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 March 31, 2015

 

or

 

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

 

For the transition period from ______to______

 

Commission File Number: 001-34567

 

CHINA YIDA HOLDING, CO.

(Exact name of registrant as specified in its charter)

 

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

 

+ 86 (591) 28082230

(Registrant's telephone number, including area code)

 

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

Yes 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 May 14, 2015
Common stock, $.001 par value		3,914,580

 

 

 

PART 1 - FINANCIAL INFORMATION

 

Item 1. Financial Statements.

 

CHINA YIDA HOLDING, CO. AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

Index to consolidated financial statements

 

	Page
Consolidated Balance Sheets as of March 31, 2015 and December 31, 2014	2
Consolidated Statements of Income and Comprehensive Income for the three months ended March 31, 2015 and 2014	3
Consolidated Statements of Cash Flows for the three months ended March 31, 2015 and 2014	4
Notes to the Consolidated Financial Statements	5 - 28

 

 

CHINA YIDA HOLDING CO. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

 

		March 31,				December 31,
		2015				2014
		(UNAUDITED)				(AUDITED)
ASSETS
Current assets
Cash and cash equivalents		$	9,353,739			$	958,664
Accounts receivable			379,459				343,807
Other receivables, net			216,639				148,828
Advances and prepayments			858,431				838,933
Prepayment - current portion			920,419				832,207
Total current assets			11,728,687				3,122,439
Property and equipment, net			180,237,843				181,613,405
Intangible assets, net			46,275,534				46,419,350
Long-term prepayments			2,548,870				2,032,764
Total assets		$	240,790,934			$	233,187,958
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Short-term loans		$	1,960,592			$	1,954,047
Long-term debt, current portion			3,267,653				3,256,746
Accounts payable			481,933				713,414
Accrued expenses and other payables			1,494,347				1,364,863
Due to related parties			15,583,032				31,680,942
Taxes payable			45,737				38,922
Total current liabilities			22,833,294				39,008,934
Long-term debt			112,734,046				83,047,011
Total liabilities			135,567,340				122,055,945
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 March 31, 2015 and December 31, 2014, respectively)			3,915				3,915
Additional paid in capital			49,163,705				49,163,705
Accumulated other comprehensive income			17,870,757				17,512,681
Retained earnings			35,635,887				41,902,382
Statutory reserve			2,549,330				2,549,330
Total equity			105,223,594				111,132,013
Total liabilities and equity		$	240,790,934			$	233,187,958

 

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)

 

		For The Three Months Ended
		March 31,
		2015				2014
Net revenue		$	2,572,962			$	2,007,066
Cost of revenue			2,169,091				2,134,619
Gross profit (loss)			403,871				(127,553	)
Operating expenses
Selling expenses			2,509,369				2,630,623
General and administrative expenses			2,207,956				1,916,185
Total operating expenses			4,717,325				4,546,808
Loss from operations			(4,313,454	)			(4,674,361	)
Other income (expense)
Other (expense) income, net			(7,711	)			204,425
Interest income			3,078				2,869
Interest expense			(1,948,408	)			(2,205,048	)
Total other expenses			(1,953,041	)			(1,997,754	)
Loss before income tax and non-controlling interest			(6,266,495	)			(6,672,115	)
Less: Provision for income tax			-				-
Net loss from continuing operations			(6,266,495	)			(6,672,115	)
Net loss from discontinued operations, net of income taxes			-				(618,930	)
Net loss			(6,266,495	)			(7,291,045	)
Other comprehensive income
Foreign currency translation loss			(876,069	)			(1,098,639	)
Comprehensive loss		$	(7,142,564	)		$	(8,389,684	)
Amounts attributable to common stockholders:
Net loss from continuing operations, net of income taxes			(6,266,495	)			(6,672,115	)
Net loss from discontinued operations, net of income taxes			-				(618,930	)
Net loss attributable to common stockholders			(6,266,495	)			(7,291,045	)
Net loss attributable to common stockholders per share - basic and diluted:
- Basic & diluted earnings/(loss) per share from continuing operations		$	(1.60	)		$	(1.70	)
- Basic & diluted earnings/(loss) per share from discontinued operations		$	-			$	(0.16	)
- Basic & diluted earnings/(loss) per share attributable to common stockholders		$	(1.60	)		$	(1.86	)
Weighted average shares outstanding
- Basic			3,914,580				3,914,580
- Diluted			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 Three Months Ended March 31,
		2015				2014
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss		$	(6,266,495	)		$	(7,291,045	)
Net loss from discontinued operations			-				618,930
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation			2,065,975				1,971,318
Amortization			298,130				299,785
Changes in operating assets and liabilities:
Accounts receivable			(34,367	)			9,209
Other receivables, net			(67,052	)			(36,790	)
Advances and prepayments			(16,622	)			(469,080	)
Accounts payable			(232,965	)			36,314
Accrued expenses and other payables			131,088				944,284
Net cash used in continuing operations			(4,122,308	)			(3,917,075	)
Net cash used in discontinued operations			-				(241,100	)
Net cash used in operating activities			(4,122,308	)			(4,158,175	)
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property and equipment			(89,811	)			(254,586	)
Additions of long-term prepayments for acquisition of property, equipment and land use rights			(22,793	)			(3,414	)
Net cash used in continuing operations			(112,604	)			(258,000	)
Net cash used in discontinued operations			-				(16,965	)
Net cash used in investing activities			(112,604	)			(274,965	)
CASH FLOWS FROM FINANCING ACTIVITIES
Payment of deferred financing costs			(569,624	)			-
Proceeds from long-term loans			29,294,968				-
(Repayment of) proceeds from loans from related parties			(16,130,995	)			3,912,241
Net cash provided by continuing operations			12,594,349				3,912,241
Net cash provided by discontinued operations			-				113,577
Net cash provided by financing activities			12,594,349				4,025,818
EFFECT OF EXCHANGE RATE CHANGES ON CASH			35,638				35,184
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS			8,395,075				(372,138	)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD			958,664				2,415,575	(1)
CASH AND CASH EQUIVALENTS, ENDING OF PERIOD		$	9,353,739			$	2,043,437	(2)
SUPPLEMENTAL DISCLOSURES:
Cash paid during the period for:
Income tax		$	-			$	-
Interest		$	1,948,408			$	1,457,722

 

(1) Included cash and cash equivalents from continuing and discontinued operations of $2,157,738 and $257,837, respectively.

 

(2) Included cash and cash equivalents from continuing and discontinued operations of $1,859,840 and $183,597, respectively.

 

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

 

 

CHINA YIDA HOLDING, CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

1.	ORGANIZATION AND DESCRIPTION OF BUSINESS

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 

CHINA YIDA HOLDING, CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 (UNAUDITED)

 

1.	ORGANIZATION AND DESCRIPTION OF BUSINESS (CONTINUED)

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 

CHINA YIDA HOLDING, CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

2.	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 (CONTINUED)

 

The unaudited consolidated financial statements of China Yida Holding, Co. and Subsidiaries have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and pursuant to the requirements for reporting on Form 10-Q.  Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States of America for annual financial statements.  However, the information included in these interim financial statements reflects all adjustments (consisting solely of normal recurring adjustments) which are, in the opinion of management, necessary for the fair presentation of the consolidated financial position and the consolidated results of operations.  Results shown for interim periods are not necessarily indicative of the results to be obtained for a full year.  The consolidated balance sheet information as of December 31, 2014 was derived from the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K.  These interim financial statements should be read in conjunction with that report.  Certain comparative amounts have been reclassified to conform to the current period's presentation.

 

a. Basis of presentation

 

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

 

b. Principles of consolidation

 

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

 

Consolidation of Variable Interest Entities

 

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

 

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

 

		March 31, 2015				December 31, 2014
Total current assets *		$	10,418,603			$	4,407,430
Total assets		$	10,426,283			$	4,415,085
Total current liabilities #		$	19,473,151			$	13,352,110
Total liabilities		$	19,473,151			$	13,352,110

 

* Including intercompany receivables of $10,348,081 and $4,342,251 as at March 31, 2015 and December 31, 2014, respectively, to be eliminated in consolidation.

 

# Including intercompany payables of $19,442,472 and $13,321,547 as March 31, 2015 and December 31, 2014, 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 March 31, 2015 and December 31, 2014, the Company has uninsured deposits in banks of approximately $9,331,000 and $943,000.

 

e. Accounts receivable

 

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

 

f. Advances and prepayments

 

The Company advances funds to certain vendors for purchase of its construction materials and necessary services. Based on the management’s judgment, no allowance for advances and prepayments were assessed and recorded as of March 31, 2015 and December 31, 2014, respectively.

 

g. Property and equipment

 

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

 

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

 

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

 

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 March 31, 2015 and December 31, 2014. 

 

j. Revenue recognition

 

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

 

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

 

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

 

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

 

For the three months ended March 31, 2015
		Tulou
Gross receipts		$	101,190
Profit sharing costs			-
Nature resource compensation expenses			8,964
Total paid to the local governments			8,964
Net receipts		$	92,226

 

For the three months ended March 31, 2014
		Tulou
Gross receipts		$	150,119
Profit sharing costs			-
Nature resource compensation expenses			13,751
Total paid to the local governments			13,751
Net receipts		$	136,368

 

 

CHINA YIDA HOLDING, CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

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

 

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 three months ended March 31, 2015 and 2014 were $281,768 and $290,163, 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 $83,266 and $68,196 for the three months ended March 31, 2015 and 2014, respectively.  Other than the above, neither the Company nor its subsidiaries provide any other post-retirement or post-employment benefits.

 

m. Foreign currency translation

 

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

 

n. Income taxes

 

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is recognized if it is more likely than not that some portion, or all, of a deferred tax asset will not be realized. There were no deferred income tax assets as of March 31, 2015 and December 31, 2014, respectively.  

 

 

CHINA YIDA HOLDING, CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

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

 

The Company applied the provisions of ASC 740-10-50, “Accounting For Uncertainty In Income Taxes”, which provides clarification related to the process associated with accounting for uncertain tax positions recognized in our financial statements. Audit periods remain open for review until the statute of limitations has passed. The completion of review or the expiration of the statute of limitations for a given audit period could result in an adjustment to the Company’s liability for income taxes. Any such adjustment could be material to the Company’s results of operations for any given quarterly or annual period based, in part, upon the results of operations for the given period. At March 31, 2015, management considered that the Company had no uncertain tax positions, and will continue to evaluate for uncertain positions in the future. 

 

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

 

o. Fair values of financial instruments

 

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

 

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

 

p. Stock-based compensation

 

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

 

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

 

q. Earnings per share (EPS)

 

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

 

r. Statutory Reserves

 

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

 

As of March 31, 2015, the statutory reserve of the subsidiaries already reached 50% of the registered capital of the subsidiaries and the Company did not have any further allocation on it.

 

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

 

  

CHINA YIDA HOLDING, CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

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

 

s. Dividend Policy

 

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

 

t. Reclassifications

 

Except for the classification for discontinued operations, certain classifications have been made to the prior year financial statements to conform to the current year presentation. The reclassification had no impact on previously reported net loss or accumulated deficit.

 

u. Recent accounting pronouncements

 

In February 18, 2015, FASB issued ASU 2015-02-Consolidation (Topic 810). The amendments in this Update affect reporting entities that are required to evaluate whether they should consolidate certain legal entities. All legal entities are subject to reevaluation under the revised consolidation model. Specifically, the amendments: (1) Modify the evaluation of whether limited partnerships and similar legal entities are variable interest entities (VIEs) or voting interest entities; (2) Eliminate the presumption that a general partner should consolidate a limited partnership; (3) Affect the consolidation analysis of reporting entities that are involved with VIEs, particularly those that have fee arrangements and related party relationships; (4) Provide a scope exception from consolidation guidance for reporting entities with interests in legal entities that are required to comply with or operate in accordance with requirements that are similar to those in Rule 2a-7 of the Investment Company Act of 1940 for registered money market funds. The amendments in this Update are effective for public business entities for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2015. The Company is still in progress of evaluating future impact of adopting this standard.

 

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

 

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

 

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

 

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

 

 

CHINA YIDA HOLDING, CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

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

 

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

 

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

Step 2: Identify the performance obligations in the contract.

Step 3: Determine the transaction price.

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

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

 

 

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.

 

 

CHINA YIDA HOLDING, CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

4.	OTHER RECEIVABLES, NET

 

Other receivables consist of the following: 

 

		March 31, 2015				December 31, 2014
Advance to employees		$	120,789			$	74,451
Security deposits			41,854				42,670
Other			53,996				31,707
			216,639				148,828
Less: Allowance			-				-
		$	216,639			$	148,828

 

5.	ADVANCES AND PREPAYMENTS

 

Advances and prepayments consist of the following:

 

		March 31, 2015				December 31, 2014
Advance payments related to consumables of Yang-Sheng Paradise		$	401,759			$	493,013
Advance payments related to facilities of Yang-Sheng Paradise			306,600				226,344
Advance payments related to hotel facilities of Yunding resort			128,576				116,104
Other			21,496				3,472
		$	858,431			$	838,933

 

As of March 31, 2015 and December 31, 2014, advance payments related to the consumables to be used in Yang-Sheng Paradise were $401,759 and $493,013, respectively. As of March 31, 2015 and December 31, 2014, advance payments related to the facilities of Yang-Sheng Paradise were $306,600 and $226,344, respectively.

 

As of March 31, 2015 and December 31, 2014, advance payments related to hotel facilities of Yunding resort were $128,576 and $116,104, respectively.

 

 

CHINA YIDA HOLDING, CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

6.	PROPERTY AND EQUIPMENT, NET

 

Property and equipment consist of the following:

 

		March 31, 2015				December 31, 2014
Buildings, improvements, and attractions		$	193,373,037			$	192,727,526
Electronic equipment			4,907,526				4,832,741
Transportation equipment			2,742,887				2,705,322
Office furniture			1,012,405				1,005,977
			202,035,855				201,271,566
Less: Accumulated depreciation			(21,798,012	)			(19,658,161	)
Property and equipment, net		$	180,237,843			$	181,613,405

 

Depreciation expense for the three months ended March 31, 2015 and 2014 were $2,065,975 and $1,971,318 respectively.

  

7.	INTANGIBLE ASSETS, NET

 

Intangible assets consist of the following:

 

		March 31, 2015				December 31, 2014
Land use right		$	48,232,895			$	48,071,885
			48,232,895				48,071,885
Accumulated amortization			(1,957,361	)			(1,652,535	)
Intangible assets, net		$	46,275,534			$	46,419,350

 

 

CHINA YIDA HOLDING, CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

7.	INTANGIBLE ASSETS, NET (CONTINUED)

 

For the three months ended March 31, 2015 and 2014, amortization expense amounted to $298,130 and $299,785, respectively. 

 

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

 

As of March 31,
2016		$	1,192,524
2017			1,192,524
2018			1,192,524
2019			1,192,524
2020			1,192,524
Thereafter			40,312,914
		$	46,275,534

 

8.	LONG-TERM PREPAYMENTS

 

Long-term prepayments consist of the following:

 

		March 31, 2015				December 31, 2014
Prepayments for project planning, assessments and consultation fees		$	1,387,016			$	1,408,991
Prepayment for cooperative development			364,049				387,573
Deferred financing costs			480,944				-
Others			316,861				236,201
		$	2,548,870			$	2,032,764

 

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

 

In 2008, Hong Kong Yi Tat entered into a Tourist Destination Cooperative Development Agreement with Yongtai County Government with respect to the development of Yunding Park pursuant to which Fujian Yida is obligated to pay RMB 5.0 million, or approximately $0.82 million, to the Yongtai County People’s Government over the course of the first 10 years of the Agreement. By the end of 2013, the Company had fulfilled this obligation with total payments made in the amount of approximately $818,036 (RMB 5.0 million) recorded as prepayments for cooperative development to be expensed throughout the term of the Agreement. As of March 31, 2015 and December 31, 2014, prepayments for cooperative development amounted to $364,049 and $387,573, respectively.

 

Deferred financing costs represent fees paid on amounted to $571,839 (RMB 3.50 million), in order to obtain additional debt used to construct resort project.  These fees were deferred and amortized on a straight line basis over the life of the debt.

 

Estimated amortization of the deferred financing costs for the next five years and thereafter is as follows:

 

As of March 31,

2016		$	87,005
2017			87,005
2018			87,005
2019			87,005
2020			87,005
Thereafter			132,924
Total minimum payments		$	567,949
Current portion recorded under prepayments – current portion			(87,005	)
Long term portion		$	480,944

 

 

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:

 

		March 31, 2015				December 31, 2014
Loan from Fujian Haixia Bank (formerly known as Merchant bank of Fuzhou), interest rate at 9.6% per annum, due June 20, 2015, collateralized by the personal guarantees by two of the Company’s directors.		$	1,960,592			$	1,954,047

 

In June 2014, the Company borrowed an amount of $1,960,592 (RMB 12 million) due on June 20, 2015 from Fujian Haixia Bank, with the interest rate at 9.6% per annum.

 

Interest expense for the three months ended March 31, 2015 and 2014 amounted to $46,872 and $53,329, respectively.

 

Long-term debt

 

Long term debt consists of the following:

 

		March 31, 2015				December 31, 2014
Loan from China Minsheng Banking Corp, Ltd., interest rate at 9% per annum, final installment due on November 30, 2019, secured by the land use right of Jiangxi Zhangshu, collateralized by the personal guarantees by two of the Company’s directors. (Note (a))		$	37,578,015			$	37,452,574
Loan from China Construction Bank, interest rate at 6.55% per annum, final installment due on July 15, 2022, collateralized by the fixed assets of Fujian Yida and personal guarantees by two of the Company’s directors as additional collateral.  (Note (b))			31,369,474				31,264,757
Loan from Industrial and Commercial Bank of China Limited., interest rate at 7.07% per annum, final installment due on December 16, 2021, collateralized by the land use rights of Jiangxi Fenyi, guaranteed by Yida (Fujian) Tourism Group Limited., and personal guarantees by two of the Company’s directors as additional collateral. (Note (c))			29,408,881				-
Loan from China Construction Bank, interest rate at 7.86% per annum, final installment due on August 5, 2022, collateralized by the fixed assets of Fujian Yida and personal guarantees by two of the Company’s directors as additional collateral.  (Note (d))			4,901,480				4,885,118
Loan from China Construction Bank, interest rate at 7.86% per annum, final installment due on August 5, 2022, collateralized by the fixed assets of Fujian Yida and personal guarantees by two of the Company’s directors as additional collateral.  (Note (e))			4,901,480				4,885,118
Loan from China Construction Bank, interest rate at 7.86% per annum, final installment due on August 5, 2022, collateralized by the fixed assets of Fujian Yida and personal guarantees by two of the Company’s directors as additional collateral.  (Note (f))			4,084,567				4,070,932
Loan from China Construction Bank, interest rate at 7.86% per annum, final installment due on August 5, 2022, collateralized by the fixed assets of Fujian Yida and personal guarantees by two of the Company’s directors as additional collateral.  (Note (g))			3,757,802				3,745,257
			116,001,699				86,303,757
Less: current portion			(3,267,653	)			(3,256,746	)
Total		$	112,734,046			$	83,047,011

 

 

CHINA YIDA HOLDING, CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

9.	BANK LOANS (CONTINUED)

 

Note:

 

(a)	$13,070,614 (RMB 80,000,000) and $24,507,401 (RMB 150,000,000) will be due in each twelve-month period as of March 31, 2019 and 2020, respectively.
(b)	$1,307,061 (RMB 8,000,000), $1,633,827 (RMB 10,000,000), $3,267,653 (RMB 20,000,000), $3,267,653 (RMB 20,000,000), $4,901,480 (RMB 30,000,000), $4,901,480 (RMB 30,000,000), $6,535,307 (RMB 40,000,000) and $5,555,013 (RMB 34,000,000) will be due in each twelve-month period as of March 31, 2016, 2017, 2018, 2019, 2020, 2021, 2022 and 2023, respectively.
(c)	$29,408,881 (RMB 180,000,000) will be due in the twelve-month period as of March 31, 2022.
(d)	$653,531 (RMB 4,000,000) will be due in each twelve-month period as of March 31, 2016, 2017, 2018, 2019, 2020, 2021 and 2022, respectively, and $326,763 (RMB 2,000,000) will be due in the twelve-month period as of March 31, 2023.
(e)	$653,531 (RMB 4,000,000) will be due in each twelve-month period as of March 31, 2016, 2017, 2018, 2019, 2020, 2021 and 2022, respectively, and $326,763 (RMB 2,000,000) will be due in the twelve-month period as of March 31, 2023.
(f)	$490,148 (RMB 3,000,000) will be due in each twelve-month period as of March 31, 2016, 2017, 2018, 2019 and 2020, respectively, $653,531 (RMB 4,000,000) will be due in each twelve-month period as of March 31, 2021 and 2022, respectively, and $326,765 (RMB 2,000,000) will be due in the twelve-month period as of March 31, 2023.
(g)	$163,383 (RMB 1,000,000), $163,383 (RMB 1,000,000), $326,764 (RMB 2,000,000), $490,148 (RMB 3,000,000), $653,531 (RMB 4,000,000), $653,531 (RMB 4,000,000), $653,531 (RMB 4,000,000) and $653,531 (RMB 4,000,000) will be due in each twelve-month period as of March 31, 2016, 2017, 2018, 2019, 2020, 2021, 2022 and 2023, respectively.

 

Interest expense for the three months ended March 31, 2015 and 2014 amounted to $1,901,536 and $2,151,719, respectively.

 

10.	ACCRUED EXPENSES AND OTHER PAYABLES

 

Accrued expenses and other payables consist of the following:

 

		March 31, 2015				December 31, 2014
Accrued payroll		$	543,464			$	550,573
Accrued local government fees			348,974				347,040
Security deposits payable			259,396				224,125
Unearned revenue			200,084				100,508
Welfare payable			13,272				13,228
Other			129,157				129,389
		$	1,494,347			$	1,364,863

 

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 three months ended March 31, 2015 and 2014. Net operating loss at March 31, 2015, which can be used to offset future taxable income, was approximately $3,953,638. No tax benefit has been realized since a valuation allowance has offset the deferred tax asset resulting from the net operating losses.

 

 

CHINA YIDA HOLDING, CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

11.	INCOME TAX (CONTINUED)

 

Cayman Islands

 

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

 

Hong Kong

 

Hong Kong Yi Tat, a wholly owned subsidiary of the Company, is incorporated in Hong Kong. Hong Kong Yi Tat is subject to Hong Kong taxation on its activities conducted in Hong Kong and income arising in or derived from Hong Kong. No provisions for income taxes have been made as Hong Kong Yi Tat has no taxable income for the period. The applicable statutory tax rate for the subsidiary was 16.5% for each of the three months ended March 31, 2015 and 2014.

 

PRC

 

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

 

Provision for income tax consists of the following:

 

		For The three months Ended March 31,
		2015				2014
Current
USA		$	-			$	-
China			-				-
			-				-
Deferred
USA
Deferred tax asset for NOL carry forwards			32,480				21,155
Valuation allowance			(32,480	)			(21,155	)
Net changes in deferred income tax under non-current portion			-				-
China
Deferred tax asset for NOL carry forwards			1,549,422				1,639,659
Valuation allowance			(1,549,422	)			(1,639,659	)
Net changes in deferred income tax under non-current portion			-				-
Net deferred income tax expenses			-				-
Provision for income tax		$	-			$	-

  

 

CHINA YIDA HOLDING, CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

11.	INCOME TAX (CONTINUED)

 

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

 

		For The three months Ended March 31,
		2015				2014
Tax expense at statutory rate - US			35.0	%			35.0	%
Changes in valuation allowance - US			(35.0	%)			(35.0	%)
Tax expense at statutory rate - HK			16.5	%			16.5	%
Changes in valuation allowance - HK			(16.5	%)			(16.5	%)
Foreign income tax rate - PRC			25.0	%			25.0	%
Other (a)			(25.0	%)			(25.0	%)
Effective income tax rates			(0.0	%)			(0.0	%)

 

(a)	Other represents expenses incurred by the Company that are not deductible for PRC income taxes and changes in valuation allowance for PRC entities for the three months ended March 31, 2015 and 2014, respectively.

 

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

 

The change in total allowance for the three months ended March 31, 2015 and 2014 was an increase of $1,581,902 and $1,660,814, 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.

 

 

CHINA YIDA HOLDING, CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

12.	EQUITY (CONTINUED)

 

(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, 2014			18,000
Granted			-
Exercised			-
Forfeited			-
Outstanding as of March 31, 2015			18,000

 

For the three months ended March 31, 2015 and 2014, the Company recognized $0 and $0, respectively, as stock-based compensation expense, which was included in general and administrative expenses.

 

 

CHINA YIDA HOLDING, CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

13.	DISCONTINUED OPERATIONS

 

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

 

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

 

		For The three months Ended March 31,
		2015				2014
Net Revenue		$	-			$	646,966
Cost of Revenue			-				553,626
Selling expenses			-				278,338
General, and administrative expenses			-				263,406
Interest expense			-				182,969
Interest income			-				344
Other income, net			-				12,099
Net loss		$	-			$	(618,930	)

 

 

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 March 31,
2016		$	110,926
2017			33,490
2018			27,322
2019			27,366
2020			27,414
Thereafter			852,789
Total minimum payments		$	1,079,307

 

The Company incurred rental expenses of $84,332 and $41,166 for the three months ended March 31, 2015 and 2014, 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 $8,964 and $13,751 to the Hua’an government for the three months ended March 31, 2015 and 2014, respectively, and recorded as selling expenses. 

 

(3) Litigation

 

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

 

15.	DUE TO RELATED PARTIES

 

As of March 31, 2015, the Company had $12,659,814 and $2,923,218 due to Fujian Xinhengji Advertisement Co., Ltd and Mr. Minhua Chen, respectively. As of December 31, 2014, the Company had $28,921,820 and $2,759,122 due to Fujian Xinhengji Advertisement Co., Ltd and Mr. Minhua Chen, respectively. Mr. Minhua Chen, the Chief Executive Officer and Chairman of the Company, is the Chairman of Fujian Xinhengji Advertisement Co., Ltd. Those loans are unsecured, bear no interest, and due on demand.

 

 

CHINA YIDA HOLDING, CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

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 three months Ended March 31,
		2015				2014
Amounts attributable to common stockholders:
Net loss from continuing operations, net of income taxes		$	(6,266,495	)		$	(6,672,115	)
Net loss from discontinued operations, net of income taxes			-				(618,930	)
Net loss attributable to common stockholders		$	(6,266,495	)		$	(7,291,045	)
Net loss attributable to common stockholders per share - basic and diluted:
- Basic & diluted earnings/(loss) per share from continuing operations		$	(1.60	)		$	(1.70	)
- Basic & diluted earnings/(loss) per share from discontinued operations			-				(0.16	)
- Basic & diluted earnings/(loss) per share attributable to common stockholders		$	(1.60	)		$	(1.86	)
Basic and Diluted weighted average outstanding shares of common stock			3,914,580				3,914,580
Potential common shares outstanding as of March 31, 2015:
Warrants outstanding			-				-
Options outstanding			18,000				18,000

 

For the three months ended March 31, 2015 and 2014, 18,000 options were not included in the diluted earnings per share because the average stock price was lower than the strike price of these options.

 

 

CHINA YIDA HOLDING, CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

  

17.	SUBSEQUENT EVENTS

 

Management has evaluated subsequent events through the date which the consolidated financial statements were issued. All subsequent events requiring recognition as of March 31, 2015 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, 2014, filed on March 31, 2015 (the “Annual Report”). Although management believes that the assumptions made and expectations reflected in the forward-looking statements are reasonable, there is no assurance that the underlying assumptions will, in fact, prove to be correct or that actual results will not be different from expectations expressed in this report.

 

Overview

 

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

 

We currently operate Hua’An Tulou cluster (“Tulou” or the “Earth Buildings”) tourist destination (which is certified as a World Culture Heritage), Yunding Recreational Park (Large-scale National Recreational Park), covering over 300 square kilometers, and China Yang-Sheng Paradise. As of March 31, 2015, through our wholly owned subsidiaries in China, we have entered into two  cooperation agreements respectively with the local Chinese government agents, namely, (i) the Jiangxi Province Zhangshu Municipal Government, and (ii) the Fenyi County, Xinyu City, Jiangxi Province Government. Under these agreements, we have obtained the right to invest in the construction and development of China Yang-sheng (Nourishing Life) Paradise Project (“Yang-sheng Paradise”) (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”).

 

The revenue from tourism has been increasing. However, any increase in tourism revenue will depend on the progress we make in developing our existing and new projects in our other tourist destinations. Our tourism business is seasonal, although we have visitors to our parks throughout the year. In 2015, we will continue to develop and construct the new Jiangxi projects i.e. the second phase construction of Yang-sheng Paradise and the City of Caves. As of March 31, 2015, the first phase of City of Caves in Jiangxi had been completed and is expected to open in the second quarter of 2015.

 

Factors Affecting Our Performance

 

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

 

Net loss from the discontinued operations was $0 and $618,930 for the three months ended March 31, 2015 and 2014, respectively.

 

As a result of the share transactions described above, the Results of Operation set forth below does not reflect the operations for Fujian Jintai. The results of operations of Fujian jintai have been presented as discontinued operations. Therefore, management’s discussion and analysis set forth herein below are based on the results of continuing operations.

 

Results of Operations

 

Results of Operations for the three months ended March 31, 2015 and 2014

 

The following table presents a summary of operating information for the three months ended March 31, 2015 and 2014:

 

		For The Three Months								Increase/				Increase/
		Ended March 31,								(Decrease)				(Decrease)
(All amounts, other than  percentage, in U.S. Dollar)		2015				2014				U.S. Dollar ($)				Percentage (%)
Net revenue		$	2,572,962			$	2,007,066			$	565,896				28.20
Cost of revenue			2,169,091				2,134,619				34,472				1.61
Gross profit (loss)			403,871				(127,553	)			531,424				(416.63	)
Selling expenses			2,509,369				2,630,623				(121,254	)			(4.61	)
General and administrative expenses			2,207,956				1,916,185				291,771				15.23
Loss from operations			(4,313,454	)			(4,674,361	)			360,907				(7.72	)
Other income (expense), net			(7,711	)			204,425				(212,136	)			(103.77	)
Interest income			3,078				2,869				209				7.28
Interest expense			(1,948,408	)			(2,205,048	)			256640				(11.64	)
Net loss from continuing operations			(6,266,495	)			(6,672,115	)			405,620				(6.08	)
Loss from discontinued operations			-				(618,930	)			618,930				(100.00	)
Net loss		$	(6,266,495	)		$	(7,291,045	)		$	1,024,550				(14.05	)

  

 

Net Revenue

 

Net revenue from continuing operations increased by approximately $0.57 million or approximately 28.2%, from approximately $2 million for the three months ended March 31, 2014 to approximately $2.57 million for the three months ended March 31, 2015, including approximately $1.74 million from Yunding Park, an increase of $0.14 million or 9%, $0.1 million from Hua’an Tulou, a decrease of $0.05 million or 33%, and $0.73 million from China Yang-sheng paradise, an increase of $0.48 million or 192%, for the three months ended March 31, 2015, as compared to the same period in 2014. The primary sources of the revenues are ticket sales, tour shuttle bus fees, accommodation and sales from restaurants. The increase in tourism business was primarily due to the revenue increase at China Yang-sheng paradise and Yunding Park due to effective marketing promotion activities and advertisement that led to an increase in number of tourists. We provided deeper ticket discount due to the fierce competition among the destinations and the decreased 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 slightly by approximately $0.04 million or approximately 1.61%, from approximately $2.13 million for the three months ended March 31, 2014 to approximately $2.17 million for the three months ended March 31, 2015.

   

Gross profit

 

Gross profit increased approximately $0.53 million, or approximately 416.63%, from negative gross profit of approximately $0.13 million for the three months ended March 31, 2014 to gross profit of approximately $0.4 million for the three months ended March 31, 2015. Our gross margin was approximately 15.70% for the three months ended March 31, 2015, compared to negative gross profit margin of approximately 6.36% the three months ended March 31, 2014, representing a increase of approximately 22 percentage points. The increase of gross margin was primarily due to the revenue increase at China Yang-sheng paradise and Yunding Park.

 

 

Selling Expenses

 

Selling expenses were approximately $2.51 million for the three months ended March 31, 2015, compared to approximately $2.63 million for the three months ended March 31, 2014, which represents a decrease of approximately $0.12 million, or approximately 4.61%. The decrease in selling expense was primarily due to the decrease in advertisement expenses during the three months ended March 31, 2015.

 

General and Administrative Expenses

 

General and administrative expenses were approximately $2.21 million for the three months ended March 31, 2015, compared to approximately $1.92 million for the three months ended March 31, 2014, which represents an increase of approximately $0.29 million, or approximately 15.23%. 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 March 31, 2015.

 

Interest expense

 

Interest expense was approximately $1.95 million for the three months ended March 31, 2015, representing a decrease of approximately $0.26 million or approximately 11.64%, compared to the approximately $2.21 million for the three months ended March 31, 2014. The decrease was primarily due to the lower interest rate for the loans in the three months ended March 31, 2015 .

 

Net Loss

 

As a result of the above factors, we have net loss of approximately $6.27 million for the three months ended March 31, 2015 as compared to net loss of approximately $7.29 million for the three months ended March 31, 2014, representing a decrease of loss of approximately $1.02 million or approximately 14.05%. The decrease of loss was primarily attributable to the revenue increase at China Yang-sheng paradise and Yunding Park for the three months ended March 31, 2015 as compared with that for the three months ended March 31, 2014.

 

Liquidity and Capital Resources

 

Our principal source of liquidity during the three months ended March 31, 2015 was primarily the proceeds from long-term loans.

 

As of March 31, 2015, we had cash and cash equivalents of approximately $9.35 million as compared to approximately $0.96 million as of December 31, 2014, representing an increase of $8.39 million. Our principal source of liquidity during the three months ended March 31, 2015 was primarily the proceeds from long-term loans of approximately $29.29 million.

 

As of March 31, 2015 and December 31, 2014, our working capital deficits were approximately $11.1 million and $35.89 million, respectively.

 

 

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

 

		For The Three Months Ended March 31,
		2015				2014
Net cash used in operating activities of continuing operations		$	(4,122,308	)		$	(3,917,075	)
Net cash used in investing activities of continuing operations		$	(112,604	)		$	(258,000	)
Net cash provided by financing activities of continuing operations		$	12,594,349			$	3,912,241
Net cash used in discontinued operations		$	-			$	(144,488	)

 

Net cash used in operating activities of continuing operations was approximately $4.12 million for the three months ended March 31, 2015, compared to approximately $3.92 million for the three months ended March 31, 2014. The decrease of $0.20 million was primarily due to the decrease of $1.08 million of accrued expenses and accounts payables, decrease of $0.62 million of loss from discontinued operations, offset by the increase resulted from advances and prepayments of $0.45 million and from the decrease in net loss of $1.02 million.

 

Net cash used in investing activities of continuing operations was approximately $0.11 million for the three months ended March 31, 2015, compared to approximately $0.26 million for the three months ended March 31, 2014. The increase of approximately $0.15 million was primarily due to the decrease of $0.16 million of cash used in additions to property and equipment.

 

Net cash provided by financing activities of continuing operations amounted to approximately $12.59 million for the three months ended March 31, 2015, compared to approximately $3.91 million for the three months ended March 31, 2014, representing an increase of approximately $8.68 million. The increase in net cash provided by financing activities was mainly because the increase of $29.29 million in proceeds from bank loans which was offset by the decrease of $20.04 million in repayment of loans from related parties.

 

Bank loans

 

As of March 31, 2015, the Company had seven bank loans from three institutional lenders for the development of the tourism destinations.

 

1.

A loan for approximately $37.58 million from China Minsheng Banking Corp, Ltd. It bears interest rate at 9% per annum. $13,070,614 (RMB 80,000,000) and $24,507,401 (RMB 150,000,000) will be due in each twelve-month period as of March 31, 2019 and 2020, respectively. It is secured by the land use right of Jiangxi Zhangshu, and collateralized by the personal guarantees by two of the Company’s directors.

 

2.

A loan for approximately $31.37 million from China Construction Bank. It bears interest at 6.55% per annum. $1,307,061 (RMB 8,000,000), $1,633,827 (RMB 10,000,000), $3,267,653 (RMB 20,000,000), $3,267,653 (RMB 20,000,000), $4,901,480 (RMB 30,000,000), $4,901,480 (RMB 30,000,000), $6,535,307 (RMB 40,000,000) and $5,555,013 (RMB 34,000,000) will be due in each twelve-month period as of March 31, 2016, 2017, 2018, 2019, 2020, 2021, 2022 and 2023, respectively. It is secured by the fixed assets of Fujian Yida, and collateralized by the personal guarantees of two of the Company’s directors.

 

3.

A loan for approximately $29.41 million from Industrial and Commercial Bank of China Limited. The loan bears interest at 7.07% per annum, and is due on December 16, 2021. It is collateralized by the land use rights of Jiangxi Fenyi, guaranteed by Yida (Fujian) Tourism Group Limited., and personal guarantees by two of the Company’s directors.

 

4.

A loan for approximately $4.9 million from China Construction Bank. It bears interest at 7.86% per annum. $653,531 (RMB 4,000,000) will be due in each twelve-month period as of March 31, 2016, 2017, 2018, 2019, 2020, 2021 and 2022, respectively, and $326,763 (RMB 2,000,000) will be due in the twelve-month period as of March 31, 2023. It is secured by the fixed assets of Fujian Yida, and collateralized by the personal guarantees of two of the Company’s directors.

  

5.	A loan for approximately $4.9 million from China Construction Bank. It bears interest at 7.86% per annum. $653,531 (RMB 4,000,000) will be due in each twelve-month period as of March 31, 2016, 2017, 2018, 2019, 2020, 2021 and 2022 respectively, and $326,763 (RMB 2,000,000) will be due in the twelve-month period as of March 31, 2023. It is secured by the fixed assets of Fujian Yida, and collateralized by the personal guarantees of two of the Company’s directors.
6.	A loan for approximately $4.08 million from China Construction Bank. It bears interest at 7.86% per annum. $490,148 (RMB 3,000,000) will be due in each twelve-month period as of March 31, 2016, 2017, 2018, 2019 and 2020, respectively, $653,531 (RMB 4,000,000) will be due in each twelve-month period as of March 31, 2021 and 2022, respectively, and $326,765 (RMB 2,000,000) will be due in the twelve-month period as of March 31, 2023. It is secured by the fixed assets of Fujian Yida, and collateralized by the personal guarantees of two of the Company’s directors.

 

7.

A loan for approximately $3.76 million from China Construction Bank. It bears interest at 7.86% per annum. $163,383 (RMB 1,000,000), $163,383 (RMB 1,000,000), $326,764 (RMB 2,000,000), $490,148 (RMB 3,000,000), $653,531 (RMB 4,000,000), $653,531 (RMB 4,000,000), $653,531 (RMB 4,000,000) and $653,531 (RMB 4,000,000) will be due in each twelve-month period as of March 31, 2016, 2017, 2018, 2019, 2020, 2021, 2022 and 2023, 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 $5.23 million in bank loans that will mature. We plan to replace these loans with new bank loans in approximately the same aggregate amounts.

 

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

 

Obligations Under Material Contracts

 

Below is a table setting forth the Company’s material contractual obligations as of March 31, 2015:

 

						Payment due by period
Contractual Obligations		Total				1 year				1-3 years				3-5 years				More than 5 years
Bank Loans		$	117,962,291			$	5,228,245			$	8,986,047			$	50,485,247			$	53,262,752
Operating Lease Obligations			1,079,307				110,926				60,812				54,780				852,789
Total		$	119,041,598			$	5,339,171			$	9,046,859			$	50,540,027			$	54,115,541

 

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 $8,964 and $13,751 to the Hua’an government for the three months ended March 31, 2015 and 2014, respectively, and recorded as selling expenses. 

 

2015 Outlook

 

In 2015, we continued the construction and development of two new tourism projects, the Yang-sheng Paradise in Zhangshu City, Jiangxi province, and the City of Caves in Fenyi City, Jiangxi province, which represent our commitment to expanding our business operations by applying our current business model to the development of other valuable tourist destinations outside Fujian province and throughout China. We expect to open City of Caves to the public in the second quarter of 2015. We expect to fund our operations with cash from operations and bank loans. 

 

Critical Accounting Policies

 

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

 

 

Basis of presentation

 

The unaudited consolidated financial statements of China Yida Holding, Co. and Subsidiaries have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and pursuant to the requirements for reporting on Form 10-Q.  Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States of America for annual financial statements.  However, the information included in these interim financial statements reflects all adjustments (consisting solely of normal recurring adjustments) which are, in the opinion of management, necessary for the fair presentation of the consolidated financial position and the consolidated results of operations.  Results shown for interim periods are not necessarily indicative of the results to be obtained for a full year.  The consolidated balance sheet information as of December 31, 2014 was derived from the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K.  These interim financial statements should be read in conjunction with that report.  Certain comparative amounts have been reclassified to conform to the current period's presentation. 

 

Principles of consolidation

 

The accompanying consolidated financial statements include the accounts of China Yida and its wholly-owned subsidiaries Keenway Limited, Hong Kong Yi Tat, Fuyu, Fujian Yida, Tulou, 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:

 

		March 31, 2015				December 31, 2014
Total current assets *		$	10,418,603			$	4,407,430
Total assets		$	10,426,283			$	4,415,085
Total current liabilities #		$	19,473,151			$	13,352,110
Total liabilities		$	19,473,151			$	13,352,110

 

* Including intercompany receivables of $10,348,081 and $4,342,251 as at March 31, 2015 and December 31, 2014, respectively, to be eliminated in consolidation.

 

# Including intercompany payables of $19,442,472 and $13,321,547 as March 31, 2015 and December 31, 2014, respectively, to be eliminated in consolidation.

 

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

 

Use of estimates and assumptions

 

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

 

 

Property and equipment

 

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

 

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

 

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

 

Intangible assets

 

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

 

Impairment

 

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

 

Assets are grouped and evaluated at the lowest level for their identifiable cash flows that are largely independent of the cash flows of other groups of assets. The Company considers historical performance and future estimated results in its evaluation of potential impairment and then compares the carrying amount of the asset to the future estimated cash flows expected to result from the use of the asset. If the carrying amount of the asset exceeds estimated expected undiscounted future cash flows, the Company measures the amount of impairment by comparing the carrying amount of the asset to its fair value. The estimation of fair value is generally measured by discounting expected future cash flows as the rate the Company utilizes to evaluate potential investments. The Company estimates fair value based on the information available, judgments and projections are considered necessary. There was no impairment of long-lived assets as of March 31, 2015 and December 31, 2014.

 

Revenue recognition

 

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

 

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

 

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

 

 

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

 

For the three months ended March 31, 2015
			Tulou
Gross receipts		$	101,190
Profit sharing costs			-
Nature resource compensation expenses			8,964
Total paid to the local governments			8,964
Net receipts		$	92,226

 

For the three months ended March 31, 2014
			Tulou
Gross receipts		$	150,119
Profit sharing costs			-
Nature resource compensation expenses			13,751
Total paid to the local governments			13,751
Net receipts		$	136,368

 

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 March 31, 2015 and December 31, 2014, respectively.

 

The Company applied the provisions of ASC 740-10-50, “Accounting For Uncertainty In Income Taxes”, which provides clarification related to the process associated with accounting for uncertain tax positions recognized in our financial statements. Audit periods remain open for review until the statute of limitations has passed. The completion of review or the expiration of the statute of limitations for a given audit period could result in an adjustment to the Company’s liability for income taxes. Any such adjustment could be material to the Company’s results of operations for any given quarterly or annual period based, in part, upon the results of operations for the given period. At March 31, 2015, management considered that the Company had no uncertain tax positions, and will continue to evaluate for uncertain positions in the future.

 

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

 

 

Fair values of financial instruments

 

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

 

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

 

Stock-based compensation

 

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

 

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

 

Recent accounting pronouncements

 

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

 

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

 

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

 

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

 

 

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

 

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

Step 2: Identify the performance obligations in the contract.

Step 3: Determine the transaction price.

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

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

 

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

 

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

 

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.

 

 

Inflation and Seasonality

 

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

 

Off Balance Sheet Arrangements

 

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

 

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

  

Not applicable because we are a small reporting company.

 

Item 4. Controls and Procedures. 

 

Evaluation of disclosure controls and procedures.

 

Our disclosure controls and procedures are designed to ensure (i) that information required to be disclosed by us in the reports we file or submit under the Exchange Act are recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms; and (ii) that information required to be disclosed by us in the reports it files or submits under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. As of March 31, 2015, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of the end of the period covered by this report, our disclosure controls and procedures were not effective.

 

Changes in internal control over financial reporting.

 

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

 

 

PART II - OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

None.

 

Item 1A. Risk Factors.

 

There has been no material change to our risk factors from those presented in our Form 10-K for the fiscal year ended December 31, 2014.

 

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

 

None.

 

Item 3. Defaults Upon Senior Securities.

 

None.

 

Item 4. Mine Safety Disclosures.

 

Not applicable.

 

Item 5. Other Information.

 

None.

 

Item 6. Exhibits.

 

No.		Description
10.1		Fixed Assets Loan Agreement with Fuzhou Wusi Branch of Industrial and Commercial Bank of China dated January 9, 2015
31.1		Certification of Chief Executive Officer Required by Rule 13a-14(a) (17 CFR 240.13a-14(a))
31.2		Certification of Chief Financial Officer Required by Rule 13a-14(a) (17 CFR 240.13a-14(a))
32.1		Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2		Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		XBRL Taxonomy Extension Label Linkbase Document
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

 

 

SIGNATURES

 

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

 

	CHINA YIDA HOLDING, CO.
Date: May 15, 2015	By:	/s/ Minhua Chen
		Minhua Chen
		Chief Executive Officer
		(Principal Executive Officer)
	By:	/s/ Yongxi Lin
		Yongxi Lin Chief Financial Officer (Principal Financial Officer)

 

 

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