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PINGTAN MARINE ENTERPRISE LTD.
FORM 10-Q
September 30, 2021
TABLE OF CONTENTS
i
FORWARD LOOKING STATEMENTS
This report contains forward-looking statements regarding our business, financial condition, results of operations and prospects. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates” and similar expressions or variations of such words are intended to identify forward-looking statements, but are not deemed to represent an all-inclusive means of identifying forward-looking statements as denoted in this report. Additionally, statements concerning future matters are forward-looking statements.
Although forward-looking statements in this report reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by us. Consequently, forward-looking statements are inherently subject to risks and uncertainties and actual results and outcomes may differ materially from the results and outcomes discussed in or anticipated by the forward-looking statements. Factors that could cause or contribute to such differences in results and outcomes include, without limitation, the impact of the coronavirus (COVID-19) on the Company’s financial condition, business operations and liquidity; the impact of COVID-19 on our customers and distributors; anticipated growth and growth strategies; need for additional capital and the availability of financing; conducting fishing operations and locating or re-locating vessels, in foreign waters and related license requirements; actions taken by government regulators, such as the Indonesian moratorium, or reports or allegations of illegal activity by us, related parties or those with which we conduct business; operational, mechanical, climatic or other unanticipated issues that adversely affect the production capacity of the Company’s vessels; delays in deploying vessels; our ability to successfully manage relationships with customers, distributors and other important relationships; technological changes; competition; demand for our products and services; the deterioration of general economic conditions, whether internationally, nationally or in the local markets in which we operate; legislative or regulatory changes that may adversely affect our business; and those specifically addressed under the headings “Risks Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our annual report on Form 10-K, in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Form 10-Q and information contained in other reports that we file with the SEC. You are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this report.
We undertake no obligation to revise or update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this report, except as required by law. Readers are urged to carefully review and consider the various disclosures made throughout the entirety of this quarterly report, which are designed to advise interested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects.
Unless otherwise indicated, references in this report to “we,” “us” or the “Company” refer to Pingtan Marine Enterprise Ltd. and its subsidiaries.
ii
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
PINGTAN MARINE ENTERPRISE LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN U.S. DOLLARS)
| September 30, | December 31, | |||||||
| 2021 | 2020 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Restricted cash | ||||||||
| Accounts receivable, net | ||||||||
| Inventories, net | ||||||||
| Prepaid expenses | ||||||||
| Prepaid expenses - related party | - | |||||||
| Other receivables | ||||||||
| Total Current Assets | ||||||||
| OTHER ASSETS: | ||||||||
| Cost method investment | ||||||||
| Equity method investment | ||||||||
| Prepayment for long-term assets | ||||||||
| Right-of-use asset | ||||||||
| Property, plant and equipment, net | ||||||||
| Total Other Assets | ||||||||
| Total Assets | $ | $ | ||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accounts payable - related parties | ||||||||
| Short-term bank loans | ||||||||
| Long-term bank loans - current portion | ||||||||
| Accrued liabilities and other payables | ||||||||
| Lease liability- current | ||||||||
| Due to related parties | ||||||||
| Total Current Liabilities | ||||||||
| OTHER LIABILITIES: | ||||||||
| Lease liability | - | |||||||
| Long-term bank loans - non-current portion | ||||||||
| Total Liabilities | ||||||||
| COMMITMENTS AND CONTINGENCIES | ||||||||
| SHAREHOLDERS’ EQUITY: | ||||||||
| Equity attributable to ordinary shareholders of the Company: | ||||||||
| Preferred shares ($ | ||||||||
| Ordinary shares ($ | ||||||||
| Additional paid-in capital | ||||||||
| (Deficit) | ( | ) | ( | ) | ||||
| Statutory reserve | ||||||||
| Accumulated other comprehensive (loss) | ( | ) | ( | ) | ||||
| Total equity attributable to ordinary shareholders of the Company | ||||||||
| Non-controlling interest | ||||||||
| Total Shareholders’ Equity | ||||||||
| Total Liabilities and Shareholders’ Equity | $ | $ | ||||||
See notes to consolidated financial statements.
1
PINGTAN MARINE ENTERPRISE LTD. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME
(IN U.S. DOLLARS)
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| REVENUE | $ | $ | $ | $ | ||||||||||||
| COST OF REVENUE | ||||||||||||||||
| GROSS (LOSS) PROFIT | ( | ) | ( | ) | ||||||||||||
| OPERATING EXPENSES (INCOME): | ||||||||||||||||
| Selling | ||||||||||||||||
| General and administrative | ||||||||||||||||
| General and administrative - depreciation | ||||||||||||||||
| Subsidy | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Impairment loss | ||||||||||||||||
| Total Operating (INCOME) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| INCOME FROM OPERATIONS | ||||||||||||||||
| OTHER INCOME (EXPENSE): | ||||||||||||||||
| Interest income | ||||||||||||||||
| Interest (expense) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Foreign currency transaction gain (loss) | ( | ) | ||||||||||||||
| Gain from cost method investment | ||||||||||||||||
| (Loss) on equity method investment | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expense) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total Other (Expense), net | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| INCOME (LOSS) BEFORE INCOME TAXES | ( | ) | ||||||||||||||
| INCOME TAXES | ||||||||||||||||
| NET INCOME (LOSS) | $ | $ | $ | ( | ) | $ | ||||||||||
| LESS: NET INCOME (LOSS) ATTRIBUTABLE TO THE NON-CONTROLLING INTEREST | ( | ) | ||||||||||||||
| NET INCOME (LOSS) ATTRIBUTABLE TO ORDINARY SHAREHOLDERS OF THE COMPANY BEFORE PREFERRED DIVIDENDS | ( | ) | ||||||||||||||
| LESS: PREFERRED SHARE DIVIDENDS | ( | ) | ||||||||||||||
| NET INCOME (LOSS) ATTRIBUTABLE TO ORDINARY SHAREHOLDERS OF THE COMPANY | $ | $ | $ | ( | ) | $ | ||||||||||
| COMPREHENSIVE INCOME (LOSS): | ||||||||||||||||
| NET INCOME (LOSS) | ( | ) | ||||||||||||||
| OTHER COMPREHENSIVE (LOSS) INCOME | ||||||||||||||||
| Unrealized foreign currency translation gain | ||||||||||||||||
| COMPREHENSIVE INCOME (LOSS) | ( | ) | ||||||||||||||
| LESS: COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO THE NON-CONTROLLING INTEREST | ( | ) | ||||||||||||||
| COMPREHENSIVE (LOSS) INCOME ATTRIBUTABLE TO ORDINARY SHAREHOLDERS OF THE COMPANY | $ | $ | $ | ( | ) | $ | ||||||||||
| NET INCOME (LOSS) PER ORDINARY SHARE ATTRIBUTABLE TO ORDINARY SHAREHOLDERS OF THE COMPANY | ||||||||||||||||
| Basic | $ | $ | $ | ( | ) | $ | ||||||||||
| Diluted | $ | $ | $ | ( | ) | $ | ||||||||||
| WEIGHTED AVERAGE ORDINARY SHARES OUTSTANDING: | ||||||||||||||||
| Basic | ||||||||||||||||
| Diluted | ||||||||||||||||
See condensed notes to unaudited consolidated financial statements
2
PINGTAN MARINE ENTERPRISE LTD. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020
(IN U.S. DOLLARS)
| Equity Attributable To Ordinary Shareholders of The Company | ||||||||||||||||||||||||||||||||||||||||
| Preferred shares | Ordinary Shares | Additional | Retained | Accumulated Other | Non- | Total | ||||||||||||||||||||||||||||||||||
| Number of | Number of | Paid-in | Earnings | Statutory | Comprehensive | controlling | Shareholders’ | |||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | (Deficit) | Reserve | (Loss) | Interest | Equity | |||||||||||||||||||||||||||||||
| Balance, June 30, 2021 (Unaudited) | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | ||||||||||||||||||||||||||||
| Net income | - | - | ||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | - | - | ||||||||||||||||||||||||||||||||||||||
| Balance, September 30, 2021 (Unaudited) | - | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | |||||||||||||||||||||||||||
| Balance, June 30, 2020 (Unaudited) | $ | $ | $ | $ | $ | $ | ( | ) | $ | $ | ||||||||||||||||||||||||||||||
| Net income | - | - | ||||||||||||||||||||||||||||||||||||||
| Common stock issuance for professional fee | - | |||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | - | - | ||||||||||||||||||||||||||||||||||||||
| Balance, September 30, 2020 (Unaudited) | $ | $ | $ | $ | $ | $ | ( | ) | $ | $ | ||||||||||||||||||||||||||||||
See condensed notes to unaudited consolidated financial statements
3
PINGTAN MARINE ENTERPRISE LTD. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020
(IN U.S. DOLLARS)
| Equity Attributable To Ordinary Shareholders of The Company | ||||||||||||||||||||||||||||||||||||||||
| Preferred shares | Ordinary Shares | Additional | Retained | Accumulated Other | Non- | Total | ||||||||||||||||||||||||||||||||||
| Number of | Number of | Paid-in | Earnings | Statutory | Comprehensive | controlling | Shareholders’ | |||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | (Deficit) | Reserve | (Loss) | Interest | Equity | |||||||||||||||||||||||||||||||
| Balance, December 31, 2020 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | ||||||||||||||||||||||||||||
| Net (loss) | - | - | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Issue of series A preferred shares | ||||||||||||||||||||||||||||||||||||||||
| Issue of ordinary shares | ||||||||||||||||||||||||||||||||||||||||
| Dividend payments for preferred shares | ( | ) | ||||||||||||||||||||||||||||||||||||||
| Converted Series A Preferred Shares into ordinary shares | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||
| Repurchase of Preferred Shares | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Foreign currency translation adjustment | - | - | ||||||||||||||||||||||||||||||||||||||
| Balance, September 30, 2021 (Unaudited) | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | ||||||||||||||||||||||||||||
| Balance, December 31, 2019 | $ | $ | $ | $ | $ | $ | ( | ) | $ | $ | ||||||||||||||||||||||||||||||
| Net income | - | - | ||||||||||||||||||||||||||||||||||||||
| Common stock issuance for professional fee | - | |||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | - | - | ||||||||||||||||||||||||||||||||||||||
| Balance, September 30, 2020 (Unaudited) | $ | $ | $ | $ | $ | $ | ( | ) | $ | $ | ||||||||||||||||||||||||||||||
See condensed notes to unaudited consolidated financial statements
4
PINGTAN MARINE ENTERPRISE LTD. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN U.S. DOLLARS)
| For the Nine Months
Ended September 30, | ||||||||
| 2021 | 2020 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net (loss) income | $ | ( | ) | $ | ||||
| Adjustments to reconcile net income from operations to net cash provided by (used in) operating activities: | ||||||||
| Depreciation | ||||||||
| Bad debt expense | ||||||||
| (Decrease) increase in inventory allowance | ||||||||
| Loss on equity method investment | ||||||||
| Common stock issuance for professional fee | ||||||||
| Impairment loss for fishing vessels | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Inventories | ( | ) | ( | ) | ||||
| Prepaid expenses | ( | ) | ( | ) | ||||
| Prepaid expenses - related party | ||||||||
| Other receivables | ( | ) | ||||||
| Accounts payable | ( | ) | ||||||
| Accounts payable - related parties | ||||||||
| Accrued liabilities and other payables | ||||||||
| Accrued liabilities and other payables - related party | ||||||||
| Advance from customers | ( | ) | ||||||
| Due to related parties | ||||||||
| NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES | ( | ) | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Purchase of property, plant and equipment | ( | ) | ( | ) | ||||
| Prepayment made for long-term assets | ( | ) | ||||||
| Proceeds from government grants for fishing vessel construction | ||||||||
| NET CASH USED IN INVESTING ACTIVITIES | ( | ) | ( | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds of short-term bank loans | ||||||||
| Repayments of short-term bank loans | ( | ) | ( | ) | ||||
| Proceeds from long-term bank loans | ||||||||
| Repayments of long-term bank loans | ( | ) | ( | ) | ||||
| Proceeds from issuance of ordinary shares | ||||||||
| Proceeds from issuance of series A preferred shares | ||||||||
| Proceeds from related party | ||||||||
| Repurchase of preferred shares | ( | ) | ||||||
| Loans issued to related parties | ( | ) | ||||||
| Repayments of loans issued to related parties | ||||||||
| NET CASH PROVIDED BY FINANCING ACTIVITIES | ||||||||
| EFFECT OF EXCHANGE RATE ON CASH, CASH EQUIVALENTS AND RESTRICTED CASH | ||||||||
| NET INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH | ||||||||
| CASH, CASH EQUIVALENTS AND RESTRICTED CASH - beginning of period | ||||||||
| CASH, CASH EQUIVALENTS AND RESTRICTED - end of period | $ | $ | ||||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||||||
| Cash paid for: | ||||||||
| Interest | $ | $ | ||||||
| Income taxes | $ | $ | ||||||
| RECONCILIATION TO AMOUNTS ON CONSOLIDATED BALANCE SHEETS: | ||||||||
| Cash and cash equivalents | ||||||||
| Restricted cash | ||||||||
| TOTAL CASH, CASH EQUIVALENTS AND RESTRICTED CASH | $ | $ | ||||||
| NON-CASH INVESTING AND FINANCING ACTIVITIES: | ||||||||
| Acquisition of property and equipment paid by related party on behalf | $ | ( | ) | |||||
| Acquisition of property and equipment by decreasing prepayment for long-term assets | $ | $ | ( | ) | ||||
See condensed notes to unaudited consolidated financial statements
5
PINGTAN MARINE ENTERPRISE LTD. AND SUBSIDIARIES
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(IN
U.S. DOLLARS)
SEPTEMBER 30, 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 (“FASB”)
Accounting Standards Codification (“ASC”) 805-40, CDGC and Merchant Supreme are deemed the accounting acquirers and the Company
is the legal acquirer in the transaction and, consequently, the transaction is treated as a recapitalization of the Company. Accordingly,
the assets and liabilities and the historical operations that are reflected in the consolidated financial statements are those of CDGC,
Merchant Supreme and their subsidiaries and are recorded at the historical cost basis. The Company’s assets, liabilities and results
of operations were consolidated with the assets, liabilities, and results of operations of CDGC, Merchant Supreme and their subsidiaries
after the acquisition date of February 25, 2013. Following the completion of the business combination which became effective on February
25, 2013, CDGC and Merchant Supreme became the wholly-owned subsidiaries of the Company. The Company’s ordinary shares, par value
$
In order to place increased focus on the fishing business and pursue more effective growth opportunities, the Company decided to exit and sell the specialized dredging services operated by China Dredging. The Company completed the sale of CDGC and its subsidiaries on December 4, 2013.
On
February 9, 2015, the Company terminated its existing Variable Interest Entity (“VIE”) agreements, pursuant to an Agreement
of Termination dated February 9, 2015, entered into by and among Ms. Honghong Zhuo, Mr. Zhiyan Lin (each a shareholder of Fujian Provincial
Pingtan County Ocean Fishing Group Co., Ltd (“Pingtan Fishing”), and together the “Pingtan Fishing’s Shareholders”),
Pingtan Fishing and Pingtan Guansheng Ocean Fishing Co., Ltd. (“Pingtan Guansheng”). On February 9, 2015, the Pingtan Fishing’s
Shareholders transferred
6
PINGTAN MARINE ENTERPRISE LTD. AND SUBSIDIARIES
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(IN
U.S. DOLLARS)
SEPTEMBER 30, 2021
NOTE 1 – DESCRIPTION OF BUSINESS AND ORGANIZATION (continued)
Details of the Company’s subsidiaries that are included in these consolidated financial statements as of September 30, 2021, are as follows:
| Name of subsidiaries | Place and date of incorporation |
Percentage of ownership |
Principal activities | |||
| Merchant Supreme Co., Ltd. (“Merchant Supreme”) |
June 25, 2012 |
|||||
| Prime Cheer Corporation Ltd. (“Prime Cheer”) |
May 3, 2012 |
|||||
| Pingtan Guansheng Ocean Fishing Co., Ltd. (“Pingtan Guansheng”) |
October 12, 2012 |
|||||
| Fujian Heyue Marine Fishing Development Co., Ltd. (“Fujian Heyue”) |
January 27, 2015 |
|||||
| Fujian Provincial Pingtan County Fishing Group Co., Ltd. (“Pingtan Fishing”) |
February 27, 1998 |
|||||
| Pingtan Dingxin Fishing Information Consulting Co., Ltd. (“Pingtan Dingxin”) |
October 23, 2012 |
|||||
| Pingtan Yikang Global Fishery Co., Ltd. (“Yikang Fishery”) |
September 14, 2017 |
|||||
| Pingtan Shinsilkroad Fishery Co., Ltd. (“Shinsilkroad Fishery”) |
September 14, 2017 |
|||||
| Fuzhou Howcious Investment Co., Ltd (“Howcious Investment”) |
September 5, 2017 |
|||||
| Pingtan Ocean Fishery Co., Ltd (“Ocean Fishery”) |
July 21, 2017 |
7
PINGTAN MARINE ENTERPRISE LTD. AND SUBSIDIARIES
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(IN U.S. DOLLARS)
SEPTEMBER 30, 2021
NOTE 1 – DESCRIPTION OF BUSINESS AND ORGANIZATION (continued)
Fujian Heyue is in the business of shrimp trading, and through its PRC subsidiary, Pingtan Fishing, engages in ocean fishing with its owned and controlled vessels within the Indian Exclusive Economic Zone and the international waters.
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 consolidated 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, as amended, for the year ended December 31, 2020 filed with the Securities and Exchange Commission on October 13, 2021.
Going concern
The Company had a working capital deficit of $
The Company meets its day-to-day working capital requirements through cash flow provided by operations, bank loans and related parties’ advances. 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 68 fishing vessels and 3 transport vessels, the deployment of these vessels into operation will generate more revenue and cash inflows to the Company. In addition, the Company receives subsidies for modification and rebuilding projects and is reimbursed for certain operating expenses from government entities, as an encouragement of the development of ocean fishing industry.
Use of estimates
The preparation of the unaudited consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, and the related disclosures at the date of the financial statements and during the reporting period. Actual results could materially differ from these estimates. Significant estimates in the three and nine months ended September 30, 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.
8
PINGTAN MARINE ENTERPRISE LTD. AND SUBSIDIARIES
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(IN U.S. DOLLARS)
SEPTEMBER 30, 2021
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Cash
Cash consists of cash on hand and cash in banks.
The Company maintains cash with various financial institutions in China's mainland and Hong Kong. At September 30, 2021 and December 31,
2020, cash balances in China's mainland were $
Restricted cash
Restricted cash consists of cash deposits held
by the Export Import Bank of China to secure its bank loans and Hong Long’s short-term bank loans. At September 30, 2021 and December
31, 2020, restricted cash amounted to $
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.
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.
9
PINGTAN MARINE ENTERPRISE LTD. AND SUBSIDIARIES
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(IN U.S. DOLLARS)
SEPTEMBER 30, 2021
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Accounts receivable
Accounts receivable are presented net of an allowance
for doubtful accounts. The Company maintains an allowance for doubtful accounts for estimated losses. The Company reviews the accounts
receivable on a periodic basis and makes general and specific allowance when there is doubt as to the collectability of individual balances.
In evaluating the collectability of individual receivable balance, the Company considers many factors, including the age of the balance,
a customer’s historical payment history, its current creditworthiness and current economic trends. Accounts are written off after
exhaustive efforts at collection. The Company only grants credit terms to established customers who are deemed to be financially responsible.
Credit periods to customers are within 180 days after customers received the purchased goods. At September 30, 2021 and December 31, 2020,
the Company had established, based on a review of its outstanding balances, an allowance for doubtful accounts in the amounts of $
Inventories
Inventories, consisting of frozen fish and marine catches, are stated at the lower of cost or net realizable value utilizing the weighted average method. The cost of inventories is primarily comprised of fuel, freight, depreciation, direct labor, consumables, government levied charges and taxes. Consumables include fishing nets and metal containers used by fishing vessels. The Company’s fishing fleets in Indian waters and the international waters operate throughout the year, although the May to July period demonstrates lower catch quantities compared to the October to January period, which is the peak season.
A reserve is established when management determines
that certain inventories may not be saleable. If inventory costs exceed net realizable value due to obsolescence or quantities in excess
of expected demand or price decreases, the Company will record a reserve for the difference between the cost and the market value. These
reserves are recorded based on estimates. At September 30, 2021 and December 31, 2020, the Company has a reserve for inventories in the
amount of $
Inventory reserves are intended to reduce the carrying value of inventories to their net realizable value. The Company regularly evaluates its ability to realize the value of inventories based on a combination of factors including: 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 to carry out ocean fishing projects in international waters. 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.
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 usually owns
10
PINGTAN MARINE ENTERPRISE LTD. AND SUBSIDIARIES
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(IN U.S. DOLLARS)
SEPTEMBER 30, 2021
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Property, plant and equipment
Property, plant and equipment are carried at cost and are depreciated on a straight-line basis over the estimated useful lives of the assets. The cost of repairs and maintenance is expensed as incurred; major replacements and improvements are capitalized. When assets are retired or disposed of, the cost and accumulated depreciation are removed from the accounts, and any resulting gains or losses are included in operation 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 | ||
| Vehicles | ||
| Office and other equipment |
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 and $
Impairment of long-lived assets
In accordance with ASC Topic 360, the Company reviews long-lived assets
for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable.
The Company evaluates the impairment by comparing the carrying amount of the assets to an estimate of future undiscounted cash flows expected
to be generated from the use of the assets and their eventual disposition. If the sum of the expected future undiscounted cash flows is
less than the carrying amount of the assets, the Company recognizes an impairment loss based on the excess of the carrying amount of the
long-lived assets over their fair value. Impairment loss represents the impairment loss on the vessels whenever events or changes in circumstances
indicate that the carrying amount of the assets might not be recovered. The Company recognized impairment loss of $
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 the vessel construction contract termination on the
basis that the construction progress 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 $
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 being when 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.
11
PINGTAN MARINE ENTERPRISE LTD. AND SUBSIDIARIES
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(IN U.S. DOLLARS)
SEPTEMBER 30, 2021
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Revenue recognition (continued)
Disaggregation of revenue
The following tables disaggregate revenues under ASC Topic 606 by species of fish. For the three months ended September 30, 2021 and 2020, our revenue by species of fish was as follows (dollars in thousands, except for average price):
| Three Months Ended September 30, 2021 | ||||||||||||||||
| Revenue | Volume (KG) | Average price | Percentage of revenue | |||||||||||||
| Argentina squid | $ | $ | % | |||||||||||||
| Indian Ocean squid | % | |||||||||||||||
| Sardine | % | |||||||||||||||
| South American white shrimp (whole) | % | |||||||||||||||
| Chub mackerel | % | |||||||||||||||
| Other | % | |||||||||||||||
| Total | $ | $ | % | |||||||||||||
| Three Months Ended September 30, 2020 | ||||||||||||||||
| Revenue | Volume (KG) | Average price | Percentage of revenue | |||||||||||||
| Indian Ocean squid | $ | $ | % | |||||||||||||
| Peru squid | % | |||||||||||||||
| Chub mackerel | % | |||||||||||||||
| Tuna | % | |||||||||||||||
| Sardine | % | |||||||||||||||
| Others | % | |||||||||||||||
| Total | $ | $ | % | |||||||||||||
The following tables disaggregate revenues under ASC Topic 606 by species of fish. For the nine months ended September 30, 2021 and 2020, our revenue by species of fish was as follows (dollars in thousands, except for average price):
| Nine Months Ended September 30, 2021 | ||||||||||||||||
| Revenue | Volume (KG) |
Average price |
Percentage of revenue |
|||||||||||||
| Argentina squid | $ | $ | % | |||||||||||||
| Indian Ocean squid | % | |||||||||||||||
| South American white shrimp (whole) | % | |||||||||||||||
| Peru squid | % | |||||||||||||||
| Chub mackerel | % | |||||||||||||||
| Others | % | |||||||||||||||
| Total | $ | $ | % | |||||||||||||
| Nine Months Ended September 30, 2020 | ||||||||||||||||
| Revenue | Volume (KG) | Average price | Percentage of revenue | |||||||||||||
| Indian Ocean squid | $ | $ | % | |||||||||||||
| Peru squid | % | |||||||||||||||
| Chub mackerel | % | |||||||||||||||
| Cuttle fish | % | |||||||||||||||
| Croaker fish | % | |||||||||||||||
| Others | % | |||||||||||||||
| Total | $ | $ | % | |||||||||||||
12
PINGTAN MARINE ENTERPRISE LTD. AND SUBSIDIARIES
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(IN U.S. DOLLARS)
SEPTEMBER 30, 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 Ministry of Agriculture and Rural Affairs of the PRC (“MARA”). The qualification renews on April 1 of each year. Pingtan Fishing is exempt from income tax derived from its ocean fishing operations in the periods it processes a valid Ocean Fishing Enterprise Qualification Certificate issued by the MARA.
The China’s Enterprise Income Tax Law (“EIT
Law”), which went into effect on January 1, 2018, also provides that an enterprise established under the laws of foreign countries
or regions but whose “de facto management body” is located in the PRC be treated as a resident enterprise for PRC tax purposes
and consequently be subject to the PRC income tax at the rate of
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.
13
PINGTAN MARINE ENTERPRISE LTD. AND SUBSIDIARIES
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(IN U.S. DOLLARS)
SEPTEMBER 30, 2021
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Income taxes (continued)
Deferred tax assets are reduced by a valuation allowance to the extent that management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the consolidated statements of operations and comprehensive income (loss) in the period that includes the enactment date.
The Company prescribes a more-likely-than-not threshold for financial statement recognition and measurement of a tax position taken in the tax return. This interpretation also provides guidance on de-recognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, accounting for income taxes in interim periods and income tax disclosures. As of September 30, 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 amounted
to $
Employee benefits
The Company makes mandatory contributions to the
PRC government’s health, retirement benefit and unemployment funds in accordance with the relevant Chinese social security laws.
The costs of these payments are charged to the same accounts as the related salary costs in the same period as the related salary costs
incurred. Employee benefit costs amounted to $
14
PINGTAN MARINE ENTERPRISE LTD. AND SUBSIDIARIES
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(IN U.S. DOLLARS)
SEPTEMBER 30, 2021
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Foreign currency translation
The reporting currency of the Company is the U.S.
dollar. The functional currency of the Company and Merchant Supreme and Prime Cheer, the Company’s subsidiaries, is the U.S. dollar.
The functional currency of Pingtan Guansheng, Fujian Heyue and Pingtan Fishing, the Company’s subsidiaries, is the Chinese Renminbi
(“RMB”). For the Company’s subsidiaries Pingtan Guansheng, Fujian Heyue and Pingtan Fishing, whose functional currencies
are the RMB, results of operations and cash flows are translated at average exchange rates during the period, assets and liabilities are
translated at the unified exchange rate at the end of the period, and equity is translated at historical exchange rates. As a result,
amounts relating to assets and liabilities reported on the statements of cash flows may not necessarily agree with the changes in the
corresponding balances on the balance sheets. Translation adjustments resulting from the process of translating the local currency financial
statements into U.S. dollars are included in determining comprehensive income. The cumulative translation adjustment and effect of exchange
rate changes on cash for the nine months ended September 30, 2021 and 2020 was $
All the Company’s revenue transactions are transacted in the functional currency of the operating subsidiaries. The Company does not enter into any material transactions in foreign currencies. Transaction gains or losses have not had, and are not expected to have, a material effect on the results of operations of the Company.
Asset and liability accounts at September 30, 2021 and December 31, 2020 were translated at 6.4854 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 nine months ended September 30, 2021 and 2020 were 6.4714 RMB and 6.9917 RMB to $1.00, respectively. The average translation rates applied to the statements of operations for three months ended September 30, 2021 and 2020 were 6.4707 RMB and 6.9205 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 (loss) 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 dilutive securities. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity.
Basic net income per share is computed by dividing net income (loss) 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 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 September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Net income (loss) attributable to ordinary shareholders of the Company | ( | ) | ||||||||||||||
| Preferred Share Dividends | ( | ) | ||||||||||||||
| Net income (loss) available to ordinary shareholders of the company for basic and diluted net income per share of ordinary shares | $ | $ | $ | ( | ) | $ | ||||||||||
| Weighted average ordinary shares outstanding | ||||||||||||||||
| Basic | ||||||||||||||||
| Diluted | ||||||||||||||||
| Net income per ordinary share attributable to ordinary shareholders of the Company | ||||||||||||||||
| Basic | $ | $ | $ | ( | ) | $ | ||||||||||
| Diluted | $ | $ | $ | ( | ) | $ | ||||||||||
15
PINGTAN MARINE ENTERPRISE LTD. AND SUBSIDIARIES
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(IN U.S. DOLLARS)
SEPTEMBER 30, 2021
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Non-controlling interest
On February 15, 2015, China Agriculture invested
RMB
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 ordinary shareholders of the Company, its management, members of the immediate families of principal ordinary shareholders of the Company and its management and other parties with which the Company may deal with if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. The Company discloses all significant related party transactions.
Comprehensive income (loss)
Comprehensive income (loss) is comprised of net income (loss) and all changes to the statements of stockholders’ equity, except those due to investments by stockholders, changes in paid-in capital and distributions to stockholders. For the Company, comprehensive income (loss) for the three and nine months ended September 30, 2021 and 2020 included net income (loss) and unrealized gain from foreign currency translation adjustments.
Segment information
ASC Topic 280 “Segment reporting” establishes standards for reporting information on operating segments in interim and annual financial statements. All of the Company’s operations are considered by the chief operating decision maker to be aggregated in one reportable operating segment. All of the Company’s customers are in the PRC and all income is derived from ocean fishery.
Commitments and contingencies
In the normal course of business, the Company is subject to contingencies, including legal proceedings and environmental claims, arising out of the normal course of businesses that relate to a wide range of matters, including among others, liability for breaches of contracts. The Company records accruals for such contingencies based upon the assessment of the probability of occurrence and, where determinable, an estimate of the liability. Management may consider many factors in making these assessments, including historical operations, scientific evidence and the specifics of each matter.
The Company’s management has evaluated all such proceedings and claims that existed as of September 30, 2021. 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 are 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. 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 receivable is limited due to generally short payment terms. The Company also performs ongoing credit evaluations of its customers to help further reduce credit risk.
16
PINGTAN MARINE ENTERPRISE LTD. AND SUBSIDIARIES
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(IN U.S. DOLLARS)
SEPTEMBER 30, 2021
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Concentrations of credit, economic and political risks (continued)
According to the sale agreement signed on December
4, 2013, the Company does not own 20 fishing vessels but has the operating rights to operate these vessels which are owned by a related
company, Fuzhou Hong Long Ocean Fishery Co., Ltd (“Hong Long”) and the Company is entitled to
Recent Adopted Accounting Standards
Codification Improvements to Topic 842, Leases (“ASU 2018-10”) and ASU 2018-11, Leases (Topic 842), Targeted Improvements (“ASU 2018-11”). The amendments in ASU 2018-10 affect only narrow aspects of the guidance issued in the amendments in ASU 2016-02, including but not limited to lease residual value guarantee, rate implicit in the lease and lease term and purchase option. The amendments in ASU 2018-11 provide an optional transition method for adoption of the new standard, which will allow entities to continue to apply the legacy guidance in ASC Topic 840, including its disclosure requirements, in the comparative periods presented in the year of adoption. We applied the new standard beginning January 1, 2020. The adoption did not have a material impact on the Company’s consolidated financial statements.
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 was effective for interim and annual periods beginning after December 15, 2019. We applied the new standard beginning January 1, 2020. The adoption did not have a material impact on the Company’s consolidated financial statements.
In January 2020, the FASB issued ASU 2020-01, Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815): Clarifying the Interactions between Topic 321, Topic 323, and Topic 815 (“ASU 2020-01”) to clarify the interaction in accounting for equity securities under Topic 321, investments accounted for under the equity method of accounting in Topic 323 and the accounting for certain forward contracts and purchased options accounted for under Topic 815. ASU 2020-01 was effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2020. We applied the new standard beginning January 1, 2021. The adoption did not have a material impact on the Company’s consolidated financial statements.
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.
17
PINGTAN MARINE ENTERPRISE LTD. AND SUBSIDIARIES
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(IN U.S. DOLLARS)
SEPTEMBER 30, 2021
NOTE 3 – ACCOUNTS RECEIVABLE
At September 30, 2021 and December 31, 2020, accounts receivable consisted of the following:
| September 30, 2021 | December 31, 2020 | |||||||
| (Unaudited) | ||||||||
| Accounts receivable | $ | $ | ||||||
| Less: allowance for doubtful accounts | ( | ) | ( | ) | ||||
| $ | $ | |||||||
The Company reviews the accounts receivable on
a periodic basis and makes general and specific allowance when there is doubt as to the collectability of an individual balance. Bad debt
expense was $
NOTE 4 – INVENTORIES
At September 30, 2021 and December 31, 2020, inventories consisted of the following:
| September 30, 2021 | December 31, 2020 | |||||||
| (Unaudited) | ||||||||
| Frozen fish and marine catches in warehouse | $ | $ | ||||||
| Frozen fish and marine catches work in progress | ||||||||
| Frozen fish and marine catches in transit | ||||||||
| Less: reserve for inventories | ( | ) | ( | ) | ||||
| $ | $ | |||||||
Frozen fish and marine catches in warehouse represent 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.
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 $
18
PINGTAN MARINE ENTERPRISE LTD. AND SUBSIDIARIES
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(IN U.S. DOLLARS)
SEPTEMBER 30, 2021
NOTE 5 – OTHER RECEIVABLES
At September 30, 2021 and December 31, 2020, other receivables consisted of the following:
| September 30, 2021 | December 31, 2020 | |||||||
| (Unaudited) | ||||||||
| VAT recoverable (1) | $ | $ | ||||||
| Other | ||||||||
| $ | $ | |||||||
| (1) | The balance of advanced VAT represents input VAT available for deducting the amount of VAT paid in the future. |
NOTE 6 – COST METHOD INVESTMENT
At September 30, 2021 and December 31, 2020, the
cost method investment amounted to $
In accordance with ASC Topic 321, the Company elected to use the measurement alternative to measure such investments at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments of the same issuer, if any. The Company monitors its investment in the non-marketable security and will recognize, if ever existing, a loss in value which is deemed to be other than temporary. The Company determined that there was no impairment on this investment as of September 30, 2021 and December 31, 2020.
NOTE 7 – EQUITY METHOD INVESTMENT
At September 30, 2021 and December 31, 2020, the
equity investment amounted to $
Global Deep Ocean processes, stores, and transports
Deep Ocean fishing products. Total registered capital of Global Deep Ocean is RMB
The Company measures this equity investment in
the consolidated financial statements utilizing 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 changes in the Company’s share of the investee’s
net assets and any impairment loss relating to the investment. For the three months ended September 30, 2021 and 2020, the Company’s
share of Global Deep Ocean’s net loss was $
19
PINGTAN MARINE ENTERPRISE LTD. AND SUBSIDIARIES
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(IN U.S. DOLLARS)
SEPTEMBER 30, 2021
NOTE 8 – PREPAYMENT FOR LONG-TERM ASSETS
At September 30, 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.
For the nine months ended September 30, 2021, a summary of activities in prepayment for long-term assets was as follows:
| Prepayment for fishing vessels’ construction | ||||
| Balance - December 31, 2020 | $ | |||
| Prepayments made for fishing vessels’ construction | ||||
| Reclassification to construction-in-progress | ||||
| Foreign currency fluctuation | ||||
| Balance – September 30, 2021 | $ | |||
NOTE 9 – PROPERTY, PLANT AND EQUIPMENT
At September 30, 2021 and December 31, 2020, property, plant and equipment consisted of the following:
| Useful life | September 30, 2021 | December 31, 2020 | ||||||||
| (Unaudited) | ||||||||||
| Fishing vessels | $ | $ | ||||||||
| Vehicles | ||||||||||
| Office and other equipment | ||||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||||
| $ | $ | |||||||||
20
PINGTAN MARINE ENTERPRISE LTD. AND SUBSIDIARIES
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(IN U.S. DOLLARS)
SEPTEMBER 30, 2021
NOTE 9 – PROPERTY, PLANT AND EQUIPMENT (continued)
During the nine months ended September 30, 2021, the 20 vessels that received approval from MARA to operate in international waters after modification and rebuilt into 20 seine vessels, had been completed and deployed to international water for operation.
During the nine months ended September 30, 2021,
the Company received a government subsidy for a group of fishing vessels amounting to RMB
For the three months ended September 30,
2021 and 2020, depreciation expense amounted to $
The Company had 81 and 82 fishing vessels at September
30, 2021 and December 31, 2020, with net carrying amount of approximately $
The Company recognized an impairment loss of $
21
PINGTAN MARINE ENTERPRISE LTD. AND SUBSIDIARIES
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(IN U.S. DOLLARS)
SEPTEMBER 30, 2021
NOTE 10 – RELATED PARTIES TRANSACTIONS
Accounts payable - related parties
At September 30, 2021 and December 31, 2020, accounts payable - related parties consisted of the following:
| Name of related party | September 30, 2021 | December 31, 2020 | ||||||
| (Unaudited) | ||||||||
| Hong Long (1) | $ | $ | ||||||
| Global Deep Ocean | ||||||||
| Fujian Jingfu Ocean Fishery Development Co., Ltd. (2) | ||||||||
| Huna Lin (3) | ||||||||
| $ | $ | |||||||
| (1) | Hong Long is an affiliate company majority owned by a family member of the Company’s CEO. |
| (2) | Fujian Jingfu Ocean Fishery Development Co., Ltd. is a subsidiary of Hong Long |
| (3) | Huna Lin is an immediate family of Zhiyan Lin, and Zhiyan Lin is a shareholder of Pingtan Fishing, |
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, 2021 and December 31, 2020, the due to related parties amount consisted of the following:
| September 30, 2021 | December 31, 2020 | |||||||
| (Unaudited) | ||||||||
| Accrued compensation for LiMing Yung, Chief Financial Officer | $ | $ | ||||||
| Accrued compensation for Xinrong Zhuo, Chief Executive Officer | ||||||||
| Advance from Xinrong Zhuo, Chief Executive Officer | ||||||||
Due to Hong Long | ||||||||
| $ | $ | |||||||
The balance of accrued compensation represents accrued compensation for the CEO and CFO.
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.
The majority of due to
Hong Long represents the prepayment made to shipbuilding company for the modification and rebuilding of the 20 vessels in 2021 by Hong
Long on behalf of the Company, with an annual interest rate of
Operating lease
On July 31, 2012, the Company entered into a lease
for office space with Ping Lin, the spouse of the Company’s CEO (the “Office Lease”).
For the three months ended September 30, 2021
and 2020, rent expense related to the Office Lease amounted to $
| Twelve-month period Ending September 30: | Amount | |||
| 2022 | $ | |||
| 2023 | ||||
| 2024 | ||||
22
PINGTAN MARINE ENTERPRISE LTD. AND SUBSIDIARIES
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(IN U.S. DOLLARS)
SEPTEMBER 30, 2021
NOTE 10 – RELATED PARTIES TRANSACTIONS (continued)
Purchases from related parties
During the three and nine months ended September 30, 2021 and 2020, purchases from related parties were as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||
| Purchase of fuel, fishing nets and other on board consumables | ||||||||||||||||
| Fujian Jingfu Marine Fishery Development Co., Ltd | $ | $ | $ | $ | ||||||||||||
| From Zhiyan Lin | ||||||||||||||||
| Global Deep Ocean | ||||||||||||||||
| Fuzhou Honglong Ocean Fishery Co., Ltd. | ||||||||||||||||
| Purchase of leasing | ||||||||||||||||
| Ping Lin | ||||||||||||||||
| Purchase of vessel maintenance services, docking and freight | ||||||||||||||||
| Huna Lin | ||||||||||||||||
| Purchase of inventory for sale | ||||||||||||||||
| Global Deep Ocean | $ | $ | $ | $ | ||||||||||||
23
PINGTAN MARINE ENTERPRISE LTD. AND SUBSIDIARIES
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(IN U.S. DOLLARS)
SEPTEMBER 30, 2021
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 maturity. The Company is in compliance with all debt covenants. At September 30, 2021 and December 31, 2020, short-term bank loans consisted of the following:
| September 30, 2021 | December 31, 2020 | |||||||
| (Unaudited) | ||||||||
| $ | $ | |||||||
| $ | $ | |||||||
24
PINGTAN MARINE ENTERPRISE LTD. AND SUBSIDIARIES
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(IN U.S. DOLLARS)
SEPTEMBER 30, 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 September 30, 2021 and December 31, 2020, long-term bank loans consisted of the following:
| September 30, 2021 | December 31, 2020 | |||||||
| (Unaudited) | ||||||||
| $ | $ | |||||||
| Total long-term bank loans | $ | $ | ||||||
| Less: current portion | ( | ) | ( | ) | ||||
| Long-term bank loans, non-current portion | $ | $ | ||||||
25
PINGTAN MARINE ENTERPRISE LTD. AND SUBSIDIARIES
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(IN U.S. DOLLARS)
SEPTEMBER 30, 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 September 30, | Principal | |||
| 2022 | $ | |||
| 2023 | ||||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| Thereafter | ||||
| $ | ||||
| Less: current portion | ( | ) | ||
| Long-term liability | $ | |||
The weighted average interest rate for short-term
bank loans was approximately
The weighted average interest rate for long-term
bank loans was approximately
For the three months ended September 30, 2021
and 2020, interest expense related to bank loans amounted to $
NOTE 12 – ACCRUED LIABILITIES AND OTHER PAYABLES
At September 30, 2021 and December 31, 2020, accrued liabilities and other payables consisted of the following:
| September 30, 2021 | December 31, 2020 | |||||||
| (Unaudited) | ||||||||
| Accrued salaries and related benefits | $ | $ | ||||||
| Accrued interest | ||||||||
| Other | ||||||||
| $ | $ | |||||||
26
PINGTAN MARINE ENTERPRISE LTD. AND SUBSIDIARIES
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(IN U.S. DOLLARS)
SEPTEMBER 30, 2021
NOTE 13 – SHARE CAPITAL
Preferred shares
| Number of shares | Total | |||||||
| Balance, December 31, 2020 | $ | |||||||
| Issuance of preferred shares1 | ||||||||
| Conversion of preferred shares to ordinary shares | ( | ) | ( | ) | ||||
| Redemption of preferred shares2 | ( | ) | ( | ) | ||||
| Balance, September 30, 2021 | $ | |||||||
| 1 |
| 2 | |
Ordinary shares
| Number of shares | Total | |||||||
| Balance, December 31, 2020 | $ | |||||||
| Issuance of ordinary shares1 | ||||||||
| Conversion of preferred shares to ordinary shares | ||||||||
| Repurchase of ordinary shares2 | ( | ) | ( | ) | ||||
| Balance, September 30, 2021 | $ | |||||||
| 1 | ||
| 2 |
NOTE 14 – CERTAIN RISKS AND CONCENTRATIONS
Credit risk
At September 30, 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
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| Customer | 2021 | 2020 | 2021 | 2020 | ||||||||||||
| A | % | % | ||||||||||||||
| B | % | % | ||||||||||||||
| C | % | % | ||||||||||||||
| D | % | % | ||||||||||||||
| E | % | % | ||||||||||||||
| F | % | % | ||||||||||||||
| * | less than |
27
PINGTAN MARINE ENTERPRISE LTD. AND SUBSIDIARIES
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(IN U.S. DOLLARS)
SEPTEMBER 30, 2021
NOTE 14 – CERTAIN RISKS AND CONCENTRATIONS (continued)
Major suppliers
The following table
sets forth information as to each supplier that accounted for
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| Supplier | 2021 | 2020 | 2021 | 2020 | ||||||||||||
| A | % | % | % | % | ||||||||||||
| B | % | % | % | % | ||||||||||||
| C | % | |||||||||||||||
| D | % | |||||||||||||||
| E | % | |||||||||||||||
| F | % | |||||||||||||||
NOTE 15 – COMMITMENTS AND CONTINGENCIES
Severance payments
The Company has employment agreements with certain
employees that provide for severance payments to such employees upon termination of employment under certain circumstances, as defined
in the applicable agreements. The Company has estimated its possible severance payments to be approximately $
Operating lease
See note 10 for related party operating lease commitment.
NOTE 16 – SUBSEQUENT EVENTS
On October
21, 2021, the Company repaid a long-term bank loan of $
On October
21, 2021, the Company received a subsidy of $
On October 22, 2021, the Company
repaid a long-term bank loan of $
On October
22, 2021, the Company received a loan of $
On October
22, 2021, the Company received a subsidy of $
On October 28, 2021, the Company
repaid a long-term bank loan of $
On October
28, 2021, the Company received a loan of $
On October 28, 2021, the
Company repaid a short-term bank loan of $
On October
28, 2021, the Company received a loan of $
On October
28, 2021, the Company received a loan of $
On November 10, 2021, the Company
repaid a short-term bank loan of $
28
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of the results of operations and financial condition of Pingtan Marine Enterprise Ltd. for the three and nine months ended September 30, 2021 and 2020 should be read in conjunction with the Pingtan Marine Enterprise Ltd. unaudited financial statements and the notes thereto contained elsewhere in this report. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth under the Risk Factors, Special Note Regarding Forward-Looking Statements and Business sections in our Form 10-K, as amended, for the fiscal year ended December 31, 2020 filed with the Securities and Exchange Commission on October 13, 2021. We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions to identify forward-looking statements.
Unless otherwise indicated, references to the “Company,” “us” or “we” refer to Pingtan Marine Enterprise Ltd. and its subsidiaries. All amounts expressed below are in US dollars.
Overview
We are a marine enterprise group primarily engaging in ocean fishing through our operating subsidiary, Fujian Provincial Pingtan County Ocean Fishing Group Co., Ltd., or Pingtan Fishing, which is organized in the People’s Republic of China (“PRC”). We carry out marine fishing operations in the international waters and the approved waters in access fishing countries with many of our owned vessels or licensed vessels for which we have exclusive operating license rights. We provide high quality seafood to a diverse group of customers including distributors, restaurant owners and exporters in the PRC.
We initially had a fishing fleet of 40 vessels in 2013. By June 2015, we expanded to 135 vessels through construction of 3 new vessels, the purchase of 72 licensed vessels and the acquisition of 20-year exclusive operation rights to 20 vessels. Our fishing fleet consists of vessels of diversified fishing methods, including trawling, drift netting, light luring seine, long line fishing and squid jigging.
From 2017 to 2018, we purchased 2 refrigerated transport vessels and 4 squid jigging vessels. Of those vessels, 2 transport vessels and 2 squid jigging vessels finished renovation in subsequent years and were deployed to international waters. The remaining 2 vessels’ ownership transfer was not yet completed, but the Company is entitled to 100% of the operations and net profits (losses) from the vessels.
29
In April 2018, 27 vessels received approval from the MARA to operate in the international waters after the completion of modification and rebuilding projects. The 27 fishing vessels were modified and rebuilt into 20 squid jigging vessels and 7 light luring seine vessels and have been deployed to sea for operation in late 2018 and early 2019.
In 2019, the Company had 30 fishing vessels that received approval from the MARA to operate in the international waters after completion of modification and rebuilding. The 30 vessels were rebuilt and modified into 15 squid jigging vessels and 15 seine vessels. The renovation of the 30 vessels was completed in 2019 and these vessels were deployed to international waters for operation.
In 2020, the Company had 11 fishing vessels that received approval from the MARA to operate in the international waters after completion of modification and rebuilding. The 11 vessels were rebuilt and modified into 10 squid jigging vessels and 1 refrigerated transport vessel. The renovation of the 11 vessels was completed in 2020 and these vessels were deployed to international waters for operation.
In 2021, 20 vessels had been completed the modification and rebuilding in batches.
As of September 30, 2021, we owned 51 squid jigging vessels, 26 trawlers, 25 seine vessels, 13 drifters, 4 longline fishing vessels, and 3 transport vessels and had exclusive operating license rights to 20 seine vessels. Additionally, 1 krill fishing vessel was in the building stage.
Among the 142 vessels, 100 were located in international waters, 12 were located in the Bay of Bengal in India, 13 were located in the PRC, 17 were located in the Arafura Sea in Indonesia and not in operation.
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. As of September 30, 2021, the Company was in further negotiations with the shipbuilding company regarding the details of the return of the prepaid shipbuilding payments.
We catch nearly 30 different species of fish, including squid, ribbon fish, croaker fish and cuttle fish. All of our catch is shipped back to the PRC. We arrange chartered transportation ships to deliver frozen stocks to cold storage warehouses located in one of the PRC’s largest seafood trading centers, the MaWei Seafood Market in Fujian Province.
We derive our revenue primarily from the sale of frozen seafood products. We sell our products directly to customers, including seafood processors, distributors, restaurant owners and exporters. Most of our customers have long-term, cooperative relationships with us. Our existing customers also introduce new customers to us from time to time. In July 2017, we started strategic cooperation with an e-commerce platform to sell our fish products directly to consumers online. Based on past experience, demand for seafood products is the highest from December to January, during the Chinese New Year. We believe that our profitability and growth are dependent on our ability to deploy our vessels to new fishing grounds and our ability to expand our customer base.
30
Significant factors affecting our results of operations
| ● |
COVID-19 pandemic: In December 2019, a novel strain of coronavirus (COVID-19) surfaced in the PRC. In reaction to this outbreak, many provinces and municipalities in the PRC activated the highest Level-I Response to the emergency public health incident. As a result, business activities in the PRC were significantly affected.
Emergency quarantine measures and travel restrictions have had a significant impact on many sectors across the PRC, which has also adversely affected our operations. To reduce the impact on our production and operations, we implemented certain safety measures to allow us to gradually resume work in mid-February of 2020. For the employees who left Fuzhou during the Spring Festival holiday and could not return to Fuzhou as scheduled, or those who could only resume work after satisfying the 14-day quarantine requirement, we provided paid leave. Since resuming work in mid-February of 2020, we have been using a shift system and adopted additional health and safety procedures to protect our employees. With these measures, we were able to maintain sales and operations from mid-February to mid-March. On March 23, 2020, we resumed normal operations and are conducting business as usual with health and safety procedures to protect employees. Management is focused on mitigating the effects of COVID-19 on our business operations while protecting the employees’ health and safety. We continue to actively monitor the situation and may take further actions that alter our business operations, as may be required by local authorities or that we determine are in the best interests of our employees, customers, partners, suppliers and other stakeholders.
Some of our customers are fish processing plants that export processed fish products to foreign countries. These customers reduced or postponed their purchases from us in the initial stage of the pandemic, but since the middle of the second quarter of 2020, they have adjusted their business strategies in relation to exportation or domestic sale. Because of the reduction or postponement, our unit selling prices decreased, our inventory levels increased and our accounts receivables were not timely paid as anticipated. |
|
The COVID-19 pandemic continues to cause major disruptions to businesses and markets worldwide as the virus spreads or a resurgence in certain jurisdictions. The effects of the outbreak are still evolving, and the ultimate severity and duration of the pandemic and the implications on global economic conditions remains uncertain. Therefore, the extent of the impact of the pandemic on our financial condition and results of operations is still highly uncertain and will depend on future developments, such as the ultimate duration and scope of the outbreak, its impact on our customers and exporters, how quickly normal economic conditions, operations, and the demand for our products can resume and whether the pandemic leads to recessionary conditions in the PRC, United States, or globally.
While we anticipate that our results of operations will continue to be impacted by this pandemic for the remainder of the year, we are unable to reasonably estimate the extent of the impact on our full-year results of operations, our liquidity or our overall financial position. |
| ● | Governmental policies: Fishing is a highly regulated industry and our operations require licenses and permits. Our ability to obtain, sustain or renew such licenses and permits on acceptable terms is subject to changes in regulations and policies and is at the discretion of the applicable government agencies. Our inability to obtain, or loss or denial of extensions to, any of our applicable licenses or permits could hamper our ability to generate revenue from our operations. |
31
| ● | Resource & environmental factors: Our fishing expeditions are based in the EEZ, and the international waters. Any earthquake, tsunami, adverse weather or oceanic conditions, or other disasters in such areas may result in disruption to our operations and could adversely affect our sales. Adverse weather conditions such as storms, cyclones and typhoons or cataclysmic events may also decrease the volume of fish catches or may even hamper our operations. Our fishing volumes may also be adversely affected by major climatic disruptions such as El Niño, which in the past has caused significant decreases in the seafood catch worldwide. Besides weather patterns, other unpredictable factors, such as fish migration, may also impact our harvest volume. |
| ● | Fluctuation on fuel prices: Our operations may be adversely affected by fluctuations in fuel prices. Changes in fuel prices may result in increases in the selling prices of our products, and may, in turn, adversely affect our sales volume, revenue and operating profit. |
| ● | Competition: We engage in operation in the EEZ, and the international waters. Competition within our designated fishing areas is not currently significant as the region is not overfished or regulated by government limits on the number of vessels that are allowed to fish in the territories; however, there is no guarantee that competition will not become more intense. Competition in the consumer market in the PRC, however, is high as fish compete with other sources of protein. We also compete with other fishing companies that offer similar and varied products. There is significant demand for fish in the Chinese market. We believe our catch appeals to a wide segment of consumers because of the low-price points of our products. |
| ● |
Fishing licenses: Each of our fishing vessels requires approval from the MARA to carry out ocean fishing projects in international waters and foreign territories. Different countries may have different policies for foreign cooperation in fisheries. Some countries require fishing licenses issued by the accessed country; some others may require establishment of a joint venture or sole proprietorship to obtain local licenses.
In early December 2014, the Indonesian government introduced a six-month moratorium on issuing new fishing licenses and renewals so that the country’s Ministry of Maritime Affairs and Fisheries (“MMAF”) could combat illegal fishing and rectify ocean fishing order. In February 2015, we ceased all fishing operations in Indonesia. During the moratorium, we were informed that the fishing licenses of four vessels operated through PT. Avona, one of the local companies through which we conduct business in Indonesia, and the fishery business license of PT. Dwikarya, the other local company through which we conduct business in Indonesia, were revoked. Although, in November 2015, the Indonesian government announced that the moratorium had concluded, the MMAF has neither implemented new fishing policies nor resumed the license renewal process. As a result of the above, all local fishing licenses of our vessels in Indonesia are presently inactive. In 2020, we recognized an impairment loss of approximately $34,566,000 for the 37 vessels in Indonesian waters. See Note 2 for discussion of impairment of long-lived assets.
In October 2016, we deployed 13 vessels, which were granted fishing licenses by the Ministry of Agriculture and Fisheries of the Democratic Republic of Timor-Leste (“MAF”), to operate in the Indo-Pacific waters of the country. In September 2017, we were informed that the fishing licenses of these 13 vessels were suspended and the vessels were docked in the port by the MAF. The 13 vessels have returned to the PRC. |
32
RESULTS OF OPERATIONS
Comparison of results of operations for the three and nine months ended September 30, 2021 and 2020
Revenue
We catch different species of fish, ship them back to China and sell the catches to distributors and retailers by acting as a wholesaler. Selling of marine catch and trading of shrimps are our product lines. The product type, contractual price and quantities are identified in contracts. We do not offer promotional payments, customer coupons, rebates or other cash redemption offers to our customers, and we do not accept returns from customers. Our revenues are recorded at a point in time. All of our operations are considered by the Company’s Chief Operating Decision Maker to be aggregated in one reportable operating segment and our revenue is disaggregated by product type in terms of species of fish sold pursuant to FASB ASC 606-10-55-91(a).
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 when 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.
For the three months ended September 30, 2021 and 2020, our revenue by species of fish was as follows (dollars in thousands, except for average price):
| Three Months Ended September 30, 2021 | ||||||||||||||||
| Revenue | Volume (KG) | Average price | Percentage of revenue | |||||||||||||
| Argentina squid | $ | 9,587 | 2,960,703 | $ | 3.24 | 26.6 | % | |||||||||
| Indian Ocean squid | 7,872 | 8,108,747 | 0.97 | 21.8 | % | |||||||||||
| Sardine | 4,262 | 10,240,299 | 0.42 | 11.8 | % | |||||||||||
| South American white shrimp (whole) | 3,584 | 688,152 | 5.21 | 9.9 | % | |||||||||||
| Chub mackerel | 2,915 | 3,935,434 | 0.74 | 8.1 | % | |||||||||||
| Other | 7,884 | 4,942,466 | 8.35 | 21.8 | % | |||||||||||
| Total | $ | 36,104 | 30,875,800 | $ | 1.17 | 100.0 | % | |||||||||
| Three Months Ended September 30, 2020 | ||||||||||||||||
| Revenue | Volume (KG) | Average price | Percentage of revenue | |||||||||||||
| Indian Ocean squid | $ | 6,071 | 7,285,134 | $ | 0.83 | 39.3 | % | |||||||||
| Peru squid | 4,685 | 3,382,517 | 1.39 | 30.3 | % | |||||||||||
| Chub mackerel | 981 | 1,030,773 | 0.95 | 6.4 | % | |||||||||||
| Tuna | 662 | 184,867 | 3.58 | 4.3 | % | |||||||||||
| Sardine | 649 | 1,743,914 | 0.37 | 4.2 | % | |||||||||||
| Others | 2,400 | 1,070,101 | 2.24 | 15.5 | % | |||||||||||
| Total | $ | 15,448 | 14,697,306 | $ | 1.05 | 100.0 | % | |||||||||
33
For the nine months ended September 30, 2021 and 2020, our revenue by species of fish was as follows (dollars in thousands, except for average price):
| Nine Months Ended September 30, 2021 | ||||||||||||||||
| Revenue | Volume (KG) | Average price | Percentage of revenue | |||||||||||||
| Argentina squid | $ | 22,176 | 6,872,403 | $ | 3.23 | 21.9 | % | |||||||||
| Indian Ocean squid | 18,574 | 18,968,099 | 0.98 | 18.3 | % | |||||||||||
| South American white shrimp (whole) | 16,449 | 3,251,646 | 5.06 | 16.2 | % | |||||||||||
| Peru squid | 13,984 | 10,519,823 | 1.33 | 13.8 | % | |||||||||||
| Chub mackerel | 7,934 | 8,145,864 | 0.97 | 7.8 | % | |||||||||||
| Others | 22,159 | 24,086,521 | 0.92 | 22.0 | % | |||||||||||
| Total | $ | 101,276 | 71,844,356 | $ | 1.41 | 100.0 | % | |||||||||
| Nine Months Ended September 30, 2020 | ||||||||||||||||
| Revenue | Volume (KG) | Average price | Percentage of revenue | |||||||||||||
| Indian Ocean squid | $ | 25,892 | 30,557,785 | $ | 0.85 | 46.1 | % | |||||||||
| Peru squid | 9,523 | 6,436,282 | 1.48 | 16.9 | % | |||||||||||
| Chub mackerel | 4,996 | 5,585,977 | 0.89 | 8.9 | % | |||||||||||
| Cuttle fish | 4,554 | 1,024,960 | 4.44 | 8.1 | % | |||||||||||
| Croaker fish | 3,367 | 1,861,511 | 1.81 | 6.0 | % | |||||||||||
| Others | 7,886 | 4,524,509 | 1.74 | 14.0 | % | |||||||||||
| Total | $ | 56,218 | 49,991,024 | $ | 1.12 | 100.0 | % | |||||||||
For the three months ended September 30, 2021, we had revenue of $36,103,674, as compared to revenue of $15,448,083 for the three months ended September 30, 2020, an increase of $20,655,591, or 133.7%. Sales volumes in the three months ended September 30, 2021 increased by 110.1% to 30,875,800 kg from 14,697,306 kg in the three months ended September 30, 2020. Average unit sale price increased 11.4% in the three months ended September 30, 2021 as compared to the three months ended September 30, 2020.
For the nine months ended September 30, 2021, we had revenue of $101,275,967, as compared to revenue of $56,218,216 for the nine months ended September 30, 2020, an increase of $45,057,751, or 80.1%. Sales volumes in the nine months ended September 30, 2021 increased 43.7% to 71,844,356 kg from 49,991,024 kg in the nine months ended September 30, 2020. Average unit sale price increased 25.9% in the nine months ended September 30, 2021 as compared to the nine months ended September 30, 2020.
For the three and nine months ended September 30, 2021, our increase in revenue was primarily attributable to the different sales mix, average unit sale price increased, and increase in sales volume as more vessels were in operation.
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Cost of revenue
Our cost of revenue primarily consists of the cost of the inventory sold which includes fuel cost, labor cost, depreciation, freight and other overhead costs and other costs. Others cost include the reserve for inventories and other miscellaneous costs. Fuel cost, labor cost and depreciation generally accounted for the majority of our cost of revenue for the three months and nine months ended September 30, 2021 and 2020. The following table sets forth our cost of revenue information, both in amounts and as a percentage of revenue for the three months ended September 30, 2021 and 2020 (dollars in thousands):
| Three Months Ended September 30, | ||||||||||||||||||||||||
| 2021 | 2020 | |||||||||||||||||||||||
| Amount | % of cost of revenue | % of revenue | Amount | % of cost of revenue | % of revenue | |||||||||||||||||||
| Fuel cost | $ | 18,679 | 46.5 | % | 51.7 | % | $ | 8,418 | 61.1 | % | 54.5 | % | ||||||||||||
| Purchase cost | 4,971 | 12.4 | % | 13.8 | % | - | - | - | ||||||||||||||||
| Labor cost | 5,561 | 13.8 | % | 15.4 | % | 2,134 | 15.5 | % | 13.8 | % | ||||||||||||||
| Freight | 4,647 | 11.6 | % | 12.9 | % | 1,165 | 8.4 | % | 7.5 | % | ||||||||||||||
| Depreciation | 4,466 | 11.1 | % | 12.4 | % | 1,436 | 10.4 | % | 9.3 | % | ||||||||||||||
| Spare parts | 1,639 | 4.1 | % | 4.5 | % | 656 | 4.8 | % | 4.2 | % | ||||||||||||||
| Maintenance fee | 200 | 0.5 | % | 0.6 | % | 4 | 0.0 | % | 0.0 | % | ||||||||||||||
| Other | 2 | 0.0 | % | 0.0 | % | (25 | ) | (0.2 | )% | (0.2 | )% | |||||||||||||
| Total cost of revenue | $ | 40,165 | 100.0 | % | 111.3 | % | $ | 13,788 | 100.0 | % | 89.1 | % | ||||||||||||
The following table sets forth our cost of revenue information, both in amounts and as a percentage of revenue, for the nine months ended September 30, 2021 and 2020 (dollars in thousands):
| Nine Months Ended September 30, | ||||||||||||||||||||||||
| 2021 | 2020 | |||||||||||||||||||||||
| Amount | % of cost of revenue | % of revenue | Amount | % of cost of revenue | % of revenue | |||||||||||||||||||
| Fuel cost | $ | 49,294 | 46.3 | % | 48.7 | % | $ | 29,168 | 62.5 | % | 51.9 | % | ||||||||||||
| Purchase cost | 22,606 | 21.2 | % | 22.3 | % | - | - | - | ||||||||||||||||
| Labor cost | 13,169 | 12.4 | % | 13.0 | % | 6,926 | 14.8 | % | 12.3 | % | ||||||||||||||
| Depreciation | 9,402 | 8.8 | % | 9.3 | % | 4,417 | 9.5 | % | 7.9 | % | ||||||||||||||
| Freight | 8,398 | 7.9 | % | 8.3 | % | 4,378 | 9.4 | % | 7.8 | % | ||||||||||||||
| Spare parts | 3,084 | 2.9 | % | 3.0 | % | 1,197 | 2.6 | % | 2.1 | % | ||||||||||||||
| Maintenance fee | 392 | 0.4 | % | 0.4 | % | 20 | 0.0 | % | 0.0 | % | ||||||||||||||
| Other | 187 | 0.1 | % | 0.2 | % | 536 | 1.2 | % | 1.0 | % | ||||||||||||||
| Total cost of revenue | $ | 106,532 | 100.0 | % | 105.2 | % | $ | 46,642 | 100.0 | % | 83.0 | % | ||||||||||||
Cost of revenue for the three months ended September 30, 2021 was $40,165,352, representing an increase of $26,377,831, or 191.3%, as compared to $13,787,521 for the three months ended September 30, 2021. Cost of revenue for the nine months ended September 30, 2021 was $106,530,518, representing an increase of $59,888,634, or 128.4%, as compared to $46,641,884 for the nine months ended September 30, 2020. The increase was primarily attributable to more vessels being in designated waters, which drove up refueling costs and other related costs of revenue. Purchase cost represents purchase cost of fishery products incurred by Fujian Heyue. As an effort to further penetrate fishery products market, Fujian Heyue commenced trading of fishery products in the first quarter of year 2021.
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Gross profit
Our gross profit is affected primarily by decreases in average unit sale price and changes in production costs. Fuel cost, depreciation, and labor cost together account for about 70.9% and 87.0% of cost of revenue for the three months ended September 30, 2021 and 2020, respectively. Fuel cost, depreciation, and labor cost together account for about 67.5% and 86.8% of cost of revenue for the nine months ended September 30, 2021 and 2020, respectively. The fluctuation of fuel price and change in labor cost may significantly affect our cost of inventory and gross profit.
The following table sets forth information as to our revenue, cost of revenue, gross profit and gross margin for the three and nine months ended September 30, 2021 and 2020.
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Revenue | $ | 36,103,674 | $ | 15,448,083 | $ | 101,275,967 | $ | 56,218,216 | ||||||||
| Cost of revenue | $ | 40,165,352 | $ | 13,787,521 | $ | 105,497,389 | $ | 46,641,884 | ||||||||
| Gross (loss) profit | $ | (4,061,678 | ) | $ | 1,660,562 | $ | (4,221,422 | ) | $ | 9,576,332 | ||||||
| Gross margin | (11.3 | )% | 10.7 | % | (5.2 | )% | 17.0 | % | ||||||||
Gross loss for the three months ended September 30, 2021 was $4,061,678, representing a change of $5,722,240, or 344.6%, as compared to gross profit of $1,660,562 for the three months ended September 30, 2020. Gross loss for the nine months ended September 30, 2021 was $5,254,551, representing a change of $14,830,883, or 154.9%, as compared to gross profit of $9,576,332 for the nine months ended September 30, 2020. The decrease was due to the increase in our unit production cost of fish.
Gross margin decreased to (11.3)% for the three months ended September 30, 2021 from 10.7% for the three months ended September 30, 2020. Gross margin decreased to (5.2)% for the nine months ended September 30, 2021 from 17.0% for the nine months ended September 30, 2020. The decrease in gross margin was primarily attributable to more vessels were designated waters, which drove up refueling costs and other related costs of revenue and the purchase cost of fishery products.
Selling expenses
Our selling expense mainly includes shipping and handling fees, insurance, customs clearance charge, storage fees and advertising expenses. Our sales activities are conducted through direct selling by our internal sales staff. Because of the strong demand for our products and services, we typically do not aggressively market and distribute our products.
Selling expense amounted to $1,976,187 for the three months ended September 30, 2021, as compared to $1,333,927 for the three months ended September 30, 2020, a decrease of $642,260, or 48.1%. Selling expense amounted to $5,112,982 for the nine months ended September 30, 2021, as compared to $3,282,097 for the nine months ended September 30, 2020, an increase of $1,830,885, or 55.8%. Selling expense as a percentage of revenue for the three months ended September 30, 2021 decreased to 5.5% from 8.6% for the same period in 2020. Selling expense as a percentage of revenue for the nine months ended September 30, 2021 decreased to 5.0% from 5.8% for the same period in 2020. Selling expense for the three and nine months ended September 30, 2021 and 2020 consisted of the following:
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Insurance | $ | 615,978 | $ | 471,163 | $ | 1,913,245 | $ | 1,301,969 | ||||||||
| Storage fees | 584,456 | 450,554 | 1,566,357 | 871,294 | ||||||||||||
| Customs clearance charge | 365,209 | 324,824 | 977,061 | 358,035 | ||||||||||||
| Shipping and handling fees | 213,891 | 35,397 | 258,311 | 356,490 | ||||||||||||
| Adverting | 14,927 | - | 14,927 | - | ||||||||||||
| Other | 181,726 | 51,989 | 383,081 | 394,309 | ||||||||||||
| $ | 1,976,187 | $ | 1,333,927 | $ | 5,112,982 | $ | 3,282,097 | |||||||||
| ● | For the three months ended September 30, 2021, insurance increased by $144,815, or 30.7%, as compared to the three months ended September 30, 2020. For the nine months ended September 30, 2021, insurance increased by $611,276, or 47.0%, as compared to the nine months ended September 30, 2020. The change was mainly attributable to the different insured fishing vessels mix. |
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| ● | For the three months ended September 30, 2021, storage fees increased by $133,902, or 29.7%, as compared to the three months ended September 30, 2020. For the nine months ended September 30, 2021, storage fees increased by $695,063, or 79.8%, as compared to the nine months ended September 30, 2020. The increase was mainly attributable to larger warehouses being rented as more fish were delivered for inventory. |
| ● | For the three months ended September 30, 2021, customs clearance charges increased by $40,385, or 12.4%, as compared to the three months ended September 30, 2020. For the nine months ended September 30, 2021, customs clearance charge increased by $619,026, or 172.9%, as compared to the nine months ended September 30, 2020. The change was mainly attributable to the number of customs declarations. | |
| ● | For the three months ended September 30, 2021, shipping and handling fees increased by $178,494, or 504.3%, as compared to the three months ended September 30, 2020. For the nine months ended September 30, 2021, shipping and handling fees decreased by $98,179, or 27.5%, as compared to the nine months ended September 30, 2020. The change was mainly attributable to the number of deliveries from ports to the warehouse in China. |
| ● | Other miscellaneous selling expense for the three months ended September 30, 2021 increased by $129,737, or 249.5%, as compared to the three months ended September 30, 2020. Other miscellaneous selling expense for the nine months ended September 30, 2021 decreased by $11,228, or 2.8%, as compared to the nine months ended September 30, 2020. |
General and administrative expense
General and administrative expense amounted to $2,174,063 for the three months ended September 30, 2021, as compared to $1,583,800 for the three months ended September 30, 2020, an increase of $590,263, or 37.3%. General and administrative expense amounted to $6,050,924 for the nine months ended September 30, 2021, as compared to $5,150,042 for the nine months ended September 30, 2020, an increase of $900,882, or 17.5%. General and administrative expense for the three and nine months ended September 30, 2021 and 2020 consisted of the following:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Depreciation | $ | 1,001,961 | $ | 773,812 | $ | 1,146,815 | $ | 2,274,579 | ||||||||
| Professional fees | 452,264 | 272,593 | 2,071,057 | 1,117,925 | ||||||||||||
| Compensation and related benefits | 270,010 | 260,808 | 901,329 | 823,726 | ||||||||||||
| Bad debt expense | 246,106 | 188,293 | 756,464 | 245,498 | ||||||||||||
| Rent and related administrative service charge | 117,778 | 21,086 | 355,220 | 257,787 | ||||||||||||
| Travel and entertainment | 41,384 | 26,687 | 222,236 | 35,560 | ||||||||||||
| Other | 44,559 | 40,521 | 597,802 | 394,967 | ||||||||||||
| $ | 2,174,063 | $ | 1,583,800 | $ | 6,050,924 | $ | 5,150,042 | |||||||||
| ● | We recorded the depreciation in relation to vessels that are not operating as general and administrative expense rather than cost of revenue. For the three months ended September 30, 2021, depreciation expense increased by $228,149, or 29.5%, as compared to the three months ended September 30, 2020. For the nine months ended September 30, 2021, depreciation expense decreased by $1,127,764, or 49.6%, as compared to the nine months ended September 30, 2020. |
| ● | Professional fees, which primarily consist of legal fees, accounting fees, investor relation service charges, valuation service fees and other fees associated with being a public company, for the three months ended September 30, 2021, increased by $179,671, or 65.9%, as compared to the three months ended September 30, 2020. The increase in the three months ended September 30, 2021 was primarily attributable to an increase in accounting fees of approximately $142,000 and an increase in legal fees of approximately $105,000, offset by a decrease in consulting fees of approximately $15,000 and a decrease in investor relations of approximately $51,000. For the nine months ended September 30, 2021, professional fees increased by $953,132, or 85.3%, as compared to the nine months ended September 30, 2020. The increase in the nine months ended September 30, 2021, was primarily attributable to an increase in legal fees of approximately $481,000, an increase in investor relation service charges of approximately $124,000, an increase in accounting fees of approximately $291,808 and an increase in consulting fees of approximately $62,000. |
| ● | Compensation and related benefits increased by $9,202, or 3.5%, for the three months ended September 30, 2021 as compared to the three months ended September 30, 2020. For the nine months ended September 30, 2021, compensation and related benefits increased by $77,603, or 9.4%, as compared to the nine months ended September 30, 2020. |
| ● | For the three months ended September 30, 2021, we recorded bad debt expense of $246,106 as compared to $188,293 for the three months ended September 30, 2020. For the nine months ended September 30, 2021, we recorded bad debt expense of $756,464 as compared to bad debt expense of $245,498 for the nine months ended September 30, 2020. Based on our periodic review of accounts receivable balances, we adjusted the allowance for doubtful accounts after considering management’s evaluation of the collectability of individual receivable balances, including the analysis of subsequent collections, the customers’ collection history, and recent economic events. |
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| ● | Rent and related administrative service charge increased by $96,692, or 458.6%, for the three months ended September 30, 2021 as compared to the three months ended September 30, 2020. For the nine months ended September 30, 2021, rent and related administrative service charge increased by $97,433, or 37.8%, as compared to the nine months ended September 30, 2020. | |
| ● | For the three months ended September 30, 2021, travel and entertainment expense increased by $14,697, or 55.1%, as compared to the three months ended September 30, 2020. For the nine months ended September 30, 2020, travel and entertainment expense increased by $186,676, or 525.0%, as compared to the nine months ended September 30, 2020. The increase was mainly attributable to an increase in travel expense of approximately $15,000 and an increase in entertainment expense of approximately $172,000. |
| ● | Other general and administrative expenses, which primarily consists of communication fees, office supplies, miscellaneous taxes, bank service charges, depreciation, and NASDAQ listing fees. For the three months ended September 30, 2021, other general and administrative expenses increased by $4,038, or 10.0%, as compared to the three months ended September 30, 2020. For the nine months ended September 30, 2021, other general and administrative expense increased by $202,836, or 51.4%, as compared to the nine months ended September 30, 2020. |
Subsidy
The subsidy mainly consists of an incentive granted by the Chinese government to encourage the development of the ocean fishing industry in order to satisfy the demand of natural seafood in the PRC and other miscellaneous subsidies from the Chinese government. For the three months ended September 30, 2021, subsidies increased by $11,843,301, or 266.7%, as compared to the three months ended September 30, 2020. For the nine months ended September 30, 2021, subsidies increased by $7,109,010, or 55.6%, as compared to the nine months ended September 30, 2020. The change was mainly due to the government’s subsidy disbursement schedule.
Impairment
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. We recognized an impairment loss of $495,857 and nil for the three months ended September 30, 2021 and 2020, respectively. We recognized impairment loss of $1,471,223 and nil for the nine months ended September 30, 2021 and 2020, respectively.
Income from operations
As a result of the factors described above, for the three months ended September 30, 2021 income from operations amounted to $7,576,247, as compared to income from operations of $3,183,566 for the three months ended September 30, 2020, a change of $4,392,681, or 138.0%. For the nine months ended September 30, 2021, income from operations amounted to $1,998,149, as compared to income from operations of $13,923,012 for the nine months ended September 30, 2020, a change of $11,924,863, or 85.6%.
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Other income(expense)
Other income(expense) mainly includes interest income from bank deposits, interest expense for short-term and long-term bank borrowings, foreign currency transaction gain (loss), and loss on equity method investment.
For the three months ended September 30, 2021, other expense, net, amounted to $4,706,923 as compared to other expense, net, of $2,401,871 for the three months ended September 30, 2020, an increase of $2,305,052, or 96.0%, which was primarily attributable to an increase in interest expenses of approximately $19,000 as a result of an increase in bank loans, a decrease in interest income of approximately $950,000, an increase in loss on equity method investment of approximately $226,335 and an increase in foreign currency transaction loss of approximately $1,113,000.
For the nine months ended September 30, 2021, other expense, net, amounted to $11,700,581 as compared to other expense, net, of $6,385,621 for the nine months ended September 30, 2020, an increase of $5,314,960, or 83.2%, which was primarily attributable to an increase in interest expense of approximately $1,849,000 as a result of an increase in bank loans, a decrease in interest income of approximately $3,263,148, an increase in loss on equity method investment of approximately $414,000 ,an increase in other expense of approximately $42,000 and an decrease in foreign currency transaction gain of approximately $219,000 offset by an increase in gain from cost method investment of approximately $472,000.
Income taxes
We are exempt from income taxes for income generated from our ocean fishing operations in China for the three and nine months ended September 30, 2021 and 2020.
Net income (loss)
As a result of the factors described above, our net income was $2,869,324 for the three months ended September 30, 2021, as compared to net income of $781,695 for the three months ended September 30, 2020, a change of $2,087,629 or 267.1%. Our net loss was $9,702,432 for the nine months ended September 30, 2021, as compared to net income of $7,537,391 for the nine months ended September 30, 2020, a change of $17,239,823 or 228.7%.
Net income (loss) attributable to ordinary shareholders of the Company
The net income attributable to ordinary shareholders of the Company was $2,584,624, or $0.03 per ordinary share (basic and diluted), for the three months ended September 30, 2021, as compared with a net income attributable to ordinary shareholders of the Company of $689,184, or $0.01 per ordinary share (basic and diluted), for the three months ended September 30, 2020, a change of $1,895,440 or 275.0%.
The net loss attributable to ordinary shareholders of the Company was $9,155,641, or $(0.11) per ordinary share (basic and diluted), for the nine months ended September 30, 2021, as compared with net income attributable to ordinary shareholders of the Company of $6,777,864, or $0.09 per ordinary share (basic and diluted), for the nine months ended September 30, 2020, a change of $15,933,505 or 235.1%.
Foreign currency translation adjustment
Our reporting currency is the U.S. dollar. The functional currency of the Company and Merchant Supreme and Prime Cheer, subsidiaries of the Company, is the U.S. dollar and the functional currency of the Company’s subsidiaries which are incorporated in China is the Chinese Renminbi (“RMB”). The financial statements of our subsidiaries which are incorporated in China are translated to U.S. dollars using period end rates of exchange for assets and liabilities, equity is translated at the historical exchange rates and average rates of exchange (for the period) for revenue, costs, and expenses. Net gains and losses resulting from foreign exchange transactions are included in the consolidated statements of operations and comprehensive income (loss). As a result of foreign currency translations, which are a non-cash adjustment, we reported a foreign currency translation gain of $4,111,818 for the three months ended September 30, 2021, as compared to foreign currency translation gain of $5,700,836 for the three months ended September 30, 2020. We reported a foreign currency translation gain of $3,083,162 for the nine months ended September 30, 2021, as compared to foreign currency translation gain of $3,846,221 for the nine months ended September 30, 2020. This non-cash loss had the effect of increasing/decreasing our reported comprehensive loss/gain and this non-cash gain had the effect of decreasing/increasing our reported comprehensive loss/gain.
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Comprehensive income (loss)
As a result of our foreign currency translation adjustment, we had comprehensive income for the three months ended September 30, 2021 of $6,981,142, as compared to comprehensive income of $6,482,531 for the three months ended September 30, 2020. We had comprehensive loss of $6,619,270 for the nine months ended September 30, 2021, as compared to comprehensive income of $11,383,612 for the nine months ended September 30, 2020.
Cash flows for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020
The following summarizes the key components of our cash flows for the nine months ended September 30, 2021 and 2020:
| Nine Months Ended September 30, | ||||||||
| 2021 | 2020 | |||||||
| Net cash provided by (used in) operating activities | $ | 71,368,706 | $ | (23,838,922 | ) | |||
| Net cash used in investing activities | (100,591,610 | ) | (64,394,531 | ) | ||||
| Net cash provided by financing activities | 44,867,227 | 94,840,528 | ||||||
| Effect of exchange rate on cash | 2,525,721 | 935,670 | ||||||
| Net increase in cash, cash equivalents and restricted cash | $ | 18,170,044 | $ | 7,542,745 | ||||
Net cash flow provided by operating activities was $71,368,706 for the nine months ended September 30, 2021 as compared to net cash flow used in operating activities of $23,838,922 for the nine months ended September 30, 2020, a change of $95,207,628.
| ● | Net cash flow provided by operating activities for the nine months ended September 30, 2021 primarily reflected our net loss of approximately $9,702,432, and the add-back of non-cash items, mainly consisting of depreciation of approximately $12,510,000, bad debt expense of approximately $756,000, reserve for inventories of approximately $740,000, loss on equity method investment of approximately $765,000 and impairment loss of fishing vessels of approximately $1,471,000, and changes in operating assets and liabilities primarily consisting of a decrease in accounts receivable of approximately $9,584,000, a decrease in prepaid expenses - related party of approximately $2,032,000, a decrease in other receivables of approximately $1,309,000, an increase in accounts payable of approximately $20,066,000, an increase in accounts payable-related parties of approximately $401,000, an increase in accrued liabilities and other payables of approximately $8,070,000, an increase in accrued liabilities and other payables-related party of approximately $29,569,000 and an increase in due to related parties of approximately $77,000, offset by an increase in inventories of approximately $5,567,000 due to more fishery products purchased by Fujian Heyue and the slowdown in sales deliveries as a result of strict measures taken by the government to address prevention and control of COVID-19 and an increase in prepaid expenses of approximately $1,350,000. |
| ● | Net cash flow used in operating activities for the nine months ended September 30, 2020, primarily reflected our net income of approximately $7,537,000, and the add-back of non-cash items, mainly consisting of depreciation of approximately $10,617,000, bad debt expense of approximately $245,000, reserve for inventories of approximately $1,712,000, loss on equity method investment of approximately $351,000 and issuance of ordinary shares for professional fees valued at approximately $26,000, and changes in operating assets and liabilities primarily consisting of an increase in accounts receivable of approximately $5,191,000, an increase in inventory of approximately $35,028,000 due to our business expansion resulting from more fishing vessels put in operations, an increase in prepaid expenses of approximately $432,000, an increase in other receivables of approximately $328,000, a decrease in accounts payable of approximately $4,642,000 and a decrease in advance from customers of approximately $619,000, offset by an increase in accounts payable-related parties of approximately $219,000, an increase in accrued liabilities and other payables of approximately $1,554,000 and an increase in due to related parties of approximately $140,000. |
Net cash flow used in investing activities was $100,591,610 for the nine months ended September 30, 2021 as compared to $64,394,531 for the nine months ended September 30, 2020. During the nine months ended September 30, 2021, we made prepayments for long-term assets of approximately $32,038,302 and made payments for purchase of property, plant and equipment of approximately $68,553,308. During the nine months ended September 30, 2020, we made payments for purchase of property, plant and equipment of approximately $93,357,000, offset by proceeds received from proceeds from government subsidies for fishing vessels construction of approximately $28,963,000.
Net cash flow provided by financing activities was $44,867,227 for the nine months ended September 30, 2021 as compared to net cash flow provided by financing activities of $94,840,528 for the nine months ended September 30, 2020. During the nine months ended September 30, 2021, we received proceeds from short-term bank loans of approximately $44,813,000, proceeds from long-term bank loans of approximately $78,720,000, proceeds from issuance of new shares of approximately $8,050,000and proceeds from related party of approximately $1,450,000, offset by the repayments of short-term bank loans of approximately $42,031,000, repayments of long-term bank loans of approximately $44,684,000 and repurchase of series A preferred shares of approximately $1,450,000. During the nine months ended September 30, 2020, we received short-term bank loans of approximately $81,811,000, long-term bank loans of approximately $104,640,000 and repayments of loans issued to related parties of approximately $157,693,000, offset by the repayments of short-term bank loans of approximately $42,908,000, the repayment of long-term bank loans of approximately $46,325,000 and loans issued to related parties of approximately $160,070,000.
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LIQUIDITY AND CAPITAL RESOURCES
Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations and otherwise operate on an ongoing basis. Our principal liquidity demands are based on the capital needs of Pingtan Fishing related to the acquisition or construction of new fishing vessels and continuously upgrading and renovating existing vessels, and our general corporate purposes. We historically relied on cash flow provided by operations and bank loans to supplement our working capital. We also receive government subsidies as a government incentive for encouraging development of the ocean fishing industry. Since the outbreak of COVID-19, we have been paying close attention to the operation of our customers and optimizing the collection of accounts receivable. For new customers, we adopted the policy of receiving payment before pick-up. At September 30, 2021 and December 31, 2020, we had cash balances of approximately $15,756,293 and $691,933, respectively. The significant portion of these funds are located in financial institutions located in the PRC and will continue to be indefinitely reinvested in our operations in the PRC.
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. 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 or (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 per share, subject to certain adjustments. Holders of Series A Preferred Shares are entitled to receive dividends of 8.0% per annum. The net proceeds from this offering were approximately $3.70 million. From January 8, 2021 until May 27, 2021, the purchaser converted Series A Preferred Shares into ordinary shares of the Company pursuant to the terms of the certificate of designation of the Preferred Shares (the “Certificate of Designation”). The Company failed to timely file its Annual Report on Form 10-K for the fiscal year ended December 31, 2020 (as amended, the “10-K”) with the SEC, which ultimately resulted in the registration statement registering the Series A Preferred Shares and ordinary shares sold in the offering no longer being effective, which is a “Triggering Event” as defined in the Certificate of Designation, and triggered certain redemption rights of the purchaser as set forth in 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 for aggregate consideration of $1,450,000.
The following table sets forth a summary of changes in our working capital from December 31, 2020 to September 30, 2021:
| December 31, 2020 to September 30, 2021 | ||||||||||||||||
| September 30, 2021 | December 31, 2020 | Change | Percentage Change | |||||||||||||
| Working capital deficit: | ||||||||||||||||
| Total current assets | $ | 125,561,583 | $ | 114,249,453 | $ | 11,312,130 | 9.9 | % | ||||||||
| Total current liabilities | 227,829,933 | 133,364,200 | 94,465,733 | 70.8 | % | |||||||||||
| Working capital deficit: | $ | (102,268,350 | ) | $ | (19,114,747 | ) | $ | (83,153,603 | ) | 435.0 | % | |||||
Our working capital deficit increased by $83,153,603 to a working capital deficit of $102,268,350 at September 30, 2021 from a working capital deficit of $19,114,747 at December 31, 2020. This increase in the working capital deficit is primarily attributable to a decrease in accounts receivable, net of allowance for doubtful accounts, of approximately $10,123,000, a decrease in prepaid expenses - related party of approximately $2,015,000, a decrease in other receivables of approximately $1,295,000, an increase in accounts payable of approximately $20,137,000, an increase in accounts payable-related parties of approximately $461,000, an increase in short-term bank loans of approximately $3,095,000, an increase in long-term bank loans - current portion approximately of $30,689,000 due to the repayment schedule, an increase in accrued liabilities and other payables of approximately $8,763,000, an increase in lease liability of approximately $367,000 and an increase in due to related party of approximately $30,955,000, offset by an increase in restricted cash of approximately $3,106,000, an increase in inventories, net of reserve for inventories, of approximately $5,229,000 and an increase in prepaid expenses of approximately $1,347,000.
In order to mitigate our liquidity risk, we plan 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 vessel modification and rebuilding projects 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 flows provided by operations, bank loans and related parties’ advances. 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 that management has control over the timing and scope of investments in vessel building and operations in Indian waters and international waters and consideration of opportunities in new fishing territories. Also, in the recent years, the Company has upgraded 68 fishing vessels and 3 transport vessels, the upgraded fishing vessels and transport vessels have greater working capacities and will generate more revenue and cash inflows to the Company. In addition, the Company receives subsidies for modification and rebuilding project and reimbursement of certain operating expenses from the PRC government, as an encouragement for the development of the ocean fishing industry.
41
Contractual Obligations and Off-Balance Sheet Arrangements
Contractual obligations
We have certain fixed contractual obligations and commitments that include future estimated payments. Changes in our business needs, cancellation provisions, changing interest rates, and other factors may result in actual payments differing from the estimates. We cannot provide certainty regarding the timing and amounts of payments. We have presented below a summary of the most significant assumptions used in our determination of amounts presented in the tables, in order to assist in the review of this information within the context of our consolidated financial position, results of operations, and cash flows.
The following tables summarize our contractual obligations as of September 30, 2021 (dollars in thousands), and the effect these obligations are expected to have on our liquidity and cash flows in future periods.
| Payments Due by Period | ||||||||||||||||||||
| Contractual obligations: | Total | Less than 1 year | 1-3 years | 3-5 years | 5+ years | |||||||||||||||
| Related party office lease obligation | $ | 13 | $ | 13 | $ | - | $ | - | $ | - | ||||||||||
| Short-term bank loans (1) | 55,509 | 55,509 | - | - | - | |||||||||||||||
| Office lease obligation | 399 | 399 | - | - | - | |||||||||||||||
| Long-term bank loans | 320,803 | 70,676 | 171,526 | 72,587 | 6,014 | |||||||||||||||
| Total | $ | 376,724 | $ | 126,597 | $ | 171,526 | $ | 72,587 | $ | 6,014 | ||||||||||
| (1) | Historically, we have refinanced these short-term bank loans for an additional term of six months to one year and we expect to continue to refinance these loans upon expiration. |
Off-balance Sheet Arrangements
None.
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 840, including its disclosure requirements, in the comparative periods presented in the year of adoption.
Adoption of the new standard resulted in the recording of right use asset and lease liability of $0.77 million as of January 1, 2019, which primarily relates to our corporate office leases. The standard did not materially impact our condensed consolidated statements of operations or cash flows. Adopting the new standard did not have a material impact on the accounting for leases under which we are the lessee.
In August 2018, the FASB issued ASU 2018-13, “Changes to the Disclosure Requirements for Fair Value Measurement.” This standard eliminates the current requirement to disclose the amount or reason for transfers between level 1 and level 2 of the fair value hierarchy and the requirement to disclose the valuation methodology for level 3 fair value measurements. The standard includes additional disclosure requirements for level 3 fair value measurements, including the requirement to disclose the changes in unrealized gains and losses in other comprehensive income during the period and permits the disclosure of other relevant quantitative information for certain unobservable inputs. The new guidance is effective for interim and annual periods beginning after December 15, 2019. We applied the new standard beginning January 1, 2020. The adoption did not have a material impact on the Company’s consolidated financial statements.
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.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in reports filed or submitted under the Securities Exchange Act of 1934, as amended (“Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed under the Exchange Act is accumulated and communicated to management, including the principal executive and financial officers, as appropriate to allow timely decisions regarding required disclosure. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives.
In connection with the preparation of the quarterly report on Form 10-Q for the quarter ended September 30, 2021, our management, including our principal executive officer and principal financial officer, carried out an evaluation of the effectiveness of our disclosure controls and procedures, which are defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Based on this evaluation, management concluded that our disclosure controls and procedures were not effective as of September 30, 2021 as a result of the material weaknesses in our internal control over financial reporting discussed below.
A material weakness (within the meaning of PCAOB Auditing Standard No. 5) is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. In connection with management’s assessment of our internal control over financial reporting described above, management has identified the material weakness in our internal control over financial reporting as of December 31, 2020 that we did not maintain a sufficient complement of personnel with an appropriate level of experience and training in the application of US GAAP commensurate with our financial reporting requirements. We concluded that our internal control over financial reporting was not effective as of September 30, 2021.
43
Nonetheless, management believes that our consolidated financial statements included in this Quarter Report on Form 10-Q have been prepared in accordance with generally accepted accounting principles. Our Chief Executive Officer and Chief Financial Officer have certified that, based on such officer’s knowledge, the financial statements and other financial information included in this Quarter Report on Form 10-Q fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report. In addition, we are determining a remediation plan for the material weaknesses, which plan is described below.
Material Weakness Remediation Activities
In the fiscal year ended December 31, 2020 and the first and second quarters of 2021, we identified a material weakness in our internal controls over financial reporting as described above.
We are currently in the process of remediating the material weakness and have taken and will continue to take steps that we believe will address the underlying causes of the material weakness. We are committed to continuing to improve our financial organization. The remediation efforts include:
| ● | performing an assessment of our financial organization to determine the sufficiency of resources with the appropriate level of knowledge, experience and training commensurate with our internal controls and executing any recommendations arising from the assessment; |
| ● | evaluating the need for the establishment of effective internal audit functions, however, due to the scarcity of qualified candidates with extensive experience in US GAAP reporting and accounting in the region, we might decide to outsource the function to an outside party; |
| ● | expanding our accounting staff through actively recruiting for open positions and anticipate hiring additional qualified accounting and financial reporting personnel in 2021; and |
| ● | re-training our current accounting staff regarding risks, controls and maintaining adequate evidence. |
While progress has been made to enhance our internal control over financial reporting, we are still in the process of implementing, documenting and testing these processes, procedures and controls. We will continue to devote significant time and attention to these remediation efforts. However, the material weaknesses cannot be considered remediated until the applicable remedial controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.
Changes in Internal Controls over Financial Reporting
The changes in the aforementioned internal controls over financial reporting and the remediation efforts expected to be undertaken have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. No other changes in the Company’s internal control over financial reporting occurred during the fiscal quarter ended September 30, 2021.
44
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, we may be subject to legal proceedings and claims in the ordinary course of business. Except as disclosed below, we are not a party to any litigation the outcome of which, if determined adversely to us, would individually or in the aggregate be reasonably expected to have a material adverse effect on our business, operating results, cash flows or financial condition.
As previously disclosed by the Company, the United States Securities and Exchange Commission (“SEC”) initiated a formal, non-public investigation of the Company, and the SEC issued a request for a variety of documents and other information. The document request relates to a range of matters, including the Company’s public disclosures related to the Company’s delayed filings of its Annual Report on Form 10-K for the fiscal year ended December 31, 2020 and quarterly reports on Form 10-Q for the periods ended March 31, 2021 and June 30, 2021. We are cooperating with the SEC in its investigation. We cannot predict the outcome of this investigation.
ITEM 1A. RISK FACTORS
Factors that could cause our actual results to differ materially from those in this report are described in the Company’s Annual Report on Form 10-K, as amended, for the fiscal year ended December 31, 2020 filed with the SEC on October 13, 2021.
45
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.
Exhibit
| 31.1* | Certification of the Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a). | |
| 31.2* | Certification of the Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a). | |
| 32* | Certification of the Chief Executive Officer and Chief Financial Officer required by Rule 13a-14(b) or Rule 15d- 14(b) and 18 U.S.C. 1350. | |
| 101.INS* | Inline XBRL INSTANCE DOCUMENT | |
| 101.SCH* | Inline XBRL TAXONOMY EXTENSION SCHEMA DOCUMENT | |
| 101.CAL* | Inline XBRL TAXONOMY EXTENSION CALCULATION LINKBASE DOCUMENT | |
| 101.DEF* | Inline XBRL TAXONOMY EXTENSION DEFINITION LINKBASE DOCUMENT | |
| 101.LAB* | Inline XBRL TAXONOMY EXTENSION LABEL LINKBASE DOCUMENT | |
| 101.PRE* | Inline XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE DOCUMENT | |
| 104* | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
| * | Filed herewith |
46
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| PINGTAN MARINE ENTERPRISE LTD. | ||
| (Registrant) | ||
| Date: November 15, 2021 | By: | /s/ Xinrong Zhuo |
| Xinrong Zhuo | ||
|
Chairman of the Board and Chief Executive Officer (Principal Executive Officer) | ||
| Date: November 15, 2021 | By: | /s/ LiMing Yung |
| LiMing Yung | ||
|
Chief Financial Officer (Principal Financial and Accounting Officer) | ||
47
Exhibit 31.1
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Xinrong Zhuo, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q (the “report”) of Pingtan Marine Enterprise Ltd. |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15 (e) and 15d-15 (e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15 (f) and 15d-15 (f)) for the registrant and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: November 15, 2021 | By: | /s/ Xinrong Zhuo |
| Xinrong Zhuo | ||
| Chairman of the Board and | ||
| Chief Executive Officer | ||
| (Principal Executive Officer) |
Exhibit 31.2
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, LiMing Yung, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q (the “report”) of Pingtan Marine Enterprise Ltd; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15 (e) and 15d-15 (e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15 (f) and 15d-15 (f)) for the registrant and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: November 15, 2021 | By: | /s/ LiMing Yung |
| LiMing Yung | ||
| Chief Financial Officer (Principal Financial and Accounting Officer) |
Exhibit 32
Certifications Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350
Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350
The undersigned, Xinrong Zhuo and LiMing Yung, in their capacities as Chief Executive Officer and Chief Financial Officer, respectively, of Pingtan Marine Enterprise Ltd. (the “Registrant”) do each hereby certify with respect to the Quarterly Report on Form 10-Q of the Registrant for the period ended September 30, 2021, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), that, to the best of their knowledge:
| (1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant as of, and for, the periods presented in this Report. |
| Date: November 15, 2021 | /s/ Xinrong Zhuo |
| Xinrong Zhuo | |
| Chairman of the Board and | |
| Chief Executive Officer | |
| (Principal Executive Officer) | |
| Date: November 15, 2021 | /s/ LiMing Yung |
| LiMing Yung | |
| Chief Financial Officer | |
| (Principal Financial and Accounting Officer) |
Consolidated Balance Sheets (Parentheticals) - $ / shares |
Sep. 30, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Statement of Financial Position [Abstract] | ||
| Preferred stock, shares par value (in Dollars per share) | $ 0.001 | $ 0.001 |
| Preferred stock, shares authorized | 5,000,000 | 5,000,000 |
| Preferred stock, shares issued | ||
| Preferred stock, shares outstanding | ||
| Ordinary shares, par value (in Dollars per share) | $ 0.001 | $ 0.001 |
| Ordinary shares, shares authorized | 125,000,000 | 125,000,000 |
| Ordinary shares, shares issued | 85,940,965 | 79,302,428 |
| Ordinary shares, shares outstanding | 85,940,965 | 79,302,428 |
Unaudited Consolidated Statements of Operations and Comprehensive (loss) Income - USD ($) |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
Sep. 30, 2021 |
Sep. 30, 2020 |
|
| Income Statement [Abstract] | ||||
| REVENUE | $ 36,103,674 | $ 15,448,083 | $ 101,275,967 | $ 56,218,216 |
| COST OF REVENUE | 40,165,352 | 13,787,521 | 106,530,518 | 46,641,884 |
| GROSS (LOSS) PROFIT | (4,061,678) | 1,660,562 | (5,254,551) | 9,576,332 |
| OPERATING EXPENSES (INCOME): | ||||
| Selling | 1,976,187 | 1,333,927 | 5,112,982 | 3,282,097 |
| General and administrative | 1,172,102 | 809,988 | 4,904,109 | 2,875,463 |
| General and administrative - depreciation | 1,001,961 | 773,812 | 1,146,815 | 2,274,579 |
| Subsidy | (16,284,032) | (4,440,731) | (19,887,829) | (12,778,819) |
| Impairment loss | 495,857 | 1,471,223 | ||
| Total Operating (INCOME) | (11,637,925) | (1,523,004) | (7,252,700) | (4,346,680) |
| INCOME FROM OPERATIONS | 7,576,247 | 3,183,566 | 1,998,149 | 13,923,012 |
| OTHER INCOME (EXPENSE): | ||||
| Interest income | 23,276 | 973,265 | 72,729 | 3,335,877 |
| Interest (expense) | (4,055,798) | (4,036,524) | (11,720,712) | (9,871,949) |
| Foreign currency transaction gain (loss) | (365,513) | 747,678 | 184,148 | 402,987 |
| Gain from cost method investment | 38 | 764 | 605,216 | 133,517 |
| (Loss) on equity method investment | (308,921) | (82,586) | (765,101) | (351,129) |
| Other income (expense) | (5) | (4,468) | (76,861) | (34,924) |
| Total Other (Expense), net | (4,706,923) | (2,401,871) | (11,700,581) | (6,385,621) |
| INCOME (LOSS) BEFORE INCOME TAXES | 2,869,324 | 781,695 | (9,702,432) | 7,537,391 |
| INCOME TAXES | ||||
| NET INCOME (LOSS) | 2,869,324 | 781,695 | (9,702,432) | 7,537,391 |
| LESS: NET INCOME (LOSS) ATTRIBUTABLE TO THE NON-CONTROLLING INTEREST | 284,700 | 92,511 | (546,791) | 759,527 |
| NET INCOME (LOSS) ATTRIBUTABLE TO ORDINARY SHAREHOLDERS OF THE COMPANY BEFORE PREFERRED DIVIDENDS | 2,584,624 | 689,184 | (9,155,641) | 6,777,864 |
| LESS: PREFERRED SHARE DIVIDENDS | (300,000) | |||
| NET INCOME (LOSS) ATTRIBUTABLE TO ORDINARY SHAREHOLDERS OF THE COMPANY | 2,584,624 | 689,184 | (9,455,641) | 6,777,864 |
| COMPREHENSIVE INCOME (LOSS): | ||||
| NET INCOME (LOSS) | 2,869,324 | 781,695 | (9,702,432) | 7,537,391 |
| OTHER COMPREHENSIVE (LOSS) INCOME | ||||
| Unrealized foreign currency translation gain | 4,111,818 | 5,700,836 | 3,083,162 | 3,846,221 |
| COMPREHENSIVE INCOME (LOSS) | 6,981,142 | 6,482,531 | (6,619,270) | 11,383,612 |
| LESS: COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO THE NON-CONTROLLING INTEREST | 613,410 | 556,889 | (282,897) | 1,075,369 |
| COMPREHENSIVE (LOSS) INCOME ATTRIBUTABLE TO ORDINARY SHAREHOLDERS OF THE COMPANY | $ 6,367,732 | $ 5,925,642 | $ (6,336,373) | $ 10,308,243 |
| NET INCOME (LOSS) PER ORDINARY SHARE ATTRIBUTABLE TO ORDINARY SHAREHOLDERS OF THE COMPANY | ||||
| Basic (in Dollars per share) | $ 0.03 | $ 0.01 | $ (0.11) | $ 0.09 |
| Diluted (in Dollars per share) | $ 0.03 | $ 0.01 | $ (0.11) | $ 0.09 |
| WEIGHTED AVERAGE ORDINARY SHARES OUTSTANDING: | ||||
| Basic (in Shares) | 86,389,548 | 79,071,363 | 83,854,623 | 79,060,490 |
| Diluted (in Shares) | 86,797,148 | 79,071,363 | 83,854,623 | 79,060,490 |
Unaudited Consolidated Statements of Changes in Shareholders’ Equity - USD ($) |
Preferred shares |
Ordinary Shares |
Additional Paid-in Capital |
Retained Earnings (Deficit) |
Statutory Reserve |
Accumulated Other Comprehensive (Loss) |
Non- controlling Interest |
Total |
|---|---|---|---|---|---|---|---|---|
| Balance at Dec. 31, 2019 | $ 79,055 | $ 81,682,599 | $ 54,286,454 | $ 15,748,751 | $ (16,080,908) | $ 19,361,905 | $ 155,077,856 | |
| Balance (in Shares) at Dec. 31, 2019 | 79,055,053 | |||||||
| Net income (loss) | 6,777,864 | 759,527 | 7,537,391 | |||||
| Common stock issuance for professional fee | $ 247 | 363,394 | 363,641 | |||||
| Common stock issuance for professional fee (in Shares) | 247,375 | |||||||
| Foreign currency translation adjustment | 3,530,379 | 315,842 | 3,846,221 | |||||
| Balance at Sep. 30, 2020 | $ 79,302 | 82,045,993 | 61,064,318 | 15,748,751 | (12,550,529) | 20,437,274 | 166,825,109 | |
| Balance (in Shares) at Sep. 30, 2020 | 79,302,428 | |||||||
| Balance at Jun. 30, 2020 | $ 79,055 | 81,682,599 | 60,375,134 | 15,748,751 | (17,786,987) | 19,880,385 | 159,978,937 | |
| Balance (in Shares) at Jun. 30, 2020 | 79,055,053 | |||||||
| Net income (loss) | 689,184 | 92,511 | 781,695 | |||||
| Common stock issuance for professional fee | $ 247 | 363,394 | 363,641 | |||||
| Common stock issuance for professional fee (in Shares) | 247,375 | |||||||
| Foreign currency translation adjustment | 5,236,458 | 464,378 | 5,700,836 | |||||
| Balance at Sep. 30, 2020 | $ 79,302 | 82,045,993 | 61,064,318 | 15,748,751 | (12,550,529) | 20,437,274 | 166,825,109 | |
| Balance (in Shares) at Sep. 30, 2020 | 79,302,428 | |||||||
| Balance at Dec. 31, 2020 | $ 79,302 | 82,045,993 | (18,594,755) | 15,751,712 | (9,568,873) | 15,266,311 | 84,979,690 | |
| Balance (in Shares) at Dec. 31, 2020 | 79,302,428 | |||||||
| Net income (loss) | (9,155,641) | (546,791) | (9,702,432) | |||||
| Issue of series A preferred shares | $ 4,000 | 3,694,273 | 3,698,273 | |||||
| Issue of series A preferred shares (in Shares) | 4,000,000 | |||||||
| Issue of ordinary shares | $ 3,626 | 4,347,617 | 4,351,243 | |||||
| Issue of ordinary shares (in Shares) | 3,625,954 | |||||||
| Dividend payments for preferred shares | $ 295 | 299,705 | (300,000) | |||||
| Dividend payments for preferred shares (in Shares) | 295,218 | |||||||
| Converted Series A Preferred Shares into ordinary shares | $ (3,409) | $ 3,511 | (102) | |||||
| Converted Series A Preferred Shares into ordinary shares (in Shares) | (3,409,078) | 3,510,557 | ||||||
| Repurchase of Preferred Shares | $ (591) | $ (793) | (1,448,616) | (1,450,000) | ||||
| Repurchase of Preferred Shares (in Shares) | (590,922) | (793,192) | ||||||
| Foreign currency translation adjustment | 2,819,268 | 263,894 | 3,083,162 | |||||
| Balance at Sep. 30, 2021 | $ 85,941 | 88,938,870 | (28,050,396) | 15,751,712 | (6,749,605) | 14,983,414 | 84,959,936 | |
| Balance (in Shares) at Sep. 30, 2021 | 85,940,965 | |||||||
| Balance at Jun. 30, 2021 | $ 85,941 | 88,938,870 | (30,635,020) | 15,751,712 | (10,532,713) | 14,370,004 | 77,978,794 | |
| Balance (in Shares) at Jun. 30, 2021 | 85,940,965 | |||||||
| Net income (loss) | 2,584,624 | 284,700 | 2,869,324 | |||||
| Foreign currency translation adjustment | 3,783,108 | 328,710 | 4,111,818 | |||||
| Balance at Sep. 30, 2021 | $ 85,941 | $ 88,938,870 | $ (28,050,396) | $ 15,751,712 | $ (6,749,605) | $ 14,983,414 | $ 84,959,936 | |
| Balance (in Shares) at Sep. 30, 2021 | 85,940,965 |
Description of Business and Organization |
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| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| DESCRIPTION OF BUSINESS AND ORGANIZATION | NOTE 1 – DESCRIPTION OF BUSINESS AND ORGANIZATION
Pingtan Marine Enterprise Ltd. (the “Company” or “PME”), formerly China Growth Equity Investment Limited (“CGEI”), incorporated in the Cayman Islands as an exempted limited liability company, was incorporated as a blank check company on January 18, 2010 with the purpose of directly or indirectly acquiring, through a merger, share exchange, asset acquisition, plan of arrangement, recapitalization, reorganization or similar business combination, an operating business, or control of such operating business through contractual arrangements, that has its principal business and/or material operations located in the People’s Republic of China (“PRC”). In connection with its initial business combination, in February 2013, CGEI changed its name to Pingtan Marine Enterprise Ltd.
On October 24, 2012, CGEI and China Dredging Group Co., Ltd (“CDGC” or “China Dredging”) entered into a Merger Agreement providing for the combination of CGEI and CDGC and on October 24, 2012, CGEI also acquired all of the outstanding capital shares and other equity interests of Merchant Supreme Co., Ltd. (“Merchant Supreme”), a company incorporated on June 25, 2012, in the British Virgin Islands (“BVI”), as per a Share Purchase Agreement. On February 25, 2013, the merger between the Company, CDGC and Merchant Supreme became effective and has been accounted for as a “reverse merger” and recapitalization since the common shareholders of CDGC and Merchant Supreme (i) owned a majority of the outstanding ordinary shares of the Company immediately following the completion of the transaction, and (ii) have significant influence and the ability to elect or appoint or to remove a majority of the members of the governing body of the combined entity. In accordance with the provision of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 805-40, CDGC and Merchant Supreme are deemed the accounting acquirers and the Company is the legal acquirer in the transaction and, consequently, the transaction is treated as a recapitalization of the Company. Accordingly, the assets and liabilities and the historical operations that are reflected in the consolidated financial statements are those of CDGC, Merchant Supreme and their subsidiaries and are recorded at the historical cost basis. The Company’s assets, liabilities and results of operations were consolidated with the assets, liabilities, and results of operations of CDGC, Merchant Supreme and their subsidiaries after the acquisition date of February 25, 2013. Following the completion of the business combination which became effective on February 25, 2013, CDGC and Merchant Supreme became the wholly-owned subsidiaries of the Company. The Company’s ordinary shares, par value $0.001 per share, are listed on The NASDAQ Capital Market under the symbol “PME”.
In order to place increased focus on the fishing business and pursue more effective growth opportunities, the Company decided to exit and sell the specialized dredging services operated by China Dredging. The Company completed the sale of CDGC and its subsidiaries on December 4, 2013.
On February 9, 2015, the Company terminated its existing Variable Interest Entity (“VIE”) agreements, pursuant to an Agreement of Termination dated February 9, 2015, entered into by and among Ms. Honghong Zhuo, Mr. Zhiyan Lin (each a shareholder of Fujian Provincial Pingtan County Ocean Fishing Group Co., Ltd (“Pingtan Fishing”), and together the “Pingtan Fishing’s Shareholders”), Pingtan Fishing and Pingtan Guansheng Ocean Fishing Co., Ltd. (“Pingtan Guansheng”). On February 9, 2015, the Pingtan Fishing’s Shareholders transferred 100% of their equity interest in Pingtan Fishing to Fujian Heyue Marine Fishing Development Co., Ltd. (“Fujian Heyue”), pursuant to an Equity Transfer Agreement dated February 9, 2015, entered into by and among the Pingtan Fishing’s Shareholders, Pingtan Fishing and Fujian Heyue. On February 15, 2015, China Agriculture Industry Development Fund Co., Ltd. (“China Agriculture”) invested 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.
Details of the Company’s subsidiaries that are included in these consolidated financial statements as of September 30, 2021, are as follows:
Fujian Heyue is in the business of shrimp trading, and through its PRC subsidiary, Pingtan Fishing, engages in ocean fishing with its owned and controlled vessels within the Indian Exclusive Economic Zone and the international waters. |
Summary of Significant Accounting Policies |
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| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 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 consolidated 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, as amended, for the year ended December 31, 2020 filed with the Securities and Exchange Commission on October 13, 2021.
Going concern
The Company had a working capital deficit of $102,268,349 as of September 30, 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 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 68 fishing vessels and 3 transport vessels, the deployment of these vessels into operation will generate more revenue and cash inflows to the Company. In addition, the Company receives subsidies for modification and rebuilding projects and is reimbursed for certain operating expenses from government entities, as an encouragement of the development of ocean fishing industry.
Use of estimates
The preparation of the unaudited consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, and the related disclosures at the date of the financial statements and during the reporting period. Actual results could materially differ from these estimates. Significant estimates in the three and nine months ended September 30, 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 China's mainland and Hong Kong. At September 30, 2021 and December 31, 2020, cash balances in China's mainland were $15,716,960 and $468,273, respectively, and cash balances in Hong Kong were $39,333 and $223,660, respectively, and are not fully insured. According to the "Deposit Protection Scheme Regulations" implemented in Hong Kong in September 2006 and the "Deposit Insurance Regulations" implemented in China's mainland in February 2015, if a bank fails, companies can receive up to HK$500,000 and RMB500,000 in compensation, respectively. The Company has not experienced any losses in bank accounts and believes it is not exposed to any risks on its cash in bank accounts.
Restricted cash
Restricted cash consists of cash deposits held by the Export Import Bank of China to secure its bank loans and Hong Long’s short-term bank loans. At September 30, 2021 and December 31, 2020, restricted cash amounted to $13,018,350 and $9,912,666, respectively.
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.
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 creditworthiness and current economic trends. Accounts are written off after exhaustive efforts at collection. The Company only grants credit terms to established customers who are deemed to be financially responsible. Credit periods to customers are within 180 days after customers received the purchased goods. At September 30, 2021 and December 31, 2020, the Company had established, based on a review of its outstanding balances, an allowance for doubtful accounts in the amounts of $1,168,466 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.
A reserve is established when management determines that certain inventories may not be saleable. If inventory costs exceed net realizable value due to obsolescence or quantities in excess of expected demand or price decreases, the Company will record a reserve for the difference between the cost and the market value. These reserves are recorded based on estimates. At September 30, 2021 and December 31, 2020, the Company has a reserve for inventories in the amount of $16,962,451 and $16,125,749, respectively.
Inventory reserves are intended to reduce the carrying value of inventories to their net realizable value. The Company regularly evaluates its ability to realize the value of inventories based on a combination of factors including: 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 to carry out ocean fishing projects in international waters. 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.
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 usually owns 20% to 50% 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 7 for discussion of the equity 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 operation 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:
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 and $183,747 for the three months ended September 30, 2021 and 2020, respectively, in the fishing vessels under construction. The Company capitalized interest of and $1,192,672 for the nine months ended September 30, 2021 and 2020, respectively, in the fishing vessels under construction.
Impairment of long-lived assets
In accordance with ASC Topic 360, the Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable. The Company evaluates the impairment by comparing the carrying amount of the assets to an estimate of future undiscounted cash flows expected to be generated from the use of the assets and their eventual disposition. If the sum of the expected future undiscounted cash flows is less than the carrying amount of the assets, the Company recognizes an impairment loss based on the excess of the carrying amount of the long-lived assets over their fair value. Impairment loss represents the impairment loss on the vessels whenever events or changes in circumstances indicate that the carrying amount of the assets might not be recovered. The Company recognized impairment loss of $495,857 and for the three months ended September 30, 2021 and 2020, respectively. The Company recognized impairment loss of $1,471,223 and for the nine months ended September 30, 2021 and 2020, respectively. During the nine months ended September 30, 2021, the Company assessed the recoverability of 1 new 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.
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 the vessel construction contract termination on the basis that the construction progress 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. As of September 30, 2021, the Company was in negotiations with the shipbuilding company regarding the details of the return of the prepaid shipbuilding payments.
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 being when 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 Topic 606 by species of fish. For the three months ended September 30, 2021 and 2020, our revenue by species of fish was as follows (dollars in thousands, except for average price):
The following tables disaggregate revenues under ASC Topic 606 by species of fish. For the nine months ended September 30, 2021 and 2020, our revenue by species of fish was as follows (dollars in thousands, except for average price):
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 Ministry of Agriculture and Rural Affairs of the PRC (“MARA”). The qualification renews on April 1 of each year. Pingtan Fishing is exempt from income tax derived from its ocean fishing operations in the periods it processes a valid Ocean Fishing Enterprise Qualification Certificate issued by the MARA.
The China’s Enterprise Income Tax Law (“EIT Law”), which went into effect on January 1, 2018, also provides that an enterprise established under the laws of foreign countries or regions but whose “de facto management body” is located in the PRC be treated as a resident enterprise for PRC tax purposes and consequently be subject to the PRC income tax at the rate of 25% for its worldwide income. The Implementing Rules of the new EIT Law merely define the location of the “de facto management body” as “the place where the exercising, in substance, of the overall management and control of the production and business operation, personnel, accounting, properties, etc., of a non-PRC company is located.” On April 22, 2009, the PRC State Administration of Taxation further issued a notice entitled “Notice Regarding Recognizing Offshore-Established Enterprises Controlled by PRC Shareholders as Resident Enterprises Based on Their Place of Effective Management.” Under this notice, a foreign company controlled by a PRC company or a group of PRC companies shall be deemed as a PRC resident enterprise if (i) the senior management and the core management departments in charge of its daily operations mainly function in the PRC; (ii) its financial decisions and human resource decisions are subject to decisions or approvals of persons or institutions in the PRC; (iii) its major assets, accounting books, company seals, minutes and files of board meetings and shareholders’ meetings are located or kept in the PRC; and (iv) more than half of the directors or senior management personnel with voting rights reside in the PRC. Based on a review of surrounding facts and circumstances, the Company does not believe that it is likely that its operations outside of the PRC should be considered a resident enterprise for PRC tax purposes. However, due to limited guidance and implementation history of the EIT Law, should the Company be treated as a resident enterprise for PRC tax purposes, the Company will be subject to PRC tax on worldwide income at a uniform tax rate of 25% retroactive to May 3, 2012.
In addition, Pingtan Fishing is not subject to foreign income taxes for its operations in either India or 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.
The Company prescribes a more-likely-than-not threshold for financial statement recognition and measurement of a tax position taken in the tax return. This interpretation also provides guidance on de-recognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, accounting for income taxes in interim periods and income tax disclosures. As of September 30, 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 amounted to $213,891 and $35,397 for the three months ended September 30, 2021 and 2020, respectively. Shipping and handling costs amounted to $258,311 and $356,490 for the nine months ended September 30, 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 amounted to $1,340,598 and $606,825 for the three months ended September 30, 2021 and 2020, respectively. Employee benefit costs amounted to $2,970,449 and $1,795,348 for the nine months ended September 30, 2021 and 2020, respectively.
Foreign currency translation
The reporting currency of the Company is the U.S. dollar. The functional currency of the Company and Merchant Supreme and Prime Cheer, the Company’s subsidiaries, is the U.S. dollar. The functional currency of Pingtan Guansheng, Fujian Heyue and Pingtan Fishing, the Company’s subsidiaries, is the Chinese Renminbi (“RMB”). For the Company’s subsidiaries Pingtan Guansheng, Fujian Heyue and Pingtan Fishing, whose functional currencies are the RMB, results of operations and cash flows are translated at average exchange rates during the period, assets and liabilities are translated at the unified exchange rate at the end of the period, and equity is translated at historical exchange rates. As a result, amounts relating to assets and liabilities reported on the statements of cash flows may not necessarily agree with the changes in the corresponding balances on the balance sheets. Translation adjustments resulting from the process of translating the local currency financial statements into U.S. dollars are included in determining comprehensive income. The cumulative translation adjustment and effect of exchange rate changes on cash for the nine months ended September 30, 2021 and 2020 was $2,622,688 and $935,670, respectively. Transactions denominated in foreign currencies are translated into the functional currency at the exchange rates prevailing on the transaction dates. Assets and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rates prevailing at the balance sheet date and any transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred.
All the Company’s revenue transactions are transacted in the functional currency of the operating subsidiaries. The Company does not enter into any material transactions in foreign currencies. Transaction gains or losses have not had, and are not expected to have, a material effect on the results of operations of the Company.
Asset and liability accounts at September 30, 2021 and December 31, 2020 were translated at 6.4854 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 nine months ended September 30, 2021 and 2020 were 6.4714 RMB and 6.9917 RMB to $1.00, respectively. The average translation rates applied to the statements of operations for three months ended September 30, 2021 and 2020 were 6.4707 RMB and 6.9205 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 (loss) 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 dilutive securities. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity.
Basic net income per share is computed by dividing net income (loss) 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 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:
Non-controlling interest
On February 15, 2015, China Agriculture invested RMB 400 million (approximately $65 million) into Pingtan Fishing and acquired an 8% equity interest in Pingtan Fishing. As of September 30, 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 ordinary shareholders of the Company, its management, members of the immediate families of principal ordinary shareholders of the Company and its management and other parties with which the Company may deal with if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. The Company discloses all significant related party transactions.
Comprehensive income (loss)
Comprehensive income (loss) is comprised of net income (loss) and all changes to the statements of stockholders’ equity, except those due to investments by stockholders, changes in paid-in capital and distributions to stockholders. For the Company, comprehensive income (loss) for the three and nine months ended September 30, 2021 and 2020 included net income (loss) and unrealized gain from foreign currency translation adjustments.
Segment information
ASC Topic 280 “Segment reporting” establishes standards for reporting information on operating segments in interim and annual financial statements. All of the Company’s operations are considered by the chief operating decision maker to be aggregated in one reportable operating segment. All of the Company’s customers are in the PRC and all income is derived from ocean fishery.
Commitments and contingencies
In the normal course of business, the Company is subject to contingencies, including legal proceedings and environmental claims, arising out of the normal course of businesses that relate to a wide range of matters, including among others, liability for breaches of contracts. The Company records accruals for such contingencies based upon the assessment of the probability of occurrence and, where determinable, an estimate of the liability. Management may consider many factors in making these assessments, including historical operations, scientific evidence and the specifics of each matter.
The Company’s management has evaluated all such proceedings and claims that existed as of September 30, 2021. 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 are 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. 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 receivable 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 the net profit (loss) of the vessels. The Company has latitude in establishing price and discretion in supplier selection. There were no economic risks associated with the operating rights but the Company may need to bear the operation risks and credit risks as aforementioned.
Recent Adopted Accounting Standards
Codification Improvements to Topic 842, Leases (“ASU 2018-10”) and ASU 2018-11, Leases (Topic 842), Targeted Improvements (“ASU 2018-11”). The amendments in ASU 2018-10 affect only narrow aspects of the guidance issued in the amendments in ASU 2016-02, including but not limited to lease residual value guarantee, rate implicit in the lease and lease term and purchase option. The amendments in ASU 2018-11 provide an optional transition method for adoption of the new standard, which will allow entities to continue to apply the legacy guidance in ASC Topic 840, including its disclosure requirements, in the comparative periods presented in the year of adoption. We applied the new standard beginning January 1, 2020. The adoption did not have a material impact on the Company’s consolidated financial statements.
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 was effective for interim and annual periods beginning after December 15, 2019. We applied the new standard beginning January 1, 2020. The adoption did not have a material impact on the Company’s consolidated financial statements.
In January 2020, the FASB issued ASU 2020-01, Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815): Clarifying the Interactions between Topic 321, Topic 323, and Topic 815 (“ASU 2020-01”) to clarify the interaction in accounting for equity securities under Topic 321, investments accounted for under the equity method of accounting in Topic 323 and the accounting for certain forward contracts and purchased options accounted for under Topic 815. ASU 2020-01 was effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2020. We applied the new standard beginning January 1, 2021. The adoption did not have a material impact on the Company’s consolidated financial statements.
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which eliminates certain exceptions to the existing guidance for income taxes related to the approach for intra-period tax allocations, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. This ASU also simplifies the accounting for income taxes by clarifying and amending existing guidance related to the effects of enacted changes in tax laws or rates in the effective tax rate computation, the recognition of franchise tax and the evaluation of a step-up in the tax basis of goodwill, among other clarifications. ASU 2019-12 was effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2020. We applied the new standard beginning January 1, 2021. The adoption did not have a material impact on the Company’s consolidated financial statements.
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. |
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Accounts Receivable |
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| ACCOUNTS RECEIVABLE | NOTE 3 – ACCOUNTS RECEIVABLE
At September 30, 2021 and December 31, 2020, accounts receivable consisted of the following:
The Company reviews the accounts receivable on a periodic basis and makes general and specific allowance when there is doubt as to the collectability of an individual balance. Bad debt expense was $246,105 and $188,293 for the three months ended September 30, 2021 and 2020, respectively. Bad debt expense was $756,463 and $245,498 for the nine months ended September 30, 2021 and 2020, respectively. |
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Inventories |
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| INVENTORIES | NOTE 4 – INVENTORIES
At September 30, 2021 and December 31, 2020, inventories consisted of the following:
Frozen fish and marine catches in warehouse represent 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.
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 $6,422,157 and a recovery of $(288,953) for the three months ended September 30, 2021 and 2020, respectively. The Company recorded a provision for inventory of $740,084 and $1,711,666 for the nine months ended September 30, 2021 and 2020, respectively. |
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Other Receivables |
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| OTHER RECEIVABLES | NOTE 5 – OTHER RECEIVABLES
At September 30, 2021 and December 31, 2020, other receivables consisted of the following:
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Cost Method Investment |
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| Cost Method Investment Line Item [Abstract] | |
| COST METHOD INVESTMENT | NOTE 6 – COST METHOD INVESTMENT
At September 30, 2021 and December 31, 2020, the cost method investment amounted to $3,238,042 and $3,218,440, respectively. The investment represents Pingtan Fishing’s, the Company’s subsidiary, minority interest in Fujian Pingtan Rural-Commercial Bank Joint-Stock Co., Ltd. (“Pingtan Rural-Commercial Bank”), a private financial institution. Pingtan Fishing completed its registration as a shareholder on October 17, 2012 and paid RMB 21 million (approximately US$3.0 million) to purchase 5% of the common stock of Pingtan Rural-Commercial Bank. Pingtan Fishing held 15,113,250 shares and which accounts for a 4.8% investment in the total equity investment of the bank as of September 30, 2021 and December 31, 2020.
In accordance with ASC Topic 321, the Company elected to use the measurement alternative to measure such investments at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments of the same issuer, if any. The Company monitors its investment in the non-marketable security and will recognize, if ever existing, a loss in value which is deemed to be other than temporary. The Company determined that there was no impairment on this investment as of September 30, 2021 and December 31, 2020. |
Equity Method Investment |
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| Equity Method Investments and Joint Ventures [Abstract] | |
| EQUITY METHOD INVESTMENT | NOTE 7 – EQUITY METHOD INVESTMENT
At September 30, 2021 and December 31, 2020, the equity investment amounted to $29,107,193 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 two unrelated companies in the PRC. In April 2017, these two companies sold their shares to another unrelated party, Zhen Lin. As of September 30, 2020 and 2021, Pingtan Fishing and Zhen Lin accounted for 20% and 80% of the total ownership, respectively.
Global Deep Ocean processes, stores, and transports Deep Ocean fishing products. Total registered capital of Global Deep Ocean is RMB 1 billion (approximately US $154.2 million) and as of September 30, 2021, Pingtan Fishing had contributed its share of registered capital of RMB 200 million (approximately US$30.8 million).
The Company measures this equity investment in the consolidated financial statements utilizing 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 changes in the Company’s share of the investee’s net assets and any impairment loss relating to the investment. For the three months ended September 30, 2021 and 2020, the Company’s share of Global Deep Ocean’s net loss was $308,921 and $82,586, respectively, which was included in loss on equity method investment in the accompanying consolidated statements of operations and comprehensive income. For the nine months ended September 30, 2021 and 2020, the Company’s share of Global Deep Ocean’s net loss was $765,101 and $351,129, respectively, which was included in loss on equity method investment in the accompanying consolidated statements of operations and comprehensive income. |
Prepayment for Long-Term Assets |
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| PREPAYMENT FOR LONG-TERM ASSETS | NOTE 8 – PREPAYMENT FOR LONG-TERM ASSETS
At September 30, 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.
For the nine months ended September 30, 2021, a summary of activities in prepayment for long-term assets was as follows:
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Property, Plant and Equipment |
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| PROPERTY, PLANT AND EQUIPMENT | NOTE 9 – PROPERTY, PLANT AND EQUIPMENT
At September 30, 2021 and December 31, 2020, property, plant and equipment consisted of the following:
During the nine months ended September 30, 2021, the 20 vessels that received approval from MARA to operate in international waters after modification and rebuilt into 20 seine vessels, had been completed and deployed to international water for operation.
During the nine months ended September 30, 2021, the Company received a government subsidy for a group of fishing vessels amounting to RMB 151.2 million (approximately US$23.4 million). The subsidy is related to assets which requires deducting it from the carrying amount of the asset.
For the three months ended September 30, 2021 and 2020, depreciation expense amounted to $5,317,274 and $3,944,203, respectively, of which $4,315,313 and $3,170,392, respectively, was included in cost of revenue and inventories, and the remainder was included in general and administrative expense. For the nine months ended September 30, 2021 and 2020, depreciation expense amounted to $12,510,131 and $10,616,935, of which $11,363,316 and $8,342,357, respectively, was included in cost of revenue and inventories, and the remainder was included in general and administrative expense, respectively.
The Company had 81 and 82 fishing vessels at September 30, 2021 and December 31, 2020, with net carrying amount of approximately $219.8 million and $227.3 million, respectively, pledged as collateral for its bank loans.
The Company recognized an impairment loss of $495,857 and for the three months ended September 30, 2021 and 2020, respectively. The Company recognized impairment loss of $1,471,223 and for the nine months ended September 30, 2021 and 2020, respectively. During the nine months ended September 30, 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 of 1,471,223. |
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| Related Party Transactions [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| RELATED PARTIES TRANSACTIONS | NOTE 10 – RELATED PARTIES TRANSACTIONS
Accounts payable - related parties
At September 30, 2021 and December 31, 2020, accounts payable - related parties consisted of the following:
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, 2021 and December 31, 2020, the due to related parties amount consisted of the following:
The balance of accrued compensation represents accrued compensation for the CEO and CFO.
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.
The majority of due to Hong Long represents the prepayment made to shipbuilding company for the modification and rebuilding of the 20 vessels in 2021 by Hong Long on behalf of the Company, with an annual interest rate of 4.35%.
Operating lease
On July 31, 2012, the Company entered into a lease for office space with Ping Lin, the spouse of the Company’s CEO (the “Office Lease”). Pursuant to the Office Lease, the annual rent is RMB 84,000 (approximately US$13,000) and expired on July 31, 2021. This lease was renewed under the same terms upon expiry, and the Office Lease will expire on December 31, 2023.
For the three months ended September 30, 2021 and 2020, rent expense related to the Office Lease amounted to $3,245 and $3,038, respectively. For the nine months ended September 30, 2021 and 2020, rent expense related to the Office Lease amounted to $9,735 and $9,011, respectively. The future minimum rental payments required under the Office Lease are as follows:
Purchases from related parties
During the three and nine months ended September 30, 2021 and 2020, purchases from related parties were as follows:
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Bank Loans |
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| Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| BANK LOANS | 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 maturity. The Company is in compliance with all debt covenants. At September 30, 2021 and December 31, 2020, short-term bank loans consisted of the following:
Long-term bank loans
Long-term bank loans represent the amounts due to various banks lasting over one year. Usually, the long-term bank loans cannot be renewed with these banks upon maturities. The Company is in compliance with all long-term bank loan covenants. At September 30, 2021 and December 31, 2020, long-term bank loans consisted of the following:
The future maturities of long-term bank loans are as follows:
The weighted average interest rate for short-term bank loans was approximately 6.0% and 4.0% for the nine months ended September 30, 2021 and 2020, respectively.
The weighted average interest rate for long-term bank loans was approximately 4.3% and 4.8% for the nine months ended September 30, 2021 and 2020, respectively.
For the three months ended September 30, 2021 and 2020, interest expense related to bank loans amounted to $4,055,798 and $4,220,271, respectively, of which, and $183,747 was capitalized to construction-in-progress, respectively. For the nine months ended September 30, 2021 and 2020, interest expense related to bank loans amounted to $11,720,712 and $11,064,621, respectively, of which and $1,192,672 was capitalized to construction-in-progress, respectively. |
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Accrued Liabilities and Other Payables |
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| Payables and Accruals [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ACCRUED LIABILITIES AND OTHER PAYABLES | NOTE 12 – ACCRUED LIABILITIES AND OTHER PAYABLES
At September 30, 2021 and December 31, 2020, accrued liabilities and other payables consisted of the following:
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Share Capital |
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| Share Capital [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SHARE CAPITAL | NOTE 13 – SHARE CAPITAL
Preferred shares
Ordinary shares
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Certain Risks and Concentrations |
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| Risks and Uncertainties [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CERTAIN RISKS AND CONCENTRATIONS | NOTE 14 – CERTAIN RISKS AND CONCENTRATIONS
Credit risk
At September 30, 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 and nine months ended September 30, 2021 and 2020.
Three customers accounted for 10% or more of the Company’s total accounts receivable at September 30, 2020, for a total of 36.4% of accounts receivable. At December 31, 2020, six customers accounted for 10% or more of the Company’s accounts receivable for a total of 87.4%. Major suppliers
The following table sets forth information as to each supplier that accounted for 10% or more of the Company’s purchases for the three and nine months ended September 30, 2021 and 2020.
Two suppliers, whose accounts payable accounted for 10% or more of the Company’s total accounts payable and accounts payable – related parties at September 30, 2021, accounted for 80.8% of the Company’s total accounts payable and accounts payable – related parties at September 30, 2021.
Three suppliers, whose accounts payable accounted for 10% or more of the Company’s total accounts payable and accounts payable – related parties at September 30, 2020, accounted for 68.6% of the Company’s total accounts payable and accounts payable – related parties at September 30, 2020. |
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Commitments and Contingencies |
9 Months Ended |
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Sep. 30, 2021 | |
| Commitments and Contingencies Disclosure [Abstract] | |
| COMMITMENTS AND CONTINGENCIES | NOTE 15 – COMMITMENTS AND CONTINGENCIES
Severance payments
The Company has employment agreements with certain employees that provide for severance payments to such employees upon termination of employment under certain circumstances, as defined in the applicable agreements. The Company has estimated its possible severance payments to be approximately $10,000 as of September 30, 2021 and December 31, 2020, which have not been reflected in its consolidated financial statements due to immateriality.
Operating lease
See note 10 for related party operating lease commitment. |
Subsequent Events |
9 Months Ended |
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Sep. 30, 2021 | |
| Subsequent Events [Abstract] | |
| SUBSEQUENT EVENTS | NOTE 16 – SUBSEQUENT EVENTS
On October 21, 2021, the Company repaid a long-term bank loan of $5.0 million to The Export-Import Bank of China in accordance with the loan repayment schedule.
On October 21, 2021, the Company received a subsidy of $724,462.
On October 22, 2021, the Company repaid a long-term bank loan of $1.9 million to The Export-Import Bank of China in accordance with the loan repayment schedule.
On October 22, 2021, the Company received a loan of $1.8 million from The Export-Import Bank of China. The loan is due on July 1, 2023 with annual interest rate of 2.20%.
On October 22, 2021, the Company received a subsidy of $309,445.
On October 28, 2021, the Company repaid a long-term bank loan of $2.2 million to The Export-Import Bank of China in accordance with the loan repayment schedule.
On October 28, 2021, the Company received a loan of $2.1 million from The Export-Import Bank of China. The loan is due on July 1, 2023 with annual interest rate of 2.20%.
On October 28, 2021, the Company repaid a short-term bank loan of $10.8 million to Fujian Haixia Bank in accordance with the loan repayment schedule.
On October 28, 2021, the Company received a loan of $9.5 million from The Export-Import Bank of China. The loan is due on July 30, 2026 with annual interest rate of 5.12%.
On October 28, 2021, the Company received a loan of $10.8 million from Fujian Haixia Bank. The loan is due on October 28, 2022 with annual interest rate of 6.09%.
On November 10, 2021, the Company repaid a short-term bank loan of $0.8 million to China Development Bank in accordance with the loan repayment schedule. |
Accounting Policies, by Policy (Policies) |
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| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Basis of presentation | 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 consolidated 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, as amended, for the year ended December 31, 2020 filed with the Securities and Exchange Commission on October 13, 2021.
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| Going concern | Going concern
The Company had a working capital deficit of $102,268,349 as of September 30, 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 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 68 fishing vessels and 3 transport vessels, the deployment of these vessels into operation will generate more revenue and cash inflows to the Company. In addition, the Company receives subsidies for modification and rebuilding projects and is reimbursed for certain operating expenses from government entities, as an encouragement of the development of ocean fishing industry.
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| Use of estimates | Use of estimates
The preparation of the unaudited consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, and the related disclosures at the date of the financial statements and during the reporting period. Actual results could materially differ from these estimates. Significant estimates in the three and nine months ended September 30, 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.
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| Cash | Cash
Cash consists of cash on hand and cash in banks. The Company maintains cash with various financial institutions in China's mainland and Hong Kong. At September 30, 2021 and December 31, 2020, cash balances in China's mainland were $15,716,960 and $468,273, respectively, and cash balances in Hong Kong were $39,333 and $223,660, respectively, and are not fully insured. According to the "Deposit Protection Scheme Regulations" implemented in Hong Kong in September 2006 and the "Deposit Insurance Regulations" implemented in China's mainland in February 2015, if a bank fails, companies can receive up to HK$500,000 and RMB500,000 in compensation, respectively. 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.
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| Restricted cash | Restricted cash
Restricted cash consists of cash deposits held by the Export Import Bank of China to secure its bank loans and Hong Long’s short-term bank loans. At September 30, 2021 and December 31, 2020, restricted cash amounted to $13,018,350 and $9,912,666, respectively.
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| Fair value of financial instruments | 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.
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.
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| Accounts receivable | 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 creditworthiness and current economic trends. Accounts are written off after exhaustive efforts at collection. The Company only grants credit terms to established customers who are deemed to be financially responsible. Credit periods to customers are within 180 days after customers received the purchased goods. At September 30, 2021 and December 31, 2020, the Company had established, based on a review of its outstanding balances, an allowance for doubtful accounts in the amounts of $1,168,466 and $411,131, respectively.
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| Inventories | Inventories
Inventories, consisting of frozen fish and marine catches, are stated at the lower of cost or net realizable value utilizing the weighted average method. The cost of inventories is primarily comprised of fuel, freight, depreciation, direct labor, consumables, government levied charges and taxes. Consumables include fishing nets and metal containers used by fishing vessels. The Company’s fishing fleets in Indian waters and the international waters operate throughout the year, although the May to July period demonstrates lower catch quantities compared to the October to January period, which is the peak season.
A reserve is established when management determines that certain inventories may not be saleable. If inventory costs exceed net realizable value due to obsolescence or quantities in excess of expected demand or price decreases, the Company will record a reserve for the difference between the cost and the market value. These reserves are recorded based on estimates. At September 30, 2021 and December 31, 2020, the Company has a reserve for inventories in the amount of $16,962,451 and $16,125,749, respectively.
Inventory reserves are intended to reduce the carrying value of inventories to their net realizable value. The Company regularly evaluates its ability to realize the value of inventories based on a combination of factors including: forecasted sales and estimated current and future market value.
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| Fishing licenses | Fishing licenses
Each of the Company’s fishing vessels requires an approval from the Ministry of Agriculture and Rural Affairs of the PRC to carry out ocean fishing projects in international waters. 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.
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 usually owns 20% to 50% 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 7 for discussion of the equity 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 operation 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:
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| Investment in unconsolidated company – Global Deep Ocean | 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 usually owns 20% to 50% 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 7 for discussion of the equity investment.
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| Property, plant and equipment | 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 operation 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:
Expenditures for repairs and maintenance, which do not extend the useful life of the assets, are expensed as incurred.
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| Capitalized interest | 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 and $183,747 for the three months ended September 30, 2021 and 2020, respectively, in the fishing vessels under construction. The Company capitalized interest of and $1,192,672 for the nine months ended September 30, 2021 and 2020, respectively, in the fishing vessels under construction.
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| Impairment of long-lived assets | Impairment of long-lived assets
In accordance with ASC Topic 360, the Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable. The Company evaluates the impairment by comparing the carrying amount of the assets to an estimate of future undiscounted cash flows expected to be generated from the use of the assets and their eventual disposition. If the sum of the expected future undiscounted cash flows is less than the carrying amount of the assets, the Company recognizes an impairment loss based on the excess of the carrying amount of the long-lived assets over their fair value. Impairment loss represents the impairment loss on the vessels whenever events or changes in circumstances indicate that the carrying amount of the assets might not be recovered. The Company recognized impairment loss of $495,857 and for the three months ended September 30, 2021 and 2020, respectively. The Company recognized impairment loss of $1,471,223 and for the nine months ended September 30, 2021 and 2020, respectively. During the nine months ended September 30, 2021, the Company assessed the recoverability of 1 new 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.
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 the vessel construction contract termination on the basis that the construction progress 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. As of September 30, 2021, the Company was in negotiations with the shipbuilding company regarding the details of the return of the prepaid shipbuilding payments.
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| Revenue recognition | 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 being when 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 Topic 606 by species of fish. For the three months ended September 30, 2021 and 2020, our revenue by species of fish was as follows (dollars in thousands, except for average price):
The following tables disaggregate revenues under ASC Topic 606 by species of fish. For the nine months ended September 30, 2021 and 2020, our revenue by species of fish was as follows (dollars in thousands, except for average price):
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| Government subsidies | 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.
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| Income taxes | 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 Ministry of Agriculture and Rural Affairs of the PRC (“MARA”). The qualification renews on April 1 of each year. Pingtan Fishing is exempt from income tax derived from its ocean fishing operations in the periods it processes a valid Ocean Fishing Enterprise Qualification Certificate issued by the MARA.
The China’s Enterprise Income Tax Law (“EIT Law”), which went into effect on January 1, 2018, also provides that an enterprise established under the laws of foreign countries or regions but whose “de facto management body” is located in the PRC be treated as a resident enterprise for PRC tax purposes and consequently be subject to the PRC income tax at the rate of 25% for its worldwide income. The Implementing Rules of the new EIT Law merely define the location of the “de facto management body” as “the place where the exercising, in substance, of the overall management and control of the production and business operation, personnel, accounting, properties, etc., of a non-PRC company is located.” On April 22, 2009, the PRC State Administration of Taxation further issued a notice entitled “Notice Regarding Recognizing Offshore-Established Enterprises Controlled by PRC Shareholders as Resident Enterprises Based on Their Place of Effective Management.” Under this notice, a foreign company controlled by a PRC company or a group of PRC companies shall be deemed as a PRC resident enterprise if (i) the senior management and the core management departments in charge of its daily operations mainly function in the PRC; (ii) its financial decisions and human resource decisions are subject to decisions or approvals of persons or institutions in the PRC; (iii) its major assets, accounting books, company seals, minutes and files of board meetings and shareholders’ meetings are located or kept in the PRC; and (iv) more than half of the directors or senior management personnel with voting rights reside in the PRC. Based on a review of surrounding facts and circumstances, the Company does not believe that it is likely that its operations outside of the PRC should be considered a resident enterprise for PRC tax purposes. However, due to limited guidance and implementation history of the EIT Law, should the Company be treated as a resident enterprise for PRC tax purposes, the Company will be subject to PRC tax on worldwide income at a uniform tax rate of 25% retroactive to May 3, 2012.
In addition, Pingtan Fishing is not subject to foreign income taxes for its operations in either India or 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.
The Company prescribes a more-likely-than-not threshold for financial statement recognition and measurement of a tax position taken in the tax return. This interpretation also provides guidance on de-recognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, accounting for income taxes in interim periods and income tax disclosures. As of September 30, 2021 and December 31, 2020, there were no amounts that had been accrued with respect to uncertain tax positions.
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| Shipping and handling costs | Shipping and handling costs
Shipping and handling costs are included in selling expense and amounted to $213,891 and $35,397 for the three months ended September 30, 2021 and 2020, respectively. Shipping and handling costs amounted to $258,311 and $356,490 for the nine months ended September 30, 2021 and 2020, respectively.
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| Employee benefits | Employee benefits
The Company makes mandatory contributions to the PRC government’s health, retirement benefit and unemployment funds in accordance with the relevant Chinese social security laws. The costs of these payments are charged to the same accounts as the related salary costs in the same period as the related salary costs incurred. Employee benefit costs amounted to $1,340,598 and $606,825 for the three months ended September 30, 2021 and 2020, respectively. Employee benefit costs amounted to $2,970,449 and $1,795,348 for the nine months ended September 30, 2021 and 2020, respectively.
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| Foreign currency translation | Foreign currency translation
The reporting currency of the Company is the U.S. dollar. The functional currency of the Company and Merchant Supreme and Prime Cheer, the Company’s subsidiaries, is the U.S. dollar. The functional currency of Pingtan Guansheng, Fujian Heyue and Pingtan Fishing, the Company’s subsidiaries, is the Chinese Renminbi (“RMB”). For the Company’s subsidiaries Pingtan Guansheng, Fujian Heyue and Pingtan Fishing, whose functional currencies are the RMB, results of operations and cash flows are translated at average exchange rates during the period, assets and liabilities are translated at the unified exchange rate at the end of the period, and equity is translated at historical exchange rates. As a result, amounts relating to assets and liabilities reported on the statements of cash flows may not necessarily agree with the changes in the corresponding balances on the balance sheets. Translation adjustments resulting from the process of translating the local currency financial statements into U.S. dollars are included in determining comprehensive income. The cumulative translation adjustment and effect of exchange rate changes on cash for the nine months ended September 30, 2021 and 2020 was $2,622,688 and $935,670, respectively. Transactions denominated in foreign currencies are translated into the functional currency at the exchange rates prevailing on the transaction dates. Assets and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rates prevailing at the balance sheet date and any transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred.
All the Company’s revenue transactions are transacted in the functional currency of the operating subsidiaries. The Company does not enter into any material transactions in foreign currencies. Transaction gains or losses have not had, and are not expected to have, a material effect on the results of operations of the Company.
Asset and liability accounts at September 30, 2021 and December 31, 2020 were translated at 6.4854 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 nine months ended September 30, 2021 and 2020 were 6.4714 RMB and 6.9917 RMB to $1.00, respectively. The average translation rates applied to the statements of operations for three months ended September 30, 2021 and 2020 were 6.4707 RMB and 6.9205 RMB to $1.00, respectively. Cash flows from the Company’s operations are calculated based upon the local currencies using the average translation rate.
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| Earnings (loss) per share | Earnings (loss) 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 dilutive securities. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity.
Basic net income per share is computed by dividing net income (loss) 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 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:
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| Non-controlling interest | Non-controlling interest
On February 15, 2015, China Agriculture invested RMB 400 million (approximately $65 million) into Pingtan Fishing and acquired an 8% equity interest in Pingtan Fishing. As of September 30, 2021, China Agriculture owned 8% of the equity interest of Pingtan Fishing, which was not under the Company’s control.
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| Related parties | 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 ordinary shareholders of the Company, its management, members of the immediate families of principal ordinary shareholders 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.
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| Comprehensive income (loss) | Comprehensive income (loss)
Comprehensive income (loss) is comprised of net income (loss) and all changes to the statements of stockholders’ equity, except those due to investments by stockholders, changes in paid-in capital and distributions to stockholders. For the Company, comprehensive income (loss) for the three and nine months ended September 30, 2021 and 2020 included net income (loss) and unrealized gain from foreign currency translation adjustments.
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| Segment information | Segment information
ASC Topic 280 “Segment reporting” establishes standards for reporting information on operating segments in interim and annual financial statements. All of the Company’s operations are considered by the chief operating decision maker to be aggregated in one reportable operating segment. All of the Company’s customers are in the PRC and all income is derived from ocean fishery.
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| Commitments and contingencies | Commitments and contingencies
In the normal course of business, the Company is subject to contingencies, including legal proceedings and environmental claims, arising out of the normal course of businesses that relate to a wide range of matters, including among others, liability for breaches of contracts. The Company records accruals for such contingencies based upon the assessment of the probability of occurrence and, where determinable, an estimate of the liability. Management may consider many factors in making these assessments, including historical operations, scientific evidence and the specifics of each matter.
The Company’s management has evaluated all such proceedings and claims that existed as of September 30, 2021. 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.
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| Concentrations of credit, economic and political risks | 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 are 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. 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 receivable 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 the net profit (loss) of the vessels. The Company has latitude in establishing price and discretion in supplier selection. There were no economic risks associated with the operating rights but the Company may need to bear the operation risks and credit risks as aforementioned.
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| Recent Adopted Accounting Standards | Recent Adopted Accounting Standards
Codification Improvements to Topic 842, Leases (“ASU 2018-10”) and ASU 2018-11, Leases (Topic 842), Targeted Improvements (“ASU 2018-11”). The amendments in ASU 2018-10 affect only narrow aspects of the guidance issued in the amendments in ASU 2016-02, including but not limited to lease residual value guarantee, rate implicit in the lease and lease term and purchase option. The amendments in ASU 2018-11 provide an optional transition method for adoption of the new standard, which will allow entities to continue to apply the legacy guidance in ASC Topic 840, including its disclosure requirements, in the comparative periods presented in the year of adoption. We applied the new standard beginning January 1, 2020. The adoption did not have a material impact on the Company’s consolidated financial statements.
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 was effective for interim and annual periods beginning after December 15, 2019. We applied the new standard beginning January 1, 2020. The adoption did not have a material impact on the Company’s consolidated financial statements.
In January 2020, the FASB issued ASU 2020-01, Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815): Clarifying the Interactions between Topic 321, Topic 323, and Topic 815 (“ASU 2020-01”) to clarify the interaction in accounting for equity securities under Topic 321, investments accounted for under the equity method of accounting in Topic 323 and the accounting for certain forward contracts and purchased options accounted for under Topic 815. ASU 2020-01 was effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2020. We applied the new standard beginning January 1, 2021. The adoption did not have a material impact on the Company’s consolidated financial statements. In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which eliminates certain exceptions to the existing guidance for income taxes related to the approach for intra-period tax allocations, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. This ASU also simplifies the accounting for income taxes by clarifying and amending existing guidance related to the effects of enacted changes in tax laws or rates in the effective tax rate computation, the recognition of franchise tax and the evaluation of a step-up in the tax basis of goodwill, among other clarifications. ASU 2019-12 was effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2020. We applied the new standard beginning January 1, 2021. |
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| Recent accounting pronouncements | 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. |
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Description of Business and Organization (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of subsidiary and variable interest entity |
|
Summary of Significant Accounting Policies (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of estimated useful lives of the assets |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of disaggregate revenues |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of reconciliation of basic and diluted net income per share |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounts Receivable (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||
| Receivables [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of accounts receivable |
|
|||||||||||||||||||||||||||||||||||||||||||||
Inventories (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of inventories |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Receivables (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||
| Other Receivables [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of other receivables |
|
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Prepayment for Long-Term Assets (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2021 | |||||||||||||||||||||||||||||||
| Prepayment For Long Term Assets [Abstract] | |||||||||||||||||||||||||||||||
| Schedule of prepayment for long-term assets |
|
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Property, Plant and Equipment (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of property, plant and equipment |
|
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Related Parties Transactions (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Related Party Transactions [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of accounts payable - related parties |
|
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| Schedule of due to related parties |
|
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| Schedule of future minimum rental payment under office lease |
|
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| Schedule of purchases from related parties |
|
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Bank Loans (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of short-term bank loans |
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of long-term bank loans |
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of future maturities of long-term bank loans |
|
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Accrued Liabilities and Other Payables (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Payables and Accruals [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of accrued liabilities and other payables |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share Capital (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Share Capital [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of share capital |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Certain Risks and Concentrations (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Risks and Uncertainties [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of major customers |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of major suppliers |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Description of Business and Organization (Details) $ / shares in Units, $ in Millions |
1 Months Ended | ||||
|---|---|---|---|---|---|
|
Feb. 15, 2015
USD ($)
|
Sep. 30, 2021
$ / shares
|
Dec. 31, 2020
$ / shares
|
Feb. 15, 2015
CNY (¥)
|
Feb. 09, 2015 |
|
| Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items] | |||||
| Ordinary shares, par value (in Dollars per share) | $ 0.001 | $ 0.001 | |||
| Pingtan Fishing [Member] | |||||
| Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items] | |||||
| Percentage of ownership | 100.00% | ||||
| Percentage of equity-owned subsidiaries | 92.00% | ||||
| China Agriculture Industry Development Fund Co., Ltd. [Member] | |||||
| Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items] | |||||
| Percentage of ownership | 8.00% | 8.00% | |||
| Agriculture investment | $ 65 | ¥ 400,000,000 |
Summary of Significant Accounting Policies (Details) |
3 Months Ended | 9 Months Ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 04, 2013 |
May 03, 2012 |
Sep. 30, 2021
USD ($)
|
Sep. 30, 2020
USD ($)
|
Sep. 30, 2021
USD ($)
|
Sep. 30, 2020
USD ($)
|
Sep. 30, 2021
CNY (¥)
|
Sep. 30, 2021
HKD ($)
|
Dec. 31, 2020
USD ($)
|
Feb. 15, 2015
USD ($)
|
Feb. 15, 2015
CNY (¥)
|
|
| Summary of Significant Accounting Policies (Details) [Line Items] | |||||||||||
| Working capital deficit | $ 102,268,349 | $ 102,268,349 | |||||||||
| Compensation amount | ¥ 500,000 | $ 500,000 | |||||||||
| Restricted cash | 13,018,350 | 13,018,350 | $ 9,912,666 | ||||||||
| Allowance for doubtful accounts | 1,168,466 | 1,168,466 | 411,131 | ||||||||
| Reserve for inventories | 16,962,451 | 16,962,451 | 16,125,749 | ||||||||
| Capitalized interest | $ 183,747 | $ 1,192,672 | |||||||||
| Recognized impairment loss | 495,857 | 1,471,223 | |||||||||
| Construction-in-progress | 24,472,000 | ||||||||||
| Total impairment of assets | 66,694,000 | ||||||||||
| Construction costs | 1,471,000 | 1,471,000 | |||||||||
| Income tax at the rate | 25.00% | ||||||||||
| Shipping and handling costs | 213,891 | 35,397 | 258,311 | 356,490 | |||||||
| Employee benefit costs | $ 1,340,598 | $ 606,825 | 2,970,449 | 1,795,348 | |||||||
| Cumulative translation adjustment and effect of exchange rate | $ 2,622,688 | $ 935,670 | |||||||||
| Description of foreign currency translation | Asset and liability accounts at September 30, 2021 and December 31, 2020 were translated at 6.4854 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 nine months ended September 30, 2021 and 2020 were 6.4714 RMB and 6.9917 RMB to $1.00, respectively. The average translation rates applied to the statements of operations for three months ended September 30, 2021 and 2020 were 6.4707 RMB and 6.9205 RMB to $1.00, respectively. Cash flows from the Company’s operations are calculated based upon the local currencies using the average translation rate. | ||||||||||
| Entitlement of net profit loss towards fishing vessels by entity, percentage | 100.00% | ||||||||||
| China Agriculture Industry Development Fund Co., Ltd. [Member] | |||||||||||
| Summary of Significant Accounting Policies (Details) [Line Items] | |||||||||||
| Agriculture investment | $ 65,000,000 | ¥ 400,000,000 | |||||||||
| Business Combination [Member] | Pingtan Fishing [Member] | |||||||||||
| Summary of Significant Accounting Policies (Details) [Line Items] | |||||||||||
| Interest, percentage | 8.00% | 8.00% | 8.00% | 8.00% | 8.00% | 8.00% | |||||
| Minimum [Member] | |||||||||||
| Summary of Significant Accounting Policies (Details) [Line Items] | |||||||||||
| Investment in unconsolidated percentage | 20.00% | ||||||||||
| Maximum [Member] | |||||||||||
| Summary of Significant Accounting Policies (Details) [Line Items] | |||||||||||
| Investment in unconsolidated percentage | 50.00% | ||||||||||
| PRC [Member] | |||||||||||
| Summary of Significant Accounting Policies (Details) [Line Items] | |||||||||||
| Cash balances | $ 15,716,960 | $ 15,716,960 | 468,273 | ||||||||
| Income tax at the rate | 25.00% | ||||||||||
| Hong Kong [Member] | |||||||||||
| Summary of Significant Accounting Policies (Details) [Line Items] | |||||||||||
| Cash balances | $ 39,333 | $ 39,333 | $ 223,660 | ||||||||
Summary of Significant Accounting Policies (Details) - Schedule of estimated useful lives of the assets |
9 Months Ended |
|---|---|
Sep. 30, 2021 | |
| Vehicles [Member] | |
| Business Acquisition [Line Items] | |
| Property, plant and equipment, Estimated useful life | 5 years |
| Minimum [Member] | Fishing vessels [Member] | |
| Business Acquisition [Line Items] | |
| Property, plant and equipment, Estimated useful life | 10 years |
| Minimum [Member] | Office and other equipment [Member] | |
| Business Acquisition [Line Items] | |
| Property, plant and equipment, Estimated useful life | 3 years |
| Maximum [Member] | Fishing vessels [Member] | |
| Business Acquisition [Line Items] | |
| Property, plant and equipment, Estimated useful life | 20 years |
| Maximum [Member] | Office and other equipment [Member] | |
| Business Acquisition [Line Items] | |
| Property, plant and equipment, Estimated useful life | 5 years |
Accounts Receivable (Details) - USD ($) |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
Sep. 30, 2021 |
Sep. 30, 2020 |
|
| Receivables [Abstract] | ||||
| Bad debt expense | $ 246,105 | $ 188,293 | $ 756,463 | $ 245,498 |
Accounts Receivable (Details) - Schedule of accounts receivable - USD ($) |
Sep. 30, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Schedule of accounts receivable [Abstract] | ||
| Accounts receivable | $ 22,991,713 | $ 32,357,692 |
| Less: allowance for doubtful accounts | (1,168,466) | (411,131) |
| Accounts receivable, net | $ 21,823,247 | $ 31,946,561 |
Inventories (Details) - USD ($) |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
Sep. 30, 2021 |
Sep. 30, 2020 |
|
| Inventory Disclosure [Abstract] | ||||
| Provision for inventory | $ 6,422,157 | $ (288,953) | $ 740,084 | $ 1,711,666 |
Inventories (Details) - Schedule of inventories - USD ($) |
Sep. 30, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Schedule of inventories [Abstract] | ||
| Frozen fish and marine catches in warehouse | $ 56,458,862 | $ 44,272,021 |
| Frozen fish and marine catches work in progress | 28,015,835 | 20,702,914 |
| Frozen fish and marine catches in transit | 5,327,580 | 18,761,950 |
| Inventories, gross | 89,802,277 | 83,736,885 |
| Less: reserve for inventories | (16,962,451) | (16,125,749) |
| Total inventories | $ 72,839,826 | $ 67,611,136 |
Other Receivables (Details) - Schedule of other receivables - USD ($) |
Sep. 30, 2021 |
Dec. 31, 2020 |
||
|---|---|---|---|---|
| Schedule of other receivables [Abstract] | ||||
| VAT recoverable | [1] | $ 211,457 | $ 1,520,501 | |
| Other | 394,841 | 380,593 | ||
| Other receivables | $ 606,298 | $ 1,901,094 | ||
| ||||
Cost Method Investment (Details) |
Sep. 30, 2021
USD ($)
shares
|
Dec. 31, 2020
USD ($)
|
Oct. 17, 2012
USD ($)
|
Oct. 17, 2012
CNY (¥)
|
|---|---|---|---|---|
| Cost Method Investment [Line Items] | ||||
| Cost method investment | $ | $ 3,238,042 | $ 3,218,440 | ||
| Pingtan Fishing [Member] | ||||
| Cost Method Investment [Line Items] | ||||
| Cost method investment | $ 3,000,000 | ¥ 21,000,000 | ||
| Percentage of common stock subscribed | 5.00% | 5.00% | ||
| Number of shares held as investment (in Shares) | shares | 15,113,250 | |||
| Cost method investment, ownership percentage | 4.80% |
Equity Method Investment (Details) ¥ in Millions |
3 Months Ended | 9 Months Ended | ||||
|---|---|---|---|---|---|---|
|
Sep. 30, 2021
USD ($)
|
Sep. 30, 2020
USD ($)
|
Sep. 30, 2021
USD ($)
|
Sep. 30, 2020
USD ($)
|
Sep. 30, 2021
CNY (¥)
|
Dec. 31, 2020
USD ($)
|
|
| Equity Method Investment (Details) [Line Items] | ||||||
| Equity method investment | $ 29,107,193 | $ 29,107,193 | $ 29,689,813 | |||
| Loss on equity method investments | $ (308,921) | $ (82,586) | $ (765,101) | $ (351,129) | ||
| Pingtan Fishing [Member] | ||||||
| Equity Method Investment (Details) [Line Items] | ||||||
| Percentage of ownership | 20.00% | 20.00% | 20.00% | |||
| Total registered capital | $ 30,800,000 | $ 30,800,000 | ¥ 200 | |||
| Zhen Lin [Member] | ||||||
| Equity Method Investment (Details) [Line Items] | ||||||
| Percentage of ownership | 80.00% | 80.00% | 80.00% | |||
| Global Deep Ocean [Member] | ||||||
| Equity Method Investment (Details) [Line Items] | ||||||
| Total registered capital | $ 154,200,000 | $ 154,200,000 | ¥ 1,000 | |||
Prepayment for Long-Term Assets (Details) - Schedule of prepayment for long-term assets |
9 Months Ended |
|---|---|
|
Sep. 30, 2021
USD ($)
| |
| Schedule of prepayment for long-term assets [Abstract] | |
| Balance at beginning | $ 66,083,041 |
| Prepayments made for fishing vessels’ construction | 32,038,302 |
| Reclassification to construction-in-progress | |
| Foreign currency fluctuation | 333,324 |
| Balance at ending | $ 98,454,667 |
Property, Plant and Equipment (Details) |
3 Months Ended | 9 Months Ended | ||||
|---|---|---|---|---|---|---|
|
Sep. 30, 2021
USD ($)
|
Sep. 30, 2020
USD ($)
|
Sep. 30, 2021
USD ($)
|
Sep. 30, 2021
CNY (¥)
|
Sep. 30, 2020
USD ($)
|
Dec. 31, 2020
USD ($)
|
|
| Property, Plant and Equipment [Line Items] | ||||||
| Received government subsidy | $ 23,400,000 | ¥ 151,200,000 | ||||
| Depreciation expense | $ 5,317,274 | $ 3,944,203 | 11,363,316 | $ 8,342,357 | ||
| Net carrying amount of fishing vessels | 219,800,000 | 219,800,000 | $ 227,300,000 | |||
| Impairment loss on vessels | 495,857 | 1,471,223 | ||||
| Recognized an impairment loss | 1,471,223 | |||||
| Cost of Revenue and Inventories [Member] | ||||||
| Property, Plant and Equipment [Line Items] | ||||||
| Depreciation expense | $ 4,315,313 | $ 3,170,392 | $ 12,510,131 | $ 10,616,935 | ||
Related Parties Transactions (Details) |
1 Months Ended | 3 Months Ended | 9 Months Ended | |||
|---|---|---|---|---|---|---|
|
Jul. 31, 2012
USD ($)
|
Jul. 31, 2012
CNY (¥)
|
Sep. 30, 2021
USD ($)
|
Sep. 30, 2020
USD ($)
|
Sep. 30, 2021
USD ($)
|
Sep. 30, 2020
USD ($)
|
|
| Related Party Transaction [Line Items] | ||||||
| Annual interest rate | 4.35% | |||||
| Office rent expenses | $ 3,245 | $ 3,038 | $ 9,735 | $ 9,011 | ||
| Ping Lin [Member] | ||||||
| Related Party Transaction [Line Items] | ||||||
| Lessee, operating lease, description | Pursuant to the Office Lease, the annual rent is RMB 84,000 (approximately US$13,000) and expired on July 31, 2021. | Pursuant to the Office Lease, the annual rent is RMB 84,000 (approximately US$13,000) and expired on July 31, 2021. | ||||
| Operating office lease, rent expense | $ 13,000 | ¥ 84,000 | ||||
Related Parties Transactions (Details) - Schedule of due to related parties - USD ($) |
Sep. 30, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Related Parties Transactions (Details) - Schedule of due to related parties [Line Items] | ||
| Due to related parties | $ 30,973,032 | $ 18,354 |
| LiMing Yung [Member] | Chief Financial Officer [Member] | ||
| Related Parties Transactions (Details) - Schedule of due to related parties [Line Items] | ||
| Due to related parties | 15,000 | 15,000 |
| Xinrong Zhuo [Member] | ||
| Related Parties Transactions (Details) - Schedule of due to related parties [Line Items] | ||
| Due to related parties | 1,450,000 | |
| Xinrong Zhuo [Member] | Chief Executive Officer [Member] | ||
| Related Parties Transactions (Details) - Schedule of due to related parties [Line Items] | ||
| Due to related parties | 3,354 | $ 3,354 |
| Honglong [Member] | ||
| Related Parties Transactions (Details) - Schedule of due to related parties [Line Items] | ||
| Due to related parties | $ 29,504,678 |
Related Parties Transactions (Details) - Schedule of future minimum rental payment under office lease |
Sep. 30, 2021
USD ($)
|
|---|---|
| Schedule of future minimum rental payment under office lease [Abstract] | |
| 2022 | $ 12,980 |
| 2023 | 12,980 |
| 2024 | 3,245 |
| Total | $ 29,205 |
Related Parties Transactions (Details) - Schedule of purchases from related parties - USD ($) |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
Sep. 30, 2021 |
Sep. 30, 2020 |
|
| Related Parties Transactions (Details) - Schedule of purchases from related parties [Line Items] | ||||
| Purchase of fuel, fishing nets and other on board consumables | $ 6,921,580 | $ 258,505 | $ 15,759,988 | $ 1,323,225 |
| Purchase of leasing | 852 | 3,038 | 852 | 9,011 |
| Fujian Jingfu Marine Fishery Development Co., Ltd [Member] | ||||
| Related Parties Transactions (Details) - Schedule of purchases from related parties [Line Items] | ||||
| Purchase of fuel, fishing nets and other on board consumables | 732,523 | 1,718,149 | ||
| From Zhiyan Lin [Member] | ||||
| Related Parties Transactions (Details) - Schedule of purchases from related parties [Line Items] | ||||
| From Zhiyan Lin | 2,769 | 2,769 | ||
| Global Deep Ocean [Member] | ||||
| Related Parties Transactions (Details) - Schedule of purchases from related parties [Line Items] | ||||
| Purchase of fuel, fishing nets and other on board consumables | 122,333 | 203,784 | ||
| Purchase of inventory for sale | 6,202,532 | |||
| Fuzhou Honglong Ocean Fishery Co., Ltd.[Member] | ||||
| Related Parties Transactions (Details) - Schedule of purchases from related parties [Line Items] | ||||
| Purchase of fuel, fishing nets and other on board consumables | 6,066,724 | 255,736 | 13,838,055 | 1,320,456 |
| Huna Lin [Member] | ||||
| Related Parties Transactions (Details) - Schedule of purchases from related parties [Line Items] | ||||
| Purchase of vessel maintenance service, docking and freight | $ 4,734,671 | $ 3,851,681 | $ 11,177,091 | $ 7,262,932 |
Bank Loans (Details) - USD ($) |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
Sep. 30, 2021 |
Sep. 30, 2020 |
|
| Property, Plant and Equipment [Line Items] | ||||
| Weighted average interest rate for short-term bank loans | 6.00% | 4.00% | 6.00% | 4.00% |
| Weighted average interest rate for long-term bank loans | 4.30% | 4.80% | 4.30% | 4.80% |
| Interest expense | $ 4,055,798 | $ 4,220,271 | $ 11,720,712 | $ 11,064,621 |
| Construction-in-Progress [Member] | ||||
| Property, Plant and Equipment [Line Items] | ||||
| Interest costs capitalized | $ 183,747 | $ 1,192,672 | ||
Bank Loans (Details) - Schedule of short-term bank loans - USD ($) |
Sep. 30, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Short-term Debt [Line Items] | ||
| Short-term bank loans | $ 55,509,299 | $ 52,414,596 |
| Due on January 21, 2021 [Member] | The Export-Import Bank of China [Member] | ||
| Short-term Debt [Line Items] | ||
| Short-term bank loans | 41,686,462 | |
| Due on October 29, 2021 [Member] | Fujian Haixia Bank [Member] | ||
| Short-term Debt [Line Items] | ||
| Short-term bank loans | 10,793,475 | 10,728,134 |
| Due on January 19, 2022 [Member] | Fujian Haixia Bank [Member] | ||
| Short-term Debt [Line Items] | ||
| Short-term bank loans | 29,296,574 | |
| Due on January 20, 2022 [Member] | Fujian Haixia Bank [Member] | ||
| Short-term Debt [Line Items] | ||
| Short-term bank loans | $ 15,419,250 |
Bank Loans (Details) - Schedule of short-term bank loans (Parentheticals) |
9 Months Ended |
|---|---|
Sep. 30, 2021 | |
| Due on January 21, 2021 [Member] | The Export-Import Bank of China [Member] | |
| Short-term Debt [Line Items] | |
| Annual interest rate | 3.88% |
| Debt instrument, maturity date | Jan. 21, 2021 |
| Short-term debt description | Guaranteed by Pin Lin, Xinrong Zhuo and Hong Long, pledged deposits provided by Hong Long amounted to RMB 42 million. |
| Due on October 29, 2021 [Member] | Fujian Haixia Bank [Member] | |
| Short-term Debt [Line Items] | |
| Annual interest rate | 6.09% |
| Debt instrument, maturity date | Oct. 29, 2021 |
| Short-term debt description | 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. |
| Debt ratio of borrower | 100.00% |
| Due on January 19, 2022 [Member] | Fujian Haixia Bank [Member] | |
| Short-term Debt [Line Items] | |
| Annual interest rate | 6.09% |
| Debt instrument, maturity date | Jan. 19, 2022 |
| Short-term debt description | 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. |
| Debt ratio of borrower | 80.00% |
| Due on January 20, 2022 [Member] | Fujian Haixia Bank [Member] | |
| Short-term Debt [Line Items] | |
| Annual interest rate | 6.09% |
| Debt instrument, maturity date | Jan. 20, 2022 |
| Short-term debt description | 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. |
| Debt ratio of borrower | 80.00% |
Bank Loans (Details) - Schedule of long-term bank loans - USD ($) |
Sep. 30, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Debt Instrument [Line Items] | ||
| Total long-term bank loans | $ 320,802,886 | $ 285,103,665 |
| Less: current portion | (70,676,635) | (39,987,577) |
| Long-term bank loans, non-current portion | 250,126,251 | 245,116,088 |
| Due on January 30, 2023 [Member] | The Export-Import Bank of China [Member] | ||
| Debt Instrument [Line Items] | ||
| Total long-term bank loans | 2,312,887 | 2,298,886 |
| Due on November 27, 2023 [Member] | China Development Bank [Member] | ||
| Debt Instrument [Line Items] | ||
| Total long-term bank loans | 3,546,427 | 4,291,254 |
| Due on March 28, 2025 [Member] | The Export-Import Bank of China [Member] | ||
| Debt Instrument [Line Items] | ||
| Total long-term bank loans | 46,257,748 | 58,238,440 |
| Due on August 21, 2026 [Member] | The Export-Import Bank of China [Member] | ||
| Debt Instrument [Line Items] | ||
| Total long-term bank loans | 48,570,636 | 57,931,922 |
| Due on October 21, 2025 [Member] | The Export-Import Bank of China [Member] | ||
| Debt Instrument [Line Items] | ||
| Total long-term bank loans | 45,101,304 | 49,809,192 |
| Due on July 30, 2026 [Member] | China Development Bank [Member] | ||
| Debt Instrument [Line Items] | ||
| Total long-term bank loans | 9,482,838 | 10,383,301 |
| Due on April 21, 2028 [Member] | The Export-Import Bank of China [Member] | ||
| Debt Instrument [Line Items] | ||
| Total long-term bank loans | 20,045,024 | 19,923,677 |
| Due on December 21, 2028 [Member] | The Export-Import Bank of China [Member] | ||
| Debt Instrument [Line Items] | ||
| Total long-term bank loans | 21,586,949 | 21,456,268 |
| Due on January 15, 2023 [Member] | The Export-Import Bank of China [Member] | ||
| Debt Instrument [Line Items] | ||
| Total long-term bank loans | 25,006,939 | |
| Due on August 21, 2022 [Member] | The Export-Import Bank of China [Member] | ||
| Debt Instrument [Line Items] | ||
| Total long-term bank loans | 20,450,317 | 21,000,000 |
| Due on February 21, 2023 [Member] | The Export-Import Bank of China [Member] | ||
| Debt Instrument [Line Items] | ||
| Total long-term bank loans | 10,875,630 | |
| Due on June 21, 2028 [Member] | The Export-Import Bank of China [Member] | ||
| Debt Instrument [Line Items] | ||
| Total long-term bank loans | 21,741,142 | |
| Duo on July 01, 2023 [Member] | The Export-Import Bank of China [Member] | ||
| Debt Instrument [Line Items] | ||
| Total long-term bank loans | 9,589,808 | |
| Due on June 27, 2025 [Member] | Bank of Communications [Member] | ||
| Debt Instrument [Line Items] | ||
| Total long-term bank loans | $ 36,235,237 | $ 39,770,725 |
Bank Loans (Details) - Schedule of long-term bank loans (Parentheticals) |
9 Months Ended | |
|---|---|---|
Sep. 30, 2021 |
Dec. 31, 2020 |
|
| Due on January 30, 2023 [Member] | The Export-Import Bank of China [Member] | ||
| Debt Instrument [Line Items] | ||
| Annual interest rate | 4.90% | 4.90% |
| Debt instrument, maturity date | Jan. 30, 2023 | |
| Long-term debt, description | Guaranteed by Xinrong Zhuo and Ping Lin and collateralized by 2 fishing vessels | |
| Due on November 27, 2023 [Member] | China Development Bank [Member] | ||
| Debt Instrument [Line Items] | ||
| Annual interest rate | 5.145% | 5.145% |
| Debt instrument, maturity date | Nov. 27, 2023 | |
| Long-term debt, description | Guaranteed by Xinrong Zhuo, Honghong Zhuo, Mr. and Mrs. Zhiyan Lin and 17 fishing vessels | |
| Debt ratio of borrower | 80.00% | |
| Due on March 28, 2025 [Member] | The Export-Import Bank of China [Member] | ||
| Debt Instrument [Line Items] | ||
| Annual interest rate | 4.949% | 4.949% |
| Debt instrument, maturity date | Mar. 28, 2025 | |
| Long-term debt, description | Guaranteed by Hong Long, Xinrong Zhuo, Ping Lin and collateralized by 20 fishing vessels. | |
| Due on August 21, 2026 [Member] | The Export-Import Bank of China [Member] | ||
| Debt Instrument [Line Items] | ||
| Annual interest rate | 4.70% | 4.70% |
| Debt instrument, maturity date | Aug. 21, 2026 | |
| Long-term debt, description | 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. | |
| Due on October 21, 2025 [Member] | The Export-Import Bank of China [Member] | ||
| Debt Instrument [Line Items] | ||
| Annual interest rate | 4.70% | 4.70% |
| Debt instrument, maturity date | Oct. 21, 2025 | |
| Long-term debt, description | 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. | |
| Due on July 30, 2026 [Member] | China Development Bank [Member] | ||
| Debt Instrument [Line Items] | ||
| Annual interest rate | 5.39% | 5.39% |
| Debt instrument, maturity date | Jul. 30, 2026 | |
| Long-term debt, description | 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 | |
| Debt ratio of borrower | 80.00% | |
| Due on April 21, 2028 [Member] | The Export-Import Bank of China [Member] | ||
| Debt Instrument [Line Items] | ||
| Annual interest rate | 4.65% | 4.65% |
| Debt instrument, maturity date | Apr. 21, 2028 | |
| Long-term debt, description | 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. | |
| Due on December 21, 2028 [Member] | The Export-Import Bank of China [Member] | ||
| Debt Instrument [Line Items] | ||
| Annual interest rate | 4.65% | 4.65% |
| Debt instrument, maturity date | Dec. 21, 2028 | |
| Long-term debt, description | 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. | |
| Due on January 15, 2023 [Member] | The Export-Import Bank of China [Member] | ||
| Debt Instrument [Line Items] | ||
| Annual interest rate | 4.00% | 4.00% |
| Debt instrument, maturity date | Jan. 15, 2023 | |
| Long-term debt, description | Guaranteed by Pin Lin, Xinrong Zhuo and Hong Long, and collateralized by two related parties' investments in equity interest of one PRC local banks. | |
| Due on August 21, 2022 [Member] | The Export-Import Bank of China [Member] | ||
| Debt Instrument [Line Items] | ||
| Annual interest rate | 2.20% | 2.20% |
| Debt instrument, maturity date | Aug. 21, 2022 | |
| Long-term debt, description | Guaranteed by Hong Long, Xinrong Zhuo and Pin Lin. | |
| Due on February 21, 2023 [Member] | The Export-Import Bank of China [Member] | ||
| Debt Instrument [Line Items] | ||
| Annual interest rate | 2.20% | 2.20% |
| Debt instrument, maturity date | Feb. 21, 2023 | |
| Long-term debt, description | 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. | |
| Due on June 21, 2028 [Member] | The Export-Import Bank of China [Member] | ||
| Debt Instrument [Line Items] | ||
| Annual interest rate | 2.20% | 2.20% |
| Debt instrument, maturity date | Jun. 21, 2028 | |
| Long-term debt, description | Guaranteed by Lin 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. | |
| Duo on July 01, 2023 [Member] | The Export-Import Bank of China [Member] | ||
| Debt Instrument [Line Items] | ||
| Annual interest rate | 2.20% | 2.20% |
| Debt instrument, maturity date | Jul. 01, 2023 | |
| Long-term debt, description | Guaranteed by Pin Lin, Xinrong Zhuo | |
| Due on June 27, 2025 [Member] | Bank of Communications [Member] | ||
| Debt Instrument [Line Items] | ||
| Annual interest rate | 4.65% | 4.65% |
| Debt instrument, maturity date | Jun. 27, 2025 | |
| Long-term debt, description | Guaranteed by Xinrong Zhuo, Huanghai Shipbuilding Co., Ltd. and Fujian Jingfu Ocean Fishery Development Co., Ltd.. |
Bank Loans (Details) - Schedule of future maturities of long-term bank loans - USD ($) |
Sep. 30, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Schedule of future maturities of long-term bank loans [Abstract] | ||
| 2022 | $ 70,676,635 | |
| 2023 | 107,035,617 | |
| 2024 | 64,491,011 | |
| 2025 | 56,087,520 | |
| 2026 | 16,498,597 | |
| Thereafter | 6,013,506 | |
| Total long-term bank loans | 320,802,886 | $ 285,103,665 |
| Less: current portion | (70,676,635) | (39,987,577) |
| Long-term liability | $ 250,126,251 | $ 245,116,088 |
Accrued Liabilities and Other Payables (Details) - Schedule of accrued liabilities and other payables - USD ($) |
Sep. 30, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Schedule of accrued liabilities and other payables [Abstract] | ||
| Accrued salaries and related benefits | $ 19,511,877 | $ 11,440,174 |
| Accrued interest | 478,617 | 462,304 |
| Other | 924,138 | 249,155 |
| Accrued liabilities and other payables | $ 20,914,632 | $ 12,151,633 |
Share Capital (Details) - USD ($) |
1 Months Ended | ||||
|---|---|---|---|---|---|
Mar. 08, 2021 |
Jan. 08, 2021 |
May 27, 2021 |
Sep. 30, 2021 |
Dec. 31, 2020 |
|
| Share Capital (Details) [Line Items] | |||||
| Ordinary shares | 3,625,954 | ||||
| Convertible preferred shares, par value | $ 0.001 | $ 0.001 | |||
| stated value, per share | $ 1.31 | ||||
| Aggregate consideration | $ 1,450,000 | ||||
| Warrants to purchase | 2,719,464 | ||||
| Exercise price, per share | $ 1.31 | ||||
| Series A Preferred Stock [Member] | |||||
| Share Capital (Details) [Line Items] | |||||
| Ordinary shares | 4,000,000 | ||||
| Convertible preferred shares, par value | $ 0.001 | ||||
| Purchase price | 1 | ||||
| stated value, per share | $ 1.1 | ||||
| Redeemed shares | 590,922 | ||||
| Repurchased ordinary shares | 793,192 |
Share Capital (Details) - Schedule of share capital |
9 Months Ended | |||||||
|---|---|---|---|---|---|---|---|---|
|
Sep. 30, 2021
USD ($)
shares
| ||||||||
| Preferred Shares [Member] | ||||||||
| Share Capital (Details) - Schedule of share capital [Line Items] | ||||||||
| Number of shares, balance at beginning | shares | ||||||||
| Balance at beginning | $ | ||||||||
| Number of shares, Issuance of preferred shares | shares | 4,000,000 | [1] | ||||||
| Issuance of preferred shares | $ | $ 4,000 | [1] | ||||||
| Number of shares conversion from preferred shares to ordinary shares | shares | (3,409,078) | |||||||
| Conversion of preferred shares to ordinary shares | $ | $ (3,409) | |||||||
| Number of shares, Redemption of preferred shares | shares | (590,922) | [2] | ||||||
| Redemption of preferred shares | $ | $ (591) | [2] | ||||||
| Number of shares, balance at beginning | shares | ||||||||
| Balance | $ | ||||||||
| Ordinary Shares [Member] | ||||||||
| Share Capital (Details) - Schedule of share capital [Line Items] | ||||||||
| Number of shares, balance at beginning | shares | 79,302,428 | |||||||
| Balance at beginning | $ | $ 79,302 | |||||||
| Number of shares, Issuance of shares | shares | 3,625,954 | [3] | ||||||
| Issuance of shares | $ | $ 3,626 | [3] | ||||||
| Number of shares conversion from preferred shares to ordinary shares | shares | 3,805,775 | |||||||
| Conversion of preferred shares to ordinary shares | $ | $ 3,806 | |||||||
| Number of shares, Repurchase of ordinary shares | shares | (793,192) | [2] | ||||||
| Repurchase of ordinary shares | $ | $ (793) | [2] | ||||||
| Number of shares, balance at beginning | shares | 85,940,965 | |||||||
| Balance | $ | $ 85,941 | |||||||
| ||||||||
Certain Risks and Concentrations (Details) |
3 Months Ended | 9 Months Ended | 12 Months Ended | ||
|---|---|---|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
Sep. 30, 2021 |
Sep. 30, 2020 |
Dec. 31, 2020 |
|
| Certain Risks and Concentrations (Details) [Line Items] | |||||
| Outstanding accounts receivable | 10.00% | 10.00% | 9.00% | 10.00% | |
| Percentage of total outstanding accounts payable related parties | 87.40% | ||||
| Accounts Payable Related Party [Member] | |||||
| Certain Risks and Concentrations (Details) [Line Items] | |||||
| Number of suppliers | 2 | ||||
| Accounts Payable Related Party One [Member] | |||||
| Certain Risks and Concentrations (Details) [Line Items] | |||||
| Number of suppliers | 3 | ||||
| Accounts Payable Related Party [Member] | |||||
| Certain Risks and Concentrations (Details) [Line Items] | |||||
| Number of customers | Three | ||||
| Major Customers [Member] | |||||
| Certain Risks and Concentrations (Details) [Line Items] | |||||
| Outstanding accounts receivable | 10.00% | ||||
| Major Customers [Member] | Accounts Payable Related Party [Member] | |||||
| Certain Risks and Concentrations (Details) [Line Items] | |||||
| Outstanding accounts receivable | 10.00% | ||||
| Percentage of total outstanding accounts payable related parties | 36.40% | ||||
| Major Suppliers [Member] | Accounts Payable Related Party [Member] | |||||
| Certain Risks and Concentrations (Details) [Line Items] | |||||
| Outstanding accounts receivable | 10.00% | 10.00% | 20.00% | 20.00% | |
| Major Suppliers [Member] | Accounts Payable Related Party One [Member] | |||||
| Certain Risks and Concentrations (Details) [Line Items] | |||||
| Outstanding accounts receivable | 10.00% | ||||
| Percentage of total outstanding accounts payable related parties | 68.60% | ||||
| Major Suppliers Two [Member] | Accounts Payable Related Party [Member] | |||||
| Certain Risks and Concentrations (Details) [Line Items] | |||||
| Outstanding accounts receivable | 10.00% | ||||
| Percentage of total outstanding accounts payable related parties | 80.80% | ||||
Certain Risks and Concentrations (Details) - Schedule of major customers |
3 Months Ended | 9 Months Ended | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
Sep. 30, 2021 |
Sep. 30, 2020 |
|||||||
| Customer A [Member] | ||||||||||
| Concentration Risk [Line Items] | ||||||||||
| Concentration risk, Percentage | 23.00% | [1] | 20.00% | |||||||
| Customer B [Member] | ||||||||||
| Concentration Risk [Line Items] | ||||||||||
| Concentration risk, Percentage | 17.00% | [1] | 17.00% | [1] | ||||||
| Customer C [Member] | ||||||||||
| Concentration Risk [Line Items] | ||||||||||
| Concentration risk, Percentage | [1] | 18.00% | [1] | 14.00% | ||||||
| Customer D [Member] | ||||||||||
| Concentration Risk [Line Items] | ||||||||||
| Concentration risk, Percentage | [1] | 14.00% | [1] | 11.00% | ||||||
| Customer E [Member] | ||||||||||
| Concentration Risk [Line Items] | ||||||||||
| Concentration risk, Percentage | [1] | 10.00% | [1] | 14.00% | ||||||
| Customer F [Member] | ||||||||||
| Concentration Risk [Line Items] | ||||||||||
| Concentration risk, Percentage | [1] | 10.00% | [1] | 11.00% | ||||||
| ||||||||||
Certain Risks and Concentrations (Details) - Schedule of major suppliers |
3 Months Ended | 9 Months Ended | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
Sep. 30, 2021 |
Sep. 30, 2020 |
|||||||
| Supplier A [Member] | ||||||||||
| Certain Risks and Concentrations (Details) - Schedule of major suppliers [Line Items] | ||||||||||
| Concentration risk, Percentage | 21.00% | 40.00% | 39.00% | 38.00% | ||||||
| Supplier B [Member] | ||||||||||
| Certain Risks and Concentrations (Details) - Schedule of major suppliers [Line Items] | ||||||||||
| Concentration risk, Percentage | 10.00% | 11.00% | 10.00% | 11.00% | ||||||
| Supplier C [Member] | ||||||||||
| Certain Risks and Concentrations (Details) - Schedule of major suppliers [Line Items] | ||||||||||
| Concentration risk, Percentage | [1] | [1] | [1] | 20.00% | ||||||
| Supplier D [Member] | ||||||||||
| Certain Risks and Concentrations (Details) - Schedule of major suppliers [Line Items] | ||||||||||
| Concentration risk, Percentage | 10.00% | [1] | [1] | [1] | ||||||
| Supplier E [Member] | ||||||||||
| Certain Risks and Concentrations (Details) - Schedule of major suppliers [Line Items] | ||||||||||
| Concentration risk, Percentage | [1] | 10.00% | [1] | [1] | ||||||
| Supplier F [Member] | ||||||||||
| Certain Risks and Concentrations (Details) - Schedule of major suppliers [Line Items] | ||||||||||
| Concentration risk, Percentage | [1] | 10.00% | [1] | [1] | ||||||
| ||||||||||
Commitments and Contingencies (Details) - USD ($) |
9 Months Ended | 12 Months Ended |
|---|---|---|
Sep. 30, 2021 |
Dec. 31, 2020 |
|
| Commitments and Contingencies Disclosure [Abstract] | ||
| Severance payments | $ 10,000 | $ 10,000 |
Subsequent Events (Details) - Subsequent Event [Member] - USD ($) |
1 Months Ended | ||||||
|---|---|---|---|---|---|---|---|
Nov. 10, 2021 |
Oct. 22, 2021 |
Oct. 21, 2021 |
Jul. 30, 2026 |
Jul. 01, 2023 |
Oct. 28, 2022 |
Oct. 28, 2021 |
|
| Subsequent Events (Details) [Line Items] | |||||||
| Long-term bank loan | $ 5,000,000 | ||||||
| Amount received as subsidy | $ 309,445 | $ 724,462 | |||||
| Short term loan amount | 1,900,000 | ||||||
| Loan amount | $ 1,800,000 | $ 2,100,000 | |||||
| Annual interest rate | 2.20% | ||||||
| Repaid short-term bank loan | $ 800,000 | ||||||
| Export-Import Bank of China [Member] | |||||||
| Subsequent Events (Details) [Line Items] | |||||||
| Long-term bank loan | 2,200,000 | ||||||
| Annual interest rate | 5.12% | 2.20% | |||||
| Repaid a long-term bank loan | 9,500,000 | ||||||
| Fujian Haixia Bank [Member] | |||||||
| Subsequent Events (Details) [Line Items] | |||||||
| Long-term bank loan | 10,800,000 | ||||||
| Loan amount | $ 10,800,000 | ||||||
| Annual interest rate | 6.09% | ||||||