UNITED STATES 

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

(Mark One)

 

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2014

 

or

 

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ______to______

 

Commission File Number: 001-34567

 

CHINA YIDA HOLDING, CO.

(Exact name of registrant as specified in its charter)

 

Nevada		50-0027826
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
28/F Yifa Building, No. 111 Wusi Road Fuzhou, Fujian, P. R. China		350003
(Address of principal executive offices)		(Zip Code)

 

+ 86 (591) 28082230

(Registrant's telephone number, including area code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No o

 

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 x No o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large  accelerated filer		o		Accelerated filer		o
Non-accelerated filer		o (Do not check if a smaller reporting company)		Smaller reporting company		x

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No x

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date.

 

Class		Shares outstanding as of November 11, 2014
Common stock, $.001 par value		3,914,580

 

 

 

PART 1 -FINANCIAL INFORMATION

 

Item 1. Financial Statements.

 

CHINA YIDA HOLDING, CO. AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

Index to consolidated financial statements

 

	Page
Consolidated Balance Sheets as of September 30, 2014 and December 31, 2013	2
Consolidated Statements of Income and Comprehensive Income for the nine months and three months ended September 30, 2014 and 2013	3
Consolidated Statements of Cash Flows for the nine months ended September 30, 2014 and 2013	4
Notes to the Consolidated Financial Statements	5 - 28

  

  

CHINA YIDA HOLDING CO. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

 

		September 30,				December 31,
		2014				2013
		(UNAUDITED)				(AUDITED)
ASSETS
Current assets
Cash and cash equivalents		$	5,981,829			$	2,157,738
Accounts receivable			700,376				571,637
Other receivables, net			211,150				268,835
Advances and prepayments			1,704,112				1,361,194
Prepayment - current portion			844,664				659,050
Current assets of discontinued operations			-				587,329
Total current assets			9,442,131				5,605,783
Property and equipment, net			183,141,620				182,719,628
Intangible assets, net			46,614,410				47,837,641
Long-term prepayments			2,147,440				2,707,374
Non-current assets of discontinued operations			-				37,730,857
Total assets		$	241,345,601			$	276,601,283
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Short-term loans		$	4,549,369			$	2,454,108
Long-term debt, current portion			1,218,581				6,871,502
Accounts payable			640,709				565,694
Accrued expenses and other payables			1,598,877				1,019,391
Due to related parties			41,855,609				35,596,962
Taxes payable			55,790				27,895
Current liabilities of discontinued operations			-				2,110,055
Total current liabilities			49,918,935				48,645,607
Long-term debt			76,283,166				78,531,462
Non-current liabilities of discontinued operations			-				8,135,018
Total liabilities			126,202,101				135,312,087
Equity
Preferred stock ($0.0001 par value, 10,000,000 shares authorized, none issued and outstanding)			-				-
Common stock ($0.001 par value, 100,000,000 shares authorized, 3,914,580 and 3,914,580 shares issued and outstanding as of September 30, 2014 and December 31, 2013, respectively)			3,915				3,915
Additional paid in capital			49,163,705				49,163,705
Accumulated other comprehensive income			17,249,950				18,388,750
Retained earnings			46,176,600				71,183,496
Statutory reserve			2,549,330				2,549,330
Total equity			115,143,500				141,289,196
Total liabilities and equity		$	241,345,601			$	276,601,283

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

  

CHINA YIDA HOLDING CO. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(UNAUDITED)

 

		Nine Months Ended September 30,								Three Months Ended September 30,
		2014				2013				2014				2013
Net revenue
Advertisement		$	-			$	2,899,844			$	-			$	318,434
Tourism			9,030,961				6,891,455				3,870,984				2,616,382
Total net revenue			9,030,961				9,791,299				3,870,984				2,934,816
Cost of revenue
Advertisement			-				2,038,196				-				271,213
Tourism			6,784,170				3,104,123				2,471,661				1,145,681
Total cost of revenue			6,784,170				5,142,319				2,471,661				1,416,894
Gross profit			2,246,791				4,648,980				1,399,323				1,517,922
Operating expenses
Selling expenses			7,717,558				6,566,556				2,906,081				2,243,762
General and administrative expenses			5,555,330				4,160,079				1,967,665				1,669,838
Total operating expenses			13,272,888				10,726,635				4,873,746				3,913,600
Loss from operations			(11,026,097	)			(6,077,655	)			(3,474,423	)			(2,395,678	)
Other income (expense)
Other expense, net			(399,986	)			(560,284	)			(618,142	)			(527,976	)
Interest income			7,448				75,499				2,975				4,817
Interest expense			(6,460,899	)			(3,280,394	)			(1,999,487	)			(928,581	)
Total other expenses			(6,853,437	)			(3,765,179	)			(2,614,654	)			(1,451,740	)
Loss before income tax and non-controlling interest			(17,879,534	)			(9,842,834	)			(6,089,077	)			(3,847,418	)
Less: Provision for income tax			-				132,830				-				961
Net loss from continuing operations			(17,879,534	)			(9,975,664	)			(6,089,077	)			(3,848,379	)
Discontinued Operation
(Loss) income from discontinued operations, net of income taxes			(616,732	)			(782,692	)			(83,796	)			220,202
(Loss) gain on disposal of subsidiary, net of income taxes			(6,510,630	)			999,133				(6,510,630	)			-
Net (loss) income from discontinued operations, net of income taxes			(7,127,362	)			216,441				(6,594,426	)			220,202
Net loss			(25,006,896	)			(9,759,223	)			(12,683,503	)			(3,628,177	)
Net loss attributable to non-controlling interest:
Net loss from discontinued operation			-				102,215				-				-
Net loss attributable to China Yida Holding Co.		$	(25,006,896	)		$	(9,657,008	)		$	(12,683,503	)		$	(3,628,177	)
Net loss		$	(25,006,896	)		$	(9,759,223	)		$	(12,683,503	)		$	(3,628,177	)
Other comprehensive income
Foreign currency translation (loss) gain			(1,138,800	)			3,573,349				143,407				681,539
Comprehensive loss			(26,145,696	)			(6,185,874	)			(12,540,096	)			(2,946,638	)
Comprehensive loss attributable to non-controlling interest			-				390,730				-				-
Comprehensive loss attributable to China Yida Holding Co.		$	(26,145,696	)		$	(5,795,144	)		$	(12,540,096	)		$	(2,946,638	)
Amounts attributable to common stockholders:
Net loss from continuing operations, net of income taxes			(17,879,534	)			(9,975,664	)			(6,089,077	)			(3,848,379	)
Net income from discontinued operations, net of income taxes			(7,127,362	)			318,656				(6,594,426	)			220,202
Net loss attributable to common stockholders			(25,006,896	)			(9,657,008	)			(12,683,503	)			(3,628,177	)
Net loss attributable to common stockholders per share - basic and diluted:
- Basic & diluted earnings/(loss) per share from continuing operations		$	(4.57	)		$	(2.55	)		$	(1.56	)		$	(0.98	)
- Basic & diluted earnings/(loss) per share from discontinued operations		$	(1.82	)		$	0.08			$	(1.68	)		$	0.06
- Basic & diluted earnings/(loss) per share attributable to common stockholders		$	(6.39	)		$	(2.47	)		$	(3.24	)		$	(0.92	)
Weighted average shares outstanding
- Basic			3,914,580				3,914,580				3,914,580				3,914,580
- Diluted			3,914,580				3,914,580				3,914,580				3,914,580

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

  

CHINA YIDA HOLDING CO. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

		For The Nine Months Ended September 30,
		2014				2013
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss attributable to common stockholders		$	(25,006,896	)		$	(9,657,008	)
Loss from discontinued operations			616,732				782,692
Adjustments to reconcile net income to net cash provided by operating activities:
Loss (gain) on disposal of discontinued operation			6,510,630				(999,133	)
Depreciation			6,412,392				3,090,269
Amortization			893,871				1,355,439
Amortization of financing costs			-				111,976
Noncontrolling interest			-				(102,215	)
Changes in operating assets and liabilities:
Accounts receivable			(132,831	)			(398,206	)
Other receivables, net			28,156				(2,031,734	)
Advances and prepayments			(352,702	)			(3,573,044	)
Accounts payable			79,007				98,765
Accrued expenses and other payables			587,164				3,247,724
Taxes payable			55,851				(444,929	)
Net cash used in continuing operations			(10,308,625	)			(8,519,404	)
Net cash provided by (used in) discontinued operations			675,366				(1,093,625	)
Net cash used in operating activities			(9,633,259	)			(9,613,029	)
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property and equipment			(8,097,950	)			(71,652,052	)
Change in long-term prepayments for acquisition of property, equipment and land use rights			351,457				(304,269	)
Net cash used in continuing operations			(7,746,493	)			(71,956,321	)
Net cash provided by (used in) discontinued operations			471,410				(480,122	)
Net cash used in investing activities			(7,275,083	)			(72,436,443	)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of obligation under airtime rights commitment			-				(1,567,134	)
Proceed from disposal of discontinued entities			35,570,385				9,616,155
Proceeds from discontinued entities			23,480,855				625,957
Repayment to discontinued entities			(38,277,859	)			(856,729	)
Proceeds from short-term loans			4,554,327				4,021,038
Repayment of short-term loans			(2,439,818	)			(1,608,415	)
Proceeds from long-term loans			40,175,667				53,077,703
Repayment of long-term loans			(47,495,120	)			(12,223,956	)
Proceeds from loans from related parties			6,483,770				27,117,207
Net cash provided by continuing operations			22,052,207				78,201,825
Net cash used in discontinued operations			(1,399,034	)			(768,742	)
Net cash provided by financing activities			20,653,173				77,433,083
EFFECT OF EXCHANGE RATE CHANGES ON CASH			(174,502	)			88,662
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS			3,570,329				(4,527,727	)
NET DECREASE IN CASH & CASH EQUIVALENTS FROM DISCONTINUED OPERATIONS			(253,763	)			(2,291,658	)
NET INCREASE (DECREASE) IN CASH & CASH EQUIVALENTS FROM CONTINUING OPERATIONS			3,824,091				(2,236,069	)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD			2,157,738				3,542,459
CASH AND CASH EQUIVALENTS, ENDING OF PERIOD		$	5,981,829			$	1,306,390
SUPPLEMENTAL DISCLOSURES:
Non-cash investing activities:
Transfer from construction in progress to property and equipment		$	-			$	70,772,638
Cash paid during the period for:
Income tax		$	-			$	525,184
Interest		$	6,404,999			$	5,248,955

 

The accompanying notes are an integral part of these consolidated financial statements 

  

CHINA YIDA HOLDING, CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

1.	ORGANIZATION AND DESCRIPTION OF BUSINESS

 

China Yida Holding Co. (“China Yida”) and its subsidiaries (collectively the "Company”, “we”, “us”, or “our”) engage in tourism and advertisement businesses in the People’s Republic of China.

 

Keenway Limited was incorporated under the laws of the Cayman Islands on May 9, 2007 for the purpose of functioning as an off-shore holding company to obtain ownership interests in Hong Kong Yi Tat International Investment Co., Ltd (“Hong Kong Yi Tat”), a company incorporated under the laws of Hong Kong. Immediately prior to the Merger (defined below), Mr. Chen Minhua and his wife, Ms. Fan Yanling, were the majority shareholders of Keenway Limited.

 

On November 19, 2007, we entered into a share exchange and stock purchase agreement with Keenway Limited, Hong Kong Yi Tat, and with the shareholders of Keenway Limited at that time, including Chen Minhua, Fan Yanling, Zhang Xinchen, Extra Profit International Limited, and Lucky Glory International Limited (collectively, the “Keenway Limited Shareholders”), pursuant to which in exchange for all of their shares of Keenway Limited common stock, the Keenway Limited Shareholders received 18,180,649 newly issued shares (or 90,903,246 shares prior to the reverse stock split on November 16, 2012) of our common stock and 728,359 shares (or 3,641,796 shares prior to the reverse stock split on November 16, 2012) of our common stock which was transferred from some of our then existing shareholders (the “Merger”). As a result of the closing of the Merger, the Keenway Limited Shareholders owned approximately 94.5% of our then issued and outstanding shares on a fully diluted basis and Keenway Limited became our wholly owned subsidiary.

 

Hong Kong Yi Tat was incorporated as the holding company of our operating entities, Fujian Jintai Tourism Development Co., Ltd., and Fujian Jiaoguang Media Co., Ltd., Yida (Fujian) Tourism Group Limited, and Fujian Yida Tulou Tourism Development Co., Ltd. (“Tulou”).  Hong Kong Yi Tat does not have any other operation.  

 

Fujian Jintai Tourism Development Co., Ltd. (“Fujian Jintai”) has a wholly owned subsidiary, Fuzhou Hongda Commercial Services Co., Ltd., (“Hongda”).  The operation of Fujian Jintai is to develop the Great Golden Lake, one of our tourism destinations.

 

Hongda does not have any operation except for owning 100% of the ownership interest in Fuzhou Fuyu Advertising Co., Ltd. (“Fuyu”) which is engaged in the operations of our media business. On March 15, 2010, Hongda entered into an equity transfer agreement with Fujian Yunding Tourism Industrial Co., Ltd, (currently known as Yida (Fujian) Tourism Group Limited, “Fujian Yunding”), pursuant to which Fujian Yunding acquired 100% of the issued and outstanding shares of Fuyu from Hongda at the aggregate purchase price of RMB 3,000,000.  As a result, Fujian Yunding became the 100% holding company of Fuyu. Hongda ceased business and deregistered on December 2, 2011.

 

Fujian Jintai originally also owned 100% of the ownership interest in Fujian Yintai Tourism Co., Ltd. (“Yintai”). On March 15, 2010, Fujian Jintai entered into an equity transfer agreement with Fujian Yunding, pursuant to which Fujian Yunding acquired 100% of the issued and outstanding common stock of Yintai from Fujian Jintai at the aggregate purchase price of RMB 5,000,000. As a result, Yintai became a wholly owned subsidiary of Fujian Yunding.  Yintai was deregistered on November 18, 2010.

 

Fujian Yida Tulou Tourism Development Co., Ltd.’s (“Tulou”) primary business relates to the operation of the Hua’An Tulou cluster, one of our tourism destinations.

 

On April 12, 2010, our operating subsidiary “Fujian Yunding Tourism Industrial Co., Ltd.” changed its name to “Yida (Fujian) Tourism Group Limited” for our expanding business in operations of domestic tourism destinations in China by acquiring new tourism destinations. Yida (Fujian) Tourism Group Limited’s (“Fujian Yida”) primary business relates to the operations of our Yunding tourism destination and all of our newly engaged tourism destinations, and the management of our media business. 

 

On March 16, 2010, Fujian Yida formed a wholly owned subsidiary, Yongtai Yunding Resort Management Co., Ltd. (“Yongtai Yunding”) which currently has no material business operations. We plan to develop Yongtai Yunding into a business entity primarily focusing on the operations of our Yunding tourism destination.

 

Fujian Jiaoguang Media Co., Ltd. (“Fujian Jiaoguang”) and the Company’s contractual relationship comply with the requirements of the Accounting Standard Codification ("ASC") 810, to consolidate Fujian Jiaoguang’s financial statements as a Variable Interest Entity. During the current period, Fujian Jiaoguang had no material business operations.

 

Fuzhou Fuyu Advertising Co., Ltd. (“Fuyu”) concentrates on the mass media segment of our business.  Its primary business is focused on advertisements, including media publishing, television, cultural and artistic communication activities, and performance operation and management activities.

 

On April 15, 2010, we entered into agreement with Anhui Xingguang Group to set up a subsidiary - Anhui Yida Tourism Development Co., Ltd. ("Anhui Yida") by investing 60% of the equity interest, and Anhui Xingguang Group owns 40% of the equity interest of Anhui Yida. The total paid-in capital of Anhui Yida was $14,687,307 (equals RMB 100 million). Anhui Yida's primary business relates to the operation of our tourism destinations, specifically, Ming dynasty culture tourist destination. 

 

 

CHINA YIDA HOLDING, CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED) 

 

1.	ORGANIZATION AND DESCRIPTION OF BUSINESS (CONTINUED)

 

On July 6, 2010, Fujian Yida formed a wholly owned subsidiary, Jiangxi Zhangshu (Yida) Tourism Development Co., Ltd. (“Jiangxi Zhangshu”) which currently has no material business operations. The initial paid-in capital of Jiangxi Zhangshu was $2,937,461 (RMB 20 million). On July 5, 2011, Fujian Yida and Fuyu further injected capital amounted to RMB 49 million and RMB1 million, respectively, to Jiangxi Zhangshu. On March 20, 2012, Fujian Yida and Fuyu further injected capital amounted to RMB 29.4 million and RMB 0.6 million, respectively, to Jiangxi Zhangshu, and the total paid-in capital increased to $15,842,337 (RMB100 million). We plan to develop Jiangxi Zhangshu into a business entity primarily focusing on the operations of a new tourist destination.

 

On July 7, 2010, Fujian Yida formed a wholly owned subsidiary, Jiangxi Fenyi (Yida) Tourism Development Co., Ltd. (“Jiangxi Fenyi”) which currently has no material business operations. The initial paid-in capital of Jiangxi Fenyi was $1,762,477 (RMB 12 million).  On July 7, 2011, Fujian Yida further injected capital amounted to RMB 48 million to Jiangxi Fenyi and the total paid-in capital increased to $9,391,876 (RMB 60 million). We plan to develop Jiangxi Fenyi into a business entity primarily focusing on the operations of a new tourist destination.

 

On June 24, 2011, Fujian Yida formed a wholly owned subsidiary, Fujian Yida Travel Service Co., Ltd (the “Yida Travel”). The total paid-in capital of Yida Travel was $1,546,670 (RMB 10 million).  Its primary business is to conduct domestic and international traveling services in China, including operating the direct sales of travel services for our current tourist destinations at the Great Golden Lake, Yunding Recreational Park, and Hua’An Tulou Cluster, and our three tourist destinations currently under construction, Ming Dynasty Entertainment World, China Yang-sheng (Nourishing Life) Paradise, and the City of Caves.

 

On May 11, 2012, Jiangxi Zhangshu formed a wholly owned subsidiary, Zhangshu (Yida) Real Estate Development Co., Ltd. (“Zhangshu Development”). The total paid-in capital of Zhangshu Development was $792,532 (RMB 5 million). Its primary business is to conduct business of real estate development and sales in China.

 

On May 16, 2012, Anhui Yida formed a wholly owned subsidiary, Bengbu (Yida) Real Estate Development Co., Ltd. (the “Bengbu Yida”). The total paid-in capital of Bengbu Yida was $1,268,050 (RMB 8 million). Its primary business is to conduct business of real estate development in China.

 

On May 22, 2012, Jiangxi Zhangshu formed a wholly owned subsidiary, Zhangshu (Yida) Investment Co., Ltd. (the “Zhangshu Investment”). The total paid-in capital of Zhangshu Investment was $792,532 (RMB 5 million). Its primary business is to conduct real estate investment, project management and consulting in China.

 

On June 6, 2012, Jiangxi Fenyi formed a wholly owned subsidiary, Fenyi (Yida) Property Development Co., Ltd. (“Fenyi Development”). The total paid-in capital of Fenyi Development was $792,532 (RMB 5 million). Its primary business is to conduct business of real estate development and sales in China.

 

On July 20, 2012, Anhui Yida formed a wholly owned subsidiary, Bengbu (Yida) Investment Co., Ltd. (“Bengbu Investment”). The total paid-in capital of Bengbu Investment was $792,532 (RMB 5 million). Its primary business is to conduct real estate investment, project management and consulting in China.

 

On July 30, 2012, Fujian Yida formed a wholly owned subsidiary, Fujian (Yida) Culture and Tourism Performing Arts Co., Ltd. (“Yida Arts”). The total paid-in capital of Yida Arts was $792,532 (RMB 5 million). Its primary business is to operate performance and show events at Yunding Park.

 

On June 3, 2013, Fujian Yida entered into a stock transfer agreement with Anhui Xingguang Investment Group Ltd (“Purchaser”), pursuant to which Fujian Yida agreed to transfer its 60% interest in Anhui Yida to the Purchaser for 60 million RMB, or $9.72 million, The Purchaser assumed all the assets and liabilities of Anhui Yida.

 

On June 26, 2013, Fujian Yida formed a wholly owned subsidiary, Yunding Hotel Management Co., Ltd. (“Yunding Hotel”). The total paid-in capital of Yunding Hotel was $4,860,000 (RMB 30 million). Its primary business is to operate and manage the hotel and its facilities at Yunding Park.

 

On June 24, 2014, Jiangxi Zhangshu formed a wholly owned subsidiary, Jiangxi Yida Travel Service Co., Ltd (“Jiangxi Travel”). The total paid-in capital of Zhangshu Development was $48,691 (RMB 0.3 million). Its primary business is to conduct domestic and international traveling services in China.

 

  

CHINA YIDA HOLDING, CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

2.	GOING CONCERN

 

The Company’s consolidated financial statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred significant negative cash flows from operative activities, and continuing net losses and working capital deficits that allow it to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company’s ability to obtain adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations. The accompanying consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

 

Management’s Plan to Continue as a Going Concern

 

In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management’s plans to obtain such resources for the Company include (1) obtaining capital from the sale of its substantial assets, (2) generating and recovery of tourism revenue, and (3) short-term and long-term borrowings from banks, stockholders or other related party(ies). However, management cannot provide any assurance that the Company will be successful in accomplishing any of its plans.

 

The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually to secure other sources of financing and attain profitable operations.

 

3.	BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

The unaudited consolidated financial statements of China Yida Holding, Co. and Subsidiaries have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and pursuant to the requirements for reporting on Form 10-Q.  Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States of America for annual financial statements.  However, the information included in these interim financial statements reflects all adjustments (consisting solely of normal recurring adjustments) which are, in the opinion of management, necessary for the fair presentation of the consolidated financial position and the consolidated results of operations.  Results shown for interim periods are not necessarily indicative of the results to be obtained for a full year.  The consolidated balance sheet information as of December 31, 2013 was derived from the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K.  These interim financial statements should be read in conjunction with that report.  Certain comparative amounts have been reclassified to conform to the current period's presentation.

 

a. Basis of presentation

 

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America. The functional currency is the Chinese Renminbi, however the accompanying consolidated financial statements have been translated and presented in United States Dollars ($).

 

b. Principles of consolidation

 

The accompanying consolidated financial statements include the accounts of China Yida and its wholly-owned subsidiaries Keenway Limited, Hong Kong Yi Tat, Fuyu, Fujian Yida, Tulou, Yongtai Yunding, Jiangxi Zhangshu, Jiangxi Fenyi, Yida Travel, Fenyi Development, Zhangshu Development, Zhangshu Investment,  Yida Arts, Yunding hotel, Jiangxi Travel and the accounts of its variable interest entity, Fujian Jiaoguang. All significant inter-company accounts and transactions have been eliminated in consolidation

 

Consolidation of Variable Interest Entities

 

According to the requirements of ASC 810, an Interpretation of Accounting Research Bulletin No. 51 that requires a Variable Interest Entity ("VIE"), the Company has evaluated the economic relationships of Fujian Jiaoguang which signed an exclusive right agreement with the Company. Therefore, Fujian Jiaoguang is considered to be a VIE, as defined by ASC Topic 810-10, of which the Company is the primary beneficiary.

 

The carrying amount and classification of Fujian Jiaoguang’s assets and liabilities included in the Consolidated Balance Sheets are as follows:

 

		September 30, 2014				December 31, 2013
Total current assets *		$	6,470,528			$	12,244,845
Total assets		$	6,478,166			$	12,252,536
Total current liabilities #		$	15,318,650			$	11,193,422
Total liabilities		$	15,318,650			$	11,193,422

 

* Including intercompany receivables of $6,463,934 and $12,231,075 as at September 30, 2014 and December 31, 2013, respectively, to be eliminated in consolidation.

 

# Including intercompany payables of $15,288,021 and $11,169,092 as at September 30, 2014 and December 31, 2013, respectively, to be eliminated in consolidation.

 

  

CHINA YIDA HOLDING, CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

3.	BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Although Fujian Jiaoguang no longer had revenues, its bank account still has to be maintained active with certain cash flows to support its expenses.  As such, Fujian Jiaoguang transferred funds from and to the Company’s directly-owned subsidiaries, which resulted in intercompany receivables and payables. Since Fujian Jiaoguang is a variable interest entity subject to consolidation, the balances of its intercompany receivables and payables are eliminated against the corresponding account balances at the Company’s directly-owned subsidiaries at the consolidation level.

 

c. Use of estimates and assumptions

 

The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the amount of revenues and expenses during the reporting periods. Management makes these estimates using the best information available at the time the estimates are made. However, actual results could differ materially from those results. The most significant estimates reflected in the consolidated financial statements include depreciation, useful lives of property and equipment, deferred income taxes, useful life of intangible assets and contingencies. Estimates and assumptions are periodically reviewed and the effects of revisions are reflected in the consolidated financial statements in the period they are determined to be necessary.

 

d. Cash and cash equivalents

 

The Company considers all cash on hand and in banks, certificates of deposit and other highly-liquid investments with original maturities of three months or less, when purchased, to be cash and cash equivalents. As of September 30, 2014 and December 31, 2013, the Company has uninsured deposits in banks of approximately $5,956,000 and $2,147,000.

 

e. Accounts receivable

 

The Company maintains reserves for potential credit losses on accounts receivable. Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves. Based on the management’s judgment, no allowance for doubtful accounts is required at the balance sheet dates. 

 

f. Advances and prepayments

 

The Company advances funds to certain vendors for purchase of its construction materials and necessary services. Based on the management’s judgment, no allowance for advances and prepayments were assessed and recorded as of September 30, 2014 and December 31, 2013, respectively.

 

g. Property and equipment

 

Property and equipment are recorded at cost less accumulated depreciation. Gains or losses on disposals are reflected as gain or loss in the year of disposal. The cost of improvements that extends the life of property, and equipment are capitalized. These capitalized costs may include structural improvements, equipment, and fixtures. All ordinary repair and maintenance costs are expensed as incurred.

 

Depreciation for financial reporting purposes is provided using the straight-line method over the estimated useful lives of the assets or lease term as follows:

 

Building	20 years
Electronic Equipment	5 to 8 years
Transportation Equipment	8 years
Office Furniture	5 to 8 years
Leasehold Improvement and Attractions	Lesser of term of the lease or the estimated useful lives of the assets

 

h. Intangible assets

 

Intangible assets consist of acquisition of management right of tourist resort, commercial airtime rights and land use rights for tourism resorts.  They are amortized on the straight line basis over their respective lease periods. The lease period of management right, commercial airtime rights and land use rights is 30 years, 3 years and 40 years, respectively. 

 

  

CHINA YIDA HOLDING, CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

3.	BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

i. Impairment

 

The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable through the estimated undiscounted cash flows expected to result from the use and eventual disposition of the assets. Whenever any such impairment exists, an impairment loss will be recognized for the amount by which the carrying value exceeds the fair value.

 

Assets are grouped and evaluated at the lowest level for their identifiable cash flows that are largely independent of the cash flows of other groups of assets. The Company considers historical performance and future estimated results in its evaluation of potential impairment and then compares the carrying amount of the asset to the future estimated cash flows expected to result from the use of the asset. If the carrying amount of the asset exceeds estimated expected undiscounted future cash flows, the Company measures the amount of impairment by comparing the carrying amount of the asset to its fair value. The estimation of fair value is generally measured by discounting expected future cash flows as the rate the Company utilizes to evaluate potential investments. The Company estimates fair value based on the information available, judgments and projections are considered necessary. There was no impairment of long-lived assets as of September 30, 2014 and December 31, 2013. 

 

j. Revenue recognition

 

Revenue is recognized at the date of service rendered to customers when a formal arrangement exists, the price is fixed or determinable, the services rendered, no other significant obligations of the Company exist and collectability is reasonably assured. Payments received before satisfaction of all of the relevant criteria for revenue recognition are recorded as unearned revenue.

 

Revenues from advance resort ticket sales are recognized when the tickets are used. Revenues from our contractors who have tourism contracts with us are generally recognized over the period of the applicable agreements commencing with the tourists visiting the resort. The Company also sells admission and activities tickets for a resort which the Company has the management right.

 

The Company sells the television airtime to third parties. The Company records advertising sales when advertisements are aired.

 

The Company has no allowance for product returns or sales discounts because services that are rendered and accepted by the customers are normally not refundable and discounts are normally not granted after service has been rendered. 

 

Profit sharing costs are recorded as cost of revenue. Profit sharing arrangements with the local governments for the management rights (see Note 14):

 

For the nine months ended September 30, 2014
		Tulou
Gross receipts		$	486,126
Profit sharing costs			-
Nature resource compensation expenses			43,856
Total paid to the local governments			43,856
Net receipts		$	442,270

 

For the nine months ended September 30, 2013
		Tulou
Gross receipts		$	512,986
Profit sharing costs			-
Nature resource compensation expenses			45,953
Total paid to the local governments			45,953
Net receipts		$	467,033

 

  

CHINA YIDA HOLDING, CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

3.	BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

For the three months ended September 30, 2014
		Tulou
Gross receipts		$	126,818
Profit sharing costs			-
Nature resource compensation expenses			11,441
Total paid to the local governments			11,441
Net receipts		$	115,377

 

For the three months ended September 30, 2013 

 

		Tulou
Gross receipts		$	177,774
Profit sharing costs			-
Nature resource compensation expenses			15,638
Total paid to the local governments			15,638
Net receipts		$	162,136

 

k. Advertising costs

 

The Company expenses the cost of advertising as incurred or, as appropriate, the first time the advertising takes place. Advertising costs for the nine months ended September 30, 2014 and 2013 were $1,772,762 and $1,095,450, respectively. Advertising costs for the three months ended September 30, 2014 and 2013 were $920,266 and $296,730, respectively.

 

l. Post-retirement and post-employment benefits

 

Full time employees of subsidiaries of the Company participate in a government mandated multi-employer defined contribution plan pursuant to which certain pension benefits, medical care, employee housing, and other welfare benefits are provided to employees. Chinese labor regulations require that the subsidiaries of the Company make contributions to the government for these benefits based on a certain percentages of employees’ salaries. The Company has no legal obligation for the benefits beyond the contributions made. The total amounts for such employee benefits, which were expensed as incurred, were $230,450 and $163,734 for the nine months ended September 30, 2014 and 2013, respectively, and were $136,598 and $52,750 for the three months ended September 30, 2014 and 2013 respectively. Other than the above, neither the Company nor its subsidiaries provide any other post-retirement or post-employment benefits.

 

m. Foreign currency translation

 

The Company uses the United States dollar ("U.S. dollars") for financial reporting purposes. The Company’s subsidiaries maintain their books and records in their functional currency, being the primary currency of the economic environment in which their operations are conducted. In general, for consolidation purposes, the Company translates the subsidiaries' assets and liabilities into U.S. dollars using the applicable exchange rates prevailing at the balance sheet dates, and the statements of income are translated at average exchange rates during the reporting periods. Gain or loss on foreign currency transactions are reflected on the income statement. Gain or loss on financial statement translation from foreign currency are recorded as a separate component in the equity section of the balance sheet and is included as part of accumulated other comprehensive income. The functional currency of the Company and its subsidiaries in China is the Chinese Renminbi.

 

n. Income taxes

 

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is recognized if it is more likely than not that some portion, or all, of a deferred tax asset will not be realized. There were no deferred income tax assets as of September 30, 2014 and December 31, 2013, respectively.

  

 

CHINA YIDA HOLDING, CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

3.	BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

The Company applied the provisions of ASC 740-10-50, “Accounting For Uncertainty In Income Taxes”, which provides clarification related to the process associated with accounting for uncertain tax positions recognized in our financial statements. Audit periods remain open for review until the statute of limitations has passed. The completion of review or the expiration of the statute of limitations for a given audit period could result in an adjustment to the Company’s liability for income taxes. Any such adjustment could be material to the Company’s results of operations for any given quarterly or annual period based, in part, upon the results of operations for the given period. At September 30, 2014, management considered that the Company had no uncertain tax positions, and will continue to evaluate for uncertain positions in the future. 

 

China Yida is subject to U.S. Federal and California state examination by tax authorities for years after 2008, and the PRC tax authority for years after 2007.

 

o. Fair values of financial instruments

 

The carrying amounts reported in the consolidated financial statements for current assets and currently liabilities approximate fair value due to the short-term nature of these financial instruments. The carrying amount of long-term loans approximates fair value since the interest rates associated with the debts approximate the current market interest rates.

 

The Company adopted ASC 820-10, “Fair Value Measurements and Disclosures”, which establishes a single authoritative definition of fair value and a framework for measuring fair value and expands disclosure of fair value measurements for both financial and nonfinancial assets and liabilities. This standard defines fair value, provides guidance for measuring fair value and requires certain disclosures. This standard does not require any new fair value measurements, but discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flows) and the cost approach (cost to replace the service capacity of an asset or replacement cost). For purposes of ASC 820-10-15, nonfinancial assets and nonfinancial liabilities would include all assets and liabilities other than those meeting the definition of a financial asset or financial liability as defined in ASC-820-10-15-15-1A.

 

p. Stock-based compensation

 

The Company records stock-based compensation expense pursuant to ASC 718-10, "Share Based Payment Arrangement ” which requires companies to measure compensation cost for stock-based employee compensation plans at fair value at the grant date and recognize the expense over the employee's requisite service period. The Company’s expected volatility assumption is based on the historical volatility of Company’s stock or the expected volatility of similar entities. The expected life assumption is primarily based on historical exercise patterns and employee post-vesting termination behavior. The risk-free interest rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of grant.

 

Stock-based compensation expense is recognized based on awards expected to vest, and there were no estimated forfeitures as the Company has a short history of issuing options. ASC 718-10 requires forfeitures to be estimated at the time of grant and revised in subsequent periods, if necessary, if actual forfeitures differ from those estimates.

 

q. Earnings per share (EPS)

 

Earnings per share is calculated in accordance with ASC 260. Basic earnings per share is based upon the weighted average number of common shares outstanding. Diluted earnings per share is based on the assumption that all dilutive convertible shares and stock instruments were converted or exercised. Options and warrants are assumed to be exercised at the beginning of the period if the average stock price for the period is greater than the exercise price of the warrants and options.

 

r. Statutory Reserves

 

In accordance with the relevant laws and regulations of the PRC and the articles of association of the Company, the Company is required to allocate 10% of their net income reported in the PRC statutory accounts, after offsetting any prior years’ losses, to the statutory surplus reserve, on an annual basis. When the balance of such reserve reaches 50% of the respective registered capital of the subsidiaries, any further allocation is optional.

 

As at September 30, 2014, the statutory reserve of the subsidiaries already reached 50% of the registered capital of the subsidiaries and the Company did not have any further allocation on it.

 

The statutory surplus reserves can be used to offset prior years’ losses, if any, and may be converted into registered capital, provided that the remaining balances of the reserve after such conversion is not less than 25% of registered capital. The statutory surplus reserve is non-distributable.

   

  

CHINA YIDA HOLDING, CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

3.	BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

s. Segment reporting

 

ASC 250, "Disclosure About Segments of an Enterprise and Related Information" requires use of the "management approach" model for segment reporting. The management approach model is based on the way a company’s management organizes segments within the company for making operating decisions and assessing performance. Reportable segments are based on products and services, geography, legal structure, management structure, or any other manner in which management disaggregates a company. Prior to July 2013, the Company had two reportable segments: advertisement and tourism. Now the company has only one reportable segment which is tourism.

 

t. Dividend Policy

 

Under the laws governing foreign invested enterprises in China, dividend distribution and liquidation are allowed but subject to special procedures under the relevant laws and rules. Any dividend payments will be subject to the decision of the Board of Directors and subject to foreign exchange rules governing such repatriation. Any liquidation is subject to both the relevant government agency’s approval and supervision as well as the foreign exchange control.

 

u. Reclassifications

 

Except for the classification for discontinued operations, certain classifications have been made to the prior year financial statements to conform to the current year presentation. The reclassifications have no impact on the Company’s 2013 Consolidated Statements of Income and Comprehensive Income and Consolidated Statements of Cash Flows.

 

v. Recent accounting pronouncements 

 

In August 2014, FASB issued ASU 2014-15 – Presentation of Financial Statements – Going Concern (Subtopic 205-40). The amendments in this Update states the disclosure of uncertainties about an entity’s ability to continue as a going concern. An entity’s management should evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued (or available to be issued). When management identifies conditions or events that raise substantial doubt, management should consider whether its plans will alleviate the substantial doubt.

 

When substantial doubt is raised but is alleviated by management’s plans, the entity should disclose following information: (a) Principal conditions or events that raised substantial doubt (before consideration of management’s plans); (b) Management’s evaluation of the significance of those conditions or events in relation to the entity’s ability to meet its obligations; (c) Management’s plans that alleviated the substantial doubt.

 

When substantial doubt is raised but is not alleviated by management’s plans,, an entity should include a statement in the footnotes indicating that there is substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued (or available to be issued), and disclose the following information: (a) Principal conditions or events that raise substantial doubt; (b) Management’s evaluation of the significance of those conditions or events in relation to the entity’s ability to meet its obligations; (c) Management’s plans that are intended to mitigate the conditions or events that raise the substantial doubt.

 

The amendments in this Update are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. The Company is still in progress of evaluating future impact of adopting this standard.

 

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve the core principle, an entity should apply the following steps:

 

Step 1: Identify the contract(s) with a customer.

Step 2: Identify the performance obligations in the contract.

Step 3: Determine the transaction price.

Step 4: Allocate the transaction price to the performance obligations in the contract.

Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation.

 

 

CHINA YIDA HOLDING, CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

3.	BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

An entity should disclose sufficient information to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. For a public entity, the amendments in this Update are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early application is not permitted. For all other entities (nonpublic entities), the amendments in this Update are effective for annual reporting periods beginning after December 15, 2017, and interim periods within annual periods beginning after December 15, 2018. A nonpublic entity may elect to apply this guidance earlier. The Company has begun evaluating future impact of adopting this standard on the Company’s consolidated financial position and operating results.

 

In April 2014, the FASB issued ASU 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360). The amendments in this Update change the requirements for reporting discontinued operations in Subtopic 205-20. A discontinued operation may include a component of an entity or a group of components of an entity, or a business or nonprofit activity. A disposal of a component of an entity or a group of components of an entity is required to be reported in discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results. The amendments in this Update require an entity to present, for each comparative period, the assets and liabilities of a disposal group that includes a discontinued operation separately in the asset and liability sections, respectively, of the statement of financial position. The amendments in this Update require a public business entity and a not-for-profit entity that has issued, or is a conduit bond obligor for, securities that are traded, listed, or quoted on an exchange or an over-the-counter market to provide disclosures about a disposal of an individually significant component of an entity that does not qualify for discontinued operations presentation in the financial statements. The amendments in this Update require all other entities to provide disclosures about a disposal of an individually significant component of an entity that does not qualify for discontinued operations presentation in the financial statements. The amendments in this Update expand the disclosures about an entity’s significant continuing involvement with a discontinued operation. Those disclosures are required until the results of operations of the discontinued operation in which an entity retains significant continuing involvement are no longer presented separately as discontinued operations in the statement where net income is reported (or statement of activities for a not-for-profit entity). The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial position and results of operations.

 

In January 2014, the FASB issued ASU 2014-02, Intangibles-Goodwill and Other (Topic 350): Accounting for Goodwill. The amendments in this Update allow an accounting alternative for the subsequent measurement of goodwill. An entity within the scope of the amendments that elects the accounting alternative in this Update should amortize goodwill on a straight-line basis over 10 years, or less than 10 years if the entity demonstrates that another useful life is more appropriate. An entity that elects the accounting alternative is further required to make an accounting policy election to test goodwill for impairment at either the entity level or the reporting unit level. Goodwill should be tested for impairment when a triggering event occurs that indicates that the fair value of an entity (or a reporting unit) may be below its carrying amount. The disclosures required under this alternative are similar to existing U.S. generally accepted accounting principles (GAAP). However, an entity that elects the accounting alternative is not required to present changes in goodwill in a tabular reconciliation. The accounting alternative, if elected, should be applied prospectively to goodwill existing as of the beginning of the period of adoption and new goodwill recognized in annual periods beginning after December 15, 2014, and interim periods within annual periods beginning after December 15, 2015. Early application is permitted. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial position and results of operations.

 

In December 2013, the FASB issued ASU 2013-12, “Definition of a Public Business Entity”. The Board has decided that it should proactively determine which entities would be within the scope of the Private Company Decision-Making Framework: A Guide for Evaluating Financial Accounting and Reporting for Private Companies (Guide). This will aim to minimize the inconsistency and complexity of having multiple definitions of, or a diversity in practice as to what constitutes, a nonpublic entity and public entity within U.S. generally accepted accounting principles (GAAP) on a going-forward basis. This Update addresses those issues by defining public business entity. The Accounting Standards Codification includes multiple definitions of the terms nonpublic entity and public entity. The amendment in this Update improves U.S. GAAP by providing a single definition of public business entity for use in future financial accounting and reporting guidance. The amendment does not affect existing requirements. There is no actual effective date for the amendment in this Update. However, the term public business entity will be used in Accounting Standards Updates which are the first Updates that will use the term public business entity. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial position and results of operations.

 

 

CHINA YIDA HOLDING, CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

3.	BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

In July 2013, the FASB issued ASU 2013-11, “Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists.” An unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset. To the extent a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. The assessment of whether a deferred tax asset is available is based on the unrecognized tax benefit and deferred tax asset that exist at the reporting date and should be made presuming disallowance of the tax position at the reporting date. For public entities, the guidance is effective prospectively for reporting periods beginning after December 15, 2013. For nonpublic entities, the guidance is effective prospectively for reporting periods beginning after December 15, 2014. Early adoption is permitted. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial position and results of operations. 

 

In February 2013, the FASB issued ASU 2013-02, “Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income.”  This ASU does not change the current requirements for reporting net income or other comprehensive income in financial statements.  However, this guidance requires an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component.  In addition, an entity is required to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period.  For other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures required under U.S. GAAP that provide additional detail about those amounts.  For public entities, the guidance is effective prospectively for reporting periods beginning after December 15, 2012.  For nonpublic entities, the guidance is effective prospectively for reporting periods beginning after December 15, 2013.  Early adoption is permitted.  The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial position and results of operations.

 

4.	OTHER RECEIVABLES, NET

 

Other receivables consist of the following: 

 

		September 30, 2014				December 31, 2013
Advance to employees		$	107,158			$	125,824
Security deposits			40,088				104,730
Other			63,904				38,281
			211,150				268,835
Less: Allowance			-				-
		$	211,150			$	268,835

 

5.	ADVANCES AND PREPAYMENTS

 

Advances and prepayments consist of the following: 

 

		September 30, 2014				December 31, 2013
Advance payments related to land use rights		$	819,635			$	814,000
Advance payments related to hotel facilities of Yunding resort			267,308				354,461
Advance payments related to facilities of Yang-Sheng Paradise			180,333				27,900
Other			436,836				164,833
			1,704,112				1,361,194
Less: Allowance			-				-
		$	1,704,112			$	1,361,194

 

As of September 30, 2014, advance payments related to land use rights represents the payment made by Fujian Yida and Fenyi Yida. Fujian Yida made advance payments to the local government of Yongtai County of $808,378 (RMB 4.98 million) for the acquisition of land use rights. Fenyi Yida made advance payments to the local government of $11,257 (RMB 0.07 million) for the acquisition of land use rights during the nine months ended September 30, 2014.

 

As of December 31, 2013, advance payments related to land use rights represents the payment made by Fujian Yida. Fujian Yida made advance payments to the local government of Yongtai County of $814,000 (RMB 4.98 million) for the acquisition of land use rights.

 

As of September 30, 2014 and December 31, 2013, advance payments related to facilities of Yang-Sheng Paradise were $180,333 and $27,900, respectively.

 

As of September 30, 2014 and December 31, 2013, advance payments related to hotel facilities of Yunding resort were $267,308 and $354,461, respectively.

 

 

CHINA YIDA HOLDING, CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

6.	PROPERTY AND EQUIPMENT, NET

 

Property and equipment consist of the following:

 

		September 30, 2014				December 31, 2013
Buildings, improvements, and attractions		$	192,731,457			$	187,404,825
Electronic equipment			4,071,181				3,705,166
Transportation equipment			2,890,994				2,602,218
Office furniture			1,003,754				235,306
			200,697,386				193,947,515
Less: Accumulated depreciation			(17,555,766	)			(11,227,887	)
Property and equipment, net		$	183,141,620			$	182,719,628

 

Depreciation expense for the nine months ended September 30, 2014 and 2013 were $6,412,392 and $3,090,269 respectively.

 

Depreciation expense for the three months ended September 30, 2014 and 2013 were $2,473,273 and $1,071,774, respectively.

 

7.	INTANGIBLE ASSETS, NET

 

Intangible assets consist of the following:

 

		September 30, 2014				December 31, 2013
Land use right		$	47,965,661			$	48,299,182
Commercial airtime rights			-				6,882,616
			47,965,661				55,181,798
Accumulated amortization			(1,351,251	)			(7,344,157	)
Intangible assets, net		$	46,614,410			$	47,837,641

 

Commercial airtime rights

 

On August 1, 2010, the Company entered into a commercial airtime rights agreement with a television station. Under the terms of the agreement, the Company can obtain commercial airtime and resell to advertisers from August 1, 2010 to July 31, 2013 for a monthly fee of $163,607 (RMB 1,000,000) for the period from August 1, 2010 to July 31, 2011. The fee is increased by 20% annually on every August 1.  From August 1, 2011 to July 31, 2012, the monthly fee is $196,329 (RMB 1,200,000).  From August 31, 2012 to July 30, 2013, the monthly fee will be $235,594 (RMB 1,440,000) for the period.  The agreement can be renewed for two additional years, with mutual agreement between the parties. Since the Company is reselling the commercial airtime to advertisers, the Company has present-valued the monthly payments, including the 20% annual increase, using the market borrowing rate of 7% for three years and recorded $6,882,616 (RMB 42,067,917) as commercial airtime rights as an intangible asset, $7,146,363 (RMB 43,680,000) as an obligation under airtime rights commitment, and $263,747 (RMB 1,612,083) as deferred interest at inception.

 

At inception, the Company had made an initial assessment that there is no assurance the Company will exercise the option for two additional years and therefore, the Company has only considered the present value of the monthly fee for the first three years under the terms of the agreement.

 

As of September 30, 2014, the commercial airtime rights have been fully amortized.

 

 

CHINA YIDA HOLDING, CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

7.	INTANGIBLE ASSETS, NET (CONTINUED)

 

Land use right

 

For the nine months ended September 30, 2014 and 2013, amortization expense amounted to $893,871 and $1,355,439, respectively.

 

For the three months ended September 30, 2014 and 2013, amortization expense amounted to $297,453 and $205,317, respectively.

 

Estimated amortization for the next five years and thereafter is as follows:

 

As of September 30,
2015		$	1,191,828
2016			1,191,828
2017			1,191,828
2018			1,191,828
2019			1,191,828
Thereafter			40,655,270
		$	46,614,410

 

8.	LONG-TERM PREPAYMENTS

 

Long-term prepayments consist of the following:

 

		September 30, 2014				December 31, 2013
Prepayments for project planning, assessments and consultation fees		$	1,547,426			$	1,989,648
Prepayment for cooperative development			411,400				488,828
Others			188,614				228,898
		$	2,147,440			$	2,707,374

 

Prepayments for project planning, assessments and consultation fees represent advances relating to the planning, assessment and consultation for the development of tourism destinations in Jiangxi province.

 

In 2008, Hong Kong Yi Tat entered into a Tourist Destination Cooperative Development Agreement with Yongtai County Government with respect to the development of Yunding Park pursuant to which Fujian Yida is obligated to pay RMB 5.0 million, or approximately $0.82 million, to the Yongtai County People’s Government over the course of the first 10 years of the Agreement. By the end of 2013, the Company had fulfilled this obligation with total payments made in the amount of approximately $818,036 (RMB 5.0 million) recorded as prepayments for cooperative development to be expensed throughout the term of the Agreement. As of September 30, 2014 and December 31, 2013, prepayments for cooperative development amounted to $411,400 and $488,828, respectively.

 

 

CHINA YIDA HOLDING, CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

9.	BANK LOANS

 

Short-term loans

 

Short-term loans represent borrowings from commercial banks that are due within one year. These loans consisted of the following:

 

		September 30, 2014				December 31, 2013
Loan from China Minsheng Banking Corp, Ltd., interest rate at 7% per annum, due June 10, 2015, (a)		$	2,599,639			$	-
Loan from Fujian Haixia Bank (formerly known as Merchant bank of Fuzhou), interest rate at 9.6% per annum, due June 20, 2015, collateralized by the personal guarantees by two of the Company’s directors. (b)			1,949,730				-
Loan from Fujian Haixia Bank (formerly known as Merchant bank of Fuzhou), interest rate at 8.7% per annum, due October 17, 2014, guaranteed by Fujian Jintai Tourism Development Co., Ltd. and Yida Travel Service Co. Ltd. (c)			-				2,454,108
Total		$	4,549,369			$	2,454,108

 

(a)

On June 2014, the Company borrowed an amount of $2,599,639 (RMB 16 million) due on June 10, 2015 from China Minsheng Banking Corp, Ltd., with the interest rate at 7% per annum.

 

(b)

On June 2014, the Company borrowed an amount of $1,949,730 (RMB 12 million) due on June 20, 2015 from Fujian Haixia Bank, with the interest rate at 9.6% per annum.

 

(c)

On October 2013, the Company borrowed an amount of $2,454,108 (RMB 15 million) due on October 17, 2014 from Fujian Haixia Bank, with the interest rate at 8.7% per annum. For the nine months ended September 30, 2014, the Company repaid the loan of $2,454,108 (RMB 15 million).

 

Interest expense for the nine months ended September 30, 2014 and 2013 amounted to $207,836 and $173,713, respectively. Interest expense for the three months ended September 30, 2014 and 2013 amounted to $101,614 and $105,652, respectively. The interest expense for the nine months ended September 30, 2014 and 2013 of $0 and $62,675, respectively, was capitalized as part of construction in progress. The interest expense for the three months ended September 30, 2014 and 2013 that amounted to $0 and $29,018, respectively, was capitalized as part of construction in progress.

 

Long-term debt

 

Long term debt consists of the following: 

 

		September 30, 2014				December 31, 2013
Loan from China Construction Bank, interest rate at 6.55% and 7.86% per annum, final installment due on August 5, 2022, collateralized by the fixed assets of Fujian Yida and personal guarantees by two of the Company’s directors as additional collateral.  (Note (c))		$	40,131,932			$	-
Loan from China Minsheng Banking Corp, Ltd., interest rate at 9% per annum, final installment due on November 30, 2019, secured by the land use right of Jiangxi Zhangshu, collateralized by the personal guarantees by two of the Company’s directors. (Note (a))			37,369,815				53,990,380
Loan from China Minsheng Banking Corp, Ltd., interest rate at 12.50% per annum, final installment due on March 6, 2015, secured by the land use rights of Fujian Yida and the right to collect resort ticket sales at Yunding resort as additional collateral. (Note (b))			-				24,541,082
Loan from China Minsheng Banking Corp, Ltd., interest rate at 11.97% per annum, final installment due on November 20, 2014, secured by credit guarantee of Fujian Jintai, collateralized by the fixed assets of Fujian Yida, and collateralized by the personal guarantees by two of the Company’s directors. (Note (d))			-				6,871,502
			77,501,747				85,402,964
Less: current portion			(1,218,581	)			(6,871,502	)
Total		$	76,283,166			$	78,531,462

 

 

CHINA YIDA HOLDING, CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

9.	BANK LOANS (CONTINUED)

 

Note:

 

(a)	$12,998,197 (RMB 80,000,000) and $24,371,618 (RMB 150,000,000) will be due in each twelve-month period as of September 30, 2019 and 2020, respectively.
(b)	$24,541,082 (RMB 150,000,000) has been paid off during the nine months ended September 30, 2014.
(c)	$2,599,639 (RMB 16,000,000), $3,574,504 (RMB 22,000,000), $4,386,891 (RMB 27,000,000), $5,199,279 (RMB 32,000,000), $6,092,905 (RMB 37,500,000), $6,986,531 (RMB 43,000,000) and $10,073,602 (RMB 62,000,000) will be due in each twelve-month period as of September 30, 2016, 2017, 2018, 2019, 2020, 2021 and 2022, respectively.
(d)	$6,871,502 (RMB 42,000,000) has been repaid in full amount during the nine months ended September 30, 2014.

 

Interest expense for the nine months ended September 30, 2014 and 2013 amounted to $6,253,064 and $5,986,257, respectively.  Interest expense for the three months ended September 30, 2014 and 2013 amounted to $1,897,874 and $2,318,648, respectively. The interest expense for the nine months ended September 30, 2014 and 2013 of $0 and $2,861,905, respectively, was capitalized as part of construction in progress. The interest expense for the three months ended September 30, 2014 and 2013 that amounted to $0 and $1,475,997, respectively, was capitalized as part of construction in progress. 

 

10.	ACCRUED EXPENSES AND OTHER PAYABLES

 

Accrued expenses and other payables consist of the following:

 

		September 30, 2014				December 31, 2013
Accrued payroll		$	582,481			$	587,176
Security deposits payable			451,367				93,235
Unearned revenue			200,529				78,058
Accrued local government fees			209,439				210,895
Welfare payable			13,199				13,291
Other			141,862				36,736
		$	1,598,877			$	1,019,391

 

  

CHINA YIDA HOLDING, CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

11.	INCOME TAX

 

The Company is subject to Hong Kong (“HK”) and People’s Republic of China (“PRC”) profit tax. For certain operations in HK and PRC, the Company has incurred net accumulated operating losses for income tax purposes.

 

United States

 

The Company is incorporated in the United States of America and is subject to United States federal taxation. No provisions for income taxes have been made as the Company has no taxable income for the period. The applicable income tax rate for the Company was 35% for the each of the six months ended September 30, 2014 and 2013. Net operating loss at September 30, 2014, which can be used to offset future taxable income, was approximately $3,815,202. No tax benefit has been realized since a valuation allowance has offset the deferred tax asset resulting from the net operating losses.

 

Cayman Islands

 

Keenway Limited, a wholly owned subsidiary of the Company, is incorporated in the Cayman Islands and, under the current laws of the Cayman Islands, is not subject to income taxes.

 

Hong Kong

 

Hong Kong Yi Tat, a wholly owned subsidiary of the Company, is incorporated in Hong Kong. Hong Kong Yi Tat is subject to Hong Kong taxation on its activities conducted in Hong Kong and income arising in or derived from Hong Kong. No provisions for income taxes have been made as Hong Kong Yi Tat has no taxable income for the period. The applicable statutory tax rate for the subsidiary was 16.5% for each of the nine months ended September 30, 2014 and 2013.

 

PRC

 

Effective on January 1, 2008, the PRC Enterprise Income Tax Law, EIT Law, and Implementing Rules impose an unified enterprise income tax rate of 25% on all domestic-invested enterprises and foreign investment enterprises in PRC, unless they qualify under certain limited exceptions. As such, starting from January 1, 2008, the Company’s subsidiaries in PRC are subject to an enterprise income tax rate of 25%.

 

Provision for income tax consists of the following:

 

		For The Nine Months Ended September 30,								For The Three Months Ended September 30,
		2014				2013				2014				2013
Current
USA		$	-			$	-			$	-			$	-
China			-				132,830				-				961
			-				132,830				-				961
Deferred
USA
Deferred tax asset for NOL carry forwards			65,233				80,682				20,157				13,741
Valuation allowance			(65,233	)			(80,682	)			(20,157	)			(13,741	)
			-				-				-				-
China
Current portion
Temporary difference from general and administrative expenses			-				-				-				-
Net changes in deferred income tax under current portion			-				-				-				-
Non current portion
Deferred tax asset for NOL carry forwards			6,830,556				2,629,822				3,927,167				973,946
Valuation allowance			(6,830,556	)			(2,629,822	)			(3,927,167	)			(973,946	)
Net changes in deferred income tax under non-current portion			-				-				-				-
Net deferred income tax expenses (benefit)			-				-				-				-
Total provision for income tax		$	-			$	132,830			$	-			$	961

 

 

CHINA YIDA HOLDING, CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

11.	INCOME TAX (CONTINUED)

 

The following is a reconciliation of the provision for income taxes at the PRC and Hong Kong tax rate to the income taxes reflected in the Statement of Income:

 

		For The Nine Months Ended September 30,
		2014				2013
Tax expense at statutory rate - US			35.0	%			35.0	%
Changes in valuation allowance - US			(35.0	%)			(35.0	%)
Tax expense at statutory rate - HK			16.5	%			16.5	%
Changes in valuation allowance - HK			(16.5	%)			(16.5	%)
Foreign income tax rate - PRC			25.0	%			25.0	%
Other (a)			(25.00	%)			(26.35	%)
Effective income tax rates			(0.00	%)			(1.35	%)

 

(a)	Other represents expenses incurred by the Company that are not deductible for PRC income taxes and changes in valuation allowance for PRC entities for the nine months ended September 30, 2014 and 2013, respectively.

 

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which the net operating losses and temporary differences become deductible. Management considered projected future taxable income and tax planning strategies in making this assessment.

 

The change in total allowance for the nine months ended September 30, 2014 and 2013 was an increase of $6,895,789 and $2,710,503 respectively.

 

The change in total allowance for the three months ended September 30, 2014 and 2013 was an increase of $3,947,324 and $987,685 respectively. 

 

12.

EQUITY

 

(1)  REVERSE SPLIT

 

Effective November 19, 2012, the Company conducted a 1-for-5 Reverse Stock Split of all issued and outstanding shares of its common stock. Upon the effect of the Reverse Stock Split, the Company’s issued and outstanding shares reduced from 19,571,785 to 3,914,580. Except as otherwise specified, all information in these consolidated financial statements and notes and all share and per share information has been retroactively adjusted for all periods presented to reflect the reverse stock split, as if the Reverse Stock Split had occurred at the beginning of the earliest period presented.

 

(2) WARRANTS

 

The remaining 773,812 Class A Warrants expired on September 6, 2011.

 

(3)  STOCK-BASED COMPENSATION

 

On June 10, 2009 (the “Grant Date”), the Company entered into a Non-qualified Stock Option Agreement with one of the Company’s directors, pursuant to which, the Company issued the director non-qualified stock options (the “Stock Options”) to purchase a total of 6,000 shares of the Company’s common stock as compensation for his services to be rendered as the Company’s director.  One half of the Stock Options shall vest on the sixth month anniversary of the Grant Date (the “First Vesting Date”) and become exercisable at an exercise price equal to the market price of the Company’s common stock on the First Vesting Date and the second half of Stock Options shall vest on the twelfth month anniversary of the Grant Date (the “Second Vesting Date”) and become exercisable at an exercise price equal to the market price of the Company’s common stock on the Second Vesting Date.

 

On January 21, 2011 (the “CFO Stock Option Grant Date”), the Company entered into a Non-qualified Stock Option Agreement with the Company’s former Chief Financial Officer, pursuant to which, the Company issued non-qualified stock options (the “CFO Stock Options”) to purchase a total of 15,000 shares of the Company’s common stock as compensation for his services to be rendered as the Company’s Chief Financial Officer. 3,000 CFO Stock Options vested on the CFO Stock Option Grant Date; 4,000 CFO Stock Options shall vest on the one-year anniversary of the CFO Grant Date; 4,000 CFO Stock Options shall vest on the second-year anniversary of the CFO Grant Date; and 4,000 CFO Stock Options shall vest on the third-year anniversary of the CFO Grant Date.  The exercise price for all of the shares was determined as the fair value of our common stock using the closing price on the grant date.

 

On November 5, 2011, our former CFO submitted a letter of resignation resigning from his position. The resignation was effective as of December 31, 2011. Under the Non-qualified Stock Option Agreement, if CFO is removed from office for cause prior to the 21 st  day of January, 2012, any outstanding stock options held by him which are not vested and exercisable by him immediately prior to resignation shall terminate as of the date of removal, and any outstanding stock options held by CFO which is vested and exercisable immediately prior to removal shall be exercisable at any time prior to the expiration date of such stock option or within one-year after the date of removal, whichever is shorter. As a result, 12,000 CFO Stock Options were forfeited as of December 31, 2011. On January 6, 2012, our former CFO transferred options to purchase 3,000 shares to Mr. Minhua Chen, our Chief Executive Officer, as a gift.

 

 

CHINA YIDA HOLDING, CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

12.	EQUITY (CONTINUED)

 

On January 21, 2011 (the “VPIR Stock Option Grant Date”), the Company entered into a Non-qualified Stock Option Agreement with the Company’s former Corporate Secretary and VP of Investor Relation (“VPIR”), pursuant to which, the Company issued non-qualified stock options (the “VPIR Stock Options”) to purchase a total of 15,000 shares of the Company’s common stock as compensation for his services to be rendered as the Company’s VP of Investor Relation. 3,000 VPIR Stock Options shall vest on the VPIR Stock Option Grant Date; 4,000 VPIR Stock Options shall vest on the one-year anniversary of the VPIR Grant Date; 4,000 VPIR Stock Options shall vest on the second-year anniversary of the VPIR Grant Date; and 4,000 VPIR Stock Options shall vest on the third-year anniversary of the VPIR Grant Date. The exercise price for all of the shares was determined as the fair value of our common stock using the closing price on the grant date.

 

On November 5, 2011, our former VPIR submitted a letter of resignation resigning from his position. The resignation was effective as of December 31, 2011. Under the Non-qualified Stock Option Agreement, if VPIR is removed from office for cause prior to the 21 st  day of January, 2012, any outstanding stock option held by him which is not vested and exercisable by him immediately prior to resignation shall terminate as of the date of removal, and any outstanding stock options held by VPIR which is vested and exercisable immediately prior to removal shall be exercisable at any time prior to the expiration date of such stock option or within one-year after the date of removal, whichever is shorter. As a result, 12,000 VPIR Stock Options were forfeited as of December 31, 2011. On January 6, 2012, our former VPIR transferred options to purchase 3,000 shares to Mr. Minhua Chen, our Chief Executive Officer, as a gift.

 

On March 17, 2011 (the “ID Stock Option Grant Date”), the Company entered into a Non-qualified Stock Option Agreement with the Company’s Independent Director, pursuant to which, the Company issued non-qualified stock options (the “ID Stock Options”) to purchase a total of 6,000 shares of the Company’s common stock as compensation for his services to be rendered as the Company’s Independent Director. One half of the ID Stock Options vested on the ID Grant Date and the second half of ID Stock Options vested on June 10, 2011.  The exercise price for all of the shares was determined as the fair value of our common stock using the closing price on the grant date.

 

On July 27, 2011, the Company entered into an agreement with the Company’s Independent Director, pursuant to which, the Company granted 4,000 restricted shares of the Company’s common stock as compensation for his services to be rendered as the Company’s Independent Director from June 10, 2011 to June 9, 2012. The estimated value of the 4,000 shares was $73,000 on June 10, 2011. On May 24, 2012, the 4,000 restricted shares were issued.

 

The Company valued the stock options using the Black-Scholes model with the following assumptions:

 

Type of Stock Option		Number of Options				Expected Term				Expected Volatility				Dividend Yield				Risk Free Interest  Rate
Options to Independent Director, June 10, 2009			6,000				5.25				356	%			0	%			3.11	%
Options to Chief Financial Officer, January 21, 2011			15,000				6.25				60	%			0	%			3.44	%
Options to VP of Investor Relation, January 21, 2011			15,000				6.25				60	%			0	%			3.44	%
Options to Independent Director, March 17, 2011			6,000				6.25				60	%			0	%			3.25	%

 

The following is a summary of the option activity:

 

		Number of  Options
Outstanding as of December 31, 2013			18,000
Granted			-
Exercised			-
Forfeited			-
Outstanding as of September 30, 2014			18,000

 

For the nine months ended September 30, 2014 and 2013, the Company recognized $0 and $0, respectively, as stock-based compensation expense, which was included in general and administrative expenses.

 

For the three months ended September 30, 2014 and 2013, the Company recognized $0 and $0, respectively, as stock-based compensation expense, which was included in general and administrative expenses.

 

 

CHINA YIDA HOLDING, CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

13.	DISCONTINUED OPERATIONS

 

On June 3, 2013, Fujian Yida entered into a stock transfer agreement with Anhui Xingguang Investment Group Ltd (“Purchaser”), pursuant to which Fujian Yida agreed to transfer its 60% interest in Anhui Yida to the Purchaser for RMB 60 million, or $9.72 million and the Purchaser agreed to assume all the assets and liabilities of Anhui Yida.

 

On August 26, 2014, Hong Kong Yi Tat entered into a certain share transfer agreement with Fujian Taining Great Golden Lake Tourism Economic Development Industrial Co., Ltd. (the “Purchaser”), pursuant to which Hong Kong Yi Tat agreed to sell 100% of its equity interest in Fujian Jintai to the Purchaser (the “Sale”) for a price of RMB 228,801,359, or approximately $37 million (the “Purchase Price”). 

 

The Company has reclassified the assets and liabilities of the discontinued entity in the accompanied financial statements.

 

Following table summarizes the classification of assets and liabilities of the discontinued entity as at December 31, 2013.

 

Fujian Jintai
Current assets
Cash		$	257,837
Other receivable			169,728
Others			159,764
Current assets of discontinued operations			587,329
Add back: Intercompany receivable elimination			38,562,409
Current assets of discontinued operations before intercompany elimination			39,149,738
Non-current assets
Property, plant & equipment, net			33,917,060
Long-term prepayments			457,576
Intangible assets, net			3,356,220
Non-current assets of discontinued operations			37,730,856
Current liabilities
Long-term loan, current portion			2,032,002
Accrued expenses and other payables			78,053
Current liabilities of discontinued operations			2,110,055
Add back: Intercompany receivable elimination			23,705,298
Current liabilities of discontinued operations before intercompany elimination			25,815,353
Non-current liabilities
Long-term loan			8,135,018
Non-current liabilities of discontinued operations		$	8,135,018

 

At the date of disposal August 26, 2014, the Company recorded $616,732 as loss from operations of discontinued entity and $6,510,630 as loss on disposal of discontinued entity.

 

Following is the Gain/Loss Calculation for disposal of Fujian Jintai.

 

Fujian Jintai Gain/Loss calculation
Net assets of the Company as of  December 31, 2013		$	42,930,223
Less: Loss from discontinued operations through September 30, 2014			616,732
Less: Other comprehensive loss through September 30, 2014			229,044
Net assets of the Company at the date of disposal		$	42,084,447
Proceeds from disposal, gross			37,175,063
Less: Capital gains tax			(1,601,246	)
Proceeds from disposal, net of capital gains tax		$	35,573,817
Loss on disposal of discontinued operations		$	6,510,630

 

 

13.	DISCONTINUED OPERATIONS (CONTINUED)

 

The results of Anhui Yida and Fujian Jintai have been presented as a discontinued operation in the consolidated statements of income and comprehensive income. Selected operating results for the discontinued business are presented in the following tables:  

 

		For The Nine Months Ended September 30, 2014
		Fujian Jintai				Anhui Yida				Total
Net revenue		$	3,492,327			$	-			$	3,492,327
Cost of revenue			(1,828,348	)			-				(1,828,348	)
Selling expenses			(904,667	)			-				(904,667	)
General, and administrative expenses			(605,331	)			-				(605,331	)
Interest expense			(443,108	)							(443,108	)
Interest income			692				-				692
Other expense, net			(328,297	)			-				(328,297	)
Net Loss		$	(616,732	)		$	-			$	(616,732	)

 

		For The Three Months Ended September 30, 2014
		Fujian Jintai				Anhui Yida				Total
Net revenue		$	1,506,174			$	-			$	1,506,174
Cost of revenue			(596,571	)			-				(596,571	)
Selling expenses			(310,298	)			-				(310,298	)
General, and administrative expenses			(130,054	)			-				(130,054	)
Interest expense			(87,468	)			-				(87,468	)
Interest Income			12				-				12
Other expense, net			(465,591	)			-				(465,591	)
Net Loss		$	(83,796	)		$	-			$	(83,796	)

 

		For The Nine Months Ended September 30, 2013
		Fujian Jintai				Anhui Yida				Total
Net Revenue		$	3,606,706			$	-			$	3,606,706
Cost of Revenue			(1,941,750	)			-				(1,941,750	)
Selling expenses			(1,154,815	)			-				(1,154,815	)
General, and administrative expenses			(757,146	)			(256,306	)			(1,013,452	)
Interest expense			(207,348	)			-				(207,348	)
Interest Income			7,188				1,007				8,195
Other expense, net			(79,991	)			(237	)			(80,228	)
Net Loss		$	(527,156	)		$	(255,536	)		$	(782,692	)

 

		For The Three Months Ended September 30, 2013
		Fujian Jintai				Anhui Yida				Total
Net revenue		$	1,741,215			$	-			$	1,741,215
Cost of revenue			(748,163	)			-				(748,163	)
Selling expenses			(511,891	)			-				(511,891	)
General, and administrative expenses			(236,013	)			-				(236,013	)
Interest expense			(738	)			-				(738	)
Interest income			2,182				-				2,182
Other expense, net			(26,390	)			-				(26,390	)
Net Income		$	220,202			$	-			$	220,202

 

 

CHINA YIDA HOLDING, CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

14.	COMMITMENTS AND CONTINGENCIES

 

(1) Operating commitments

 

Operating commitments consist of leases for office space under various operating lease agreements which expire in April 2021.

 

Operating lease agreements generally contain renewal options that may be exercised at the Company’s discretion after the completion of the terms. The Company’s obligations under various operating leases are as follows:

 

As of September 30,
2015		$	135,193
2016			66,903
2017			27,119
2018			27,152
2019			27,209
Thereafter			891,428
Total minimum payments		$	1,175,004

 

The Company incurred rental expenses of $163,774 and $191,039 for the nine months ended September 30, 2014 and 2013, respectively.

 

The Company incurred rental expenses of $64,720 and $47,870 for the three months ended September 30, 2014 and 2013, respectively. 

 

  

CHINA YIDA HOLDING, CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

14.	COMMITMENTS AND CONTINGENCIES (CONTINUED)

 

(2) Compensation for using natural resources commitments

 

In December 2008, Tulou entered into a Tourist Resources Development Agreement with Hua’an County Government (“Hua’an government”) which is related to pay compensation fees for using natural resources in Tulou.  The Company agreed to pay (1) 16% of gross ticket sales in the first five years; (2) 20% of gross ticket sales in the second five years; (3) 23% of gross ticket sales in the third five years; (4) 25% of gross ticket sales in the fourth five years; (5) 28% of gross ticket sales in the fifth five years; (6) 30% in twenty six years and thereafter when the ticket price of the Clusters is RMB60 ($9.50 USD) or above per person.

 

The Company paid approximately $43,856 and $45,953 to the Hua’an government for the nine months ended September 30, 2014 and 2013, respectively, and recorded as selling expenses.

 

The Company paid approximately $11,441 and $15,638 to the Hua’an government for the three months ended September 30, 2014 and 2013, respectively, and recorded as selling expenses. 

 

(3) Litigation

 

The Company’s management does not expect the legal proceedings involving the Company would have a material impact on the Company’s consolidated financial position or results of operations.

 

15.	DUE TO RELATED PARTIES

 

As of September 30, 2014, the Company had $38,933,299 and $2,922,310 due to Fujian Xinhengji Advertisement Co., Ltd and Mr. Minhua Chen, respectively. As of December 31, 2013, the Company had $31,397,840 and $4,199,122 due to Fujian Xinhengji Advertisement Co., Ltd and Mr. Minhua Chen, respectively. Mr. Minhua Chen, the Chief Executive Officer and Chairman of the Company, is the Chairman of Fujian Xinhengji Advertisement Co., Ltd. Those loans are unsecured, bear no interest, and due on demand.

 

 

CHINA YIDA HOLDING, CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

16.	EARNINGS PER SHARE

 

Basic earnings per share is computed by dividing net income attributable to common shareholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share reflects the potential dilution of securities by including other potential common stock, including convertible preferred stock, stock options and warrants, in the weighted average number of common shares outstanding for the period, if dilutive.  The numerators and denominators used in the computations of basic and dilutive earnings per share are presented in the following table:

 

Basic and diluted: 

 

		For The Nine Months Ended September 30,								For The Three Months Ended September 30,
		2014				2013				2014				2013
Amounts attributable to common stockholders:
Net loss from continuing operations, net of income taxes		$	(17,879,534	)		$	(9,975,664	)		$	(6,089,077	)		$	(3,848,379	)
Net income from discontinued operations, net of income taxes			(7,127,362	)			318,656				(6,594,426	)			220,202
Net loss attributable to common stockholders		$	(25,006,896	)		$	(9,657,008	)		$	(12,683,503	)		$	(3,628,177	)
Net loss attributable to common stockholders per share - basic and diluted:
- Basic & diluted loss per share from continuing operations		$	(4.57	)		$	(2.55	)		$	(1.56	)		$	(0.98	)
- Basic & diluted (loss)earnings per share from discontinued operations			(1.82	)			0.08				(1.68	)			0.06
- Basic & diluted loss per share attributable to common stockholders		$	(6.39	)		$	(2.47	)		$	(3.24	)		$	(0.92	)
Basic and Diluted weighted average outstanding shares of common stock			3,914,580				3,914,580				3,914,580				3,914,580
Potential common shares outstanding as of September 30, 2014:
Warrants outstanding			-				-				-				-
Options outstanding			18,000				18,000				18,000				18,000

 

For the nine months and three months ended September 30, 2014 and 2013, 18,000 options were not included in the diluted earnings per share because the average stock price was lower than the strike price of these options.

 

 

CHINA YIDA HOLDING, CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

17.	BUSINESS SEGMENTS

 

During the nine months ended September 30, 2014 and 2013, the Company was organized into two main business segments: advertisement and tourism. The primary business relates to tourism at Yunding resort, Yang-sheng Paradise, and Tulou resort. The Company offers bamboo rafting, parking lot service, photography services, hotel lodging and ethnic cultural communications. The primary business related to advertisement is focused on advertisements, including media publishing, television, cultural and artistic communication activities, and performance operation and management activities. The following table presents a summary of operating information and certain balance sheet information for the two segments for the three months ended:

 

		For The Nine Months Ended September 30,								For The Three Months Ended September 30,
		2014				2013				2014				2013
Revenues:
Advertisement		$	-			$	2,899,844			$	-			$	318,434
Tourism			9,030,961				6,891,455				3,870,984				2,616,382
Total			9,030,961				9,791,299				3,870,984				2,934,816
Operating income (loss):
Advertisement			-				432,016				-				(70,506	)
Tourism			(11,026,097	)			(6,280,582	)			(3,474,423	)			(2,286,280	)
Other			-				(229,089	)			-				(38,892	)
Total			(11,026,097	)			(6,077,655	)			(3,474,423	)			(2,395,678	)
Net income (loss):
Advertisement			-				255,844				-				(79,865	)
Tourism			(17,879,534	)			(10,000,950	)			(6,089,077	)			(3,729,217	)
Other			-				(230,558	)			-				(39,297	)
Net loss from continuing operations			(17,879,534	)			(9,975,664	)			(6,089,077	)			(3,848,379	)
Net (loss)income from discontinued operations			(7,127,362	)			216,441				(6,594,426	)			220,202
Total			(25,006,896	)			(9,759,223	)			(12,683,503	)			(3,628,177	)
Capital expenditure:
Advertisement			-				-				-				-
Tourism			8,097,950				71,652,052				7,703,366				25,693,791
Total		$	8,097,950			$	71,652,052			$	7,703,366			$	25,693,791

 

		September 30, 2014				December 31, 2013
Intangible assets:
Advertisement		$	-			$	-
Tourism			46,614,410				47,837,641
Total		$	46,614,410			$	47,837,641

 

Identifiable assets:
Advertisement		$	-			$	33,537
Tourism			241,345,601				238,239,127
Others			-				10,433
Assets of continuing operations			241,345,601				238,283,097
Assets of discontinued operations			-				38,318,186
Total		$	241,345,601			$	276,601,283

 

Others represent reconciling amounts including certain assets which are excluded from segments and adjustments to eliminate inter-company transactions.

 

 

CHINA YIDA HOLDING, CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

18.	SUBSEQUENT EVENTS

 

Management has evaluated subsequent events through the date which the consolidated financial statements were issued. All subsequent events requiring recognition as of September 30, 2014 have been incorporated into these unaudited consolidated financial statements and there are no subsequent events that require disclosure in accordance with FASB ASC Topic 855, “Subsequent Events”.

 

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS.

 

The following discussion of our financial condition and results of operations should also be read in conjunction with our unaudited consolidated financial statements and the notes to those financial statements appearing elsewhere in this Form 10-Q. The following discussion contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 relating to future events or our future performance. Actual results may materially differ from those projected in the forward-looking statements as a result of certain risks and uncertainties set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013, filed on March 31, 2014 (the “Annual Report”). Although management believes that the assumptions made and expectations reflected in the forward-looking statements are reasonable, there is no assurance that the underlying assumptions will, in fact, prove to be correct or that actual results will not be different from expectations expressed in this report.

 

Overview

 

We were formed on June 4, 1999 to serve as a vehicle to effect a merger, capital stock exchange, asset acquisition or other similar business combination with a company having its primary operations in the PRC. On November 19, 2007, we consummated the acquisition of Keenway Limited, Hong Kong Yi Tat International Investment Co., Ltd (“Hong Kong Yi Tat”), and the then shareholders of Keenway Limited, including Minhua Chen, Yanling Fan, Xinchen Zhang, Extra Profit International Limited, and Lucky Glory International Limited, received shares of our common stock.

 

We currently operate Hua’An Tulou cluster (“Tulou” or the “Earth Buildings”) tourist destination (World Culture Heritage), Yunding Recreational Park (Large-scale National Recreational Park), covering over 300 square kilometers in total, and China Yang-Sheng Paradise. As of September 30, 2014, through our wholly owned subsidiaries in China, we have entered into two cooperation agreements respectively with the local Chinese government agents, namely, (i) the Jiangxi Province Zhangshu Municipal Government, (ii) the Fenyi County, Xinyu City, Jiangxi Province Government. Under these agreements, we have obtained:

 

	(i)	the right to construction and development of the Royal Hot Spring World project,
	(ii)	the right to invest in construction and development of China Yang-sheng (Nourishing Life) Paradise Project (“Yang-sheng Paradise”) (including the projects: (a) Salt Water Hot Spring SPA & Health Center, (b) Yang-sheng Holiday Resort, (c) World Yang-sheng Cultural Museum, (d) International Camphor Tree Garden, (e) Chinese Medicine and Herb Museum, (f) Yang-sheng Sports Club, (g) Old Town of Chinese Traditional Medicine, and (h) various other Yang-sheng related projects and tourism real estate projects) with a forty (40) year exclusive right to develop, operate and manage a variety of caves, hot springs and other natural and cultural tourist resources identified in the Meng Mountain area, and various caves and tourist resources of the Dagang Mountain located in Fenyi County, Xinyu City, Jiangxi Province (“City of Caves”), and

 

Advertising business had been our primary source of revenue for the last two years before January 2013 because the tourism business has experienced serious disruptions from flooding and severe weather while the new advertisement regulatory restriction was not enforced by the local government. Our tourism business has become the primary source of our revenue since first quarter of 2013. The revenue from advertising has ceased as the new advertisement regulatory restrictions are enforced. The revenue from tourism has been increased. However, any increase in tourism revenue will depend on the recovery of Great Golden Lake from flooding and the progress we make in developing our existing and new projects in our other tourist destinations. Our tourism business is seasonal, we have visitors to our parks throughout the year. In 2015, we will continue to develop and construct the new Jiangxi projects. As of September 30, 2014, the first phase project of City of Caves in Jiangxi has been completed and expected to open in the first quarter of 2015.

 

We are subject to risks common to companies operating in China, including risks inherent in our commercialization efforts, uncertainty of regulatory approvals and laws, the need for future capital, and retention of key employees. We cannot provide assurance that we will generate revenues or achieve and sustain profitability in the future.

 

 

Factors Affecting Our Performance

 

Tourism Business

 

For the tourism business, our revenue is driven by the reputation of our tourist destinations. We strive to present quality tourist attractions that offer our visitors diverse entertainment, including catering, hotel, transportation, and shopping. We generate our revenue from our visitors and tourists. We incur many costs associated with operating the tourist business, including, administration fees, business traveling fees, land use rights fees, and revenue sharing fees.

 

We began to generate revenue after the grand openings of Yang-sheng Paradise which opened in October 2013, due to the terrible weather, financial funding and the difficult level of the cave construction, City of Caves has postponed the trial opening in the first quarter of 2015, we believe that we will be able to maintain the high gross profit margins in the tourism segment. Also, we expect Yunding to continue to grow.  Our tourism business has become the primary source of our revenue since first quarter of 2013.

 

Discontinued Operations

 

On June 3, 2013, Yida (Fujian) Tourism Group Limited. (“Fujian Yida”), our subsidiary, entered into a stock transfer agreement with Anhui Xingguang Investment Group Ltd (“Anhui Xingguang”), pursuant to which Fujian Yida agreed to transfer its 60% interest in Anhui Yida Tourism Development Co. Ltd. (“Anhui Yida”) to Anhui Xingguang for RMB 60 million, or $9.72 million. Anhui Xingguang also assumed all the assets and liabilities of Anhui Yida.

 

On August 26, 2014, Hong Kong Yi Tat entered into a certain share transfer agreement with Fujian Taining Great Golden Lake Tourism Economic Development Industrial Co., Ltd. (the “Purchaser”), pursuant to which Hong Kong Yi Tat agreed to sell 100% of its equity interest in Fujian Jintai to the Purchaser (the “Sale”) for a price of RMB 228,801,359, or approximately $37 million. (the “Purchase Price”). 

 

Net loss from the discontinued operations was $616,732 and $782,692 for the nine months ended September 30, 2014 and 2013, respectively.

 

Net loss from the discontinued operations was $83,796 and net income from discontinued operation was $220,202 for the three months ended September 30, 2014 and 2013, respecively.

 

As a result of the share transfer described above, the Results of Operation set forth below does not reflect the operations for Fujian Jintai, Anhui Yida and its wholly owned subsidiaries: Bengbu (Yida) Real Estate Development Co., Ltd. (“Bengbu Yida”) and Bengbu (Yida) Investment Co., Ltd. (“Bengbu Investment”). The results of operations of Fujian jintai, Anhui Yida and its subsidiaries have been presented as discontinued operations. Therefore, management’s discussion and analysis set forth herein below are based on the results of continuing operations.

 

2014 Outlook

 

As we terminated our advertising business in July 2013, we plan to focus on tourism business only. In 2014, we continued the construction and development of two new tourism projects, the Yang-sheng Paradise in Zhangshu City, Jiangxi province, and the City of Caves in Fenyi City, Jiangxi province, which represent our commitment to expanding our business operations by applying our current business model to the development of other valuable tourist destinations outside Fujian province and throughout China. We expect to open City of Caves to the public in the first quarter of 2015.

 

 

Results of Operations

 

Results of Operations for the three months ended September 30, 2014 and 2013

 

Prior to July 2013, the Company was organized into two main business segments, tourism and advertisement. The following table presents a summary of operating information for the three months ended September 30, 2014 and 2013:

 

		For The Three Months Ended								Increase/ (Decrease)				Increase/ (Decrease)
		September 30,								U.S. Dollar				Percentage
(All amounts, other than percentage, in U.S. Dollar)		2014				2013				($)				(%)
Net revenue
Advertisement		$	-			$	318,434			$	(318,434	)		(100.00)
Tourism			3,870,984				2,616,382				1,254,602			47.95
Total net revenue			3,870,984				2,934,816				936,168			31.90
Cost of revenue
Advertisement			-				271,213				(271,213	)		(100.00)
Tourism			2,471,661				1,145,681				1,325,980			115.74
Total cost of revenue			2,471,661				1,416,894				1,054,767			74.44
Gross profit			1,399,323				1,517,922				(118,599	)		(7.81)
Selling expenses			2,906,081				2,243,762				662,319			29.52
General and administrative expenses			1,967,665				1,669,838				297,827			17.84
Loss from operations			(3,474,423	)			(2,395,678	)			(1,078,745	)		45.03
Other expense, net			(618,142	)			(527,976	)			(90,165	)		17.08
Interest income			2,975				4,817				(1,842	)		(38.24)
Interest expense			(1,999,487	)			(928,581	)			(1,070,906	)		115.33
Less: Provision for income tax			-				961				(961	)		(100.00)
Net loss from continuing operations			(6,089,077	)			(3,848,379	)			(2,240,698	)		58.22
Net (loss) income from on discontinued operations			(6,594,426	)			220,202				(6,814,628	)		(3,094.72)
Net Loss		$	(12,683,503	)		$	(3,628,177	)		$	(9,055,326	)		249.58

 

 

Net Revenue

 

Net revenue from continuing operations increased by approximately $0.94 million or approximately 31.9%, from approximately $2.93 million for the three months ended September 30, 2013 to approximately $3.87 million for the three months ended September 30, 2014. The increase in net revenue was primarily due to the increase in the revenue from tourism revenue which was partially offset by the decrease in advertisement revenue.

 

Advertisement

 

Advertisement revenue decreased by approximately $0.32 million or 100%, from approximately $0.32 million for the three months ended September 30, 2013 to $0 for the three months ended September 30, 2014. The decrease was because the agreement with FETV expired in July 2013 which caused the decrease in advertisement revenue from FETV.

 

We generated no revenue from the “Journey through China on the Train” program for the three months ended September 30, 2014 and 2013. The Company lost all the clients since the railway program was broadcasted manually by train attendants and we had no control over the frequency of program broadcasting. We terminated the “Journey through China on the Train” program from March of 2013.

 

 

Tourism 

 

Tourism revenue increased by approximately $1.25 million or approximately 47.95% from approximately $2.62 million for the three months ended September 30, 2013 to approximately $3.87 million for the three months ended September 30, 2014, including approximately $2.95 million from Yunding Park, an increase of $0.52 million or 20%, $0.13 million from Hua’an Tulou, a decrease of $0.06 million or 32%, and $0.79 million from China Yang-sheng paradise for the three months ended September 30, 2014, as compared to the same period in 2013. The primary sources of the revenues are ticket sales, tour shuttle bus fees, and restaurants.  The increase in tourism business was primarily due to the revenue increase at China Yang-sheng paradise, the newly opened tourism destination, and an increase in the number of tourists at Yunding Park due to effective promotion. We have to provide deeper ticket discount due to the fierce competition among the destinations. Also the tourist consumption had also decreased. The gross revenue increased due to increase in the number of tourist attracted by the reduced ticket fee. We expect the fierce competition and the reduced tourist consumption to continue in the near future.

 

Cost of Revenue

 

Cost of revenues increased by approximately $1.05 million or approximately 74.44%, from approximately $1.42 million for the three months ended September 30, 2013 to approximately $2.47 million for the three months ended September 30, 2014. The increase in cost of revenue was primarily due to an increase in cost of revenue of tourism, partially offset by a decrease in cost of revenue of advertisement.

 

Advertisement

 

Cost of revenue from advertisement decreased by approximately $0.27 million or 100%, from approximately $0.27 million for the three months ended September 30, 2013 to $0 for the three months ended September 30, 2014. The decrease was because the agreement with FETV expired in July 2013 so there was no revenue or cost incurred for the three months ended September 30, 2014.

 

Tourism

 

Cost of revenue from tourism increased by approximately $1.32 million or approximately 115.74%, from approximately $1.15 million for the three months ended September 30, 2013 to approximately $2.47 million for the three months ended September 30, 2014. The increase was primarily due to the increase in tourists and sales activities at China Yang-sheng paradise and Yunding Park, and depreciation cost for the new construction completed for tourism destinations.

 

Gross profit

 

Gross profit decreased approximately $0.12 million, or approximately 7.81%, from approximately $1.52 million for the three months ended September 30, 2013 to $1.4 million for the three months ended September 30, 2014. Our gross margin was approximately 36.15% for the three months ended September 30, 2014, compared to gross margin of approximately 51.72% for the three months ended September 30, 2013, representing a decrease of approximately 16 percentage points.

 

Advertisement

 

Gross profit from advertisement decreased by approximately $0.05 million, or 100%, from approximately $0.05 million for the three months ended September 30, 2013 to $0 for the three months ended September 30, 2014. Gross margin from advertisement was 0% for the three months ended September 30, 2014, compared to approximately 14.83% for the three months ended September 30, 2013. The decrease was because the agreement with FETV expired in July 2013.

 

 

Tourism

 

Gross profit from tourism decreased approximately $0.07 million, or approximately 4.85%, from approximately $1.47 million for the three months ended September 30, 2013 to approximately $1.4 million for the three months ended September 30, 2014. Our gross margin from tourism was approximately 36.15% for the three months ended September 30, 2014, compared to gross margin of approximately 56.21% for the three months ended September 30, 2013. The decrease of gross margin was primarily attributable to the increase of the cost of revenue which include the increase in sales activities at China Yang-sheng paradise and Yunding Park, and depreciation cost for the new construction completed for tourism destinations.

 

Selling Expenses

 

Selling expenses were approximately $2.9 million for the three months ended September 30, 2014, compared to approximately $2.24 million for the three months ended September 30, 2013, which represents an increase of approximately $0.66 million, or approximately 29.52%. The increase in selling expense was primarily due to the increase of the sales activities at China Yang-sheng paradise and Yunding Park during the three months ended September 30, 2014.

 

General and Administrative Expenses

 

General and administrative expenses were approximately $1.97 million for the three months ended September 30, 2014, compared to approximately $1.67 million for the three months ended September 30, 2013, which represents an increase of approximately $0.3 million, or approximately 17.84%. This increase was due to the increase of administrative expenses for the operation of China Yang-sheng paradise, City of Caves, and Yunding Park during the three months ended September 30, 2014.

 

Interest expense.

 

Interest expense was approximately $2 million for the three months ended September 30, 2014, representing an increase of approximately $1.07 million or approximately 115.33%, compared to the approximately $0.93 million for the three months ended September 30, 2013. The increase in interest expense was primarily because part of the interest expense for the three months ended September 30, 2013 was capitalized as part of construction in progress.

 

Net Loss 

 

As a result of the above factors, we have net loss of approximately $12.68 million for the three months ended September 30, 2014 as compared to net loss of approximately $3.63 million for the three months ended September 30, 2013, representing an increase of loss of approximately $9.05 million or approximately 249.58%. The increase of loss was primarily attributable to the decrease in advertisement revenue because the agreement with FETV expired in July 2013, the increase in cost of revenue and general and administrative expenses for the operation of China Yang-sheng paradise for the three months ended September 30, 2014 as compared with that for the three months ended September 30, 2013. 

 

 

Results of Operations for the nine months ended September 30, 2014 and 2013

 

Prior to July, 2013, the Company is organized into two main business segments, tourism and advertisement. The following table presents a summary of operating information for the nine months ended September 30, 2014 and 2013: 

 

		For The Nine Months Ended								Increase/ (Decrease)				Increase/ (Decrease)
		September 30								U.S. Dollar				Percentage
(All amounts, other than percentage, in U.S. Dollar)		2014				2013				($)				(%)
Net revenue
Advertisement		$	-			$	2,899,844			$	(2,899,844	)		(100.00)
Tourism			9,030,961				6,891,455				2,139,506			31.05
Total net revenue			9,030,961				9,791,299				(760,338	)		(7.77)
Cost of revenue
Advertisement			-				2,038,196				(2,038,196	)		(100.00)
Tourism			6,784,170				3,104,123				3,680,047			118.55
Total cost of revenue			6,784,170				5,142,319				1,641,851			31.93
Gross profit			2,246,791				4,648,980				(2,402,189	)		(51.67)
Selling expenses			7,717,558				6,566,556				1,151,002			17.53
General and administrative expenses			5,555,330				4,160,079				1,395,251			33.54
Loss from operations			(11,026,097	)			(6,077,655	)			(4,948,442	)		81.42
Other expense, net			(399,986	)			(560,284	)			160,298			(28.61)
Interest income			7,448				75,499				(68,051	)		(90.13)
Interest expense			(6,460,899	)			(3,280,394	)			(3,180,505	)		96.95
Less: Provision for income tax			-				132,830				(132,830	)		(100.00)
Net loss  from continuing operations			(17,879,534	)			(9,975,664	)			(7,903,870	)		79.23
Net loss from discontinued operations			(7,127,362	)			216,441				(7,343,803	)		(3,392.98)
Net Loss			(25,006,896	)			(9,759,223	)			(15,247,673	)		156.24
Net loss attributable to non-controlling interest:			-				102,215				(102,215	)		(100.00)
Net loss attributable to China Yida Holding Co.		$	(25,006,896	)		$	(9,657,008	)		$	(15,349,888	)		158.95

 

Net Revenue

 

Net revenue decreased by approximately $0.76 million or approximately 7.77%, from approximately $9.79 million for the nine months ended September 30, 2013 to approximately $9.03 million for the nine months ended September 30, 2014. The decrease in net revenue was primarily due to the decrease in the revenue from advertisement revenue which was partially offset by an increase in tourism.

 

Advertisement

 

Advertisement revenue decreased by approximately $2.9 million or 100%, from approximately $2.9 million for the nine months ended September 30, 2013 to $0 for the nine months ended September 30, 2014. The decrease was because the agreement with FETV expired in July 2013 which caused the decrease in advertisement revenue from FETV.

 

We generated no sales from the “Journey through China on the Train” program for the nine months ended September 30, 2014 as compared to approximately $0.06 million for the nine months ended September 30, 2013. The Company lost all the clients since the railway program is broadcasted manually by train attendants and we had no control over the frequency of program broadcasting, we terminated “Journey through China on the Train” program in March of 2013.

 

  

Tourism 

 

Tourism revenue increased by approximately $2.14 million or approximately 31.05% from approximately $6.89 million for the nine months ended September 30, 2013 to approximately $9.03 million for the nine months ended September 30, 2014, including approximately $7.2 million from Yunding Park, an increase of $0.83 million or 13%, $0.49 million from Hua’an Tulou, a decrease of $0.03 million or 6%, and $1.34 million from China Yang-sheng paradise for the nine months ended September 30, 2014, as compared to the same period in 2013. The primary sources of the revenues are ticket sales, tour shuttle bus fees, and restaurants.  The increase in tourism business was primarily due to the revenue increase at China Yang-sheng paradise, the newly opened tourism destinations, and Yunding Park due to effective marketing promotion activities and advertisement in China that led to an increase in number of tourists. We have to provide deeper ticket discount due to the fierce competition among the destinations. Also the tourist consumption had also decreased. The gross revenue increased due to the increase in the number of tourists attracted by the reduced ticket fee. We expect the fierce competition and the reduced tourist consumption to continue in the near future.

 

Cost of Revenue

 

Cost of revenues increased by approximately $1.64 million or approximately 31.93%, from approximately $5.14 million for the nine months ended September 30, 2013 to approximately $6.78 million for the nine months ended September 30, 2014. The increase in cost of revenue was primarily due to an increase in cost of revenue of tourism, partially offset by a decrease in cost of revenue of advertisement.

 

Advertisement

 

Cost of revenue from advertisement decreased by approximately $2.04 million or 100%, from approximately $2.04 million for the nine months ended September 30, 2013 to $0 for the nine months ended September 30, 2014. The decrease was also because the agreement with FETV expired in July 2013 so there was no cost incurred with for the nine months ended September 30, 2014.

 

Tourism

 

Cost of revenue from tourism increased by approximately $3.68 million or approximately 118.55%, from approximately $3.1 million for the nine months ended September 30, 2013 to approximately $6.78 million for the nine months ended September 30, 2014. The increase was primarily due to the increase in tourists and sales activities at China Yang-sheng paradise and Yunding Park, and depreciation cost for the new construction completed for tourism destinations.

 

Gross profit

 

Gross profit decreased approximately $2.4 million, or approximately 51.67%, from approximately $4.65 million for the nine months ended September 30, 2013 to $2.25 million for the nine months ended September 30, 2014. Our gross margin was approximately 24.88% for the nine months ended September 30, 2014, compared to gross profit margin of approximately 47.48% for the nine months ended September 30, 2013, representing a decrease of approximately 23 percentage points.

 

Advertisement

 

Gross profit from advertisement decreased by approximately $0.86 million, or 100%, from approximately $0.86 million for the nine months ended September 30, 2013 to $0 for the nine months ended September 30, 2014. Gross margin from advertisement was 0% for the nine months ended September 30, 2014, compared to approximately 29.71% for the nine months ended September 30, 2013. The decrease was because the agreement with FETV expired in July 2013.

 

Tourism

 

Gross profit from tourism decreased approximately $1.54 million, or approximately 40.68%, from approximately $3.79 million for the nine months ended September 30, 2013 to approximately $2.25 million for the nine months ended September 30, 2014. Our gross margin from tourism was approximately 24.88% for the nine months ended September 30, 2014, compared to gross profit margin of approximately 54.96% for the nine months ended September 30, 2013. The decrease of gross margin was primarily attributable to the increase of the cost of revenue in connection to the increase in sales activities at China Yang-sheng paradise and Yunding Park, and depreciation cost for the new construction completed for tourism destinations.

 

Selling Expenses

 

Selling expenses were approximately $7.72 million for the nine months ended September 30, 2014, compared to approximately $6.57 million for the nine months ended September 30, 2013, which represents an increase of approximately $1.15 million, or approximately 17.53%. The increase in selling expense was primarily due to the increase in variable costs and advertisement expenses at China Yang-sheng paradise during the nine months ended September 30, 2014. 

 

 

General and Administrative Expenses

 

General and administrative expenses were approximately $5.56 million for the nine months ended September 30, 2014, compared to approximately $4.16 million for the nine months ended September 30, 2013, which represents an increase of approximately $1.4 million, or approximately 33.54%. This increase was due to the increase of administrative expenses for the operation of China Yang-sheng paradise, City of Caves and Yunding Park during the nine months ended September 30, 2014.

  

Interest expense.

 

Interest expense was approximately $6.46 million for the nine months ended September 30, 2014, representing an increase of approximately $3.18 million or approximately 96.95%, compared to the approximately $3.28 million for the nine months ended September 30, 2013. The increase in interest expense was primarily because part of the interest expense for the nine months ended September 30, 2013 was capitalized as part of construction in progress.

 

Income Tax

 

Income tax was $0 for the nine months ended September 30, 2014, representing a decrease of approximately $0.13 million or 100%, compared to the approximately $0.13 million income tax for the nine months ended September 30, 2013. The decrease was because the agreement with FETV expired in July 2013.

 

Net Loss 

 

As a result of the above factors, we have net loss of approximately $25.01 million for the nine months ended September 30, 2014 as compared to net loss of approximately $9.66 million for the nine months ended September 30, 2013, representing an increase of loss of approximately $15.35 million or approximately 158.95%. The increase of loss was primarily attributable to the decrease in advertisement revenue because the agreement with FETV expired in July 2013, the increase in cost of revenue and general and administrative expenses for the operation of China Yang-sheng paradise, and the cost related to disposal of Fujian Jintai for the nine months ended September 30, 2014 as compared with that for the nine months ended September 30, 2013. 

 

Liquidity and Capital Resources

 

Our principal source of liquidity during the three months ended September 30, 2014 was primarily the proceeds from loans from related parties.

 

As of September 30, 2014, we had cash and cash equivalents of approximately $5.98 million as compared to approximately $2.16 million as of December 31, 2013, representing an increase of $3.82 million. Our principal source of liquidity during the nine months ended September 30, 2014 was primarily resulted from proceeds from disposal of Fujian Jintai of approximately $35.57 million and from loans from related parties of approximately $6.5 million for the nine months ended September 30, 2014.

 

As of September 30, 2014 and December 31, 2013, our working capital deficits were approximately $40.48 million and $43.04 million, respectively. 

 

 

The following table sets forth a summary of our cash flows for the years indicated:

 

		For the Nine Months Ended September 30,
		2014				2013
Net cash used in operating activities of continuing operations		$	(10,308,625	)		$	(8,519,404	)
Net cash used in investing activities of continuing operations		$	(7,746,493	)		$	(71,956,321	)
Net cash provided by financing activities of continuing operations		$	22,052,207			$	78,201,825
Net cash used in discontinued operations		$	(253,763	)		$	(2,291,658	)

 

Net cash used in operating activities of continuing operations was approximately $10.31 million for the nine months ended September 30, 2014, compared to approximately $8.52 million for the nine months ended September 30, 2013.  The increase of $1.79 million was primarily due to the net loss of $25.01 million for the nine months ended September 30, 2014 as compared to the net loss of $9.66 million for the nine months ended September 30, 2013.

 

Net cash used in investing activities of continuing operations was approximately $7.75 million for the nine months ended September 30, 2014, compared to approximately $71.96 million for the nine months ended September 30, 2013.  The decrease of $64.21 million was primarily due to the decrease of $45.61 million in the construction cost related to China Yang-sheng Paradise which had been completed during the year ended December 31, 2013. 

 

Net cash provided by financing activities of continuing operations amounted to approximately $22.05 million for the nine months ended September 30, 2014, compared to approximately $78.2 million for the nine months ended September 30, 2013, representing a decrease of approximately $56.15 million.  The decrease in net cash provided by financing activities was mainly because the net repayment of bank loans was $5.2 million (total repayment of loans of $49.93 million netting total proceeds from loans of $44.73 million off) during the nine months ended September 30, 2014 as compared to the net proceeds from bank loans was of $43.27 million (total proceeds from loans of $57.1 million netting total repayment of loans of $13.83 million off) during the nine months ended September 30, 2013.

 

Bank loans

 

As of September 30, 2014, the Company had four bank loans from four institutional lenders for the development of the tourism destinations.

 

1.	A loan for approximately $2.6 million from China Minsheng Banking Corp, Ltd. The loan bears interest at 7% per annum, and is due on June 10, 2015.
2.	A loan for approximately $1.95 million from Fujian Haixia Bank (formerly known as Merchant bank of Fuzhou). The loan bears interest at 9.6% per annum, and is due on June 20, 2015.
3.	A loan for approximately $37.37 million from China Minsheng Banking Corp, Ltd. It bears interest rate at 9% per annum. $12,998,197 (RMB 80,000,000) and $24,371,618 (RMB 150,000,000) will be due in each twelve-month period as of September 30, 2019 and 2020, respectively. It is secured by the land use right of Jiangxi Zhangshu, and collateralized by the personal guarantees by two of the Company’s directors.

 

4.

A loan for approximately $40.13 million from China Construction Bank.  It bears interest at 6.55% and 7.86% per annum. $2,599,639 (RMB 16,000,000), $3,574,504 (RMB 22,000,000), $4,386,891 (RMB 27,000,000), $5,199,279 (RMB 32,000,000), $6,092,905 (RMB 37,500,000), $6,986,531 (RMB 43,000,000) and $10,073,602 (RMB 62,000,000) will be due in each twelve-month period as of September 30, 2016, 2017, 2018, 2019, 2020, 2021 and 2022, respectively. It is secured by the fixed assets of Fujian Yida, and collateralized by the personal guarantees of two of the Company’s directors.

 

In the coming 12 months, we have approximately $5.77 million in bank loans that will mature. We plan to replace these loans with new bank loans in approximately the same aggregate amounts.

 

We believe we can arrange capitals or funds for construction projects based on the actual cash flow expenditures, which means we can accelerate the construction when we have more cash flows and we can slow down the construction when we are lack of funds.

 

  

Obligations Under Material Contracts

 

Below is a table setting forth the Company’s material contractual obligations as of September 30, 2014:

 

						Payment due by period
Contractual Obligations		Total				1 year				1-3 years				3-5 years				More than 5 years
Bank Loans		$	82,051,116			$	5,767,950			$	6,174,143			$	22,584,367			$	47,524,656
Operating Lease Obligations			1,175,004				135,193				94,022				54,361				891,428
Total		$	83,226,120			$	5,903,143			$	6,268,165			$	22,638,728			$	48,416,084

 

Compensation For Using Nature Resources Commitments

 

In December 2008, Tulou entered into a Tourist Resources Development Agreement with Hua’an County Government (“Hua’an government”) which is related to pay compensation fees for using natural resources in Tulou.  The Company agreed to pay (1) 16% of gross ticket sales in the first five years; (2) 20% of gross ticket sales in the second five years; (3) 23% of gross ticket sales in the third five years; (4) 25% of gross ticket sales in the fourth five years; (5) 28% of gross ticket sales in the fifth five years; (6) 30% in twenty six years and thereafter when the ticket price of the Clusters is RMB60 ($9.50 USD) or above per person.

 

The Company paid approximately $43,856 and $45,953 to the Hua’an government for the nine months ended September 30, 2014 and 2013, respectively, and recorded as selling expenses.

 

The Company paid approximately $11,441 and $15,638 to the Hua’an government for the three months ended September 30, 2014 and 2013, respectively, and recorded as selling expenses. 

 

Critical Accounting Policies

 

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires our management to make assumptions, estimates, and judgments that affect the amounts reported, including the notes thereto, and related disclosures of commitments and contingencies, if any. We have identified certain accounting policies that are significant to the preparation of our consolidated financial statements. These accounting policies are important for an understanding of our financial condition and results of operations. Critical accounting policies are those that are most important to the portrayal of our financial condition and results of operations and require management’s difficult, subjective, or complex judgment, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. Certain accounting estimates are particularly sensitive because of their significance to financial statements and because of the possibility that future events affecting the estimate may differ significantly from management’s current judgments. We believe the following critical accounting policies involve the most significant estimates and judgments used in the preparation of our consolidated financial statements.

 

 

Basis of presentation

 

The unaudited consolidated financial statements of China Yida Holding, Co. and Subsidiaries have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and pursuant to the requirements for reporting on Form 10-Q.  Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States of America for annual financial statements.  However, the information included in these interim financial statements reflects all adjustments (consisting solely of normal recurring adjustments) which are, in the opinion of management, necessary for the fair presentation of the consolidated financial position and the consolidated results of operations.  Results shown for interim periods are not necessarily indicative of the results to be obtained for a full year.  The consolidated balance sheet information as of December 31, 2013 was derived from the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K.  These interim financial statements should be read in conjunction with that report.  Certain comparative amounts have been reclassified to conform to the current period's presentation.

 

Principles of consolidation

 

The accompanying consolidated financial statements include the accounts of China Yida and its wholly-owned subsidiaries Keenway Limited, Hong Kong Yi Tat, Fuyu, Fujian Yida, Tulou, Yongtai Yunding, Jiangxi Zhangshu, Jiangxi Fenyi, Yida Travel, Fenyi Development, Zhangshu Development, Zhangshu Investment,  Yida Arts, Yunding hotel, Jiangxi Travel and the accounts of its variable interest entity, Fujian Jiaoguang. All significant inter-company accounts and transactions have been eliminated in consolidation.

 

Consolidation of Variable Interest Entities

 

According to the requirements of ASC 810, an Interpretation of Accounting Research Bulletin No. 51 that requires a Variable Interest Entity ("VIE"), the Company has evaluated the economic relationships of Fujian Jiaoguang which signed an exclusive right agreement with the Company. Therefore, Fujian Jiaoguang is considered to be a VIE, as defined by ASC Topic 810-10, of which the Company is the primary beneficiary.

 

The carrying amount and classification of Fujian Jiaoguang’s assets and liabilities included in the Consolidated Balance Sheets are as follows: 

 

		September 30, 2014				December 31, 2013
Total current assets *		$	6,470,528			$	12,244,845
Total assets		$	6,478,166			$	12,252,536
Total current liabilities #		$	15,318,650			$	11,193,422
Total liabilities		$	15,318,650			$	11,193,422

 

* Including intercompany receivables of $6,463,934 and $12,231,075 as at September 30, 2014 and December 31, 2013, respectively, to be eliminated in consolidation.

 

# Including intercompany payables of $15,288,021 and $11,169,092 as at September 30, 2014 and December 31, 2013, respectively, to be eliminated in consolidation.

 

Although Fujian Jiaoguang no longer had revenues, its bank account still has to be maintained active with certain cash flows to support its expenses.  As such, Fujian Jiaoguang transferred funds from and to the Company’s directly-owned subsidiaries, which resulted in intercompany receivables and payables. Since Fujian Jiaoguang is a variable interest entity subject to consolidation, the balances of its intercompany receivables and payables are eliminated against the corresponding account balances at the Company’s directly-owned subsidiaries at the consolidation level.

 

Use of estimates and assumptions

 

The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the amount of revenues and expenses during the reporting periods. Management makes these estimates using the best information available at the time the estimates are made. However, actual results could differ materially from those results. The most significant estimates reflected in the consolidated financial statements include depreciation, useful lives of property and equipment, deferred income taxes, useful life of intangible assets and contingencies. Estimates and assumptions are periodically reviewed and the effects of revisions are reflected in the consolidated financial statements in the period they are determined to be necessary.

  

 

Property and equipment

 

Property and equipment are recorded at cost less accumulated depreciation. Gains or losses on disposals are reflected as gain or loss in the year of disposal. The cost of improvements that extends the life of property, and equipment are capitalized. These capitalized costs may include structural improvements, equipment, and fixtures. All ordinary repair and maintenance costs are expensed as incurred.

 

Depreciation for financial reporting purposes is provided using the straight-line method over the estimated useful lives of the assets or lease term as follows:

 

Building	20 years
Electronic Equipment	5 to 8 years
Transportation Equipment	8 years
Office Furniture	5 to 8 years
Leasehold Improvement and Attractions	Lesser of term of the lease or the estimated useful lives of the assets

 

Intangible assets

 

Intangible assets consist of acquisition of management right of tourism destinations, commercial airtime rights and land use rights for tourism destinations.  They are amortized on the straight line basis over their respective lease periods. The lease period of management right, commercial airtime rights and land use rights is 30 years, 3 years and 40 years, respectively.

 

Impairment

 

The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable through the estimated undiscounted cash flows expected to result from the use and eventual disposition of the assets. Whenever any such impairment exists, an impairment loss will be recognized for the amount by which the carrying value exceeds the fair value.

 

Assets are grouped and evaluated at the lowest level for their identifiable cash flows that are largely independent of the cash flows of other groups of assets. The Company considers historical performance and future estimated results in its evaluation of potential impairment and then compares the carrying amount of the asset to the future estimated cash flows expected to result from the use of the asset. If the carrying amount of the asset exceeds estimated expected undiscounted future cash flows, the Company measures the amount of impairment by comparing the carrying amount of the asset to its fair value. The estimation of fair value is generally measured by discounting expected future cash flows as the rate the Company utilizes to evaluate potential investments. The Company estimates fair value based on the information available, judgments and projections are considered necessary. There was no impairment of long-lived assets as of September 30, 2014 and December 31, 2013.

 

Revenue recognition

 

Revenue is recognized at the date of service rendered to customers when a formal arrangement exists, the price is fixed or determinable, the services rendered, no other significant obligations of the Company exist and collectability is reasonably assured. Payments received before satisfaction of all of the relevant criteria for revenue recognition are recorded as unearned revenue.

 

Revenues from advance tourism destinations ticket sales are recognized when the tickets are used. Revenues from our contractors who have tourism contracts with us are generally recognized over the period of the applicable agreements commencing with the tourists visiting the tourism destinations. The Company also sells admission and activities tickets for a tourism destination which the Company has the management right.

 

The Company sells the television airtime to third parties. The Company records advertising sales when advertisements are aired.

 

The Company has no allowance for product returns or sales discounts because services that are rendered and accepted by the customers are normally not refundable and discounts are normally not granted after service has been rendered.

 

 

Profit sharing costs are recorded as cost of revenue. Profit sharing arrangements with the local governments for the management rights (see Note 14):

 

For the nine months ended September 30, 2014

 

		Tulou
Gross receipts		$	486,126
Profit sharing costs			-
Nature resource compensation expenses			43,856
Total paid to the local governments			43,856
Net receipts		$	442,270

 

For the nine months ended September 30, 2013

 

		Tulou
Gross receipts		$	512,986
Profit sharing costs			-
Nature resource compensation expenses			45,953
Total paid to the local governments			45,953
Net receipts		$	467,033

 

For the three months ended September 30, 2014

 

		Tulou
Gross receipts		$	126,818
Profit sharing costs			-
Nature resource compensation expenses			11,441
Total paid to the local governments			11,441
Net receipts		$	115,377

 

For the three months ended September 30, 2013 

 

		Tulou
Gross receipts		$	177,774
Profit sharing costs			-
Nature resource compensation expenses			15,638
Total paid to the local governments			15,638
Net receipts		$	162,136

 

 

Foreign currency translation

 

The Company uses the United States dollar ("U.S. dollars") for financial reporting purposes. The Company's subsidiaries maintain their books and records in their functional currency, being the primary currency of the economic environment in which their operations are conducted. In general, for consolidation purposes, the Company translates the subsidiaries' assets and liabilities into U.S. dollars using the applicable exchange rates prevailing at the balance sheet dates, and the statements of income are translated at average exchange rates during the reporting periods. Gain or loss on foreign currency transactions are reflected on the income statement. Gain or loss on financial statement translation from foreign currency are recorded as a separate component in the equity section of the balance sheet and is included as part of accumulated other comprehensive income. The functional currency of the Company and its subsidiaries in China is the Chinese Renminbi.

 

Income taxes

 

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is recognized if it is more likely than not that some portion, or all, of a deferred tax asset will not be realized. There were no deferred income tax assets as of September 30, 2014 and December 31, 2013, respectively.

 

The Company applied the provisions of ASC 740-10-50, “Accounting For Uncertainty In Income Taxes”, which provides clarification related to the process associated with accounting for uncertain tax positions recognized in our financial statements. Audit periods remain open for review until the statute of limitations has passed. The completion of review or the expiration of the statute of limitations for a given audit period could result in an adjustment to the Company’s liability for income taxes. Any such adjustment could be material to the Company’s results of operations for any given quarterly or annual period based, in part, upon the results of operations for the given period. At September 30, 2014, management considered that the Company had no uncertain tax positions, and will continue to evaluate for uncertain positions in the future.

 

China Yida is subject to U.S. Federal and California state examination by tax authorities for years after 2008, and the PRC tax authority for years after 2007.

 

 

Fair values of financial instruments

 

The carrying amounts reported in the consolidated financial statements for current assets and currently liabilities approximate fair value due to the short-term nature of these financial instruments. The carrying amount of long-term loans approximates fair value since the interest rates associated with the debts approximate the current market interest rates.

 

The Company adopted ASC 820-10, “Fair Value Measurements and Disclosures”, which establishes a single authoritative definition of fair value and a framework for measuring fair value and expands disclosure of fair value measurements for both financial and nonfinancial assets and liabilities. This standard defines fair value, provides guidance for measuring fair value and requires certain disclosures. This standard does not require any new fair value measurements, but discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flows) and the cost approach (cost to replace the service capacity of an asset or replacement cost). For purposes of ASC 820-10-15, nonfinancial assets and nonfinancial liabilities would include all assets and liabilities other than those meeting the definition of a financial asset or financial liability as defined in ASC-820-10-15-15-1A.

 

Stock-based compensation

 

The Company records stock-based compensation expense pursuant to ASC 718-10, "Share Based Payment Arrangement,” which requires companies to measure compensation cost for stock-based employee compensation plans at fair value at the grant date and recognize the expense over the employee's requisite service period. The Company’s expected volatility assumption is based on the historical volatility of Company’s stock or the expected volatility of similar entities. The expected life assumption is primarily based on historical exercise patterns and employee post-vesting termination behavior. The risk-free interest rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of grant.

 

Stock-based compensation expense is recognized based on awards expected to vest, and there were no estimated forfeitures as the Company has a short history of issuing options. ASC 718-10 requires forfeitures to be estimated at the time of grant and revised in subsequent periods, if necessary, if actual forfeitures differ from those estimates.

 

Recent accounting pronouncements

 

In August 2014, FASB issued ASU 2014-15 – Presentation of Financial Statements – Going Concern (Subtopic 205-40). The amendments in this Update states the disclosure of uncertainties about an entity’s ability to continue as a going concern. An entity’s management should evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued (or available to be issued). When management identifies conditions or events that raise substantial doubt, management should consider whether its plans will alleviate the substantial doubt.

 

When substantial doubt is raised but is alleviated by management’s plans, the entity should disclose following information: (a) Principal conditions or events that raised substantial doubt (before consideration of management’s plans); (b) Management’s evaluation of the significance of those conditions or events in relation to the entity’s ability to meet its obligations; (c) Management’s plans that alleviated the substantial doubt.

 

When substantial doubt is raised but is not alleviated by management’s plans,, an entity should include a statement in the footnotes indicating that there is substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued (or available to be issued), and disclose the following information: (a) Principal conditions or events that raise substantial doubt; (b) Management’s evaluation of the significance of those conditions or events in relation to the entity’s ability to meet its obligations; (c) Management’s plans that are intended to mitigate the conditions or events that raise the substantial doubt.

 

The amendments in this Update are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. The Company is still in progress of evaluating future impact of adopting this standard.

 

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve the core principle, an entity should apply the following steps:

 

Step 1: Identify the contract(s) with a customer.

Step 2: Identify the performance obligations in the contract.

Step 3: Determine the transaction price.

Step 4: Allocate the transaction price to the performance obligations in the contract.

Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation.

 

An entity should disclose sufficient information to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. For a public entity, the amendments in this Update are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early application is not permitted. For all other entities (nonpublic entities), the amendments in this Update are effective for annual reporting periods beginning after December 15, 2017, and interim periods within annual periods beginning after December 15, 2018. A nonpublic entity may elect to apply this guidance earlier. The Company has begun evaluating future impact of adopting this standard on the Company’s consolidated financial position and operating results.

 

In April 2014, the FASB issued ASU 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360). The amendments in this Update change the requirements for reporting discontinued operations in Subtopic 205-20. A discontinued operation may include a component of an entity or a group of components of an entity, or a business or nonprofit activity. A disposal of a component of an entity or a group of components of an entity is required to be reported in discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results. The amendments in this Update require an entity to present, for each comparative period, the assets and liabilities of a disposal group that includes a discontinued operation separately in the asset and liability sections, respectively, of the statement of financial position. The amendments in this Update require a public business entity and a not-for-profit entity that has issued, or is a conduit bond obligor for, securities that are traded, listed, or quoted on an exchange or an over-the-counter market to provide disclosures about a disposal of an individually significant component of an entity that does not qualify for discontinued operations presentation in the financial statements. The amendments in this Update require all other entities to provide disclosures about a disposal of an individually significant component of an entity that does not qualify for discontinued operations presentation in the financial statements. The amendments in this Update expand the disclosures about an entity’s significant continuing involvement with a discontinued operation. Those disclosures are required until the results of operations of the discontinued operation in which an entity retains significant continuing involvement are no longer presented separately as discontinued operations in the statement where net income is reported (or statement of activities for a not-for-profit entity). The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial position and results of operations.

 

In January 2014, the FASB issued ASU 2014-02, Intangibles-Goodwill and Other (Topic 350): Accounting for Goodwill. The amendments in this Update allow an accounting alternative for the subsequent measurement of goodwill. An entity within the scope of the amendments that elects the accounting alternative in this Update should amortize goodwill on a straight-line basis over 10 years, or less than 10 years if the entity demonstrates that another useful life is more appropriate. An entity that elects the accounting alternative is further required to make an accounting policy election to test goodwill for impairment at either the entity level or the reporting unit level. Goodwill should be tested for impairment when a triggering event occurs that indicates that the fair value of an entity (or a reporting unit) may be below its carrying amount. The disclosures required under this alternative are similar to existing U.S. generally accepted accounting principles (GAAP). However, an entity that elects the accounting alternative is not required to present changes in goodwill in a tabular reconciliation. The accounting alternative, if elected, should be applied prospectively to goodwill existing as of the beginning of the period of adoption and new goodwill recognized in annual periods beginning after December 15, 2014, and interim periods within annual periods beginning after December 15, 2015. Early application is permitted. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial position and results of operations. 

 

 

In December 2013, the FASB issued ASU 2013-12, “Definition of a Public Business Entity”. The Board has decided that it should proactively determine which entities would be within the scope of the Private Company Decision-Making Framework: A Guide for Evaluating Financial Accounting and Reporting for Private Companies (Guide). This will aim to minimize the inconsistency and complexity of having multiple definitions of, or a diversity in practice as to what constitutes, a nonpublic entity and public entity within U.S. generally accepted accounting principles (GAAP) on a going-forward basis. This Update addresses those issues by defining public business entity. The Accounting Standards Codification includes multiple definitions of the terms nonpublic entity and public entity. The amendment in this Update improves U.S. GAAP by providing a single definition of public business entity for use in future financial accounting and reporting guidance. The amendment does not affect existing requirements. There is no actual effective date for the amendment in this Update. However, the term public business entity will be used in Accounting Standards Updates which are the first Updates that will use the term public business entity. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial position and results of operations.

 

In July 2013, the FASB issued ASU 2013-11, “Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists.” An unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset. To the extent a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. The assessment of whether a deferred tax asset is available is based on the unrecognized tax benefit and deferred tax asset that exist at the reporting date and should be made presuming disallowance of the tax position at the reporting date. For public entities, the guidance is effective prospectively for reporting periods beginning after December 15, 2013. For nonpublic entities, the guidance is effective prospectively for reporting periods beginning after December 15, 2014. Early adoption is permitted. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial position and results of operations.

 

In February 2013, the FASB issued ASU 2013-02, “Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income.”  This ASU does not change the current requirements for reporting net income or other comprehensive income in financial statements.  However, this guidance requires an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component.  In addition, an entity is required to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period.  For other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures required under U.S. GAAP that provide additional detail about those amounts.  For public entities, the guidance is effective prospectively for reporting periods beginning after December 15, 2012.  For nonpublic entities, the guidance is effective prospectively for reporting periods beginning after December 15, 2013.  Early adoption is permitted.  The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial position and results of operations.

 

Inflation and Seasonality

  

Our operating results and operating cash flows historically have not been materially affected by inflation or seasonality.

  

Off Balance Sheet Arrangements

  

We do not have any off balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, sales or expenses, results of operations, liquidity or capital expenditures, or capital resources that are material to an investment in our securities.

  

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOUSURES ABOUT MARKET RISK.

  

Not applicable because we are a small reporting company.

 

Item 4. Controls and Procedures. 

 

Evaluation of disclosure controls and procedures.

 

Our disclosure controls and procedures are designed to ensure (i) that information required to be disclosed by us in the reports we file or submit under the Exchange Act are recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms; and (ii) that information required to be disclosed by us in the reports it files or submits under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. As of September 30, 2014, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of the end of the period covered by this report, our disclosure controls and procedures were not effective.

 

Changes in internal control over financial reporting.

 

During the period covered by this report, there was no change in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect our internal control over financial reporting.

  

  

PART II - OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

None.

 

Item 1A. Risk Factors.

 

There has been no material change to our risk factors from those presented in our Form 10-K for the fiscal year ended December 31, 2013.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

 

None.

 

Item 3. Defaults Upon Senior Securities.

 

None.

 

Item 4. Mine Safety Disclosures.

 

Not applicable.

 

Item 5. Other Information.

 

None.

 

Item 6. Exhibits.

 

No.		Description
10.1		Fixed Assets Loan Agreement with Fujian Branch of China Construction Bank dated September 4, 2014
10.2		Fixed Assets Loan Agreement with Fujian Branch of China Construction Bank dated September 24, 2014
10.3		Fixed Assets Loan Agreement with Fujian Branch of China Construction Bank dated August 1, 2014
31.1		Certification of Chief Executive Officer Required by Rule 13a-14(a) (17 CFR 240.13a-14(a))
31.2		Certification of Chief Financial Officer Required by Rule 13a-14(a) (17 CFR 240.13a-14(a))
32.1		Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 *
32.2		Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 *
101.INS		XBRL Instance Document †
101.SCH		XBRL Taxonomy Extension Schema Document †
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document †
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document †
101.LAB		XBRL Taxonomy Extension Label Linkbase Document †
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document †

 

*		Filed herein
**		In accordance with SEC Release 33-8238, Exhibits 32.1 and 32.2 are furnished and not filed.
†		Furnished herewith. XBRL (eXtensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

	CHINA YIDA HOLDING, CO.
Date: November 14, 2014	By:	/s/ Minhua Chen
		Minhua Chen Chief Executive Officer (Principal Executive Officer)
	By:	/s/ Yongxi Lin
		Yongxi Lin Chief Financial Officer (Principal Financial Officer)

 

  

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