UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☒
ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended
December 31,
2016
or
☐
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:
000-55576
YANGTZE
RIVER DEVELOPMENT LIMITED
(Exact name of registrant as specified
in its charter)
Nevada
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27-1636887
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State or other jurisdiction of
incorporation or organization
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(I.R.S. Employer
Identification No.)
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183 Broadway, Suite 5
New York, NY
United States
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10007
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(Address of principal executive offices)
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(Zip Code)
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Registrant’s telephone number, including
area code:
(646) 861-3315
Securities registered pursuant to Section 12(b) of the
Act:
Title of each class:
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Name of each exchange on which registered:
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None
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None
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Securities registered pursuant to Section 12(g) of the
Act:
Common Stock, par value $0.0001 per share
(Title of class)
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities Act. Yes
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No
☒
Indicate by check mark if the
registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes
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No
☒
Indicate by check mark whether the registrant (1) has
filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes
☒
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 if disclosure of delinquent
filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained,
to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K. ☐
Indicate by check mark whether the registrant is a
large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of
“large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2
of the Exchange Act.
Accelerated filer
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Large accelerated filer
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☐
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Non-accelerated filer
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☐ (Do not check if a smaller reporting company)
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Smaller reporting company
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☐
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Indicate by check mark whether the registrant is a
shell company (as defined in Rule 12b-2 of the Act). Yes
☐
No
☒
State
the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price
at which the common equity was last sold, as of the last business day of the registrant’s most recently completed second
fiscal quarter: $409,477,453.
Number of the issuer’s common stock outstanding
as of March 8, 2017: 172,269,446.
Documents incorporate by reference: None.
TABLE OF CONTENTS
EXPLANATORY NOTE
The Company’s filing
status has changed from a “smaller reporting company” to an “accelerated filer” for the period ended December
31, 2016 as the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference
to the price at which the common equity was last sold, as of the last business day of our most recently completed second fiscal
quarter exceeded $75,000,000. Therefore, the Company will provide the information that references this explanatory note in our
next 10-K filing for fiscal year ended December 31, 2017.
FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K (this “Report”)
contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the
“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
Forward-looking statements discuss matters that are not historical facts. Because they discuss future events or conditions, forward-looking
statements may include words such as “anticipate,” “believe,” “estimate,” “intend,”
“could,” “should,” “would,” “may,” “seek,” “plan,” “might,”
“will,” “expect,” “predict,” “project,” “forecast,” “potential,”
“continue” negatives thereof or similar expressions. These forward-looking statements are found at various places throughout
this Report and include information concerning possible or assumed future results of our operations; business strategies; future
cash flows; financing plans; plans and objectives of management; any other statements regarding future operations, future cash
needs, business plans and future financial results, and any other statements that are not historical facts.
From time to time, forward-looking statements also
are included in our other periodic reports on Forms 10-Q and 8-K, in our press releases, in our presentations, on our website and
in other materials released to the public. Any or all of the forward-looking statements included in this Report and
in any other reports or public statements made by us are not guarantees of future performance and may turn out to be inaccurate.
These forward-looking statements represent our intentions, plans, expectations, assumptions and beliefs about future events and
are subject to risks, uncertainties and other factors. Many of those factors are outside of our control and could cause
actual results to differ materially from the results expressed or implied by those forward-looking statements. In light of these
risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur or might occur to
a different extent or at a different time than we have described. You are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date of this Report. All subsequent written and oral forward-looking statements concerning
other matters addressed in this Report and attributable to us or any person acting on our behalf are expressly qualified in their
entirety by the cautionary statements contained or referred to in this Report.
Except to the extent required by law, we undertake
no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, a change
in events, conditions, circumstances or assumptions underlying such statements, or otherwise.
USE OF CERTAIN DEFINED TERMS
In this Report, unless otherwise noted
or as the context otherwise requires,
“Yangtze River”, the “Company,” “YERR,” “we,”
“us,” and “our”
refers to the combined business of Yangtze River Development Limited, a corporate
formed under the laws of the State of Nevada, Energetic Mind Limited (“Energetic Mind”), which is our wholly-owned
subsidiary formed under the laws of the British Virgin Islands (“BVI”), Energetic Mind’s wholly-owned subsidiary
Ricofeliz Capital (HK) Ltd (“Ricofliz Capital”), a company formed under the laws of Hong Kong, and Ricofeliz Capital’s
wholly-owned subsidiary, Wuhan Yangtze River Newport Logistics Co., Ltd (“Wuhan Newport”), a wholly foreign-owned
enterprise formed under the laws of the People’s Republic of China (“China”).
PART I
Item 1.
Business.
Overview
Yangtze River Development Limited is a Nevada corporation
that operates through its wholly-owned subsidiary Energetic Mind, which operates through its wholly-owned subsidiary Ricofeliz
Capital, which operates through its wholly-owned subsidiary Wuhan Newport, a wholly foreign-owned enterprise that primarily engages
in the business of real estate and infrastructural development with a port logistics center located in Wuhan, Hubei Province of
China. Situated in the middle reaches of the Yangtze River, Wuhan Newport is a large infrastructure development project implemented
under China's latest "One Belt One Road" initiative and is believed to be strategically positioned in the anticipated
"Pilot Free Trade Zone" of the Wuhan Port, a crucial trading window among China, the Middle East and Europe. To be fully
developed upon completion, within the logistics center, there will be six operating zones: port operation area, warehouse and distribution
area, cold chain logistics area, rail cargo loading area, exhibition area and business related area. The Logistics Center is also
expected to provide a number of shipping berths for cargo ships of various sizes. Wuhan Newport is expected to provide domestic
and foreign businesses direct access to the anticipated Pilot Free Trade Zone in Wuhan. The project will include commercial buildings,
professional logistic supply chain centers, direct access to the Yangtze River, Wuhan-Xinjiang-Europe Railway and ground transportation,
storage and processing centers, and IT supporting services, among others.
Income generated from the use of the warehouses, cargo
loading and unloading, railway and highway transportation and logistics services and other logistics supporting services is expected
to be the main source of our expected income. It is also expected that income from real estate sales and leasing would be a relatively
minor portion of our expected income since we are planning to sell or lease only a small portion of our real estate properties
such as office spaces. We plan to use the major area of our real estate properties for the development of our Logistics Center,
from which our main source of expected income can be derived. Theses income includes but not limited to the service fees we charge
for our clients’ usage of warehouses, online information platform, ship berths, cold-chain storages, cargo handling, shipment
loading and unloading.
Wuhan Yangtze River Newport Logistics
Center
The Wuhan Yangtze River Newport Logistics Center (the
“Logistics Center”), is an extensive complex located in Wuhan, the capital of the Hubei Province of China, a major
transportation hub city with access to numerous railways, roads and expressways passing through the city and connecting to major
cities in China, as well as other international centers of commerce and business.
The Logistics Center is expected to occupy approximately
1,918,000 square meters, for which the construction and development are expected to be completed in three phases in three years
and reach its target maximum annual profit by the end of 2021 assuming the entire funding required for construction of the Logistics
Center of $1.03 billion is in place by 2020 and the Logistics Center is in operation per our business plan. The following
table illustrates the timeframe of our investment and construction progress.
Time
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Phase of
Investment/Construction
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Percentage of Total
Anticipated
Investment/
Construction (1)
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Production
Capacity (2)
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1
st
Year (2017)
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1
st
Phase
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40
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%
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30
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%
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2
nd
Year (2018)
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2
nd
Phase
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70
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%
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40
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%
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3
rd
Year (2019)
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3
rd
Phase
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100
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%
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60
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%
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4
th
Year (2020)
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Completed
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100
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%
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75
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%
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5
th
Year (2021)
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Completed
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100
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%
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100
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%
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(1)
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The percentage of construction in a certain phase reflects the anticipated contribution of the investment
in such particular phase. For example, contribution of 40% of the total investment in Phase 1 will lead to construction of 40%
of total value of the Logistics Center.
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(2)
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The percentage of Production Capacity shows the fraction of the target maximum annual profit to be earned under the full operation of the Wuhan Project. We target to reach its maximum annual profit by the end of 2021 assuming the entire funding required for construction of the Logistics Center of $1.03 billion is in place by 2020 and the Logistics Center is in operation according to our business plan.
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The Logistics Center is located within the Wuhan Newport
Yangluo Port, on the upper stream of the Yangtze River, and close to the northern base of Wuhan Iron and Steel, China's first mega-sized
iron and steel production complex. The Logistics Center is expected to include a port terminal that will be located approximately
26.5km from the Wuhan Guan and 5.5km from the Yangluo Yangtze River Bridge. The operation area of the port is expected to consist
of a riverbank of 1,039 meters with eight 5,000-to-10,000-ton berths, two of which are multi-purpose berths and the other six are
general cargo berths. It is designed to be able to handle up to 5,000,000 tons of cargo annually, including up to 100,000 TEU for
annual container throughput (including 20,000 TEU in freezer areas), 1,000,000 tons of iron and steel and 3,000,000 tons of general
cargo.
Within the Logistics Center, functional areas will
be divided into six operating zones: a port operation area, a warehouse and distribution area, a cold chain supply logistics area,
a rail cargo loading area, an exhibition area and a business related area. The Logistics Center will also be complemented with
container storage areas, multi-functional areas, general storage areas, a multi-functional warehouse and infrastructural development,
including new roads, gas stations, parking areas, gas and water pipes, electricity lines and all other facilities and equipment
to operate the Logistics Center.
Aside from being situated in the Wuhan Yangluo Comprehensive
Bonded Zone, the Yangluo development area is amongst the third group of China’s Pilot Free Trade Zone (FTZ) applicants to
submit FTZ applications to the State Council. As of the date hereof, approvals have been granted to Shanghai, Tianjin, Guangdong
and Fujian. Corporations within the approved free-trade zones are typically entitled to a series of favorable regulations and policies
that could help the businesses grow and succeed.
Wuhan Newport has signed a twenty-year lease agreement,
the maximum number of years permitted by the applicable PRC laws, and with rights to renew at its sole discretion effective April
27, 2015, to lease approximately 1,200,000 square meters of land for building logistics warehouses in support of the Logistics
Center. The warehouses are expected to be comprised of port terminal zones, warehouse logistics zones, cold chain supply zones
and railroad loading and unloading zones. The warehouses, once constructed, will connect the port terminal along the Yangtze River
and the railway leading to Europe, satisfying the requirement of China’s latest “One Belt, One Road” initiative.
It will also be able to support large logistics companies in Wuhan and other nearby provinces which will rent the warehouses, terminals
and offices within the Logistics Center.
Logistics Center Highlights:
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The shipping center will be implemented under China’s latest “One Belt, One Road” initiative to promote the "Yangtze River Economic Belt";
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Wuhan Newport is part of the Yangluo port, which is part of the area that is currently seeking approval for status as a "Free-Trade Zone";
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Wuhan Newport is part of the "Yangluo Comprehensive Bonded Zone", which allows the enterprises in the zone to receive certain favorable tax treatments such as export tax rebates and less or free of value-added tax and consumption tax;
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The “One Belt, One Road”
Initiative.
According to the
Vision
and Actions on Jointly Building Belt and Road
issued by the National Development and Reform Commission, Ministry of Foreign
Affairs, and Ministry of Commerce of the People's Republic of China, with State Council authorization in March 2015, "One
Belt, One Road" (the “Initiative”) is a infrastructural development concept initiated by the leaders of the Chinese
government in 2013. It refers to the New Silk Road Economic Belt, which will link China with Europe through Central and Western
Asia, and the 21st Century Maritime Silk Road, which will connect China with Southeast Asian countries, Africa and Europe through
the Pacific and Indian Ocean. Neither the belt, nor the road, follow a designated route, but serve as a conceptual roadmap for
China’s plan to expand its presence commercially to the regions outside of the country and strengthen its economic relationships
with the nations in these regions.
The “Belt” and
the “Road” run through the continents of Asia, Europe and Africa, connecting the vibrant East Asian economic circle
on one end and developed European economic circle on the other, and encompassing countries with huge potential for economic development.
The Silk Road Economic Belt focuses on bringing together China, Central Asia, Russia and Europe (the Baltic), linking China with
the Persian Gulf and the Mediterranean Sea through Central Asia and West Asia, and connecting China with Southeast Asia, South
Asia and the countries along the Indian Ocean. The 21st-Century Maritime Silk Road is designed to go from China's coast to Europe
through the South China Sea and the Indian Ocean in one route, and from China's coast through the South China Sea to the South
Pacific in the other.
On land, the Initiative is expected to
focus on jointly building a new Eurasian Land Bridge and developing China-Mongolia-Russia, China-Central Asia-West Asia and China-Indochina
Peninsula economic corridors by taking advantage of international transport routes, relying on core cities along the Belt and
Road and using key economic industrial parks as cooperation platforms. At sea, the Initiative is expected to focus on jointly
building smooth, secure and efficient transportation routes connecting major sea ports along the Belt and the Road. The China-Pakistan
Economic Corridor and the Bangladesh-China-India-Myanmar Economic Corridor are closely related to the Belt and Road Initiative,
and therefore require closer cooperation and greater progress. (Source:
http://en.ndrc.gov.cn/newsrelease/201503/t20150330_669367.html
;
National Development and Reform Commission, Ministry of Foreign Affairs, and Ministry of Commerce of the People's Republic
of China, with State Council authorization
).
Corporate History
On December 23, 2009, the Company was incorporated
under the laws of the State of Nevada under the name of “Ciglarette International, Inc.”.
On March 1, 2011, the Company completed a reverse acquisition
transaction through a share exchange with Kirin China Holding, a British Virgin Islands company (“Kirin China”), whereby
the Company acquired all of the issued and outstanding shares of Kirin China in exchange for 18,547,297 shares of common stock,
which represented approximately 98.4% of the total shares outstanding immediately following the closing of this share exchange
(the “First Share Exchange”). Upon consummation of the First Share Exchange, Company changes its name to “Kirin
International Holding, Inc.” and traded under the symbol “KIRI” on OTC Markets. As a result of the First Share
Exchange, Kirin China became a wholly-owned subsidiary. The Company ceased the smokeless cigarette business and became a holding
company, through various controlled entities in the China, engaged in the development and operation of real estate in China. Through
Kirin China, Company engaged in private real estate development focusing on residential and commercial real estate development
in “tier-three” cities in China. Tier-three cities are provincial capital cities with ordinary economic development
and prefecture cities with relatively strong economic development.
On December 19, 2015, Company entered into certain
share exchange agreements with Energetic Mind and all the shareholders of Energetic Mind whereby the Company acquired 100% issued
and outstanding ordinary shares of Energetic Mind (the “Second Share Exchange”). Pursuant to the terms of the agreements
for the Second Share Exchange, in exchange for 100% issued and outstanding ordinary shares of Energetic Mind, the Company agreed
to issue to (i) the shareholders of Energetic Mind an aggregate of one hundred fifty-one million (151,000,000) shares of Company’s
common stock and (2) a certain related party an additional 8% convertible promissory note in the principal amount of one hundred
fifty million dollars ($150,000,000), with a conversion price of $10.00 per share.
On December 31, 2015, the Company disposed all of its
interests in i) Brookhollow Lake, LLC, ii) Newport Property Holding, LLC, iii) Kirin China, iv) Kirin Hopkins Real Estate Group
LLC, v) Archway Development Group LLC, vi) Specturm International Enterprise, LLC and vii) wholly-owned subsidiary HHC-6055 Centre
Drive LLC. The sale of Kirin China also effectively terminated Company’s contractual relationship with Hebei Zhongding Real
Estate Development Co. Ltd and Xingtai Zhongding Jiye Real Estate Development Co., Ltd, both of which are companies formed under
the laws of the People’s Republic of China and were deemed Company’s variable interest entities prior to this sale
(“Subsidiaries Sale”).
As a result of the Second Share Exchange and the Subsidiaries
Sale, the Company currently operates its business solely through its wholly-owned subsidiary Energetic Mind, which is the sole
shareholder of Ricofliz, which engages its business through its wholly-owned subsidiary Wuhan Newport.
On January 13, 2016, Company filed a Certificate of
Amendment to its Articles of Incorporation (the “Amendment”) with the Secretary of the State of the State of Nevada,
changing its name from “Kirin International Holding, Inc.” to “Yangtze River Development Limited”. Effective
January 22, 2016, Company changed its stock symbol from “KIRI” to “YERR”.
The Company, by and among Armada Enterprises GP (“Armada”) and Wight International
Construction, LLC (“Wight”), e
ntered into (i) a Contribution, Conveyance and
Assumption Agreement (“Contribution Agreement”) dated October 3, 2016, first and second addendums, dated October 3,
2016 and November 30, 2016, respectively, and (ii) an Amended and Restated Limited Liability Company Agreement dated November 16,
2016 (collectively with the Contribution Agreement, the (“Agreement”, whereby the Company acquired 100 million preferred
B membership units of Wight, which would ultimately convert into 100 million LP units in Armada Enterprises LP. In exchange, the
Company issued a $500 million convertible promissory note (“Note”) and 50,000,000 shares of the Company’s common
stock to Wight. As a result of the Agreement and the conversion of the Note on November 17, 2016, Wight owned 100,000,000 shares
of the Company’s common stock representing 36.73% of the Company’s voting power and the Company owned 100 million preferred
B membership units in Wight representing a 62.5% non-voting equity interest in Wight.
Under the terms of
the Agreement, at the first closing, Wight was required to provide an aggregate total of $200 million, including $50 million in
working capital and $150 million in construction funding (the “Funding”) to the Company, by January 18, 2017. Wight
did not provide the Funding on January 18, 2017 and the Company provided to Wight a “Notice of Default and Request for Cure”.
Wight proposed to provide $50 million in working capital funding on or before February 15, 2017 and secure $150 million in construction
funding on or before March 15, 2017. Wight failed to provide the $50 million in working capital funding as proposed by February
15, 2017. Therefore, the Company, on February 24, 2017 decided to terminate the Agreement for non-performance by Wight. Pursuant
to the Agreement, the termination thereof calls for the immediate return of the 100,000,000 shares of common stock issued by the
Company to Wight.
On February 27, 2017,
the Company issued a “Termination and Demand” letter to Wight which terminated the Agreement with Wight and Armada
and demanded the return of the 100,000,000 shares of common stock.
On March 1, 2017, the 100,000,000 shares of
the Company’s common stock were canceled and returned by Wight, and were subsequently returned to the Company’s treasury.
The Company reserves the right to pursue
any further legal action with respect to Armada’s and Wight’s default under the Agreement.
Organization & Subsidiaries
Upon completion of the Second Share Exchange described
above in “Corporate History”, Yangtze River Development Limited holds 100% ordinary shares of its wholly owned subsidiary,
Energetic Mind, which holds all of the share capital of Ricofeliz Capital. Ricofeliz Capital holds all of the share capital
of Wuhan Newport, a wholly foreign-owned enterprise located in Wuhan of Hubei Province in China.
The following diagram illustrates our corporate structure as
of the date of this Annual Report:
Office Complex Project
Taking into consideration the Comprehensive Bonded
Zone and Free Trade Zone status of the Logistic Center, Wuhan Newport has obtained the land use rights to own approximately 500,000
square meters of commercial lands on which Wuhan Newport will build a mixed residential and office complex of approximately 700,000
square meters. As of the date of this Annual Report, mixed-use complex totaling approximately 100,000 square meters have
been completed and there are outstanding 600,000 square meters to be constructed in three phases within the next five (5) years.
To support the office complex, a light railway from
downtown Wuhan to the complex is undergoing construction, for which the complex will be accessible by two stations along the light
railway line. In addition, an expressway along the north shore of the Yangtze River in Wuhan is currently under construction; the
completion of the highway is also expected to provide direct ground access between Wuhan city center and the Logistics Center and
cut down the commute time to only 20 minutes.
Upon completion of the construction of the office buildings, Wuhan Newport
plans to sell half of the complex while leasing out the remaining half for long-term income. It is Company’s goal to recover
the initial investment costs through sale of half of the complex and generate a stable return based on rent of the other half complex
upon completion of the project.
Transportation and Logistics Services
Taking the regional advantage of the highways, railways
and waterways in Yangluo area, Company plans to develop a shipping hub with access to all types of cargo transportation and offer
complementary services to businesses within this logistics center. The Company intends to create an efficient, reliable and comprehensive
logistics service system by utilizing the third-party service providers with offices within the Logistics Center to provide professional
logistics services.
Company is currently constructing the port terminal
which will be the focal point of the Yangtze River Economic Belt. The Yangtze River riverbank within our properties measures 1,039
meters, where we plan to complete eight cargo berths handling ships ranging from 5,000 to 10,000 tons.
A cargo transportation railway invested by the government
has been built next to the Logistic Center. The railway is known as the Wuhan-Xinjiang-Europe (“WXE”) Railway in the
Silk Road Economic Zone as it is in the “One Belt, One Road” initiative introduced by the Chinese government. The WXE
Freight Train sets out from Wuhan to Xinjiang and finally ends in Mainland Europe. Wuhan Newport’s terminal is therefore
an important component of the “Silk Road Economic Belt” under the “One Belt, One Road” framework.
The customs facility at the Yangluo Comprehensive Bonded
Area allow cargo vessels ranging from 5,000 to 10,000 tons to set out from Shanghai downstream via the Yangtze River in order to
transport “Made in China” commodities to the Pacific Ocean and further to any other ports across the Indian Ocean.
In return transporting commodities from other countries will be shipped directly back to Wuhan and then distributed throughout
rest of the Mainland China. Aside from being situated in the Wuhan Yangluo Comprehensive Bonded Zone, Yangluo development area
is amongst the third group of China’s Free-Trade Zone (FTZ) applicants to submit FTZ applications to the State Council through
the Wuhan municipal government for approval. Approvals have so far been granted to Shanghai, Tianjin, Guangdong and Fujian. Enterprises
within the approved free-trade zones are typically entitled to a series of favorable regulations and policies that could help the
businesses grow and succeed.
Cold Chain Logistics Services
A cold chain is a temperature-controlled supply chain.
An unbroken cold chain is an uninterrupted series of storage and distribution activities which maintain a given temperature range.
It is used to help extend and ensure the shelf life of products such as fresh agricultural produce, seafood and frozen food.
Within the Logistics Center, Company will provide extensive
storage and processing services to its customers. Meanwhile, a cold chain logistics service system will be established to better
help Company’s clients’ processing needs for their frozen foods, meats and other products that need special processing
and handling. In addition, Company will offer professional services with temperature control, sorting, processing, packaging and
delivery to ensure the reliability and safety of the logistics process.
Information Platform
To adapt to the needs of modern logistics
service and meet the standards of the industry worldwide, Company will establish comprehensive automated management systems, as
well as develop an operation system, enquiry system and decision-making systems for all types of business information such as
warehouse, storage, trade, distribution and transportation, movable assets supervision and freight forwarding. Company plans to
launch an integrated and information-sharing platform geared towards the demand of its targeted markets and potential clients.
Company will establish a uniform information platform
including an internet-based logistics information portal and an e-commerce platform to provide the Company’s clients with
services such as logistics services tracking, service rating, online operation, electronic transaction, etc…. The Company
expects this information portal to be equally reliable for both service providers and their respective clients.
Company will also establish an e-commerce system based
on the logistics information portal and it will provide clients with many updated services such as online transactions, online
payments, online inquiries and business information communication. This will create a comprehensive service system and a business
model with high integration of information flow, capital flow, trade flow and goods flow.
Portside Service
Company also plans to provide incentives for companies
that specialize in IT, production of new material and high-end equipment and manufacturing companies to station nearby the Logistics
Center so that these companies can grow with the Logistics Center, leveraging each other’s specialization to serve each other’s
business needs.
Logistics Financing
Logistics financing is mainly based on using supplies
as collateral to obtain financing for supply chains to improve its overall economic efficiency. Developing an innovative logistics
financing is significant because traditionally mortgages or loans are concentrated in real estate and logistics financing provides
a lower systematic risk for lenders.
Compared to developed countries, logistics
financing is a rather new field in China with a huge market potential of about 7 trillion RMB. The driving force for logistics
financial service in western countries is mainly attributable to financial institutions as opposed to third-party private logistics
companies in China who would occasionally provide financing options.
Logistics financial services became a popular investment
vehicle among these third-party lenders. However, the business of logistics financing has become more complex for these private
lenders to handle as they will need professional service to guide them the process and thus safeguard their investments.
Even though the history of logistics financing has
been relatively short in China, the appetite for this is expected to grow as the Free Trade Zones in Shanghai, Tianjin and soon-to-be
Wuhan will likely attract more business and international financial institutions. Logistics financing not only provides the businesses
with a new alternative to meet their capital needs, but also opens a new channel for commercial banks to reach small and midsize
businesses. While interest income generated from logistics financing transaction is often an important source of income for many
multinational logistics companies, companies who are able to provide financing are often the industry leaders. Because logistics
financing can be an effective channel for the Company to reach its targeted market, our Company plans to capture this first-mover
advantage when logistics financing is still in its development stage in China.
In light of this market opportunity, Company plans
to establish and utilize e-commerce platforms to offer online booking, online dealing and online exhibiting services to provide
professional transaction services for electronic products, commodity, foods and metals. Company also plans to provide comprehensive
support services to complement logistics financing. Maritime insurance and training services will be offered within the Logistic
Center. Company plans to help its clients to raise construction capital through Build-Transfer (BT), Build-Operate-Transfer (BOT),
corporate debt and equity financing. Company also plans to collaborate and develop strategic alliances with other logistics or
cargo shipping centers around the world.
Sales and Marketing
We plan to sell its properties by forming strategic
alliances with CMST Development (Hankou) Co. Ltd. (“CMST-Hankou”), the Shanxi Chamber of Commerce in Hubei (“SCCH”)
and the Wuhan Coal Business Association (“WCBA”).
Partnership with CMST
CMST-Hankou is a regional subsidiary of the CMST Development
Co. Ltd, which is a state-owned enterprise that principally engages in the logistics and import & export businesses. CMST-Hankou’s
core business includes warehouse storage, sale and distribution of commodities, and freight forwarding. Pursuant to the Memorandum
of Understanding executed with CMST-Hankou on August 20, 2015, CMST-Hankou has agreed to transfer all of its warehouse storage
and processing division, distribution service division and other existing businesses to the premises of the Logistics Center. In
addition, CMST-Hankou has agreed to move its warehouse for steel trading business with the Shanghai Future Exchange to the Logistics
Center. In consideration, we have agreed to offer CMST-Hankou a 5% discount for all services provided within the Logistics Center,
including those within the warehouses, port terminal, and railway operating zones. In addition, CMST-Hankou has agreed to assist
the Company with the establishment of an online commodity exchange platform to provide a comprehensive support system through the
supply chain and provide necessary personnel to help with the management of the warehouse operations within the Logistics Center.
Though at a slight discount, the Company is expected to receive fees based on CMST-Hankou’s large volume of commodities that
need to be stored and use of complementary services at the warehouse facilities and operating areas, as well as rental income and/or
property sales generated from the office complex. However, the partnership is subject to the terms and conditions of the definitive
agreement between CMST-Hankou and the Company. No assurances can be provided at this point that such a definitive agreement will
be executed.
Partnership with SCCH
SCCH is a non-profit business coalition with 252 businesses
across various industries as members. Pursuant to the Memorandum of Understanding executed with SCCH on July 27, 2015, SCCH has
agreed to move its headquarters to the office complex within the Logistics Center by purchasing or leasing certain units. In consideration
of a 7% discount to the purchase price of $2,729 per square meter of our properties, approximately 50 businesses within the organization
plan to open offices in the Logistics Center and purchase at least 100,000 square meters of space within the office complex. SCCH,
on behalf of 50 businesses, also executed a letter of intent to purchase approximately 100,000 square meters of storefront. In
addition, because we expect the 50 businesses to have a total annual turnover of commodities of more than 5,000,000 tons, we have
agreed to offer members of SCCH a 5% discount for all services provided within the Logistics Center, including those within the
warehouses, port terminal, and railway operating zones. However, the partnership is subject to the terms and conditions of the
definitive agreement between SCCH and the Company. No assurances can be provided at this point that such a definitive agreement
will be executed.
Partnership with WCBA
WCBA is a non-profit business coalition with more than
300 businesses within the coal mining industry as members. Pursuant to the Memorandum of Understanding executed with WCBA on September
17, 2015, WCBA has agreed to move its headquarters to the office complex within the Logistics Center by purchasing or leasing certain
units. We have agreed to offer WCBA member businesses a 5% discount to the purchase price of $2,729 per square meter of our properties.
In addition, because we expect WCBA members to have a total annual turnover of coal-related commodities of more than 20,000,000
tons and will use the Company’s warehouse storage for at least 3,000,000 tons, we have agreed to offer members of WCBA a
5% discount for all services provided within the Logistics Center, including those within the warehouses, port terminal, and railway
operating zones. However, the partnership is subject to the terms and conditions of the definitive agreement between WCBA and the
Company. No assurances can be provided at this point that such a definitive agreement will be executed.
Market Opportunity for Logistics Finance
Logistics financing provides financial
services such as financing, clearance and insurance to support the logistics industry. It evolves as the logistics industry develops.
Not only can logistics financing services improve the service capability and increase the profitability of third party logistics
companies; it can also expand financing channels, decrease financing cost and increase the capital efficiency.
The major target clients for logistics finance services
are small and medium sized companies, which are an important sector of China’s economy and have great weight in the market.
One of the biggest hurdles in the life cycle of these small and medium sized companies is lack of cash flow, which can become the
“bottle neck” of their development and prevent progress. The need for logistics financing results from the lack of
available credit financing facilities and the difficulty of obtaining financing on the capital markets. Therefore, logistics financing
services protect against the financing problems by allowing these small and medium companies to use their raw materials and commodities
as collateral to borrow money. Logistics financing increases the liquidity of cash flow, lowers the clearance risks and improves
the efficiency of the economic operation. Upon completion of the Logistics Center, we expect to house many small and mid-size logistics
companies. The offering of logistics financing will therefore become an important component of the business, as these businesses
are expected to have financing needs as they grow their businesses.
Market Overview of Wuhan
Located in the middle reaches of the Yangtze River,
Wuhan has been regarded as the gateway to nine provinces nearby. Beijing-Guangzhou Railway and the Yangtze River converge in Wuhan
and also Beijing-Jiulong Railway and Beijing-Guangzhou Railway intersect in it, thus forming a railway network linking North China,
Southwest China, Central South China and East China. Moreover, Beijing-Zhuhai Expressway and Shanghai-Chengdu Expressway converge
in Wuhan and a high-speed railway along the Yangtze River will be completed here soon. Therefore, a “flexible multimodal
transportation system” combining expressways, high-speed railways and water transportation on the Yangtze River will give
greater prominence to Wuhan's position of strategic importance as a junction of water and land transportation in China.
Wuhan is the largest inland logistics and cargo distribution
center in China, with its service covering approximately a 400 million population in the five neighboring provinces including
Hunan, Jiangxi, Anhui, Henan and Sichuan. At present, there are over 10,000 commercial organizations, 105,000 commodity networks,
four commercial listed enterprises as well as eight comprehensive shopping centers on the list of China Top 100 Retail Shopping
Centers.
China is thoroughly implementing the strategy of coordinated
regional development, expanding domestic demand, innovation-driven development and new urbanization, and building a new economic
support belt relying on the Yangtze River. As a central city in the central region and the middle reach of the Yangtze River, and
the country’s major transportation hub and science and technology base, Wuhan faces multiple overlapping strategic opportunities.
Location, transportation, science, education, market and other advantages will be further enhanced and fully released and more
quickly transformed into development and competitive advantage.
Wuhan is a major transportation hub of
China situated at the midstream of the Yangtze River. Going west alongside the Yangtze, upstream are the cities in Chongqing,
Sichuan, Yunnan and Qinghai. Going east downstream are provinces of Hunan, Anhui and Jiangsu, as well as the cities of Nanjing
and Shanghai, until finally arriving at the sea. The railway runs north bound to Harbin, westbound to Urumqi, east bound to Shanghai
and south bound to the Shenzhen Highway and expressways that stretch in all directions ensuring easy and convenient transportation
to all provinces in China. Likewise, Wuhan is largest economic city in central China with an annual GDP beyond 1,000 billion RMB.
In 2015, the China State Council introduced and implemented the Midstream Yangtze River City Group Development Plan headed by
Wuhan. In fact, the city was once called “The Oriental Chicago” by the US Harper’s Magazine back in 1918.
With the rapid development of inland water
shipping in China, logistics and port management industry has grown significantly. Wuhan is one of the major inland water ports
in China. In 2014, Wuhan government released an
Opinion On Accelerating The Establishment Of Shipping Center In The Middle
Reach Of Yangtze River
, indicated that the government will help the Wuhan shipping center to be a well-equipped, surrounding
industry developed internationally with a scaled and intelligent inland water shipping center with all port and shipping resources
highly concentrated. In the
Development Plan On Wuhan Logistics Space (2012-2020)
, Wuhan is strategically positioned as
the critical joint of the global supply chain and the logistics transportation hub and information center of China.
Wuhan has supported many logistics companies, including,
as of March 2014, 99 tier-one logistics companies, which are supported by the local government that aims to forming a multi-dimension
logistics industry in Wuhan by providing meaningful support to promising logistics companies.
However, in Wuhan, logistics for domestic trade operated
separately from that for international trade and all resources are scattered and not concentrated enough to form a well-organized
and well-managed international supply chain. It becomes very difficult for Wuhan to realize the synergy of business, logistics,
money and information. In addition, a majority of the current logistics companies in Wuhan focus on traditional cargo transportation
and storage services. Therefore, there exists an opportunity for an efficient, comprehensive and modern logistics service center
to facilitate the channel of both regional and global logistics.
Competitive Advantages
The following factors reflect the Company’s advantages over the company’s
competitors:
|
●
|
Experienced Logistics Management Team.
We have a professional team with significant experience in logistics management. Members of the Company’s team have had work experience with well-known logistics management companies in different cities. In addition, the management members are well educated with degrees from top universities such as Huazhong University of Science and Technology, Wuhan University, University of British Columbia and the Chinese Academy of Social Sciences.
|
|
●
|
Encouraging Policy Environment.
Under China’s latest “One Belt, One Road” initiative, the Company is strategically positioned in the anticipated “Pilot Free Trade Zone” of the Wuhan Port, a crucial trading window between China, the Middle East and Europe. In May 2015, the China State Council approved the nation’s economic strategic plan, the Vigorous Development Plan of Yangtze River Economic Belt. The Yangtze River Economic Belt has sharpened the focus on the Wuhan New Port Yangluo Terminal, the port project that the Company is developing.
|
|
●
|
Unique Transportation Network.
Wuhan is located in the middle reaches of the Yangtze River, east facing south-eastern coastal economic developed area and west linking north-western raw material base. The distance to metropolitan cities, such as Beijing, Shanghai, Hong Kong and Chongqing are within 1,200 kilometers. As a central city on mainland China, Wuhan is capable of reaching over 30 provinces like Yunnan Province, Henan Province, Sichuan Province, Shanxi Province, Jiangxi Province and Hunan Province and 600 cities and counties in China.
|
|
●
|
Highway:
the Logistics Center is in close proximity to the Beijing-Zhuhai expressway, the Shanghai-Chengdu Expressway, and the Jiangbei Expressway.
|
|
●
|
Waterway:
the project adjacent to the Yangluo deep-water port, has eight 5,000-ton berths, directly leading to Jianghai. Yangluo Port is the largest national shipping port in Central China and the largest container port in the upper reaches of the Yangtze River. We will be strategically located for international procurement, distribution and delivery.
|
|
●
|
Railway:
through Chinese commodity freight logistics Beijing-Guangzhou, Beijing-Kowloon Railway, close to Beijing-Guangzhou railway extension line, special railway lines offer direct access to the center of the Wuhan Yangtze River Newport Logistics Center, through Jiangbei railway- Xianglushan station connects all of the domestic railway freight stations, and through the construction of the "Chinese new Europe" railway through the Continent.
|
|
●
|
Airport:
30 kilometers from the Wuhan Tianhe airport.
|
|
●
|
Light-rail transit:
by the year 2018, two light rail stations are expected to be completed next to the Logistics Center, cutting the commute to downtown Wuhan to only 20 minutes.
|
|
●
|
Jiangbei Expressway:
after the completion of Jiangbei Expressway, commute by car from downtown Wuhan to the Logistics Centers is expected to be only about 20 minutes.
|
The following map shows the location of the Wuhan Newport Logistics Center and surrounding
transportation network:
Employees
As of the date of this Report, we have a total of 87
employees, including our executive officers.
Our employees are not represented by any
collective bargaining agreement and we have never experienced a work stoppage. We believe we have good relations with our employees.
Where You Can Find More Information
We are subject to the reporting obligations
of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These obligations include filing an annual
report under cover of Form 10-K, with audited financial statements, unaudited quarterly reports on Form 10-Q and the requisite
proxy statements with regard to annual stockholder meetings. The public may read and copy any materials the Company files with
the Securities and Exchange Commission (the “SEC”) at the SEC’s Public Reference Room at 100 F Street, NE, Washington,
DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0030.
The SEC maintains an Internet site (http://www.sec.gov) that contains reports, proxy and information statements and other information
regarding issuers that file electronically with the SEC.
Item 1A.
Risk Factors.
See Explanatory Note.
Item 1B.
Unresolved Staff Comments.
See Explanatory Note.
Item 2.
Properties.
Our corporate headquarters is located at 183 Broadway,
5
th
Floor, New York, NY 10007, for which we currently pay a rent of 6,000.00 USD per month for our lease. The lease
originally terminates on April 15, 2017 and we have requested an extension to May 14, 2017. We will be moving into a new office
premise in New York City.
As of the date hereof, we have completed
the construction of seven commercial office buildings since 2010, occupying 92,755.8 square meters of space, including our sales
and welcome center.
The following chart illustrates the properties we currently
have the land use rights to in Wuhan, Hubei Province, China. We do not have ownership over such properties.
Certification
Number
of Land Use Right
|
|
Location
|
|
Purpose of Use
|
|
Area (
㎡
)
|
|
|
Termination
Date
|
Wu Xin Guo Yong (2008)
Di Zhuan No. 029
|
|
South of Han Shi Road, Wuhan Yangluo Economic Development Zone, Hubei Province, PRC
|
|
Commercial
|
|
|
9,802.67
|
|
|
August 30, 2048
|
Wu Xin Guo Yong (2008)
Di Zhuan No. 030
|
|
South of Han Shi Road, Wuhan Yangluo Economic Development Zone, Hubei Province, PRC
|
|
Commercial
|
|
|
59,308.09
|
|
|
August 30, 2048
|
Wu Xin Guo Yong (2008)
Di Zhuan No. 031
|
|
South of Han Shi Road, Wuhan Yangluo Economic Development Zone, Hubei Province, PRC
|
|
Commercial
|
|
|
79,178.94
|
|
|
August 30, 2048
|
Wu Xin Guo Yong (2008)
Di Zhuan No. 032
|
|
South of Han Shi Road, Wuhan Yangluo Economic Development Zone, Hubei Province, PRC
|
|
Commercial
|
|
|
87,108.30
|
|
|
August 30, 2048
|
Wu Xin Guo Yong (2009)
Di Zhuan No. 005
|
|
South of Han Shi Road, Wuhan Yangluo Economic Development Zone, Hubei Province, PRC
|
|
Commercial
|
|
|
176,853.70
|
|
|
August 30, 2048
|
Wu Xin Guo Yong (2009)
Di Zhuan No. 006
|
|
South of Han Shi Road, Wuhan Yangluo Economic Development Zone, Hubei Province, PRC
|
|
Commercial
|
|
|
103,304.49
|
|
|
August 30, 2048
|
The following chart illustrates the properties we currently
lease in Wuhan, Hubei Province, PRC and New York, United States. We do not have ownership over such properties.
Name
of the Property
|
|
Location
|
|
Purpose
of Use
|
|
Area
(㎡)
|
|
|
Duration
Date
|
Land
Lease No. HZ20150427 (1)
|
|
Chunfeng
Village, Yangluo Neighborhood, Wuhan, Hubei Province, PRC
|
|
Commercial
|
|
|
1,214,654.52
|
|
|
April
26, 2035
|
New York Office Premise
|
|
183 Broadway, New
York, NY 10007
|
|
Commercial
|
|
|
Suite
5
|
|
|
April 15, 2017
|
(1)
|
On October 8, 2016, we entered an amendment to the Land Lease No. HZ20150427 Agreement (“Amendment”) that was executed
on April 27, 2015 between the Company and Chunfeng Villagers Committee at the Yangluo Neighborhood Office in Xinzhou District,
Wuhan (“CVC”). We agreed to make an advance payment of the first year rent to CVC (“First Year Rent”),
upon the earlier of the following date or event to occur: (i) June 3rd, 2017; or (ii) within 5 days after the Company’s
port terminal obtains approval from the government. The term of such land lease is 20 years from the date of CVC’s receipt
of the First Year Rent.
|
Item 3. Legal Proceedings
We are currently not involved in any litigation that we believe could
have a materially adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry
or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the
knowledge of the executive officers of our Company or any of our subsidiaries, threatened against or affecting our Company, our
common stock, any of our subsidiaries or of our Company’s or our Company’s subsidiaries’ officers or directors
in their capacities as such, in which an adverse decision could have a material adverse effect.
Item 4.
Mine Safety Disclosures
Not Applicable.
PART II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases Of Equity Securities.
Market Information
Our common stock trades on the OTC Markets
under the symbol “YERR”. The OTC Markets is a quotation service that displays real-time quotes, last-sale
prices, and volume information in over-the-counter (“OTC”) equity securities. An OTC Markets equity security generally
is any equity that is not listed or traded on a national securities exchange. We have applied to list our common stock
on the NASDAQ Global Select, but we cannot assure you that our application will be approved.
Price
Range of Common Stock
The following table shows, for the periods indicated,
the high and low bid prices per share of our common stock as reported by the OTC Markets’ quotation service. These
bid prices represent prices quoted by broker-dealers on the OTC Markets quotation service. The quotations reflect inter-dealer
prices, without retail mark-up, mark-down or commissions, and may not represent actual transactions.
|
|
Fiscal Year 2016
|
|
|
|
High
|
|
|
Low
|
|
|
|
|
|
|
|
|
First Quarter (January 1 - March 31)
|
|
$
|
6.15
|
|
|
$
|
3.70
|
|
Second Quarter (April 1 - June 30)
|
|
$
|
7.50
|
|
|
$
|
3.80
|
|
Third Quarter (July 1 - September 30)
|
|
$
|
5.50
|
|
|
$
|
3.50
|
|
Fourth Quarter (October 1 - December 31)
|
|
$
|
6.40
|
|
|
$
|
3.50
|
|
|
|
Fiscal Year 2015
|
|
|
|
High
|
|
|
Low
|
|
|
|
|
|
|
|
|
First Quarter (January 1 - March 31)
|
|
$
|
0.45
|
|
|
$
|
0.07
|
|
Second Quarter (April 1 - June 30)
|
|
$
|
1.90
|
|
|
$
|
0.25
|
|
Third Quarter (July 1 - September 30)
|
|
$
|
3.20
|
|
|
$
|
1.12
|
|
Fourth Quarter (October 1 - December 31)
|
|
$
|
8.40
|
|
|
$
|
1.84
|
|
Holders
As of March 8, 2017, there were 60 holders
of record of our common stock. Because shares of the Company’s common stock are held by depositaries, brokers and
other nominees, the number of beneficial holders of the Company’s shares is substantially larger than the number of stockholders
of record.
Dividends
We have never declared or paid a cash dividend. Any
future decisions regarding dividends will be made by our Board of Directors. We currently intend to retain and use any future earnings
for the development and expansion of our business and do not anticipate paying any cash dividends in the foreseeable future. Our
Board of Directors has complete discretion on whether to pay dividends. Even if our Board of Directors decides to pay dividends,
the form, frequency and amount will depend upon our future operations and earnings, capital requirements and surplus, general financial
condition, contractual restrictions and other factors that the Board of Directors may deem relevant.
Securities
Authorized for Issuance under Equity Compensation Plan
In order to compensate our officers, directors, employees
and/or consultants, on February 23, 2016, our Board of Directors approved and stockholders ratified by consent the 2016 Stock Incentive
Plan (the “Plan”). The Plan has a total of 10,000,000 shares reserved for issuance.
Under the Plan, an eligible person in the Company’s
service may acquire a proprietary interest in the Company in the form of shares or an option to purchase shares of the Company’s
common stock.
There were no issuances under the Plan during the year ended December 31, 2016.
Rule 10B-18 Transactions
During the years ended December 31, 2016 and 2015,
there were no repurchases of the Company’s common stock by the Company.
Item 6.
Selected Financial Data.
See Explanatory Note.
Item 7.
Management’s Discussion and Analysis of Financial Conditions and Results of Operations.
THE FOLLOWING DISCUSSION OF OUR PLAN OF
OPERATION AND RESULTS OF OPERATIONS SHOULD BE READ IN CONJUNCTION WITH THE FINANCIAL STATEMENTS AND RELATED NOTES TO THE FINANCIAL
STATEMENTS INCLUDED ELSEWHERE IN THIS ANNUAL REPORT. THIS DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS THAT RELATE TO FUTURE
EVENTS OR OUR FUTURE FINANCIAL PERFORMANCE. THESE STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS
THAT MAY CAUSE OUR ACTUAL RESULTS, LEVELS OF ACTIVITY, PERFORMANCE OR ACHIEVEMENTS TO BE MATERIALLY DIFFERENT FROM ANY FUTURE
RESULTS, LEVELS OF ACTIVITY, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY THESE FORWARD-LOOKING STATEMENTS. THESE RISKS
AND OTHER FACTORS INCLUDE, AMONG OTHERS, THOSE LISTED UNDER “FORWARD-LOOKING STATEMENTS” AND THOSE INCLUDED ELSEWHERE
IN THIS ANNUAL REPORT.
Overview
Yangtze River Development Limited is a Nevada corporation
that operates through its wholly-owned subsidiary Energetic Mind Limited, a British Virgin Islands company, which holds 100% of
the capital stock of Ricofeliz Capital (HK) Ltd., a Hong Kong company that holds 100% of the capital stock of Wuhan Yangtze River
Newport Logistics Co., Ltd., a wholly foreign-owned enterprise formed under the laws of the People’s Republic of China that
primarily engages in the business of real estate and infrastructural development with a port Logistics Center located in Wuhan,
Hubei Province of China. Situated in the middle reaches of the Yangtze River, Wuhan Newport is a large infrastructure development
project implemented under China's latest "One Belt One Road" initiative and is believed to be strategically positioned
in the anticipated "Pilot Free Trade Zone" of the Wuhan Port, a crucial trading window among China, the Middle East and
Europe. To be fully developed upon completion, within the Logistics Center, there will be six operating zones: including port operation
area, warehouse and distribution area, cold chain logistics area, rail cargo loading area, exhibition area and business related
area. The logistics center is also expected to provide a number of shipping berths for cargo ships of various sizes. Wuhan Newport
is expected to provide domestic and foreign businesses a direct access to the Pilot Free Trade Zone in Wuhan. The project will
include commercial buildings, professional logistic supply chain centers, direct access to the Yangtze River, Wuhan-Xinjiang-Europe
Railway and ground transportation, storage and processing centers, and IT supporting services, among others.
Plan of Operation
Our Logistics Center is an extensive complex located
in Wuhan, the capital of the Hubei Province of China, a major transportation hub city with access to numerous railways, roads and
expressways passing through the city and connecting to major cities in China, as well as other international centers of commerce
and business.
The Logistics Center is expected to occupy approximately
1,918,000 square meters, for which the construction and development are expected to be completed in three phases in three years
and reach its target maximum annual profit by the end of 2021 assuming the entire funding required for construction of the Logistics
Center of $1.03 billion is in place by 2020 and the Logistics Center is in operation according to our business plan. The following
table illustrates the timeframe of our investment and construction progress.
Time
|
|
Phase of
Investment/Construction
|
|
Percentage of Total
Anticipated
Investment/
Construction (1)
|
|
|
Production
Capacity (2)
|
|
1
st
Year (2017)
|
|
1
st
Phase
|
|
|
40
|
%
|
|
|
30
|
%
|
2
nd
Year (2018)
|
|
2
nd
Phase
|
|
|
70
|
%
|
|
|
40
|
%
|
3
rd
Year (2019)
|
|
3
rd
Phase
|
|
|
100
|
%
|
|
|
60
|
%
|
4
th
Year (2020)
|
|
Completed
|
|
|
100
|
%
|
|
|
75
|
%
|
5
th
Year (2021)
|
|
Completed
|
|
|
100
|
%
|
|
|
100
|
%
|
(1)
|
The percentage of construction in a certain phase reflects the anticipated contribution of the investment
in such particular phase. For example, contribution of 40% of the total investment in Phase 1 will lead to construction of 40%
of total value of the Wuhan Project.
|
(2)
|
The percentage of Production Capacity shows the fraction of the target maximum annual profit to be earned under the full operation of the Wuhan Project. We target to reach its maximum annual profit by the end of 2021 assuming the entire funding required for construction of the Logistics Center of $1.03 billion is in place by 2020 and the Logistics Center is in operation according to our business plan.
|
The Logistics Center is located within the Wuhan Newport
Yangluo Port, on the upper stream of the Yangtze River, and close to the northern base of Wuhan Iron and Steel, China's first mega-sized
iron and steel production complex. The Logistics Center is expected to include a port terminal that will be located approximately
26.5km from the Wuhan Guan and 5.5km from the Yangluo Yangtze River Bridge. The operation area of the port is expected to consist
of a riverbank of 1,039 meters with eight 5,000-to-10,000-ton berths, two of which are multi-purpose berths and the other six are
general cargo berths. It is designed to be able to handle up to 5,000,000 tons of cargo annually, including up to 100,000 TEU for
annual container throughput (including 20,000 TEU in freezers areas), 1,000,000 tons of iron and steel and 3,000,000 tons of general
cargo.
Within the Logistics Center, functional
areas will be divided into six operating zones: a port operation area, a warehouse and distribution area, a cold chain supply
logistics area, a rail cargo loading area, an exhibition area and a business related area. The Logistics Center will also be complemented
with container storage areas, multi-functional areas, general storage areas, multi-functional warehouse and infrastructural development,
including new roads, gas stations, parking areas, gas and water pipes, electricity lines and all other facilities and equipment
to operate the Logistics Center.
Aside from being situated in the Wuhan Yangluo Comprehensive
Bonded Zone, the Yangluo development area is amongst the third group of China’s Pilot Free Trade Zone (FTZ) applicants to
submit FTZ applications to the State Council. As of the date of this prospectus, approvals have been granted to Shanghai, Tianjin,
Guangdong and Fujian. Enterprises within the approved free-trade zones are typically entitled to a series of favorable regulations
and policies that could help the businesses grow and succeed. However, we can provide no assurance at this point that the FTZ application
will in fact be approved.
Wuhan Newport has signed
a twenty-year lease agreement, the maximum number of years permitted by the applicable PRC laws, and with rights to renew at its
sole discretion, effective April 27, 2015 to lease approximately 1,200,000 square meters of land for building logistics warehouses
in support of the Logistics Center. The warehouses are expected to comprise of port terminal zones, warehouse logistics zones,
cold chain supply zones and railroad loading and unloading zones. The warehouses will connect the port terminal along the Yangtze
River and the railway leading to Europe, satisfying the requirement of China’s latest “One Belt, One Road” initiative.
It will also be able to support large logistics companies in Wuhan and other nearby provinces, which will rent the warehouses,
terminals and offices within the Logistics Center
Factors Affecting our Operating Results
Growth of China’s Economy
.
We operate and derive all of our revenue from operations in China. Economic conditions in China, therefore, affect our operations,
including the demand for our properties and services and the availability and prices of land maintenance among other expenses.
China has experienced significant economic growth with recorded Gross Domestic Product growth rates at 7.4% in 2014, 6.9% in 2015
and 6.7% in 2016. China is expected to experience continued growth in all areas of investment and consumption. However,
if the Chinese economy were to become significantly affected by a negative stimulus, China’s growth rate would likely to
fall and our revenue could correspondingly decline.
Government Regulations.
Our business
and results of operations are subject to PRC government policies and regulations regarding the following:
|
●
|
Land Use Right
— According to the Land Administration Law of the PRC and Interim Regulations of the People’s Republic of China Concerning the Assignment and Transfer of the Right to the Use of the State-owned Land in the Urban Areas, individuals and companies are permitted to acquire rights to use urban land or land use rights for specific purposes, including residential, industrial and commercial purposes. We acquire land use rights from local governments and/or other entities for development of residential and commercial real estate projects. We do not have ownership over these lands.
|
|
|
|
|
●
|
Land Development
— According to the Urban Real Estate Development and Operation Administration Regulation, the Urban Real Estate Development and Operation Administration Rules of Hebei Province promulgated by the government of the Hebei Province, and the Real Estate Development Enterprise Qualification Administration Regulation, a real estate development enterprise shall obtain a Real Estate Development Enterprise Qualification Certificate. We obtained the related certificates and seek to ensure that each phase of our projects complies with our certificates.
|
|
|
|
|
●
|
Project Financing
— According to the Land Administration Law and the Property Law of the PRC, the land use rights, residential housing and other buildings still in process of construction may be pledged and mortgaged. From time to time, we pledge and mortgage our land use rights and real properties to lenders in order to obtain project financing.
|
Interest Rate and Inflation Challenges.
We
are subject to market risks due to fluctuations in interest rates and refinancing of mid-term debt. Higher interest rates may also
affect our revenues, gross profits and our ability to raise and service debt and to finance our developments. Inflation could result
in increases in the price of raw materials and labor costs. We do not believe that inflation or deflation has affected
our business materially.
Acquisitions of Land Use Rights and Associated
Costs
.
We acquire land use rights for development through the governmental auction process and by obtaining land use rights
permits from third parties through negotiation, acquisition of entities, co-development or other joint venture arrangements. Our
ability to secure sufficient financing for land use rights acquisitions and property development depends on internal cash flows
in addition to lenders’ perceptions of our credit reliability, market conditions in the capital markets, investors’
perception of our securities, the PRC economy and the PRC government regulations that affect the availability and cost of financing
real estate companies or property purchasers.
Critical Accounting Estimates
As discussed in Part II, Item 7, Management’s
Discussion and Analysis of Financial Condition and Results of Operations, of our Annual Report on Form 10-K for the fiscal year
ended December 31, 2016, we consider our estimates on revenue recognition, impairment of long-lived assets, and real estate property
refunds and compensation payables to be the most critical in understanding the judgments that are involved in preparing our consolidated
financial statements. There have been no significant changes to these estimates in the year ended December 31, 2016.
Results of Operations
Comparison of Years Ended December 31, 2016 and 2015
The following table sets forth
the results of our operations for the periods indicated in U.S. dollars
|
|
For the
years ended
December 31
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
-
|
|
|
$
|
-
|
|
Costs of revenue
|
|
|
-
|
|
|
|
-
|
|
Gross profit
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
Selling expenses
|
|
$
|
2,348
|
|
|
$
|
11,577
|
|
General and administrative expenses
|
|
|
5,446,175
|
|
|
|
4,547,646
|
|
Total operating expenses
|
|
|
5,448,523
|
|
|
|
4,559,223
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(5,448,523
|
)
|
|
|
(4,559,223
|
)
|
|
|
|
|
|
|
|
|
|
Other expenses
|
|
|
|
|
|
|
|
|
Other income
|
|
|
3,587
|
|
|
|
868
|
|
Other expenses
|
|
|
(174
|
)
|
|
|
(3,231
|
)
|
Interest income
|
|
|
229
|
|
|
|
55
|
|
Interest expenses
|
|
|
(8,424,794
|
)
|
|
|
(3,199,031
|
)
|
Total other expenses
|
|
|
(8,421,152
|
)
|
|
|
(3,201,339
|
)
|
|
|
|
|
|
|
|
|
|
Loss before income taxes
|
|
|
(13,869,675
|
)
|
|
|
(7,760,562
|
)
|
Income taxes expense
|
|
|
1,143,595
|
|
|
|
1,378,700
|
|
Net loss
|
|
$
|
(12,726,080
|
)
|
|
$
|
(6,381,862
|
)
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments
|
|
|
(19,227,596
|
)
|
|
|
(6,649,917
|
)
|
Comprehensive loss
|
|
$
|
(31,953,676
|
)
|
|
$
|
(13,031,779
|
)
|
|
|
|
|
|
|
|
|
|
Loss per share - basic and diluted
|
|
$
|
(0.07
|
)
|
|
$
|
(0.04
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding - basic and diluted
|
|
|
177,459,678
|
|
|
|
151,682,554
|
|
Revenue.
We did not generate any revenue from the sales of real
estate property for the years ended December 31, 2016 and 2015. In addition, since our Logistics Center is still in its development
stage and therefore is not yet in operation, we have not started providing any logistics service within our port terminal and have
not generated any sales from providing such services.
Cost of Revenue.
For the years ended December 31, 2016 and 2015, our
cost of goods sold was $0, respectively.
Gross Profit.
Our gross margin was $0 for the years ended December
31, 2016 and 2015, respectively.
Selling expenses.
Selling expenses were $2,348 for
the year ended December 31, 2016, compared to $11,577 for the year ended December 31, 2015, a decrease of $9,229. The decrease
is primarily due to the decrease of marketing expenses.
General and administrative expenses
.
Our general and administrative expenses
consist of salaries, office expenses, utilities, business travel, amortization expenses (including legal expenses, accounting
expenses and other professional service expenses) and stock compensation. General and administrative expenses were $5,446,175 for
the year ended December 31, 2016, compared to $4,547,646 for the year ended December 31, 2015, an increase of $898,529.
The significant increase is primarily due to the increase of expenses related to professional services.
Loss from operations.
Operating loss was $5,448,523 for the
year ended December 31, 2016, compared to operating loss of $4,559,223 for the year ended December 31, 2015, an increase of $889,300.
The significant increase is primarily due to the increase of operations expenses relating to general and administrative expenses.
Other expenses.
Other expenses were $8,421,152 for
the year ended December 31, 2016, compared to $3,201,339 for the year ended December 31, 2015. The significant increase in
other expenses is mainly attributable to the interest of convertible bond issued on December 19, 2015. Our interest income
and expenses were $229 and $8,424,794, respectively, for the year ended December 31, 2016, compared to interest income and
expenses of $55 and $3,199,031, respectively, for year ended December 31, 2015. Our other income and expenses were $3,587 and
$174, respectively, for the year ended December 31, 2016, compared to other income and expenses of $868 and $3,231,
respectively, for the year ended December 31, 2015.
Income tax.
We received an income tax benefit of $1,143,595
for the year ended December 31, 2016, compared to $1,378,700 for the year ended December 31, 2015. The slight decrease is primarily
due to the decrease of net loss incurred from Wuhan Newport.
Net loss.
Our net loss from operations for the year ended December 31, 2016 was $12,726,080, compared to net loss of
$6,381,862 for the year ended December 31, 2015, an increase in net loss of $6,344,218. This increase is primarily due to significant
increase is primarily due to the increase of expenses related to professional services, the increase of operations expenses relating
to general and administrative expenses, and the interest of convertible bond issued on December 19, 2015.
Foreign currency translation.
Our consolidated financial statements are expressed
in U.S. dollars but the functional currency of our operating subsidiary is RMB. Results of operations and cash flows are translated
at average exchange rates during the period, assets and liabilities are translated at the unified exchange rate at the end of the
period and equity is translated at historical exchange rates. Translation adjustments resulting from the process of translating
the financial statements denominated in RMB into U.S. dollars are included in determining comprehensive income. Our foreign currency
translation loss for the year ended December 31, 2016 was $19,227,596, compared to a foreign currency translation loss of $6,649,917
for the year ended December 31, 2015, an increase of $12,577,679. The significant decrease of foreign currency translation is mainly
attributable to the depreciation of RMB against U.S. dollars.
Net loss available to common stockholders.
Net loss available to our common stockholders was $0.07
per share, for the year ended December 31, 2016, compared to net loss of $0.04 per share for the year ended December 31, 2015.
Liquidity and Capital Resources
The following table sets forth a summary of our cash flows for the years
indicated:
|
|
Years Ended
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
Net Cash Used in Operating Activities
|
|
$
|
(2,135,205
|
)
|
|
$
|
(4,735,142
|
)
|
Net Cash (Used in) Provided by Investing Activities
|
|
$
|
(1,851
|
)
|
|
$
|
494,179
|
|
Net Cash Provided by Financing Activities
|
|
$
|
1,688,769
|
|
|
$
|
4,698,162
|
|
We had a balance of cash and cash equivalents of $63,092
as of December 31, 2016. We have historically funded our working capital needs through advance payments from customers, bank borrowings,
and capital from stockholders. Our working capital requirements are influenced by the state and level of our operations, and the
timing of capital needed for projects.
Operating Activities
.
Net cash used in
operating activities was $2,135,205 for the year ended December 31, 2016, compared to net cash used in operating activities of
$4,735,142 for the year ended December 31, 2015, a decrease of $2,599,937. The decrease in net cash used in operating activities
was primarily contributed by the following factors:
|
●
|
Share-based compensation expense contributed $2,014,664 cash inflow for the year ended December 31, 2016. In the same period of 2015, share-based compensation expense contributed $1,808,867 cash inflow, which led to a decrease of $205,797 in net cash outflow.
|
|
|
|
|
●
|
Changes in real estate properties and land lots under development provided $367,826 cash outflow for the year ended December 31, 2016, compared to changes in real estate properties and land lots under development contributed $778,977 cash outflow in the same period of 2015, which led to a decrease of $411,151 in net cash outflow.
|
|
|
|
|
●
|
Changes in accounts payable provided $7,553 cash outflow for the year ended December 31, 2016, compared to $nil cash outflow for the year ended December 31, 2015, which lead to an increase of $7,553 in net cash outflow from operating activities.
|
|
●
|
Changes in other payables and accrued liabilities provided $8,559,773 cash inflow for the year ended December 31, 2016, compared other payables and accrued liabilities contributed $2,257,051 cash inflow for the year ended December 31, 2015, which led to a decrease of $6,302,722 in net cash outflow.
|
|
|
|
|
●
|
We have net loss of $12,726,080 for the year ended December 31, 2016, compared to net loss of $6,381,862 for the year ended December 31, 2015, which led to an increase of $6,344,218 in net cash outflow.
|
Investing Activities.
Net
cash used in investing activities was $1,851 for the year ended December 31, 2016, compared to $494,179 provided by investing
activities for the year ended December 31, 2015, representing an increase of $496,030 in cash outflow. This increase is primarily
due to the effect of share exchange.
Financing Activities
.
Net cash
provided by financing activities was $1,688,769 for the year ended December 31, 2016, compared to net cash of $4,698,162 provided
by financing activities for the year ended December 31, 2015, representing a decrease of $3,009,393 in cash inflow. The decrease
was primarily due to advances of $2,201,144 from related parties in the year ended December 31, 2016, compared to $4,874,761 for
the year ended December 31, 2015.
As shown in our financial statements, we have negative
cash flows from operations, sustained recurring losses for a number of years and currently we are not generating revenues. Over
the past years, the Company has been funded through a combination of bank loans and advances from shareholders. On January 29,
2016, we received an undertaking commitment letter provided by our majority shareholder who is willing to provide sufficient funding
on an as-needed basis. In addition, the Company plans to dispose of the existing developed real estate properties with market value
of approximately $42 million when the Company needs cash flows. The Company believes that, as a result of these, it currently has
sufficient cash and financing commitments to meet its funding requirements for a reasonable period of time.
Firm
Commitment Offering
The
Company has entered into an investment banking agreement with Boustead Securities, LLC., who is acting as representative of the
underwriters of a $40,000,000 firm commitment offering for the Company. The underwriters will be committed severally to purchase
all of the shares of common stock offered by us. The obligations of the underwriters may be terminated upon the occurrence of
certain events to be specified in the underwriting agreement. Furthermore, pursuant to the proposed underwriting agreement, the
underwriters’ several obligations will be subject to customary conditions, representations and warranties contained in the
underwriting agreement, such as receipt by the underwriters of officers’ certificates and legal opinions. We have agreed
to indemnify the underwriters against specified liabilities, including liabilities under the Securities Act, and to contribute
to payments the underwriters may be required to make in respect thereof. The underwriters propose to offer the shares of common
stock offered by us to the public at the registered direct offering price to be determined. There is no assurance that this offering
will close or that the Company will receive the $40,000,000.
Off-Balance Sheet Arrangements
On January 29, 2016, we received an undertaking commitment
letter provided by the our majority shareholder who is willing to provide sufficient funding on an as-needed basis. We believe
that the financial commitment provided by our majority shareholder could provide our company with sufficient capital resources
to meet our capital needs for a reasonable period of time.
Critical Accounting Policies
We prepare our consolidated financial statements in
accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements
require the use of estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent
assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting
period. Our management periodically evaluates the estimates and judgments made. Management bases its estimates and judgments on
historical experience and on various factors that are believed to be reasonable under the circumstances. Actual results may differ
from these estimates as a result of different assumptions or conditions.
The methods, estimates, and judgment we use in applying
our most critical accounting policies have a significant impact on the results we report in our financial statements. The SEC has
defined “critical accounting policies” as those accounting policies that are most important to the portrayal of our
financial condition and results, and require us to make our most difficult and subjective judgments, often as a result of the need
to make estimates of matters that are inherently uncertain. Based upon this definition, our most critical estimates relate to the
fair value of warrant liabilities, impairment of long-lived assets, commitments and contingencies, and revenue recognition. We
also have other key accounting estimates and policies, but we believe that these other policies either do not generally require
us to make estimates and judgments that are as difficult or as subjective, or it is less likely that they would have a material
impact on our reported results of operations for a given period. For additional information see Note 2, “Summary of Significant
Accounting Policies” in the notes to our consolidated financial statements appearing elsewhere in this report. Although we
believe that our estimates and assumptions are reasonable, they are based upon information presently available, and actual results
may differ significantly from these estimates.
Item 7A.
Quantitative and Qualitative Disclosures about Market Risk.
See Explanatory Note.
Item 8.
Financial Statements and Supplementary Data.
Reference is made to the financial statements, listed
in Item 15, which appear at pages F-1 through F-21 of this Report and which are incorporated herein by reference.
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
On May 9, 2016, Yangtze River Development Limited (the “Company”)
was informed by its independent registered accountants, Dominic K.F. Chan & Co. ("DKFC"), that DCAW (CPA) Ltd. (“DCAW”)
has succeeded from DKFC, the license to audit U.S. public company regulated by PCAOB, effective from May 1, 2016. The principals
and staff of DCAW are the same auditors and staff who were engaged on the audit of the Company while at DKFC. The engagement of
DCAW was approved by the Company’s Board of Directors on May 13, 2016.
The reports of DKFC on the
Company’s financial statements as of and for the years ended December 31, 2015 and December 31, 2014, contained no adverse
opinion or disclaimer of opinion nor was qualified or modified as to uncertainty, audit scope, or accounting principle.
During the recent fiscal years
ending ended December 31, 2015 and December 31, 2014 and the subsequent period through March 31, 2016, there have been no (i) disagreements
with DKFC, on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure,
which disagreements, if not resolved to DKFC, satisfaction, would have caused DKFC, to make reference to the subject matter of
the disagreement(s) in connection with its reports; or (ii) reportable events as defined in Item 304(a)(1)(v) of Regulation S-K.
Neither the Company nor anyone
on behalf of the Company consulted DCAW regarding either (a) the application of accounting principles to a specified transaction,
either completed or contemplated, or the type of audit opinion that might be rendered on the financial statements of the Company,
and no written or oral advice of DCAW was provided with respect to any accounting, auditing, or financial reporting issue, or (b)
any matter that was either the subject of a disagreement of the type described in Item 304(a)(iv) of Regulation S-K or any “reportable
event described in Item 304(a)(1)(v) of Regulation S-K.
Item 9A. Controls and Procedures.
Evaluation
of Disclosure Controls and Procedures
Pursuant
to Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended (“Exchange Act”), the Company carried out
an evaluation, with the participation of the Company’s management, including the Company’s Chief Executive Officer
(“CEO”) (the Company’s principal executive officer) and Chief Financial Officer (“CFO”) (the Company’s
principal financial and accounting officer), of the effectiveness of the Company’s disclosure controls and procedures (as
defined under Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation,
the Company’s CEO and CFO concluded that the Company’s disclosure controls and procedures are effective to ensure
that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act,
is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that
such information is accumulated and communicated to the Company’s management, including the Company’s CEO and CFO,
as appropriate, to allow timely decisions regarding required disclosure.
Management's
Annual Report on Internal Control Over Financial Reporting.
The
management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting for
the Company. Our internal control system was designed to, in general, provide reasonable assurance to the Company’s management
and Board regarding the preparation and fair presentation of published financial statements, but because of its inherent limitations,
internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness
to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
Our management assessed the effectiveness
of the Company’s internal control over financial reporting as of December 31, 2016. The framework used by management in
making that assessment was the criteria set forth in the document entitled “Internal Control - Integrated Framework”
issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that assessment, our management has determined
that as of December 31, 2016, the Company’s internal control over financial reporting was effective.
Changes
in Internal Controls over Financial Reporting
There were no changes in our internal controls
over financial reporting that occurred during the fourth quarter of the fiscal year ended December 31, 2016 that has materially
affected, or is reasonably likely to materially affect, our internal control over financial reporting.
On
January 25, 2016, the Board formed and adopted charters for the Audit Committee, which consists of solely independent directors
and is chaired by Harvey Leibowitz, whom the Board believes qualifies as an “audit committee financial expert,” as
that term is defined in applicable regulations of the SEC.
Item 9B.
Other Information
None.
PART
III
Item 10.
Directors, Executive Officers and Corporate Governance.
Our directors, executive officers and key
employees as of March 8, 2017 are listed below. The number of directors is determined by our Board of Directors. All
directors hold office until the next annual meeting of the Board or until their successors have been duly elected and qualified. Officers
are elected by the Board of Directors and their terms of office are, except to the extent governed by employment contract, at
the discretion of the Board of Directors.
Directors
and Executive Officers
Name
|
|
Age
|
|
Position
|
Xiangyao Liu
|
|
45
|
|
Chief Executive Officer, President, Secretary and Chairman of the Board
|
Xin “Cindy” Zheng
|
|
38
|
|
Chief Financial Officer
|
James Stuart Coleman
|
|
60
|
|
Director
|
Zhanhuai Cheng
|
|
69
|
|
Director
|
Yanliang Wu
|
|
51
|
|
Director
|
Yu Zong
|
|
46
|
|
Director
|
Harvey Leibowitz (1) (2) (3) (4) (5) (6)
|
|
82
|
|
Independent Director
|
Zhixue Liu (2) (3) (5)
|
|
53
|
|
Independent Director
|
Tongming Wang (1) (4) (6)
|
|
57
|
|
Independent Director
|
Adam S. Goldberg (1) (2) (3) (4) (5) (6)
|
|
46
|
|
Independent Director
|
Daniel W. Heffernan (1) (2) (3) (4) (5) (6)
|
|
67
|
|
Independent Director
|
Zhihong Su (1) (2) (3) (4) (5) (6)
|
|
56
|
|
Independent Director
|
(1)
|
Member of the Audit Committee
|
(2)
|
Member of the Compensation Committee
|
(3)
|
Member of the Nomination Committee
|
(4)
|
Member of the Governance and Human Resources Committee
|
(5)
|
Member of the Board Oversight Committee
|
(6)
|
Member of the Social Media Committee
|
Xiangyao
Liu,
President, CEO, Secretary and Chairman of the Board (age 45)
Mr.
Xiangyao Liu served in the state-owned Materials Bureau of Hebei Province and was involved in steel and other logistics trading
between 1994 and 1996. From 1996 to 2003, he invested and established the Pacific Trade and Logistics in China, served as the
General Manager and engaged in the trading and logistics of steel, agricultural products and other commodities. In 2010, Mr. Liu
participated in the investment of Wuhan Renhe Group Limited, which held the Wuhan Huazhong Steel Trading Center Co., Ltd., at
that time, supervising the logistics and trading of steel. He also started to engage in financial and security investments in
Hong Kong. From November 2010 to December 2012, Mr. Liu was the deputy general manager of Wuhan Renhe Group Limited; From January
2012 to June 2015, Mr. Liu served as the Deputy General Manager of the Wuhan Huazhong Steel Trading Center Co., Ltd., which later
became the Wuhan Yangtze River Newport Logistics Co. Ltd. He supervised the transition of the steel trading renter to a residential
and commercial complex which supports the warehouses and docks, led projects to bring the Steel Trading Center into the Yangluo
Comprehensive Bonded Zone and Free Trade Area in Wuhan, supervised the feasibility study of the Wuhan Yangtze River Newport Logistics
Center and collaborated with the local government to develop the Yangluo Newport Project Plan, handling corporate structuring,
strategic planning and operations management of the company. Mr. Liu was appointed as the CEO and the Chairman of the Board of
the Company in July 2015 because of his managerial skills and expertise in the industry.
Mr.
Liu received his Bachelor’s degree in Business Management from the Hebei Institute of Finance in 1994.
Xin
“Cindy” Zheng,
Chief Financial Officer (age 38)
Ms.
Zheng joined the Company (formerly Kirin International Limited) in December 2009. From September 2010 to March 2011, she
has been employed by the Company’s finance department where she has had oversight of the Company’s accounting and
financing matters. Ms. Zheng was appointed as Chief Financial Officer in April 2011. Prior to joining the Company, Ms. Zheng
was employed as Marketing Director for both XingtaiZhongdingJiye Real Estate Development Co., Ltd., and Hebei Zhongding Real Estate
Development Co., Ltd., which through certain contractual arrangements, the Company controls. As Marketing Director, Ms. Zheng’s
responsibilities included oversight of the Company’s marketing efforts. From May 2006 to December 2009, Ms. Zheng was
employed in the Lighting Division of Philips, a Netherlands based fortune 500 company. Philips has generated approximately
$9 billion dollars in revenue in China, where she was responsible for budgeting and financial planning for the operations of Philip’s
lighting division in northern China. From April 2004 to May 2006, Ms. Zheng was employed by Mercer Consulting in China where
she engaged in management consulting and financial modeling for a variety of companies, including state and privately owned business. Ms.
Zheng graduated from the University of Bradford in the United Kingdom in February 2004 with a Master’s degree in Financial
Management. She has extensive experience in accounting and capital markets.
James
Stuart Coleman
,
Director (age 60)
Mr.
James Coleman has been the Chief Representative in the United States of Wuhan Yangtze River Newport Logistics Co., Limited since
April 2015. Mr. Coleman has also been the CEO and CFO of Dream Recovery International, Inc., a drug and alcohol rehabilitation
facility since January 2014. Mr. Coleman has also been a Partner of the Angel Capital Ltd, an angel capital investor in start-up
companies since September 2012. Since April 2006, Mr. Coleman has served as an Associate Broker at Bond New York Properties, LLC,
specializing in commercial real estate in New York. We have selected Mr. Coleman as a director because of his experience with
the capital markets in the United States.
Mr.
Coleman received his Bachelor’s degree in Arts from Allegheny College in 1978. He is also a licensed Associate Broker in
the State of New York.
Zhanhuai
Cheng,
Director (age 69)
Mr.
Zhanhuai Cheng has served as the Chief Technology Officer (“CTO”) of Wuhan Huazhong Steel Trading Center since December
2008 and is responsible for the planning and construction of the logistics warehouse, dock berths, and supporting residential
and commercial buildings. Since July 2015, after Wuhan Huangzhong Steel Trading Center restructured into Wuhan Newport, Mr. Cheng
continued serving as the CTO of Wuhan Newport. Mr. Cheng was appointed as a member of the Board in December 2015. From 2000 to
2007, Mr. Cheng was employed by the Wuhan City Port Authority Officers and was in charge of port construction planning. During
his term with the office, Mr. Cheng worked with the various ports along the Yangtze River and accumulated great experience in
port planning, wharf construction, operations and management. He helped various agencies of the Wuhan government to complete the
transformation of the water network, port construction, etc., and obtained the title of advanced workers of Wuhan City. During
his service, Mr. Cheng also directed the planning, development and construction of the Qingshan Port, Yangluo Port, Yangsi Port
and other terminals in Wuhan.
From
1993 to 2000, Mr. Cheng served as an officer of Wuhan Light Rail Construction and was in charge of resource development, project
design, tendering and construction work. During his term of office, Mr. Cheng has contributed greatly to metro line planning and
rail transit construction in Wuhan. These are recognized by the Wuhan Government with a number of honorary titles issued to him.
Mr.
Cheng has also previously worked in the Wuhan Iron and Steel Limited, focusing on the production of railway and other construction,
and port transportation projections. Mr. Cheng was also employed by the Ministry of Railways Bridge Engineering Bureau and served
as a staff analyst and later on a vice dean of an academic institute, contributing to many projects and achieving great success.
We have selected Mr. Cheng as a director because of his expertise in our industry.
Yanliang
Wu,
Director (age 51)
Mr.
Wu has served as the deputy general manager of Wuhan Huazhong Steel Trading Center since June 2010. Since July 2015, after Wuhan
Huangzhong Steel Trading Center re-structured into Wuhan Newport, Mr. Wu continued serving as the deputy general manager of Wuhan
Newport. Mr. Wu has been working for Wuhan Yangtze River Newport Logistics Co. Ltd. since 2012, and is in charge of the company's
indoor storage, outdoor yards, approval, planning and construction of warehouses, and operations management. Mr. Wu worked for
Alpha Logistics Co, Ltd. in Montreal, Canada from 1997 to 2003, where he served as the Head of Logistics and coordinated the construction
of the logistics network of the company in North America and the Pacific Rim. From 2002 to 2012, he was in charge of the company’s
business development in the logistics industry in Mainland China, as well as leading the opening of its Shanghai branch. From
1986 to 1996, Mr. Wu worked in the head office of the state-owned Wuhan Metal Materials Corporation, serving as the Minister of
Management and General Manager of Commodity Trading. During his employment, he received two accolades for his personal achievement
in 1990 and 1992. He was also certified as a senior economist in China in September 1994. We have selected Mr. Wu as a director
because of his expertise in our industry.
Mr.
Wu received his Bachelor of Sciences degree in Logistics from Huazhong University of Science and Technology in 1986.
Yu
Zong,
Director (age 46)
Mr.
Zong has served as the Deputy General Manager of Wuhan Yangtze River Newport Logistics Co. Ltd. from February 2012 to September
2015, and was in charge of the development, construction and management of the real estate. Mr. Zong became its general manager
and legal representative in October 2015. In July 2015, after Wuhan Huangzhong Steel Trading Center re-structured into Wuhan Newport,
Mr. Zong was appointed as the deputy general manager of Wuhan Newport. Mr. Zong was appointed as General Manager and Chief Representative
of Wuhan Newport in October 2015. From September 2009 to January 2012, he worked in Wuhan Dingxin Real Estate Ltd. as the Deputy
General Manager and Chief Engineer, leading the construction and management of the “Mocha Town” Phase II Development
Project. From 2007 to 2009, Mr. Zong worked in the China Railway Group Wuhan Properties Limited, as the minister of
Engineering Planning Division, and participated in a large real estate project which had a total investment of six (6) billion
RMB. From 2003 to 2006, Mr. Zong worked in Hubei Jiuding Ltd., as the Deputy General Manager and Chief Engineer and
was responsible for the construction and management of a villa project which occupied an area of 80,000 square meters and a total
construction area of 70,000 square meters. During the construction period, his duties included preliminary design, construction
report, project quality control, and compliance. From 2000 to 2002, Mr. Zong worked as the Project Manager for Pace Home Development
Inc., in Canada, providing consulting services for various types of construction projects. Mr. Zong also previously worked
in the Wuhan Institute of Architecture Design Institute. We have selected Mr. Zong as a director because of his expertise in our
industry.
Mr.
Zong obtained his bachelor’s degree in Civil Engineering in 1993 from Wuhan University. He also obtained his master’
degree in Engineering from the University of British Columbia in 2004.
Harvey
Leibowitz,
Independent Director, Chair of the Audit and Compensation Committees (age 82)
Mr.
Leibowtiz has been a director and Chair of the Audit Committee of ASTA Funding, Inc., a company listed on the NASDAQ since 2000.
Mr. Leibowitz graduated from the City University of New York - Baruch College in 1955 with a bachelor’s degree in Accounting.
Between 1955 and 1962, he was employed as a staff accountant at various accounting firms working on matters relating to audits,
taxes and write-ups. From 1962 to 1979, Mr. Leibowtiz worked at Standard Financial Corporation, which acquired Sterling National
Bank in 1965, in capacities including internal auditor and Senior Vice President in charge of commercial financing and factoring.
From 1980 to 1994, Mr. Leibowitz worked for companies such as International Paper Company, Century Factors, Inc., and Foothill
Financial Advisors, Inc., and was in charge of commercial financing involving secured loan financing. From 1994 to 1999, Mr. Leibowitz
worked for Sterling National Bank as an internal auditor and was in charge of the Commercial Finance Department. Based on Mr.
Leibowitz’s education and employment background, we have selected Mr. Leibowitz as a director and chairman of the Audit
Committee because of his expertise in accounting and finance and the Board believes that Mr. Leibowitz qualifies as a “financial
expert” as defined by the SEC rules.
Zhixue
Liu,
Independent Director (age 53)
Mr.
Liu obtained his Ph.D. in Management and is currently a professor at the School of Management of Huazhong University of Science
and Technology. Mr. Liu has been teaching as a professor at the School of Management of the Huazhong University of Science &
Technology since January 2011. Mr. Liu was appointed as a member of the Board in December 2015. Also currently the Deputy Director
of the Product Operations and Logistics Management Department, Mr. Liu is one of the main drafters of
The People’s
Republic of China National Standard - Classification and Index of Logistics Enterprises
and
The People's Republic
of China National Standard - Logistics Terminology
. He is also a member of the National Ministry of Education Logistics Specialty
Guidance Steering Committee, Board of Trustee of the National Natural Science Fund Committee Management Division, Committee of
the National Professional Commission for Certification of Logistics Specialist, Deputy Secretary General of the China Logistics
Technology Association, Executive Director of the China Society of Logistics, and Executive Director of the China Marketing Association.
Mr.
Liu obtained his bachelor’s in Logistics from Huazhong University of Science and Technology in 1986. After his graduation,
he served as an assistant, lecturer, associate professor, professor and doctoral tutor in the University, and focuses on researching
and teaching logistics management, supply chain management, international trade, international business operations and marketing.
Recently, he has published six (6) representative works, including the
Modern Logistics Handbook
, and more than forty
(40) papers in domestic and foreign mainstream journals. He also hosted and participated in academic forums on
Research on
Model of Supply Chain Logistics Management and Case Studies on China's Auto Supply Chain
and other studies initiated by the
National Natural Science Foundation. Mr. Liu has led research on the
Shandong Weifang City Logistics Development Strategy
Plan, Planning of Jiangyin Yangtze Port Integrated Logistics Zone
and
Logistics Solutions for Dongfeng Vehicles,
Study on Transition of Wuhan Iron and Logistics Transportation Companies
and a number of other logistics management topics.
Mr. Liu and his research have been awarded the Outstanding Scientific Achievement Award under China’s "Ninth Five-Year"
key scientific and technological projects, and Second Place in the National Commerce Scientific Advancement Award. We have selected
Mr. Liu as a director because of his expertise and scholarship in the industry.
Tongmin
Wang,
Independent Director (age 57)
Mr.
Wang was a chief engineer of Logistical Equipment at Wuhan Iron and Steel Limited from January 2011. Mr. Wang has worked for Wuhan
Iron and Steel Limited and Wuhan Port Terminal Foreign Trade Co., Ltd. since 2007. He has served as the deputy general manager
of the Office of Corporate Integration, Chief Administrative Officer, Director of Cargo Unloading and Chief Engineer of Logistical
Equipment. Mr. Wang worked for Wuhan Port Group from 1992 to 2007. During this period, he held positions include Deputy Administrate
Officer, Deputy Director of the Wuhan Water Company, Director of the Wuhan Port Mechanical Company, Manager of the Office of the
Corporate Integration, Director of the Cargo Unloading Division and etc. From 1981 to 1992, Mr. Wang worked for the Wuhan Port
Machinery Plant of the Ministry of Transportation in China.
Mr.
Wang possesses professional knowledge and more than three decades of experience in the management of a port. He is familiar with
the logistics industry and takes a practical approach in the organization and management of cargo loading/unloading. He is able
to utilize his expertise to solve practical problems involving the day-to-day operations at a port terminal. We have selected
Mr. Wang as a director because of his expertise in the industry.
He
received his bachelor’s degree in Mechanical Engineering from Wuhan Institute of Maritime and master’s degree in Industrial
Management from the Chinese Academy of Social Sciences in 1998.
Adam S. Goldberg,
Independent
Director, Chair of the Social Media Committee (age 46)
Mr. Goldberg is the president and founder of
Telco Experts LLC since March 2008. He served as CEO of Gemini Communications from March 1996 to March 2008. At Telco, Mr. Goldberg
obtained regulatory approval as a licensed telephone company in 21 states and manages staff of 30 telecommunication professionals
and engineers. Mr. Goldberg has extensive experience in business development, regulatory affairs, strategic planning, employee
development and project management. We have selected Mr. Goldberg as a director because of his expertise in project management
and strategic planning.
Mr. Goldberg obtained his bachelor’s
degree in Marketing and finance from University of Maryland, Robert H. Smith School of Business in 1993.
Daniel
W. Heffernan,
Independent Director Chair of the Nomination and Board Oversight Committees (age 56)
Mr.
Heffernan has served as the Principal of HRK Associates, specializing in credit enhanced finance since 1998. Mr. Heffernan was
the Principal of HRK Associates since January 2011. Mr. Heffernan was appointed as a member of the Board in December 2015. Prior
to his position at HRK, from 1973 to 1986, Mr. Heffernan served as an officer at New York Life Insurance Company. From 1986 to
1998, Mr. Heffernan was employed as an officer at Jhminer, Co. Ltd., in New York. Mr. Heffernan has more than thirty years of
financial experience in the highly specialized niche market of mitigation of risk through the use of insurance and reinsurance
related financial products. He has provided services to clients operating throughout the U.S. and in the international marketplace,
leveraging his experience in providing credit enhanced, customized financial solutions that provide a distinctive bridge to the
capital markets.
Mr.
Heffernan is actuarially trained and has previously worked for New York Life Insurance Company, where he ran the Pension Department
and supervised its two hundred eighty employees, and MINET/MIPI Brokers. While at New York Life, he consulted with a client base
in excess of 5,000 corporations and unions, providing services ranging from structuring to administration. We have selected Mr.
Heffernan as a director because of his expertise in finance.
Mr.
Daniel W. Heffernan obtained his bachelor’s degree in Theology from New York Shadowbrook Jesuit Seminary in 1972.
Zhihong
Su
,
Independent Director, Chair of the Governance and Human Resources Committee (age 56)
Mr.
Su has served as the managing partner of the Beijing Hengjun Law Firm since December 2001, practicing in areas such as securities,
litigation, general corporate and banking. Mr. Su was appointed as member of the Board in January 2016. Mr. Su started his career
as in-house counsel for China International Trust and Investment Corporation (“CITIC”) in December 1984, and was responsible
for the legal affairs of overseas investments. In January 1990, Mr. Su was sent to station at the Washington DC-based law firm
Arnold and Porter LLP as a foreign lawyer to oversee a full spectrum of legal matters of CITIC’s subsidiaries in the United
States, namely, CITIC Steel Group, CITIC Buffalo Tungsten Company, CITIC Seattle Woodland and CITIC Florida Real Estate Co. Ltd.
During his stay in Washington from 1990 to June 1996, he worked on a number of matters involving corporate and securities law.
Upon returning to China in July 1996, Mr. Su worked for the Law Offices of Jiahe as one of the founding members and as an attorney
until November 2001. We have chosen Mr. Su to serve as a director because of the perspective he brings to legal matters in China.
Mr.
Su earned his bachelor’s degree in Laws (LLB) from China University of Political Science and Law where he had taught for
a year after graduation before becoming a qualified Chinese lawyer in the same year.
Term
of Office
Our
directors are appointed for a one-year term to hold office until the next annual general meeting of our shareholders or until
removed from office in accordance with our bylaws. Our officers are appointed by our board of directors and hold office until
removed by the board.
Family
Relationships
There are no family relationships between any of our directors or
executive officers and any other directors or executive officers. None of our directors or executive officers or their respective
immediate family members or affiliates are indebted to us.
Involvement
in Certain Legal Proceedings
Except
as described below, to the best of our knowledge, none of our directors or executive officers has, during the past ten years:
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been
convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other
minor offenses);
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had
any bankruptcy petition filed by or against the business or property of the person, or of any partnership, corporation or
business association of which he was a general partner or executive officer, either at the time of the bankruptcy filing or
within two years prior to that time;
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been
subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, by any court of competent jurisdiction
or federal or state authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting, his involvement
in any type of business, securities, futures, commodities, investment, banking, savings and loan, or insurance activities,
or to be associated with persons engaged in any such activity;
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been
found by a court of competent jurisdiction in a civil action or by the Commission or the Commodity Futures Trading Commission
to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;
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been
the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently
reversed, suspended or vacated (not including any settlement of a civil proceeding among private litigants), relating to an
alleged violation of any federal or state securities or commodities law or regulation, any law or regulation respecting financial
institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement
or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or
any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or
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been
the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory
organization (as defined in Section 3(a)(26) of the Exchange Act), any registered entity (as defined in Section 1(a)(29) of
the Commodity Exchange Act), or any equivalent exchange, association, entity or organization that has disciplinary authority
over its members or persons associated with a member.
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On
December 19, 2015, James Coleman joined us as Executive Director. Prior to joining us, Mr. Coleman was the managing member and
owner of Firebird International LLC, Dream International Holdings LLC and Dream Recovery International LLC, all of which are privately
held companies engaged primarily in drug rehabilitation businesses, from January 2014 to September 2016. On September 13, 2016,
all three entities mentioned above filed voluntary petitions in the United States Bankruptcy Court for the District of Southern
Florida seeking relief under the provisions of chapter 7 of title 11 of the United States Code in order to facilitate liquidations
in these three entities.
Except
as set forth in our discussion below in “Certain Relationships and Related Transactions,” none of our directors or
executive officers has been involved in any transactions with us or any of our directors, executive officers, affiliates or associates
which are required to be disclosed pursuant to the rules and regulations of the Commission.
Committees
of the Board of Directors
On January 25, the Board formed and adopted
charters for six standing committees: Audit Committee, Compensation Committee, Nomination Committee, Governance and Human Resources
Committee, Board Oversight Committee, Social Media Committee (collectively the “Committees”). Each Committee consists
of only independent directors of the Company. The Board also adopted charter for the Regulatory, Compliance and Government Affairs
Committee, for which the charter will be implemented once the committee is formed. The Company believes that the adoption of these
charters and formation of these Committees are necessary for the implementation of effective internal control and oversight and
a significant step towards remediating any material weakness the Company currently has.
Audit Committee
The Audit Committee shall make such examinations
as are necessary to monitor the corporate financial reporting and external audits of the Company and its subsidiaries; to provide
to the Board the results of its examinations and recommendations derived therefrom; to outline to the Board improvements made,
or to be made, in internal accounting controls; to nominate independent auditor; and to provide to the Board such additional information
and materials as it may deem necessary to make the Board aware of significant financial matters requiring Board attention.
Compensation Committee
The purpose of the Compensation Committee is
to review and make recommendations to the Board regarding all forms of compensation to be provided to the executive officers and
directors of the Company, including stock compensation and loans, and all bonus and stock compensation to all employees.
Nomination Committee
The purpose of the Nomination Committee shall
be to review and make recommendations to the Board regarding matters concerning corporate governance; review the composition of
and evaluate the performance of the Board; recommend persons for election to the Board and evaluate director compensation; review
the composition of committees of the Board and recommend persons to be members of such committees; review and maintain compliance
of committee membership with applicable regulatory requirements; and review conflicts of interest of members of the Board and corporate
officers.
Governance and Human Resources Committee
The Governance and Human Resources Committee
shall be is responsible for (1) developing Company’s approach to the Board and corporate governance issues; (2) helping to
maintain an effective working relationship between the Board and management; (3) exercising, within the limits imposed by the by-laws
of the Company, by applicable laws, and by the Board, the powers of the Board for the management and direction of the affairs of
the Company during the intervals between meetings of the Board; (4) reviewing and making recommendations to the Board for the appointment
of senior executives of the Company and for considering their terms of employment; (5) reviewing succession planning, matters of
compensation; (6) recommending awards under the Company’s long term and short term incentive plans; (7) assuming the role
of administrator, whether by delegation or by statute, for the corporate-sponsored registered pension plans and the Supplementary
Executive Retirement Plan of the Company and its wholly-owned subsidiaries and any future, additional or replacement plans relating
to the plans; and (8) monitoring the investment performance of the trust funds for the plans and compliance with applicable legislation
and investment policies.
Board Oversight Committee
Board Oversight Committee shall assist the Board
Oversight Committee and the Board in the exercise of its responsibilities, particularly by defining the scope of the Committee’s
authority in respect of risk oversight matters delegated to it by the Board.
Social Media Committee
The Social Media Committee shall oversee the
social media strategy initiatives for the Company pursuant to Regulation FD. The Committee shall 1) provide compliant Regulation
FD strategic leadership for social media through the alignment of social media strategies and activities with enterprise strategic
objectives and processes; 2) establish and maintain corporate policies with respect to use of social media for both process-driven
social engagements, as well as for use of social media by employees for participating in social conversations (e.g. blogging and
Tweeting by subject matter experts); 3) prioritize social media initiatives and deliver final approvals and recommendations on
proceeding with proposed social media projects, including process, technology, and organizational project; 4) ensure open communication
between the social media department and the other functional units of the Company so as to promote collaborative strategies, planning,
and implementation.
As of March 8, 2016, the following are the respective
members of each committee.
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Audit Committee:
Harvey Leibowitz (Chair), Zhihong Su, Daniel W. Heffernan, Adam Goldberg, Tongmin Wang
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Compensation Committee:
Harvey Leibowitz (Chair), Zhihong Su, Zhixue Liu, Adam Goldberg, Daniel W. Heffernan
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Nomination Committee:
Daniel W. Heffernan (Chair), Harvey Leibowitz, Zhixue Liu, Adam Goldberg, Zhihong Su
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Governance and Human Resources Committee:
Zhihong Su (Chair), Harvey Leibowitz, Adam Goldberg, Daniel W. Heffernan, Tongmin Wang
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Board Oversight Committee:
Daniel W. Heffernan (Chair), Zhixue Liu, Harvey Leibowitz, Adam Goldberg, Zhihong Su
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Social Media Committee:
Adam Goldberg (Chair), Harvey Leibowitz, Zhihong Su, Daniel W. Heffernan, Tongmin Wang
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Corporate
Governance
The
business and affairs of the company are managed under the direction of our Board. We have conducted Board meetings regularly since
inception. Each of our directors has attended all meetings either in person or via telephone conference, or through written consent
for special meetings. In addition to the contact information in this Annual Report, the Board has adopted procedures for communications
to the officers and directors as of January 28, 2016. Each stockholder will be given specific information on how he/she can direct
communications to the officers and directors of the Company at our annual stockholders meeting. All communications from stockholders
are relayed to the members of the Board.
Board
Leadership Structure and Role in Risk Oversight
Our
Board is primarily responsible for overseeing our risk management processes. The Board receives and reviews periodic reports from
management, auditors, legal counsel, and others, as considered appropriate regarding our company’s assessment of risks.
The Board focuses on the most significant risks facing our company and our company’s general risk management strategy, and
also ensures that risks undertaken by our company are consistent with the Board’s appetite for risk. While the Board oversees
our company’s risk management, management is responsible for day-to-day risk management processes. We believe this division
of responsibilities is the most effective approach for addressing the risks facing our company and that our Board leadership structure
supports this approach.
The
audit committee, which was formed on June 28, 2016, assists our Board in its general oversight of, among other things, the company’s
policies, guidelines and related practices regarding risk assessment and risk management, including the risk of fraud. As part
of this endeavor, the audit committee reviews and assesses the company’s major financial, legal, regulatory, environmental
and similar risk exposures and the steps that management has taken to monitor and control such exposures. The audit committee
also reviews and assesses the quality and integrity of the company’s public reporting, the company’s compliance with
legal and regulatory requirements, the performance and independence of the company’s independent auditors, the performance
of the company’s internal audit department, the effectiveness of the company’s disclosure controls and procedures,
and the adequacy and effectiveness of the company’s risk management policies and related practices.
Insider Trading Policy
The
Board also adopted an insider trading policy that allows insiders to sell securities of the Company pursuant to pre-arranged trading
plans.
This
insider trading policy was put in place because effective October 23, 2000, the Securities and Exchange Commission (the “SEC”)
adopted rules related to insider trading. One of these rules, Rule 10b5-1 of the Securities Exchange Act of 1934, as amended,
provides an exemption to the insider trading rules in the form of an affirmative defense. Rule 10b5-1 recognizes the creation
of formal programs under which executives and other insiders may sell the securities of publicly traded companies on a regular
basis pursuant to written plans that are entered into at a time when the plan participants are not aware of material non-public
information and that otherwise comply with the requirements of Rule 10b5-1.
The
Board also adopted a written disclosure policy, which applies to all directors, officers and employees of the Company and its
wholly owned subsidiaries, to ensure that communications to the investing public about the Company are timely, factual and accurate
and broadly disseminated in accordance with all applicable legal and regulatory requirements.
Whistleblower Policy
The Board adopted a whistleblower procedure
that provides the Audit Committee the responsibility to ensure proper procedure of the receipt, retention, and treatment of complaints
about the Company’s accounting, internal accounting controls, or auditing matters. The Audit Committee must also provide
for confidential, anonymous submission by the Company’s employees of concerns about questionable accounting or auditing matters.
Code of Ethics
We have adopted a code of ethics as of the date
of this Annual Report that applies to our principal executive officer, principal financial officer, directors and principal accounting
officer as well as our employees. Our standards are in writing and are to be posted on our website at www.yerr.com.cn at a future
time. The following is a summation of the key points of the Code of Ethics we adopted:
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Honest and ethical conduct, including ethical handling of actual or apparent conflicts of interest between personal and professional relationships;
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Full, fair, accurate, timely, and understandable disclosure reports and documents that a small business issuer files with, or submits to, the Commission and in other public communications made by our Company;
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Full compliance with applicable government laws, rules and regulations;
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The prompt internal reporting of violations of the code to an appropriate person or persons identified in the code; and
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Accountability for adherence to the code.
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Section
16(a) Beneficial Ownership Reporting Compliance
Under
Section 16(a) of the Exchange Act, our directors and certain of our officers, and persons holding more than 10 percent of our
common stock are required to file forms reporting their beneficial ownership of our common stock and subsequent changes in that
ownership with the United States Securities and Exchange Commission.
Based solely upon a review of copies of such
forms filed on Forms 3, 4, and 5, and amendments thereto furnished to us, we believe that as of March 8, 2017, our executive officers,
directors and greater than 10 percent beneficial owners have complied on a timely basis with all Section 16(a) filing requirements.
Item 11.
Executive Compensation.
Summary
Compensation Table
The
Summary Compensation Table below sets forth information regarding the compensation awarded to or earned by the company’s
executive officers for our fiscal years ended December 31, 2016 and 2015.
Name
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Year
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Salary
($)
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Bonus
($)
|
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Securities-based
Compensation
($)
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All
other compensation
($)
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Total
($)
|
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Xiangyao Liu
|
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2016
|
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0
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-
|
|
|
|
-
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|
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-
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0
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Chief Executive Officer(1)
|
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2015
|
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0
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
0
|
|
|
|
|
|
|
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Jianfeng Guo
Former Chief Executive Officer,
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2016
|
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-
|
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|
-
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|
-
|
|
|
|
-
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|
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0
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|
Former Chairman of the Board (2)
|
|
|
2015
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Longlin Hu
|
|
|
2016
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
Former Chief Executive Officer(3)
|
|
|
2015
|
|
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37,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
37,500
|
|
|
|
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|
|
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|
|
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|
|
|
|
Xin “Cindy” Zheng
|
|
|
2016
|
|
|
|
54,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
54,000
|
|
Chief Financial Officer
|
|
|
2015
|
|
|
|
54,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
54,000
|
|
(1)
|
On
December 19, 2015, Company acquired Energetic Mind and its wholly-owned subsidiaries and in connection with that transaction,
Mr. Liu was appointed as our President, Chief Executive Officer, Secretary and Chairman of the Board. The amounts in this
table reflect compensation awarded or paid by Energetic Mind and its subsidiaries to Mr. Liu in fiscal year 2014 and 2015.
As of the date of this Annual Report, President, Chief Executive Officer, Secretary and Chairman of the Board.
|
|
|
(2)
|
Mr.
Guo was appointed as our President and Chief Executive Officer on June 1, 2015 and resigned as an executive officer and director
on December 19, 2015 as a result of the transaction describe above in (1).
|
|
|
(3)
|
Mr.
Hu resigned from all his officer and director positions as president and chief executive office of the Company and as a member
of the board of directors on June 1, 2015. Prior to his resignation, Mr. Hu served as the President and Chief Executive Officer
and a member of the Board of Directors from March 1, 2011.
|
Employment
Agreements
We have employment agreements with all of our directors and officers
except Xiangyao Liu.
Option
Grants
We
had no outstanding equity awards as of the end of fiscal year 2016.
Option
Exercises and Fiscal Year-End Option Value Table
There
were no stock options exercised during fiscal 2016 by the executive officers.
Long-Term
Incentive Plans and Awards
There
were no awards made to a named executive officer in fiscal 2016 under any long-term incentive plan.
Employment
Contracts, Termination of Employment, Change-in-Control Arrangements
We
have no other employment agreements with any of our executive officers.
Director
Compensation Table
The following table sets forth the compensation received by each
of our Directors for the year ended December 31, 2016.
Name
|
|
Fees
Earned
or Paid
in Cash
($)
|
|
|
Stock
Awards
($)
|
|
|
Option
Awards
($)
|
|
|
Non-Equity
Incentive Plan
Compensation
($)
|
|
|
Non-Qualified
Deferred
Compensation
($)
|
|
|
All Other
Compensation
($)
|
|
|
Total
($)
|
|
Xiangyao Liu
Chairman of the Board
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
James Stuart Coleman
Executive Director(1)
|
|
|
2,301
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,301
|
|
Zhanhuai Cheng
Executive Director (1)
|
|
|
789
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
789
|
|
Yanliang Wu
Executive Director (1)
|
|
|
789
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
789
|
|
Yu Zong
Executive Director(1)
|
|
|
789
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
789
|
|
Harvey Leibowitz
Independent Director (2)
|
|
|
2,104
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,104
|
|
Zhixue Liu
Independent Director(3)
|
|
|
789
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Tongmin Wang
Independent Director(3)
|
|
|
789
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
789
|
|
Daniel W. Heffernan
Independent Director (4)(5)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Romano Tio
Independent Director(4)(5)(6)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Zhihong Su
Independent Director(3)(5)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
(1)
|
As
employee directors, James Coleman will be provided with cash compensation of $70,000 per year. Yanliang Wu, Yu Zong and Zhanhuai
Cheng will be provided with cash compensation of $24,000 per year, payable monthly.
|
|
|
(2)
|
As
an independent director and Chair of the Audit Committee, Harvey Leibowitz will be provided with the following compensation:
(a) subject to the Board’s approval, the Company will issue each a total of 20,000 of restricted common stock for services
rendered to the Company, with an annual compensation in cash of $48,000, payable quarterly; and (b) during the directorship
term, the Company will reimburse the independent directors for all reasonable out-of-pocket travel expenses incurred by the
director in attending any in-person meetings, provided that the director complies with the generally applicable policies,
practices and procedures of the Company for submission of expense reports, receipts or similar documentation of such expenses.
|
|
|
(3)
|
As
independent directors, Zhihong Su, Tongmin Wang and Zhixue Liu will be provided with the following compensation: (a) subject
to the Board’s approval, the Company will issue each a total of 10,000 of restricted common stock for services rendered
to the Company, with an annual compensation in cash of $24,000, payable monthly; and (b) during the directorship term, the
Company will reimburse the independent directors for all reasonable out-of-pocket travel expenses incurred by the director
in attending any in-person meetings, provided that the director complies with the generally applicable policies, practices
and procedures of the Company for submission of expense reports, receipts or similar documentation of such expenses.
|
|
|
(4)
|
As
independent directors, Daniel W. Heffernan and Romano Tio will be provided with the following compensation: (a) subject to
the Board’s approval, the Company will issue each a total of 15,000 of restricted common stock for services rendered
to the Company, with an annual compensation in cash of $48,000, payable quarterly; and (b) during the directorship term, the
Company will reimburse the independent directors for all reasonable out-of-pocket travel expenses incurred by the director
in attending any in-person meetings, provided that the director complies with the generally applicable policies, practices
and procedures of the Company for submission of expense reports, receipts or similar documentation of such expenses.
|
|
|
(5)
|
Individuals
were appointed as members of the Board in January, 2016.
|
|
|
(6)
|
Adam Goldberg replaced Romano Tio as member of the Board in February 2017.
|
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The following table sets forth certain information
regarding our shares of common stock beneficially owned as of March 8, 2017, for (i) each stockholder known to be the beneficial
owner of 5% or more of the Company’s outstanding shares of common stock, (ii) each named executive officer and director,
and (iii) all executive officers and directors as a group. A person is considered to beneficially own any shares: (i) over which
such person, directly or indirectly, exercises sole or shared voting or investment power, or (ii) of which such person has the
right to acquire beneficial ownership at any time within 60 days through an exercise of stock options or warrants. Unless otherwise
indicated, voting and investment power relating to the shares shown in the table for our directors and executive officers is exercised
solely by the beneficial owner or shared by the owner and the owner’s spouse or children.
Unless
otherwise specified, the address of each of the persons set forth below is in care of the Company, at the address of: c/o 183
Broadway, Suite 5, New York, NY 10007
Name of Beneficial Owner
|
|
Amount and Nature of Beneficial Ownership
|
|
|
Percent of Common Stock (1)
|
|
Xiangyao Liu, CEO,
President, Secretary and Chairman of the Board (2)
|
|
|
91,240,000
|
|
|
|
52.96
|
%
|
James Stuart Coleman,
Executive Director(3)
|
|
|
4,060,000
|
|
|
|
2.36
|
%
|
Zhanhuai Cheng,
Executive Director
|
|
|
0
|
|
|
|
0
|
%
|
Yanliang Wu,
Executive Director
|
|
|
0
|
|
|
|
0
|
%
|
Yu Zong,
Executive Director
|
|
|
0
|
|
|
|
0
|
%
|
Harvey Leibowitz,
Independent Director
|
|
|
0
|
|
|
|
0
|
%
|
Zhixue Liu,
Independent Director
|
|
|
0
|
|
|
|
0
|
%
|
Tongmin Wang,
Independent Director
|
|
|
0
|
|
|
|
0
|
%
|
Daniel W. Heffernan,
Independent Director
|
|
|
0
|
|
|
|
0
|
%
|
Romano Tio,
Independent Director
|
|
|
0
|
|
|
|
0
|
%
|
Zhihong Su,
Independent Director
|
|
|
0
|
|
|
|
0
|
%
|
Zhanhuai Cheng,
Executive Director
|
|
|
0
|
|
|
|
0
|
%
|
All directors and executive officers as a group (12 person)
|
|
|
95,370,000
|
|
|
|
55.64
|
%
|
5% Shareholders:
|
|
|
|
|
|
|
|
|
Jasper Lake Holdings Limited (2)
|
|
|
91,240,000
|
|
|
|
52.96
|
%
|
Crestlake Holdings Limited (4)
|
|
|
16,600,000
|
|
|
|
9.64
|
%
|
Fortunate Drift Limited (5)
|
|
|
16,600,000
|
|
|
|
9.64
|
%
|
Majestic Symbol Limited (6)
|
|
|
16,600,000
|
|
|
|
9.64
|
%
|
Prolific Lion Limited (7)
|
|
|
14,575,348
|
|
|
|
8.46
|
%
|
(1)
|
Based on 172,269,446 shares of Common Stock
outstanding as of March 8, 2017.
|
(2)
|
Mr. Liu has investing and dispositive power of shares beneficially owned by Jasper Lake Holdings Limited.
|
|
|
(3)
|
Mr. Coleman owns all of the membership interest of Best Future Investment LLC., which owns 4,060,000 shares
of the Company’s common stock. Mr. Coleman may be deemed to be the beneficial owner of the shares of our common stock held
by Best Future Investment LLC.
|
|
|
(4)
|
Yanliang Hu has investing and dispositive power of shares beneficially owned by Crestlake Holdings Limited.
|
|
|
(5)
|
Linyu Cheng has investing and dispositive power of shares beneficially owned by Fortunate Drift Limited.
|
|
|
(6)
|
Long Zhao has investing and dispositive power of shares beneficially owned by Majestic Symbol Limited.
|
|
|
(7)
|
Zhimin Chen has sole voting and dispositive power of shares beneficially owned by Prolific Lion Limited. Additionally, Mr. Chen has sole voting and dispositive power of 1,746,000 shares beneficially owned by Valiant Power Limited.
|
Authorized Capital Stock
Our authorized share capital consists of 500,000,000
shares of common stock, par value $0.0001 per share, and 100,000,000 shares of preferred stock, par value $0.0001 per share. As
of March 8, 2017, 172,269,446 shares of our common stock and no shares of our preferred stock were outstanding.
Common Stock
Each share of our common stock entitles its
holder to one vote in the election of each director and on all other matters voted on generally by our stockholders, other than
any matter that (1) solely relates to the terms of any outstanding series of preferred stock or the number of shares of that series
and (2) does not affect the number of authorized shares of preferred stock or the powers, privileges and rights pertaining to the
common stock. No share of our common stock affords any cumulative voting rights. This means that the holders of a majority of the
voting power of the shares voting for the election of directors can elect all directors to be elected if they choose to do so.
Holders of our common stock will be entitled
to dividends in such amounts and at such times as our Board of Directors in its discretion may declare out of funds legally available
for the payment of dividends. We currently intend to retain our entire available discretionary cash flow to finance the growth,
development and expansion of our business and do not anticipate paying any cash dividends on the common stock in the foreseeable
future. Any future dividends will be paid at the discretion of our Board of Directors after taking into account various factors,
including:
|
●
|
general business conditions;
|
|
●
|
industry practice;
|
|
●
|
our financial condition and performance;
|
|
●
|
our future prospects;
|
|
●
|
our cash needs and capital investment plans;
|
|
●
|
our obligations to holders of any preferred stock we may issue;
|
|
●
|
income tax consequences; and
|
|
●
|
the restrictions Nevada and other applicable laws and our credit arrangements then impose.
|
If we liquidate or dissolve our business, the
holders of our common stock will share ratably in all our assets that are available for distribution to our stockholders after
our creditors are paid in full and the holders of all series of our outstanding preferred stock, if any, receive their liquidation
preferences in full.
Our common stock has no preemptive rights and
is not convertible or redeemable or entitled to the benefits of any sinking or repurchase fund.
Preferred Stock
At the direction of our Board of Directors,
without any action by the holders of our common stock, we may issue one or more series of preferred stock from time to time. Our
Board of Directors can determine the number of shares of each series of preferred stock, the designation, powers, preferences and
relative, participating, optional or other special rights, and the qualifications, limitations or restrictions applicable to any
of those rights, including dividend rights, voting rights, conversion or exchange rights, terms of redemption and liquidation preferences,
of each series.
Undesignated preferred stock may enable our
Board of Directors to render more difficult or to discourage an attempt to obtain control of our company by means of a tender offer,
proxy contest, merger or otherwise, and thereby to protect the continuity of our management. The issuance of shares of preferred
stock may adversely affect the rights of our common stockholders. For example, any preferred stock issued may rank prior to the
common stock as to dividend rights, liquidation preference or both, may have full or limited voting rights and may be convertible
into shares of common stock. As a result, the issuance of shares of preferred stock, or the issuance of rights to purchase shares
of preferred stock, may discourage an unsolicited acquisition proposal or bids for our common stock or may otherwise adversely
affect the market price of our common stock or any existing preferred stock.
Warrants
There are no outstanding warrants.
Transfer Agent and Registrar
The Transfer Agent for our common stock is VStock
Transfer, LLC located at 18 Lafayette Pl, Woodmere, NY 11598. The telephone number is: (212) 828-8436.
Item 13.
Certain Relationships and Related Transactions, and Director Independence.
Transactions
with Related Persons
Loans
from a Related Party
On July 13, 2015, Wuhan Renhe Group Co., Ltd ("Wuhan
Renhe"), where Xiangyao Liu, our CEO and President, was a majority shareholder, transferred all of its interests in Wuhan
Newport to Ricofeliz. As a former shareholder of Wuhan Newport, Wuhan Renhe provided numerous loans to Wuhan Newport prior to the
transfer. On June 30, 2015, Wuhan Renhe forgave a total
amount of $285,413,074 with the Company. The Company has credited the amount of $285,413,074 to additional paid-in capital in equity.
As of December 31, 2016 and December 31, 2015, the amounts due to Wuhan Renhe Real Estate Co., Ltd, an entity controlled by Geng
Wang, who is an affiliate of Wuhan Renhe, were $0 and $667,776, respectively.
As of December 31, 2016, and December 31, 2015, the
amounts due to Weibin Zhao, an officer of Wuhan Newport and a related party, were $118,130 and $126,516, respectively. The amount
is unsecured, interest free and does not have a fixed repayment date.
As of December 31, 2016 and December 31, 2015, the
amounts due to Mr. Liu Xiangyao, our President and CEO, were $31,751,959 and $2,428,731, respectively. The amount is unsecured,
interest free and does not have a fixed repayment date.
Director Independence
Because the Company’s Common Stock is
not currently listed on a national securities exchange, the Company has used the definition of “independence” of The
NASDAQ Stock Market to make this determination. NASDAQ Listing Rule 5605(a)(2) provides that an “independent director”
is a person other than an officer or employee of the company or any other individual having a relationship which, in the opinion
of the company’s board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities
of a director. The NASDAQ listing rules provide that a director cannot be considered independent if:
|
●
|
the director is, or at any time during the past three years was, an employee of the company;
|
|
●
|
the director or a family member of the director accepted any compensation from the company in excess of $120,000 during any period of 12 consecutive months within the three years preceding the independence determination (subject to certain exclusions, including, among other things, compensation for board or board committee service);
|
|
●
|
a family member of the director is, or at any time during the past three years was, an executive officer of the company;
|
|
●
|
the director or a family member of the director is a partner in, controlling stockholder of, or an executive officer of an entity to which the company made, or from which the company received, payments in the current or any of the past three fiscal years that exceed 5% of the recipient’s consolidated gross revenue for that year or $200,000, whichever is greater (subject to certain exclusions);
|
|
●
|
the director or a family member of the director is employed as an executive officer of an entity where, at any time during the past three years, any of the executive officers of the company served on the compensation committee of such other entity; or
|
|
●
|
the director or a family member of the director is a current partner of the company’s outside auditor, or at any time during the past three years was a partner or employee of the company’s outside auditor, and who worked on the company’s audit.
|
Based on this review,
Harvey Leibowitz, Zhixue Liu, Yongming Wang, Romano Tio, Daniel Heffernan and Zhihong Su “independent” directors. In
addition and by definition, the Board has determined that all members of each of the audit and compensation committees are independent.
The Board has determined that Mr. Harvey Leibowitz
qualifies as an “audit committee financial expert,” as that term is defined in applicable regulations of the SEC.
As of March 8, 2017, our Board is
composed of eleven members, of which directors are independent directors. The six independent directors are Harvey Leibowitz,
Zhixue Liu, Yongming Wang, Romano Tio, Daniel Heffernan and Zhihong Su. In addition, as indicated above, each of our audit
and compensation committees is composed entirely of independent directors, including the chairperson of the audit committee
and compensation committees.
Item 14.
Principal Accounting Fees and Services.
The
following is a summary of the audit fees for the fiscal years ended December 31, 2016 and 2015.
Fee Category
|
|
2016
|
|
|
2015
|
|
Audit fees
|
|
$
|
120,000
|
|
|
$
|
120,000
|
|
Audit-related fees
|
|
|
-
|
|
|
|
-
|
|
Tax fees
|
|
|
-
|
|
|
|
-
|
|
Other fees
|
|
|
-
|
|
|
|
-
|
|
Total Fees
|
|
$
|
120,000
|
|
|
$
|
120,000
|
|
All
of the services provided and fees charged by our independent registered accounting firm were approved by the board of directors
and audit committee.
Audit
Fees
For
the Company’s fiscal years ended December 31, 2016 and December 31, 2015, we were billed approximately $120,000 for each
year, for professional services rendered for the audit and reviews of our financial statements.
Audit
Related Fees
The
Company did not incur any audit related fees, other than the fees discussed in Audit Fees, above, for services related to our
audit for the fiscal years ended December 31, 2016 and December 31, 2015.
Tax
Fees
For
the Company’s fiscal years ended December 31, 2016 and December 31, 2015, we did no incur any fees for professional services
rendered for tax compliance, tax advice, and tax planning.
All
Other Fees
The
Company did not incur any other fees related to services rendered by our principal accountant for the fiscal years ended December
31, 2016 and December 31, 2015.
Pre-Approval
of Services
The
Audit Committee pre-approves all audit and permissible non-audit services provided by the independent accountants. These services
may include audit services, audit-related services, tax services and other services. The Audit Committee has adopted a written
policy for the pre-approval of services provided by the independent accountants, under which policy the Audit Committee generally
pre-approves services for up to one year and any pre-approval is detailed as to the particular service or category of services
and is subject to a specific budget. In addition, the Audit Committee may also pre-approve particular services on a case-by-case
basis. For each proposed service, the independent accountant is required to provide detailed back-up documentation at the time
of approval. The Audit Committee may delegate pre-approval authority to one or more of its members. Such a member must report
any decisions to the Audit Committee at the next scheduled meeting.
PART
IV
Item 15.
Exhibits, Financial Statement Schedules.
(a)
The following documents are filed as part of this report:
(1)
|
Financial
Statements:
|
The audited balance sheet of the Company as
of December 31, 2016 and December 31, 2015, the related condensed statements of operations, changes in stockholders’ deficiency
and cash flows for the years then ended, the footnotes thereto, and the report of Dominic KF Chan & Co., independent auditors,
are filed herewith.
None
Financial
statement schedules have been omitted because they are either not applicable or the required information is included in the financial
statements or notes hereto.
The
exhibits listed in the accompanying index to exhibits are filed or incorporated by reference as part of this Report.
(b)
The following are exhibits to this Report and, if incorporated by reference, we have indicated the document previously filed with
the SEC in which the exhibit was included.
Certain
of the agreements filed as exhibits to this Report contain representations and warranties by the parties to the agreements that
have been made solely for the benefit of the parties to the agreement. These representations and warranties:
|
●
|
may
have been qualified by disclosures that were made to the other parties in connection with the negotiation of the agreements,
which disclosures are not necessarily reflected in the agreements;
|
|
|
|
|
●
|
may
apply standards of materiality that differ from those of a reasonable investor; and
|
|
|
|
|
●
|
were
made only as of specified dates contained in the agreements and are subject to subsequent developments and changed circumstances.
|
Accordingly,
these representations and warranties may not describe the actual state of affairs as of the date that these representations and
warranties were made or at any other time. Investors should not rely on them as statements of fact.
Exhibit
Number
|
|
Description
|
|
|
|
1.1
|
|
Form
of Underwriting Agreement (incorporated by reference to Exhibit 1.1 of the Company’s registration statement on Form
S-1 filed with the SEC on December 20, 2016)
|
2.1
|
|
Share
Exchange Agreement, dated December 19, 2015, by and between the Company and Crestlake Holdings Limited (incorporated by reference
to Exhibit 2.1 filed on Current Report to Form 8-K with the SEC on December 21, 2015)
|
2.2
|
|
Share
Exchange Agreement, dated December 19, 2015, by and between the Company and Start Well International Limited (incorporated
by reference to Exhibit 2.2 filed on Current Report to Form 8-K with the SEC on December 21, 2015)
|
2.3
|
|
Share
Exchange Agreement, dated December 19, 2015, by and between the Company and Majestic Symbol Limited (incorporated by reference
to the Exhibit 2.3 filed on Current Report to Form 8-K with the SEC on December 21, 2015)
|
2.4
|
|
Share
Exchange Agreement, dated December 19, 2015, by and between the Company and Best Future Investment LLC (incorporated by reference
to the Exhibit 2.4 filed on Current Report to Form 8-K with the SEC on December 21, 2015)
|
2.5
|
|
Share
Exchange Agreement, dated December 19, 2015, by and between the Company and Fortunate Drift Limited (incorporated by reference
to the Exhibit 2.5 filed on Current Report to Form 8-K with the SEC on December 21, 2015)
|
2.6
|
|
Share
Exchange Agreement, dated December 19, 2015, by and between the Company and Jasper Lake Holdings Limited (incorporated by
reference to Exhibit 2.6 filed on Current Report to Form 8-K with the SEC on December 21, 2015)
|
3.1
|
(a)
|
Articles
of Incorporation (incorporated herein by reference to Exhibit 3.1 filed with the Company’s Registration Statement on
Form S-1 filed with the SEC on April 28, 2010.)
|
|
(b)
|
Certificate
of Amendment to Articles of Incorporation (incorporated herein by reference to Exhibit 3.2 filed with the Company’s
Registration Statement on Form S-1 filed with the SEC on April 28, 2010.)
|
|
(c)
|
Certificate
of Amendment to Articles of Incorporation (incorporated by reference to Exhibit 3.1 filed on Current Report to Form 8-K with
the SEC on March 16, 2011.)
|
|
(d)
|
Certificate
of Correction to Certificate of Amendment to Articles of Incorporation (incorporated by reference to Exhibit 3.2 filed on
Current Report to Form 8-K with the SEC on March 16, 2011.)
|
|
(e)
|
Certificate
of Amendment to Articles of Incorporation (incorporated by reference to Exhibit 3.1 filed on Current Report to Form 8-K with
the SEC on January 20, 2016)
|
4.1
|
|
Yangtze
River Development Limited 2016 Amended and Restated Stock Incentive Plan (incorporated herein by reference to Exhibit 4.2
filed with the Company’s Registration Statement on Form S-8 filed with the SEC on February 24, 2016)
|
10.1
|
|
Stock
Purchase and Business Sale Agreement, dated December 31, 2015, by and between the Company and Kirin Global Enterprises, Inc.
for the sale of Brookhollow Lake, LLC (incorporated by reference to Exhibit 10.1 filed on Current Report to Form 8-K with
the SEC on January 7, 2016)
|
10.2
|
|
Stock
Purchase and Business Sale Agreement, dated December 31, 2015, by and between the Company and Kirin Global Enterprises, Inc.
for the sale of New Port Property Holding, LLC (incorporated by reference to Exhibit 10.2 filed on Current Report to Form
8-K with the SEC on January 7, 2016)
|
10.3
|
|
Stock
Purchase and Business Sale Agreement, dated December 31, 2015, by and between the Company and Kirin Global Enterprises, Inc.
for the sale of Kirin China Holding Ltd. (incorporated by reference to Exhibit 10.3 filed on Current Report to Form 8-K with
the SEC on January 7, 2016)
|
10.4
|
|
Stock
Purchase and Business Sale Agreement, dated December 31, 2015, by and between the Company and Kirin Global Enterprises, Inc.
for the sale of Kirin Hopkins Real Estate Group (incorporated by reference to Exhibit 10.4 filed on Current Report to Form
8-K with the SEC on January 7, 2016)
|
10.5
|
|
Stock
Purchase and Business Sale Agreement, dated December 31, 2015, by and between the Company and Kirin Global Enterprises, Inc.
for the sale of Archway Development Group LLC (incorporated by reference to Exhibit 10.5 filed on Current Report to Form 8-K
with the SEC on January 7, 2016)
|
10.6
|
|
Stock
Purchase and Business Sale Agreement, dated December 31, 2015, by and between the Company and Kirin Global Enterprises, Inc.
for the sale of Spectrum International Enterprise, LLC (incorporated by reference to Exhibit 10.6 filed on Current Report
to Form 8-K with the SEC on January 7, 2016)
|
10.7
|
|
Stock
Purchase and Business Sale Agreement, dated December 31, 2015, by and between the Company and Kirin Global Enterprises, Inc.
for the sale of HHC-6055 Centre Drive LLC (incorporated by reference to Exhibit 10.7 filed on Current Report to Form 8-K with
the SEC on January 7, 2016)
|
10.8
|
|
Offer
and Acceptance Letter between the Company and Daniel W. Heffernan (incorporated herein by reference to Exhibit 10.8 filed with
the Company’s Registration Statement on Form S-1 filed with the SEC on March 31, 2016)
|
10.9
|
|
Offer
and Acceptance Letter between the Company and Harvey Leibowitz (incorporated herein by reference to Exhibit 10.9 filed with
the Company’s Registration Statement on Form S-1 filed with the SEC on March 31, 2016)
|
10.10
|
|
Offer
and Acceptance Letter between the Company and James Coleman (incorporated herein by reference to Exhibit 10.10 filed with
the Company’s Registration Statement on Form S-1 filed with the SEC on March 31, 2016)
|
10.11
|
|
Offer
and Acceptance Letter between the Company and Zhixue Liu (incorporated herein by reference to Exhibit 10.11 filed with the
Company’s Registration Statement on Form S-1 filed with the SEC on March 31, 2016)
|
10.12
|
|
Offer
and Acceptance Letter between the Company and Romano Tio (incorporated herein by reference to Exhibit 10.12 filed with the
Company’s Registration Statement on Form S-1 filed with the SEC on March 31, 2016)
|
10.13
|
|
Offer
and Acceptance Letter between the Company and Tongmin Wang (incorporated herein by reference to Exhibit 10.13 filed with the
Company’s Registration Statement on Form S-1 filed with the SEC on March 31, 2016)
|
10.14
|
|
Offer
and Acceptance Letter between the Company and Yanliang Wu (incorporated herein by reference to Exhibit 10.14 filed with the
Company’s Registration Statement on Form S-1 filed with the SEC on March 31, 2016)
|
10.15
|
|
Offer
and Acceptance Letter between the Company and Yu Zong (incorporated herein by reference to Exhibit 10.15 filed with the Company’s
Registration Statement on Form S-1 filed with the SEC on March 31, 2016)
|
10.16
|
|
Offer
and Acceptance Letter between the Company and Yu Zong (incorporated herein by reference to Exhibit 10.15 filed with the Company’s
Registration Statement on Form S-1 filed with the SEC on March 31, 2016)
|
10.17
|
|
Offer
and Acceptance Letter between the Company and Zhihong Su (incorporated herein by reference to Exhibit 10.17 filed with the
Company’s Registration Statement on Form S-1 filed with the SEC on March 31, 2016)
|
10.18
|
|
Offer
and Acceptance Letter of Adam S. Goldberg dated February 14, 2017 (incorporated by reference to Exhibit 10.1filed on
Current Report to Form 8-K with the SEC on March 9, 2017)
|
14.1
|
|
Code
of Business Conduct and Ethics of the Company (incorporated by reference to Exhibit 10.7 filed on Current Report to Form 8-K
with the SEC on January 28, 2016)
|
16.1
|
|
Letter
of Dominic K.F. Chan & Co. (now DCAW) dated May 13, 2016 (incorporated by reference to Exhibit 16.1 filed on Current Report
to Form 8-K with the SEC on May 13, 2016)
|
21.1
|
|
List
of Subsidiaries (incorporated by reference to Exhibit 4.2 filed on Annual Report on Form 10-K filed with the SEC on February 2,
2016)
|
31.1
|
|
Certification
of Principal Executive Officer, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
|
31.2
|
|
Certification
of Principal Financial Officer, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
|
32.1+
|
|
Certification
of Principal Executive Officer and Principal Financial 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 Principal 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 Schema
|
101.CAL
|
|
XBRL
Taxonomy Calculation Linkbase
|
101.DEF
|
|
XBRL
Taxonomy Definition Linkbase
|
101.LAB
|
|
XBRL
Taxonomy Label Linkbase
|
101.PRE
|
|
XBRL
Taxonomy Presentation Linkbase
|
+
In accordance with SEC Release 33-8238, Exhibit 32.1 and 32.2 are being furnished and not filed.
SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) 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.
|
YANGTZE
RIVER DEVELOPMENT LIMITED
|
|
|
|
|
By:
|
/s/
Xiangyao Liu
|
|
|
Xiangyao
Liu
|
|
|
President
and Chief Executive Officer
(Principal
Executive Officer)
|
|
|
|
|
Date:
|
March
9, 2017
|
|
|
|
|
By:
|
/s/
Xin Zheng
|
|
|
Xin
Zheng
|
|
|
Chief
Financial Officer
(Principal
Financial and Accounting Officer)
|
|
|
|
|
Date:
|
March
9, 2017
|
Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf
of the registrant and in the capacities and on the dates indicated.
Name
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/
Xiangyao Liu
|
|
President,
Chief Executive Officer and Director
|
|
March
9, 2017
|
Xiangyao
Liu
|
|
(Principal
Executive Officer)
|
|
|
|
|
Chief
Financial Officer
|
|
|
|
|
|
|
|
/s/
Xin Zheng
|
|
(Principal
Financial and Accounting Officer)
|
|
March
9, 2017
|
Xin
Zheng
|
|
|
|
|
|
|
|
|
|
/s/
James Stuart Coleman
|
|
Director
|
|
March
9, 2017
|
James
Stuart Coleman
|
|
|
|
|
|
|
|
|
|
/s/
Zhanhuai Cheng
|
|
Director
|
|
March
9, 2017
|
Zhanhuai
Cheng
|
|
|
|
|
|
|
|
|
|
/s/
Yanliang Wu
|
|
Director
|
|
March
9, 2017
|
Yanliang
Wu
|
|
|
|
|
|
|
|
|
|
/s/
Yu Zong
|
|
Director
|
|
March
9, 2017
|
Yu
Zong
|
|
|
|
|
|
|
|
|
|
/s/
Harvey Leibowitz
|
|
Independent
Director
|
|
March
9, 2017
|
Harvey
Leibowitz
|
|
|
|
|
|
|
|
|
|
/s/
Zhixue Liu
|
|
Independent
Director
|
|
March
9, 2017
|
Zhixue
Liu
|
|
|
|
|
|
|
|
|
|
/s/Tongming
Wang
|
|
Independent
Director
|
|
March
9, 2017
|
Tongming
Wang
|
|
|
|
|
|
|
|
|
|
/s/
Romano Tio
|
|
Independent
Director
|
|
March
9, 2017
|
Romano
Tio
|
|
|
|
|
|
|
|
|
|
/s/
Daniel W. Heffernan
|
|
Independent
Director
|
|
March
9, 2017
|
Daniel
W. Heffernan
|
|
|
|
|
|
|
|
|
|
/s/
Zhihong Su
|
|
Independent
Director
|
|
March
9, 2017
|
Zhihong
Su
|
|
|
|
|
TABLE
OF CONTENTS
|
中正達會計師事務所有限公司
Centurion ZD CPA Limited
Certified Public Accountants (Practising)
|
|
|
HK office: 7th Floor, Nan Dao Commercial Building, 359-361
Queen’s Road Central, Hong Kong
香港皇后大道中三五九至三六一號南島商業大廈七樓
Tel : (852) 2851 7954 Fax: (852) 2545 4086
Kowloon office: Room 2105-06, 21/F., Office Tower, Langham
Place, 8 Argyle Street, Mongkok, Kowloon, Hong Kong
九龍旺角亞皆老街八號朗豪坊辦公大樓2105-06室
Tel: (852) 2780 0607 Fax: (852) 2780 0013
|
|
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board
of Directors and Stockholders of
Yangtze
River Development Limited
We
have audited the accompanying consolidated balance sheets of Yangtze River Development Limited (the “Company”) as
of December 31, 2016 and 2015, and the related consolidated statements of operations and comprehensive loss, changes in owners’
equity and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.
We
conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements
are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of their internal
control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit
also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements,
assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In
our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position
of Yangtze River Development Limited as of December 31, 2016 and 2015, and the results of its operations and its cash flows for
the years then ended in conformity with accounting principles generally accepted in the United States of America.
Centurion
ZD CPA Ltd. (fka DCAW (CPA) Ltd. as successor to Dominic K.F. Chan & Co.)
Certified
Public Accountants
Hong
Kong, March 9, 2017
Yangtze
River Development Limited
(FORMERLY
Kirin International Holding, Inc.)
Consolidated
Balance Sheets
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
63,092
|
|
|
$
|
512,569
|
|
Other assets and receivables
|
|
|
4,151,752
|
|
|
|
6,259,865
|
|
Real estate property completed
|
|
|
29,507,108
|
|
|
|
31,566,156
|
|
Real estate properties and land lots under development
|
|
|
341,427,234
|
|
|
|
364,876,105
|
|
Property and equipment, net
|
|
|
89,742
|
|
|
|
157,499
|
|
Deferred tax assets
|
|
|
4,472,581
|
|
|
|
3,614,419
|
|
Total Assets
|
|
$
|
379,711,509
|
|
|
$
|
406,986,613
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
5,159,212
|
|
|
$
|
5,526,610
|
|
Due to related parties
|
|
|
31,870,222
|
|
|
|
32,045,112
|
|
Other taxes payable
|
|
|
49,918
|
|
|
|
13,350
|
|
Other payables and accrued liabilities
|
|
|
8,985,719
|
|
|
|
560,830
|
|
Real estate property refund and compensation payable
|
|
|
24,997,563
|
|
|
|
25,274,753
|
|
Convertible note
|
|
|
75,000,000
|
|
|
|
75,000,000
|
|
Loans payable
|
|
|
41,456,074
|
|
|
|
44,502,981
|
|
Total Liabilities
|
|
$
|
187,518,708
|
|
|
$
|
182,923,636
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
Preferred stock at $0.0001 par value; 100,000,000 shares authorized; none issued or outstanding
|
|
$
|
-
|
|
|
$
|
-
|
|
Common stock at $0.0001 par value; 500,000,000 shares authorized; 272,269,446 and 172,254,446 shares issued and outstanding at December 31, 2016 and 2015, respectively
|
|
|
27,227
|
|
|
|
17,225
|
|
Additional paid-in capital
|
|
|
242,696,445
|
|
|
|
242,622,947
|
|
Accumulated losses
|
|
|
(28,989,090
|
)
|
|
|
(16,263,010
|
)
|
Accumulated other comprehensive loss
|
|
|
(21,541,781
|
)
|
|
|
(2,314,185
|
)
|
Total Equity
|
|
$
|
192,192,801
|
|
|
$
|
224,062,977
|
|
Total Liabilities and Equity
|
|
$
|
379,711,509
|
|
|
$
|
406,986,613
|
|
See
notes to the consolidated financial statements
Yangtze River Development Limited
(FORMERLY
Kirin International Holding, Inc.)
consolidated
Statements of OPERATIONS and Comprehensive LOSS
|
|
For the Years Ended
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
-
|
|
|
$
|
-
|
|
Cost of revenue
|
|
|
-
|
|
|
|
-
|
|
Gross profit (loss)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
Selling expenses
|
|
|
2,348
|
|
|
|
11,577
|
|
General and administrative expenses
|
|
|
5,446,175
|
|
|
|
4,547,646
|
|
Total operating expenses
|
|
|
5,448,523
|
|
|
|
4,559,223
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(5,448,523
|
)
|
|
|
(4,559,223
|
)
|
|
|
|
|
|
|
|
|
|
Other income (expenses)
|
|
|
|
|
|
|
|
|
Other income
|
|
|
3,587
|
|
|
|
868
|
|
Other expenses
|
|
|
(174
|
)
|
|
|
(3,231
|
)
|
Interest income
|
|
|
229
|
|
|
|
55
|
|
Interest expenses
|
|
|
(8,424,794
|
)
|
|
|
(3,199,031
|
)
|
Total other income (expenses)
|
|
|
(8,421,152
|
)
|
|
|
(3,201,339
|
)
|
|
|
|
|
|
|
|
|
|
Loss before income taxes
|
|
|
(13,869,675
|
)
|
|
|
(7,760,562
|
)
|
Income taxes benefit
|
|
|
1,143,595
|
|
|
|
1,378,700
|
|
Net loss
|
|
$
|
(12,726,080
|
)
|
|
$
|
(6,381,862
|
)
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments
|
|
|
(19,227,596
|
)
|
|
|
(6,649,917
|
)
|
Comprehensive loss
|
|
$
|
(31,953,676
|
)
|
|
$
|
(13,031,779
|
)
|
|
|
|
|
|
|
|
|
|
Loss per share - basic and diluted
|
|
$
|
(0.07
|
)
|
|
$
|
(0.04
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding - basic and diluted
|
|
|
177,459,678
|
|
|
|
151,682,554
|
|
See
notes to the consolidated financial statements
Yangtze
River Development Limited
(FORMERLY
Kirin International Holding, Inc.)
consolidated
Statements of CHANGES IN Equity
|
|
Common stock
|
|
|
Additional
|
|
|
|
|
|
Accumulated
other
|
|
|
|
|
|
|
Number of shares
|
|
|
Amount
|
|
|
paid-in
capital
|
|
|
Accumulated
losses
|
|
|
comprehensive
(loss) income
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of January 1, 2015
|
|
|
151,000,000
|
|
|
$
|
15,100
|
|
|
$
|
27,955,331
|
|
|
$
|
(9,881,148
|
)
|
|
$
|
4,335,732
|
|
|
$
|
22,425,015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forgiveness of loan from Wuhan Renhe
|
|
|
-
|
|
|
|
-
|
|
|
|
285,413,074
|
|
|
|
-
|
|
|
|
-
|
|
|
|
285,413,074
|
|
Effect of share exchange
|
|
|
20,596,546
|
|
|
|
2,060
|
|
|
|
(86,182,521
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(86,180,461
|
)
|
Restricted shares issued for services
|
|
|
657,900
|
|
|
|
65
|
|
|
|
3,749,965
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,750,030
|
|
Extinguishment of debt with a former officer
|
|
|
-
|
|
|
|
-
|
|
|
|
11,687,098
|
|
|
|
-
|
|
|
|
-
|
|
|
|
11,687,098
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(6,381,862
|
)
|
|
|
-
|
|
|
|
(6,381,862
|
)
|
Foreign currency translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(6,649,917
|
)
|
|
|
(6,649,917
|
)
|
Balance as of December 31, 2015
|
|
|
172,254,446
|
|
|
$
|
17,225
|
|
|
$
|
242,622,947
|
|
|
$
|
(16,263,010
|
)
|
|
$
|
(2,314,185
|
)
|
|
$
|
224,062,977
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted shares issued for services
|
|
|
15,000
|
|
|
|
2
|
|
|
|
73,498
|
|
|
|
-
|
|
|
|
-
|
|
|
|
73,500
|
|
Issuance of shares for the Armada transaction (See Note 1.1)
|
|
|
100,000,000
|
|
|
|
10,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
10,000
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(12,726,080
|
)
|
|
|
-
|
|
|
|
(12,726,080
|
)
|
Foreign currency translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(19,227,596
|
)
|
|
|
(19,227,596
|
)
|
Balance as of December 31, 2016
|
|
|
272,269,446
|
|
|
$
|
27,227
|
|
|
$
|
242,696,445
|
|
|
$
|
(28,989,090
|
)
|
|
$
|
(21,541,781
|
)
|
|
$
|
192,192,801
|
|
See
notes to the consolidated financial statements
Yangtze
River Development Limited
(FORMERLY
Kirin International Holding, Inc.)
Consolidated
Statements of Cash Flows
|
|
For
the Years Ended
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
Cash Flows from Operating Activities:
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(12,726,080
|
)
|
|
$
|
(6,381,862
|
)
|
Adjustments
to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Loss
on disposal of property, and equipment
|
|
|
-
|
|
|
|
3,082
|
|
Depreciation
of property, and equipment
|
|
|
62,536
|
|
|
|
79,064
|
|
Deferred
tax benefit
|
|
|
(1,143,595
|
)
|
|
|
(1,378,700
|
)
|
Share-based
compensation expense
|
|
|
2,014,664
|
|
|
|
1,808,867
|
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Other
assets and receivables
|
|
|
-
|
|
|
|
(1,534,700
|
)
|
Real
estate property completed
|
|
|
-
|
|
|
|
(312,163
|
)
|
Real
estate properties and land lots under development
|
|
|
(367,826
|
)
|
|
|
(778,977
|
)
|
Accounts
payable
|
|
|
(7,553
|
)
|
|
|
-
|
|
Other
taxes payable
|
|
|
39,139
|
|
|
|
(13,914
|
)
|
Other
payables and accrued liabilities
|
|
|
8,559,773
|
|
|
|
2,257,051
|
|
Real
estate property refund and compensation payables
|
|
|
1,433,737
|
|
|
|
1,517,110
|
|
Net
Cash Used In Operating Activities
|
|
|
(2,135,205
|
)
|
|
|
(4,735,142
|
)
|
|
|
|
|
|
|
|
|
|
Cash
Flows from Investing Activities:
|
|
|
|
|
|
|
|
|
Purchase
of property and equipment
|
|
|
(1,851
|
)
|
|
|
(11,733
|
)
|
Proceeds
from disposal of property and equipment
|
|
|
-
|
|
|
|
130
|
|
Effect
of share exchange
|
|
|
-
|
|
|
|
505,782
|
|
Net
Cash (Used In) Provided By Investing Activities
|
|
|
(1,851
|
)
|
|
|
494,179
|
|
|
|
|
|
|
|
|
|
|
Cash
Flows from Financing Activities:
|
|
|
|
|
|
|
|
|
Advances
from related parties
|
|
|
2,201,144
|
|
|
|
4,874,761
|
|
Repayment
of financial institution loans
|
|
|
(150,532
|
)
|
|
|
(176,599
|
)
|
Repayment to
related parties
|
|
|
(361,843
|
)
|
|
|
-
|
|
Net
Cash Provided By Financing Activities
|
|
|
1,688,769
|
|
|
|
4,698,162
|
|
|
|
|
|
|
|
|
|
|
Effect
of Exchange Rate Changes on Cash and Cash Equivalents
|
|
|
(1,190
|
)
|
|
|
(996
|
)
|
|
|
|
|
|
|
|
|
|
Net
(Decrease) Increase In Cash and Cash Equivalents
|
|
|
(449,477
|
)
|
|
|
456,203
|
|
Cash
and Cash Equivalents at Beginning of Year
|
|
|
512,569
|
|
|
|
56,366
|
|
Cash
and Cash Equivalents at End of Year
|
|
$
|
63,092
|
|
|
$
|
512,569
|
|
|
|
|
|
|
|
|
|
|
Supplemental
Cash Flow Information:
|
|
|
|
|
|
|
|
|
Cash
paid for interest expenses
|
|
$
|
-
|
|
|
$
|
3,001,771
|
|
Cash
paid for income tax
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Supplemental
Disclosure of Non-Cash Transaction:
|
|
|
|
|
|
|
|
|
Issuance
of shares for the Armada transaction
|
|
$
|
10,000
|
|
|
$
|
-
|
|
Restricted
shares issued for services
|
|
$
|
73,500
|
|
|
$
|
3,750,030
|
|
Forgiveness
of loans from an owner
|
|
$
|
-
|
|
|
$
|
285,413,074
|
|
Issuance
of convertible note
|
|
$
|
-
|
|
|
$
|
150,000,000
|
|
Reduction
of convertible note
|
|
$
|
-
|
|
|
$
|
75,000,00
0
|
|
See
notes to the consolidated financial statements
Yangtze
River Development Limited
(FORMERLY
Kirin International Holding, Inc.)
NOTES
TO the FINANCIAL STATEMENTS
1.
ORGANIZATION AND PRINCIPAL ACTIVITIES
The
consolidated financial statements include the financial statements of Yangtze River Development Limited (the “Company”
or “Yangtze River”) and its subsidiaries, Energetic Mind Limited (“Energetic Mind”), Ricofeliz Capital
(HK) Limited (“Ricofeliz Capital”), and Wuhan Yangtze River Newport Logistics Co., Ltd. (“Wuhan Newport”).
The
Company, formerly named as Kirin International Holding, Inc., and Ciglarette, Inc., was incorporated in the State of Nevada on
December 23, 2009. The Company was a development stage company and has not generated significant revenue since inception to March
1, 2011.
On
March 1, 2011, the Company entered into a share exchange agreement that Kirin China Holding Limited (“Kirin China”)
became the Company’s wholly-owned subsidiary. Kirin China engaged in the development and sales of residential and commercial
real estate properties, and development of land lots in People’s Republic of China (“China”, or the “PRC”).
On
December 19, 2015, the Company completed a share exchange (the “Share Exchange”) with Energetic Mind and all the shareholders
of Energetic Mind, whereby Yangtze River acquired 100% of the issued and outstanding capital stock of Energetic Mind, in exchange
for 151,000,000 shares of Yangtze River’s common stock, which constituted approximately 88% of its issued and outstanding
shares on a fully-diluted basis of Yangtze River immediately after the consummation of the Share Exchange, and an 8% convertible
note (the “Note”) in the principal amount of $150,000,000. As a result of the Share Exchange, Energetic Mind became
Yangtze River’s wholly-owned subsidiary and Jasper Lake Holdings Limited (“Jasper”), the former shareholder
of Energetic Mind, became Yangtze River’s controlling stockholder. The Share Exchange transaction with Energetic Mind was
treated as an acquisition, with Energetic Mind as the accounting acquirer and Yangtze River as the acquired party. The financial
statements before the date of the Share Exchange are those of Energetic Mind with the results of the Company being consolidated
from the date of the Share Exchange.
Energetic
Mind owns 100% of Ricofeliz Capital and operates its business through its subsidiary Wuhan Newport.
Wuhan
Newport was a wholly owned subsidiary of Wuhan Renhe Group Co., Ltd. (the “Wuhan Renhe”), a company incorporated in
the PRC as at September 23, 2002. On July 13, 2015, Wuhan Renhe transferred all of the equity interests of the Company to Ricofeliz
Capital, a company incorporated in Hong Kong on March 25, 2015. Ricofeliz Capital was incorporated by Energetic Mind, a company
incorporated in British Virgin Islands (“BVI”). Energetic Mind was incorporated by Mr. Liu Xiangyao on January 2,
2015, and was subsequently purchased by various companies incorporated in BVI or the United States of America (“USA”),
among whom Jasper became its 64% owner. Jasper was 100% owned by Mr. Liu Xiangyao, a Hong Kong citizen.
The
major assets of Wuhan Newport include land lots for developing commercial buildings that are in line with the principal activities
of Kirin China.
On
December 31, 2015, the Company entered into certain stock purchase and business sale agreements (the “Agreements”)
with Kirin Global Enterprises, Inc. (the “Purchaser”), a California corporation and an entity controlled by a former
officer and director of the Company whereby the Company sold its interest in certain subsidiaries (see Note 11) for an aggregate
of $75,000,002. (the “Sale”).
Pursuant
to the terms of the Agreements, Jasper agreed to finance the Sale by reducing Company’s financial obligations of the Note
by an aggregate of $75,000,000. In addition, the Purchaser agreed to pay the remaining two dollars in cash.
Upon
completion of the Sale, the Company operates its business solely through its subsidiary Wuhan Newport, primarily engaging in the
business as a port logistic center located in the middle reaches of the Yangtze River in the PRC.
1.1
Armada transaction
The Company, by and among Armada Enterprises
GP (“Armada”) and Wight International Construction, LLC (“Wight”), e
ntered
into (i) a Contribution, Conveyance and Assumption Agreement (“Contribution Agreement”) dated October 3, 2016, first
and second addendums, dated October 3, 2016 and November 30, 2016, respectively, and (ii) an Amended and Restated Limited Liability
Company Agreement dated November 16, 2016 (collectively with the Contribution Agreement, the (“Agreement”, whereby
the Company acquired 100 million preferred B membership units of Wight, which would ultimately convert into 100 million LP units
in Armada Enterprises LP. In exchange, the Company issued a $500 million convertible promissory note (“Note”) and
50,000,000 shares of the Company’s common stock to Wight. As a result of the Agreement and the conversion of the Note on
November 17, 2016, Wight owned 100,000,000 shares of the Company’s common stock representing 36.73% of the Company’s
voting power and the Company owned 100 million preferred B membership units in Wight representing a 62.5% non-voting equity interest
in Wight.
Yangtze
River Development Limited
(FORMERLY
Kirin International Holding, Inc.)
NOTES
TO the FINANCIAL STATEMENTS
Under
the terms of the Agreement, at the first closing, Wight was required to provide an aggregate total of $200 million, including
$50 million in working capital and $150 million in construction funding (the “Funding”) to the Company, by January
18, 2017. Wight did not provide the Funding on January 18, 2017 and the Company provided to Wight a “Notice of Default and
Request for Cure”. Wight proposed to provide $50 million in working capital funding on or before February 15, 2017 and secure
$150 million in construction funding on or before March 15, 2017. Wight failed to provide the $50 million in working capital funding
as proposed by February 15, 2017. Therefore, the Company, on February 24, 2017 decided to terminate the Agreement for non-performance
by Wight. Pursuant to the Agreement, the termination thereof calls for the immediate return of the 100,000,000 shares of common
stock issued by the Company to Wight.
On February 27, 2017,
the Company issued a “Termination and Demand” letter to Wight which terminated the Agreement with Wight and Armada
and demanded the return of the 100,000,000 shares of common stock.
On March 1, 2017, the 100,000,000 shares of
the Company’s common stock were canceled and returned by Wight, and were subsequently returned to the Company’s
treasury.
2.
Summary of Significant Accounting Policies
2.1
Basis of presentation
The
accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles
in the United States of America (“GAAP”).
The
consolidated financial statements include the financial statements of all the subsidiaries. All transactions and balances between
the Company and its subsidiaries have been eliminated upon consolidation.
The
consolidated balance sheets are presented unclassified because the time required to complete real estate projects and the Company’s
working capital considerations usually stretch for more than one-year period.
2.2
Use of estimates
The
preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the
consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results
could differ from those estimates. On an ongoing basis, management reviews these estimates using the currently available information.
Changes in facts and circumstances may cause the Company to revise its estimates. Significant accounting estimates reflected in
the consolidated financial statements include: (i) the allowance for doubtful debts; (ii) accrual of estimated liabilities; (iii)
contingencies; (iv) deferred tax assets; (v) impairment of long-lived assets; (vi) useful lives of property plant and equipment;
and (vii) real estate property refunds and compensation payables.
2.3
Cash and cash equivalents
Cash
and cash equivalents consist of cash and bank deposits with original maturities of three months or less, which are unrestricted
as to withdrawal and use the Company maintains accounts at banks and has not experienced any losses from such concentrations.
2.4
Property and equipment
The
property and equipment are stated at cost less accumulated depreciation. The depreciation is computed on a straight-line method
over the estimated useful lives of the assets with 5% salvage value. Estimated useful lives of property and equipment are stated
in Note 7.
The
Company eliminates the cost and related accumulated depreciation of assets sold or otherwise retired from the accounts and includes
any gain or loss in the statement of income. The Company charges maintenance, repairs and minor renewals directly to expenses
as incurred; major additions and betterment to equipment are capitalized.
Yangtze
River Development Limited
(FORMERLY
Kirin International Holding, Inc.)
NOTES
TO the FINANCIAL STATEMENTS
2.5
Impairment of long-lived assets
The
Company applies the provisions of ASC No. 360 Sub topic 10, "Impairment or Disposal of Long-Lived Assets"(ASC 360- 10)
issued by the Financial Accounting Standards Board ("FASB"). ASC 360-10 requires that long-lived assets be reviewed
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.
The
Company tests long-lived assets, including property and equipment and finite lived intangible assets, for impairment at least
annually or more frequently upon the occurrence of an event or when circumstances indicate that the net carrying amount is greater
than its 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 in making whatever estimates, judgments and projections
are considered necessary. There were no impairment losses in the years ended December 31, 2016 and 2015.
2.6
Fair values of financial instruments
ASC
Topic 825, Financial Instruments (“Topic 825”) requires disclosure of fair value information of financial instruments,
whether or not recognized in the balance sheets, for which it is practicable to estimate that value. In cases where quoted market
prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques
are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. In that regard,
the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be
realized in immediate settlement of the instruments. Topic 825 excludes certain financial instruments and all nonfinancial assets
and liabilities from its disclosure requirements. Accordingly, the aggregate fair value amounts do not represent the underlying
value of the Company.
Level 1
|
inputs to the valuation methodology are quoted prices
(unadjusted) for identical assets or liabilities in active markets.
|
Level 2
|
inputs to the valuation methodology include quoted prices
for similar assets and liabilities in active markets, and inputs that are observable for the assets or liability, either directly
or indirectly, for substantially the full term of the financial instruments.
|
Level 3
|
inputs to the valuation methodology are unobservable
and significant to the fair value.
|
As
of December 31, 2016 and 2015, financial instruments of the Company primarily comprise of cash, accrued interest receivables,
other receivables, short-term bank loans, deposits payables and accrued expenses, which were carried at cost on the balance sheets,
and carrying amounts approximated their fair values because of their generally short maturities.
2.7
Convertible notes
In
accordance with ASC subtopic 470-20, the convertible notes are initially carried at the principal amount of the convertible notes.
Debt premium or discounts, which are the differences between the carrying value and the principal amount of convertible notes
at the issuance date, together with related debts issuance cost, are subsequently amortized using effective interest method as
adjustments to interest expense from the debt issuance date to its first redemption date. Convertible notes are classified as
a current liability if they are or will be callable by the Company or puttable by the debt holders within one year from the balance
sheet date, even though liquidation may not be expected within that period.
Yangtze
River Development Limited
(FORMERLY
Kirin International Holding, Inc.)
NOTES
TO the FINANCIAL STATEMENTS
2.8
Foreign currency translation and transactions
The
Company’s consolidated financial statements are presented in the U.S. dollar (US$), which is the Company’s
reporting currency. Yangtze River, Energetic Mind, and Ricofeliz Capital uses US$ as its functional currency. Wuhan Newport
uses Renminbi Yuan (“RMB”) as its functional currency. Transactions in foreign currencies are initially recorded
at the functional currency rate ruling at the date of transaction. Any differences between the initially recorded amount and
the settlement amount are recorded as a gain or loss on foreign currency transaction in the statements of
operations.
In
accordance with ASC 830, Foreign Currency Matters, the Company translated the assets and liabilities into US$ using the rate
of exchange prevailing at the applicable balance sheet date and the statements of operations and cash flows are translated at
an average rate during the reporting period. Adjustments resulting from the translation are recorded in owners’
equity as part of accumulated other comprehensive income.
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
Balance sheet items, except for equity accounts
|
|
|
6.9447
|
|
|
|
6.4917
|
|
|
|
For the Years Ended
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
Items in the statements of operations and comprehensive income, and statements of cash flows
|
|
|
6.6431
|
|
|
|
6.2288
|
|
2.9
Revenue recognition
The
Company recognizes revenue from steel trading when persuasive evidence of an arrangement exists, delivery has occurred, the price
is fixed or determinable and collection is reasonably assured.
Real
estate sales are reported in accordance with the provisions of ASC 360-20, Property, Plant and Equipment, Real Estate Sales.
Revenue
from the sales of completed properties and properties where the construction period is twelve months or less is recognized by
the full accrual method when (a) sale is consummated; (b) the buyer’s initial and continuing involvements are adequate to
demonstrate a commitment to pay for the property; (c) the receivable is not subject to future subordination; (d) the Company has
transferred to the buyer the usual risks and rewards of ownership in a transaction that is in substance a sale and does not have
a substantial continuing involvement with the property. A sale is not considered consummated until (a) the parties are bound by
the terms of a contract or agreement, (b) all consideration has been exchanged, (c) any permanent financing for which the seller
is responsible has been arranged, (d) all conditions precedent to closing have been performed. Fair value of buyer’s payments
to be received in future periods pursuant to sales contract is classified under accounts receivable. Sales transactions not meeting
all the conditions of the full accrual method are accounted for using the deposit method of accounting. Under the deposit method,
all costs are capitalized as incurred, and payments received from the buyer are recorded as a deposit liability.
Revenue
and profit from the sale of development properties where the construction period is more than twelve months is recognized by
the percentage-of-completion method on the sale of individual units when the following conditions are met: (a) construction
is beyond a preliminary stage; (b) the buyer is committed to the extent of being unable to require a refund except for
non-delivery of the unit; (c) sufficient units have already been sold to assure that the entire property will not revert to
rental property; (d) sales prices are collectible and (e) aggregate sales proceeds and costs can be reasonably estimated. If
any of these criteria are not met, proceeds are accounted for as deposits until the criteria are met and/or the sale
consummated.
The
Company has not generated any revenue from the sales of real estate property for the years ended December 31, 2016 and 2015.
Yangtze
River Development Limited
(FORMERLY
Kirin International Holding, Inc.)
NOTES
TO the FINANCIAL STATEMENTS
2.10
Real estate capitalization and cost allocation
Real
estate property completed and real estate properties and land lots under development consist of commercial units under
construction and units completed. Properties under development or completed are stated at cost or estimated net realizable
value, whichever is lower. Cost capitalization of development and redevelopment activities begins during the predevelopment
period, which we define as the activities that are necessary to begin the development of the property. We cease
capitalization upon substantial completion of the project, but no later than one year from cessation of major construction
activity. We also cease capitalization when activities necessary to prepare the property for its intended use have been
suspended. Costs include costs of land use rights, direct development costs, interest on indebtedness, construction overhead
and indirect project costs. The Company acquires land use rights with lease terms of 40 years through government sale
transaction. Land use rights are divided and transferred to customers after the Company delivers properties. The Company
capitalizes payments for obtaining the land use rights, and allocates to specific units within a project based on
units’ gross floor area. Costs of land use rights for the purpose of property development are not amortized. Other
costs are allocated to units within a project based on the ratio of the sales value of units to the estimated total
sales value.
2.11
Capitalization of interest
In
accordance with ASC 360, Property, Plant and Equipment, interest incurred during construction is capitalized to properties under
development. For the years ended December 31, 2016 and 2015, $nil and $nil were capitalized as properties under development, respectively.
2.12
Advertising expenses
Advertising
costs are expensed as incurred, or the first time the advertising takes place, in accordance with ASC 720-35, Advertising Costs.
For the years ended December 31, 2016 and 2015, the Company recorded advertising expenses of $2,348 and $7,724, respectively.
2.13
Share-based compensation
The
Company grants restricted shares to its non-employee consultants. Awards granted to non-employees are measured at fair value at
the earlier of the commitment date or the date the services are completed, and are recognized using graded vesting method over
the period the service is provided.
2.14
Income taxes
Current
income taxes are provided for in accordance with the laws of the relevant taxing authorities. As part of the process of preparing
consolidated financial statements, the Company is required to estimate its income taxes in each of the jurisdictions in which
it operates. The Company accounts for income taxes using the liability method. Under this method, deferred income taxes are recognized
for tax consequences in future years of differences between the tax bases of assets and liabilities and their reported amounts
in the consolidated financial statements at each year-end and tax loss carry forwards. Deferred tax assets and liabilities are
measured using enacted tax rates applicable for the differences that are expected to affect taxable income.
The
Company adopts a more likely than not threshold and a two-step approach for the tax position measurement and financial statement
recognition. Under the two-step approach, the first step is to evaluate the tax position for recognition by determining if the
weight of available evidence indicates that it is more likely than not that the position will be sustained, including resolution
of related appeals or litigation process, if any. The second step is to measure the tax benefit as the largest amount that is
more than 50% likely of being realized upon settlement. As of December 31, 2016 and 2015, the Company did not have any uncertain
tax position.
2.15
Land Appreciation Tax (“LAT”)
In
accordance with the relevant taxation laws in the PRC, the Company is subject to LAT based on progressive rates ranging from 30%
to 60% on the appreciation of land value, which is calculated as the proceeds of sales of properties less deductible expenditures,
including borrowing costs and all property development expenditures. LAT is prepaid at 1% to 2% of the pre-sales proceeds each
year as required by the local tax authorities, and is settled generally after the construction of the real estate project is completed
and majority of the units are sold. The Company provides LAT as expensed when the related revenue is recognized based on estimate
of the full amount of applicable LAT for the real estate projects in accordance with the requirements set forth in the relevant
PRC laws and regulations. LAT would be included in income tax expense in the statements of operations and comprehensive income
(loss).
Yangtze
River Development Limited
(FORMERLY
Kirin International Holding, Inc.)
NOTES
TO the FINANCIAL STATEMENTS
2.16
Earnings (loss) per share
Basic
earnings (loss) per share is computed using the weighted average number of common shares outstanding during the year. Diluted
earnings per share is computed using the weighted average number of common shares and potential common shares outstanding during
the period for convertible notes under if-convertible method, if dilutive. Potential common shares are not included in the denominator
of the diluted earnings per share calculation when inclusion of such shares would be anti-dilutive, such as in a period in which
a net loss is recorded.
2.17
Comprehensive loss
Comprehensive
loss includes net income (loss) and foreign currency adjustments. Comprehensive loss is reported in the consolidated statements
of operations and comprehensive loss. Accumulated other comprehensive loss, as presented on the consolidated balance sheets are
the cumulative foreign currency translation adjustments.
2.18
Contingencies
In
the normal course of business, the Company is subject to loss contingencies, such as legal proceedings and claims arising out
of its business, that cover a wide range of matters, including, among others, government investigations and tax matters. In accordance
with ASC No. 450 Sub topic 20, “Loss Contingencies”, the Company records accruals for such loss contingencies when
it is probable that a liability has been incurred and the amount of loss can be reasonably estimated.
2.19
Recently issued accounting pronouncements
The
Company does not believe other recently issued but not yet effective accounting standards from ASU 2017-06, if currently adopted,
would have a material effect of the consolidated financial position, results of operation and cash flows.
3.
Risks
(a)
Liquidity risk
The
Company is exposed to liquidity risk which is risk that it is unable to provide sufficient capital resources and liquidity to
meet its commitments and business needs. Liquidity risk is controlled by the application of financial position analysis and monitoring
procedures.
(b)
Foreign currency risk
A
majority of the Company’s operating activities and a significant portion of the Company’s assets and liabilities are
denominated in RMB, which is not freely convertible into foreign currencies. All foreign exchange transactions take place either
through the Peoples’ Bank of China (“PBOC”) or other authorized financial institutions at exchange rates quoted
by PBOC. Approval of foreign currency payments by the PBOC or other regulatory institutions requires submitting a payment application
form together with suppliers' invoices and signed contracts. The value of RMB is subject to changes in central government policies
and to international economic and political developments affecting supply and demand in the China Foreign Exchange Trading System
market.
(c)
For the years ended December 31, 2016 and 2015, there were no sales.
Yangtze River Development
Limited
(FORMERLY
Kirin International Holding, Inc.)
NOTES
TO the FINANCIAL STATEMENTS
4.
OTHER assets and receivables
Other
assets and receivables as of December 31, 2016 and 2015 consisted of:
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
Deposits
|
|
$
|
792
|
|
|
$
|
847
|
|
Prepaid consulting and legal fees
|
|
|
-
|
|
|
|
1,941,163
|
|
Underwriting commission and rental deposit
|
|
|
1,606,000
|
|
|
|
1,606,000
|
|
Temporary investment deposit
|
|
|
10,000
|
|
|
|
-
|
|
Excessive business tax and related urban construction and education surcharge
|
|
|
1,578,178
|
|
|
|
1,726,408
|
|
Excessive land appreciation tax
|
|
|
956,782
|
|
|
|
985,447
|
|
|
|
$
|
4,151,752
|
|
|
$
|
6,259,865
|
|
Business
tax and LAT are payable each year at 5% and 1% - 2% respectively of customer deposits received. The Company recognizes sales related
business tax and LAT in the income statement to the extent that they are proportionate to the revenue recognized each period.
Any excessive amounts of business and LAT liabilities recognized at period-end pursuant to tax laws and regulations over the amounts
recognized in the income statement are capitalized in prepayments and will be expensed in subsequent periods.
5.
REAL ESTATE PROPERTY COMPLETED
The
account balance and components of the real estate property completed were as follow:
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
Properties completed
|
|
|
|
|
|
|
Wuhan Centre China Grand Steel Market
|
|
|
|
|
|
|
Costs of land use rights
|
|
$
|
7,213,617
|
|
|
$
|
7,716,994
|
|
Other development costs
|
|
|
22,293,491
|
|
|
|
23,849,162
|
|
|
|
$
|
29,507,108
|
|
|
$
|
31,566,156
|
|
As
of December 31, 2016, the sole and wholly owned developing project of the Company is called Wuhan Centre China Grand Steel Market
(Phase 1) Commercial Building in the south of Hans Road, Wuhan Yangluo Economic Development Zone with approximately 222,496.6
square meters of total construction area. Since June 2009, the Company commenced the construction of the project that funded through
a combination of bank loans and advances from shareholders. The Company has obtained certificates representing titles of the land
use rights used for the development of the project. As of December 31, 2016, the Company has completed the construction of four
buildings covering area of approximately 35,350.4square meters of construction area. The Company values the real estate assets
based on estimates using present value by quoted prices for comparable real estate projects.
Yangtze
River Development Limited
(FORMERLY
Kirin International Holding, Inc.)
NOTES
TO the FINANCIAL STATEMENTS
6.
REAL ESTATE PROPERTIES AND LAND LOTS UNDER DEVELOPMENT
The
components of real estate properties and land lots under development were as follows:
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
Properties under development
|
|
|
|
|
|
|
Wuhan Centre China Grand Steel Market
|
|
|
|
|
|
|
Costs of land use rights
|
|
$
|
8,699,859
|
|
|
$
|
9,306,948
|
|
Other development costs
|
|
|
36,791,759
|
|
|
|
38,982,735
|
|
|
|
|
|
|
|
|
|
|
Land lots under development Costs of land use rights
|
|
|
295,935,616
|
|
|
|
316,586,422
|
|
|
|
$
|
341,427,234
|
|
|
$
|
364,876,105
|
|
The
investments in undeveloped land were acquired in September, 2007. The Company leases the land under land use right leases
with various terms from the PRC government, and does not have ownership of the underlying land.
As
of December 31, 2016, the Company has three buildings under development of the project described in Note 5 covering area of approximately
57,450.4 square meters of construction area.
Land
use right with net book value of $169,461,795, including in real estate held for development and land lots undeveloped were pledged
as collateral for the
financial institution
loan
as at December 31, 2016.
(See Note 10)
7.
Property and Equipment
The
Company’s property and equipment used to conduct day-to-day business are recorded at cost less accumulated depreciation.
Depreciation expenses are calculated using straight-line method over the estimated useful life with 5% of estimated salvage value
below:
|
|
Useful life
|
|
|
December 31,
|
|
|
|
Years
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
Fixture, furniture and office equipment
|
|
5
|
|
|
$
|
60,017
|
|
|
$
|
63,474
|
|
Vehicles
|
|
5
|
|
|
|
493,955
|
|
|
|
528,424
|
|
Less: accumulated depreciation
|
|
|
|
|
|
(464,230
|
)
|
|
|
(434,399
|
)
|
Property and equipment, net
|
|
|
|
|
$
|
89,742
|
|
|
$
|
157,499
|
|
Depreciation
expense totaled $62,536 and $79,064 for the years ended December 31, 2016 and 2015, respectively.
8.
OTHER PAYABLES AND ACCRUED LIABILITIES
Other
payables and accrued liabilities as of December 31, 2016 and 2015 consisted of:
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
Salaries payable
|
|
$
|
301,590
|
|
|
$
|
182,716
|
|
Business tax and related urban construction and education surcharge
|
|
|
10,577
|
|
|
|
12,947
|
|
Deposits from contractors
|
|
|
156,954
|
|
|
|
167,907
|
|
Interest payable on convertible bond
|
|
|
6,197,260
|
|
|
|
197,260
|
|
Interest payable on loans
|
|
|
2,319,338
|
|
|
|
-
|
|
|
|
$
|
8,985,719
|
|
|
$
|
560,830
|
|
Yangtze
River Development Limited
(FORMERLY
Kirin International Holding, Inc.)
NOTES
TO the FINANCIAL STATEMENTS
9.
REAL ESTATE PROPERTY REFUND AND COMPENSATION PAYABLe
During
the years 2012 and 2011, the Company signed 443 binding agreements of sales of commercial offices of the project with floor
area of 22,790 square meters to unrelated purchasers (the transactions or the real estate sales transactions). The Company
received deposits and considerations from the purchasers as required by the agreements. The construction commenced in the
2010, which was originally expected to be delivered to customers in late of 2012. No revenue was recognized from the sales of
the commercial offices due to the reason stated below.
Owing
to commercial reasons, the Company decided to terminate the agreements made for the sale of the real estate properties in relation
to the project of Wuhan Centre China Grand Market. According to the agreements of sales, the Company is obliged to compensate
the purchaser at a rate equal to 6% per annum or 0.05% per day on the deposits paid. In the years ended December 31, 2016 and
2015, the Company incurred $1,433,737 and $1,528,126 compensation expenses which were included in general and administrative expenses.
As
at December 31, 2016, 375 out of 443 agreements were cancelled, and no completed office (or real estate certificate) has been
delivered to the purchaser. The Company is still in the progress of negotiating with the purchasers for the cancellation of
the remaining agreements. The directors of the Company are of the opinion that almost all of the purchasers shall accept the
cancellation. If, finally the purchaser insisted on the execution of the agreement, the Company will accept.
Real
estate property refund and compensation payable represent the amount of customer deposits received and the compensation calculated
in accordance with the provisions in the sales agreements. The payable consists of the followings:
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
Property sales deposits
|
|
$
|
18,838,103
|
|
|
$
|
20,152,652
|
|
Compensation
|
|
|
6,159,460
|
|
|
|
5,122,101
|
|
|
|
$
|
24,997,563
|
|
|
$
|
25,274,753
|
|
10.
Loans payable
|
|
|
|
|
December 31,
|
|
Bank name
|
|
Term
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
China Construction Bank
|
|
|
From May 30, 2014 to May 29, 2020
|
|
|
$
|
41,456,074
|
|
|
$
|
44,502,981
|
|
Loans
are floating rate loans whose rates (2016: 5.58% per annum and 2015: 6.33% per annum) are set at 5% above the over 5 years base
borrowing rate stipulated by the People's Bank of China. Interest expenses incurred on loans payable for the years ended December
31, 2016 and 2015 was $2,424,794 and $3,001,771, respectively.
Land
use right with net book value of $169,461,795, including in real estate held for development and land lots under development were
pledged as collateral for the loan as at December 31, 2016.
The
aggregate maturities of loans payable of each of years subsequent to December 31, 2016 are as follows:
2017
|
|
$
|
10,079,629
|
|
2018
|
|
|
10,079,629
|
|
2019
|
|
|
11,519,576
|
|
2020
|
|
|
9,777,240
|
|
|
|
$
|
41,456,074
|
|
Yangtze
River Development Limited
(FORMERLY
Kirin International Holding, Inc.)
NOTES
TO thE FINANCIAL STATEMENTS
11.
DISPOSAL OF SUBSIDIARIES
On
December 31, 2015, the Company sold all of its interests in i) Brookhollow Lake, LLC, ii) Newport Property Holding, LLC, iii)
wholly-owned subsidiary Kirin China, iv) wholly-owned subsidiary Kirin Hopkins Real Estate Group, v) wholly-owned subsidiary Archway
Development Group LLC, vi) wholly-owned subsidiary Specturm International Enterprise, LLC and vii) wholly-owned subsidiary HHC-6055
Centre Drive LLC (collectively referred to as the “Kirin Subsidiaries”). The sale of Kirin China also effectively
terminated Company’s contractual relationship with Hebei Zhongding Real Estate Development Co. Ltd and Xingtai Zhongding
Jiye Real Estate Development Co., Ltd, both of which are companies formed under the laws of the People’s Republic of China
and were deemed Company’s variable interest entities prior to the Sale.
The
Company sold its interests in Kirin Subsidiaries for an aggregate of $75,000,002 for the Sale. The carrying amount of the net
assets of Kirin Subsidiaries was $63,312,904 as of disposal date and the Company recognized the differences of $11,687,098 to
shareholders' equity as a capital transaction.
12.
CONVERTIBLE NOTE
On
December 19, 2015, the Company issued an 8% convertible note in the principal amount of $150,000,000 to Jasper, a related party,
in the Share Exchange (see Note 1). The holder of the Note may convert all or any portion of the then aggregate outstanding principal
amount, together with any accrued and unpaid interest, into shares of Company’s common stock at $10.00 per share.
The
maturity date of the Note is December 18, 2018.
On
December 31, 2015, pursuant to the terms and conditions of the Agreements, Jasper, financed the Purchaser for the Sale by reducing
Company’s financial obligations under the Note by an aggregate of $75,000,000 (see Note 1). As a result of the Sale, the
outstanding balance due to Jasper under the Note was $75,000,000 plus any accrued interest.
There
was no beneficial conversion feature attributable to the Note as the set conversion price of the Note was greater than the fair
value of the common share price at the date of issuance. The Company has accounted for the Note in accordance with ASC 470-20,
as a single instrument as a non-current liability. The Note is initially carried at the gross cash received at the issuance date.
The
interest expense for the convertible note included in the consolidated statements of operations was $6,197,260 and $197,260, respectively,
for the years ended December 31, 2016 and 2015. Note issuance costs are immaterial.
The
interest payable for the convertible note included in the consolidated balance sheets was $6,197,260 and $197,260, respectively
as at December 31, 2016 and 2015.
13.
Employee Retirement Benefit
The
Company has made employee benefit contribution in accordance with Chinese relevant regulations, including retirement insurance,
unemployment insurance, medical insurance, work injury insurance and birth insurance. The Company recorded the contribution in
the salary and employee charges when incurred. The contributions made by the Company were $125,027 and $64,005, respectively for
the years ended December 31, 2016 and 2015.
Yangtze
River Development Limited
(FORMERLY
Kirin International Holding, Inc.)
NOTES
TO the FINANCIAL STATEMENTS
14.
INCOME TAXES
The
Company was incorporated in the state of Nevada. Under the current law of Nevada, the Company is not subject to state corporate
income tax. No provision for federal corporate income tax has been made in the financial statements as there are no assessable
profits.
Energetic
Mind was incorporated in the British Virgin Islands (“BVI”). Under the current law of the BVI, Energetic Mind is not
subject to tax on income.
Ricofeliz
Capital was incorporated in Hong Kong. No provision for Hong Kong profits tax has been made in the financial statements as there
are no assessable profits.
Wuhan
Newport was incorporated in the PRC, was governed by the income tax law of the PRC and is subject to PRC enterprise income tax
(“EIT”). The EIT rate of PRC is 25%.
Income
tax expenses for the years ended December 31, 2016 and 2015 are summarized as follows:
|
|
Years Ended December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
Current
|
|
$
|
-
|
|
|
$
|
-
|
|
Deferred tax benefit
|
|
$
|
1,143,595
|
|
|
$
|
1,378,700
|
|
A
reconciliation of the income tax benefit determined at the PRC EIT income tax rate to the Company’s effective income tax
benefit is as follows:
|
|
Years Ended December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
EIT at the PRC statutory rate of 25%
|
|
$
|
3,467,419
|
|
|
$
|
1,940,140
|
|
Valuation allowance
|
|
|
(2,323,824
|
)
|
|
|
(561,440
|
)
|
|
|
$
|
1,143,595
|
|
|
$
|
1,378,700
|
|
The
Company evaluates the level of authority for each uncertain tax position (including the potential application of interest and
penalties) based on the technical merits, and measures the unrecognized benefits associated with the tax positions. For the years
ended December 31, 2016 and 2015, the Company had no unrecognized tax benefits.
The
Company does not anticipate any significant increase to its liability for unrecognized tax benefit within the next 12 months.
The Company will classify interest and penalties related to income tax matters, if any, in income tax expense.
Deferred
income taxes are recognized for tax consequences in future years of differences between the tax bases of assets and liabilities
and their reported amounts in the consolidated financial statements at each year-end and tax loss carry forwards. The tax effects
of temporary differences that give rise to the following approximate deferred tax assets and liabilities as of December 31, 2016
and 2015 are presented below.
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
Deferred tax assets
|
|
|
|
|
|
|
Operating loss carry forward
|
|
$
|
372,075
|
|
|
$
|
303,237
|
|
Excess of interest expenses
|
|
|
1,887,225
|
|
|
|
1,398,582
|
|
Accrued expenses
|
|
|
2,213,281
|
|
|
|
1,912,600
|
|
|
|
$
|
4,472,581
|
|
|
$
|
3,614,419
|
|
The
Company had net operating losses carry forward of $1,423,666 as of December 31, 2016 which will expire on various dates between
December 31, 2018 and 2020.
Yangtze
River Development Limited
(FORMERLY
Kirin International Holding, Inc.)
NOTES
TO the FINANCIAL STATEMENTS
15.
loss per share
|
|
Years Ended December 31,
|
|
|
|
2016
|
|
|
2015
|
|
Numerator:
|
|
|
|
|
|
|
Net loss
|
|
$
|
(12,726,080
|
)
|
|
$
|
(6,381,862
|
)
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding-basic and diluted
|
|
|
177,459,678
|
|
|
|
151,682,554
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted loss per share
|
|
$
|
(0.07
|
)
|
|
$
|
(0.04
|
)
|
Common
shares of 7,950,411 resulting from the assumed conversion of 8% Convertible Note (Note 12) were excluded from the calculation
of diluted loss per share for the years ended December 31, 2016 as their effect is anti-dilutive.
16.
Related Party Transactions
16.1
Nature of relationships with related parties
Name
|
|
Relationships with the Company
|
Mr Zhao Weibin
|
|
Officer
|
Mr Liu Xiangyao
|
|
Director
|
Wuhan Renhe Group Co., Ltd (“Wuhan Renhe”)
|
|
Former shareholder (Mr Wang Geng) of Wuhan Newport
|
Wuhan Renhe Real Estate Co., Ltd (“Renhe RE”)
|
|
Mr. Wang Geng, the director of the Company, holds 100% of Renhe RE
|
16.2
Related party balances and transactions
Amount
due to Mr Zhao Weibin were $118,263 and $126,516 as at December 31, 2016 and 2015, respectively. The amount is unsecured, interest
free and does not have a fixed repayment date.
A
summary of changes in the amount due to Mr Zhao Weibin is as follows:
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
At beginning of year
|
|
$
|
126,516
|
|
|
$
|
126,516
|
|
Exchange difference adjustment
|
|
|
(8,253
|
)
|
|
|
-
|
|
At end of year
|
|
$
|
118,263
|
|
|
$
|
126,516
|
|
Amount
due to Mr Liu Xiangyao were $31,751,959 and $2,428,731 as at December 31, 2016 and 2015, respectively. The amount is unsecured,
interest free and does not have a fixed repayment date.
Yangtze
River Development Limited
(FORMERLY
Kirin International Holding, Inc.)
NOTES
TO the FINANCIAL STATEMENTS
A
summary of changes in the amount due to Mr Liu Xiangyao is as follows:
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
At beginning of year
|
|
$
|
2,428,731
|
|
|
$
|
-
|
|
Advances from the director
|
|
|
29,720,658
|
|
|
|
2,428,731
|
|
Repayment to the director
|
|
|
(359,881
|
)
|
|
|
-
|
|
Exchange difference adjustment
|
|
|
(37,549
|
)
|
|
|
-
|
|
At end of year
|
|
$
|
31,751,959
|
|
|
$
|
2,428,731
|
|
Amount
due to Wuhan Renhe were $nil and $28,822,089 as at December 31, 2016 and December 31, 2015, respectively. The amount is unsecured,
interest free and does not have a fixed repayment date.
On
June 30, 2015, Wuhan Renhe forgave a total amount of $285,413,074 with the Company. The Company has credited the amount of $285,413,074
to additional paid-in capital in equity.
A
summary of changes in the amount due to Wuhan Renhe is as follows:
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
At beginning of year
|
|
$
|
28,822,089
|
|
|
$
|
322,388,060
|
|
Advances from the related party
|
|
|
-
|
|
|
|
28,463,394
|
|
Forgiveness of loan
|
|
|
-
|
|
|
|
(285,413,074
|
)
|
Exchange difference adjustment
|
|
|
-
|
|
|
|
(36,616,291
|
)
|
Repayment to the related company
|
|
|
28,822,089
|
|
|
|
-
|
|
At end of year
|
|
$
|
-
|
|
|
$
|
28,822,089
|
|
Amount
due to Renhe RE were $nil and $667,776 as at December 31, 2016 and December 31, 2015, respectively. The amount is unsecured, interest
free and does not have a fixed repayment date.
A
summary of changes in the amount due to Renhe RE is as follows:
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
At the beginning of year
|
|
$
|
667,776
|
|
|
$
|
-
|
|
Advances from the related party
|
|
|
-
|
|
|
|
667,776
|
|
Repayment to the related company
|
|
|
667,776
|
|
|
|
-
|
|
At end of year
|
|
$
|
-
|
|
|
$
|
667,776
|
|
Yangtze
River Development Limited
(FORMERLY
Kirin International Holding, Inc.)
NOTES
TO THE FINANCIAL STATEMENTS
17.
SHARE-BASED COMPENSATION EXPENSES
On
December 27, 2015, the Company granted 317,345 and 340,555 shares of the Company’s restricted common stock to a number
of consultants, in exchange for its legal and professional services to the Company for the years ended December 31, 2015 and
2016, respectively. These shares were valued at $5.7 per share, the closing bid price of the Company’s common stock on
the date of grant. Total compensation expense recognized in the general and administrative expenses of the consolidated
statement of operations for the year ended December 31, 2015 was $1,808,867. Total compensation expense of approximately
$1,941,163 was recognized in 2016. The shares attributable to fiscal 2015 and 2016 were issued on December 30,
2015.
On
January 25, 2016, the Company granted 15,000 shares of the Company’s restricted common stock to a consultant, in exchange
for its legal and professional services to the Company for the year 2016. These shares were valued at $4.9 per share, the closing
bid price of the Company’s common stock on the date of grant. This compensation expense of approximately $73,500 was recognized
in 2016.
Total
compensation expenses recognized in the general and administrative expenses of the consolidated statements of operations for the
years ended December 31, 2016 and 2015 was $2,014,663 and $1,808,867 respectively.
18.
Concentration of Credit Risks
As
of December 31, 2016 and 2015, substantially all of the Company’s cash and cash equivalents were held by major financial
institutions located in China and the US, which management believes are of high credit quality.
The
Company’s operations are carried out in the PRC. Accordingly, the Company’s business, financial condition and results
of operations may be influenced by the political, economic and legal environments in the PRC as well as by the general state of
the PRC’s economy. The business may be influenced by changes in governmental policies with respect to laws and regulations,
anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things.
No
customer accounted for more than 10% of total accounts receivable as of December 31, 2016 and 2015.
19.
Commitments and Contingencies
Operating
lease commitments
For
the years ended December 31, 2016 and 2015, rental expenses under operating leases were $72,000 and $6,000, respectively.
The
future obligations for operating leases of each of years subsequent to December 31, 2016 are as follows:
2017
|
|
$
|
21,000
|
|
2018
|
|
|
-
|
|
Total minimum payment required
|
|
$
|
21,000
|
|
Legal
proceeding
The
Company is not currently a party to any legal proceeding, investigation or claim which, in the opinion of the management, is likely
to have a material adverse effect on the business, financial condition or results of operations.
The Company did not
identify any contingency as of December 31, 2016.
Yangtze
River Development Limited
(FORMERLY
Kirin International Holding, Inc.)
NOTES
TO THE FINANCIAL STATEMENTS
20.
RESTRICTED NET ASSETS
PRC
laws and regulations permit payments of dividends by the Company’s subsidiary incorporated in the PRC only out of their
retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. In addition, the Company’s
subsidiary incorporated in the PRC are required to annually appropriate 10% of their net income to the statutory reserve prior
to payment of any dividends, unless such reserve have reached 50% of their respective registered capital. In addition, registered
share capital and capital reserve accounts are also restricted from withdrawal in the PRC, up to the amount of net assets held
in each subsidiary. As a result of the restrictions described above and elsewhere under PRC laws and regulations, the Company’s
subsidiary incorporated in the PRC are restricted in their ability to transfer a portion of their net assets to the Company in
the form of dividends or advances from PRC subsidiary. Such restriction amounted to $287,214,468 as of December 31, 2016. Except
for the above, there is no other restriction on the use of proceeds generated by the Company’s subsidiary to satisfy any
obligations of the Company.
21.
GOING CONCERN
As
shown in the accompanying financial statements, the Company has sustained recurring losses and negative cash flows from operations.
Over the past years, the Company has been funded through a combination of bank loans and advances from shareholders. On January
29, 2016, the Company received an undertaking commitment letter provided by the Company’s majority shareholder who is willing
to provide sufficient funding on an as-needed basis. In addition, the Company plans to dispose of the existing developed real
estate properties with market value of approximately $42 million when the Company needs cash flows. The Company believes that,
as a result of these, it currently has sufficient cash and financing commitments to meet its funding requirements for a reasonable
period of time.
22.
SUBSEQUENT EVENTS
Under the terms of the Armada Agreement
(See Note 1.1), at the first closing, Wight was required to provide an aggregate total of $200 million, $50 million in Working
Capital and $150 million in Construction Funding, to us by January 18, 2017. Wight did not provide the funding on January 18, 2017
and we gave Notice of Default and Request for Cure. Wight proposed to provide $50 million in Working Capital on or before February
15, 2017 and secure $150 million in Construction Funding on or before March 15, 2017. Wight failed to provide the $50 million in
Working Capital as proposed by February 15, 2017.
On February 24, 2017, due to Wight’s
nonperformance and nonpayment of $50 million for the First Financing, the Company decided to unwind Armada Financing. Pursuant
to Armada Agreement, the termination of the Armada Agreement calls for the immediate return of the 100,000,000 shares of common
stock issued by the Company to Wight. On February 27, 2017, the Company issued a notice of termination of contract to Wight.
On February 27, 2017, the Company
issued a “Termination and Demand” letter to Wight which terminated the Agreement with Wight and Armada and demanded
the return of the 100,000,000 shares of common stock.
On March 1, 2017, the 100,000,000
shares of the Company’s common stock were canceled and returned by Wight, and were subsequently returned to the Company’s
treasury.
The Company reserves the right to pursue any further legal action
with respect to Armada’s and Wight’s default under the Agreement.
F-21
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