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 Peoples Republic of China (PRC). In connection with its initial business combination, in February 2013, CGEI changed its name to Pingtan Marine Enterprise Ltd. On October 24, 2012, CGEI and China Dredging Group Co., Ltd (CDGC or China Dredging) entered into a Merger Agreement providing for the combination of CGEI and CDGC and on October 24, 2012, CGEI also acquired all of the outstanding capital shares and other equity interests of Merchant Supreme Co., Ltd. (Merchant Supreme), a company incorporated on June 25, 2012, in the British Virgin Islands (BVI), as per a Share Purchase Agreement. On February 25, 2013, the merger between the Company, CDGC and Merchant Supreme became effective and has been accounted for as a reverse merger and recapitalization since the common shareholders of CDGC and Merchant Supreme (i) owned a majority of the outstanding ordinary shares of the Company immediately following the completion of the transaction, and (ii) have significant influence and the ability to elect or appoint or to remove a majority of the members of the governing body of the combined entity. In accordance with the provision of Financial Accounting Standards Board Accounting Standards Codification (ASC) 805-40, CDGC and Merchant Supreme are deemed the accounting acquirers and the Company is the legal acquirer in the transaction and, consequently, the transaction is treated as a recapitalization of the Company. Accordingly, the assets and liabilities and the historical operations that are reflected in the consolidated financial statements are those of CDGC, Merchant Supreme and their subsidiaries and are recorded at the historical cost basis. The Companys assets, liabilities and results of operations were consolidated with the assets, liabilities and results of operations of CDGC, Merchant Supreme and their subsidiaries subsequent to the acquisition date of February 25, 2013. Following the completion of the business combination which became effective on February 25, 2013, CDGC and Merchant Supreme became the wholly-owned subsidiaries of the Company. The ordinary shares, par value $0.001 per share, are listed on The NASDAQ Capital Market under the symbol PME. In order to place increased focus on the fishing business and pursue more effective growth opportunities, the Company decided to exit and sell the specialized dredging services operated by China Dredging. The Company completed the sale of CDGC and its subsidiaries on December 4, 2013. On February 9, 2015, the Company terminated its existing Variable Interest Entity (VIE) agreements, pursuant to an Agreement of Termination dated February 9, 2015, entered into by and among Ms. Honghong Zhuo, Mr. Zhiyan Lin (each a shareholder of Fujian Provincial Pingtan County Ocean Fishing Group Co., Ltd (Pingtan Fishing), together the Pingtan Fishings Shareholders), Pingtan Fishing and Pingtan Guansheng Ocean Fishing Co., Ltd. (Pingtan Guansheng). On February 9, 2015, the Pingtan Fishings 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 Fishings 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 Companys subsidiaries which are included in these consolidated financial statements as of March 31, 2020 are as follows: Name of subsidiaries Place and date of incorporation Percentage of ownership Principal activities Merchant Supreme Co., Ltd. (Merchant Supreme) BVI, June 25, 2012 100% held by PME Intermediate holding company Prime Cheer Corporation Ltd. (Prime Cheer) Hong Kong, May 3, 2012 100% held by Merchant Supreme Intermediate holding company Pingtan Guansheng Ocean Fishing Co., Ltd. (Pingtan Guansheng) PRC, October 12, 2012 100% held by Prime Cheer Intermediate holding company Fujian Heyue Marine Fishing Development Co., Ltd. (Fujian Heyue) PRC, January 27, 2015 100% held by Pingtan Guansheng Intermediate holding company Fujian Provincial Pingtan County Fishing Group Co., Ltd. (Pingtan Fishing) PRC, February 27, 1998 92% held by Fujian Heyue Oceanic fishing Pingtan Dingxin Fishing Information Consulting Co., Ltd. (Pingtan Dingxin) PRC, October 23, 2012 100% held by Pingtan Fishing Dormant Pingtan Yikang Global Fishery Co., Ltd. (Yikang Fishery) PRC, September 14, 2017 100% held by Pingtan Fishing Dormant Pingtan Shinsilkroad Fishery Co., Ltd. (Shinsilkroad Fishery) PRC, September 14, 2017 100% held by Pingtan Fishing Dormant Fuzhou Howcious Investment Co., Ltd (Howcious Investment) PRC, September 5, 2017 100% held by Pingtan Fishing Dormant Pingtan Ocean Fishery Co., Ltd (Ocean Fishery) PRC, July 21, 2017 100% held by Pingtan Fishing Dormant Fujian Heyue, through its PRC subsidiary, Pingtan Fishing, engages in ocean fishing with its owned and controlled vessels within the Indian Exclusive Economic Zone, the international waters and Arafura Sea of Indonesia. The Company had a working capital deficit of $1,572,148 as of March 31, 2020. In order to mitigate its liquidity risk, the Company plans to rely on the proceeds from loans from banks and/or financial institutions to increase working capital in order to meet capital demands, and the government subsidies for modification and rebuilding project and reimbursement of certain operating expenses. In addition, Mr. Zhuo, the Chief Executive Officer and Chairman of the Board, will continue to provide financial support to the Company when necessary. The Company meets its day-to-day working capital requirements through cash flow provided by operations, bank loans and related parties advances. The Indonesian governments moratorium on fishing licenses renewals creates uncertainty over fishing operations in Indonesian waters. The Companys forecasts and projections show that the Company has adequate resources to continue in operational existence to meet its obligations in the twelve months following the date of this filing, considering operations in Indian waters and international waters and consideration of opportunities in new fishing territories. Also, in the past two years, the Company has upgraded 57 fishing vessels, 2 transport vessels and another 10 fishing vessels are modification and rebuilding project, the deployment of more vessels in operation will generate more revenue and cash inflows to the Company. In addition, the Company receives subsidy for modification and rebuilding project and reimbursement of certain operating expenses from government, as an encouragement of the development of ocean fishing industry.