Yangtze River Port & Logistics Ltd - FORM 10-Q

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EX-32.2 - CERTIFICATION - Yangtze River Port & Logistics Ltd	f10q0316ex32ii_yangtze.htm
EX-31.1 - CERTIFICATION - Yangtze River Port & Logistics Ltd	f10q0316ex31i_yangtze.htm
EX-32.1 - CERTIFICATION - Yangtze River Port & Logistics Ltd	f10q0316ex32i_yangtze.htm
EX-31.2 - CERTIFICATION - Yangtze River Port & Logistics Ltd	f10q0316ex31ii_yangtze.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2016

☐ 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: 333-166343

YANGTZE RIVER DEVELOPMENT LIMITED

(Exact name of registrant as specified in its charter)

Nevada		27-1636887
State or other jurisdiction of incorporation or organization		(I.R.S. Employer Identification No.)

183 Broadway, Suite 5 New York, NY		10007
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (646) 861- 3315

N/A

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

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

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

The registrant had 172,269,446 shares of common stock, $0.0001 per share, outstanding at May 9, 2016.

YANGTZE RIVER DEVELOPMENT LIMITED

QUARTERLY REPORT ON FORM 10-Q

March 31, 2016

TABLE OF CONTENTS

		PAGE

PART I	FINANCIAL INFORMATION	1

Item 1.	Financial Statements (Unaudited)	1

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	25

Item 4.	Controls and Procedures	25

PART II	OTHER INFORMATION	26

Item 1.	Legal Proceedings	26

Item 1A.	Risk Factors	26

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	26

Item 3.	Defaults Upon Senior Securities	26

Item 4.	Mine Safety Disclosures	26

Item 5.	Other Information	26

Item 6.	Exhibits	26

SIGNATURES		27

Financial Statements:

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (this “Report”) contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements discuss matters that are not historical facts. Because they discuss future events or conditions, forward-looking statements may include words such as “anticipate,” “believe,” “estimate,” “intend,” “could,” “should,” “would,” “may,” “seek,” “plan,” “might,” “will,” “expect,” “predict,” “project,” “forecast,” “potential,” “continue” negatives thereof or similar expressions. These forward-looking statements are found at various places throughout this Report and include information concerning possible or assumed future results of our operations; business strategies; future cash flows; financing plans; plans and objectives of management; any other statements regarding future operations, future cash needs, business plans and future financial results, and any other statements that are not historical facts.

From time to time, forward-looking statements also are included in our other periodic reports on Forms 10-Q and 8-K, in our press releases, in our presentations, on our website and in other materials released to the public. Any or all of the forward-looking statements included in this Report and in any other reports or public statements made by us are not guarantees of future performance and may turn out to be inaccurate. These forward-looking statements represent our intentions, plans, expectations, assumptions and beliefs about future events and are subject to risks, uncertainties and other factors. Many of those factors are outside of our control and could cause actual results to differ materially from the results expressed or implied by those forward-looking statements. In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than we have described. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Report. All subsequent written and oral forward-looking statements concerning other matters addressed in this Report and attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this Report.

Except to the extent required by law, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, a change in events, conditions, circumstances or assumptions underlying such statements, or otherwise.

USE OF CERTAIN DEFINED TERMS

In this Report, unless otherwise noted or as the context otherwise requires, “Yangtze River”, the “Company,” “YERR,” “we,” “us,” and “our” refers to the combined business of Yangtze River Development Limited, a corporate formed under the laws of the State of Nevada, Energetic Mind Limited (“Energetic Mind”), which is our wholly-owned subsidiary formed under the laws of the British Virgin Islands (“BVI”), Energetic Mind’s wholly-owned subsidiary Ricofeliz Capital (HK) Ltd (“Ricofliz Capital”), a company formed under the laws of Hong Kong, and Ricofelix Capital’s wholly-owned subsidiary, Wuhan Yangtze River Newport Logistics Co., Ltd (“Wuhan Newport”), a wholly foreign-owned enterprise formed under the laws of the People’s Republic of China (“China”).

PART I—FINANCIAL INFORMATION

Item 1.

Financial Statements.

Yangtze River Development Limited

(FORMERLY Kirin International Holding, Inc.)

Condensed Consolidated Balance Sheets

	March 31, 2016			December 31, 2015
ASSETS	(Unaudited)
Cash and cash equivalents	$	209,007		$	512,569
Other assets and receivables		5,307,118			6,259,865
Real estate property completed		31,773,683			31,566,156
Real estate properties and land lots under development		367,332,893			364,876,105
Property and equipment, net		142,824			157,499
Deferred tax assets		3,949,444			3,614,419
Total Assets	$	408,714,969		$	406,986,613

LIABILITIES AND EQUITY
Liabilities
Accounts payable	$	5,609,860		$	5,526,610
Due to related parties		32,479,118			32,045,112
Other taxes payable		13,438			13,350
Other payables and accrued liabilities		2,736,538			560,830
Real estate property refund and compensation payable		25,811,255			25,274,753
Convertible note		75,000,000			75,000,000
Loans payable		44,795,559			44,502,981
Total Liabilities	$	186,445,768		$	182,923,636

Equity
Preferred stock at $0.0001 par value; 100,000,000 shares authorized; none issued or outstanding	$	-		$	-
Common stock at $0.0001 par value; 500,000,000 shares authorized; 172,269,446 and 172,254,446 shares issued and outstanding at March 31, 2016 and December 31, 2015 respectively		17,227			17,225
Additional paid-in capital		242,696,445			242,622,947
Accumulated losses		(20,070,204	)		(16,263,010	)
Accumulated other comprehensive loss		(374,267	)		(2,314,185	)
Total Equity	$	222,269,201		$	224,062,977
Total Liabilities and Equity	$	408,714,969		$	406,986,613

See notes to unaudited condensed consolidated financial statements

Yangtze River Development Limited

(FORMERLY Kirin International Holding, Inc.)

Condensed consolidated Statements of OPERATIONS and Comprehensive LOSS

	For the Three Months Ended March 31,
	2016			2015
	(Unaudited)
Revenue	$	-		$	-
Cost of revenue		-			-
Gross profit		-			-

Operating expenses
General and administrative expenses		1,955,484			480,600
Total operating expenses		1,955,484			480,600

Loss from operations		(1,955,484	)		(480,600	)

Other expenses
Other expenses		(28	)		-
Interest income		76			17
Interest expenses		(2,158,685	)		(809,288	)
Total other expenses		(2,158,637	)		(809,271	)

Loss before income taxes		(4,114,121	)		(1,289,871	)
Income taxes benefit		306,927			322,468
Net loss	$	(3,807,194	)	$	(967,403	)

Other comprehensive loss
Foreign currency translation adjustments		1,939,918			92,517
Comprehensive loss	$	(1,867,276	)	$	(874,886	)

Loss per share - basic and diluted	$	(0.02	)	$	(0.01	)

Weighted average shares outstanding - basic and diluted		172,265,325			151,000,000

See notes to unaudited condensed consolidated financial statements

Yangtze River Development Limited

(FORMERLY Kirin International Holding, Inc.)

condensed consolidated Statements of CHANGES IN Equity

	Common stock				Additional						Accumulated other
	Number of shares		Amount		paid-in capital			Accumulated losses			comprehensive (loss) income			Total

Balance as of January 1, 2015		151,000,000	$	15,100	$	27,955,331		$	(9,881,148	)	$	4,335,732		$	22,425,015

Forgiveness of loan from Wuhan Renhe		-		-		285,413,074			-			-			285,413,074
Effect of share exchange		20,596,546		2,060		(86,182,521	)		-			-			(86,180,461	)
Restricted shares issued for services		657,900		65		3,749,965			-			-			3,750,030
Extinguishment of debt with a former officer		-		-		11,687,098			-			-			11,687,098
Net loss		-		-		-			(6,381,862	)		-			(6,381,862	)
Foreign currency translation adjustment		-		-		-			-			(6,649,917	)		(6,649,917	)
Balance as of December 31, 2015		172,254,446	$	17,225	$	242,622,947		$	(16,263,010	)	$	(2,314,185	)	$	224,062,977

Restricted shares issued for services		15,000		2		73,498			-			-			73,500
Net loss		-		-		-			(3,807,194	)		-			(3,807,194	)
Foreign currency translation adjustment		-		-		-			-			1,939,918			1,939,918
Balance as of March 31, 2016 (Unaudited)		172,269,446	$	17,227	$	242,696,445		$	(20,070,204	)	$	(374,267	)	$	222,269,201

See notes to unaudited condensed consolidated financial statements

Yangtze River Development Limited

(FORMERLY Kirin International Holding, Inc.)

condensed Consolidated Statements of Cash Flows

	For the Three Months Ended March 31,
	2016			2015
Cash Flows from Operating Activities:	(Unaudited)
Net loss	$	(3,807,194	)	$	(967,403	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation of property, and equipment		17,266			20,942
Deferred tax benefit		(306,927	)		(322,468	)
Share-based compensation expense		1,044,082			-
Changes in operating assets and liabilities:
Other assets and receivables		-			(5,019	)
Real estate property completed		-			(316,466	)
Real estate properties and land lots under development		(57,155	)		(563,073	)
Accounts payable		47,131			-
Other taxes payable		-			(28,212	)
Other payables and accrued liabilities		2,163,882			33,446
Real estate property refund and compensation payables		365,178			374,831
Net Cash Used In Operating Activities		(533,737	)		(1,773,422	)

Cash Flows from Investing Activities: Purchase of property and equipment		(1,851	)		-
Net Cash Used In Investing Activities		(1,851	)		-

Cash Flows from Financing Activities:
Advances from related parties		231,990			1,723,295
Net Cash Provided By Financing Activities		231,990			1,723,295

Effect of Exchange Rate Changes on Cash and Cash Equivalents		36			43

Net Decrease In Cash and Cash Equivalents		(303,598	)		(50,127	)
Cash and Cash Equivalents at Beginning of Period		512,569			56,366
Cash and Cash Equivalents at End of Period	$	209,007		$	6,282

Supplemental Cash Flow Information:

Cash paid for interest expenses	$	-		$	809,288
Cash paid for income tax	$	-		$	-

See notes to unaudited condensed consolidated financial statements

Yangtze River Development Limited

(FORMERLY Kirin International Holding, Inc.)

NOTES TO unaudited condensed FINANCIAL STATEMENTS

MARCH 31, 2016 and 2015

1. ORGANIZATION AND PRINCIPAL ACTIVITIES

The condensed consolidated financial statements include the financial statements of Yangtze River Development Limited (the “Company” or “Yangtze River”) and its subsidiaries, Energetic Mind Limited (“Energetic Mind”), Ricofeliz Capital (HK) Limited (“Ricofeliz Capital”), and Wuhan Yangtze River Newport Logistics Co., Ltd. (“Wuhan Newport”).

The Company, formerly named as Kirin International Holding, Inc., and Ciglarette, Inc., was incorporated in the State of Nevada on December 23, 2009. The Company was a development stage company and has not generated significant revenue since inception to March 1, 2011.

On March 1, 2011, the Company entered into a share exchange agreement that Kirin China Holding Limited (“Kirin China”) became the Company’s wholly-owned subsidiary. Kirin China engaged in the development and sales of residential and commercial real estate properties, and development of land lots in People’s Republic of China (“China”, or the “PRC”).

On December 19, 2015, the Company completed a share exchange (the “Share Exchange”) with Energetic Mind and all the shareholders of Energetic Mind, whereby Yangtze River acquired 100% of the issued and outstanding capital stock of Energetic Mind, in exchange for 151,000,000 shares of Yangtze River’s common stock, which constituted approximately 88% of its issued and outstanding shares on a fully-diluted basis of Yangtze River immediately after the consummation of the Share Exchange, and an 8% convertible note (the “Note”) in the principal amount of $150,000,000. As a result of the Share Exchange, Energetic Mind became Yangtze River’s wholly-owned subsidiary and Jasper Lake Holdings Limited (“Jasper”), the former shareholder of Energetic Mind, became Yangtze River’s controlling stockholder. The Share Exchange transaction with Energetic Mind was treated as an acquisition, with Energetic Mind as the accounting acquirer and Yangtze River as the acquired party. The financial statements before the date of the Share Exchange are those of Energetic Mind with the results of the Company being consolidated from the date of the Share Exchange.

Energetic Mind owns 100% of Ricofeliz Capital and operates its business through its subsidiary Wuhan Newport.

Wuhan Newport was a wholly owned subsidiary of Wuhan Renhe Group Co., Ltd. (the “Wuhan Renhe”), a company incorporated in the PRC as at September 23, 2002. On July 13, 2015, Wuhan Renhe transferred all of the equity interests of the Company to Ricofeliz Capital, a company incorporated in Hong Kong on March 25, 2015. Ricofeliz Capital was incorporated by Energetic Mind, a company incorporated in British Virgin Islands (“BVI”). Energetic Mind was incorporated by Mr. Liu Xiangyao on January 2, 2015, and was subsequently purchased by various companies incorporated in BVI or the United States of America (“USA”), among whom Jasper became its 64% owner. Jasper was 100% owned by Mr. Liu Xiangyao, a Hong Kong citizen.

The major assets of Wuhan Newport include land lots for developing commercial buildings that are in line with the principal activities of Kirin China.

On December 31, 2015, the Company entered into certain stock purchase and business sale agreements (the “Agreements”) with Kirin Global Enterprises, Inc. (the “Purchaser”), a California corporation and an entity controlled by a former officer and director of the Company whereby the Company sold its interest in certain subsidiaries (see note 11) for an aggregate of $75,000,002. (the “Sale”).

Pursuant to the terms of the Agreements, Jasper agreed to finance the Sale by reducing Company’s financial obligations of the Note by an aggregate of $75,000,000. In addition, the Purchaser agreed to pay the remaining two dollar in cash.

Upon completion of the Sale, the Company operates its business solely through its subsidiary Wuhan Newport, primarily engaging in the business as a port logistic center located in the middle reaches of the Yangtze River in the PRC.

Yangtze River Development Limited

(FORMERLY Kirin International Holding, Inc.)

NOTES TO unaudited condensed FINANCIAL STATEMENTS

MARCH 31, 2016 and 2015

2. Summary of Significant Accounting Policies

2.1 Basis of presentation

The accompanying condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”).

The condensed consolidated financial statements include the financial statements of all the subsidiaries. All transactions and balances between the Company and its subsidiaries have been eliminated upon consolidation.

The condensed consolidated balance sheets are presented unclassified because the time required to complete real estate projects and the Company’s working capital considerations usually stretch for more than one-year period.

2.2 Use of estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. On an ongoing basis, management reviews these estimates using the currently available information. Changes in facts and circumstances may cause the Company to revise its estimates. Significant accounting estimates reflected in the condensed consolidated financial statements include: (i) the allowance for doubtful debts; (ii) accrual of estimated liabilities; and (iii) contingencies; (iv) deferred tax assets; (v) impairment of long-lived assets; (vi) useful lives of property plant and equipment; and (vii) real estate property refunds and compensation payables.

2.3 Cash and cash equivalents

Cash and cash equivalents consist of cash and bank deposits with original maturities of three months or less, which are unrestricted as to withdrawal and use the Company maintains accounts at banks and has not experienced any losses from such concentrations.

2.4 Property and equipment

The property and equipment are stated at cost less accumulated depreciation. The depreciation is computed on a straight-line method over the estimated useful lives of the assets with 5% salvage value. Estimated useful lives of property and equipment are stated in Note 7.

The Company eliminates the cost and related accumulated depreciation of assets sold or otherwise retired from the accounts and includes any gain or loss in the statement of income. The Company charges maintenance, repairs and minor renewals directly to expenses as incurred; major additions and betterment to equipment are capitalized.

2.5 Impairment of long-lived assets

The Company applies the provisions of ASC No. 360 Sub topic 10, "Impairment or Disposal of Long-Lived Assets"(ASC 360- 10) issued by the Financial Accounting Standards Board ("FASB"). ASC 360-10 requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable through the estimated undiscounted cash flows expected to result from the use and eventual disposition of the assets. Whenever any such impairment exists, an impairment loss will be recognized for the amount by which the carrying value exceeds the fair value.

The Company tests long-lived assets, including property and equipment and finite lived intangible assets, for impairment at least annually or more frequently upon the occurrence of an event or when circumstances indicate that the net carrying amount is greater than its fair value. Assets are grouped and evaluated at the lowest level for their identifiable cash flows that are largely independent of the cash flows of other groups of assets. The Company considers historical performance and future estimated results in its evaluation of potential impairment and then compares the carrying amount of the asset to the future estimated cash flows expected to result from the use of the asset. If the carrying amount of the asset exceeds estimated expected undiscounted future cash flows, the Company measures the amount of impairment by comparing the carrying amount of the asset to its fair value. The estimation of fair value is generally measured by discounting expected future cash flows as the rate the Company utilizes to evaluate potential investments. The Company estimates fair value based on the information available in making whatever estimates, judgments and projections are considered necessary. There were no impairment losses in the three months ended March 31, 2016 and 2015.

Yangtze River Development Limited

(FORMERLY Kirin International Holding, Inc.)

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

2.6 Fair values of financial instruments

ASC Topic 825, Financial Instruments (“Topic 825”) requires disclosure of fair value information of financial instruments, whether or not recognized in the balance sheets, for which it is practicable to estimate that value. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instruments. Topic 825 excludes certain financial instruments and all nonfinancial assets and liabilities from its disclosure requirements. Accordingly, the aggregate fair value amounts do not represent the underlying value of the Company.

Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments.

Level 3 inputs to the valuation methodology are unobservable and significant to the fair value.

As of March 31, 2016 and 2015, financial instruments of the Company primarily comprise of cash, accrued interest receivables, other receivables, short-term bank loans, deposits payables and accrued expenses, which were carried at cost on the balance sheets, and carrying amounts approximated their fair values because of their generally short maturities.

2.7 Convertible notes

In accordance with ASC subtopic 470-20, the convertible notes are initially carried at the principal amount of the convertible notes. Debt premium or discounts, which are the differences between the carrying value and the principal amount of convertible notes at the issuance date, together with related debts issuance cost, are subsequently amortized using effective interest method as adjustments to interest expense from the debt issuance date to its first redemption date. Convertible notes are classified as a current liability if they are or will be callable by the Company or puttable by the debt holders within one year from the balance sheet date, even though liquidation may not be expected within that period.

2.8 Foreign currency translation and transactions

The Company’s condensed consolidated financial statements are presented in the U.S. dollar (US$), which is the Company’s reporting currency. Yangtze River, Energetic Mind, and Ricofeliz Capital uses US$ as its functional currency. Wuhan Newport uses Renminbi Yuan (“RMB”) as its functional currency. Transactions in foreign currencies are initially recorded at the functional currency rate ruling at the date of transaction. Any differences between the initially recorded amount and the settlement amount are recorded as a gain or loss on foreign currency transaction in the statements of operations.

In accordance with ASC 830, Foreign Currency Matters, the Company translated the assets and liabilities into US$ using the rate of exchange prevailing at the applicable balance sheet date and the statements of operations and cash flows are translated at an average rate during the reporting period. Adjustments resulting from the translation are recorded in owners’ equity as part of accumulated other comprehensive income.

		March 31, 2016				December 31, 2015
Balance sheet items, except for equity accounts			6.4493				6.4917

	For the Three Months Ended March 31,
	2016		2015
Items in the statements of operations and comprehensive income, and statements of cash flows		6.5404		6.1441

2.9 Revenue recognition

The Company recognizes revenue from steel trading when persuasive evidence of an arrangement exists, delivery has occurred, the price is fixed or determinable and collection is reasonably assured.

Real estate sales are reported in accordance with the provisions of ASC 360-20, Property, Plant and Equipment, Real Estate Sales.

Yangtze River Development Limited

(FORMERLY Kirin International Holding, Inc.)

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

Revenue from the sales of completed properties and properties where the construction period is twelve months or less is recognized by the full accrual method when (a) sale is consummated; (b) the buyer’s initial and continuing involvements are adequate to demonstrate a commitment to pay for the property; (c) the receivable is not subject to future subordination; (d) the Company has transferred to the buyer the usual risks and rewards of ownership in a transaction that is in substance a sale and does not have a substantial continuing involvement with the property. A sale is not considered consummated until (a) the parties are bound by the terms of a contract or agreement, (b) all consideration has been exchanged, (c) any permanent financing for which the seller is responsible has been arranged, (d) all conditions precedent to closing have been performed. Fair value of buyer’s payments to be received in future periods pursuant to sales contract is classified under accounts receivable. Sales transactions not meeting all the conditions of the full accrual method are accounted for using the deposit method of accounting. Under the deposit method, all costs are capitalized as incurred, and payments received from the buyer are recorded as a deposit liability.

Revenue and profit from the sale of development properties where the construction period is more than twelve months is recognized by the percentage-of-completion method on the sale of individual units when the following conditions are met: (a)construction is beyond a preliminary stage; (b) the buyer is committed to the extent of being unable to require a refund except for non-delivery of the unit; (c) sufficient units have already been sold to assure that the entire property will not revert to rental property; (d) sales prices are collectible and (e) aggregate sales proceeds and costs can be reasonably estimated. If any of these criteria are not met, proceeds are accounted for as deposits until the criteria are met and/or the sale consummated.

The Company has not generated any revenue from the sales of real estate property for the three months ended March 31, 2016 and 2015.

2.10 Real estate capitalization and cost allocation

Real estate property completed and real estate properties and land lots under development consist of commercial units under construction and units completed. Properties under development or completed are stated at cost or estimated net realizable value, whichever is lower. Cost capitalization of development and redevelopment activities begins during the predevelopment period, which we define as the activities that are necessary to begin the development of the property. We cease capitalization upon substantial completion of the project, but no later than one year from cessation of major construction activity. We also cease capitalization when activities necessary to prepare the property for its intended use have been suspended. Costs include costs of land use rights, direct development costs, interest on indebtedness, construction overhead and indirect project costs. The Company acquires land use rights with lease terms of 40 years through government sale transaction. Land use rights are divided and transferred to customers after the Company delivers properties. The Company capitalizes payments for obtaining the land use rights, and allocates to specific units within a project based on units’ gross floor area. Costs of land use rights for the purpose of property development are not amortized. Other costs are allocated to units within a project based on the ratio of the sales value of units to the estimated total sales value.

2.11 Capitalization of interest

In accordance with ASC 360, Property, Plant and Equipment, interest incurred during construction is capitalized to properties under development. For the three months ended March 31, 2016 and 2015, $nil and $nil were capitalized as properties under development, respectively.

2.12 Advertising expenses

Advertising costs are expensed as incurred, or the first time the advertising takes place, in accordance with ASC 720-35, Advertising Costs. For the three months ended March 31, 2016 and 2015, the Company recorded advertising expenses of $1,468 and $nil, respectively.

2.13 Share-based compensation

The Company grants restricted shares to its non-employee consultants. Awards granted to non-employees are measured at fair value at the earlier of the commitment date or the date the services are completed, and are recognized using graded vesting method over the period the service is provided.

2.14 Income taxes

Current income taxes are provided for in accordance with the laws of the relevant taxing authorities. As part of the process of preparing condensed consolidated financial statements, the Company is required to estimate its income taxes in each of the jurisdictions in which it operates. The Company accounts for income taxes using the liability method. Under this method, deferred income taxes are recognized for tax consequences in future years of differences between the tax bases of assets and liabilities and their reported amounts in the condensed consolidated financial statements at each year-end and tax loss carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates applicable for the differences that are expected to affect taxable income.

Yangtze River Development Limited

(FORMERLY Kirin International Holding, Inc.)

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

The Company adopts a more likely than not threshold and a two-step approach for the tax position measurement and financial statement recognition. Under the two-step approach, the first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained, including resolution of related appeals or litigation process, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon settlement. As of March 31, 2016 and 2015, the Company did not have any uncertain tax position.

2.15 Land Appreciation Tax (“LAT”)

In accordance with the relevant taxation laws in the PRC, the Company is subject to LAT based on progressive rates ranging from 30% to 60% on the appreciation of land value, which is calculated as the proceeds of sales of properties less deductible expenditures, including borrowing costs and all property development expenditures. LAT is prepaid at 1% to 2% of the pre-sales proceeds each year as required by the local tax authorities, and is settled generally after the construction of the real estate project is completed and majority of the units are sold. The Company provides LAT as expensed when the related revenue is recognized based on estimate of the full amount of applicable LAT for the real estate projects in accordance with the requirements set forth in the relevant PRC laws and regulations. LAT would be included in income tax expense in the statements of operations and comprehensive income (loss).

2.16 Earnings (loss) per share

Basic earnings (loss) per share is computed using the weighted average number of common shares outstanding during the year. Diluted earnings per share is computed using the weighted average number of common shares and potential common shares outstanding during the period for convertible notes under if-convertible method, if dilutive. Potential common shares are not included in the denominator of the diluted earnings per share calculation when inclusion of such shares would be anti-dilutive, such as in a period in which a net loss is recorded.

2.17 Comprehensive loss

Comprehensive loss includes net income (loss) and foreign currency adjustments. Comprehensive loss is reported in the condensed consolidated statements of operations and comprehensive loss. Accumulated other comprehensive loss, as presented on the condensed consolidated balance sheets are the cumulative foreign currency translation adjustments.

2.18 Contingencies

In the normal course of business, the Company is subject to loss contingencies, such as legal proceedings and claims arising out of its business, that cover a wide range of matters, including, among others, government investigations and tax matters. In accordance with ASC No. 450 Sub topic 20, “Loss Contingencies”, the Company records accruals for such loss contingencies when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated.

2.19 Recently issued accounting pronouncements

The Company does not believe other recently issued but not yet effective accounting standards from ASU 2016-10, if currently adopted, would have a material effect of the condensed consolidated financial position, results of operation and cash flows.

Yangtze River Development Limited

(FORMERLY Kirin International Holding, Inc.)

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

3. Risks

(a) Liquidity risk

The Company is exposed to liquidity risk which is risk that it is unable to provide sufficient capital resources and liquidity to meet its commitments and business needs. Liquidity risk is controlled by the application of financial position analysis and monitoring procedures.

(b) Foreign currency risk

A majority of the Company’s operating activities and a significant portion of the Company’s assets and liabilities are denominated in RMB, which is not freely convertible into foreign currencies. All foreign exchange transactions take place either through the Peoples’ Bank of China (“PBOC”) or other authorized financial institutions at exchange rates quoted by PBOC. Approval of foreign currency payments by the PBOC or other regulatory institutions requires submitting a payment application form together with suppliers' invoices and signed contracts. The value of RMB is subject to changes in central government policies and to international economic and political developments affecting supply and demand in the China Foreign Exchange Trading System market.

4. OTHER assets and receivables

Other assets and receivables as of March 31, 2016 and December 31, 2015 consisted of:

	March 31, 2016		December 31, 2015
	(Unaudited)
Deposits	$	853	$	847
Prepaid consulting and legal fees		970,583		1,941,163
Underwriting commission deposit		1,606,000		1,606,000
Excessive business tax and related urban construction and education surcharge		1,737,757		1,726,408
Excessive land appreciation tax		991,925		985,447
	$	5,307,118	$	6,259,865

Business tax and LAT are payable each year at 5% and 1% - 2% respectively of customer deposits received. The Company recognizes sales related business tax and LAT in the income statement to the extent that they are proportionate to the revenue recognized each period. Any excessive amounts of business and LAT liabilities recognized at period-end pursuant to tax laws and regulations over the amounts recognized in the income statement are capitalized in prepayments and will be expensed in subsequent periods.

Yangtze River Development Limited

(FORMERLY Kirin International Holding, Inc.)

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

5. REAL ESTATE PROPERTY COMPLETED

The account balance and components of the real estate property completed were as follow:

	March 31, 2016		December 31, 2015
Properties completed	(Unaudited)
Wuhan Centre China Grand Steel Market
Costs of land use rights	$	7,767,728	$	7,716,994
Other development costs		24,005,955		23,849,162
	$	31,773,683	$	31,566,156

As of March 31, 2016, the sole and wholly owned developing project of the Company is called Wuhan Centre China Grand Steel Market (Phase 1) Commercial Building in the south of Hans Road, Wuhan Yangluo Economic Development Zone with approximately 222,496.6 square meters of total construction area. Since June 2009, the Company commenced the construction of the project that funded through a combination of bank loans and advances from shareholders. The Company has obtained certificates representing titles of the land use rights used for the development of the project. As of March 31, 2016, the Company has completed the construction of four buildings covering area of approximately 35,350.4 square meters of construction area. The Company values the real estate assets based on estimates using present value by quoted prices for comparable real estate projects.

6. REAL ESTATE PROPERTIES AND LAND LOTS UNDER DEVELOPMENT

The components of real estate properties and land lots under development were as follows:


	March 31, 2016		December 31, 2015
Properties under development	(Unaudited)
Wuhan Centre China Grand Steel Market
Costs of land use rights	$	9,368,135	$	9,306,948
Other development costs		39,296,984		38,982,735

Land lots undeveloped		318,667,774		316,586,422
	$	367,332,893	$	364,876,105

As of March 31, 2016, the Company has three buildings under development of the project described in Note 5 covering area of approximately 57,450.4 square meters of construction area.

Land use right with net book value of $181,287,079, including in real estate held for development and land lots undeveloped were pledged as collateral for the financial institution loan as at March 31, 2016. (See Note 10).

Yangtze River Development Limited

(FORMERLY Kirin International Holding, Inc.)

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

7. Property and Equipment

The Company’s property and equipment used to conduct day-to-day business are recorded at cost less accumulated depreciation. Depreciation expenses are calculated using straight-line method over the estimated useful life with 5% of estimated salvage value below:

	Useful life years	March 31, 2016			December 31, 2015
		(Unaudited)
Fixture, furniture and office equipment	5	$	65,742		$	63,474
Vehicles	5		531,898			528,424
Less: accumulated depreciation			(454,816	)		(434,399	)
Property and equipment, net		$	142,824		$	157,499

Depreciation expense totaled $17,266 and $20,942 for the three months ended March 31, 2016 and 2015, respectively.

8. OTHER PAYABLES AND ACCRUED LIABILITIES

Other payables and accrued liabilities as of March 31, 2016 and December 31, 2015 consisted of:

	March 31, 2015		December 31, 2015
	(Unaudited)
Salaries payable	$	186,571	$	182,716
Business tax and related urban construction and education surcharge		15,648		12,947
Deposits from contractors		169,011		167,907
Convertible bond interest payable		1,693,151		197,260
Interest payable		672,157		-
	$	2,736,538	$	560,830

9. REAL ESTATE PROPERTY REFUND AND COMPENSATION PAYABLe

During the years 2012 and 2011, the Company signed 443 binding agreements of sales of commercial offices of the project with floor area of 22,790 square meters to unrelated purchasers (the transactions or the real estate sales transactions). The Company received deposits and considerations from the purchasers as required by the agreements. The construction commenced in the 2010, which was originally expected to be delivered to customers in late of 2012. No revenue was recognized from the sales of the commercial offices due to the reason stated below.

Owing to commercial reasons, the Company decided to terminate the agreements made for the sale of the real estate properties in relation to the project of Wuhan Centre China Grand Market. According to the agreements of sales, the Company is obliged to compensate the purchaser at a rate equal to 6% per annum or 0.05% per day on the deposits paid. In the three months ended March 31, 2016 and 2015, the Company incurred $365,178 and $385,999 compensation expenses which were included in general and administrative expenses.

As at March 31, 2016, 375 out of 443 agreements were cancelled, and no completed office (or real estate certificate) has been delivered to the purchaser. The Company is still in the progress of negotiating with the purchasers for the cancellation of the remaining agreements. The directors of the Company are of the opinion that almost all of the purchasers shall accept the cancellation. If, finally the purchaser insisted on the execution of the agreement, the Company will accept.

Real estate property refund and compensation payable represent the amount of customer deposits received and the compensation calculated in accordance with the provisions in the sales agreements. The payable consists of the followings:

	March 31, 2016		December 31, 2015
	(Unaudited)
Property sales deposits	$	20,285,143	$	20,152,652
Compensation		5,526,112		5,122,101
	$	25,811,255	$	25,274,753

Yangtze River Development Limited

(FORMERLY Kirin International Holding, Inc.)

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

10. Loans payable

Bank name	Weighted average interest rate	Term		March 31, 2016		December 31, 2015
				(Unaudited)
China Construction Bank	Fixed annual rate of 5.936%		From May 30, 2014 to May 29, 2020	$	44,795,559	$	44,502,981
				$	44,795,559	$	44,502,981

Interest expenses incurred on loans payable for the three months ended March 31, 2016 and 2015 was $672,158 and $809,288, respectively.

Land use right with net book value of $182,478,925, including in real estate held for development and land lots under development were pledged as collateral for the loan as at March 31, 2016.

The aggregate maturities of loans payable of each of years subsequent to March 31, 2016 are as follows:

(Unaudited)

2017	$	11,008,947
2018		10,853,891
2019		12,404,447
2020		10,528,274
	$	44,795,559

11. CONVERTIBLE NOTE

On December 19, 2015, the Company issued an 8% convertible note in the principal amount of $150,000,000 to Jasper, a related party, in the Share Exchange (see note 1). The holder of the Note may convert all or any portion of the then aggregate outstanding principal amount, together with any accrued and unpaid interest, into shares of Company’s common stock at $10.00 per share.

On December 31, 2015, pursuant to the terms and conditions of the Agreements, Jasper, financed the Purchaser for the Sale by reducing Company’s financial obligations under the Note by an aggregate of $75,000,000 (see note 1). As a result of the Sale, the outstanding balance due to Jasper under the Note was $75,000,000 plus any accrued interest.

There was no beneficial conversion feature attributable to the Note as the set conversion price of the Note was greater than the fair value of the common share price at the date of issuance. The Company has accounted for the Note in accordance with ASC 470-20, as a single instrument as a non-current liability. The Note is initially carried at the gross cash received at the issuance date.

The interest expense for the convertible note included in the condensed consolidated statements of operations is $1,495,890 and $nil for the three months ended March 31, 2016 and 2015. Note issuance costs are immaterial.

12. Employee Retirement Benefit

The Company has made employee benefit contribution in accordance with Chinese relevant regulations, including retirement insurance, unemployment insurance, medical insurance, work injury insurance and birth insurance. The Company recorded the contribution in the salary and employee charges when incurred. The contributions made by the Company were $56,951 and $3,468 for the three months ended March 31, 2016 and 2015, respectively.

Yangtze River Development Limited

(FORMERLY Kirin International Holding, Inc.)

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

13. INCOME TAXES

The Company was incorporated in the state of Nevada. Under the current law of Nevada, the Company is not subject to state corporate income tax. No provision for federal corporate income tax has been made in the financial statements as there are no assessable profits.

Energetic Mind was incorporated in the British Virgin Islands (“BVI”). Under the current law of the BVI, Energetic Mind is not subject to tax on income.

Ricofeliz Capital was incorporated in Hong Kong. No provision for Hong Kong profits tax has been made in the financial statements as there are no assessable profits.

Wuhan Newport was incorporated in the PRC, was governed by the income tax law of the PRC and is subject to PRC enterprise income tax (“EIT”). The EIT rate of PRC is 25%.

Income tax expenses for the three months ended March 31, 2016 and 2015 are summarized as follows:

	March 31,
	2016		2015
	(Unaudited)		(Unaudited)
Deferred tax benefit	$	306,927	$	322,468
	$	306,927	$	322,468

A reconciliation of the income tax benefit determined at the PRC EIT income tax rate to the Company’s effective income tax benefit is as follows:

	March 31,
	2016			2015
	(Unaudited)			(Unaudited)
EIT at the PRC statutory rate of 25%	$	1,028,530		$	322,468
Valuation allowance		(721,603	)		-
	$	306,927		$	322,468

The Company evaluates the level of authority for each uncertain tax position (including the potential application of interest and penalties) based on the technical merits, and measures the unrecognized benefits associated with the tax positions. For the three months ended March 31, 2016 and 2015, the Company had no unrecognized tax benefits.

The Company does not anticipate any significant increase to its liability for unrecognized tax benefit within the next 12 months. The Company will classify interest and penalties related to income tax matters, if any, in income tax expense.

Deferred income taxes are recognized for tax consequences in future years of differences between the tax bases of assets and liabilities and their reported amounts in the condensed consolidated financial statements at each year-end and tax loss carry forwards. The tax effects of temporary differences that give rise to the following approximate deferred tax assets and liabilities as of March 31, 2016 and December 31, 2015 are presented below.

	March 31, 2016		December 31, 2015
Deferred tax assets	(Unaudited)
Operating loss carry forward	$	313,679	$	303,237
Excess of interest expenses		1,575,816		1,398,582
Accrued expenses		2,059,949		1,912,600
	$	3,949,444	$	3,614,419

The Company had net operating losses carry forward of $1,254,717 as of March 31, 2016 which will expire on various dates between December 31, 2018 and 2020.

Yangtze River Development Limited

(FORMERLY Kirin International Holding, Inc.)

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

14. loss per share

	March 31, 2016			March 31, 2015
Numerator:	(Unaudited)			(Unaudited)
Net loss for basic and diluted loss per share	$	(3,807,194	)	$	(967,403	)

Denominator:
Weighted average number of common shares outstanding-basic and diluted		172,265,325			151,000,000

Basic and diluted loss per share	$	(0.02	)	$	(0.01	)

7,649,589 common shares resulting from the assumed conversions of 8% Convertible Note (note 11) were excluded from the calculation of diluted loss per share for the three months ended March 31, 2016 as their effect is anti-dilutive.

15. Related Party Transactions

15.1 Nature of relationships with related parties

Name		Relationships with the Company
Wuhan Renhe Group Co., Ltd (“Wuhan Renhe”)		Former shareholder (Mr .Geng Wang) of Wuhan Newport
Wuhan Renhe Real Estate Co., Ltd. (“Renhe RE”)		Mr. Geng Wang, the director of the Company, holds 100% of Renhe RE
Mr. Weibin Zhao		Officer
Mr. Xiangyao Liu		Director

15.2 Related party balances and transactions

Amount due to Wuhan Renhe were $29,011,576 and $28,822,089 as at March 31, 2016 and December 31, 2015, respectively. The amount is unsecured, interest free and does not have a fixed repayment date.

On June 30, 2015, Wuhan Renhe forgave a total amount of $285,413,074 with the Company. The Company has credited the amount of $285,413,074 to additional paid-in capital in equity.

A summary of changes in the amount due to Wuhan Renhe is as follows:

	March 31, 2016		December 31, 2015
	(Unaudited)
At beginning of period	$	28,822,089	$	322,388,060
Advances from the related party		-		28,463,394
Forgiveness of loan		-		(285,413,074	)
Exchange difference adjustment		189,487		(36,616,291	)
At end of period	$	29,011,576	$	28,822,089

Yangtze River Development Limited

(FORMERLY Kirin International Holding, Inc.)

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

Amount due to Renhe RE were $672,166 and $667,776 as at March 31, 2016 and December 31, 2015, respectively. The amount is unsecured, interest free and does not have a fixed repayment date.

A summary of changes in the amount due to Renhe RE is as follows:

	March 31, 2016		December 31, 2015
	(Unaudited)
At beginning of period	$	667,776	$	-
Advances from the related party		-		667,776
Exchange difference adjustment		4,390		-
At end of period	$	672,166	$	667,776

Amount due to Mr. Weibin Zhao were $127,348 and $126,516 as at March 31, 2016 and December 31, 2015, respectively. The amount is unsecured, interest free and does not have a fixed repayment date.

A summary of changes in the amount due to Mr. Zhao Weibin is as follows:

	March 31, 2016		December 31, 2015
	(Unaudited)
At beginning of period	$	126,516	$	126,516
Exchange difference adjustment		832		-
At end of period	$	127,348	$	126,516

Amount due to Mr. Xiangyao Liu were $2,668,028 and $2,428,731 as at March 31, 2016 and December 31, 2015, respectively. The amount is unsecured, interest free and does not have a fixed repayment date.

A summary of changes in the amount due to Mr. Xiangyao Liu is as follows:

	March 31, 2016		December 31, 2015
	(Unaudited)
At beginning of period	$	2,428,731	$	-
Advances from the director		235,522		2,428,731
Exchange difference adjustment		3,775		-
At end of period	$	2,668,028	$	2,428,731

Yangtze River Development Limited

(FORMERLY Kirin International Holding, Inc.)

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

16. SHARE-BASED COMPENSATION EXPENSES

On December 27, 2015, the Company granted 317,345 and 340,555 shares of the Company’s restricted common stock to a number of consultants, in exchange for its legal and professional services to the Company for the years ended December 31, 2015 and 2016, respectively. These shares were valued at $5.7 per share, the closing bid price of the Company’s common stock on the date of grant. Total compensation expense recognized in the general and administrative expenses of the consolidated statement of operations for the year ended December 31, 2015 was $1,808,867. Total compensation expense of approximately $1,941,163 will be recognized in 2016 when all the services been rendered. The shares attributable to fiscal 2015 and 2016 were issued on December 30, 2015.

On January 25, 2016, the Company granted 15,000 shares of the Company’s restricted common stock to a consultant, in exchange for its legal and professional services to the Company for the year 2016. These shares were valued at $4.9 per share, the closing bid price of the Company’s common stock on the date of grant. This compensation expense of approximately $73,500 was recognized in 2016.

Total compensation expenses recognized in the general and administrative expenses of the condensed consolidated statements of operations for the three months ended March 31, 2016 and 2015 was $1,044,082 and $nil respectively.

17. Concentration of Credit Risks

As of March 31, 2016 and December 31, 2015, substantially all of the Company’s cash and cash equivalents were held by major financial institutions located in China and the US, which management believes are of high credit quality.

The Company’s operations are carried out in the PRC. Accordingly, the Company’s business, financial condition and results of operations may be influenced by the political, economic and legal environments in the PRC as well as by the general state of the PRC’s economy. The business may be influenced by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things.

No customer accounted for more than 10% of total accounts receivable as of March 31, 2016 and December 31, 2015.

18. Commitments and Contingencies

Operating lease commitments

For the three months ended March 31, 2016 and 2015, rental expenses under operating leases were $18,000 and $nil, respectively.

The future obligations for operating leases of each of years subsequent to March 31, 2016 are as follows:

(Unaudited)

2017		$	72,000
Total minimum payment required		$	72,000

Legal proceeding

The Company is not currently a party to any legal proceeding, investigation or claim which, in the opinion of the management, is likely to have a material adverse effect on the business, financial condition or results of operations.

The Company did not identify any contingency as of March 31, 2016.

Yangtze River Development Limited

(FORMERLY Kirin International Holding, Inc.)

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

19. SUBSEQUENT EVENT

The management evaluated all events subsequent to the balance sheet date through the date the condensed consolidated financial statements were available to be issued. There are no significant matters to make material adjustments or disclosure in the condensed consolidated financial statements.

20. RESTRICTED NET ASSETS

PRC laws and regulations permit payments of dividends by the Company’s subsidiary incorporated in the PRC only out of their retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. In addition, the Company’s subsidiary incorporated in the PRC are required to annually appropriate 10% of their net income to the statutory reserve prior to payment of any dividends, unless such reserve have reached 50% of their respective registered capital. In addition, registered share capital and capital reserve accounts are also restricted from withdrawal in the PRC, up to the amount of net assets held in each subsidiary. As a result of the restrictions described above and elsewhere under PRC laws and regulations, the Company’s subsidiary incorporated in the PRC are restricted in their ability to transfer a portion of their net assets to the Company in the form of dividends or advances from PRC subsidiary. Such restriction amounted to $297,052,074 as of March 31, 2016. Except for the above, there is no other restriction on the use of proceeds generated by the Company’s subsidiary to satisfy any obligations of the Company.

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of the results of operations and financial condition should be read in conjunction with our financial statements and the notes to those financial statements that are included elsewhere in this Report. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors. See “Forward-Looking Statements.”

Overview

Yangtze River Development Limited is a Nevada corporation that operates through its wholly-owned subsidiary Energetic Mind Limited, a British Virgin Islands company, which holds 100% capital stock of Ricofeliz Capital (HK) Ltd., a Hong Kong company that holds 100% capital stock of Wuhan Yangtze River Newport Logistics Co., Ltd., a wholly foreign-owned enterprise formed under the laws of the People’s Republic of China that primarily engages in the business of real estate and infrastructural development with a port logistics center located in Wuhan, Hubei Province of China. Situated in the middle reaches of the Yangtze River, Wuhan Newport is a large infrastructure development project implemented under China's latest "One Belt One Road" initiative and is believed to be strategically positioned in the anticipated "Pilot Free Trade Zone" of the Wuhan Port, a crucial trading window among China, the Middle East and Europe. To be fully developed upon completion, within the logistics center, there will be six operating zones: including port operation area, warehouse and distribution area, cold chain logistics area, rail cargo loading area, exhibition area and business related area. The logistics center is also expected to provide a number of shipping berths for cargo ships of various sizes. Wuhan Newport is expected to provide domestic and foreign businesses a direct access to the anticipated Free Trade Zone in Wuhan. The project will include commercial buildings, professional logistic supply chain centers, direct access to the Yangtze River, Wuhan-Xinjiang-Europe Railway and ground transportation, storage and processing centers, IT supporting services, among others.

Our Logistics Center is an extensive complex located in Wuhan, the capital of Hubei Province of China, a major transportation hub city with access to numerous railways, roads and expressways passing through the city and connecting to major cities in China, as well as other international centers of commerce and business.

The Logistics Center is expected to occupy approximately 1,918,000 square meters, for which the construction and development are expected to be completed in five years while the total anticipated investment have been divided into three phases – 40% of the total in the first year and 30% respectively in the second and third year. The following table illustrates the timeframe of our investment and construction progress.

Time	Phase of Investment	Percentage of Total Anticipated Investment	Percentage of Construction of the Logistics Center
1^st Year	1^st Phase Investment	40%	30%
2^nd Year	2^nd Phase Investment	70%	40%
3^rd Year	3^rd Phase Investment	100%	60%
4^th Year	Investment Completed	100%	75%
5^th Year	Investment Completed	100%	100%

The Logistics Center is located within the Wuhan Newport Yangluo Port, on the upper stream of the Yangtze River, and close to the northern base of Wu Iron and Steel, China's first mega-sized iron and steel production complex. The Logistics Center is expected to include a port terminal that will be located approximately 26.5km from the Wuhan Guan and 5.5km from the Yangluo Yangtze River Bridge. The operation area of the port is expected to consist of a riverbank of 1,039 meters with eight 5,000-to-10,000-ton berths, two of which are multi-purpose berths and the other six are general cargo berths. It is designed to be able to handle up to 5,000,000 tons of cargo annually, including up to 100,000 TEU for annual container throughput (including 20,000 TEU in freezers areas), 1,000,000 tons of iron and steel and 3,000,000 tons of general cargo.

Within the Logistics Center, functional areas will be divided into six operating zones: a port operation area, a warehouse and distribution area, a cold chain supply logistics area, a rail cargo loading area, an exhibition area and a business related area. The Logistics Center will also be complemented with container storage areas, multi-functional areas, general storage areas, multi-functional warehouse and infrastructural development, including new roads, gas stations, parking areas, gas and water pipes, electricity lines and all other facilities and equipment to operate the Logistics Center.

Aside from being situated in the Wuhan Yangluo Comprehensive Bonded Zone, Yangluo development area is amongst the third group of China’s Pilot Free Trade Zone (FTZ) applicants to submit FTZ applications to the State Council. As of the date of this prospectus, approvals have been granted to Shanghai, Tianjin, Guangdong and Fujian. Enterprises within the approved free-trade zones are typically entitled to a series of favorable regulations and policies that could help the businesses grow and succeed. However, we can provide no assurance at this point that the FTZ application will in fact be approved.

Wuhan Newport has signed a twenty-year lease agreement, maximum number of years permitted by the applicable PRC laws, and with rights to renew at its sole discretion effective April 27, 2015 to lease approximately 1,200,000 square meters of land for building logistics warehouses in support of the Logistics Center. The warehouses are expected to comprise of port terminal zones, warehouse logistics zones, cold chain supply zones and railroad loading and unloading zones. The warehouses will connect the port terminal along the Yangtze River and the railway leading to Europe, satisfying the requirement of China’s latest “One Belt, One Road” initiative. It will also be able to support large logistics companies in Wuhan and other nearby provinces which will rent the warehouses, terminals and offices within the Logistics Center.

Factors Affecting our Operating Results

Growth of China’s Economy. We operate and derive all of our revenue from operations in China. Economic conditions in China, therefore, affect our operations, including the demand for our properties and services and the availability and prices of land maintenance among other expenses. China has experienced significant economic growth with recorded Gross Domestic Product growth rates at 7.7% in 2013, 7.4% in 2014 and 6.9% in 2015. China is expected to experience continued growth in all areas of investment and consumption. However, if the Chinese economy were to become significantly affected by a negative stimulus, China’s growth rate would likely to fall and our revenue could correspondingly decline.

Government Regulations. Our business and results of operations are subject to PRC government policies and regulations regarding the following:

	●	Land Use Right — According to the Land Administration Law of the PRC and Interim Regulations of the People’s Republic of China Concerning the Assignment and Transfer of the Right to the Use of the State-owned Land in the Urban Areas, individuals and companies are permitted to acquire rights to use urban land or land use rights for specific purposes, including residential, industrial and commercial purposes. We acquire land use rights from local governments and/or other entities for development of residential and commercial real estate projects.

	●	Land Development — According to the Urban Real Estate Development and Operation Administration Regulation, the Urban Real Estate Development and Operation Administration Rules of Hebei Province promulgated by the government of the Hebei Province, and the Real Estate Development Enterprise Qualification Administration Regulation, a real estate development enterprise shall obtain a Real Estate Development Enterprise Qualification Certificate. We obtained the related certificates and seek to ensure that each phase of our projects complies with our certificates.

	●	Project Financing — According to the Land Administration Law and the Property Law of the PRC, the land use rights, residential housing and other buildings still in process of construction may be pledged and mortgaged. From time to time, we pledge and mortgage our land use rights and real properties to lenders in order to obtain project financing.

Interest Rate and Inflation Challenges. We are subject to market risks due to fluctuations in interest rates and refinancing of mid-term debt. Higher interest rates may also affect our revenues, gross profits and our ability to raise and service debt and to finance our developments. Inflation could result in increases in the price of raw materials and labor costs. We do not believe that inflation or deflation has affected our business materially.

Acquisitions of Land Use Rights and Associated Costs. We acquire land use rights for development through the governmental auction process and by obtaining land use rights permits from third parties through negotiation, acquisition of entities, co-development or other joint venture arrangements. Our ability to secure sufficient financing for land use rights acquisitions and property development depends on internal cash flows in addition to lenders’ perceptions of our credit reliability, market conditions in the capital markets, investors’ perception of our securities, the PRC economy and the PRC government regulations that affect the availability and cost of financing real estate companies or property purchasers.

Critical Accounting Estimates

As discussed in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of our Annual Report on Form 10-K for the fiscal year ended December 31, 2015, we consider our estimates on revenue recognition, impairment of long-lived assets, and real estate property refunds and compensation payables to be the most critical in understanding the judgments that are involved in preparing our consolidated financial statements. There have been no significant changes to these estimates in the three months ended March 31, 2016.

Results of Operations

Comparison of Three Months Ended March 31, 2016 and 2015

The following table sets forth the results of our operations for the periods indicated in U.S. dollars

	For the Three Months Ended March 31,
	2016			2015
	(Unaudited)
Revenue	$	-		$	-
Cost of revenue		-			-
Gross profit		-			-

Operating expenses
General and administrative expenses		1,955,484			480,600
Total operating expenses		1,955,484			480,600

Loss from operations		(1,955,484	)		(480,600	)

Other expenses
Other expenses		(28	)		-
Interest income		76			17
Interest expenses		(2,158,685	)		(809,288	)
Total other expenses		(2,158,637	)		(809,271	)

Loss before income taxes		(4,114,121	)		(1,289,871	)
Income taxes benefit		306,927			322,468
Net loss	$	(3,807,194	)	$	(967,403	)

Other comprehensive loss
Foreign currency translation adjustments		1,939,918			92,517
Comprehensive loss	$	(1,867,276	)	$	(874,886	)

Loss per share - basic and diluted	$	(0.02	)	$	(0.01	)

Weighted average shares outstanding - basic and diluted		172,265,325			151,000,000

Revenue.

We did not generate any revenue from the sales of real estate property for the three months ended March 31, 2016 and 2015. In addition, since our Logistics Center is still in its development stage and therefore is not yet in operation, we have not started providing any logistics service within our port terminal and have not generated any sales from providing such services.

Cost of Revenue.

During both the three months ended March 31, 2016 and 2015, our cost of goods sold was $0.

Gross Profit.

Our gross margin was $0 for both the three months ended March 31, 2016 and 2015.

General and administrative expenses.

Our general and administrative expenses consist of salaries, office expenses, utilities, business travel, amortization expenses (including legal expenses, accounting expenses and other professional service expenses) and stock compensation. General and administrative expenses were $1,955,484 for the three months ended March 31, 2016, compared to $480,600 for the three months ended March 31, 2015, an increase of $1,474,884 or 307 %. The significant increase is mainly because of the increase of expenses related to professional services.

Loss from operations.

As a result of the factors described above, operating loss was $1,955,484 for the three months ended March 31, 2016, compared to operating loss of $480,600 for the three months ended March 31, 2015, an increase of operating loss of $1,474,884, or approximately 307%.

Other expenses.

We had other expenses totaling $2,158,637 for the three months ended March 31, 2016, compared to other expense totaling $809,271 for the three months ended March 31, 2015. The significant increase in expenses is mainly attributable to the interest of convertible bond issued on December 19, 2015, which was described elsewhere in the Quarterly Report. Our interest income and expenses were $76 and $2,158,685, respectively, for the three months ended March 31, 2016, compared to interest income and expenses of $17 and $809,288, respectively, for the three months ended March 31, 2015. Other expenses were $28 and $0 for the three months ended March 31, 2016 and 2015, respectively.

Income tax.

We received an income tax benefit of $306,927 for the three months ended March 31, 2016, compared to $322,468 for the three months ended March 31, 2015.

Net loss.

As a result of the factors described above, our net loss from operations for the three months ended March 31, 2016 was $3,807,194, compared to net loss of $967,403 for the three months ended March 31, 2015, an increase in loss of $2,839,791.

Foreign currency translation.

Our condensed consolidated financial statements are expressed in U.S. dollars but the functional currency of our operating subsidiary is RMB. Results of operations and cash flows are translated at average exchange rates during the period, assets and liabilities are translated at the unified exchange rate at the end of the period and equity is translated at historical exchange rates. Translation adjustments resulting from the process of translating the financial statements denominated in RMB into U.S. dollars are included in determining comprehensive income. Our foreign currency translation gain for the three months ended March 31, 2016 was $1,939,918, compared to $92,517 for the three months ended March 31, 2015, an increase of $1,847,401.

Net loss available to common stockholders.

Net loss available to our common stockholders was $0.02 per share (basic and diluted), for the three months ended March 31, 2016, compared to net loss of $0.01 per share (basic and diluted), for the three months ended March 31, 2015.

Liquidity and Capital Resources

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

	Three Months Ended March 31,
	2016			2015
Net Cash Used In Operating Activities	$	(533,737	)	$	(1,773,422	)
Net Cash Used in Investing Activities	$	(1,851	)	$	-
Net Cash Provided by Financing Activities	$	231,990		$	1,723,295

We had a balance of cash and cash equivalents of $209,007 as of March 31, 2016. We have historically funded our working capital needs through advance payments from customers, bank borrowings, and capital from stockholders . Our working capital requirements are influenced by the state and level of our operations, and the timing of capital needed for projects.

Operating Activities. Net cash used in operating activities was $533,737 for the three months ended March 31, 2016, compared to net cash used in operating activities of $1,773,422 for the three months ended March 31, 2015, a decrease of $1,239,685. The decrease in net cash used in operating activities was primarily contributed by the following factors:

	●	Share-based compensation expense contributed $1,044,082 cash inflow for three months ended March 31, 2016. In the same period of 2015, share-based compensation expense contributed $0 cash inflow, which led to a decrease of $1,044,082 in net cash outflow.

	●	Changes in real estate properties and land lots under development provided $57,155 cash outflow for the three months ended March 31, 2016, compared to changes in real estate properties and land lots under development contributed $563,073 cash outflow in the same period of 2015, which led to a decrease of $505,918 in net cash outflow.

	●	Changes in accounts payable provided $47,131 cash inflow for the three months ended March 31, 2016, compared to $0 cash inflow for the three months ended March 31, 2015, which lead to a decrease of $47,131 in net cash outflow from operating activities.

	●	Changes in other payables and accrued liabilities provided $2,163,882 cash inflow for the three months ended March 31, 2016, compared other payables and accrued liabilities contributed $33,446 cash inflow for the three months ended March 31, 2015, which led to a decrease of $2,130,436 in net cash outflow.

	●	We have net loss of $3,807,194 for the three months ended March 31, 2016, compared to net loss of $967,403 for the three months ended March 31, 2015, which led to an increase of $2,839,791 increase in net cash outflow.

Investing Activities. Net cash used in investing activities was $1,851 for the three months ended March 31, 2016, compared to $0 for the three months ended March 31, 2015, representing an increase of $1,851 in cash outflow. The increase was primarily because of the increase of cash used for purpose of purchasing equipment.

Financing Activities. Net cash provided by financing activities was $231,990 for the three months ended March 31, 2016, compared to net cash of $1,723,295 provided by financing activities for the three months ended March 31, 2015, representing a decrease of $1,491,305 in cash inflow. The decrease was primarily because we had advances of $231,990 from related parties in the three months ended March 31, 2016, compared to $1,723,295 for the three months ended March 31, 2015.

Contractual Obligations

Jasper Lake Holdings Limited (“Jasper”), a related party, holds an 8% convertible promissory note in the principal amount of $75,000,000 with a maturity date of December 19, 2018. Upon maturity, Jasper may convert all or any portion of the then aggregate outstanding principal amount, together with any accrued and unpaid interest, into shares of Company’s common stock at $10.00 per share.

Off-Balance Sheet Arrangements

We do not have any off balance sheet arrangements.

Recently Issued Accounting Guidance

As described in Note 2 to the Condensed Consolidated Financial Statements, we not believe recently issued but not yet effective accounting standards from ASU 2016-10, if currently adopted, would have a material effect of the condensed consolidated financial position, results of operation and cash flows.

Item 3.

Quantitative and Qualitative Disclosures About Market Risk.

Smaller reporting companies are not required to provide the information required by this item.

Item 4.

Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended (“Exchange Act”), the Company carried out an evaluation, with the participation of the Company’s management, including the Company’s Chief Executive Officer (“CEO”) (the Company’s principal executive officer) and Chief Financial Officer (“CFO”) (the Company’s principal financial and accounting officer), of the effectiveness of the Company’s disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, the Company’s CEO and CFO concluded that the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.

Management's Annual Report on Internal Control Over Financial Reporting.

The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Our internal control system was designed to, in general, provide reasonable assurance to the Company’s management and Board regarding the preparation and fair presentation of published financial statements, but because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our management assessed the effectiveness of the Company’s internal control over financial reporting as of March 31, 2016. The framework used by management in making that assessment was the criteria set forth in the document entitled “Internal Control – Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that assessment, our management has determined that as of March 31, 2016, the Company’s internal control over financial reporting was effective.

This Quarterly Report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's registered public accounting firm as we are a smaller reporting company and not required to provide the report.

Changes in Internal Controls over Financial Reporting

On January 25, 2016, the Board formed and adopted charters for the Audit Committee, which consists of solely independent directors and is chaired by Harvey Leibowitz, whom the Board believes qualifies as an “audit committee financial expert,” as that term is defined in applicable regulations of the SEC.

The audit committee assists our Board in its general oversight of, among other things, the company’s policies, guidelines and related practices regarding risk assessment and risk management, including the risk of fraud. As part of this endeavor, the audit committee reviews and assesses the company’s major financial, legal, regulatory, environmental and similar risk exposures and the steps that management has taken to monitor and control such exposures. The audit committee also reviews and assesses the quality and integrity of the company’s public reporting, the company’s compliance with legal and regulatory requirements, the performance and independence of the company’s independent auditors, the performance of the company’s internal audit department, the effectiveness of the company’s disclosure controls and procedures, and the adequacy and effectiveness of the company’s risk management policies and related practices.

The Audit Committee shall also make such examinations as are necessary to monitor the corporate financial reporting and external audits of the Company and its subsidiaries; to provide to the Board the results of its examinations and recommendations derived therefrom; to outline to the Board improvements made, or to be made, in internal accounting controls; to nominate independent auditor; and to provide to the Board such additional information and materials as it may deem necessary to make the Board aware of significant financial matters requiring Board attention.

PART II—OTHER INFORMATION

Item 1.

Legal Proceedings.

To the best of our knowledge, there are no materials pending legal proceedings to which we are a party or of which any of our property is the subject. However, from time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.

Item 1A.

Risk Factors.

Smaller reporting companies are not required to provide the information required by this item.

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.

Exhibit Number		Description

31.1		Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of Sarbanes-Oxley Act of 2002.
31.2		Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of Sarbanes-Oxley Act of 2002.
32.1+		Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2+		Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Schema Document
101.CAL		XBRL Taxonomy Calculation Linkbase Document
101.DEF		XBRL Taxonomy Definition Linkbase Document
101.LAB		XBRL Taxonomy Label Linkbase Document
101.PRE		XBRL Taxonomy Presentation Linkbase Document

+ In accordance with SEC Release 33-8238, Exhibits 32.1 and Exhibit 32.2 are being furnished and not filed.

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.

	YANGTZE RIVER DEVELOPMENT LIMITED

Dated: May 9, 2016	By:	/s/ Xiangyao Liu
		Xiangyao Liu
		Chief Executive Officer

Dated: May 9, 2016	By:	/s/ Xin Zheng
		Xin Zheng
		Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

Yangtze River Port & Logistics Ltd - FORM 10-Q - May 9, 2016

Attached files

Yangtze River Port & Logistics Ltd Reports