipping Ltd.			5,230,809				24,065				8,366,895				58,942
from PT. Dwikarya Reksa Abadi			-				6,147				-				15,054
			6,113,729				2,602,135				18,183,177				8,499,594
Purchase of vessel maintenance service
from PT. Avona Mina Lestari			-				3,905,535				-				3,905,535
from PT. Dwikarya Reksa Abadi			-				1,279,430				-				3,236,107
			-				5,184,965				-				7,141,642
Purchase of transportation service
from Fuzhou Honglong Ocean Fishery Co., Ltd.			-				-				-				180,609
from Hai Yi Shipping Limited			-				10,941				-				308,459
			-				10,941				-				489,068
Purchase of Indonesia vessel agent service
from PT. Avona Mina Lestari (1)			-				-				-				2,357
		$	-			$	-			$	-			$	2,357

 

(1)

PT. Avona Mina Lestari acts as Pingtan Fishing’s agent to apply and renew Indonesia fishing licenses and Pingtan Fishing pays the agent service fees to it.