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 September 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 November 14, 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.

PINGTAN MARINE ENTERPRISE LTD.

TABLE OF CONTENTS

PART I.	FINANCIAL INFORMATION	2

ITEM 1.	FINANCIAL STATEMENTS	2

	Consolidated Balance Sheets at September 30, 2013 (Unaudited) and December 31, 2012	2
	Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2013 and 2012 (Unaudited)	3
	Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2013 and 2012 (Unaudited)	4
	Consolidated Statement of Changes in Shareholders’ Equity for the Nine Months Ended September 30, 2013 (Unaudited)	5
	Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2013 and 2012 (Unaudited)	6
	Notes to Unaudited Consolidated Financial Statements	8

ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	48

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	62

ITEM 4.	CONTROLS AND PROCEDURES	62

PART II.	OTHER INFORMATION	63

ITEM 1.	LEGAL PROCEEDINGS	63
ITEM 1A.	RISK FACTORS	63
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	63
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	63
ITEM 4.	MINE SAFETY DISCLOSURES	63
ITEM 5.	OTHER INFORMATION	63
ITEM 6.	EXHIBITS	63

	1

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

PINGTAN MARINE ENTERPRISE LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(IN U.S. DOLLARS)

	September 30, 2013		December 31, 2012
	(Unaudited)		(A)
Assets
Current assets
Cash	$	10,832,000	$	10,426,140
Notes receivable (banker's acceptances) transferred from related parties		-		3,645,817
Accounts receivable - third parties		10,252,829		11,478,436
Other receivables		11,015		29,885
Advance to related parties		-		49,802,821
Prepaid expenses		4,932,497		410,966
Inventories		5,427,251		194,331
Assets of discontinued operations		250,209,548		361,460,444
Total current assets		281,665,140		437,448,840

Other assets
Long-term investment		3,431,373		3,328,789
Deposit on setting up of Joint Venture		-		6,090,302
Property, plant and equipment, net		66,979,281		37,141,906
Other receivables		3,283,333		-
Total other assets		73,693,987		46,560,997

Total assets	$	355,359,127	$	484,009,837

Liabilities and equity
Current liabilities
Accounts payable - third parties	$	151,000	$	70,732
- related parties		163,303		5,765,632
Receipt in advance - third parties		476,399		-
- related parties		-		12,681,102
Short-term loans		22,363,811		25,169,260
Long-term loans - current portion		11,413,399		8,094,308
Accrued liabilities and other payables		3,684,872		1,033,784
Advance from related parties		115,472		153,961
Deferred income		1,714,706		-
Liabilities of discontinued operations		181,463,364		14,052,751
Total current liabilities		221,546,326		67,021,530

Other liabilities
Long-term loans, net of current portion		58,431,373		16,689,321
Total other liabilities		58,431,373		16,689,321
Total liabilities		279,977,699		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 September 30, 2013 and December 31, 2012		79,055		79,055
Additional paid-in capital		26,645,687		141,381,098
Statutory reserves		19,877,314		19,386,642
Retained earnings		-		217,224,220
Accumulated other comprehensive income		28,779,372		22,227,971
Total shareholders’ equity		75,381,428		400,298,986

Total liabilities and shareholders' equity	$	355,359,127	$	484,009,837

(A) Represents the consolidation retrospectively restated as if Pingtan Marine Enterprise Ltd. (formerly known as China Growth Equity Investment Limited) 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. Assets and liabilities of discontinued operations are retrospectively restated as of December 31, 2012 after taking into account of the Group’s plan to sell China Dredging Group Co., Ltd. and its subsidiaries to the Company’s Chairman, CEO and major shareholder, Mr Xinrong Zhuo.

See accompanying notes to unaudited consolidated financial statements.

	2

PINGTAN MARINE ENTERPRISE LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(IN U.S. DOLLARS)

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2013		2012 (A)		2013		2012 (A)

Revenue	$	20,609,107	$	13,152,223	$	61,640,940	$	39,039,757

Cost of revenue		(12,446,879)		(9,693,182)		(38,974,488)		(28,572,398)

Gross profit		8,162,228		3,459,041		22,666,452		10,467,359

Selling and marketing expenses		(361,999)		(146,641)		(730,734)		(608,483)

General and administrative expenses		(1,178,035)		(209,633)		(2,345,569)		(578,544)

Operating income		6,622,194		3,102,767		19,590,149		9,280,332

Other income/(expense)
Investment income		218		20		69,289		15,146
Interest income		2,306		678		4,861		2,888
Interest expenses		(1,049,041)		(1,079,474)		(2,444,782)		(2,438,124)
Subsidy income		168,900		3,783,578		204,492		3,783,578
Sundry income		8		-		2,021		-
Gain/(Loss) on foreign exchange, net		194,433		(21,051)		(25,972)		(52,770)
Total other income/(expense)		(683,176)		2,683,751		(2,190,091)		1,310,718

Income from continuing operations before income taxes		5,939,018		5,786,518		17,400,058		10,591,050

Income tax expense		-		-		-		-

Net income from continuing operations		5,939,018		5,786,518		17,400,058		10,591,050

Net income from discontinued operations, net of taxes		12,362,523		17,375,250		39,461,777		60,773,049

Consolidated net income	$	18,301,541	$	23,161,768	$	56,861,835	$	71,364,099

Basic and diluted earnings per share
- From continuing operations	$	0.08	$	0.07	$	0.22	$	0.13
- From discontinued operations		0.15		0.22		0.50		0.77
- Net income	$	0.23	$	0.29	$	0.72	$	0.90
Weighted average number of ordinary shares outstanding
- Basic and diluted		79,055,053		79,055,053		79,055,053		79,055,053

(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.

	3

PINGTAN MARINE ENTERPRISE LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(IN U.S. DOLLARS)

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2013		2012 (A)		2013		2012 (A)

Net income	$	18,301,541	$	23,161,768	$	56,861,835	$	71,364,099

Other comprehensive income
Foreign currency translation gain		796,724		3,870,683		6,551,401		942,406
Total comprehensive income	$	19,098,265	$	27,032,451	$	63,413,236	$	72,306,505

See accompanying notes to unaudited consolidated financial statements.

	4

PINGTAN MARINE ENTERPRISE LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED)

(IN U.S. DOLLARS)

	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		-		-		-		-		56,861,835		-		56,861,835

Appropriation to statutory reserves		-		-		-		490,672		(490,672)		-		-

Foreign currency translation gain		-		-		-		-		-		6,551,401		6,551,401

Acquisition of fishing vessels from related party		-		-		(114,735,411)		-		(273,595,383)		-		(388,330,794)

Balance as of September 30, 2013		79,055,053	$	79,055	$	26,645,687	$	19,877,314	$	-	$	28,779,372	$	75,381,428

See accompanying notes to unaudited consolidated financial statements.

	5

PINGTAN MARINE ENTERPRISE LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(IN U.S. DOLLARS)

	For the Nine Months Ended September 30,
	2013		2012 (A)

Cash flows from operating activities
Net income	$	56,861,835	$	71,364,099
Discontinued operations, net of tax		(39,461,777)		(60,773,049)
Income from continuing operations		17,400,058		10,591,050

Adjustments to reconcile net income to net cash provided by operating activities
Depreciation of property, plant and equipment		2,268,063		2,596,876
Short term investment income		-		(15,868)

Changes in operating assets and liabilities
Accounts receivable - third parties		1,568,675		(4,240,254)
- related parties		-		4,586,762
Other receivables		19,657		6,766,975
Prepaid expenses		(4,479,159)		336,543
Inventories		(5,191,641)		756,413
Accounts payable - third parties		77,561		2,498,040
- related parties		494,616		3,443,700
Receipt in advance - third parties		473,183		(382,150)
- related parties		(12,983,365)		-
Accrued liabilities and other payables		2,602,770		1,146,071
Net cash provided by operating activities from continuing operations		2,250,418		28,084,158

Cash flows from investing activities
Payment for long term investment		-		(2,995,958)
Proceeds from disposition of short-term investment		-		808,449
Proceeds from deferred income		6,224,357		-
Purchase of property, plant and equipment		(216,850,307)		(6,574,964)
Advance to related parties		(4,044,837)		(52,772,881)
Net cash used in investing activities from continuing operations		(214,670,787)		(61,535,354)

Cash flows from financing activities
Proceeds from short-term loans		43,439,587		51,478,882
Repayment of short-term loans		(46,996,499)		(36,078,434)
Proceeds from long-term loans		45,889,055		26,630,736
Repayment of long-term loans		(1,890,743)		-
Proceeds from additional paid in capital		-		13
Advance from related parties, net of reception in form of note receivable		3,847,492		(10,222,164)
Net cash provided by financing activities from continuing operations		44,288,892		31,809,033

	6

PINGTAN MARINE ENTERPRISE LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(IN U.S. DOLLARS)

	For the Nine Months Ended September 30,
	2013		2012 (A)

Cash flow from discontinued operations
Net cash provided by operating activities from discontinued operations		71,420,962		73,322,045
Net cash provided by investing activities from discontinued operations		7,624,250		23,934,193
Net cash (used in)/provided by financing activities from discontinued
operations		(560,216)		168,559
Net cash provided by discontinued operations		78,484,996		97,424,797

Effect of exchange rate		1,977,422		732,443

Net (decrease)/increase in cash		(87,669,059)		96,515,077

Cash at the beginning of period ⁽¹⁾		175,488,715		114,204,340

Cash at the end of period ⁽²⁾	$	87,819,656	$	210,719,417

Supplemental disclosure of cash flow information:

Cash paid:
From discontinued operations
Income tax paid	$	12,814,679	$	23,111,634

From continuing operations
Interest paid	$	2,325,864	$	2,559,454

Supplemental disclosure of non-cash transaction eliminated in above:

Note payable-related party	$	155,166,195	$	-

Purchase of property, plant and equipment by setting off advances to
related parties	$	54,882,642	$	-
Deposit on setting up Joint Venture netted of accounts
payable-related parties	$	6,090,302	$	-

(1) Includes cash and cash equivalents of discontinued operations of 165,062,575 and $112,409,544 at the beginning of the year in 2013 and 2012 respectively.

(2) Includes cash and cash equivalents of discontinued operations of 76,987,656 and $210,552,835 at the nine months ended September 30, 2013 and 2012 respectively.

See accompanying notes to unaudited consolidated financial statements.

	7

PINGTAN MARINE ENTERPRISE LTD. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(IN U.S. DOLLARS)

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 Xinggang 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.

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”.

On October 28, 2013, the Company announced that the independent members of the Company's Board of Directors ("the Board") agreed to sell PME's 100% owned dredging subsidiary, CDGC and its PRC operating subsidiaries, including Fujian Xinggang Port Service Co., Ltd. business and operating assets to an affiliate of the Company's Chairman, CEO and majority shareholder Mr. Xinrong Zhuo. The transaction is expected to close during the fourth quarter of 2013. Under the terms of the proposed transaction, the consideration to be received by PME is approximately $365.5 million with an expected gain on the sale to be $140.3 million. As the result of this transaction, the activities of CDGC and its PRC operating subsidiaries have been classified as discontinued operations in our statements of operations for all periods presented. The assets and liabilities of CDGC and its subsidiaries have been classified on the balance sheet as assets and liabilities of discontinued operations. The discontinued operations have been disclosed in Note 2.

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.

	8

PINGTAN MARINE ENTERPRISE LTD. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(IN U.S. DOLLARS)

1. DESCRIPTION OF BUSINESS AND ORGANIZATION (…/Cont’d)

On June 19, 2013, the Company entered into a master agreement with a related company, Fuzhou Honglong Ocean Fishery Co.,Ltd (“Hong Long”) to acquire 46 fishing vessels with total consideration of $410.1 million that was based on independant valuation reports dated June 6, 2013. The major shareholder of Hong Long is Ms. Ping Lin, spouse of Xingrong Zhuo, the Company’s Chairman and CEO, who holds 66.47% whereas the remaining two shareholders hold 33.53% during the second quarter of 2013. Mr. Zhuo currently holds about 56.2% of PME. The transaction between PME and Hong Long is accounted as common control transaction. Based on Accounting Standards Codification (“ASC”) 805-50, PME recorded the value of $21.8 million (RMB 133,701,821) as the cost of the vessels which was the net carrying amount recorded in Hong Long’s books at the date of transfer. The balance of $388.3 million above carrying amount treated as a return of capital in the equity accounts. $273.6 million was recorded as a reduction in retained earnings and the balance of $114.7 million applied to additional paid-in capital.

On September 1, 2013, the Company further entered a Memorandum with Hong Long that Hong Long transferred the operating right of vessels to Fujian Provincial Pingtan County Fishing Group Co., Ltd. (“Pingtan Fishing”). The ownership of fishing vessels belongs to Pingtan Fishing. Pingtan Fishing is entitled to 100% of the net profit reported by each the vessels from September 1, 2013 onwards.

On October 28, 2013, the Company announced that 25-year exclusive right of 20 new fishing vessels will be transferred from Xinrong Zhuo, the Company’s CEO and Chairman, to the Company as part of the sale consideration of China Dredging Group Co., Ltd in next quarter. Such operating rights were appraised at $216.1 million by an independent valuation firm.

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

Continuing operations

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

The following wholly owned or majority owned VIE’s are consolidated into financial statements:

Name of VIEs

Fujian Provincial Pingtan County Fishing Group Co., Ltd. (“Pingtan Fishing”)

Pingtan Dingxin Fishing Information Consulting Co., Ltd. (“Pingtan Dingxin”)

Pingtan Duoying Fishing Information Consulting Co., Ltd. (“Pingtan Duoying”)

Pingtan Ruiying Fishing Information Consulting Co., Ltd. (“Pingtan Ruiying”)

	9

PINGTAN MARINE ENTERPRISE LTD. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(IN U.S. DOLLARS)

2. DISCONTINUED OPERATIONS

The Company announced on October 28, 2013 that they will exit and sell specialized dredging services currently operated China Dredging to its majority shareholder, Mr. Xinrong Zhuo. The Company anticipates the sale to be completed during the fourth quarter of 2013.

Total considerations of the transaction are as followings:

(a) forgiveness of the PME's current $155.2 million 4% promissory note ¹ due on June 19, 2015.

(b) the transfer to PME of the 25-year exclusive operating rights (see description of operating rights below) for 20 new fishing vessels, with such rights appraised at $216.1 million.

Therefore, with the net asset of China Dredging Group Co., Ltd and its subsidiaries of $397.3 million as at September 30, 2013, this transaction is expected to result in a net gain on disposal of $140.3 million.

The following entities represent the discontinued operations:

Name of subsidiaries

China Dredging Group Co., Ltd(“CDGC” or “China Dredging)

China Dredging (HK) Company Limited (“China Dredging HK”)

Master Gold Corporation Limited (“Master Gold”)

Fujian Wanggang Dredging Construction Co., Ltd (“Fujian Wanggang”)

Pingtan Xingyi Port Service Co., Ltd (“Pingtan Xingyi”)

Pingtan Zhuoying Dredging Engineering Construction Co., Ltd (“Pingtan Zhuoying”)

Name of VIEs

Wonder Dredging Engineering LLC (“Wonder Dredging”)

Fujian Xinggang Port Service Co., Ltd. (“Fujian Service”)

Notes:
1.	Principal amount per the Company’s SEC filings as of June 30, 2013.

A summary of the discontinued operations is presented below.

The Company has reflected the results of the business as discontinued operations in the consolidated statements of income for the period ended September 30, 2013 and 2012 (Unaudited).

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2013		2012		2013		2012
	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)

Revenue	$	54,323,389	$	46,892,465	$	131,610,091	$	165,986,546

Cost of revenue		(33,520,993)		(20,942,489)		(74,761,710)		(76,537,718)

Gross profit		20,802,396		25,949,976		56,848,381		89,448,828

General and administrative expenses		(2,200,183)		(1,900,068)		(5,614,875)		(6,544,286)

Operating income		18,602,213		24,049,908		51,233,506		82,904,542

Other income/(expense)		(1,513,074)		(577,851)		431,465		(1,170,850)

Income before income taxes		17,089,139		23,472,057		51,664,971		81,733,692

Income tax expense		(4,726,616)		(6,096,807)		(12,203,194)		(20,960,643)

Net income from discontinued operation, net of taxes	$	12,362,523	$	17,375,250	$	39,461,777	$	60,773,049

	10

PINGTAN MARINE ENTERPRISE LTD. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(IN U.S. DOLLARS)

2. DISCONTINUED OPEATIONS (…/Cont’d)

The assets and liabilities held for sale in the consolidated balance sheet as of September 30, 2013 and December 31, 2012 are comprised of the following:

	September 30, 2013		December 31, 2012
	(Unaudited)
Assets
Current assets
Cash	$	76,987,656	$	165,062,575
Accounts receivable - third parties		4,399,624		23,446,249
Cost and estimated earnings in excess of billings on contracts in progress		14,208,348		8,133,021
Other receivables		466,284		4,189
Inventories		4,415,589		5,029,653
Total current assets		100,477,501		201,675,687

Other assets
Prepaid other deposits		-		4,430
Prepaid dredger deposits		24,190,023		23,274,105
Security deposits		16,830,065		25,087,880
Deposit for BT project		68,055,556		66,852,860
Property, plant and equipment, net		40,656,403		44,565,482
Total other assets		149,732,047		159,784,757

Total assets	$	250,209,548	$	361,460,444

Liabilities
Current liabilities
Accounts payable - third parties	$	10,549,864	$	3,690,417
Income tax payable		4,813,797		5,333,519
Accrued liabilities and other payables		4,011,855		2,704,350
Accrued interest - related party		1,768,470		-
Receipt in advance - third parties		5,153,183		-
Advance from related parties		-		560,216
Derivative liability		-		1,764,249
Note payable - related party		155,166,195		-
Total current liabilities	$	181,463,364	$	14,052,751

	11

PINGTAN MARINE ENTERPRISE LTD. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(IN U.S. DOLLARS)

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.

In October, 2013 the Company decided to sell its 100% interest in China Dredging Group Co., Ltd. and its subsidiaries to the Company’s Chairman, CEO and major shareholder, Mr. Xinrong Zhuo. As such, China Dredging Group Co., Ltd’s assets and liabilities have been classified on the balance sheet as assets and liabilities of discontinued operations. The operating results of China Dredging Group Co., Ltd have been classified as discontinued operations in our statements of operations for all periods presented. Unless otherwise indicated, all disclosures and amounts in the Notes to the Consolidated Financial Statements relate to the Company’s continuing operations.

Certain information and footnote disclosures normally included in the annual consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. These unaudited financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K and in China Dredging’s Annual Report on Form 20-F for the year ended December 31, 2012 filed with the Securities and Exchange Commission on February 6, 2013 and April 27, 2013, respectively.

Reclassifications

Certain prior year information has been reclassified to be comparable with the current period presentation. This reclassification has no effect on previously reported net income.

(b) Consolidation of VIE

The Company has no direct or indirect legal or equity ownership interest in Pingtan Fishing. Moreover, 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 Guansheng, 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.

	12

PINGTAN MARINE ENTERPRISE LTD. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(IN U.S. DOLLARS)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (…/Cont’d)

(b) Consolidation of VIE (…/Cont’d)

In accordance with Accounting Standards Codification (“ASC”) 810-10-15-14, Pingtan Fishing is deemed VIEs for two reasons. First, the equity stockholders of Pingtan Fishing do not significantly enjoy the benefits of income or suffer the consequences of losses. Second, the equity stockholders of Pingtan Fishing 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 Pingtan Fishing. Therefore, in accordance with ASC 810-10-25-38A, the Company is deemed to be the primary beneficiary of Pingtan Fishing and the financial statements of Pingtan Fishing 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 September 30, 2013 and December 31, 2012. The VIEs include Pingtan Fishing Group which comprises of Pingtan Fishing itself and the three subsidiaries; namely Pingtan Dingxin, Pingtan Duoying and Pingtan Ruiying. The creditors of Pingtan Fishing Group do not have recourse against the general creditors of their primary beneficiaries or other Group members.

	September 30,		December 31,
	2013		2012
	(Unaudited)
ASSETS
Cash	$	10,678,707	$	6,710,472
Notes receivable (banker's acceptances) transferred from related parties		-		3,645,817
Accounts receivable - third parties		10,252,829		11,478,436
Other receivables		3,294,318		29,885
Advance to related parties		-		49,802,897
Inventories		5,427,251		194,331
Prepaid expenses - third parties		4,908,497		386,966
Long-term investment		3,431,373		3,328,789
Deposit on setting up Joint Venture		-		6,092,302
Property, plant and equipment, net		66,979,281		37,141,906
	$	104,972,256	$	118,811,801

LIABILITIES
Accounts payable - third parties	$	151,000	$	70,732
- related parties		163,303		5,765,632
Receipt in advance - third parties		476,399		-
- related parties		-		12,681,102
Short-term loans		22,363,811		25,169,260
Accrued liabilities and other payables		3,462,405		1,033,640
Long-term loans		69,844,772		24,783,629
	$	96,461,690	$	69,503,995

	13

PINGTAN MARINE ENTERPRISE LTD. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(IN U.S. DOLLARS)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (…/Cont’d)

(b) Consolidation of VIE (…/Cont’d)

The following tables show the revenue and cost of revenues, and net income of the Company’s VIEs after eliminating the intercompany balances for the three and nine months ended September 30, 2013 and 2012.

	For the Three Months Ended September 30,				For the Nine Months Ended September 30
	2013		2012		2013		2012
	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)

Revenue	$	20,609,107	$	13,152,223	$	61,640,940	$	39,039,757

Cost of revenue	$	(12,446,879)	$	(9,693,182)	$	(38,974,488)	$	(28,572,398)

Net income attributable to the Company	$	6,868,193	$	5,789,531	$	19,102,412	$	10,594,063

	14

PINGTAN MARINE ENTERPRISE LTD. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(IN U.S. DOLLARS)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (…/Cont’d)

(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:

	15

PINGTAN MARINE ENTERPRISE LTD. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(IN U.S. DOLLARS)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (…/Cont’d)

(d)

Foreign currency translation (…/Cont’d)

	September 30, 2013	December 31, 2012
Balance sheet items, except for equity accounts	RMB6.12=$1	RMB6.3086=$1
	HKD7.7551=$1	HKD7.7507=$1

	For the Three Months Ended September 30,
	2013	2012
Items in statements of income and cash flows	RMB6.1226=$1	RMB6.2923=$1
	HKD7.7551=$1	HKD7.7546=$1

	For the Nine Months Ended September 30,
	2013	2012
Items in statements of income and cash flows	RMB6.1616=$1	RMB6.3085=$1
	HKD7.7575=$1	HKD7.7575=$1

(e) Cash

Cash consists of cash on hand and at banks.

(f) Accounts receivable

Merchant Supreme only grants credit terms to established customers who are deemed to be financially responsible. Credit periods to independent customers are within 180 days after customers received the purchased goods.

Merchant Supreme maintains allowances for doubtful accounts for estimated losses. 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 nine months ended September 30, 2013 and 2012, respectively. Merchant Supreme collected a majority of receivable balances from third party customers as of September 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.

	16

PINGTAN MARINE ENTERPRISE LTD. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(IN U.S. DOLLARS)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (…/Cont’d)

(g)

Revenue recognition

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 delivery to customers occur 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 who have history of financial responsibility. 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)

Government grant

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.

(i)

Deferred income

Deferred income represents income collected but not earned as of the report date. This is primarily composed of payments of the government grants to construct new fishing vessels. Upon the completion of the construction of the fishing vessels, the grant would be deducted from the gross cost of the fishing vessels.

(j)

Fishing licenses

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.

	17

PINGTAN MARINE ENTERPRISE LTD. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(IN U.S. DOLLARS)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (…/Cont’d)

(k)

Inventories

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 ensuring twelve-month period. Cost of frozen fish and other marine catches at period-ends is calculated using the weighted average method.

(l)

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 property, plant 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
Fishing vessel		10-20
Major improvement on fishing vessel		4-20
Motor vehicle		3-5
Ship and office equipments		3-5

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

(m) Capitalized Interest

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 $482,671 and $40,694 for the three months ended September 30, 2013 and 2012, respectively; $507,891 and $124,218 for the nine months ended September 30, 2013 and 2012, respectively in the fishing vessels under construction.

	18

PINGTAN MARINE ENTERPRISE LTD. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(IN U.S. DOLLARS)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (…/Cont’d)

(n)

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.

(o)

Income taxes

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. 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.

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

	19

PINGTAN MARINE ENTERPRISE LTD. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(IN U.S. DOLLARS)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (…/Cont’d)

(p)

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.

As of September 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 September 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.

(q)

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 September 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.

	20

PINGTAN MARINE ENTERPRISE LTD. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(IN U.S. DOLLARS)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (…/Cont’d)

(r)

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.

(s)

Pension and employee benefits

Cost for pension and employee benefits of Merchant Supreme was $9,498 and $14,766 for the three and nine months ended September 30, 2013 respectively and $nil for the three and nine months ended September 30, 2012, respectively.

(t)

Segment information

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

(u)

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.

	21

PINGTAN MARINE ENTERPRISE LTD. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(IN U.S. DOLLARS)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (…/Cont’d)

(u) Earnings per ordinary share (…/Cont’d)

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

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2013		2012		2013		2012
	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)

Net income	$	18,301,541	$	23,161,768	$	56,861,835	$	71,364,099

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)
- From continuing operations	$	0.08	$	0.07	$	0.22	$	0.13
- From discontinued operations		0.15		0.22		0.50		0.77
- Net income	$	0.23	$	0.29	$	0.72	$	0.90

For the three and nine months ended September 30, 2013 and 2012, the number of securities convertible into common shares not included in diluted EPS because the effect would have been anti-dilutive consists of the following:

	For the Three Months Ended		For the Nine Months Ended
	September 30,		September 30,
	2013	2012	2013	2012
	(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)

Warrants to purchase common stock	8,966,667	8,966,667	8,966,667	8,966,667

	22

PINGTAN MARINE ENTERPRISE LTD. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(IN U.S. DOLLARS)

CASH

PME

Cash is classified by geographical areas is set out as follows:

	September 30, 2013			December 31, 2012
	(Unaudited)

Hong Kong	$	-	$	3,565,355

Maximum exposure to credit risk	$	-	$	3,565,355

Cash is denominated in the following currency:

	September 30, 2013		December 31, 2012
		(Unaudited)

USD	$	-	$	3,565,355

	23

PINGTAN MARINE ENTERPRISE LTD. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(IN U.S. DOLLARS)

CASH (…/Cont’d)

Merchant Supreme

	September 30, 2013		December 31, 2012
	(Unaudited)

Hong Kong	$	678	$	862
The PRC		10,831,322		6,859,923
	$	10,832,000	$	6,860,785

Maximum exposure to credit risk	$	10,832,000	$	6,860,785

Cash is denominated in the following currencies:

	September 30, 2013		December 31, 2012
	(Unaudited)

USD	$	150,057	$	150,001
RMB		10,681,265		6,709,922
HKD		678		862
	$	10,832,000	$	6,860,785

In the PRC and Hong Kong, there are currently no rules or regulations mandating obligatory insurance of bank accounts. Management believes these financial institutions are of high credit quality.

Renminbi is not a freely convertible currency and the remittance of funds out of the PRC is subject to the exchange restrictions imposed by the PRC government.

ACCOUNTS RECEIVABLE - THIRD PARTIES

Merchant Supreme

<td style="TEXT-ALIGN: center; FONT-STYLE: normal; FONT-FAMILY: Times New Roman; BACKGROUND: #ffffff; FONT-SIZE: 10pt; VERTICAL-ALIGN: bottom; BORDER-TOP: #000000 1px soli

		September 30, 2013			December 31, 2012
		(Unaudited)