Quarterly report pursuant to sections 13 or 15(d)

Subsequent Events

v2.4.0.6
Subsequent Events
9 Months Ended
Sep. 30, 2012
Subsequent Events [Abstract]  
Subsequent Events [Text Block]

Note 11 – Subsequent Events

 

Business Combination

 

On October 24, 2012, the Company entered into agreements to acquire China Dredging Group Co. Ltd., (“CDGC”) and Merchant Supreme Co., Ltd. (“Merchant Supreme”), which will control Fujian Provincial Pingtan County Ocean Fishing Group Co., Ltd. (“Pingtan Fishing”). The combined entity, which will be renamed “Pingtan Marine Enterprise Ltd.”, intends to apply to be listed on NASDAQ under the ticker symbol “PME”. Under the terms of the agreements, the holders of Class A preferred shares and ordinary shares of CDGC will receive 52,000,000 ordinary shares of the Company. The shareholders of Merchant Supreme will receive 25,000,000 ordinary shares of the Company. After the completion of the business combination, the current shareholders of CDGC and Merchant Supreme will own approximately 62% and 30% of the Company, respectively, assuming no holders of ordinary shares exercise redemption rights. The current shareholders of the Company will own approximately 8% of the Company, assuming no redemptions.

 

Accounting Treatment of the Business Combination

 

CDGC and Merchant Supreme (which will control Pingtan Fishing) are considered entities under common control due to common majority shareholders. Since they are under common control, their assets, liabilities and results of operations will be combined at historical cost prior to the business combination.

 

The business combination will be accounted for as a reverse recapitalization with CDGC and Merchant Supreme considered the acquirers since, immediately following completion of the transaction, the shareholders of CDGC and Merchant Supreme immediately prior to the business combination will have effective control of the Company through (1) their approximately 92% shareholder interest in the combined entity, assuming no holders of ordinary shares exercises redemption rights, or their approximately 98% shareholder interest in the combined entity assuming the maximum number of holders of ordinary shares exercise redemption rights, (2) significant representation on the Company’s board of directors (initially three out of seven members), with the four remaining board members being independent, and three former officers of CDGC or Merchant Supreme being named to all senior executive positions of the Company following the business combination. Accordingly, the combined assets, liabilities and results of operations of CDGC and Merchant Supreme will become the historical financial statements of the Company at the closing of the transaction, and the Company’s assets (primarily cash and cash equivalents), liabilities and results of operations will be consolidated with CDGC’s and Merchant Supreme’s beginning on the closing date of the business combination. No step-up in basis or intangible assets or goodwill will be recorded in this transaction. All direct costs of the transaction will be charged to operations in the period that such costs are incurred.