Quarterly report pursuant to sections 13 or 15(d)

DEPOSIT ON SETTING UP OF JOINT VENTURE

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DEPOSIT ON SETTING UP OF JOINT VENTURE
6 Months Ended
Jun. 30, 2013
Equity Method Investments and Joint Ventures [Abstract]  
Equity Method Investments and Joint Ventures Disclosure [Text Block]
 
13.
DEPOSIT ON SETTING UP OF JOINT VENTURE
 
Deposit on setting up of Joint Venture as of June 30, 2013 and December 31, 2012 consisted of the following:
 
Merchant Supreme
 
 
 
June 30, 2013
 
December 31, 2012
 
 
 
(Unaudited)
 
 
 
 
Deposit for an asset interest acquisition and investment
   in a proposed Indonesia joint venture
 
$
-
 
$
6,090,302
 
 
Pursuant to a Cooperative Agreement and a Joint-Venture Contract dated March 1, 2006 entered into between the Merchant Supreme’s VIE, Pingtan Fishing and PT. Avona Mina Lestari (“Avona”), an Indonesian enterprise engaged in fishing base management and fishing vessel operations, Pingtan Fishing agreed to acquire 80% controlling interest in a fishing base owned by Avona. A joint venture company that would be controlled by Pingtan Fishing will be established between Pingtan Fishing and Avona following Pingtan Fishing’s acquisition of controlling interest in Avona’s fishing base. Total investment for the acquisition of Avona fishing base 80% interest and establishment of a joint venture company is $7,200,000, comprising $5,470,000 cash and 14 fishing vessels to be valued at $1,730,000.
 
Pingtan Fishing deposited in aggregate $5,470,000 cash ($6,090,302 as of December 31, 2012) to Avona from July 2007 to November 2009, and did not transfer any fishing vessel to Avona or the proposed joint venture company as of the issuance date of these financial statements. Because of certain government restrictions on these proposed investments, the acquisition of the Avona fishing base’s 80% controlling interest and establishment of the joint-venture were not consummated. Under separate arrangements, Xinrong Zhuo and certain of his family members, the ultimate beneficial owners of Merchant Supreme obtained the management rights of the Avona fishing base and another Indonesian enterprise PT. Dwikarya Reksa Abadi (“Kimaan”)’s fishing base. Xinrong Zhuo and his family members also gained influence over Avona’s daily operations, and combined with management rights of the fishing base, they are able to provide ship agency, maintenance and other services to Merchant Supreme’s fishing vessels so that they can legally and efficiently operate in Indonesia waters. Accordingly, Avona is regarded as a related party of Merchant Supreme.
 
On September 12, 2012, Pingtan Fishing and Avona entered into a Memorandum of Understanding, pursuant to which Pingtan Fishing and Avona reaffirmed the intention to complete Pingtan Fishing’s acquisition of the Avona fishing base’s interest, and establishment of a joint venture company. Avona further confirmed its equity holding structure shall remain unchanged prior to Pingtan Fishing’s successful acquisition of its fishing base interest, and any adjustments to Avona’s registered capital, acquisition or dispose of material properties, and material debt financings are subject to Merchant Supreme’s approval.
 
In the first quarter of 2013, Pingtan Fishing and Avona further entered into an agreement, agreeing that the deposit on setting up of joint venture would be used for settling the purchase made by Pingtan Fishing.  Should there be any news to confirm that the setting up of the joint venture is approved by the Indonesian Government, both companies would re-start this investment again.