Quarterly report pursuant to sections 13 or 15(d)

CAPITAL

v2.4.0.8
CAPITAL
6 Months Ended
Jun. 30, 2013
Stockholders' Equity Note [Abstract]  
Stockholders' Equity Note Disclosure [Text Block]
22.
CAPITAL
 
 
(a)
Share capital
 
On February 25, 2013, CGEI completed its merger with CDGC and the various transactions contemplated by the Agreement and Plan of Merger, (the “Merger Agreement”) dated as of October 24, 2012 among CGEI, CDGC, and China Dredging Sub Ltd. and the share purchase of Merchant Supreme contemplated by the share Purchase Agreement, dated as of October 24, 2012 (the “Share Purchase Agreement”), among CGEI and (collectively, the “Business Combination”) Merchant Supreme. Upon the consummation of the Business Combination, the ordinary shares, par value $0.001 per share of the Company were listed on The NASDAQ Capital Market under the symbol “PME”. Pursuant to the terms of the Merger Agreement, upon completion of the Merger, each share of then-issued outstanding ordinary shares and Class A preferred A shares of CDGC was automatically cancelled and converted into the right to receive 0.82947 Company Ordinary Shares. Pursuant to the terms of the Share Purchase Agreement, all of the issued and outstanding shares of Merchant Supreme capital shares were purchased by the Company for an aggregate of 25,000,000 Company Ordinary Shares. On February 26, 2013, the Company announced that it had completed the Business Combination.
 
An aggregate of 30,329,883 ordinary shares and 3,966,667 warrants that were originally issued by CGEI, to Chum Capital Group Limited, in connection with a private placement prior to CGEI’s initial public offering, and that became exercisable for the Company’s ordinary shares beginning on March 27, 2013 (the “Sponsor Warrants”). have been registered for resale by the selling security-holders under Form S-3 filed on June 17, 2013 and declared effective on June 19, 2013. The Company also registered an aggregate of 8,966,667 ordinary shares that are issuable by the Company upon exercise of the 3,966,667 Sponsor Warrants and 5,000,000 warrants that were issued in the CGEI’s initial public offering (the “Public Warrants”) and that became exercisable upon the consummation of the transactions contemplated by that certain Agreement and Plan of Merger, dated as of October 24, 2012, between CGEI, CDGC, China Growth Dredging Sub Ltd. and Xinrong Zhuo and by that certain Share Purchase Agreement, dated as of October 24, 2012, between CGEI and Merchant Supreme. .
 
Each Public Warrants and Sponsor Warrant (the “Warrants”) entitles the registered holder thereof to purchase one of the Company’s ordinary shares upon payment of the exercise price of $12.00 per share.
 
The Sponsor Warrants are identical to the Public Warrants except that the Sponsor Warrants will be exercisable for cash or on a cashless basis, at the holder’s option, and will not be redeemable by the Company, in each case so long as they are still held by these purchases or their transferees. 
 
The fair value of Warrants amounted to approximately $18,255,237 which was calculated by using Black-Scholes Option Calculator. The fair value of each of warrant was estimated using the following assumptions:
 
A summary of all Warrants outstanding as of June 30, 2013 and actions relating thereto during the period then ended is presented below:
 
 
 
June 30, 2013
 
 
 
(Unaudited)
 
 
 
 
 
 
Expected volatility
 
 
89
%
Expected term (in years)
 
 
4.7
 
Risk free rate
 
 
1.41
%
 
A summary of all Warrants outstanding as of June 30, 2013 is presented below:
 
 
 
Number of
Warrants
 
Exercise Price
 
Terms
 
 
 
 
 
 
 
 
 
 
 
 
Issued on May 26, 2011 and
  outstanding as of June 30, 2013
 
 
8,966,667
 
$
12.00
 
 
4.7 years
 
 
During the period ended June 30, 2013, no warrant was exercised or expired.
 
 
(b)
Retained earnings and statutory reserves
 
Fujian Service, Fujian Wanggang, Wonder Dredging, Pingtan Xingyi, Pingtan Zhuoying, Pingtan Guansheng and Pingtan Fishing Group operate in the PRC, are required to transfer 10% of their net profits after income tax, as determined in accordance with the PRC accounting rules and regulations. Appropriation to the statutory reserve by the Company is based on profit arrived at under PRC accounting standards for business enterprises for each year. The statutory reserves of the Company represent the statutory reserves of the above-mentioned companies as required under the PRC law.
 
The profit arrived at must be set off against any accumulated losses sustained by the Company in prior years, before allocation is made to the statutory reserve. Appropriation to the statutory reserve must be made before distribution of dividends to shareholders. The appropriation is required until the statutory reserve reaches 50% of the shareholders’ equity. This statutory reserve is not distributable in the form of cash dividends.
 
Retained earnings/(accumulated losses) and statutory reserves as of June 30, 2013 and December 31, 2012 consisted of the following:
 
PME
 
 
 
June 30, 2013
 
December 31, 2012
 
 
 
(Unaudited)
 
 
 
 
 
 
 
 
 
 
 
Accumulated losses
 
$
(3,284,651)
 
$
(2,366,419)
 
 
 
 
 
 
 
 
 
Statutory reserves
 
$
-
 
$
-
 
 
China Dredging
 
 
 
June 30, 2013
 
December 31, 2012
 
 
 
(Unaudited)
 
 
 
 
 
 
 
 
 
 
 
Retained earnings
 
$
209,972,814
 
$
183,053,524
 
 
 
 
 
 
 
 
 
Statutory reserves
 
$
15,770,334
 
$
15,386,316
 
 
As of June 30, 2013, the statutory reserves of Fujian Service and Wonder Dredging have fulfilled the requirement of PRC accounting rules and regulations. Fujian Wanggang and Pingtan Zhuoying had sustained losses since its establishment; therefore no appropriation of net profits to the statutory reserves was required.
 
Merchant Supreme
 
 
 
June 30, 2013
 
December 31, 2012
 
 
 
(Unaudited)
 
 
 
 
 
 
 
 
 
 
 
Retained earnings
 
$
48,712,333
 
$
36,537,115
 
 
 
 
 
 
 
 
 
Statutory reserves
 
$
4,000,326
 
$
4,000,326
 
 
As of June 30, 2013, the statutory reserve of Pingtan Fishing has fulfilled the requirement of PRC accounting rules and regulations. Pingtan Guansheng, Pingtan Dingxin, Pingtan Duoying and Pingtan Ruiying had sustained losses since its establishment; therefore no appropriation of net profits to the statutory reserves was required.