UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
x QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30,
2015
or
o 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: 001-34567
CHINA YIDA HOLDING, CO.
(Exact name of registrant as specified in its
charter)
Nevada |
|
50-0027826 |
(State or other jurisdiction of
incorporation or organization) |
|
(I.R.S. Employer
Identification No.) |
|
|
|
28/F Yifa Building, No. 111 Wusi Road
Fuzhou, Fujian, P. R. China |
|
350003 |
(Address of principal executive offices) |
|
(Zip Code) |
+ 86 (591) 28082230
(Registrant's telephone number, including area
code)
Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the 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 ☒ 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 ☒ 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 definitions of
“large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2
of the Exchange Act.
Large accelerated filer |
☐ |
Accelerated filer |
☐ |
Non-accelerated filer |
☐ |
Smaller reporting company |
☒ |
(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 o No ☒
Indicate the number of shares outstanding of each of the issuer’s
classes of common stock as of the latest practicable date.
Class |
|
Shares outstanding as of November 12,
2015 |
Common stock, $.001 par value |
|
3,914,580 |
PART
1 - FINANCIAL INFORMATION
Item 1. Financial
Statements.
CHINA
YIDA HOLDING, CO. AND SUBSIDIARIES
CONSOLIDATED
FINANCIAL STATEMENTS
(UNAUDITED)
Index
to consolidated financial statements
|
|
Page |
|
|
|
Consolidated
Balance Sheets as of September 30, 2015 and December 31, 2014 |
|
2 |
Consolidated
Statements of Income and Comprehensive Income for the nine months and three months ended September 30, 2015 and
2014 |
|
3 |
Consolidated
Statements of Cash Flows for the nine months ended September 30, 2015 and 2014 |
|
4 |
Notes
to the Consolidated Financial Statements |
|
5 |
CHINA
YIDA HOLDING CO. AND SUBSIDIARIES |
CONSOLIDATED
BALANCE SHEETS |
|
| |
September
30, | | |
December
31, | |
| |
2015 | | |
2014 | |
| |
| (UNAUDITED) | | |
| (RESTATED) | |
ASSETS | |
| | | |
| | |
Current
assets | |
| | | |
| | |
Cash
and cash equivalents | |
$ | 1,973,993 | | |
$ | 958,664 | |
Accounts
receivable | |
| 472,891 | | |
| 343,807 | |
Other
receivables, net | |
| 211,871 | | |
| 148,828 | |
Advances
and prepayments | |
| 657,955 | | |
| 838,933 | |
Prepayment
- current portion | |
| 897,944 | | |
| 832,207 | |
Total
current assets | |
| 4,214,654 | | |
| 3,122,439 | |
| |
| | | |
| | |
Property
and equipment, net | |
| 165,682,119 | | |
| 177,225,357 | |
Intangible
assets, net | |
| 43,927,408 | | |
| 46,419,350 | |
Long-term
prepayments | |
| 2,057,158 | | |
| 2,032,764 | |
Total
assets | |
$ | 215,881,339 | | |
$ | 228,799,910 | |
| |
| | | |
| | |
LIABILITIES
AND STOCKHOLDERS' EQUITY | |
| | | |
| | |
Current
liabilities | |
| | | |
| | |
Short-term
loans | |
$ | 1,885,666 | | |
$ | 1,954,047 | |
Long-term
debt, current portion | |
| 3,299,915 | | |
| 3,256,746 | |
Accounts
payable | |
| 476,005 | | |
| 713,414 | |
Accrued
expenses and other payables | |
| 1,365,890 | | |
| 1,364,863 | |
Due
to related parties | |
| 14,863,953 | | |
| 31,680,942 | |
Taxes
payable | |
| 57,858 | | |
| 38,922 | |
Total
current liabilities | |
| 21,949,287 | | |
| 39,008,934 | |
| |
| | | |
| | |
Long-term
debt | |
| 106,338,980 | | |
| 83,047,011 | |
Total
liabilities | |
| 128,288,267 | | |
| 122,055,945 | |
| |
| | | |
| | |
Commitments
and contingencies (Note 14) | |
| | | |
| | |
| |
| | | |
| | |
Equity | |
| | | |
| | |
Preferred
stock ($0.0001 par value, 10,000,000 shares authorized, none issued and outstanding) | |
| - | | |
| - | |
Common stock ($0.001
par value, 100,000,000 shares authorized, 3,914,580 and 3,914,580 shares issued and outstanding as of September 30, 2015 and
December 31, 2014, respectively) | |
| 3,915 | | |
| 3,915 | |
Additional
paid in capital | |
| 49,163,705 | | |
| 49,163,705 | |
Accumulated
other comprehensive income | |
| 14,136,329 | | |
| 17,508,968 | |
Retained
earnings | |
| 21,739,793 | | |
| 37,518,047 | |
Statutory
reserve | |
| 2,549,330 | | |
| 2,549,330 | |
Total
equity | |
| 87,593,072 | | |
| 106,743,965 | |
Total
liabilities and equity | |
$ | 215,881,339 | | |
$ | 228,799,910 | |
The
accompanying notes are an integral part of these unaudited consolidated financial statements.
CHINA
YIDA HOLDING CO. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(UNAUDITED)
| |
Nine Months Ended
September 30, | |
Three Months Ended
September 30, |
| |
2015 | |
2014 | |
2015 | |
2014 |
Net revenue | |
$ | 10,710,797 | | |
$ | 9,030,961 | | |
$ | 4,909,224 | | |
$ | 3,870,984 | |
| |
| | | |
| | | |
| | | |
| | |
Cost of revenue | |
| 7,129,467 | | |
| 6,784,170 | | |
| 2,617,088 | | |
| 2,471,661 | |
| |
| | | |
| | | |
| | | |
| | |
Gross profit | |
| 3,581,330 | | |
| 2,246,791 | | |
| 2,292,136 | | |
| 1,399,323 | |
| |
| | | |
| | | |
| | | |
| | |
Operating expenses | |
| | | |
| | | |
| | | |
| | |
Selling expenses | |
| 7,348,263 | | |
| 7,717,558 | | |
| 2,407,166 | | |
| 2,906,081 | |
General and administrative expenses | |
| 5,278,801 | | |
| 5,555,330 | | |
| 1,423,944 | | |
| 1,967,665 | |
| |
| | | |
| | | |
| | | |
| | |
Total operating expenses | |
| 12,627,064 | | |
| 13,272,888 | | |
| 3,831,110 | | |
| 4,873,746 | |
| |
| | | |
| | | |
| | | |
| | |
Loss from operations | |
| (9,045,734 | ) | |
| (11,026,097 | ) | |
| (1,538,974 | ) | |
| (3,474,423 | ) |
| |
| | | |
| | | |
| | | |
| | |
Other income (expense) | |
| | | |
| | | |
| | | |
| | |
Other (expense) income, net | |
| (326,284 | ) | |
| (399,986 | ) | |
| (12,713 | ) | |
| (618,142 | ) |
Interest income | |
| 12,836 | | |
| 7,448 | | |
| 4,013 | | |
| 2,975 | |
Interest expense | |
| (6,419,072 | ) | |
| (6,460,899 | ) | |
| (2,163,340 | ) | |
| (1,999,487 | ) |
| |
| | | |
| | | |
| | | |
| | |
Total other expenses | |
| (6,732,520 | ) | |
| (6,853,437 | ) | |
| (2,172,040 | ) | |
| (2,614,654 | ) |
| |
| | | |
| | | |
| | | |
| | |
Loss before income tax and non-controlling interest | |
| (15,778,254 | ) | |
| (17,879,534 | ) | |
| (3,711,014 | ) | |
| (6,089,077 | ) |
| |
| | | |
| | | |
| | | |
| | |
Less: Provision for income tax | |
| - | | |
| - | | |
| - | | |
| - | |
| |
| | | |
| | | |
| | | |
| | |
Net loss from continuing operations | |
| (15,778,254 | ) | |
| (17,879,534 | ) | |
| (3,711,014 | ) | |
| (6,089,077 | ) |
| |
| | | |
| | | |
| | | |
| | |
Discontinued operation | |
| | | |
| | | |
| | | |
| | |
Loss from discontinued operations, net of income taxes | |
| - | | |
| (616,732 | ) | |
| - | | |
| (83,796 | ) |
Loss on disposal of subsidiary, net of income taxes | |
| - | | |
| (6,510,630 | ) | |
| - | | |
| (6,510,630 | ) |
| |
| | | |
| | | |
| | | |
| | |
Net loss from discontinued operations, net of income taxes | |
| - | | |
| (7,127,362 | ) | |
| - | | |
| (6,594,426 | ) |
| |
| | | |
| | | |
| | | |
| | |
Net loss | |
$ | (15,778,254 | ) | |
$ | (25,006,896 | ) | |
$ | (3,711,014 | ) | |
$ | (12,683,503 | ) |
| |
| | | |
| | | |
| | | |
| | |
Other comprehensive income (loss) | |
| | | |
| | | |
| | | |
| | |
Foreign currency translation gain (loss) | |
| (3,372,639 | ) | |
| (1,138,800 | ) | |
| (3,920,195 | ) | |
| 143,407 | |
| |
| | | |
| | | |
| | | |
| | |
Comprehensive loss | |
$ | (19,150,893 | ) | |
$ | (26,145,696 | ) | |
$ | (7,631,209 | ) | |
$ | (12,540,096 | ) |
| |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | |
Amounts attributable to common stockholders: | |
| | | |
| | | |
| | | |
| | |
Net loss from continuing operations, net of income taxes | |
| (15,778,254 | ) | |
| (17,879,534 | ) | |
| (3,711,014 | ) | |
| (6,089,077 | ) |
Net loss from discontinued operations, net of income taxes | |
| - | | |
| (7,127,362 | ) | |
| - | | |
| (6,594,426 | ) |
Net loss attributable to common stockholders | |
| (15,778,254 | ) | |
| (25,006,896 | ) | |
| (3,711,014 | ) | |
| (12,683,503 | ) |
| |
| | | |
| | | |
| | | |
| | |
Net loss attributable to common stockholders per share - basic and diluted: | |
| | | |
| | | |
| | | |
| | |
- Basic & diluted earnings/(loss) per share from continuing operations | |
$ | (4.03 | ) | |
$ | (4.57 | ) | |
$ | (0.95 | ) | |
$ | (1.56 | ) |
- Basic & diluted earnings/(loss) per share from discontinued operations | |
$ | - | | |
$ | (1.82 | ) | |
$ | - | | |
$ | (1.68 | ) |
- Basic & diluted earnings/(loss) per share attributable to common stockholders | |
$ | (4.03 | ) | |
$ | (6.39 | ) | |
$ | (0.95 | ) | |
$ | (3.24 | ) |
| |
| | | |
| | | |
| | | |
| | |
Weighted average shares outstanding | |
| | | |
| | | |
| | | |
| | |
- Basic | |
| 3,914,580 | | |
| 3,914,580 | | |
| 3,914,580 | | |
| 3,914,580 | |
- Diluted | |
| 3,914,580 | | |
| 3,914,580 | | |
| 3,914,580 | | |
| 3,914,580 | |
The
accompanying notes are an integral part of these unaudited consolidated financial statements.
CHINA
YIDA HOLDING CO. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(UNAUDITED)
| |
| For
The Nine Months Ended September 30, | |
| |
| 2015 | | |
| 2014 | |
| |
| | | |
| (Restated) | |
CASH FLOWS FROM OPERATING ACTIVITIES | |
| | | |
| | |
Net loss | |
$ | (15,778,254 | ) | |
$ | (25,006,896 | ) |
Net loss from discontinued operations | |
| - | | |
| 616,732 | |
Adjustments to reconcile net income to net cash provided by operating activities: | |
| | | |
| | |
Loss on disposal of discontinued operation | |
| - | | |
| 6,510,630 | |
Depreciation | |
| 6,104,393 | | |
| 6,412,392 | |
Amortization | |
| 894,246 | | |
| 893,871 | |
Amortization of long-term prepayments | |
| 809,592 | | |
| 586,563 | |
Changes in operating assets and liabilities: | |
| | | |
| | |
Accounts receivable | |
| (145,465 | ) | |
| (132,831 | ) |
Other receivables, net | |
| (70,355 | ) | |
| 28,156 | |
Advances and prepayments | |
| 156,297 | | |
| (352,702 | ) |
Accounts payable | |
| (218,992 | ) | |
| 79,007 | |
Accrued expenses and other payables | |
| 50,295 | | |
| 587,164 | |
Taxes payable | |
| 20,924 | | |
| 55,851 | |
Net cash used in continuing operations | |
| (8,177,319 | ) | |
| (9.722,063 | ) |
Net cash provided by discontinued operations | |
| - | | |
| 675,366 | |
Net cash used in operating activities | |
| (8,177,319 | ) | |
| (9,046,697 | ) |
CASH FLOWS FROM INVESTING ACTIVITIES | |
| | | |
| | |
Proceeds from disposal of discontinued entity | |
| - | | |
| 35,570,385 | |
Additions to property and equipment | |
| (598,477 | ) | |
| (8,097,950 | ) |
Increase in long-term prepayments for acquisition of property, equipment and land use rights | |
| (438,912 | ) | |
| (235,105 | ) |
Net cash (used in) provided by continuing operations | |
| (1,037,389 | ) | |
| 27,237,330 | |
Net cash provided by discontinued operations | |
| - | | |
| 471,410 | |
Net cash (used in) provided by investing activities | |
| (1,037,389 | ) | |
| 27,708,740 | |
CASH FLOWS FROM FINANCING ACTIVITIES | |
| | | |
| | |
Payment of deferred financing costs | |
| (566,939 | ) | |
| - | |
Proceeds from short-term loans | |
| 1,943,792 | | |
| 4,554,327 | |
Repayment of short-term loans | |
| (1,943,792 | ) | |
| (2,439,818 | ) |
Proceeds from long-term loans | |
| 29,156,880 | | |
| 40,175,667 | |
Repayment of long-term loans | |
| (1,989,147 | ) | |
| (47,495,120 | ) |
(Repayment of) proceeds from loans from related parties | |
| (16,304,983 | ) | |
| 6,483,770 | |
Net cash provided by continuing operations | |
| 10,295,811 | | |
| 1,278,826 | |
Net cash used in discontinued operations | |
| - | | |
| (16,196,038 | ) |
Net cash provided by (used in) financing activities | |
| 10,295,811 | | |
| (14,917,212 | ) |
EFFECT OF EXCHANGE RATE CHANGES ON CASH | |
| (65,774 | ) | |
| (174,502 | ) |
NET INCREASE IN CASH AND CASH EQUIVALENTS | |
| 1,015,329 | | |
| 3,570,329 | |
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD | |
| 958,664 | | |
| 2,415,575 | (1) |
CASH
AND CASH EQUIVALENTS, ENDING OF PERIOD | |
$ | 1,973,993 | | |
$ | 5,985,904 | (2) |
SUPPLEMENTAL DISCLOSURES: | |
| | | |
| | |
Cash paid during the period for: | |
| | | |
| | |
Income tax | |
$ | - | | |
$ | - | |
Interest | |
$ | 6,419,072 | | |
$ | 6,404,999 | |
(1) Included
cash and cash equivalents from continuing and discontinued operations of $2,157,738 and $257,837, respectively. |
(2) Included
cash and cash equivalents from continuing and discontinued operations of $5,981,829 and $4,075, respectively. |
The
accompanying notes are an integral part of these consolidated financial statements.
CHINA
YIDA HOLDING, CO. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. |
ORGANIZATION
AND DESCRIPTION OF BUSINESS |
China
Yida Holding Co. (“China Yida”) and its subsidiaries (collectively the "Company”, “we”,
“us”, or “our”) engage in tourism and advertisement businesses in the People’s Republic of
China.
Keenway
Limited was incorporated under the laws of the Cayman Islands on May 9, 2007 for the purpose of functioning as an off-shore holding
company to obtain ownership interests in Hong Kong Yi Tat International Investment Co., Ltd (“Hong Kong Yi Tat”),
a company incorporated under the laws of Hong Kong. Immediately prior to the Merger (defined below), Mr. Chen Minhua and
his wife, Ms. Fan Yanling, were the majority shareholders of Keenway Limited.
On
November 19, 2007, we entered into a share exchange and stock purchase agreement with Keenway Limited, Hong Kong Yi Tat, and with the
shareholders of Keenway Limited at that time, including Chen Minhua, Fan Yanling, Zhang Xinchen, Extra Profit International Limited,
and Lucky Glory International Limited (collectively, the “Keenway Limited Shareholders”), pursuant to which in exchange
for all of their shares of Keenway Limited common stock, the Keenway Limited Shareholders received 18,180,649 newly issued shares
(or 90,903,246 shares prior to the reverse stock split on November 16, 2012) of our common stock and 728,359 shares (or 3,641,796
shares prior to the reverse stock split on November 16, 2012) of our common stock which was transferred from some of our then
existing shareholders (the “Merger”). As a result of the closing of the Merger, the Keenway Limited Shareholders
owned approximately 94.5% of our then issued and outstanding shares on a fully diluted basis and Keenway Limited became our wholly
owned subsidiary.
Hong
Kong Yi Tat was incorporated as the holding company of our operating entities, Fujian Jintai Tourism Development Co., Ltd., and
Fujian Jiaoguang Media Co., Ltd., Yida (Fujian) Tourism Group Limited, and Fujian Yida Tulou Tourism Development Co., Ltd. (“Tulou”). Hong
Kong Yi Tat does not have any other operation.
Fujian
Jintai Tourism Development Co., Ltd. (“Fujian Jintai”) has a wholly owned subsidiary, Fuzhou Hongda Commercial Services
Co., Ltd., (“Hongda”). The operation of Fujian Jintai is to develop the Great Golden Lake, one of our tourism
destinations.
Hongda
does not have any operation except for owning 100% of the ownership interest in Fuzhou Fuyu Advertising Co., Ltd. (“Fuyu”)
which is engaged in the operations of our media business. On March 15, 2010, Hongda entered into an equity transfer agreement
with Fujian Yunding Tourism Industrial Co., Ltd, (currently known as Yida (Fujian) Tourism Group Limited, “Fujian Yunding”),
pursuant to which Fujian Yunding acquired 100% of the issued and outstanding shares of Fuyu from Hongda at the aggregate purchase
price of RMB 3,000,000. As a result, Fujian Yunding became the 100% holding company of Fuyu. Hongda ceased business
and deregistered on December 2, 2011.
Fujian
Jintai originally also owned 100% of the ownership interest in Fujian Yintai Tourism Co., Ltd. (“Yintai”). On March
15, 2010, Fujian Jintai entered into an equity transfer agreement with Fujian Yunding, pursuant to which Fujian Yunding acquired
100% of the issued and outstanding common stock of Yintai from Fujian Jintai at the aggregate purchase price of RMB 5,000,000.
As a result, Yintai became a wholly owned subsidiary of Fujian Yunding. Yintai was deregistered on November 18, 2010.
Fujian
Yida Tulou Tourism Development Co., Ltd.’s (“Tulou”) primary business relates to the operation of the Hua’An
Tulou cluster, one of our tourism destinations.
On
April 12, 2010, our operating subsidiary “Fujian Yunding Tourism Industrial Co., Ltd.” changed its name to “Yida
(Fujian) Tourism Group Limited” for our expanding business in operations of domestic tourism destinations in China by acquiring
new tourism destinations. Yida (Fujian) Tourism Group Limited’s (“Fujian Yida”) primary business relates to
the operations of our Yunding tourism destination and all of our newly engaged tourism destinations, and the management of our
media business.
On
March 16, 2010, Fujian Yida formed a wholly owned subsidiary, Yongtai Yunding Resort Management Co., Ltd. (“Yongtai Yunding”)
which currently has no material business operations. We plan to develop Yongtai Yunding into a business entity primarily focusing
on the operations of our Yunding tourism destination.
Fujian
Jiaoguang Media Co., Ltd. (“Fujian Jiaoguang”) and the Company’s contractual relationship comply with the requirements
of the Accounting Standard Codification ("ASC") 810, to consolidate Fujian Jiaoguang’s financial statements as
a Variable Interest Entity. During the current period, Fujian Jiaoguang had no material business operations.
Fuzhou
Fuyu Advertising Co., Ltd. (“Fuyu”) concentrates on the mass media segment of our business. Its primary
business is focused on advertisements, including media publishing, television, cultural and artistic communication activities,
and performance operation and management activities.
On
April 15, 2010, we entered into agreement with Anhui Xingguang Group to set up a subsidiary - Anhui Yida Tourism Development Co.,
Ltd. ("Anhui Yida") by investing 60% of the equity interest, and Anhui Xingguang Group owns 40% of the equity interest
of Anhui Yida. The total paid-in capital of Anhui Yida was $14,687,307 (equals RMB 100 million). Anhui Yida's primary business
relates to the operation of our tourism destinations, specifically, Ming dynasty culture tourist destination.
CHINA
YIDA HOLDING, CO. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. |
ORGANIZATION
AND DESCRIPTION OF BUSINESS (CONTINUED) |
On
July 6, 2010, Fujian Yida formed a wholly owned subsidiary, Jiangxi Zhangshu (Yida) Tourism Development Co., Ltd. (“Jiangxi
Zhangshu”) which currently has no material business operations. The initial paid-in capital of Jiangxi Zhangshu was $2,937,461
(RMB 20 million). On July 5, 2011, Fujian Yida and Fuyu further injected capital amounted to RMB 49 million and RMB1 million,
respectively, to Jiangxi Zhangshu. On March 20, 2012, Fujian Yida and Fuyu further injected capital amounted to RMB 29.4 million
and RMB 0.6 million, respectively, to Jiangxi Zhangshu, and the total paid-in capital increased to $15,842,337 (RMB100 million).
We plan to develop Jiangxi Zhangshu into a business entity primarily focusing on the operations of a new tourist destination.
On
July 7, 2010, Fujian Yida formed a wholly owned subsidiary, Jiangxi Fenyi (Yida) Tourism Development Co., Ltd. (“Jiangxi
Fenyi”) which currently has no material business operations. The initial paid-in capital of Jiangxi Fenyi was $1,762,477
(RMB 12 million). On July 7, 2011, Fujian Yida further injected capital amounted to RMB 48 million to Jiangxi Fenyi
and the total paid-in capital increased to $9,391,876 (RMB 60 million). We plan to develop Jiangxi Fenyi into a business entity
primarily focusing on the operations of a new tourist destination.
On
June 24, 2011, Fujian Yida formed a wholly owned subsidiary, Fujian Yida Travel Service Co., Ltd (the “Yida Travel”).
The total paid-in capital of Yida Travel was $1,546,670 (RMB 10 million). Its primary business is to conduct domestic
and international traveling services in China, including operating the direct sales of travel services for our current tourist
destinations at the Great Golden Lake, Yunding Recreational Park, and Hua’An Tulou Cluster, and our three tourist destinations
currently under construction, Ming Dynasty Entertainment World, China Yang-sheng (Nourishing Life) Paradise, and the City of Caves.
On
May 11, 2012, Jiangxi Zhangshu formed a wholly owned subsidiary, Zhangshu (Yida) Real Estate Development Co., Ltd. (“Zhangshu
Development”). The total paid-in capital of Zhangshu Development was $792,532 (RMB 5 million). Its primary business is to
conduct business of real estate development and sales in China.
On
May 16, 2012, Anhui Yida formed a wholly owned subsidiary, Bengbu (Yida) Real Estate Development Co., Ltd. (the “Bengbu
Yida”). The total paid-in capital of Bengbu Yida was $1,268,050 (RMB 8 million). Its primary business is to conduct business
of real estate development in China.
On
May 22, 2012, Jiangxi Zhangshu formed a wholly owned subsidiary, Zhangshu (Yida) Investment Co., Ltd. (the “Zhangshu Investment”).
The total paid-in capital of Zhangshu Investment was $792,532 (RMB 5 million). Its primary business is to conduct real estate
investment, project management and consulting in China.
On
June 6, 2012, Jiangxi Fenyi formed a wholly owned subsidiary, Fenyi (Yida) Property Development Co., Ltd. (“Fenyi
Development”). The total paid-in capital of Fenyi Development was $792,532 (RMB 5 million). Its primary business is to conduct
business of real estate development and sales in China.
On
July 20, 2012, Anhui Yida formed a wholly owned subsidiary, Bengbu (Yida) Investment Co., Ltd. (“Bengbu Investment”).
The total paid-in capital of Bengbu Investment was $792,532 (RMB 5 million). Its primary business is to conduct real estate investment,
project management and consulting in China.
On
July 30, 2012, Fujian Yida formed a wholly owned subsidiary, Fujian (Yida) Culture and Tourism Performing Arts Co., Ltd. (“Yida
Arts”). The total paid-in capital of Yida Arts was $792,532 (RMB 5 million). Its primary business is to operate performance
and show events at Yunding Park.
On
June 3, 2013, Fujian Yida entered into a stock transfer agreement with Anhui Xingguang Investment Group Ltd (“Purchaser”),
pursuant to which Fujian Yida agreed to transfer its 60% interest in Anhui Yida to the Purchaser for 60 million RMB, or $9.72
million, The Purchaser assumed all the assets and liabilities of Anhui Yida.
On
June 26, 2013, Fujian Yida formed a wholly owned subsidiary, Yunding Hotel Management Co., Ltd. (“Yunding Hotel”).
The total paid-in capital of Yunding Hotel was $4,860,000 (RMB 30 million). Its primary business is to operate and manage
the hotel and its facilities at Yunding Park. The subsidiary has changed its name, Ant Colony Hotel Co., Ltd. on April 17, 2015.
On
June 24, 2014, Jiangxi Zhangshu formed a wholly owned subsidiary, Jiangxi Yida Travel Service Co., Ltd (“Jiangxi Travel”).
The total paid-in capital of Zhangshu Development was $48,691 (RMB 0.3 million). Its primary business is to conduct domestic and
international traveling services in China.
On
August 26, 2014, Hong Kong Yi Tat entered into a certain share transfer agreement with Fujian Taining Great Golden Lake Tourism
Economic Development Industrial Co., Ltd. (the “Purchaser”), pursuant to which Hong Kong Yi Tat agreed to sell 100%
of its equity interest in Fujian Jintai to the Purchaser for a price of RMB 228,801,359, or approximately $37 million.
CHINA
YIDA HOLDING, CO. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
2. |
RESTATEMENT
OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS |
As
of and For The Year Ended December 31, 2014
During
the nine-month period ended September 30, 2015, the Company reviewed its measurement for valuation of long-lived assets of Tulou
Resort, and determined that the value of those long-lived assets has declined. Tulou Resort had experienced consecutive decline
in revenue generated from its visitors and tourists and incurred net operating losses since year 2012. In considering the above
factors, the Company performed a long-lived asset recoverability test in accordance with ASC 360-10-35-15, “Impairment or
Disposal of Long-Lived Assets”, on the lowest level of identifiable cash flows. The recoverability test compared the carrying
value of the long-lived assets held by Tulou Resort to the undiscounted cash flows. As a result of this recoverability test, the
Company determined that the value of the assets was not recoverable. The Company then determined the fair value for
the long-lived assets of Tulou Resort using a discounted cash flow methodology, which resulted in a $4,384,335 long-lived assets
impairment loss for the year ended December 31, 2014.
Despite
that net operating losses were significantly lower in the year ended December 31, 2014 as compared to the prior year, while such
losses increased again in year 2015, the Company believes that such impairment should have been recorded as of December 31, 2014.
The balances as of December 31, 2014 in the accompanying unaudited consolidated balance sheet have been restated. The effects
of the adjustments on the Company’s previously issued consolidated balance sheet as of December 31, 2014 are summarized
as follows:
| |
Previously
Reported | | |
Impact
of Restatement | | |
Restated | |
| |
| | |
| | |
| |
Assets | |
| | |
| | |
| |
Property and equipment, net | |
$ | 181,613,405 | | |
$ | (4,388,048 | ) | |
$ | 177,225,357 | |
| |
| | | |
| | | |
| | |
Total assets | |
$ | 233,187,958 | | |
$ | (4,388,048 | ) | |
$ | 228,799,910 | |
| |
| | | |
| | | |
| | |
Equity | |
| | | |
| | | |
| | |
Accumulated other comprehensive income | |
$ | 17,512,681 | | |
$ | (3,713 | ) | |
$ | 17,508,968 | |
Retained earnings | |
| 41,902,382 | | |
| (4,384,335 | ) | |
| 37,518,047 | |
| |
| | | |
| | | |
| | |
Total equity | |
| 111,132,013 | | |
| (4,388,048 | ) | |
| 106,743,965 | |
| |
| | | |
| | | |
| | |
Total liabilities
and equity | |
$ | 233,187,958 | | |
$ | (4,388,048 | ) | |
$ | 228,799,910 | |
The
restatement results in a decrease in property and equipment, net and total assets of $4,388,048, a decrease in accumulated other
comprehensive income of $3,713, and a decrease in retained earnings of $4,384,335.
The
Company intends to file an amendment to its Form 10-K for the year ended December 31, 2014 and an amendment to its Form 10-Q for
the three-month period ended March 31, 2015, as soon as practicable to make the adjustments to its consolidated financial statements
contained therein as shown and described above.
As
of and For The Nine Months Ended September 30, 2014
The
Company has restated its consolidated financial statements as of and for the nine months ended September 30, 2014 to correct errors
identified in the Statement of Cash Flows. The restatement corrects the classification of cash flow resulted from proceeds from
disposal of discontinued entity and eliminates the cash flows between continuing and discontinued operations. In addition, certain
classifications have been made to the prior year consolidated financial statements to conform to the current year presentation.
The restatement and reclassification have no impact on the Company’s previously reported Consolidated Balance Sheets or
Consolidated Statements of Income and Comprehensive Income.
CHINA
YIDA HOLDING, CO. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
2. |
RESTATEMENT
OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS (CONTINUED) |
The
effects of the adjustments on the Company’s previously issued financial statements for the nine months ended September 30,
2014 are summarized as follows:
Selected
Consolidation Statements of Cash Flows information for the nine months ended September 30, 2014.
| |
| | |
Effect of | | |
| |
| |
Previously
Reported | | |
Restatement/ Reclassification | | |
As Restated | |
CASH FLOWS FROM OPERATING ACTIVITIES | |
| | | |
| | | |
| | |
Amortization of long-term prepayments | |
$ | - | | |
$ | 586,563 | | |
$ | 586,563 | |
Net cash used in continuing operations | |
| (10,308,626 | ) | |
| 586,563 | | |
| (9,722,063 | ) |
Net cash used in operating activities | |
| (9,633,260 | ) | |
| 586,563 | | |
| (9,046,697 | ) |
CASH FLOWS FROM INVESTING ACTIVITIES | |
| | | |
| | | |
| | |
Proceeds from disposal of discontinued entity | |
| - | | |
| 35,570,385 | | |
| 35,570,385 | |
Increase in long-term prepayments for acquisition of property, equipment and land use rights | |
| 351,458 | | |
| (582,563 | ) | |
| (235,105 | ) |
Net cash provided by (used in) continuing operations | |
| (7,746,493 | ) | |
| 34,983,823 | | |
| 27,237,330 | |
Net cash provided by (used in) investing activities | |
| (7,275,083 | ) | |
| 34,983,823 | | |
| 27,708,740 | |
CASH FLOWS FROM FINANCING ACTIVITIES | |
| | | |
| | | |
| | |
Proceeds from disposal of discontinued entity | |
| 35,570,385 | | |
| (35,570,385 | ) | |
| - | |
Proceeds from discontinued entities | |
| 23,480,855 | | |
| (23,480,855 | ) | |
| - | |
Repayment to discontinued entities | |
| (38,277,859 | ) | |
| 38,277,859 | | |
| - | |
Net cash provided by continuing operations | |
| 22,052,207 | | |
| (20,773,381 | ) | |
| 1,278,826 | |
Net cash used in discontinued operations | |
| (1,399,034 | ) | |
| (14,797,004 | ) | |
| (16,196,038 | ) |
Net cash provided by (used in) financing activities | |
| 20,653,173 | | |
| (35,570,385 | ) | |
| (14,917,212 | ) |
3. |
BASIS
OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
The
unaudited consolidated financial statements of China Yida Holding, Co. and Subsidiaries have been prepared in accordance with
U.S. generally accepted accounting principles for interim financial information and pursuant to the requirements for reporting
on Form 10-Q. Accordingly, they do not include all the information and footnotes required by accounting principles
generally accepted in the United States of America for annual financial statements. However, the information included
in these interim financial statements reflects all adjustments (consisting solely of normal recurring adjustments) which are,
in the opinion of management, necessary for the fair presentation of the consolidated financial position and the consolidated
results of operations. Results shown for interim periods are not necessarily indicative of the results to be obtained
for a full year. The consolidated balance sheet information as of December 31, 2014 was derived from the audited consolidated
financial statements included in the Company’s Annual Report on Form 10-K. These interim financial statements
should be read in conjunction with that report. Certain comparative amounts have been reclassified to conform to the
current period's presentation.
a.
Basis of presentation
The
accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted
in the United States of America. The functional currency is the Chinese Renminbi, however the accompanying consolidated financial
statements have been translated and presented in United States Dollars ($).
b.
Principles of consolidation
The
accompanying consolidated financial statements include the accounts of China Yida and its wholly-owned subsidiaries
Keenway Limited, Hong Kong Yi Tat, Fuyu, Fujian Yida, Tulou, Yongtai Yunding, Jiangxi Zhangshu, Jiangxi Fenyi, Yida Travel, Fenyi
Development, Zhangshu Development, Zhangshu Investment, Yida Arts, Yunding hotel, Jiangxi Travel and the accounts of its
variable interest entity, Fujian Jiaoguang. All significant inter-company accounts and transactions have been eliminated in consolidation.
Consolidation
of Variable Interest Entities
According
to the requirements of ASC 810, an Interpretation of Accounting Research Bulletin No. 51 that requires a Variable Interest Entity
("VIE"), the Company has evaluated the economic relationships of Fujian Jiaoguang which signed an exclusive right agreement
with the Company. Therefore, Fujian Jiaoguang is considered to be a VIE, as defined by ASC Topic 810-10, of which the Company
is the primary beneficiary.
CHINA
YIDA HOLDING, CO. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
3. |
BASIS
OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) |
The
carrying amount and classification of Fujian Jiaoguang’s assets and liabilities included in the Consolidated Balance Sheets
are as follows:
| |
September 30, 2015 | | |
December 31, 2014 | |
Total current assets * | |
$ | 16,988,277 | | |
$ | 4,407,430 | |
Total assets | |
$ | 16,995,664 | | |
$ | 4,415,085 | |
Total current liabilities # | |
$ | 25,820,983 | | |
$ | 13,352,110 | |
Total liabilities | |
$ | 25,820,983 | | |
$ | 13,352,110 | |
*
Including intercompany receivables of $16,818,923 and $4,342,251 as at September 30, 2015 and December 31, 2014, respectively,
to be eliminated in consolidation.
#
Including intercompany payables of $25,810,077 and $13,321,547 as September 30, 2015 and December 31, 2014, respectively, to
be eliminated in consolidation.
Although
Fujian Jiaoguang no longer had revenues, its bank account still has to be maintained active with certain cash flows to support
its expenses. As such, Fujian Jiaoguang transferred funds from and to the Company’s directly-owned subsidiaries,
which resulted in intercompany receivables and payables. Since Fujian Jiaoguang is a variable interest entity subject to
consolidation, the balances of its intercompany receivables and payables are eliminated against the corresponding account balances
at the Company’s directly-owned subsidiaries at the consolidation level.
c.
Use of estimates and assumptions
The
preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United
States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the amount of revenues
and expenses during the reporting periods. Management makes these estimates using the best information available at the time the
estimates are made. However, actual results could differ materially from those results. The most significant estimates reflected
in the consolidated financial statements include depreciation, useful lives of property and equipment, deferred income taxes,
useful life of intangible assets and contingencies. Estimates and assumptions are periodically reviewed and the effects of revisions
are reflected in the consolidated financial statements in the period they are determined to be necessary.
d.
Cash and cash equivalents
The
Company considers all cash on hand and in banks, certificates of deposit and other highly-liquid investments with original maturities
of three months or less, when purchased, to be cash and cash equivalents. As of September 30, 2015 and December 31, 2014, the
Company has uninsured deposits in banks of approximately $1,973,000 and $943,000.
e.
Accounts receivable
The
Company maintains reserves for potential credit losses on accounts receivable. Management reviews the composition of accounts
receivable and analyzes historical bad debts, customer concentrations, customer credit worthiness, current economic trends and
changes in customer payment patterns to evaluate the adequacy of these reserves. Based on the management’s judgment, no
allowance for doubtful accounts is required at the balance sheet dates.
f.
Advances and prepayments
The
Company advances funds to certain vendors for purchase of its construction materials and necessary services. Based on the
management’s judgment, no allowance for advances and prepayments were assessed and recorded as of September 30, 2015 and
December 31, 2014, respectively.
g.
Property and equipment
Property
and equipment are recorded at cost less accumulated depreciation. Gains or losses on disposals are reflected as gain or loss in
the year of disposal. The cost of improvements that extends the life of property, and equipment are capitalized. These capitalized
costs may include structural improvements, equipment, and fixtures. All ordinary repair and maintenance costs are expensed as
incurred.
Depreciation
for financial reporting purposes is provided using the straight-line method over the estimated useful lives of the assets or lease
term as follows:
Building |
|
20
years |
Electronic
Equipment |
|
5
to 8 years |
Transportation
Equipment |
|
8
years |
Office
Furniture |
|
5
to 8 years |
Leasehold Improvement
and Attractions |
|
Lesser
of term of the lease or the estimated useful lives of the assets |
CHINA
YIDA HOLDING, CO. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
3. |
BASIS
OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) |
h.
Intangible assets
Intangible
assets consist of acquisition of management right of tourist resort, commercial airtime rights and land use rights for tourism
resorts. They are amortized on the straight line basis over their respective lease periods. The lease period of management
right, commercial airtime rights and land use rights is 30 years, 3 years and 40 years, respectively.
i.
Impairment
The
Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount
of an asset may not be recoverable through the estimated undiscounted cash flows expected to result from the use and eventual
disposition of the assets. Whenever any such impairment exists, an impairment loss will be recognized for the amount by which
the carrying value exceeds the fair value.
Assets
are grouped and evaluated at the lowest level for their identifiable cash flows that are largely independent of the cash flows
of other groups of assets. The Company considers historical performance and future estimated results in its evaluation of potential
impairment and then compares the carrying amount of the asset to the future estimated cash flows expected to result from the use
of the asset. If the carrying amount of the asset exceeds estimated expected undiscounted future cash flows, the Company measures
the amount of impairment by comparing the carrying amount of the asset to its fair value. The estimation of fair value is generally
measured by discounting expected future cash flows as the rate the Company utilizes to evaluate potential investments. The Company
estimates fair value based on the information available, judgments and projections are considered necessary. Management reassessed
and recorded impairment loss of $4,384,335 for the year ended December 31, 2014. There was no additional impairment for the nine
months ended September 30, 2015.
j.
Revenue recognition
Revenue
is recognized at the date of service rendered to customers when a formal arrangement exists, the price is fixed or determinable,
the services rendered, no other significant obligations of the Company exist and collectability is reasonably assured. Payments
received before satisfaction of all of the relevant criteria for revenue recognition are recorded as unearned revenue.
Revenues
from advance resort ticket sales are recognized when the tickets are used. Revenues from our contractors who have tourism contracts
with us are generally recognized over the period of the applicable agreements commencing with the tourists visiting the resort.
The Company also sells admission and activities tickets for a resort which the Company has the management right.
The
Company has no allowance for product returns or sales discounts because services that are rendered and accepted by the customers
are normally not refundable and discounts are normally not granted after service has been rendered.
Profit
sharing costs are recorded as cost of revenue. Profit sharing arrangements with the local governments for the management rights
(see Note 14):
For
the nine months ended September 30, 2015
| |
Tulou | |
| |
| |
Gross
receipts | |
$ | 346,726 | |
| |
| | |
Profit sharing costs | |
| - | |
Nature resource
compensation expenses | |
| 31,532 | |
Total paid to
the local governments | |
| 31,532 | |
| |
| | |
Net receipts | |
$ | 315,194 | |
For
the nine months ended September 30, 2014
| |
Tulou | |
| |
| |
Gross
receipts | |
$ | 486,126 | |
| |
| | |
Profit sharing costs | |
| - | |
Nature resource
compensation expenses | |
| 43,856 | |
Total paid to
the local governments | |
| 43,856 | |
| |
| | |
Net receipts | |
$ | 442,270 | |
CHINA
YIDA HOLDING, CO. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
3. |
BASIS
OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) |
For
the three months ended September 30, 2015
| |
Tulou | |
| |
| |
Gross
receipts | |
$ | 99,927 | |
| |
| | |
Profit sharing costs | |
| - | |
Nature resource
compensation expenses | |
| 9,539 | |
Total paid to
the local governments | |
| 9,539 | |
| |
| | |
Net receipts | |
$ | 90,388 | |
For
the three months ended September 30, 2014
| |
Tulou | |
| |
| |
Gross
receipts | |
$ | 126,818 | |
| |
| | |
Profit sharing costs | |
| - | |
Nature resource
compensation expenses | |
| 11,441 | |
Total paid to
the local governments | |
| 11,441 | |
| |
| | |
Net receipts | |
$ | 115,377 | |
k.
Advertising costs
The
Company expenses the cost of advertising as incurred or, as appropriate, the first time the advertising takes place. Advertising
costs for the nine months ended September 30, 2015 and 2014 were $942,042 and $1,772,762, respectively. Advertising costs
for the three months ended September 30, 2015 and 2014 were $261,549 and $920,266, respectively.
l.
Post-retirement and post-employment benefits
Full
time employees of subsidiaries of the Company participate in a government mandated multi-employer defined contribution plan pursuant
to which certain pension benefits, medical care, employee housing, and other welfare benefits are provided to employees. Chinese
labor regulations require that the subsidiaries of the Company make contributions to the government for these benefits based on
a certain percentages of employees’ salaries. The Company has no legal obligation for the benefits beyond the contributions
made. The total amounts for such employee benefits, which were expensed as incurred, were $274,249 and $230,450 for the nine months
ended September 30, 2015 and 2014, respectively, and were $82,222 and $136,598 for the three months ended September 30, 2015 and
2014, respectively. Other than the above, neither the Company nor its subsidiaries provide any other post-retirement
or post-employment benefits.
m.
Foreign currency translation
The
Company uses the United States dollar ("U.S. dollars") for financial reporting purposes. The Company’s subsidiaries
maintain their books and records in their functional currency, being the primary currency of the economic environment in which
their operations are conducted. In general, for consolidation purposes, the Company translates the subsidiaries' assets and liabilities
into U.S. dollars using the applicable exchange rates prevailing at the balance sheet dates, and the statements of income are
translated at average exchange rates during the reporting periods. Gain or loss on foreign currency transactions are reflected
on the income statement. Gain or loss on financial statement translation from foreign currency are recorded as a separate component
in the equity section of the balance sheet and is included as part of accumulated other comprehensive income.
The functional currency of the Company and its subsidiaries in China is the Chinese Renminbi.
n.
Income taxes
Income
taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities
and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to
be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in
the period that includes the enactment date. A valuation allowance is recognized if it is more likely than not that some portion,
or all, of a deferred tax asset will not be realized. There were no deferred income tax assets as of September 30, 2015 and December
31, 2014, respectively.
CHINA
YIDA HOLDING, CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
3. |
BASIS
OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) |
The
Company applied the provisions of ASC 740-10-50, “Accounting For Uncertainty In Income Taxes”, which provides
clarification related to the process associated with accounting for uncertain tax positions recognized in our financial statements.
Audit periods remain open for review until the statute of limitations has passed. The completion of review or the expiration of
the statute of limitations for a given audit period could result in an adjustment to the Company’s liability for income
taxes. Any such adjustment could be material to the Company’s results of operations for any given quarterly or annual period
based, in part, upon the results of operations for the given period. At September 30, 2015, management considered that the Company
had no uncertain tax positions, and will continue to evaluate for uncertain positions in the future.
China
Yida is subject to U.S. Federal and California state examination by tax authorities for years after 2008, and the PRC tax authority
for years after 2007.
o. Fair values
of financial instruments
The
carrying amounts reported in the consolidated financial statements for current assets and currently liabilities approximate fair
value due to the short-term nature of these financial instruments. The carrying amount of long-term loans approximates fair value
since the interest rates associated with the debts approximate the current market interest rates.
The
Company adopted ASC 820-10, “Fair Value Measurements and Disclosures”, which establishes a single authoritative definition
of fair value and a framework for measuring fair value and expands disclosure of fair value measurements for both financial and
nonfinancial assets and liabilities. This standard defines fair value, provides guidance for measuring fair value and requires
certain disclosures. This standard does not require any new fair value measurements, but discusses valuation techniques, such
as the market approach (comparable market prices), the income approach (present value of future income or cash flows) and the
cost approach (cost to replace the service capacity of an asset or replacement cost). For purposes of ASC 820-10-15, nonfinancial
assets and nonfinancial liabilities would include all assets and liabilities other than those meeting the definition of a financial
asset or financial liability as defined in ASC-820-10-15-15-1A.
p.
Stock-based compensation
The
Company records stock-based compensation expense pursuant to ASC 718-10, "Share Based Payment Arrangement ” which
requires companies to measure compensation cost for stock-based employee compensation plans at fair value at the grant date and
recognize the expense over the employee's requisite service period. The Company’s expected volatility assumption is based
on the historical volatility of Company’s stock or the expected volatility of similar entities. The expected life assumption
is primarily based on historical exercise patterns and employee post-vesting termination behavior. The risk-free interest rate
for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of grant.
Stock-based
compensation expense is recognized based on awards expected to vest, and there were no estimated forfeitures as the Company has
a short history of issuing options. ASC 718-10 requires forfeitures to be estimated at the time of grant and revised in subsequent
periods, if necessary, if actual forfeitures differ from those estimates.
q.
Earnings per share (EPS)
Earnings
per share is calculated in accordance with ASC 260. Basic earnings per share is based upon the weighted average number of common
shares outstanding. Diluted earnings per share is based on the assumption that all dilutive convertible shares and stock instruments
were converted or exercised. Options and warrants are assumed to be exercised at the beginning of the period if the average stock
price for the period is greater than the exercise price of the warrants and options.
r.
Statutory Reserves
In
accordance with the relevant laws and regulations of the PRC and the articles of association of the Company, the Company is required
to allocate 10% of their net income reported in the PRC statutory accounts, after offsetting any prior years’ losses, to
the statutory surplus reserve, on an annual basis. When the balance of such reserve reaches 50% of the respective registered capital
of the subsidiaries, any further allocation is optional.
As
of September 30, 2015, the statutory reserve of the subsidiaries already reached 50% of the registered capital of the subsidiaries
and the Company did not have any further allocation on it.
The
statutory surplus reserves can be used to offset prior years’ losses, if any, and may be converted into registered capital,
provided that the remaining balances of the reserve after such conversion is not less than 25% of registered capital. The statutory
surplus reserve is non-distributable.
CHINA
YIDA HOLDING, CO. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
3. |
BASIS
OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) |
s.
Dividend Policy
Under
the laws governing foreign invested enterprises in China, dividend distribution and liquidation are allowed but subject to special
procedures under the relevant laws and rules. Any dividend payments will be subject to the decision of the Board of Directors
and subject to foreign exchange rules governing such repatriation. Any liquidation is subject to both the relevant government
agency’s approval and supervision as well as the foreign exchange control.
t. Reclassifications
Except
for the classification for discontinued operations, certain classifications have been made to the prior year financial statements
to conform to the current year presentation. The reclassification had no impact on previously reported net loss or accumulated
deficit.
u.
Recent accounting pronouncements
In
February 18, 2015, FASB issued ASU 2015-02-Consolidation (Topic 810). The amendments in this Update affect reporting entities
that are required to evaluate whether they should consolidate certain legal entities. All legal entities are subject to reevaluation
under the revised consolidation model. Specifically, the amendments: (1) Modify the evaluation of whether limited partnerships
and similar legal entities are variable interest entities (VIEs) or voting interest entities; (2) Eliminate the presumption that
a general partner should consolidate a limited partnership; (3) Affect the consolidation analysis of reporting entities that are
involved with VIEs, particularly those that have fee arrangements and related party relationships; (4) Provide a scope exception
from consolidation guidance for reporting entities with interests in legal entities that are required to comply with or operate
in accordance with requirements that are similar to those in Rule 2a-7 of the Investment Company Act of 1940 for registered money
market funds. The amendments in this Update are effective for public business entities for fiscal years, and for interim periods
within those fiscal years, beginning after December 15, 2015. The Company is still in progress of evaluating future impact of
adopting this standard.
In
August 2014, FASB issued ASU 2014-15 - Presentation of Financial Statements - Going Concern (Subtopic 205-40). The amendments
in this Update states the disclosure of uncertainties about an entity’s ability to continue as a going concern. An entity’s
management should evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about
the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued
(or available to be issued). When management identifies conditions or events that raise substantial doubt, management should consider
whether its plans will alleviate the substantial doubt.
When
substantial doubt is raised but is alleviated by management’s plans, the entity should disclose following information: (a)
Principal conditions or events that raised substantial doubt (before consideration of management’s plans); (b) Management’s
evaluation of the significance of those conditions or events in relation to the entity’s ability to meet its obligations;
(c) Management’s plans that alleviated the substantial doubt.
When
substantial doubt is raised but is not alleviated by management’s plans,, an entity should include a statement in the footnotes
indicating that there is substantial doubt about the entity’s ability to continue as a going concern within one year after
the date that the financial statements are issued (or available to be issued), and disclose the following information: (a) Principal
conditions or events that raise substantial doubt; (b) Management’s evaluation of the significance of those conditions or
events in relation to the entity’s ability to meet its obligations; (c) Management’s plans that are intended to mitigate
the conditions or events that raise the substantial doubt.
The
amendments in this Update are effective for the annual period ending after December 15, 2016, and for annual periods and interim
periods thereafter. Early application is permitted. The Company is still in progress of evaluating future impact of adopting this
standard.
CHINA
YIDA HOLDING, CO. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
3. |
BASIS
OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) |
In
May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). The core principle of the guidance is
that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects
the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve the core principle,
an entity should apply the following steps:
Step
1: Identify the contract(s) with a customer.
Step
2: Identify the performance obligations in the contract.
Step
3: Determine the transaction price.
Step
4: Allocate the transaction price to the performance obligations in the contract.
Step
5: Recognize revenue when (or as) the entity satisfies a performance obligation.
An
entity should disclose sufficient information to enable users of financial statements to understand the nature, amount, timing,
and uncertainty of revenue and cash flows arising from contracts with customers. For a public entity, the amendments in this Update
are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting
period. Early application is not permitted. For all other entities (nonpublic entities), the amendments in this Update are effective
for annual reporting periods beginning after December 15, 2017, and interim periods within annual periods beginning after December
15, 2018. A nonpublic entity may elect to apply this guidance earlier. The Company has begun evaluating future impact of adopting
this standard on the Company’s consolidated financial position and operating results.
In
April 2014, the FASB issued ASU 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic
360). The amendments in this Update change the requirements for reporting discontinued operations in Subtopic 205-20. A discontinued
operation may include a component of an entity or a group of components of an entity, or a business or nonprofit activity. A disposal
of a component of an entity or a group of components of an entity is required to be reported in discontinued operations if the
disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results.
The amendments in this Update require an entity to present, for each comparative period, the assets and liabilities of a disposal
group that includes a discontinued operation separately in the asset and liability sections, respectively, of the statement of
financial position. The amendments in this Update require a public business entity and a not-for-profit entity that has issued,
or is a conduit bond obligor for, securities that are traded, listed, or quoted on an exchange or an over-the-counter market to
provide disclosures about a disposal of an individually significant component of an entity that does not qualify for discontinued
operations presentation in the financial statements. The amendments in this Update require all other entities to provide disclosures
about a disposal of an individually significant component of an entity that does not qualify for discontinued operations presentation
in the financial statements. The amendments in this Update expand the disclosures about an entity’s significant continuing
involvement with a discontinued operation. Those disclosures are required until the results of operations of the discontinued
operation in which an entity retains significant continuing involvement are no longer presented separately as discontinued operations
in the statement where net income is reported (or statement of activities for a not-for-profit entity). The adoption of this standard
is not expected to have a material impact on the Company’s consolidated financial position and results of operations.
CHINA
YIDA HOLDING, CO. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
4. |
OTHER
RECEIVABLES, NET |
Other
receivables consist of the following:
| |
September
30, 2015 | | |
December 31, 2014 | |
| |
| | |
| |
Advance to employees | |
$ | 120,010 | | |
$ | 74,451 | |
Security deposits | |
| 38,795 | | |
| 42,670 | |
Other | |
| 53,066 | | |
| 31,707 | |
| |
$ | 211,871 | | |
$ | 148,828 | |
5. |
ADVANCES
AND PREPAYMENTS |
Advances
and prepayments consist of the following:
| |
September
30, 2015 | | |
December 31, 2014 | |
| |
| | |
| |
Advance payments related
to consumables of Yang-Sheng Paradise | |
$ | 312,269 | | |
$ | 493,013 | |
Advance payments related to facilities
of Yang-Sheng Paradise | |
| 221,511 | | |
| 226,344 | |
Advance payments related to facilities
of City of Caves | |
| 63,185 | | |
| - | |
Advance payments related to hotel facilities
of Yunding resort | |
| 19,275 | | |
| 116,104 | |
Other | |
| 41,715 | | |
| 3,472 | |
| |
$ | 657,955 | | |
$ | 838,933 | |
As
of September 30, 2015 and December 31, 2014, advance payments related to the consumables to be used in Yang-Sheng Paradise were
$312,269 and $493,013, respectively. As of September 30, 2015 and December 31, 2014, advance payments related to the facilities
of Yang-Sheng Paradise were $221,511 and $226,344, respectively.
As
of September 30, 2015 and December 31, 2014, advance payments related to facilities of City of Caves, opened to public in May,
2015, were $63,185 and $0, respectively.
As
of September 30, 2015 and December 31, 2014, advance payments related to hotel facilities of Yunding resort were $19,275 and $116,104,
respectively.
CHINA
YIDA HOLDING, CO. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
6. |
PROPERTY
AND EQUIPMENT, NET |
Property and equipment
consist of the following:
| |
September
30, 2015 | | |
December 31, 2014 | |
| |
| | |
(Restated) | |
| |
| | |
| |
Buildings, improvements,
and attractions | |
$ | 185,983,062 | | |
$ | 192,727,526 | |
Electronic equipment | |
| 4,848,287 | | |
| 4,832,741 | |
Transportation equipment | |
| 3,001,036 | | |
| 2,705,322 | |
Office furniture | |
| 976,301 | | |
| 1,005,977 | |
| |
| 194,808,686 | | |
| 201,271,566 | |
Less: Accumulated depreciation | |
| (24,892,078 | ) | |
| (19,658,161 | ) |
Less: Accumulated
impairment | |
| (4,234,489 | ) | |
| (4,388,048 | ) |
Property and equipment,
net | |
$ | 165,682,119 | | |
$ | 177,225,357 | |
Depreciation
expense for the nine months ended September 30, 2015 and 2014 were $6,104,393 and $6,412,392 respectively.
Depreciation expense
for the three months ended September 30, 2015 and 2014 were $2,010,803 and $2,473,273, respectively.
7. |
INTANGIBLE
ASSETS, NET |
Intangible
assets consist of the following:
| |
September
30, 2015 | | |
December 31, 2014 | |
| |
| | |
| |
Land use right | |
$ | 46,389,619 | | |
$ | 48,071,885 | |
Accumulated amortization | |
| (2,462,211 | ) | |
| (1,652,535 | ) |
Intangible assets,
net | |
$ | 43,927,408 | | |
$ | 46,419,350 | |
CHINA
YIDA HOLDING, CO. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
7. |
INTANGIBLE
ASSETS, NET (CONTINUED) |
For
the nine months ended September 30, 2015 and 2014, amortization expense amounted to $894,246 and $893,871, respectively.
For
the three months ended September 30, 2015 and 2014, amortization expense amounted to $294,495 and $297,453, respectively.
Estimated
amortization for the next five years and thereafter is as follows:
As of September 30, | |
| |
2016 | |
$ | 1,195,488 | |
2017 | |
| 1,195,488 | |
2018 | |
| 1,195,488 | |
2019 | |
| 1,195,488 | |
2020 | |
| 1,195,488 | |
Thereafter | |
| 37,949,968 | |
| |
$ | 43,927,408 | |
Long-term
prepayments consist of the following:
| |
September 30, 2015 | | |
December 31, 2014 | |
Prepayments for project
planning, assessments and consultation fees | |
$ | 1,152,581 | | |
$ | 1,408,991 | |
Deferred financing costs | |
| 431,635 | | |
| - | |
Prepayment for cooperative development | |
| 302,391 | | |
| 387,573 | |
Others | |
| 170,551 | | |
| 236,200 | |
| |
$ | 2,057,158 | | |
$ | 2,032,764 | |
Prepayments
for project planning, assessments and consultation fees represent advances relating to the planning, assessment and consultation
for the development of tourism destinations in Jiangxi province.
In
2008, Hong Kong Yi Tat entered into a Tourist Destination Cooperative Development Agreement with Yongtai County Government with
respect to the development of Yunding Park pursuant to which Fujian Yida is obligated to pay RMB 5.0 million, or approximately
$0.82 million, to the Yongtai County People’s Government over the course of the first 10 years of the Agreement. By the
end of 2013, the Company had fulfilled this obligation with total payments made in the amount of approximately $818,036 (RMB 5.0
million) recorded as prepayments for cooperative development to be expensed throughout the term of the Agreement. As of September
30, 2015 and December 31, 2014, prepayments for cooperative development amounted to $302,391 and $387,573, respectively.
Deferred
financing costs represent fees paid on amounted to $549,986 (RMB 3.50 million), in order to obtain additional debt used to construct
resort project. These fees were deferred and amortized on a straight line basis over the life of the debt.
Estimated amortization
of the deferred financing costs for the next five years and thereafter is as follows:
As
of September 30,
2016 | |
$ | 83,542 | |
2017 | |
| 83,542 | |
2018 | |
| 83,542 | |
2019 | |
| 83,542 | |
2020 | |
| 83,542 | |
Thereafter | |
| 97,467 | |
Total minimum payments | |
$ | 515,177 | |
Current portion
recorded under prepayments - current portion | |
| (83,542 | ) |
| |
| | |
Long term portion | |
$ | 431,635 | |
CHINA
YIDA HOLDING, CO. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Short-term
loans
Short-term
loans represent borrowings from commercial banks that are due within one year. These loans consisted of the following:
| |
September
30, 2015 | | |
December 31, 2014 | |
| |
| | |
| |
Loan
from Fujian Haixia Bank (formerly known as Merchant bank of Fuzhou), interest rate at 9.6% per annum, due June 20, 2015, collateralized
by the personal guarantees by two of the Company’s directors. | |
$ | - | | |
$ | 1,954,047 | |
Loan
from Fujian Haixia Bank (formerly known as Merchant bank of Fuzhou), interest rate at 8.245% per annum, due June 29, 2016,
collateralized by the personal guarantees by two of the Company’s directors. | |
| 1,885,666 | | |
| - | |
Total | |
$ | 1,885,666 | | |
$ | 1,954,047 | |
In
June 2014, the Company borrowed an amount of $1,954,047 (RMB 12 million) due on June 20, 2015 from Fujian Haixia Bank, with the
interest rate at 9.6% per annum. This loan was repaid in full amount in June, 2015.
In
June 2015, the Company borrowed an amount of $1,885,666 (RMB 12 million) due on June 29, 2016 from Fujian Haixia Bank, with the
interest rate at 8.245% per annum.
Interest
expense for the nine months ended September 30, 2015 and 2014 amounted to $133,362 and $207,836, respectively. Interest
expense for the three months ended September 30, 2015 and 2014 amounted to $36,193 and $101,614, respectively.
Long-term
debt
Long
term debt consists of the following:
| |
September
30, 2015 | | |
December 31, 2014 | |
| |
| | |
| |
Loan
from China Minsheng Banking Corp, Ltd., interest rate at 9% per annum, final installment due on November 30, 2019, secured
by the land use right of Jiangxi Zhangshu, collateralized by the personal guarantees by two of the Company’s directors.
(Note (a)) | |
$ | 36,141,928 | | |
$ | 37,452,574 | |
| |
| | | |
| | |
Loan
from China Construction Bank, interest rate at 6.55% per annum, final installment due on July 15, 2022, collateralized by
the fixed assets of Fujian Yida and personal guarantees by two of the Company’s directors as additional collateral.
(Note (b)) | |
| 29,542,097 | | |
| 31,264,757 | |
| |
| | | |
| | |
Loan
from Industrial and Commercial Bank of China Limited., interest rate from 5.92% to 7.07% per annum, final installment
due on December 16, 2021, collateralized by the land use rights of Jiangxi Fenyi, guaranteed by Yida (Fujian) Tourism
Group Limited., and personal guarantees by two of the Company’s directors as additional collateral. (Note (c)) | |
| 27,926,710 | | |
| - | |
| |
| | | |
| | |
Loan
from China Construction Bank, interest rate at 7.86% per annum, final installment due on August 5, 2022, collateralized by
the fixed assets of Fujian Yida and personal guarantees by two of the Company’s directors as additional collateral.
(Note (d)) | |
| 4,399,887 | | |
| 4,885,118 | |
| |
| | | |
| | |
Loan
from China Construction Bank, interest rate at 7.86% per annum, final installment due on August 5, 2022, collateralized by
the fixed assets of Fujian Yida and personal guarantees by two of the Company’s directors as additional collateral.
(Note (e)) | |
| 4,399,887 | | |
| 4,885,118 | |
| |
| | | |
| | |
Loan
from China Construction Bank, interest rate at 7.86% per annum, final installment due on August 5, 2022, collateralized by
the fixed assets of Fujian Yida and personal guarantees by two of the Company’s directors as additional collateral.
(Note (f)) | |
| 3,692,762 | | |
| 4,070,932 | |
| |
| | | |
| | |
Loan
from China Construction Bank, interest rate at 7.86% per annum, final installment due on August 5, 2022, collateralized by
the fixed assets of Fujian Yida and personal guarantees by two of the Company’s directors as additional collateral.
(Note (g)) | |
| 3,535,624 | | |
| 3,745,258 | |
| |
| 109,638,895 | | |
| 86,303,757 | |
Less:
current portion | |
| (3,299,915 | ) | |
| (3,256,746 | ) |
Total | |
$ | 106,338,980 | | |
$ | 83,047,011 | |
CHINA
YIDA HOLDING, CO. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
9. |
BANK
LOANS (CONTINUED) |
Note:
(a) |
$12,571,105
(RMB 80,000,000) and $23,570,823 (RMB 150,000,000) will be due in each twelve-month period as of September 30, 2019 and 2020,
respectively. |
|
|
(b) |
$1,414,249
(RMB 9,000,000), $2,357,082 (RMB 15,000,000), $3,142,776 (RMB 20,000,000), $3,928,470 (RMB 25,000,000), $4,714,164 (RMB 30,000,000),
$5,499,859 (RMB 35,000,000), and $8,485,496 (RMB 54,000,000) will be due in each twelve-month period as of September 30, 2016,
2017, 2018, 2019, 2020, 2021, and 2022, respectively. |
|
|
(c) |
$27,926,710 (RMB 177,720,000)
will be due in the twelve-month period as of September 30, 2022. |
|
|
(d) |
$628,555
(RMB 4,000,000) will be due in each twelve-month period as of September 30, 2016, 2017, 2018, 2019, 2020, 2021, and 2022,
respectively. |
|
|
(e) |
$628,555
(RMB 4,000,000) will be due in each twelve-month period as of September 30, 2016, 2017, 2018, 2019, 2020, 2021 and 2022, respectively. |
|
|
(f) |
$471,416
(RMB 3,000,000) will be due in each twelve-month period as of September 30, 2016, 2017, 2018, and 2019, respectively, $549,986
(RMB 3,500,000), $628,555 (RMB 4,000,000), and $628,555 (RMB 4,000,000) will be due in each twelve-month period as of
September 30, 2020, 2021, and 2022, respectively. |
|
|
(g) |
$157,139
(RMB 1,000,000), $235,708 (RMB 1,500,000), $392,847 (RMB 2,500,000), $549,986 (RMB 3,500,000), $628,555 (RMB 4,000,000), $628,555
(RMB 4,000,000), and $942,833 (RMB 6,000,000) will be due in each twelve-month period as of September 30, 2016, 2017, 2018,
2019, 2020, 2021, and 2022, respectively. |
Interest
expense for the nine months ended September 30, 2015 and 2014 amounted to $6,285,710 and $6,253,064, respectively.
Interest
expense for the three months ended September 30, 2015 and 2014 amounted to $2,127,147 and $1,897,874, respectively.
10. |
ACCRUED
EXPENSES AND OTHER PAYABLES |
Accrued
expenses and other payables consist of the following:
| |
September
30, 2015 | | |
December 31, 2014 | |
| |
| | |
| |
Accrued payroll | |
$ | 501,487 | | |
$ | 550,573 | |
Accrued local government fees | |
| 425,182 | | |
| 347,040 | |
Security deposits payable | |
| 140,843 | | |
| 224,125 | |
Unearned revenue | |
| 124,143 | | |
| 100,508 | |
Welfare payable | |
| 12,765 | | |
| 13,228 | |
Other | |
| 161,470 | | |
| 129,389 | |
| |
$ | 1,365,890 | | |
$ | 1,364,863 | |
The
Company is subject to Hong Kong (“HK”) and People’s Republic of China (“PRC”) profit tax. For certain
operations in HK and PRC, the Company has incurred net accumulated operating losses for income tax purposes.
United
States
The
Company is incorporated in the United States of America and is subject to United States federal taxation. No provisions for income
taxes have been made as the Company has no taxable income for the period. The applicable income tax rate for the Company was 35%
for the each of the nine months ended September 30, 2015 and 2014. Net operating loss at September 30, 2015, which can be used
to offset future taxable income, was approximately $4,060,029. No tax benefit has been realized since a valuation allowance has
offset the deferred tax asset resulting from the net operating losses.
CHINA
YIDA HOLDING, CO. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
11. |
INCOME
TAX (CONTINUED) |
Cayman
Islands
Keenway
Limited, a wholly owned subsidiary of the Company, is incorporated in the Cayman Islands and, under the current laws of the Cayman
Islands, is not subject to income taxes.
Hong
Kong
Hong
Kong Yi Tat, a wholly owned subsidiary of the Company, is incorporated in Hong Kong. Hong Kong Yi Tat is subject to Hong Kong
taxation on its activities conducted in Hong Kong and income arising in or derived from Hong Kong. No provisions for income taxes
have been made as Hong Kong Yi Tat has no taxable income for the period. The applicable statutory tax rate for the subsidiary
was 16.5% for each of the nine months ended September 30, 2015 and 2014.
PRC
Effective
on January 1, 2008, the PRC Enterprise Income Tax Law, EIT Law, and Implementing Rules impose an unified enterprise income tax
rate of 25% on all domestic-invested enterprises and foreign investment enterprises in PRC, unless they qualify under certain
limited exceptions. As such, starting from January 1, 2008, the Company’s subsidiaries in PRC are subject to an enterprise
income tax rate of 25%.
Provision
for income tax consists of the following:
| |
For
The Nine Months Ended September 30, | | |
For
The Three Months Ended September 30, | |
| |
2015 | | |
2014 | | |
2015 | | |
2014 | |
| |
| | |
| | |
| | |
| |
Current | |
| | |
| | |
| | |
| |
USA | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | - | |
China | |
| - | | |
| - | | |
| - | | |
| - | |
| |
| - | | |
| - | | |
| - | | |
| - | |
Deferred | |
| | | |
| | | |
| | | |
| | |
USA | |
| | | |
| | | |
| | | |
| | |
Deferred tax asset for NOL
carry forwards | |
| 69,717 | | |
| 65,233 | | |
| 21,592 | | |
| 20,157 | |
Valuation allowance | |
| (69,717 | ) | |
| (65,233 | ) | |
| (21,592 | ) | |
| (20,157 | ) |
| |
| - | | |
| - | | |
| - | | |
| - | |
China | |
| | | |
| | | |
| | | |
| | |
Deferred tax asset for NOL carry forwards | |
| 3,778,264 | | |
| 6,830,556 | | |
| 787,753 | | |
| 3,927,167 | |
Valuation allowance | |
| (3,778,264 | ) | |
| (6,830,556 | ) | |
| (787,753 | ) | |
| (3,927,167 | ) |
Net changes in
deferred income tax under non-current portion | |
| - | | |
| - | | |
| - | | |
| - | |
| |
| | | |
| | | |
| | | |
| | |
Net deferred
income tax expenses | |
| - | | |
| - | | |
| - | | |
| - | |
| |
| | | |
| | | |
| | | |
| | |
Total provision
for income tax | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | - | |
CHINA
YIDA HOLDING, CO. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
11. |
INCOME
TAX (CONTINUED) |
The
following is a reconciliation of the provision for income taxes at the PRC and Hong Kong tax rate to the income taxes reflected
in the Statement of Income:
| |
For
The nine months Ended September 30, | |
| |
2015 | | |
2014 | |
| |
| | |
| |
Tax expense at statutory
rate - US | |
| 35.0 | % | |
| 35.0 | % |
Changes in valuation allowance -
US | |
| (35.0 | %) | |
| (35.0 | %) |
Tax expense at statutory rate - HK | |
| 16.5 | % | |
| 16.5 | % |
Changes in valuation allowance -
HK | |
| (16.5 | %) | |
| (16.5 | %) |
Foreign income tax rate - PRC | |
| 25.0 | % | |
| 25.0 | % |
Other (a) | |
| (25.0 | %) | |
| (25.0 | %) |
Effective income
tax rates | |
| (0.0 | %) | |
| (0.0 | %) |
(a) |
Other
represents expenses incurred by the Company that are not deductible for PRC income taxes and changes in valuation allowance
for PRC entities for the nine months ended September 30, 2015 and 2014, respectively. |
In
assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion
or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the
generation of future taxable income during the periods in which the net operating losses and temporary differences become deductible.
Management considered projected future taxable income and tax planning strategies in making this assessment.
The
change in total allowance for the nine months ended September 30, 2015 and 2014 was an increase of $3,847,981 and $6,895,789,
respectively.
The change in
total allowance for the three months ended September 30, 2015 and 2014 was an increase of $809,345 and $3,947,324 respectively.
(1) REVERSE
SPLIT
Effective
November 19, 2012, the Company conducted a 1-for-5 Reverse Stock Split of all issued and outstanding shares of its common stock.
Upon the effect of the Reverse Stock Split, the Company’s issued and outstanding shares reduced from 19,571,785 to 3,914,580.
Except as otherwise specified, all information in these consolidated financial statements and notes and all share and per share
information has been retroactively adjusted for all periods presented to reflect the reverse stock split, as if the Reverse Stock
Split had occurred at the beginning of the earliest period presented.
(2)
WARRANTS
The
remaining 773,812 Class A Warrants expired on September 6, 2011.
CHINA
YIDA HOLDING, CO. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(3) STOCK-BASED
COMPENSATION
On
June 10, 2009 (the “Grant Date”), the Company entered into a Non-qualified Stock Option Agreement with one of the
Company’s directors, pursuant to which, the Company issued the director non-qualified stock options (the “Stock Options”)
to purchase a total of 6,000 shares of the Company’s common stock as compensation for his services to be rendered as the
Company’s director. One half of the Stock Options shall vest on the sixth month anniversary of the Grant Date
(the “First Vesting Date”) and become exercisable at an exercise price equal to the market price of the Company’s
common stock on the First Vesting Date and the second half of Stock Options shall vest on the twelfth month anniversary of the
Grant Date (the “Second Vesting Date”) and become exercisable at an exercise price equal to the market price of the
Company’s common stock on the Second Vesting Date.
On
January 21, 2011 (the “CFO Stock Option Grant Date”), the Company entered into a Non-qualified Stock Option Agreement
with the Company’s former Chief Financial Officer, pursuant to which, the Company issued non-qualified stock options (the
“CFO Stock Options”) to purchase a total of 15,000 shares of the Company’s common stock as compensation for
his services to be rendered as the Company’s Chief Financial Officer. 3,000 CFO Stock Options vested on the CFO Stock Option
Grant Date; 4,000 CFO Stock Options shall vest on the one-year anniversary of the CFO Grant Date; 4,000 CFO Stock Options shall
vest on the second-year anniversary of the CFO Grant Date; and 4,000 CFO Stock Options shall vest on the third-year anniversary
of the CFO Grant Date. The exercise price for all of the shares was determined as the fair value of our common stock
using the closing price on the grant date.
On
November 5, 2011, our former CFO submitted a letter of resignation resigning from his position. The resignation was effective
as of December 31, 2011. Under the Non-qualified Stock Option Agreement, if CFO is removed from office for cause prior to the
21st day of January, 2012, any outstanding stock options held by him which are not vested and exercisable by him immediately
prior to resignation shall terminate as of the date of removal, and any outstanding stock options held by CFO which is vested
and exercisable immediately prior to removal shall be exercisable at any time prior to the expiration date of such stock option
or within one-year after the date of removal, whichever is shorter. As a result, 12,000 CFO Stock Options were forfeited as of
December 31, 2011. On January 6, 2012, our former CFO transferred options to purchase 3,000 shares to Mr. Minhua Chen, our Chief
Executive Officer, as a gift.
CHINA
YIDA HOLDING, CO. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
On
January 21, 2011 (the “VPIR Stock Option Grant Date”), the Company entered into a Non-qualified Stock Option Agreement
with the Company’s former Corporate Secretary and VP of Investor Relation (“VPIR”), pursuant to which, the Company
issued non-qualified stock options (the “VPIR Stock Options”) to purchase a total of 15,000 shares of the Company’s
common stock as compensation for his services to be rendered as the Company’s VP of Investor Relation. 3,000 VPIR Stock
Options shall vest on the VPIR Stock Option Grant Date; 4,000 VPIR Stock Options shall vest on the one-year anniversary of the
VPIR Grant Date; 4,000 VPIR Stock Options shall vest on the second-year anniversary of the VPIR Grant Date; and 4,000 VPIR Stock
Options shall vest on the third-year anniversary of the VPIR Grant Date. The exercise price for all of the shares was determined
as the fair value of our common stock using the closing price on the grant date.
On
November 5, 2011, our former VPIR submitted a letter of resignation resigning from his position. The resignation was effective
as of December 31, 2011. Under the Non-qualified Stock Option Agreement, if VPIR is removed from office for cause prior to the
21st day of January, 2012, any outstanding stock option held by him which is not vested and exercisable by him immediately
prior to resignation shall terminate as of the date of removal, and any outstanding stock options held by VPIR which is vested
and exercisable immediately prior to removal shall be exercisable at any time prior to the expiration date of such stock option
or within one-year after the date of removal, whichever is shorter. As a result, 12,000 VPIR Stock Options were forfeited as of
December 31, 2011. On January 6, 2012, our former VPIR transferred options to purchase 3,000 shares to Mr. Minhua Chen, our Chief
Executive Officer, as a gift.
On
March 17, 2011 (the “ID Stock Option Grant Date”), the Company entered into a Non-qualified Stock Option Agreement
with the Company’s Independent Director, pursuant to which, the Company issued non-qualified stock options (the “ID
Stock Options”) to purchase a total of 6,000 shares of the Company’s common stock as compensation for his services
to be rendered as the Company’s Independent Director. One half of the ID Stock Options vested on the ID Grant Date and the
second half of ID Stock Options vested on June 10, 2011. The exercise price for all of the shares was determined as
the fair value of our common stock using the closing price on the grant date.
On
July 27, 2011, the Company entered into an agreement with the Company’s Independent Director, pursuant to which, the Company
granted 4,000 restricted shares of the Company’s common stock as compensation for his services to be rendered as the Company’s
Independent Director from June 10, 2011 to June 9, 2012. The estimated value of the 4,000 shares was $73,000 on June 10, 2011.
On May 24, 2012, the 4,000 restricted shares were issued.
The
Company valued the stock options using the Black-Scholes model with the following assumptions:
Type
of Stock Option | |
Number
of Options | | |
Expected Term | | |
Expected Volatility | | |
Dividend Yield | | |
Risk Free Interest Rate | |
Options
to Independent Director, June 10, 2009 | |
| 6,000 | | |
| 5.25 | | |
| 356 | % | |
| 0 | % | |
| 3.11 | % |
Options
to Chief Financial Officer, January 21, 2011 | |
| 15,000 | | |
| 6.25 | | |
| 60 | % | |
| 0 | % | |
| 3.44 | % |
Options
to VP of Investor Relation, January 21, 2011 | |
| 15,000 | | |
| 6.25 | | |
| 60 | % | |
| 0 | % | |
| 3.44 | % |
Options
to Independent Director, March 17, 2011 | |
| 6,000 | | |
| 6.25 | | |
| 60 | % | |
| 0 | % | |
| 3.25 | % |
The following
is a summary of the option activity:
| |
Number of Options | |
| |
| |
Outstanding as of December 31, 2014 | |
| 18,000 | |
Granted | |
| - | |
Exercised | |
| - | |
Forfeited | |
| - | |
Outstanding as of September 30, 2015 | |
| 18,000 | |
For
the nine months ended September 30, 2015 and 2014, the Company recognized $0 and $0, respectively, as stock-based compensation
expense, which was included in general and administrative expenses.
For
the three months ended September 30, 2015 and 2014, the Company recognized $0 and $0, respectively, as stock-based compensation
expense, which was included in general and administrative expenses.
CHINA
YIDA HOLDING, CO. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
13. |
DISCONTINUED
OPERATIONS |
On
August 26, 2014, Hong Kong Yi Tat entered into a certain share transfer agreement with Fujian Taining Great Golden Lake Tourism
Economic Development Industrial Co., Ltd. (the “Purchaser”), pursuant to which Hong Kong Yi Tat agreed to sell 100%
of its equity interest in Fujian Jintai to the Purchaser (the “Sale”) for a price of RMB 228,801,359, or approximately
$37 million (the “Purchase Price”).
The
results of Fujian Jintai have been presented as a discontinued operation in the consolidated statements of income and comprehensive
income. Selected operating results for the discontinued business are presented in the following table:
| |
For
The Nine Months Ended September
30, | |
| |
2015 | | |
2014 | |
| |
| | |
| |
Net Revenue | |
$ | - | | |
$ | 3,492,327 | |
Cost of Revenue | |
| - | | |
| (1,828,348 | ) |
Selling expenses | |
| - | | |
| (904,667 | ) |
General, and administrative expenses | |
| - | | |
| (605,331 | ) |
Interest expense | |
| - | | |
| (443,108 | ) |
Interest income | |
| - | | |
| 692 | |
Other expense,
net | |
| - | | |
| (328,297 | ) |
Net loss | |
$ | - | | |
$ | (616,732 | ) |
| |
For
The Three Months Ended September
30, | |
| |
2015 | | |
2014 | |
| |
| | |
| |
Net Revenue | |
$ | - | | |
$ | 1,506,174 | |
Cost of Revenue | |
| - | | |
| (596,571 | ) |
Selling expenses | |
| - | | |
| (310,298 | ) |
General, and administrative expenses | |
| - | | |
| (130,054 | ) |
Interest expense | |
| - | | |
| (87,468 | ) |
Interest income | |
| - | | |
| 12 | |
Other expense,
net | |
| - | | |
| (465,591 | ) |
Net income | |
$ | - | | |
$ | (83,796 | ) |
CHINA
YIDA HOLDING, CO. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
14. |
COMMITMENTS
AND CONTINGENCIES |
(1)
Operating commitments
Operating
commitments consist of leases for office space under various operating lease agreements which expire in April 2021.
Operating
lease agreements generally contain renewal options that may be exercised at the Company’s discretion after the completion
of the terms. The Company’s obligations under various operating leases are as follows:
As of September 30, | |
| |
2016 | |
$ | 66,211 | |
2017 | |
| 26,256 | |
2018 | |
| 26,299 | |
2019 | |
| 26,343 | |
2020 | |
| 26,389 | |
Thereafter | |
| 807,004 | |
Total minimum payments | |
$ | 978,502 | |
The
Company incurred rental expenses of $224,380 and $163,774 for the nine months ended September 30, 2015 and 2014, respectively.
The
Company incurred rental expenses of $66,411 and $64,720 for the three months ended September 30, 2015 and 2014, respectively.
(2)
Compensation for using natural resources commitments
In
December 2008, Tulou entered into a Tourist Resources Development Agreement with Hua’an County Government (“Hua’an
government”) which is related to pay compensation fees for using natural resources in Tulou. The Company agreed
to pay (1) 16% of gross ticket sales in the first five years; (2) 20% of gross ticket sales in the second five years; (3) 23%
of gross ticket sales in the third five years; (4) 25% of gross ticket sales in the fourth five years; (5) 28% of gross ticket
sales in the fifth five years; (6) 30% in twenty six years and thereafter when the ticket price of the Clusters is RMB60 ($9.50
USD) or above per person.
The
Company paid approximately $31,532 and $43,856 to the Hua’an government for the nine months ended September 30, 2015 and
2014, respectively, and recorded as selling expenses.
The
Company paid approximately $9,539 and $11,441 to the Hua’an government for the three months ended September 30, 2015 and
2014, respectively, and recorded as selling expenses.
(3)
Litigation
The
Company’s management does not expect the legal proceedings involving the Company would have a material impact on the Company’s
consolidated financial position or results of operations.
15. |
DUE
TO RELATED PARTIES |
As
of September 30, 2015, the Company had $11,947,006 and $2,916,947 due to Fujian Xinhengji Advertisement Co., Ltd and Mr. Minhua
Chen, respectively. As of December 31, 2014, the Company had $28,921,820 and $2,759,122 due to Fujian Xinhengji Advertisement
Co., Ltd and Mr. Minhua Chen, respectively. Mr. Minhua Chen, the Chief Executive Officer and Chairman of the Company, is the Chairman
of Fujian Xinhengji Advertisement Co., Ltd. Those loans are unsecured, bear no interest, and due on demand.
CHINA
YIDA HOLDING, CO. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Basic
earnings per share is computed by dividing net income attributable to common shareholders by the weighted average number of common
shares outstanding during the period. Diluted earnings per share reflects the potential dilution of securities by including other
potential common stock, including convertible preferred stock, stock options and warrants, in the weighted average number of common
shares outstanding for the period, if dilutive. The numerators and denominators used in the computations of basic and
dilutive earnings per share are presented in the following table:
Basic
and diluted:
| |
For
The Nine Months Ended September
30, | | |
For
The Three Months Ended September 30, | |
| |
2015 | | |
2014 | | |
2015 | | |
2014 | |
Amounts attributable to common stockholders: | |
| | |
| | |
| | |
| |
Net
loss from continuing operations, net of income taxes | |
$ | (15,778,254 | ) | |
$ | (17,879,534 | ) | |
$ | (3,711,014 | ) | |
$ | (6,089,077 | ) |
Net
loss from discontinued operations, net of income taxes | |
| - | | |
| (7,127,362 | ) | |
| - | | |
| (6,594,426 | ) |
Net
loss attributable to common stockholders | |
$ | (15,778,254 | ) | |
$ | (25,006,896 | ) | |
$ | (3,711,014 | ) | |
$ | (12,683,503 | ) |
Net
loss attributable to common stockholders per share - basic and diluted: | |
| | | |
| | | |
| | | |
| | |
-
Basic & diluted loss per share from continued operations | |
$ | (4.03 | ) | |
$ | (4.57 | ) | |
$ | (0.95 | ) | |
$ | (1.56 | ) |
-
Basic & diluted earnings per share from discontinued operations | |
| - | | |
| (1.82 | ) | |
| - | | |
| (1.68 | ) |
-
Basic & diluted loss per share attributable to common stockholders | |
$ | (4.03 | ) | |
$ | (6.39 | ) | |
$ | (0.95 | ) | |
$ | (3.24 | ) |
Basic
and Diluted weighted average outstanding shares of common stock | |
| 3,914,580 | | |
| 3,914,580 | | |
| 3,914,580 | | |
| 3,914,580 | |
Potential common
shares outstanding as of September 30, 2015: | |
| | | |
| | | |
| | | |
| | |
Warrants
outstanding | |
| - | | |
| - | | |
| - | | |
| - | |
Options
outstanding | |
| 18,000 | | |
| 18,000 | | |
| 18,000 | | |
| 18,000 | |
For
the nine and three months ended September 30, 2015 and 2014, 18,000 options were not included in the diluted earnings per share
because the average stock price was lower than the strike price of these options.
On
October 27, 2015, the Company announced that its Board of Directors has received a preliminary, non-binding proposal letter dated
October 24, 2015 from Mr. Minhua Chen, Chairman, CEO and President of the Company (“Mr. Chen”) and Yanling Fan, Chief
Operating Officer of the Company and the wife of Mr. Chen (“Ms. Fan”), to acquire all of the outstanding shares of
common stock of the Company not currently owned by them at a proposed price of $3.17 per share, in cash, subject to certain conditions.
Item 2 MANAGEMENT’S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS.
The following discussion of our
financial condition and results of operations should also be read in conjunction with our unaudited consolidated financial statements
and the notes to those financial statements appearing elsewhere in this Form 10-Q. The following discussion contains forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934
relating to future events or our future performance. Actual results may materially differ from those projected in the forward-looking
statements as a result of certain risks and uncertainties set forth in the Company’s Annual Report on Form 10-K for
the year ended December 31, 2014, filed on March 31, 2015 (the “Annual Report”). Although management believes that
the assumptions made and expectations reflected in the forward-looking statements are reasonable, there is no assurance that the
underlying assumptions will, in fact, prove to be correct or that actual results will not be different from expectations expressed
in this report.
Overview
We were formed on June 4, 1999 to serve
as a vehicle to effect a merger, capital stock exchange, asset acquisition or other similar business combination with a company
having its primary operations in the PRC. On November 19, 2007, we consummated the acquisition of Keenway Limited, Hong Kong Yi
Tat International Investment Co., Ltd (“Hong Kong Yi Tat”), and the then shareholders of Keenway Limited, including
Minhua Chen, Yanling Fan, Xinchen Zhang, Extra Profit International Limited, and Lucky Glory International Limited, received shares
of our common stock.
After disposition of our advertising business, our current
business is solely tourism. Our tourism business has become the primary source of our revenue since first quarter of 2014.
We currently operate Hua’AnTulou
cluster (“Tulou” or the “Earth Buildings”) tourist destination (which is certified as a World Culture
Heritage), Yunding Recreational Park (Large-scale National Recreational Park), covering over 300 square kilometers, and China
Yang-Sheng Paradise. As of March 31, 2015, through our wholly owned subsidiaries in China, we have entered into two cooperation
agreements respectively with the local Chinese government agents, namely, (i) the Jiangxi Province Zhangshu Municipal Government,
and (ii) the Fenyi County, Xinyu City, Jiangxi Province Government. Under these agreements, we have obtained the right to invest
in the construction and development of China Yang-sheng (Nourishing Life) Paradise Project (“Yang-sheng Paradise”)
(consist of: (a) Salt Water Hot Spring SPA & Health Center, (b) Yang-sheng Holiday Resort, (c) World Yang-sheng Cultural Museum,
(d) International Camphor Tree Garden, (e) Chinese Medicine and Herb Museum, (f) Yang-sheng Sports Club, (g) Old Town of Chinese
Traditional Medicine, and (h) various other Yang-sheng related projects and tourism real estate projects) with a forty (40) year
exclusive right to develop, operate and manage a variety of caves, hot springs and other natural and cultural tourist resources
identified in the Meng Mountain area, and various caves and tourist resources of the Dagang Mountain located in Fenyi County,
Xinyu City, Jiangxi Province (“City of Caves”).
The revenue from tourism has been increasing.
However, any increase in tourism revenue will depend on the progress we make in developing our existing and new projects in our
other tourist destinations. Our tourism business is seasonal, although we have visitors to our parks throughout the year. In 2015,
we will continue to develop and construct the new Jiangxi projects i.e. the second phase construction of Yang-sheng Paradise and
the City of Caves. As of September 30, 2015, the first phase of City of Caves in Jiangxi had been completed and opened to public
in May, 2015.
Factors Affecting Our Performance
Our revenue is driven by the reputation
of our tourist destinations. We strive to present quality tourist attractions that offer our visitors diverse entertainment, including
catering, hotel, transportation, and shopping. We generate our revenue from our visitors and tourists. We incur many costs associated
with operating the tourist business, including, administration fees, land use rights expenses, and revenue sharing fees, etc.
We began to generate revenue after
the grand openings of Yang-sheng Paradise which opened in October 2014, and the grand openings of City of Caves which opened in
May 2015. Also, we expect Yunding to continue to grow.
Discontinued Operations
On August 26, 2014, Hong Kong Yi Tat
entered into a certain share transfer agreement with Fujian Taining Great Golden Lake Tourism Economic Development Industrial
Co., Ltd. (the “Purchaser”), pursuant to which Hong Kong Yi Tat sold 100% of its equity interest in Fujian Jintai
to the Purchaser for a price of RMB 228,801,359, or approximately $37 million.
Net loss from the discontinued operations
was $0 and $616,732 for the nine months ended September 30, 2015 and 2014, respectively.
Net income from the discontinued operations
was $0 and $83,796 for the three months ended September 30, 2015 and 2014, respectively.
As a result of the share transactions
described above, the Results of Operation set forth below does not reflect the operations for Fujian Jintai. The results of operations
of Fujian Jintai have been presented as discontinued operations. Therefore, management’s discussion and analysis set forth
herein below are based on the results of continuing operations.
Results of Operations
Results of Operations for the nine months ended September
30, 2015 and 2014
The following table presents a summary
of operating information for the nine months ended September 30, 2015 and 2014:
(All amounts, other than | |
For The Nine Months Ended , | | |
Increase/ | | |
(Decrease) | |
percentage, in U.S. | |
September 30 | | |
(Decrease) | | |
Percentage | |
Dollar) | |
2015 | | |
2014 | | |
U.S. Dollar ($) | | |
(%) | |
Net revenue | |
$ | 10,710,797 | | |
$ | 9,030,961 | | |
| 1,679,836 | | |
| 18.60 | |
Cost of revenue | |
| 7,129,467 | | |
| 6,784,170 | | |
| 345,297 | | |
| 5.09 | |
Gross profit | |
| 3,581,330 | | |
| 2,246,791 | | |
| 1,334,539 | | |
| 59.40 | |
| |
| | | |
| | | |
| | | |
| | |
Selling expenses | |
| 7,348,263 | | |
| 7,717,558 | | |
| (369,295 | ) | |
| (4.79 | ) |
General and administrative expenses | |
| 5,278,801 | | |
| 5,555,330 | | |
| (276,529 | ) | |
| (4.98 | ) |
Loss from operations | |
| (9,045,734 | ) | |
| (11,026,097 | ) | |
| 1,980,363 | | |
| (17.96 | ) |
Other expense, net | |
| (326,284 | ) | |
| (399,986 | ) | |
| 73,702 | | |
| (18.43 | ) |
Interest income | |
| 12,836 | | |
| 7,448 | | |
| 5,388 | | |
| 72.34 | |
Interest expense | |
| (6,419,072 | ) | |
| (6,460,899 | ) | |
| 41,827 | | |
| (0.65 | ) |
Net loss from continuing operations | |
| (15,778,254 | ) | |
| (17,879,534 | ) | |
| 2,101,280 | | |
| (11.75 | ) |
Loss from discontinued operations | |
| - | | |
| (7,127,362 | ) | |
| 7,127,362 | | |
| (100.00 | ) |
| |
| | | |
| | | |
| | | |
| | |
Net loss | |
$ | (15,778,254 | ) | |
$ | (25,006,896 | ) | |
$ | 9,228,642 | | |
| (36.90 | ) |
Net Revenue
Net revenue from continuing operations
increased by approximately $1.68 million or approximately 18.6%, from approximately $9.03 million for the nine months ended September
30, 2014 to approximately $10.71 million for the nine months ended September 30, 2015, including approximately $7.00 million from
Yunding Park, a decrease of $0.20 million or 3%, $0.35 million from Hua’an Tulou, a decrease of $0.14 million or 29%, $2.69
million from China Yang-sheng paradise, an increase of $1.35 million or 101%, and $0.67 million from the City of Caves, an increase
of $0.67 million or 100%, for the nine months ended September 30, 2015, as compared to the same period in 2014. The primary sources
of the revenues are ticket sales, tour shuttle bus fees, accommodation and sales from restaurants. The increase in tourism business
was primarily due to the revenue increase at China Yang-sheng paradise and the City of Caves due to effective marketing and promotions
that led to an increase in number of visitors. We provided deeper ticket discount due to the fierce competition among the destinations
and the decreased tourist consumption. We expect the fierce competition and the reduced tourist consumption to continue in the
near future.
Cost of Revenue
Cost of revenues increased by approximately
$0.35 million or approximately 5.09%, from approximately $6.78 million for the nine months ended September 30, 2014 to approximately
$7.13 million for the nine months ended September 30, 2015. The increase in cost of revenue was primarily due to an increase in
the depreciation cost of newly-opened City of Caves.
Gross profit
Gross profit increased approximately
$1.33 million, or approximately 59.4%, from approximately $2.25 million for the nine months ended September 30, 2014 to approximately
$3.58 million for the nine months ended September 30, 2015. Our gross profit margin was approximately 33.44% for the nine months
ended September 30, 2015, compared to gross profit margin of approximately 24.88% the nine months ended September 30, 2014, representing
an increase of approximately 9 percentage points. The increase of gross profit margin was primarily due to the revenue increase
at China Yang-sheng paradise and the City of Caves.
Selling Expenses
Selling expenses were approximately
$7.35 million for the nine months ended September 30, 2015, compared to approximately $7.72 million for the nine months ended
September 30, 2014, which represents a decrease of approximately $0.37 million, or approximately 4.79%. The decrease in selling
expense was primarily due to the decrease in variable costs, including operation costs of shuttle buses and cable cars, hotel
maintaining costs, and marketing expenses at China Yang-sheng paradise, Yunding, and Tulou during the nine months ended September
30, 2015.
General and Administrative Expenses
General and administrative expenses
were approximately $5.28 million for the nine months ended September 30, 2015, compared to approximately $5.56 million for the
nine months ended September 30, 2014, which represents a decrease of approximately $0.28 million, or approximately 4.98%. This
decrease was due to the decrease of administrative expenses for the operation of Yunding Park and City of Caves during the nine
months ended September 30, 2015.
Interest expense
Interest expense was approximately
$6.42 million for the nine months ended September 30, 2015, representing a decrease of approximately $0.04 million or approximately
0.65%, compared to the approximately $6.46 million for the nine months ended September 30, 2014. The decrease was primarily due
to the lower interest rate for the bank loans in the nine months ended September 30, 2015.
Net Loss
As a result of the above factors, we
have net loss of approximately $15.78 million for the nine months ended September 30, 2015 as compared to net loss of approximately
$25.01 million for the nine months ended September 30, 2014, representing a decrease of loss of approximately $9.23 million or
approximately 36.9%. The decrease of loss was primarily attributable to the revenue increase at China Yang-sheng paradise and
City of Caves for the nine months ended September 30, 2015 as compared with that for the nine months ended September 30, 2014,
and the loss incurred from disposal of Fujian Jintai for the nine months ended September 30, 2014.
Results of Operations
Results of Operations for the three months ended September
30, 2015 and 2014
The following table presents a summary
of operating information for the three months ended September 30, 2015 and 2014:
| |
| | |
| | |
| | |
Increase/ | |
(All amounts, other than | |
For The Three Months Ended | | |
Increase/ | | |
(Decrease) | |
percentage, in U.S. | |
September 30, | | |
(Decrease) | | |
Percentage | |
Dollar) | |
2015 | | |
2014 | | |
U.S. Dollar ($) | | |
(%) | |
Net revenue | |
$ | 4,909,224 | | |
$ | 3,870,984 | | |
$ | 1,038,240 | | |
| 26.82 | |
Cost of revenue | |
| 2,617,088 | | |
| 2,471,661 | | |
| 145,427 | | |
| 5.88 | |
Gross profit | |
| 2,292,136 | | |
| 1,399,323 | | |
| 892,813 | | |
| 63.80 | |
| |
| | | |
| | | |
| | | |
| | |
Selling expenses | |
| 2,407,166 | | |
| 2,906,081 | | |
| (498,915 | ) | |
| (17.17 | ) |
General and administrative expenses | |
| 1,423,944 | | |
| 1,967,665 | | |
| (543,721 | ) | |
| (27.63 | ) |
Loss from operations | |
| (1,538,974 | ) | |
| (3,474,423 | ) | |
| 1,935,449 | | |
| (55.71 | ) |
Other expense, net | |
| (12,713 | ) | |
| (618,142 | ) | |
| 605,429 | | |
| (97.94 | ) |
Interest income | |
| 4,013 | | |
| 2,975 | | |
| 1,038 | | |
| 34.89 | |
Interest expense | |
| (2,163,340 | ) | |
| (1,999,487 | ) | |
| (163,853 | ) | |
| 8.19 | |
Net loss from continuing operations | |
| (3,711,014 | ) | |
| (6,089,077 | ) | |
| 2,378,063 | | |
| (39.05 | ) |
Loss from discontinued operations | |
| - | | |
| (6,594,426 | ) | |
| 6,594,426 | | |
| (100.00 | ) |
| |
| | | |
| | | |
| | | |
| | |
Net loss | |
$ | (3,711,014 | ) | |
$ | (12,683,503 | ) | |
$ | 8,972,489 | | |
| (70.74 | ) |
Net Revenue
Net revenue from continuing operations
increased by approximately $1.04 million or approximately 26.82%, from approximately $3.87 million for the three months ended
September 30, 2014 to approximately $4.91 million for the three months ended September 30, 2015, including approximately $3.15
million from Yunding Park, an increase of $0.21 million or 7%, $0.10 million from Hua’an Tulou, a decrease of $0.03 million
or 23%, $1.24 million from China Yang-sheng paradise, an increase of $0.45 million or 57%, and $0.42 million from the City of
Caves, an increase of $0.42 million or 100%, for the three months ended September 30, 2015, as compared to the same period in
2014. The primary sources of the revenues are ticket sales, tour shuttle bus fees, accommodation and sales from restaurants. The
increase in tourism business was primarily due to the revenue increase at China Yang-sheng paradise and the City of Caves due
to effective marketing and promotions that led to an increase in number of visitors. We provided deeper ticket discount due to
the fierce competition among the destinations and the decreased tourist consumption. We expect the fierce competition and the
reduced tourist consumption to continue in the near future.
Cost of Revenue
Cost of revenues increased by approximately
$0.15 million or approximately 5.88%, from approximately $2.47 million for the three months ended September 30, 2014 to approximately
$2.62 million for the three months ended September 30, 2015. The increase in cost of revenue was primarily due to an increase
in the depreciation cost of newly-opened City of Caves.
Gross profit
Gross profit increased approximately
$0.89 million, or approximately 63.8%, from approximately $1.40 million for the three months ended September 30, 2014 to approximately
$2.29 million for the three months ended September 30, 2015. Our gross profit margin was approximately 46.69% for the three months
ended September 30, 2015, compared to gross profit margin of approximately 36.15% for the three months ended September 30, 2014,
representing an increase of approximately 10 percentage points. The increase of gross profit margin was primarily due to the revenue
increase at China Yang-sheng paradise and the City of Caves.
Selling Expenses
Selling expenses were approximately
$2.41 million for the three months ended September 30, 2015, compared to approximately $2.91 million for the three months ended
September 30, 2014, which represents a decrease of approximately $0.50 million, or approximately 17.17%. The decrease in selling
expense was primarily due to the decrease in variable costs, including operation costs of shuttle buses and cable cars, hotel
maintaining costs, and advertisement expenses at China Yang-sheng paradise, Yunding, and Tulou during the three months ended September
30, 2015.
General and Administrative Expenses
General and administrative expenses
were approximately $1.42 million for the three months ended September 30, 2015, compared to approximately $1.96 million for the
three months ended September 30, 2014, which represents a decrease of approximately $0.54 million, or approximately 27.63%. This
decrease was due to the decrease of administrative expenses for the operation of Yunding Park and City of Caves during the three
months ended September 30, 2015.
Interest expense
Interest expense was approximately
$2.16 million for the three months ended September 30, 2015, representing an increase of approximately $0.16 million or approximately
8.19%, compared to the approximately $2.00 million for the three months ended September 30, 2014.
Net Loss
As a result of the above factors, we
have net loss of approximately $3.71 million for the three months ended September 30, 2015 as compared to net loss of approximately
$12.68 million for the three months ended September 30, 2014, representing a decrease of loss of approximately $8.97 million or
approximately 70.74%. The decrease of loss was primarily attributable to the revenue increase at China Yang-sheng paradise and
City of Caves for the three months ended September 30, 2015 as compared with that for the three months ended September 30, 2014,
and the loss incurred from disposal of Fujian Jintai for the three months ended September 30, 2014.
Liquidity and Capital Resources
Our principal source of liquidity during the
nine months ended September 30, 2015 was primarily the proceeds from long-term loans.
As of September 30, 2015, we had cash
and cash equivalents of approximately $1.97 million as compared to approximately $0.96 million as of December 31, 2014, representing
an increase of $1.01 million. Our principal source of liquidity during the nine months ended September 30, 2015 was
primarily the proceeds from long-term loans of approximately $29.16 million.
As of September 30, 2015 and December
31, 2014, our working capital deficits were approximately $17.73 million and $35.89 million, respectively.
The following table sets forth a summary
of our cash flows for the periods indicated:
| |
For The Nine Months Ended September 30, | |
| |
2015 | | |
2014 | |
| |
| | |
| |
Net cash used in operating activities of continuing operations | |
$ | (8,177,319 | ) | |
$ | (9,722,063 | ) |
Net cash (used in) provided by investing activities of continuing operations | |
$ | (1,037,389 | ) | |
$ | 27,237,330 | |
Net cash provided by financing activities of continuing operations | |
$ | 10,295,811 | | |
$ | 1,278,826 | |
Net cash used in discontinued operations | |
$ | - | | |
$ | (15,049,262 | ) |
Net cash used in operating activities
of continuing operations was approximately $8.18 million for the nine months ended September 30, 2015, compared to approximately
$9.72 million for the nine months ended September 30, 2014. The decrease of $1.54 million cash used was primarily due to the net
loss of $15.78 million for the nine months ended September 30, 2015 as compared to the net loss of $25.01 million for the nine
months ended September 30, 2014.
Net cash used in investing activities
of continuing operations was approximately $1.04 million for the nine months ended September 30, 2015, compared to approximately
$27.24 million of cash provided by investing activities for the nine months ended September 30, 2014. The decrease of approximately
$28.28 million was primarily due to the proceeds received from disposal of discontinued entity, Fujian Jintai, of $35.57 million
during the nine months ended September 30, 2014, and the decrease of $7.5 million of cash used in additions to property.
Net cash provided by financing activities
of continuing operations amounted to approximately $10.30 million for the nine months ended September 30, 2015, compared to approximately
$1.28 million for the nine months ended September 30, 2014, representing an increase of approximately $9.02 million. The increase
in net cash provided by financing activities was mainly due to the increase of net proceeds received from bank loans of $32.37
million, offset by the repayment of related party loans of $22.79 million during the nine months ended September 30, 2015, as
compared to the nine months ended September 30, 2014.
Bank loans
As of September 30, 2015, the Company
had eight bank loans from three institutional lenders for the development of the tourism destinations.
1. |
A
loan for approximately $36.14 million from China Minsheng Banking Corp, Ltd. It bears interest rate at 9% per annum. $12,571,105
(RMB 80,000,000) and $23,570,823 (RMB 150,000,000) will be due in each twelve-month period as of September 30, 2019 and 2020,
respectively. It is secured by the land use right of Jiangxi Zhangshu, and collateralized by the personal guarantees by two
of the Company’s directors. |
2. |
A
loan for approximately $29.54 million from China Construction Bank. It bears interest at 6.55% per annum. $1,414,249 (RMB
9,000,000), $2,357,082 (RMB 15,000,000), $3,142,776 (RMB 20,000,000), $3,928,470 (RMB 25,000,000), $4,714,164 (RMB 30,000,000),
$5,499,859 (RMB 35,000,000), and $8,485,496 (RMB 54,000,000) will be due in each twelve-month period as of September 30, 2016,
2017, 2018, 2019, 2020, 2021 and 2022, respectively. It is secured by the fixed assets of Fujian Yida, and collateralized
by the personal guarantees of two of the Company’s directors. |
3. |
A
loan for approximately $27.93 million from Industrial and Commercial Bank of China Limited. The loan bears interest at from
7.07% per annum, and is due on December 16, 2021. It is collateralized by the land use rights of Jiangxi Fenyi, guaranteed
by Yida (Fujian) Tourism Group Limited., and personal guarantees by two of the Company’s directors. |
4. |
A
loan for approximately $4.40 million from China Construction Bank. It bears interest at 7.86% per annum. $628,555 (RMB 4,000,000)
will be due in each twelve-month period as of September 30, 2016, 2017, 2018, 2019, 2020, 2021, and 2022, respectively. It
is secured by the fixed assets of Fujian Yida, and collateralized by the personal guarantees of two of the Company’s
directors. |
5. |
A
loan for approximately $4.40 million from China Construction Bank. It bears interest at 7.86% per annum$628,555 (RMB 4,000,000)
will be due in each twelve-month period as of September 30, 2016, 2017, 2018, 2019, 2020, 2021, and 2022 respectively. It
is secured by the fixed assets of Fujian Yida, and collateralized by the personal guarantees of two of the Company’s
directors. |
|
|
6. |
A
loan for approximately $3.69 million from China Construction Bank. It bears interest at 7.86% per annum. $471,416 (RMB 3,000,000)
will be due in each twelve-month period as of September 30, 2016, 2017, 2018, and 2019, respectively, $549,986 (RMB 3,500,000),
$628,555 (RMB 4,000,000), and $628,555 (RMB 4,000,000) will be due in each twelve-month period as of September 30, 2020,
2021, and 2022, respectively. It is secured by the fixed assets of Fujian Yida, and collateralized by the personal guarantees
of two of the Company’s directors. |
7. |
A
loan for approximately $3.54 million from China Construction Bank. It bears interest at 7.86% per annum. $157,139 (RMB 1,000,000),
$235,708 (RMB 1,500,000), $392,847 (RMB 2,500,000), $549,986 (RMB 3,500,000), $628,555 (RMB 4,000,000), $628,555 (RMB 4,000,000),
and $942,833 (RMB 6,000,000) will be due in each twelve-month period as of September 30, 2016, 2017, 2018, 2019, 2020, 2021,
and 2022, respectively. It is secured by the fixed assets of Fujian Yida, and collateralized by the personal guarantees of
two of the Company’s directors. |
|
|
8. |
A
loan for approximately $1.89 million from Fujian Haixia Bank (formerly known as Merchant bank of Fuzhou). The loan bears interest
at 8.245% per annum, and is due on June 29, 2016, collateralized by the personal guarantees of two of the Company’s
directors. |
In the coming 12 months, we have approximately
$5.19 million in bank loans that will mature. We plan to replace these loans with new bank loans in approximately the same aggregate
amounts.
We believe we can arrange funding for
the projects based on the actual cash flow expenditures, which means we can accelerate the construction when we have more cash
flows and we can slow down the construction when we are lack of funds.
Obligations Under Material Contracts
Below is a table setting forth the Company’s material
contractual obligations as of September 30, 2015:
| |
| | |
Payment due by period | |
Contractual Obligations | |
Total | | |
1 year | | |
1-3 years | | |
3-5 years | | |
More than 5 years | |
| |
| | |
| | |
| | |
| | |
| |
Bank Loans | |
$ | 111,524,561 | | |
$ | 5,185,581 | | |
$ | 9,585,465 | | |
$ | 49,498,725 | | |
$ | 47,254,790 | |
Operating Lease Obligations | |
| 978,502 | | |
| 66,211 | | |
| 52,555 | | |
| 52,732 | | |
| 807,004 | |
Total | |
$ | 112,503,063 | | |
$ | 5,251,792 | | |
$ | 9,638,020 | | |
$ | 49,551,457 | | |
$ | 48,061,794 | |
Compensation For Using Nature Resources
Commitments
In December 2008, Tulou entered into
a Tourist Resources Development Agreement with Hua’an County Government (“Hua’an government”) which is
related to pay compensation fees for using natural resources in Tulou. The Company agreed to pay (1) 16% of gross ticket
sales in the first five years; (2) 20% of gross ticket sales in the second five years; (3) 23% of gross ticket sales in the third
five years; (4) 25% of gross ticket sales in the fourth five years; (5) 28% of gross ticket sales in the fifth five years; (6)
30% in twenty six years and thereafter when the ticket price of the Clusters is RMB60 ($9.50 USD) or above per person.
The Company paid approximately $31,532
and $43,856 to the Hua’an government for the nine months ended September 30, 2015 and 2014, respectively, and recorded as
selling expenses.
The Company paid approximately $9,539
and $11,441 to the Hua’an government for the three months ended September 30, 2015 and 2014, respectively, and recorded
as selling expenses.
2015 Outlook
In 2015, we continued the construction
and development of two new tourism projects, the Yang-sheng Paradise in Zhangshu City, Jiangxi province, and the City of Caves
in Fenyi City, Jiangxi province, which represent our commitment to expanding our business operations by applying our current business
model to the development of other valuable tourist destinations outside Fujian province and throughout China. Now that the Company
has more cash generated from two new opened tourism sites, we will continue to develop the projects.
Critical Accounting Policies
The preparation of consolidated financial
statements in conformity with accounting principles generally accepted in the United States requires our management to make assumptions,
estimates, and judgments that affect the amounts reported, including the notes thereto, and related disclosures of commitments
and contingencies, if any. We have identified certain accounting policies that are significant to the preparation of our consolidated
financial statements. These accounting policies are important for an understanding of our financial condition and results of operations.
Critical accounting policies are those that are most important to the portrayal of our financial condition and results of operations
and require management’s difficult, subjective, or complex judgment, often as a result of the need to make estimates about
the effect of matters that are inherently uncertain and may change in subsequent periods. Certain accounting estimates are particularly
sensitive because of their significance to financial statements and because of the possibility that future events affecting the
estimate may differ significantly from management’s current judgments. We believe the following critical accounting policies
involve the most significant estimates and judgments used in the preparation of our consolidated financial statements.
Basis of presentation
The unaudited consolidated financial
statements of China Yida Holding, Co. and Subsidiaries have been prepared in accordance with U.S. generally accepted accounting
principles for interim financial information and pursuant to the requirements for reporting on Form 10-Q. Accordingly,
they do not include all the information and footnotes required by accounting principles generally accepted in the United States
of America for annual financial statements. However, the information included in these interim financial statements
reflects all adjustments (consisting solely of normal recurring adjustments) which are, in the opinion of management, necessary
for the fair presentation of the consolidated financial position and the consolidated results of operations. Results
shown for interim periods are not necessarily indicative of the results to be obtained for a full year. The consolidated
balance sheet information as of December 31, 2014 was derived from the audited consolidated financial statements included in the
Company’s Annual Report on Form 10-K. These interim financial statements should be read in conjunction with that
report. Certain comparative amounts have been reclassified to conform to the current period's presentation.
Principles of consolidation
The accompanying consolidated financial
statements include the accounts of China Yida and its wholly-owned subsidiaries Keenway Limited, Hong Kong Yi Tat, Fuyu, Fujian
Yida, Tulou, YongtaiYunding, Jiangxi Zhangshu, Jiangxi Fenyi, Yida Travel, Fenyi Development, Zhangshu Development, Zhangshu Investment,
Yida Arts, Yunding hotel, Jiangxi Travel and the accounts of its variable interest entity, Fujian Jiaoguang. All significant inter-company
accounts and transactions have been eliminated in consolidation.
Consolidation of Variable Interest
Entities
According to the requirements of ASC
810, an Interpretation of Accounting Research Bulletin No. 51 that requires a Variable Interest Entity ("VIE"), the
Company has evaluated the economic relationships of Fujian Jiaoguang which signed an exclusive right agreement with the Company.
Therefore, Fujian Jiaoguang is considered to be a VIE, as defined by ASC Topic 810-10, of which the Company is the primary beneficiary.
The carrying amount and classification
of Fujian Jiaoguang’s assets and liabilities included in the Consolidated Balance Sheets are as follows:
| |
September 30, 2015 | | |
December 31, 2014 | |
Total current assets * | |
$ | 16,988,277 | | |
$ | 4,407,430 | |
Total assets | |
$ | 16,995,664 | | |
$ | 4,415,085 | |
Total current liabilities # | |
$ | 25,820,983 | | |
$ | 13,352,110 | |
Total liabilities | |
$ | 25,820,983 | | |
$ | 13,352,110 | |
* Including intercompany receivables
of $16,818,923 and $4,342,251 as of September 30, 2015 and December 31, 2014, respectively, to be eliminated in consolidation.
# Including intercompany payables of
$25,810,077 and $13,321,547 as of September 30, 2015 and December 31, 2014, respectively, to be eliminated in consolidation.
Although Fujian Jiaoguang no longer
had revenues, its bank account still has to be maintained active with certain cash flows to support its expenses. As
such, Fujian Jiaoguang transferred funds from and to the Company’s directly-owned subsidiaries, which resulted in intercompany
receivables and payables. Since Fujian Jiaoguang is a variable interest entity subject to consolidation, the balances of
its intercompany receivables and payables are eliminated against the corresponding account balances at the Company’s directly-owned
subsidiaries at the consolidation level.
Use of estimates and assumptions
The preparation of the consolidated
financial statements in conformity with accounting principles generally accepted in the United States of America requires management
to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the consolidated financial statements and the amount of revenues and expenses during the reporting
periods. Management makes these estimates using the best information available at the time the estimates are made. However, actual
results could differ materially from those results. The most significant estimates reflected in the consolidated financial statements
include depreciation, useful lives of property and equipment, deferred income taxes, useful life of intangible assets and contingencies.
Estimates and assumptions are periodically reviewed and the effects of revisions are reflected in the consolidated financial statements
in the period they are determined to be necessary.
Property and equipment
Property and equipment are recorded
at cost less accumulated depreciation. Gains or losses on disposals are reflected as gain or loss in the year of disposal. The
cost of improvements that extends the life of property, and equipment are capitalized. These capitalized costs may include structural
improvements, equipment, and fixtures. All ordinary repair and maintenance costs are expensed as incurred.
Depreciation for financial reporting
purposes is provided using the straight-line method over the estimated useful lives of the assets or lease term as follows:
Building |
20
years |
Electronic
Equipment |
5 to 8 years |
Transportation
Equipment |
8 years |
Office Furniture |
5 to 8 years |
Leasehold
Improvement and Attractions |
Lesser of
term of the lease or the estimated useful lives of the assets |
Intangible assets
Intangible assets consist of acquisition
of management right of tourism destinations, commercial airtime rights and land use rights for tourism destinations. They are
amortized on the straight line basis over their respective lease periods. The lease period of management right, commercial airtime
rights and land use rights is 30 years, 3 years and 40 years, respectively.
Impairment
The Company reviews long-lived assets
for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable
through the estimated undiscounted cash flows expected to result from the use and eventual disposition of the assets. Whenever
any such impairment exists, an impairment loss will be recognized for the amount by which the carrying value exceeds the fair
value.
Assets are grouped and evaluated at
the lowest level for their identifiable cash flows that are largely independent of the cash flows of other groups of assets. The
Company considers historical performance and future estimated results in its evaluation of potential impairment and then compares
the carrying amount of the asset to the future estimated cash flows expected to result from the use of the asset. If the carrying
amount of the asset exceeds estimated expected undiscounted future cash flows, the Company measures the amount of impairment by
comparing the carrying amount of the asset to its fair value. The estimation of fair value is generally measured by discounting
expected future cash flows as the rate the Company utilizes to evaluate potential investments. The Company estimates fair value
based on the information available, judgments and projections are considered necessary. Management reassessed and recorded impairment
loss of $4,384,335 for the year ended December 31, 2014. There was no additional impairment for the nine months ended September
30, 2015.
Revenue recognition
Revenue is recognized at the date of
service rendered to customers when a formal arrangement exists, the price is fixed or determinable, the services rendered, no
other significant obligations of the Company exist and collectability is reasonably assured. Payments received before satisfaction
of all of the relevant criteria for revenue recognition are recorded as unearned revenue.
Revenues from advance tourism destinations
ticket sales are recognized when the tickets are used. Revenues from our contractors who have tourism contracts with us are generally
recognized over the period of the applicable agreements commencing with the tourists visiting the tourism destinations. The Company
also sells admission and activities tickets for a tourism destination which the Company has the management right.
The Company has no allowance for product
returns or sales discounts because services that are rendered and accepted by the customers are normally not refundable and discounts
are normally not granted after service has been rendered.
Profit sharing costs are recorded as
cost of revenue. Profit sharing arrangements with the local governments for the management rights (see Note 14):
For the nine months ended September
30, 2015
| |
Tulou | |
| |
| |
Gross receipts | |
$ | 346,726 | |
| |
| | |
Profit sharing costs | |
| - | |
Nature resource compensation expenses | |
| 31,532 | |
Total paid to the local governments | |
| 31,532 | |
| |
| | |
Net receipts | |
$ | 315,194 | |
For the nine months ended September 30, 2014
| |
Tulou | |
| |
| |
Gross receipts | |
$ | 486,126 | |
| |
| | |
Profit sharing costs | |
| - | |
Nature resource compensation expenses | |
| 43,856 | |
Total paid to the local governments | |
| 43,856 | |
| |
| | |
Net receipts | |
$ | 442,270 | |
For the three months ended September 30, 2015
| |
Tulou | |
| |
| |
Gross receipts | |
$ | 99,927 | |
| |
| | |
Profit sharing costs | |
| - | |
Nature resource compensation expenses | |
| 9,539 | |
Total paid to the local governments | |
| 9,539 | |
| |
| | |
Net receipts | |
$ | 90,388 | |
For the three months ended September 30, 2014
| |
Tulou | |
| |
| |
Gross receipts | |
$ | 126,818 | |
| |
| | |
Profit sharing costs | |
| - | |
Nature resource compensation expenses | |
| 11,441 | |
Total paid to the local governments | |
| 11,441 | |
| |
| | |
Net receipts | |
$ | 115,377 | |
Foreign currency translation
The Company uses the United States
dollar ("U.S. dollars") for financial reporting purposes. The Company's subsidiaries maintain their books and records
in their functional currency, being the primary currency of the economic environment in which their operations are conducted.
In general, for consolidation purposes, the Company translates the subsidiaries' assets and liabilities into U.S. dollars using
the applicable exchange rates prevailing at the balance sheet dates, and the statements of income are translated at average exchange
rates during the reporting periods. Gain or loss on foreign currency transactions are reflected on the income statement. Gain
or loss on financial statement translation from foreign currency are recorded as a separate component in the equity section of
the balance sheet and is included as part of accumulated other comprehensive income. The functional currency of the Company and
its subsidiaries in China is the Chinese Renminbi.
Income taxes
Income taxes are accounted for under
the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable
to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases
and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected
to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect
on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment
date. A valuation allowance is recognized if it is more likely than not that some portion, or all, of a deferred tax asset will
not be realized. There were no deferred income tax assets As of September 30, 2015 and December 31, 2014, respectively.
The Company applied the provisions
of ASC 740-10-50, “Accounting For Uncertainty In Income Taxes”, which provides clarification related to the process
associated with accounting for uncertain tax positions recognized in our financial statements. Audit periods remain open for review
until the statute of limitations has passed. The completion of review or the expiration of the statute of limitations for a given
audit period could result in an adjustment to the Company’s liability for income taxes. Any such adjustment could be material
to the Company’s results of operations for any given quarterly or annual period based, in part, upon the results of operations
for the given period. At September 30, 2015, management considered that the Company had no uncertain tax positions, and will continue
to evaluate for uncertain positions in the future.
China Yida is subject to U.S. Federal
and California state examination by tax authorities for years after 2008, and the PRC tax authority for years after 2007.
Fair values of financial instruments
The carrying amounts reported in the
consolidated financial statements for current assets and currently liabilities approximate fair value due to the short-term nature
of these financial instruments. The carrying amount of long-term loans approximates fair value since the interest rates associated
with the debts approximate the current market interest rates.
The Company adopted ASC 820-10, “Fair
Value Measurements and Disclosures”, which establishes a single authoritative definition of fair value and a framework for
measuring fair value and expands disclosure of fair value measurements for both financial and nonfinancial assets and liabilities.
This standard defines fair value, provides guidance for measuring fair value and requires certain disclosures. This standard does
not require any new fair value measurements, but discusses valuation techniques, such as the market approach (comparable market
prices), the income approach (present value of future income or cash flows) and the cost approach (cost to replace the service
capacity of an asset or replacement cost). For purposes of ASC 820-10-15, nonfinancial assets and nonfinancial liabilities would
include all assets and liabilities other than those meeting the definition of a financial asset or financial liability as defined
in ASC-820-10-15-15-1A.
Stock-based compensation
The Company records stock-based compensation
expense pursuant to ASC 718-10, "Share Based Payment Arrangement ” which requires companies to measure compensation
cost for stock-based employee compensation plans at fair value at the grant date and recognize the expense over the employee's
requisite service period. The Company’s expected volatility assumption is based on the historical volatility of Company’s
stock or the expected volatility of similar entities. The expected life assumption is primarily based on historical exercise patterns
and employee post-vesting termination behavior. The risk-free interest rate for the expected term of the option is based on the
U.S. Treasury yield curve in effect at the time of grant.
Stock-based compensation expense is
recognized based on awards expected to vest, and there were no estimated forfeitures as the Company has a short history of issuing
options. ASC 718-10 requires forfeitures to be estimated at the time of grant and revised in subsequent periods, if necessary,
if actual forfeitures differ from those estimates.
Recent accounting pronouncements
In August 2014, FASB issued ASU 2014-15
- Presentation of Financial Statements - Going Concern (Subtopic 205-40). The amendments in this Update states the disclosure
of uncertainties about an entity’s ability to continue as a going concern. An entity’s management should evaluate
whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability
to continue as a going concern within one year after the date that the financial statements are issued (or available to be issued).
When management identifies conditions or events that raise substantial doubt, management should consider whether its plans will
alleviate the substantial doubt.
When substantial doubt is raised but
is alleviated by management’s plans, the entity should disclose following information: (a) Principal conditions or events
that raised substantial doubt (before consideration of management’s plans); (b) Management’s evaluation of the significance
of those conditions or events in relation to the entity’s ability to meet its obligations; (c) Management’s plans
that alleviated the substantial doubt.
When substantial doubt is raised but
is not alleviated by management’s plans,, an entity should include a statement in the footnotes indicating that there is
substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial
statements are issued (or available to be issued), and disclose the following information: (a) Principal conditions or events
that raise substantial doubt; (b) Management’s evaluation of the significance of those conditions or events in relation
to the entity’s ability to meet its obligations; (c) Management’s plans that are intended to mitigate the conditions
or events that raise the substantial doubt.
The amendments in this Update are effective
for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application
is permitted. The Company is still in progress of evaluating future impact of adopting this standard.
In May 2014, the FASB issued ASU 2014-09,
Revenue from Contracts with Customers (Topic 606). The core principle of the guidance is that an entity should recognize revenue
to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity
expects to be entitled in exchange for those goods or services. To achieve the core principle, an entity should apply the following
steps:
Step 1: Identify the contract(s) with
a customer.
Step 2: Identify the performance obligations
in the contract.
Step 3: Determine the transaction price.
Step 4: Allocate the transaction price
to the performance obligations in the contract.
Step 5: Recognize revenue when (or
as) the entity satisfies a performance obligation.
An entity should disclose sufficient
information to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash
flows arising from contracts with customers. For a public entity, the amendments in this Update are effective for annual reporting
periods beginning after December 15, 2016, including interim periods within that reporting period. Early application is not permitted.
For all other entities (nonpublic entities), the amendments in this Update are effective for annual reporting periods beginning
after December 15, 2017, and interim periods within annual periods beginning after December 15, 2018. A nonpublic entity may elect
to apply this guidance earlier. The Company has begun evaluating future impact of adopting this standard on the Company’s
consolidated financial position and operating results.
In April 2014, the FASB issued ASU
2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360). The amendments in this
Update change the requirements for reporting discontinued operations in Subtopic 205-20. A discontinued operation may include
a component of an entity or a group of components of an entity, or a business or nonprofit activity. A disposal of a component
of an entity or a group of components of an entity is required to be reported in discontinued operations if the disposal represents
a strategic shift that has (or will have) a major effect on an entity’s operations and financial results. The amendments
in this Update require an entity to present, for each comparative period, the assets and liabilities of a disposal group that
includes a discontinued operation separately in the asset and liability sections, respectively, of the statement of financial
position. The amendments in this Update require a public business entity and a not-for-profit entity that has issued, or is a
conduit bond obligor for, securities that are traded, listed, or quoted on an exchange or an over-the-counter market to provide
disclosures about a disposal of an individually significant component of an entity that does not qualify for discontinued operations
presentation in the financial statements. The amendments in this Update require all other entities to provide disclosures about
a disposal of an individually significant component of an entity that does not qualify for discontinued operations presentation
in the financial statements. The amendments in this Update expand the disclosures about an entity’s significant continuing
involvement with a discontinued operation. Those disclosures are required until the results of operations of the discontinued
operation in which an entity retains significant continuing involvement are no longer presented separately as discontinued operations
in the statement where net income is reported (or statement of activities for a not-for-profit entity). The adoption of this standard
is not expected to have a material impact on the Company’s consolidated financial position and results of operations.
Inflation and Seasonality
Our operating results and operating
cash flows historically have not been materially affected by inflation or seasonality.
Off Balance Sheet Arrangements
We do not have any off balance sheet
arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial
condition, sales or expenses, results of operations, liquidity or capital expenditures, or capital resources that are material
to an investment in our securities.
Item 3. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK.
Not applicable because we are a small
reporting company.
Item 4. Controls and Procedures.
Evaluation of disclosure controls and procedures.
Our disclosure controls and procedures
are designed to ensure (i) that information required to be disclosed by us in the reports we file or submit under the Exchange
Act are recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms; and
(ii) that information required to be disclosed by us in the reports it files or submits under the Exchange Act is accumulated
and communicated to our management, including our principal executive and principal financial officer, or persons performing similar
functions, as appropriate to allow timely decisions regarding required disclosure. As of March 31, 2015, we carried out an evaluation,
under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial
Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in
Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)). Based upon that evaluation,
our Chief Executive Officer and Chief Financial Officer concluded that as of the end of the period covered by this report, our
disclosure controls and procedures were not effective.
Changes in internal control over financial reporting.
During the period covered by this report,
there was no change in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f)
under the Exchange Act) that has materially affected, or is reasonably likely to materially affect our internal control over financial
reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 1A. Risk Factors.
There has been no material change to
our risk factors from those presented in our Form 10-K for the fiscal year ended December 31, 2014.
Item 2. Unregistered Sales of Equity Securities and Use
of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.
Item 6. Exhibits.
No. |
|
Description |
31.1 |
|
Certification
of Chief Executive Officer Required by Rule 13a-14(a) (17 CFR 240.13a-14(a)) |
31.2 |
|
Certification
of Chief Financial Officer Required by Rule 13a-14(a) (17 CFR 240.13a-14(a)) |
32.1 |
|
Certification
of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002 |
32.2 |
|
Certification
of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002 |
101.INS |
|
XBRL
Instance Document |
101.SCH |
|
XBRL
Taxonomy Extension Schema Document |
101.CAL |
|
XBRL
Taxonomy Extension Calculation Linkbase Document |
101.DEF |
|
XBRL
Taxonomy Extension Definition Linkbase Document |
101.LAB |
|
XBRL
Taxonomy Extension Label Linkbase Document |
101.PRE |
|
XBRL
Taxonomy Extension Presentation Linkbase Document |
SIGNATURES
Pursuant to the requirements of the
Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
|
CHINA
YIDA HOLDING, CO. |
|
|
|
Date: November
16, 2015 |
By: |
/s/
Minhua Chen |
|
|
Minhua Chen |
|
|
Chief Executive
Officer |
|
|
(Principal
Executive Officer) |
|
|
|
|
By: |
/s/
Yongxi Lin |
|
|
Yongxi Lin
Chief Financial Officer
(Principal Financial Officer) |
43
Exhibit 31.1
CERTIFICATION
OF CHIEF EXECUTIVE
OFFICER
PURSUANT TO 18 U.S.C.
SECTION 1350,
AS ADOPTED PURSUANT
TO SECTION 302 OF
THE SARBANES-OXLEY
ACT OF 2002
I, Chen Minhua, certify that:
1. |
I have reviewed this quarterly report on Form 10-Q of China Yida Holding, Co.; |
|
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
|
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods present in this report; |
|
|
4. |
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13-a-15(f) and 15d-15(f)) for the registrant and have: |
|
|
|
|
(a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
|
|
|
(b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principals; |
|
|
|
|
(c) |
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
|
|
|
(d) |
Disclosed in this report any change in the registrant's internal control over financing reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of a quarterly report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
|
|
|
5. |
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
|
|
|
|
(a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
|
|
|
|
(b) |
Any fraud, whether or not material, that involved management or other employees who have a significant role in the registrant's internal control over financial reporting. |
November 16, 2015
/s/ Chen Minhua |
|
Chen Minhua |
|
Chief Executive Officer
(Principal Executive Officer) |
|
Exhibit 31.2
CERTIFICATION
OF CHIEF FINANCIAL
OFFICER
PURSUANT TO 18 U.S.C.
SECTION 1350,
AS ADOPTED PURSUANT
TO SECTION 302 OF
THE SARBANES-OXLEY
ACT OF 2002
I, Yongxi Lin, certify that:
1. |
I have reviewed this quarterly report on Form 10-Q of China Yida Holding, Co.; |
|
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
|
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods present in this report; |
|
|
4. |
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13-a-15(f) and 15d-15(f)) for the registrant and have: |
|
|
|
|
(a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
|
|
|
(b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principals; |
|
|
|
|
(c) |
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
|
|
|
(d) |
Disclosed in this report any change in the registrant's internal control over financing reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an quarterlyreport) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
|
|
|
5. |
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
|
|
|
|
(a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
|
|
|
|
(b) |
Any fraud, whether or not material, that involved management or other employees who have a significant role in the registrant's internal control over financial reporting. |
November 16, 2015
/s/ Yongxi Lin |
|
Yongxi Lin |
|
Chief
Financial Officer
(Principal Financial and Accounting Officer) |
|
Exhibit 32.1
Certification Pursuant To
18 U.S.C. Section 1350,
As Adopted Pursuant To
Section 906 Of The Sarbanes-Oxley Act Of 2002
In connection with the Quarterly Report of
China Yida Holding, Co. (the "Company") on Form 10-Q for the quarter ended September 30, 2015 as filed with
the Securities and Exchange Commission (the "Report"), I, Chen Minhua, certify, pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) |
The Report fully complies with the requirements of Section 13(a) or 15 (d) of the Securities Exchange Act of 1934; and |
|
|
(2) |
The information contained in the Report fairly presents, in all material respects, the financial condition of the Company as of the dates presented and the results of operations of the Company. |
/s/ Chen Minhua |
|
Chen Minhua |
|
Chief Executive Officer
(Principal Executive Officer) |
|
Dated: November 16, 2015
The foregoing certification is being furnished
solely pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title
18, United States Code) and is not being filed as part of a separate disclosure document.
Exhibit 32.2
Certification Pursuant To
18 U.S.C. Section 1350,
As Adopted Pursuant To
Section 906 Of The Sarbanes-Oxley Act Of 2002
In connection with the Quarterly Report of
China Yida Holding, Co. (the "Company") on Form 10-Q for the quarter ended September 30, 2015 as filed with the
Securities and Exchange Commission (the "Report"), I, Yongxi Lin, certify, pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) |
The Report fully complies with the requirements of Section 13(a) or 15 (d) of the Securities Exchange Act of 1934; and |
|
|
(2) |
The information contained in the Report fairly presents, in all material respects, the financial condition of the Company as of the dates presented and the results of operations of the Company. |
/s/ Yongxi Lin |
|
Yongxi Lin |
|
Chief
Financial Officer
(Principal Financial and Accounting Officer) |
|
Dated: November 16, 2015
The foregoing certification is being furnished
solely pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title
18, United States Code) and is not being filed as part of a separate disclosure document.
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