UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2013

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-35192

PINGTAN MARINE ENTERPRISE LTD.

(Exact name of registrant as specified in its charter)

Cayman Islands		N/A
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

18/F, Zhongshan Building A,

No. 154 Hudong Road

Fuzhou, P.R.C. 350001

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: 86-591-8727-1266

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated filer ¨	Accelerated filer ¨	Non-accelerated filer ¨	Smaller reporting company x
		(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

As of August 8, 2013, the outstanding number of shares of the registrant’s common stock, par value $0.01 per share, was 79,055,053.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements contained in this report, and the information incorporated by reference herein, which reflect our current views with respect to future events and financial performance, and any other statements of a future or forward-looking nature, constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements give current expectations or forecasts of future events. Our forward-looking statements include, but are not limited to, statements regarding our expectations, hopes, beliefs, intentions or strategies regarding the future. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking.

The forward-looking statements contained or incorporated by reference in this report are based on our current expectations and beliefs concerning future developments and their potential effects on us and speak only as of the date of such statement. There can be no assurance that future developments affecting us will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, those factors described under the heading “Risk Factors.” Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

References in this report to “we,” “us” or “our company” refer to Pingtan Marine Enterprise Ltd. References in this report to our “public shares” are to our ordinary shares sold as part of the units in our initial public offering (whether they are purchased in our initial public offering or thereafter in the open market) and references to “public stockholders” refer to the holders of our public shares, including our initial stockholders (as defined below) to the extent our initial stockholders purchased public shares, provided that each initial stockholder’s status as a “public stockholder” shall only exist with respect to such public shares.

PINGTAN MARINE ENTERPRISE LTD.

TABLE OF CONTENTS

PART I.	FINANCIAL INFORMATION	1

ITEM 1.	FINANCIAL STATEMENTS	1

	Consolidated Balance Sheets at June 30, 2013 (Unaudited) and December 31, 2012	1
	Consolidated Statements of Income for the Three and Six Months Ended June 30, 2013 and 2012 (Unaudited)	2
	Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2013 and 2012 (Unaudited)	3
	Consolidated Statement of Shareholders’ Equity for the Six Months Ended June 30, 2013 (Unaudited)	4
	Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2013 and 2012 (Unaudited)	5
	Notes to Unaudited Consolidated Financial Statements	7

ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	55

	Special Note Regarding Forward-Looking Statements	55
	Overview	55
	Results of Operations	60
	Liquidity and Capital Resources	67
	Recent Accounting Pronouncements	69

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	69

ITEM 4.	CONTROLS AND PROCEDURES	69

PART II.	OTHER INFORMATION	70

ITEM 1.	LEGAL PROCEEDINGS	70
ITEM 1A.	RISK FACTORS	70
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	70
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	70
ITEM 4.	MINE SAFETY DISCLOSURES	70
ITEM 5.	OTHER INFORMATION	70
ITEM 6.	EXHIBITS	70

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

PINGTAN MARINE ENTERPRISE LTD.

Consolidated Balance Sheets

	June 30, 2013		December 31, 2012
	(Unaudited)		(A)
Assets
Current assets
Cash	$	20,806,414	$	175,488,715
Notes receivable (banker's acceptances) transferred from related parties		-		3,645,817
Accounts receivable - third parties		18,603,522		34,924,685
Cost and estimated earnings in excess of billings on contracts in progress		8,341,705		8,133,021
Other receivables		10,661,783		34,074
Advance to related parties		-		49,802,821
Prepaid expenses		24,000		410,966
Inventories		7,344,328		5,223,984
Total current assets		65,781,752		277,664,083

Other assets
Prepaid other deposits		-		4,430
Prepaid dredger deposits		23,625,640		23,274,105
Prepaid fishing vessel deposits		410,017,680		-
Security deposits		18,607,228		25,087,880
Long-term investment		3,421,644		3,328,789
Deposit on setting up of Joint Venture		-		6,090,302
Deposit for BT project		67,862,613		66,852,860
Property, plant and equipment, net		93,958,771		81,707,388
Total other assets		617,493,576		206,345,754
Total assets	$	683,275,328	$	484,009,837

Liabilities and equity
Current liabilities
Accounts payable - third parties	$	8,875,293	$	3,761,149
- related parties		-		5,765,632
Receipt in advance - third parties		2,452,945		-
- related parties		-		12,681,102
Short-term loans		20,144,510		25,169,260
Long-term loans - current portion		11,381,041		8,094,308
Income tax payable		5,395,826		5,333,519
Accrued liabilities and other payables		13,046,446		3,738,134
Advance from a shareholder		480,472		714,177
Derivative liability		-		1,764,249
Deferred income		9,522,925		-
Total current liabilities		71,299,458		67,021,530

Other liabilities
Note payable		155,166,195		-
Long-term loans, net of current portion		12,195,718		16,689,321
Total other liabilities		167,361,913		16,689,321
Total liabilities		238,661,371		83,710,851

Shareholders' equity
Ordinary shares, 225,000,000 shares authorized with $0.001 authorized with $0.001 per share; 79,055,053 shares issued and outstanding as of June 30, 2013 and December 31, 2012		79,055		79,055
Additional paid-in capital		141,381,098		141,381,098
Statutory reserves		19,770,660		19,386,642
Retained earnings		255,400,496		217,224,220
Accumulated other comprehensive income		27,982,648		22,227,971
Total shareholders’ equity		444,613,957		400,298,986
Total liabilities and shareholders' equity	$	683,275,328	$	484,009,837

(A)

Represents the consolidation retrospectively restated as if Pingtan Marine Enterprise Ltd. (formerly known as China Growth Equity Investment Ltd.) completed its merger with China Dredging Group Co., Ltd. and the share purchase of Merchant Supreme Co., Ltd. on January 1, 2012 rather than on February 25, 2013.

See accompanying notes to unaudited consolidated financial statements.

PINGTAN MARINE ENTERPRISE LTD.

Consolidated Statements of Income

(unaudited)

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2013		2012 (A)		2013		2012 (A)

Revenue	$	71,909,988	$	69,925,881	$	118,318,535	$	144,981,615

Cost of revenue		(37,453,696)		(36,743,216)		(67,768,326)		(74,474,445)

Gross profit		34,456,292		33,182,665		50,550,209		70,507,170

Selling and marketing expenses		(174,046)		(252,168)		(368,734)		(461,842)

General and administrative expenses		(3,174,413)		(2,549,009)		(4,582,228)		(5,021,724)

Operating income		31,107,833		30,381,488		45,599,247		65,023,604

Other income/(expense)
Dividend income		69,071		-		69,071		-
Interest income		216,768		183,026		386,900		333,295
Interest expenses		(914,419)		(894,036)		(1,599,796)		(1,358,650)
Subsidy income		205		-		35,592		-
Sundry income		11		-		2,014		-
Gain on investment		-		15,126		-		15,126
Loss on foreign exchange, net		(428,389)		(82,133)		(220,405)		(30,595)
(Loss)/gain on derivative		-		(728,720)		1,764,249		(921,677)
Total other income/(expense)		(1,056,753)		(1,506,737)		437,625		(1,962,501)

Income before income taxes		30,051,080		28,874,751		46,036,872		63,061,103

Income tax expense		(5,273,327)		(7,533,940)		(7,476,578)		(14,863,836)

Net income	$	24,777,753	$	21,340,811	$	38,560,294	$	48,197,267

Earnings per ordinary share
- Basic and diluted	$	0.31	$	0.27	$	0.49	$	0.61

Weighted average number of ordinary shares outstanding
- Basic and diluted		79,055,053		79,055,053		79,055,053		79,055,053

(A)

See accompanying notes to unaudited consolidated financial statements.

PINGTAN MARINE ENTERPRISE LTD.

Consolidated Statements of Comprehensive Income

(unaudited)

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2013		2012 (A)		2013		2012 (A)

Net income	$	24,777,753	$	21,340,811	$	38,560,294	$	48,197,267

Other comprehensive income
Foreign currency translation gain/(loss)		4,202,178		(3,020,912)		5,754,677		(2,928,277)
Total comprehensive income	$	28,979,931	$	18,319,899	$	44,314,971	$	45,268,990

(A)

See accompanying notes to unaudited consolidated financial statements.

PINGTAN MARINE ENTERPRISE LTD.

Consolidated Statement of Changes in Shareholders’ Equity

(unaudited)

	Ordinary Shares,										Accumulated
	with no Par Value				Additional						other		Total
	Number of				paid-in		Statutory			Retained	comprehensive		shareholders'
	Shares		Amount		capital		reserves		earnings		income		equity

Balance as of January 1, 2013 (A)		79,055,053	$	79,055	$	141,381,098	$	19,386,642	$	217,224,220	$	22,227,971	$	400,298,986

Net income		-		-		-		-		38,560,294		-		38,560,294

Appropriation to statutory reserves		-		-		-		384,018		(384,018)		-		-

Foreign currency translation gain		-		-		-		-		-		5,754,677		5,754,677

Balance as of June 30, 2013		79,055,053	$	79,055	$	141,381,098	$	19,770,660	$	255,400,496	$	27,982,648	$	444,613,957

(A)

See accompanying notes to unaudited consolidated financial statements.

PINGTAN MARINE ENTERPRISE LTD.

Consolidated Statements of Cash Flows

(unaudited)

	For the Six Months Ended June 30,
	2013		2012 (A)
Cash flows from operating activities
Net income	$	38,560,294	$	48,197,267
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation of property, plant and equipment		5,347,650		5,555,301
(Gain)/loss on derivative		(1,764,249)		921,677
Available-for-sale financial instrument fair value adjustment		-		(721)

Changes in operating assets and liabilities
Accounts receivable - third parties		16,875,326		(14,880)
- related parties		-		(1,688,997)
Cost and estimated earnings in excess of billings on contracts in progress		(85,235)		(5,749,657)
Other receivables		(2,957,500)		(4,526,907)
Prepaid expenses		394,949		5,165,650
Inventories		(2,024,538)		951,295
Accounts payable - third parties		5,020,682		1,715,489
- related parties *		331,367		907,893
Receipt in advance - third parties		2,435,603		(1,064,711)
- related parties		(12,942,680)		-
Income tax payable		(18,121)		(712,176)
Accrued liabilities and other payables		9,180,577		(177,157)
Net cash provided by operating activities		58,354,125		49,479,366

Cash flows from investing activities
Deposit paid for acquisition of fishing vessels		(200,000,000)		-
Changes in security deposits		6,811,085		-
Payment for long-term investment		-		(2,992,116)
Proceeds from disposition of short-term investment		-		792,286
Proceeds from deferred income		1,861,416		-
Purchase of property, plant and equipment		(15,360,530)		(5,330,180)
Advance to related parties		(8,731,951)		(35,700,532)
Net cash used in investing activities		(215,419,980)		(43,230,542)

PINGTAN MARINE ENTERPRISE LTD.

Consolidated Statements of Cash Flows

(unaudited) (…/cont’d)

	For the Six Months Ended June 30,
	2013		2012 (A)
Cash flows from financing activities
Proceeds from short-term loans		24,994,395		28,556,774
Repayment of short-term loans		(30,680,742)		(30,928,269)
Proceeds from long-term loans		-		21,688,883
Repayment of long-term loans		(1,884,778)		-
Advance from related parties		8,571,161		20,139,296
Advance from a shareholder		(233,705)		1,006
Net cash provided by financing activities		766,331		39,457,690

Net (decrease)/increase in cash		(156,299,524)		45,706,514

Effect of exchange rate		1,617,223		(1,275,105)

Cash at the beginning of period		175,488,715		114,204,340

Cash at the end of period	$	20,806,414	$	158,635,749

Supplemental disclosure of cash flow information:
Cash paid:
Income tax paid	$	7,494,648	$	15,576,011

Interest paid	$	1,395,742	$	1,358,650

*Deposit on setting up Joint Venture netted off with accounts payable – related parties.

(A) Represents the consolidation retrospectively restated as if Pingtan Marine Enterprise Ltd. (formerly known as China Growth Equity Investment Ltd.) completed its merger with China Dredging Group Co., Ltd. and the share purchase of Merchant Supreme Co., Ltd. on January 1, 2012 rather than on February 25, 2013.

See accompanying notes to unaudited consolidated financial statements.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1.	DESCRIPTION OF BUSINESS AND ORGANIZATION

China Equity Growth Investment Ltd. ("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 PRC. In connection with its initial business combination, CGEI changed its name to Pingtan Marine Enterprise Ltd. (“the Company” or “PME”) in February 2013.

China Dredging Group Co., Ltd (“CDGC” or “China Dredging”) and Merchant Supreme Co., Ltd (“Merchant Supreme”) are limited liability companies incorporated on April 14, 2010 and June 25, 2012, respectively, in British Virgin Island (“BVI”).

China Dredging, through its PRC Variable Interest Entity (“VIE”), Fujian Service Port Service Co., Ltd (“Fujian Service”), provides specialized dredging services exclusively to the PRC marine infrastructure market and is, based on the number and capacity of the dredging vessels it operates, one of the leading independent (not state-owned) providers of such services in the PRC. Since its inception, China Dredging has functioned exclusively as a specialist subcontractor, performing dredging services for other companies licensed to function as general contractors. China Dredging engages in capital dredging, maintenance dredging and reclamation dredging projects and primarily sources its projects by subcontracting projects from general contractors.

Merchant Supreme, through its PRC VIE, Fujian Provincial Pingtan County Ocean Fishing Group Co., Ltd. (“Pingtan Fishing”) engages in ocean fishery with many of its self-owned vessels within Indian EEZ and Arafura Sea of Indonesia. Pingtan Fishing is ranked highly as one of the leading private (not state-owned) supplier and trader of oceanic aquatic products in PRC.

CGEI and CDGC entered into the Merger Agreement dated October 24, 2012, providing for the combination of CGEI and CDGC. Pursuant to the Merger Agreement, CDGC would continue as the surviving company and a wholly-owned subsidiary of CGEI. CGEI also acquired all of the outstanding capital shares and other equity interests of Merchant Supreme as per Share Purchase Agreement dated October 24, 2012. Following the completion of the business combination held 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 were listed on The NASDAQ Capital Market under the symbol “PME”.

Details of the Company’s subsidiaries and VIEs which are included in these consolidated financial statements as of June 30, 2013 are as follows:

Name of subsidiaries	Place and date of incorporation	Percentage of ownership	Principal activities

China Dredging Group Co., Ltd	BVI	100% held by PME	Intermediate holding
(“CDGC” or “China	April 14, 2010		company
Dredging”)

China Dredging (HK)	Hong Kong,	100% through CDGC	Intermediate holding
Company Limited	April 26, 2010		company
(“China Dredging HK”)

Master Gold Corporation	Hong Kong,	100% through CDGC	Intermediate holding
Limited (“Master Gold”)	June 1, 2012		company

Fujian Wanggang Dredging	PRC	100% through China	Intermediate holding
Construction Co., Ltd	June 12, 2010	Dredging HK;	company
(“Fujian Wanggang”)		VIE Agreement signed with Wonder Dredging

Pingtan Xingyi Port Service	PRC	100% through Wonder	BT project involves
Co., Ltd (“Pingtan Xingyi”)	August 6, 2012	Dredging	dredging, reclamation and
			cofferdam construction

Pingtan Zhuoying Dredging	PRC	100% through Master	Intermediate holding
Engineering Construction	September 26, 2012	Gold	company
Co., Ltd (“Pingtan Zhuoying”)

Merchant Supreme Co., Ltd.	BVI,	100% held by PME	Intermediate holding
(“Merchant Supreme”)	June 25, 2012		company

Prime Cheer Corporation	Hong Kong,	100% held by Merchant	Intermediate holding
Ltd. (“Prime Cheer”)	May 3, 2012	Supreme	company

Pingtan Guansheng Ocean	PRC	100% held by Prime	Intermediate holding
Fishing Co., Ltd.	October 12, 2012	Cheer	company
("Pingtan Guansheng")

Name of Variable Interest Entities	Place and date of incorporation	Percentage of ownership	Principal activities

Wonder Dredging Engineering	PRC	91% owned by Qing Lin and	Intermediate holding
LLC (“Wonder Dredging”)	May 10, 2010	9% owned by Panxing Zhuo; VIE agreement signed with Fujian Wanggang	company

Fujian Xinggang Port Service	PRC	50% through Fujian	Provides specialized
Co., Ltd. (“Fujian Service”)	January 8, 2008	Wanggang and 50% through Wonder Dredging; VIE agreement signed with Fujian Wanggang	dredging services

Fujian Provincial Pingtan	PRC	70% owned by Honghong	Engages in ocean fishing
County Fishing Group Co., Ltd. (“Pingtan Fishing”)	February 27, 1998	Zhuo and 30% owned by Zhiyan Lin; VIE agreement signed with Pingtan Guansheng	and sale of frozen marine catches

Pingtan Dingxin Fishing	PRC	100% through Pingtan	No business activity
Information Consulting Co.,	October 21, 2012	Fishing
Ltd. (“Pingtan Dingxin”)

Pingtan Duoying Fishing	PRC	100% through Pingtan	No business activity
Information Consulting Co.,	October 21, 2012	Fishing
Ltd. (“Pingtan Duoying”)

Pingtan Ruiying Fishing	PRC	100% through Pingtan	No business activity
Information Consulting Co.,	October 21, 2012	Fishing
Ltd. (“Pingtan Ruiying”)

2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a)

Basis of presentation

These interim consolidated financial statements of the Company and its subsidiaries and variable interest entities (each, a “VIE”, and together with the Company and its subsidiaries, the “Group”) 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 consolidated financial statements for any interim periods are not necessarily indicative of the results that may be reported for the entire year. The accompanying 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 unaudited consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries and VIEs in which the Company is the primary beneficiary. All significant intercompany balances and transactions have been eliminated. The consolidated financial statements of the Company have been prepared as if the existing corporate structure had been in existence throughout the periods presented and as if the reorganization had occurred as of the beginning of the earliest period presented.

(b)

Consolidation of VIE

The Company has no direct or indirect legal or equity ownership interest in Pingtan Fishing and it only owes 50% equity interest in Fujian Service. However, through the VIE Agreements between Fujian Wanggang and the shareholders of Wonder Dredging, the shareholders of Wonder Dredging have assigned all their rights as shareholders, including voting rights and disposition rights of their equity interests in Wonder Dredging and Fujian Service to Fujian Wanggang, our direct, wholly-owned subsidiary. Based on the VIE Agreements, Fujian Wanggang provides management services to Fujian Service and is entitled to (1) receive all of the economic benefits from Fujian Service, (2) exercise effective control over Fujian Service and Wonder Dredging, and (3) has an exclusive option to purchase all or part of the equity interests in Fujian Service. Accordingly, by virtue of the VIE Agreements, Fujian Wanggang is the primary beneficiary of Fujian Service as defined by ASC 810 “Consolidation of Variable Interest Entities”. Therefore we consolidate Fujian Service and Wonder Dredging as VIEs.

Another set of VIE agreements have been entered between Pingtan Guansheng and the shareholders of Pingtan Fishing. The shareholders of Pingtan Fishing also have assigned all their rights as shareholders, including voting rights and disposition rights of their equity interest Pingtan Fishing to Pingtan Guanshen, our direct, wholly-owned subsidiary. Accordingly, by virtue of the VIE Agreements, Pingtan Guansheng is the primary beneficiary of Pingtan Fishing as defined by ASC 810 “Consolidation of Variable Interest Entities”. Therefore we consolidate Pingtan Fishing as VIE.

In accordance with Accounting Standards Codification (“ASC”) 810-10-15-14, Fujian Service, Wonder Dredging and Pingtan Fishing are deemed VIEs for two reasons. First, the equity stockholders of these companies do not significantly enjoy the benefits of income or suffer the consequences of losses. Second, the equity stockholders of these companies do not possess the direct or indirect ability through voting or similar rights to make decisions regarding their activities that have a significant effect on the success of the companies. Therefore, in accordance with ASC 810-10-25-38A, the Company is deemed to be the primary beneficiary of these companies and the financial statements of these companies are consolidated in the Company’s consolidated financial statements.

The following tables show the assets and liabilities of the Company’s VIEs after eliminating the intercompany balances as of June 30, 2013 and December 31, 2012. The VIEs include Wonder Dredging, Fujian Service and Pingtan Fishing Group which comprises of Pingtan Fishing itself and the three subsidiaries; namely Pingtan Dingxin, Pingtan Duoying and Pingtan Ruiying. The creditors of Wonder Dredging, Fujian Service and Pingtan Fishing Group do not have recourse against the general creditors of their primary beneficiaries or other Group members.

	June 30, 2013 (Unaudited)
	Wonder		Fujian		Pingtan Fishing
	Dredging		Service		Group
ASSETS
Cash	$	6,992	$	16,879,547	$	455,104
Accounts receivable - third parties		-		14,297,260		4,306,262
Cost and estimated earnings in excess of billings on contracts in progress		-		8,341,705		-
Other receivables		-		2,919		7,659,717
Advance to related parties		-		-		8,226
Inventories		-		5,104,738		2,239,590
Prepaid dredger deposits		-		2,444,032		-
Prepaid fishing vessel deposits		-		-		410,017,680
Security deposits		-		18,607,228		-
Long-term investment		-		-		3,421,644
Property, plant and equipment, net		-		41,812,940		51,573,980
	$	6,992	$	107,490,369	$	479,682,203

LIABILITIES
Accounts payable - third parties	$	-	$	3,505,737	$	2,703,021
Receipt in advance - third parties		-		-		360,726
Short-term loans		-		-		20,144,510
Income tax payable		-		5,062,545		-
Accrued liabilities and other payables		-		2,202,403		10,120,061
Advance from related parties		4,888,063		-		155,388,195
Deferred income		-		-		9,522,925
Long-term loans		-		-		23,576,759
	$	4,888,063	$	10,770,685	$	221,816,197

	December 31, 2012
	Wonder		Fujian		Pingtan Fishing
	Dredging		Service		Group
ASSETS
Cash	$	7,232	$	164,323,611	$	6,710,472
Notes receivable (banker's acceptances) transferred from related parties		-		-		3,645,817
Accounts receivable - third parties		-		23,446,249		11,478,436
Cost and estimated earnings in excess of billings on contracts in progress		-		8,133,021		-
Other receivables		-		2,868		29,885
Advance to related parties		-		-		49,802,897
Prepaid expenses		-		-		386,966
Inventories		-		5,029,653		194,331
Prepaid dredger deposits		-		2,407,666		-
Security deposits		-		25,087,880		-
Long-term investment		-		-		3,328,789
Deposit on setting up Joint Venture		-		-		6,092,302
Property, plant and equipment, net		-		44,479,511		37,141,906
	$	7,232	$	272,910,459	$	118,811,801

LIABILITIES
Accounts payable - third parties	$	-	$	3,690,417	$	70,732
- related parties		-		-		5,765,632
Receipt in advance - related parties		-		-		12,681,102
Short-term loans		-		-		25,169,260
Income tax payable		-		5,333,519		-
Accrued liabilities and other payables		-		2,257,638		1,033,640
Long-term loans		-		-		24,783,629
	$	-	$	11,281,574	$	69,503,995

The following tables show the revenue and cost of revenues, and net income/(loss) of the Company’s VIEs after eliminating the intercompany balances for the three and six months ended June 30, 2013 and 2012. The VIEs include Wonder Dredging, Fujian Service and Pingtan Fishing Group which comprises of Pingtan Fishing itself and the three subsidiaries, namely Pingtan Dingxin, Pingtan Duoying and Pingtan Ruiying.

	For the Three Months Ended June 30, 2013 (Unaudited)
	Wonder		Fujian		Pingtan Fishing
	Dredging		Service		Group

Revenue	$	-	$	38,855,181	$	21,362,357

Cost of revenue	$	-	$	(17,249,269)	$	(12,235,475)

Net (loss)/income attributable to the Company	$	(6,674)	$	15,137,209	$	7,727,927

	For the Three Months Ended June 30, 2012 (Unaudited)
	Wonder		Fujian		Pingtan Fishing
	Dredging		Service		Group

Revenue	$	-	$	59,594,550	$	10,331,331

Cost of revenue	$	-	$	(27,573,111)	$	(9,170,105)

Net (loss)/income attributable to the Company	$	(5,267)	$	22,535,808	$	(383,106)

	For the Six Months Ended June 30, 2013 (Unaudited)
	Wonder		Fujian		Pingtan Fishing
	Dredging		Service		Group

Revenue	$	-	$	59,549,223	$	41,031,833

Cost of revenue	$	-	$	(28,628,115)	$	(26,527,609)

Net (loss)/income attributable to the Company	$	(6,703)	$	21,759,932	$	12,234,219

	For the Six Months Ended June 30, 2012 (Unaudited)
	Wonder		Fujian		Pingtan Fishing
	Dredging		Service		Group

Revenue	$	-	$	119,094,081	$	25,887,534

Cost of revenue	$	-	$	(55,595,229)	$	(18,879,216)

Net (loss)/income attributable to the Company	$	(4,058)	$	44,485,545	$	4,804,532

The following table shows the condensed cash flow activities of Wonder Dredging, Fujian Service and Pingtan Fishing Group for the six months ended June 30, 2013 and 2012:

	For the Six Months Ended June 30, 2013 (Unaudited)
	Wonder		Fujian		Pingtan Fishing
	Dredging		Service		Group

Net cash (used in)/provided by operating activities	$	(6,703)	$	34,280,668	$	18,944,116
Net cash used in investing activities		(7,280,258)		(182,671,235)		(221,709,655)
Net cash provided by financing activities		7,286,614		-		195,850,824
Net decrease in cash		(347)		(148,390,567)		(6,914,715)
Effect of exchange rate		107		946,503		659,347
Cash at the beginning of the period		7,232		164,323,611		6,710,472
Cash at the end of the period	$	6,992	$	16,879,547	$	455,104

	For the Six Months Ended June 30, 2012 (Unaudited)
	Wonder		Fujian		Pingtan Fishing
	Dredging		Service		Group

Net cash (used in)/provided by operating activities	$	(4,068)	$	47,704,970	$	2,182,667
Net cash used in investing activities		-		-		(43,230,542)
Net cash provided by/(used in) financing activities		6,468		(94,617)		39,456,684
Net increase/(decreased) in cash		2,400		47,610,353		(1,591,191)
Effect of exchange rate		(8,923)		(1,274,412)		10,673
Cash at the beginning of the period		957,786		110,535,418		1,794,796
Cash at the end of the period	$	951,263	$	156,871,359	$	214,278

(c)

Use of estimates

The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management of the Company to make a number of estimates and assumptions relating to the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the years. Significant items subject to such estimates and assumptions include the recoverability of the carrying amount and the estimated useful lives of long-lived assets; valuation allowances for receivables, and realizable values for inventories. Accordingly, actual results could differ from those estimates.

(d)

Foreign currency translation

The Company uses United States dollars (“U.S. Dollar” or “US$” or “$”) for financial reporting purposes. The subsidiaries within the Company maintain their books and records in their respective functional currency, Chinese Renminbi (“RMB”) and Hong Kong dollars (“HKD”), being the lawful currency in the PRC and Hong Kong, respectively. Assets and liabilities of foreign subsidiaries are translated at the rate of exchange in effect on the balance sheet date; income and expenses are translated at the average rate of exchange prevailing during the period. The related transaction adjustments are reflected in “Accumulated other comprehensive income’’ in the equity section of the Company’s consolidated balance sheet. A summary of exchange rate is as follows:

China Dredging
	June 30, 2013	December 31, 2012
Balance sheet items, except for equity accounts	RMB6.1374=$1	RMB6.2301=$1
	HKD7.756=$1	HKD7.7507=$1

	For the Three Months Ended June 30,
	2013	2012
Items in statements of income and cash flows	RMB6.1454=$1	RMB6.3335=$1
	HKD7.7597=$1	HKD7.7592=$1

	For the Six Months Ended June 30,
	2013	2012
Items in statements of income and cash flows	RMB6.1811=$1	RMB6.3166=$1
	HKD7.7588=$1	HKD7.7590=$1

Merchant Supreme
	June 30, 2013	December 31, 2012
Balance sheet items, except for equity accounts	RMB6.1374=$1	RMB6.3086=$1
	HKD7.756=$1	HKD7.7507=$1

	For the Three Months Ended June 30,
	2013	2012
Items in statements of income and cash flows	RMB6.1454=$1	RMB6.3335=$1
	HKD7.7597=$1	HKD7.7592=$1

	For the Six Months Ended June 30,
	2013	2012
Items in statements of income and cash flows	RMB6.1811=$1	RMB6.3166=$1
	HKD7.7588=$1	HKD7.7590=$1

(e)

Cash

Cash consists of cash on hand and at banks.

(f)

Accounts receivable

China Dredging

Accounts receivable represent billed under the terms of contracts with customers. There is no amount related to retainage. CDGC anticipates collection of all the outstanding balances within 30 to 120 days after completion reports of the contracts are issued. The allowance for doubtful accounts is CDGC’s best estimate of the amount of probable credit losses in the CDGC’s existing receivable. CDGC provides an allowance for estimated uncollectible receivables when events or conditions indicate that amounts outstanding are not recoverable. Outstanding account balances are reviewed individually for collectability. Based on the CDGC’s assessment of collectability, there has been no allowance for doubtful accounts recognized for the three and six months ended June 30, 2013 and 2012.

Merchant Supreme

Merchant Supreme only grants credit periods to established customers with long and good paying history. Credit periods to independent customers are within 180 days after customers pick up purchased goods.

Merchant Supreme maintains allowances for doubtful accounts for estimated losses resulting from the inability of Merchant Supreme’s debtors to make required payments. Merchant Supreme reviews customer credit worthiness, past transaction history, and changes in payment terms when determining the adequacy of these allowances. Accounts are written off against the allowance when it becomes evident collection will not occur.

No allowance for doubtful accounts has been provided for accounts receivable from third party customers for the three and six months ended June 30, 2013 and 2012, respectively. Merchant Supreme collected a majority of receivable balances from third party customers as of June 30, 2013 and December 31, 2012 within 60 days subsequent to respective balance sheet dates, and historically has not experienced uncollectible accounts from customers granted with credit sales.

(g)

Revenue recognition

China Dredging

CDGC recognizes contract revenues under the percentage-of-completion method to determine the appropriate amount to be recognized in a given period. Depending on the nature of contracts, the stage of completion is measured by reference to (a) the proportion of contract costs incurred for work performed to date to estimated total contract costs; (b) the amount of work certified by a site engineer; or (c) the completion of a physical proportion of the contract work. The difference between amounts billed and recognized as revenue is reflected in the balance sheet as either contract revenues in excess of billings or billings in excess of contract revenues. Provisions for estimated losses on contracts in progress are made in the period in which they are identified. In the event that contract revenue cannot be estimated reliably, contract revenue is recognized only to the extent of contract costs incurred that are likely to be recoverable.

Merchant Supreme

Merchant Supreme recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred, the price to the customer is fixed or determinable, and collection of the resulting receivable is reasonably assured.

With respects to the sale of frozen fish and other marine catches to third party customers, most of which are sole proprietor regional wholesalers in China, Merchant Supreme recognizes revenue when customers pick up purchased goods at Merchant Supreme’s cold storage warehouse, after payment is received by Merchant Supreme or credit sale is approved by Merchant Supreme for recurring customers with excellent paying history. Merchant Supreme does not offer promotional payments, customer coupons, rebates or other cash redemption offers to its customers. Merchant Supreme does not accept returns from customers. Deposits or advance payments from customers prior to delivery of goods are recorded as receipt in advance.

(h)

Cost and estimated earnings in excess of billings on contracts in progress

China Dredging

Cost and estimated earnings in excess of billings represent amounts of revenue earned under contracts in progress but not billed at the balance sheet date. These amounts become billable according to the contract terms, which usually consider passage of time, and/or completion of the project.

(i)

Government grant

Merchant Supreme

Government grants are recognized at their fair value where there is reasonable assurance that the grant will be received and all attaching conditions will be complied with. When the grant relates to an expense item, it is recognized as income over the periods necessary to match the grant on a systematic basis to the costs that it is intended to compensate. Where the grant relates to an asset, the fair value 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.

(j)

Deferred income

Merchant Supreme

Deferred income represents income collected but not earned as of the report date. This is primarily composed of one off payment of the government grant to construct new fishing vessels. The fishing vessels were under construction. Upon the completion of the construction of fishing vessels, the grant would be deducted from the cost of the fishing vessels.

(k)

Fishing licenses

Merchant Supreme

Each of the Merchant Supreme’s fishing vessels requires an approval from Ministry of Agriculture of the People’s Republic of China to carry out ocean fishing projects in foreign territories. These approvals are valid for a period from three to twelve months, and are awarded to Merchant Supreme at no cost. Merchant Supreme applies for the renewal of the approval prior to expiration to avoid interruptions of fishing vessels’ operations.

Each of the Merchant Supreme’s fishing vessels operated in Indonesia water requires a fishing license granted by the authority in Indonesia. Indonesia fishing licenses remain effective for a period of twelve months and Merchant Supreme applies for renewal prior to expiration. Merchant Supreme records cost of Indonesia fishing licenses in prepaid expenses and amortizes over the effective period of the licenses.

(l)

Inventories

China Dredging

Inventories are stated at the lower of cost and net realizable value. Cost is determined using the weighted average method. Inventories comprise consumable parts.

Merchant Supreme

Inventories are stated at the lower of cost or market. Cost comprises of fuel, depreciation, direct labor, shipping, consumables, and government levied charges and taxes. Consumables include fishing nets and metal containers used by fishing vessels and are amortized during expected useful lives of three months. Merchant Supreme’s fishing fleets in India and Indonesia waters operate around the year, although the May to July period demonstrates lower catch quantities compared to the August to December peak season. Cost incurred during a fishing vessel’s relocation period between different operating territories is deferred and amortized in ensuing six-month period. Cost of frozen fish and other marine catches at period-ends is calculated using the weighted average method.

(m)

Property, plant and equipment

Property, plant and equipment are recorded at cost less accumulated depreciation. Expenditures for major additions and betterments are capitalized. Depreciation of dredgers, fishing vessels, motor vehicles, machinery and equipment is computed by the straight-line method over the assets estimated useful lives.

Upon sale or retirement of property, plant and equipment, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in operations.

The estimated useful lives of the assets are as follows:

		Estimated lives
Dredger		7.5-10
Fishing vessel		10-20
Major improvement on fishing vessel		4-20
Motor vehicle		3-5
Machinery		3-5
Office equipment		3-5

Expenditures for repairs and maintenance, which do not extend the useful life of the assets, are expensed as incurred.

(n)

Capitalized Interest

Merchant Supreme

Interest associated with the construction of a fishing vessel 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 weighted-average cost of the Companies outstanding borrowings. Capitalization of interest ceases when the construction is substantially complete or the construction activity is suspended for more than a brief period. Merchant Supreme capitalized interest of $25,220 for the three and six months ended June 30, 2013 and $83,524 for the three and six months ended June 30, 2012, respectively, in the fishing vessels under construction.

(o)

Impairment of long-lived assets

In accordance with FASB ASC Topic 360, “Property, Plant and Equipment”, the Company tests long-lived assets or asset groups for recoverability when events or changes in circumstances indicate that their carrying amount may not be recoverable. Circumstances which could trigger a review include, but are not limited to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and current expectation that the asset will more likely than not be sold or disposed significantly before the end of its estimated useful life. Recoverability is assessed based on the carrying amount of the asset and its fair value which is generally determined based on the sum of the undiscounted cash flows expected to result from the use and the eventual disposal of the asset, as well as specific appraisal in certain instances. An impairment loss is recognized when the carrying amount is not recoverable and exceeds fair value. If long-lived assets are to be disposed, depreciation is discontinued, if applicable, and the assets are reclassified as held for sale at the lower of their carrying amounts or fair values less costs to sell.

Based on the Company’s assessment, no triggering events for the testing of long-lived assets for impairment were identified as of June 30, 2013 and December 31, 2012.

(p)

Income taxes

China Dredging

CDGC recognizes interest and penalties related to income tax matters as income tax expense. For the three and six months ended June 30, 2013 and 2012, there was no penalty or interest recognized as income tax expenses.

Merchant Supreme

Merchant Supreme’s VIE, Pingtan Fishing, is a qualified ocean fishing enterprise certified by the Ministry of Agriculture of the PRC. The qualification is renewed on April 1 each year. According to Cai Shui Zi (1997) No. 114 “Notice of Ministry of Finance and the State Administration of Taxation on Relevant Issues concerning Enterprise Income Tax on Domestic Enterprises Engaged in Fishery Business” issued by the Ministry of Finance of the PRC and State Administration of Taxation in 1997, Order of the State Council of the People's Republic of China No. 512 “Regulation on the Implementation of the Enterprise Income Tax Law of the People’s Republic of China” issued by the State Council in 2007, Guo Shui Fa (2005) No. 129 “Measures for the Administration of Tax Deduction or Exemption (Trial Implementation)” issued by State Administration of Taxation in 2008, and State Administration of Taxation Announcement (2011) No. 48 “Notice of the State Administration of Taxation on Relevant Issues concerning the Implementation of Preferential Policies of Enterprise Income Tax on Agriculture, Forestry, Stockbreeding and Fishery Projects”, 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 Ministry of Agriculture of the PRC.

Pingtan Fishing is not subject to foreign income taxes for its operations in India and Indonesia Exclusive Economic Zones.

(q)

Fair value measurements

In January 2010, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update “ASU 2010-06” “Fair Value Measurements and Disclosures”. The new guidance clarifies two existing disclosure requirements and requires two new disclosures as follows: (1) a “gross” presentation of activities (purchases, sales, and settlements) within the Level 3 rollforward reconciliation, which will replace the “net” presentation format; and (2) detailed disclosures about the transfers in and out of Level 1 and 2 measurements. This guidance is effective for the first interim or annual reporting period beginning after December 15, 2009, except for the gross presentation of the Level 3 rollforward information, which is required for annual reporting periods beginning after December 15, 2010, and for interim reporting periods thereafter. The Company adopted the amended fair value disclosures guidance on January 1, 2012.

China Dredging

CDGC's financial instruments consist principally of cash, accounts receivable, cost and estimated earnings in excess of billings on contracts in progress, accounts payable and accrued liabilities, none of which are held for trading purposes. Pursuant to Accounting Standards Codification (“ASC 820”), the fair value of the CDGC’s cash is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets. CDGC believes that the carrying amounts of the Group's financial instruments, other than derivative liability, approximate their current fair values because of their nature and respective maturity dates or durations.

Merchant Supreme

As of June 30, 2013 and December 31, 2012, none of the Merchant Supreme’s financial assets or liabilities was measured at fair value on a recurring basis. As of June 30, 2013 and December 31, 2012, none of the Company’s non-financial assets or liabilities was measured at fair value on a nonrecurring basis.

The carrying values of Merchant Supreme’s financial assets and liabilities, including accounts receivable, other receivables, other current assets, short-term loans, accounts payable, and other payables and accrued liabilities, are a reasonable estimate of fair value because of the short period of time between the origination of such instruments and their expected realization and if applicable, their stated interest rate approximates current rates available. It is not practicable to estimate the fair values of advance to and advance from related parties because of the related party nature of such advances.

(r)

Commitments and contingencies

In the normal course of business, the Company is subject to contingencies, including legal proceedings and environmental claims arising out of the normal course of businesses that relate to a wide range of matters, including among others, contracts breach liability. The Company records accruals for such contingencies based upon the assessment of the probability of occurrence and, where determinable, an estimate of the liability. Management may consider many factors in making these assessments including past history, scientific evidence and the specifics of each matter.

The Company’s management has evaluated all such proceedings and claims that existed as of June 30, 2013 and December 31, 2012. 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.

(s)

Economic and political risks

The Company's operations are conducted 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 economy.

The Company’s operation in the PRC is subject to special considerations and significant risks not typically associated with companies in North America and Western Europe. These include risks associated with, among others, the political, economic and legal environment and foreign currency exchange. The Company’s results may be adversely affected by changes in the political and social conditions in the PRC, and by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion, remittances aboard, and rates and methods of taxation, among other things.

(t)

Pension and employee benefits

China Dredging

Full time employees of CDGC’s participate in a government mandated multi-employer defined contribution plan pursuant to which certain pension benefits, medical care, unemployment insurance, employee housing fund and other welfare benefits are provided to employees. PRC labor regulations require CDGC to accrue for these benefits based on certain percentages of the employees’ salaries. Cost for pension and employee benefits of CDGC was $28,679 and $24,758 for the three months ended June 30, 2013 and 2012, respectively; $53,624 and 47,547 for the six months ended June 30, 2013 and 2012, respectively.

Merchant Supreme

Cost for pension and employee benefits of Merchant Supreme was $5,268 for the three and six months ended June 30, 2013 and $nil for the three and six months ended June 30, 2012, respectively.

(u)

Segment information

ASC 280 “Segment reporting” establishes standards for reporting information on operating segments in interim and annual financial statements. The Company has only two segments, all of the Company’s operations and customers are in the PRC and all income is derived from dredging service and ocean fishery. Accordingly, segment information on products is presented.

(v)

Earnings per ordinary share

Earnings per ordinary share (basic and diluted) is based on the net income attributable to ordinary shareholders divided by the weighted average number of ordinary shares outstanding during each period. Ordinary share equivalents are not included in the calculation of diluted earnings per ordinary share if their effect would be anti-dilutive. As of December 31, 2012, the weighted average outstanding ordinary share equivalents outstanding totaled 10,012,987 consisting of Class A Preferred Shares. There was automatic conversion of preferred shares into the Company’s ordinary shares after the closing of the transactions. Retroactive treatment as required by FASB ASC paragraph 260-10-55-12 has been applied in computing earnings per share to reflect the business combination held on February 25, 2013.

The following table sets forth the computation of basic and diluted net income per ordinary share:

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2013		2012		2013		2012
	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)

Net income	$	24,777,753	$	21,340,811	$	38,560,294	$	48,197,267

Weighted average number of ordinary shares outstanding (Basic and diluted)		79,055,053		79,055,053		79,055,053		79,055,053

Earnings per ordinary share (Basic and diluted)	$	0.31	$	0.27	$	0.49	$	0.61

SEGMENT INFORMATION

The following tables sets out the analysis of the Company's revenue and cost of revenue by segments:

	a)	Dredging service
	b)	Ocean fishery

The following is an analysis of the Company's revenue and results from continuing operations by reportable segment :

<td style="TEXT-ALIGN: left; FONT-STYLE: normal; FONT-FAMILY: Times New Roman; BACKGROUND: #ccffcc; FONT-SIZ

China Dredging

For the Three Months Ended
June 30,

For the Six Months Ended
June 30,

2013

2012

2013

2012

(Unaudited)

Dredging service