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

 

or

 

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

 

For the transition period from ______to______

 

Commission File Number: 001-34567

 

CHINA YIDA HOLDING, CO.

(Exact name of registrant as specified in its charter)

 

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

 

+ 86 (591) 28082230

(Registrant's telephone number, including area code)

 

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

Yes  ☒  No  ☐

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes  ☒  No  ☐

 

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

 

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

 

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

Yes  ☐  No  ☒

 

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

 

Class		Shares outstanding as of August 11, 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, 2016 and December 31, 2015	2
Consolidated Statements of Income and Comprehensive Income for the three months ended March 31, 2016 and 2015	3
Consolidated Statements of Cash Flows for the three months ended March 31, 2016 and 2015	4
Notes to the Consolidated Financial Statements	5 - 25

  

 

CHINA YIDA HOLDING, CO. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

 

		March 31,				December  31,
		2016				2015
		(Unaudited)
ASSETS
Current assets
Cash and cash equivalents		$	3,818,204			$	5,481,292
Accounts receivable			993,270				272,703
Other receivables, net			306,498				201,394
Advances and prepayments			518,521				536,308
Prepayment - current portion			857,866				845,922
Total current assets			6,494,359				7,337,619
Property and equipment, net			166,340,364				167,176,293
Intangible assets, net			42,771,640				42,777,443
Long-term prepayments			1,432,061				1,426,135
Total assets		$	217,038,424			$	218,717,490
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Short-term loans		$	1,860,638			$	1,848,514
Long-term debt, current portion			3,411,170				3,388,943
Accounts payable			401,603				396,318
Accrued expenses and other payables			1,488,665				1,338,021
Due to related parties			4,519,087				2,082,013
Taxes payable			54,326				34,785
Total current liabilities			11,735,489				9,088,594
Long-term debt			128,756,006				128,158,429
Total liabilities			140,491,495				137,247,023
Commitments and contingencies (Note 14)
Equity
Preferred stock ($0.0001 par value, 10,000,000 shares authorized, none issued and outstanding)			-				-
Common stock ($0.001 par value, 100,000,000 shares authorized, 3,914,580 and 3,914,580 shares issued and outstanding as of March 31, 2016 and December 31, 2015, respectively)			3,915				3,915
Additional paid in capital			49,163,705				49,163,705
Accumulated other comprehensive income			12,845,492				12,388,257
Retained earnings			11,984,487				17,365,260
Statutory reserve			2,549,330				2,549,330
Total equity			76,546,929				81,470,467
Total liabilities and equity		$	217,038,424			$	218,717,490

 

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

 

		For The Three Months Ended March 31,
		2016				2015
						(Restated)
Net revenue		$	3,497,661			$	2,572,962
Cost of revenue			2,375,710				2,137,181
Gross profit			1,121,951				435,781
Operating expenses
Selling expenses			2,219,600				2,509,369
General and administrative expenses			2,012,719				2,207,956
Total operating expenses			4,232,319				4,717,325
Loss from operations			(3,110,368	)			(4,281,544	)
Other income (expense)
Other (expense) income, net			22,799				(7,711	)
Interest income			5,667				3,078
Interest expense			(2,298,871	)			(1,948,408	)
Total other expenses			(2,270,405	)			(1,953,041	)
Loss before income tax			(5,380,773	)			(6,234,585	)
Less: Provision for income tax			-				-
Net loss			(5,380,773	)			(6,234,585	)
Other comprehensive income (loss)
Foreign currency translation gain (loss)			457,235				343,503
Comprehensive loss		$	(4,923,538	)		$	(5,891,082	)
(Loss) Earnings per share:
- Basic		$	(1.37	)		$	(1.59	)
- Diluted		$	(1.37	)		$	(1.59	)
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

 

		For The Three Months Ended March 31,
		2016				2015
						(Restated)
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss		$	(5,380,773	)		$	(6,234,585	)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation			2,031,489				2,034,065
Amortization			282,381				298,130
Amortization of long-term prepayments			236,789				213,360
Changes in operating assets and liabilities:
Accounts receivable			(708,767	)			(34,367	)
Other receivables, net			(102,338	)			(67,052	)
Advances and prepayments			21,007				(16,622	)
Accounts payable			2,648				(232,965	)
Accrued expenses and other payables			139,893				131,088
Taxes payable			19,044				-
Net cash used in operating activities			(3,458,627	)			(3,908,948	)
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property and equipment			(126,008	)			(89,811	)
Increase in long-term prepayments for acquisition of property, equipment and land use rights			(219,392	)			(236,153	)
Net cash used in investing activities			(345,400	)			(325,964	)
CASH FLOWS FROM FINANCING ACTIVITIES
Payment of deferred financing costs			-				(569,624	)
Proceeds from long-term loans			-				29,294,968
Repayment of long-term loans			(259,919	)			-
Proceeds from (repayment of) loans from related parties			2,394,538				(16,130,995	)
Net cash provided by financing activities			2,134,619				12,594,349
EFFECT OF EXCHANGE RATE CHANGES ON CASH			6,320				35,638
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS			(1,663,088	)			8,395,075
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD			5,481,292				958,664
CASH AND CASH EQUIVALENTS, ENDING OF PERIOD		$	3,818,204			$	9,353,739
SUPPLEMENTAL DISCLOSURES:
Cash paid during the period for:
Income tax		$	-			$	-
Interest		$	2,298,871			$	1,948,408

 

The accompanying notes are an integral part of these unaudited 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 the 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 operations.  

 

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 operations 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 operations 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 owning 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 tourist destinations at the Great Golden Lake, Yunding Recreational Park, and Hua’An Tulou Cluster, and our three tourist destinations, Ming Dynasty Entertainment World, China Yang-sheng (Nourishing Life) Paradise and 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 the business of real estate development and sales in China.

 

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

 

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

 

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

 

On June 26, 2013, Fujian Yida formed a wholly owned subsidiary, Yunding Hotel Management Co., Ltd. (“Yunding Hotel”). The total paid-in capital of Yunding Hotel was $4,860,000 (RMB 30 million). Its primary business is to operate and manage the hotel and its facilities at Yunding Park. The subsidiary has changed its name, Ant Colony Hotel Co., Ltd. on April 17, 2015.

 

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

 

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

 

 

CHINA YIDA HOLDING, CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

2.	RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS

  

During the six-month period ended June 30, 2015, the Company reviewed its measurement for valuation of long-lived assets of Tulou Resort, and determined that the value of those long-lived assets has declined. Tulou Resort had experienced consecutive declines in revenue generated from its visitors and tourists and incurred net operating losses since the year 2012. In considering the above factors, the Company performed a long-lived asset recoverability test in accordance with ASC 360-10-35-15, “Impairment or Disposal of Long-Lived Assets,” on the lowest level of identifiable cash flows. The recoverability test compared the carrying value of the long-lived assets held by Tulou Resort to the undiscounted cash flows. As a result of this recoverability test, the Company determined that the value of the assets was not recoverable.  The Company then determined the fair value for the long-lived assets of Tulou Resort using a discounted cash flow methodology, which resulted in a $4,384,335 long-lived assets impairment loss.

 

Despite that net operating losses were significantly lower in the year ended December 31, 2014 as compared to the prior year. While such losses increased again in year 2015, the Company believes that such impairment should have been recorded as of December 31, 2014. The balances as of and for the period ended March 31, 2015 in the accompanying unaudited financial statements have been restated.

 

In addition, the restatement corrects a classification made to the amortization of long-term prepayment in the prior period unaudited consolidated statement of cash flows to conform to the current year presentation, and an error previously not identified related to foreign translation gain (loss) on the unaudited consolidated statement of income and comprehensive income for the three months ended March 31, 2015.

 

The impact of the restatement of selected financial information on the consolidated financial statements is presented in the following tables within this Note below. 

 

Consolidated Statements of Income and Comprehensive Income 

 

		For The Three Months Ended March 31, 2015
		Previously Reported				Impact of Restatement				Restated
Cost of revenue		$	2,169,091			$	(31,910	)		$	2,137,181
Gross profit			403,871				31,910				435,781
Loss from operations			(4,313,454	)			31,910				(4,281,544	)
Loss before income tax			(6,266,495	)			31,910				(6,234,585	)
Net loss			(6,266,495	)			31,910				(6,234,585	)
Other comprehensive income (loss)
Foreign currency translation gain (loss)			(876,069	)			1,219,572				343,503
Comprehensive loss			(7,142,564	)			1,251,482				(5,891,082	)
(Loss) Earnings per share:
- Basic		$	(1.60	)		$	0.01			$	(1.59	)
- Diluted		$	(1.60	)		$	0.01			$	(1.59	)

  

 

CHINA YIDA HOLDING, CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

2.	RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS (CONTINUED)

  

Consolidated Statements of Cash Flows 

 

		For The Three Months Ended March 31, 2015
		Previously Reported				Impact of Restatement / Reclassification				Restated
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss		$	(6,266,495	)		$	31,910			$	(6,234,585	)
Depreciation			2,065,975				(31,910	)			2,034,065
Amortization of long-term prepayments			-				213,360				213,360
Net cash used in operating activities			(4,122,308	)			213,360				(3,908,948	)
CASH FLOWS FROM INVESTING ACTIVITIES
Additions of long-term prepayments for acquisition of property, equipment and land use rights			(22,793	)			(213,360	)			(236,153	)
Net cash used in investing activities			(112,604	)			(213,360	)			(325,964	)

 

3.	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 operating activities, and continuing net losses and working capital deficits that may affect its ability 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.

 

 

CHINA YIDA HOLDING, CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

4.	BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

The unaudited consolidated financial statements of China Yida Holding, Co. and Subsidiaries have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and pursuant to the requirements for reporting on Form 10-Q. Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States of America for annual financial statements.  However, the information included in these interim financial statements reflects all adjustments (consisting solely of normal recurring adjustments) which are, in the opinion of management, necessary for the fair presentation of the consolidated financial position and the consolidated results of operations.  Results shown for interim periods are not necessarily indicative of the results to be obtained for a full year.  The consolidated balance sheet information as of December 31, 2015 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 Company’s 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 the financial statements of a Variable Interest Entity ("VIE") to be consolidated, 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, 2016				December 31, 2015
Total current assets *		$	27,663,671			$	17,865,630
Total assets		$	27,670,959			$	17,872,871
Total current liabilities #		$	36,528,533			$	26,607,548
Total liabilities		$	36,528,533			$	26,607,548

 

* Including intercompany receivables of $27,651,875 and $16,979,261 as at March 31, 2016 and December 31, 2015, respectively, to be eliminated in consolidation.

 

# Including intercompany payables of $36,501,099 and $26,580,316 as March 31, 2016 and December 31, 2015, respectively, to be eliminated in consolidation.

 

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

 

c. Use of estimates and assumptions

 

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

 

 

CHINA YIDA HOLDING, CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

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

 

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, 2016 and December 31, 2015, the Company has uninsured deposits in banks of approximately $3,738,000 and $5,448,000, respectively.

 

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, 2016 and December 31, 2015, 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 land use rights for tourism resorts.  They are amortized on the straight line basis over their respective lease periods. The lease period of land use rights is 40 years. 

 

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 that are considered necessary. There was no impairment loss recorded for the three months ended March 31, 2016 and 2015.

 

j. Revenue recognition

 

Revenue is recognized at the date of service rendered to customers when a formal arrangement exists, the price is fixed or determinable, the services have been 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.

 

 

CHINA YIDA HOLDING, CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

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

 

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 selling expenses for profit sharing arrangements with the local governments for the management rights (see Note 14).

 

For the three months ended March 31, 2016

 

		Tulou
Gross receipts		$	122,630
Profit sharing costs			-
Nature resource compensation expenses			14,135
Total paid to the local governments			14,135
Net receipts		$	108,495

 

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

 

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, 2016 and 2015 were $212,122 and $281,768, 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 $94,471 and $83,266 for the three months ended March 31, 2016 and 2015, 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. 

 

 

CHINA YIDA HOLDING, CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

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

 

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, 2016 and December 31, 2015, 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 December 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.

 

 

CHINA YIDA HOLDING, CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

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

 

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, 2016, 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.

 

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 25, 2016, FASB issued ASU-2016-02-Leases (Topic 842). Topic 842 is to establish the principles that lessees and lessors shall apply to report useful information to users of financial statements about the amount, timing, and uncertainty of cash flows arising from a lease. The FASB is issuing this Update to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. Topic 842 affects any entity that enters into a lease (as that term is defined in this Update), with some specified scope exemptions. The guidance in this Update supersedes Topic 840, Leases. The main difference between previous GAAP and Topic 842 is the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous GAAP. The core principle of Topic 842 is that a lessee should recognize the assets and liabilities that arise from leases. All leases create an asset and a liability for the lessee in accordance with FASB Concepts Statement No. 6, Elements of Financial Statements, and, therefore, recognition of those lease assets and lease liabilities represents an improvement over previous GAAP, which did not require lease assets and lease liabilities to be recognized for most leases. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. When measuring assets and liabilities arising from a lease, a lessee (and a lessor) should include payments to be made in optional periods only if the lessee is reasonably certain to exercise an option to extend the lease or not to exercise an option to terminate the lease. Similarly, optional payments to purchase the underlying asset should be included in the measurement of lease assets and lease liabilities only if the lessee is reasonably certain to exercise that purchase option. Reasonably certain is a high threshold that is consistent with and intended to be applied in the same way as the reasonably assured threshold in the previous leases guidance. In addition, also consistent with the previous leases guidance, a lessee (and a lessor) should exclude most variable lease payments in measuring lease assets and lease liabilities, other than those that depend on an index or a rate or are in substance fixed payments. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. If a lessee makes this election, it should recognize lease expense for such leases generally on a straight-line basis over the lease term. The amendments in this Update are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is still in the process of evaluating the future impact of adopting this standard. 

 

 

CHINA YIDA HOLDING, CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

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

 

In November 20, 2015, FASB issued ASU-2015-17-Income Taxes. The Board is issuing this Update as part of its initiative to reduce complexity in accounting standards (the Simplification Initiative). The objective of the Simplification Initiative is to identify, evaluate, and improve areas of generally accepted accounting principles (GAAP) for which cost and complexity can be reduced while maintaining or improving the usefulness of the information provided to users of financial statements. Current GAAP requires an entity to separate deferred income tax liabilities and assets into current and noncurrent amounts in a classified statement of financial position. To simplify the presentation of deferred income taxes, the amendments in this Update require that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. The amendments in this Update apply to all entities that present a classified statement of financial position. The current requirement that deferred tax liabilities and assets of a tax-paying component of an entity be offset and presented as a single amount is not affected by the amendments in this Update. For public business entities, the amendments in this Update are effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Earlier application is permitted for all entities as of the beginning of an interim or annual reporting period. The Company is still in the process of evaluating future impact of adopting this standard.

 

In April 7, 2015, FASB issued ASU-2015-03-Interest-Imputation of Interest. The Board is issuing this Update as part of its initiative to reduce complexity in accounting standards (the Simplification Initiative). The objective of the Simplification Initiative is to identify, evaluate, and improve areas of generally accepted accounting principles (GAAP) for which cost and complexity can be reduced while maintaining or improving the usefulness of the information provided to users of financial statements. To simplify presentation of debt issuance costs, the amendments in this Update require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this Update. For public business entities, the amendments in this Update are effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. The Company has adopted this standard and the debt liability as of March 31, 2016 has been presented net of debt issuance costs.

 

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 adoption of this standard is not expected to have a material impact on the Company’s consolidated financial position and results of operations.

 

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 the process of evaluating future impact of adopting this standard.

 

 

CHINA YIDA HOLDING, CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

5.	OTHER RECEIVABLES, NET

 

Other receivables consist of the following: 

 

		March 31, 2016				December 31, 2015
Advance to employees		$	215,266			$	143,423
Security deposits			57,435				30,670
Other			33,797				27,301
		$	306,498			$	201,394

 

6.	ADVANCES AND PREPAYMENTS

 

Advances and prepayments consist of the following:

  

		March 31, 2016				December 31, 2015
Advance payments related to consumables of Yang-Sheng Paradise		$	359,443			$	345,536
Advance payments related to facilities of City of Caves			57,246				59,134
Advance payments related to facilities of Yang-Sheng Paradise			49,290				43,106
Advance payments related to facilities of Yunding resort			19,134				53,915
Other			33,408				34,617
		$	518,521			$	536,308

 

As of March 31, 2016 and December 31, 2015, advance payments related to the consumables to be used in Yang-sheng Paradise were $359,443 and $345,536, respectively. 

 

As of March 31, 2016 and December 31, 2015, advance payments related to facilities of City of Caves, opened to public in May, 2015, were $57,246 and $59,134, respectively.

 

As of March 31, 2016 and December 31, 2015, advance payments related to facilities of Yang-sheng Paradise were $49,290 and $43,106, respectively.

 

 

CHINA YIDA HOLDING, CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

7.	PROPERTY AND EQUIPMENT, NET

 

Property and equipment consist of the following:

 

		March 31, 2016				December 31, 2015
Buildings, improvements and attractions		$	190,233,865			$	188,994,299
Electronic equipment			4,811,137				4,778,455
Transportation equipment			3,087,651				2,941,910
Office furniture			965,559				959,267
			199,098,212				197,673,931
Less: Accumulated depreciation			(28,579,562	)			(26,346,577	)
Less: Accumulated impairment			(4,178,286	)			(4,151,061	)
Property and equipment, net		$	166,340,364			$	167,176,293

 

Depreciation expense for the three months ended March 31, 2016 and 2015 were $2,031,489 and $2,034,065 respectively.

 

8.	INTANGIBLE ASSETS, NET

 

Intangible assets consist of the following:

 

		March 31, 2016				December 31, 2015
Land use right		$	45,773,909			$	45,475,647
Accumulated amortization			(3,002,269	)			(2,698,204	)
Intangible assets, net		$	42,771,640			$	42,777,443

 

 

CHINA YIDA HOLDING, CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

8.	INTANGIBLE ASSETS, NET (CONTINUED)

 

For the three months ended March 31, 2016 and 2015, amortization expense amounted to $282,381 and $298,130, respectively. 

 

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

 

As of March 31,
2017		$	1,128,408
2018			1,128,408
2019			1,128,408
2020			1,128,408
2021			1,128,408
Thereafter			37,129,600
		$	42,771,640

 

9.	LONG-TERM PREPAYMENTS

 

Long-term prepayments consist of the following:

 

		March 31, 2016				December 31, 2015
Prepayments for project planning, assessments and consultation fees		$	1,080,748			$	1,024,289
Prepayment for cooperative development			251,265				273,031
Others			100,048				128,815
		$	1,432,061			$	1,426,135

 

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, 2016 and December 31, 2015, prepayments for cooperative development amounted to $251,265 and $273,031, respectively.

 

 

CHINA YIDA HOLDING, CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

10.	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, 2016				December 31, 2015
Loan from Fujian Haixia Bank (formerly known as Merchant bank of Fuzhou), interest rate at 8.245% per annum, due June 29, 2016, collateralized by the personal guarantees by two of the Company’s directors.		$	1,860,638			$	1,848,514

 

In June 2015, the Company borrowed an amount of $1,860,638 (RMB 12 million) due on June 29, 2016 from Fujian Haixia Bank, with the interest rate at 8.245% per annum. 

 

Interest expense for the three months ended March 31, 2016 and 2015 amounted to $38,238 and $46,872, respectively.

 

Long-term debt

 

Long term debt consists of the following:

 

		March 31, 2016				December 31, 2015
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))		$	35,662,232			$	35,429,857
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))			28,529,786				28,343,885
Loan from Industrial and Commercial Bank of China Limited in the amount of $27,115,701, net of deferred financing costs amounted to $384,689, interest rate from 5.64% to 7.07% per annum, final installment due on December 16, 2021, collateralized by the land use rights of Jiangxi Fenyi, guaranteed by Fujian Yida, and personal guarantees by two of the Company’s directors as additional collateral. (Note (c))			26,731,012				26,798,230
Loan from China Minsheng Banking Corp, Ltd., interest rate at 6.5% and 8.5% per annum for the periods then ended March 31, 2016 and December 31, 2015, respectively, final installment due on December 18, 2020, collateralized by the right to collect resort ticket sales at China Yang-sheng Paradise resort, guaranteed by Fujian Xinhengji Advertisement Co., Ltd, Fujian Yida, Yongtai Yunding, Jiangxi Fenyi, and personal guarantees by two of the Company’s directors as additional collateral.  (Note (d))			26,359,040				26,187,286
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))			4,031,383				4,005,114
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))			4,031,383				4,005,114
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))			3,411,170				3,388,943
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 (h))			3,411,170				3,388,943
			132,167,176				131,547,372
Less: current portion			(3,411,170	)			(3,388,943	)
Total		$	128,756,006			$	128,158,429

 

 

CHINA YIDA HOLDING, CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

10.	BANK LOANS (CONTINUED)

 

Note:

 

(a)	$12,404,255 (RMB 80,000,000) and $23,257,977 (RMB 150,000,000) will be due in each twelve-month period as of March 31, 2019 and 2020, respectively.
(b)	$1,550,532 (RMB 10,000,000), $3,101,064 (RMB 20,000,000), $3,101,064 (RMB 20,000,000), $4,651,595 (RMB 30,000,000), $4,651,595 (RMB 30,000,000), $6,202,128 (RMB 40,000,000), and $5,271,808 (RMB 34,000,000) will be due in each twelve-month period as of March 31, 2017, 2018, 2019, 2020, 2021, 2022 and 2023, respectively.
(c)	$27,115,701 (RMB 174,880,000) will be due on December 16, 2021. Deferred financing costs of $542,686 (RMB 3.50 million) was paid in order to obtain such additional debt used to construct resort project.  These fees were deferred and amortized on a straight line basis over the life of the debt. The balance was amounted to $384,689 as of March 31, 2016.
(d)	$4,651,595 (RMB 30,000,000), $6,202,127 (RMB 40,000,000), $6,202,127 (RMB 40,000,000), and $9,303,191 (RMB 60,000,000) will be due in each twelve-month period as of March 31, 2018, 2019, 2020 and 2021, respectively.
(e)	$620,213 (RMB 4,000,000) will be due in each twelve-month period as of March 31, 2017, 2018, 2019, 2020, 2021 and 2022, respectively, and $310,105 (RMB 2,000,000) will be due in the twelve-month period as of March 31, 2023.
(f)	$620,213 (RMB 4,000,000) will be due in each twelve-month period as of March 31, 2017, 2018, 2019, 2020, 2021 and 2022, respectively, and $310,105 (RMB 2,000,000) will be due in the twelve-month period as of March 31, 2023.
(g)	$465,160 (RMB 3,000,000) will be due in each twelve-month period as of March 31, 2017, 2018, 2019, and 2020, respectively, $620,213 (RMB 4,000,000), $620,213 (RMB 4,000,000), and $310,104 (RMB 2,000,000) will be due in each twelve-month period as of March 31, 2021, 2022 and 2023, respectively.
(h)	$155,053 (RMB 1,000,000), $310,105 (RMB 2,000,000), $465,160 (RMB 3,000,000), $620,213 (RMB 4,000,000), $620,213 (RMB 4,000,000), $620,213 (RMB 4,000,000), and $620,213 (RMB 4,000,000) will be due in each twelve-month period as of March 31, 2017, 2018, 2019, 2020, 2021, 2022 and 2023, respectively.

 

Interest expense for the three months ended March 31, 2016 and 2015 amounted to $2,260,633 and $1,901,536, respectively.

 

11.	ACCRUED EXPENSES AND OTHER PAYABLES

 

Accrued expenses and other payables consist of the following:

 

		March 31, 2016				December 31, 2015
Accrued payroll		$	494,956			$	469,968
Accrued local government fees			448,399				445,477
Unearned revenue			206,316				119,979
Security deposits payable			199,780				150,004
Welfare payable			12,596				12,514
Other			126,618				140,079
		$	1,488,665			$	1,338,021

 

12.	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 periods ended March 31, 2016 and 2015. Net operating loss at March 31, 2016, which can be used to offset future taxable income, was approximately $4,812,776. 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)

 

12.	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 years ended March 31, 2016 and 2015.

 

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,
		2016				2015
Current
USA		$	-			$	-
China			-				-
			-				-
Deferred
USA
Deferred tax asset for NOL carry forwards			170,849				32,480
Valuation allowance			(170,849	)			(32,480	)
			-				-
China
Non current portion
Deferred tax asset for NOL carry forwards			1,240,193				1,549,422
Valuation allowance			(1,240,193	)			(1,549,422	)
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)

 

12.	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,
		2016				2015
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, 2016 and 2015, 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, 2016 and 2015 was an increase of $1,411,042 and $1,581,902, respectively.

 

13.

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)

 

13.	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 the CFO is removed from office for cause prior to the 21st  day of January, 2012, any outstanding stock options held by him which are not vested and exercisable by him immediately prior to resignation shall terminate as of the date of removal, and any outstanding stock options held by the CFO which are 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)

 

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

 

On November 5, 2011, our former VPIR submitted a letter of resignation resigning from his position. The resignation was effective as of December 31, 2011. Under the Non-qualified Stock Option Agreement, if VPIR is removed from office for cause prior to the 21st  day of January, 2012, any outstanding stock option held by him which were not vested and exercisable by him immediately prior to resignation terminated as of the date of removal, and any outstanding stock options held by VPIR which had 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, 2015			18,000
Granted			-
Exercised			-
Forfeited			-
Outstanding as of March 31, 2016			18,000

 

For the three months ended March 31, 2016 and 2015, 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)

 

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,
2017		$	31,783
2018			25,929
2019			25,971
2020			26,016
2021			26,063
Thereafter			780,646
Total minimum payments		$	916,408

 

The Company incurred rental expenses of $23,264 and $84,332 for the three months ended March 31, 2016 and 2015, respectively.

 

(2)    Compensation for using natural resources commitments

 

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

 

The Company paid approximately $14,135 and $8,964 to the Hua’an government for the three months ended March 31, 2016 and 2015, 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, 2016 and December 31, 2015, the Company had $4,519,087 and $2,082,013 due to Fujian Xinhengji Advertisement Co., Ltd. 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 are 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,
		2016				2015
						(Restated)
Numerator for basic and diluted earnings per share attributable to the Company’s common stockholders:
Net loss attributable to common stockholders		$	(5,380,773	)		$	(6,234,585	)
Basic & diluted earnings/(loss) per share attributable to common stockholders		$	(1.37	)		$	(1.59	)
Basic and diluted weighted average outstanding shares of common stock			3,914,580				3,914,580
Potential common shares outstanding as of March 31, 2016:
Options outstanding			18,000				18,000

  

For the three months ended March 31, 2016 and 2015, 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.

 

17.	SUBSEQUENT EVENTS

 

On April 12, 2016, The Company entered into an Amended and Restated Agreement and Plan of Merger, amended and restated its previously announced Agreement and Plan of Merger (the “Original Merger Agreement”), dated March 8, 2016, with China Yida Holding Acquisition Co., a Nevada corporation (“Acquisition Co.”). Having determined that a merger in which the Company survives is a more efficient structure, the Parties agreed to amend the Original Merger Agreement principally to change the structure of the merger such that Acquisition Co. will merge with and into the Company, with the Company surviving the Merger (the “Merger”). As a result of the Merger, (1) all of the shares of Acquisition Co. common stock issued and outstanding immediately prior to the effective time of the Merger will be cancelled, and (2) each of the Company’s shares of common stock issued and outstanding immediately prior to the effective time of the Merger (the “Shares”) will be cancelled and automatically converted into a right to receive US$3.32 in cash without interest, except for the Shares (the “Principal Shares”) owned by Mr. Minhua Chen and Mrs. Yanling Fan (the “Principal Shareholders”) and the Shares held by shareholders who have exercised their rights to dissent from the Merger. After completion of the Merger, the Principal Shares will be the only issued and outstanding shares of the surviving company. Shares with respect to which dissenters’ rights have been properly exercised and not withdrawn or lost will be cancelled in consideration for the right to receive the fair value of such dissenting shares in accordance with the Nevada Revised Statutes. 

 

 

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, as amended, 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, 2015, filed on March 30, 2016 (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, as Apta Holdings, Inc., to serve as a vehicle to effect a merger, capital stock exchange, asset acquisition or other similar business combination with a company having its primary operations in the PRC. On November 19, 2007, we consummated the acquisition of Keenway Limited, Hong Kong Yi Tat International Investment Co., Ltd (“Hong Kong Yi Tat”), and the then shareholders of Keenway Limited, including Minhua Chen, Yanling Fan, Xinchen Zhang, Extra Profit International Limited and Lucky Glory International Limited, received shares of our common stock.

 

After disposition of our advertising business, our current business consists solely of tourism. Our tourism business has been the primary source of our revenue since the first quarter of 2014.

 

We currently operate the 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 (Nourishing Life) Paradise Project (“China Yang-sheng Paradise”). As of March 31, 2016, 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 obtained the right to invest in the construction and development of Yang-sheng Paradise) (consists of: (a) Salt Water Hot Spring SPA & Health Center, (b) Yang-Sheng Holiday Resort, (c) World Yang-sheng Cultural Museum, (d) International Camphor Tree Garden, (e) Chinese Medicine and Herb Museum, (f) Yang-sheng Sports Club, (g) Old Town of Chinese Traditional Medicine and (h) various other Yang-sheng related projects and tourism real estate projects) with a forty (40) year exclusive right to develop, operate and manage a variety of caves, hot springs and other natural and cultural tourist resources identified in the Meng Mountain area, and various caves and tourist resources of the Dagang Mountain located in Fenyi County, Xinyu City, Jiangxi Province (“City of Caves”).

  

The revenue from tourism has been increasing. However, any increase in tourism revenue will depend on the progress we make in developing our existing and new projects in our other tourist destinations. Our tourism business is seasonal, although we have visitors to our parks throughout the year. In 2016, we will continue to develop and construct the new Jiangxi projects such as the second phase construction of Yang-sheng Paradise and the City of Caves. The first phase of City of Caves in Jiangxi was completed and opened to the public in May, 2015.

 

Factors Affecting Our Performance

 

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

 

 

We began to generate revenue after the grand openings of Yang-sheng Paradise, which opened in October 2014, and the grand openings of City of Caves, which opened in May 2015. We expect Yunding will continue to grow.  

 

Results of Operations

 

Results of Operations for the three months ended March 31, 2016 and 2015

 

The following table presents a summary of operating information for the three months ended March 31, 2016 and 2015:

  

										Increase/				Increase/
		For The Three Months								(Decrease)				(Decrease)
		Ended March 31,								U.S. Dollar				Percentage
(All amounts, other than percentage, in U.S. Dollar)		2016				2015				($)				(%)
Net revenue		$	3,497,661			$	2,572,962			$	924,699				35.94
Cost of revenue			2,375,710				2,137,181				238,529				11.16
Gross profit			1,121,951				435,781				686,170				157.46
Selling expenses			2,219,600				2,509,369				(289,769	)			(11.55	)
General and administrative expenses			2,012,719				2,207,956				(195,237	)			(8.84	)
Loss from operations			(3,110,368	)			(4,281,544	)			1,171,176				(27.35	)
Other (expense) income, net			22,799				(7,711	)			30,510				(395.67	)
Interest income			5,667				3,078				2,589				84.11
Interest expense			(2,298,871	)			(1,948,408	)			(350,463	)			17.99
Loss before income tax and non-controlling interest			(5,380,773	)			(6,234,585	)			853,812				(13.69	)
Less: Provision for income tax			-				-				-				-
Net loss		$	(5,380,773	)		$	(6,234,585	)		$	853,812				(13.69	)

 

 

Net Revenue

 

Net revenue from continuing operations increased by approximately $0.93 million or approximately 35.94%, from approximately $2.57 million for the three months ended March 31, 2015 to approximately $3.50 million for the three months ended March 31, 2016, including approximately $1.91 million from Yunding Park, which represents an increase of $0.17 million or 10%, $0.12 million from Hua’an Tulou, which represents an increase of $0.02 million or 20%, $0.59 million from China Yang-sheng paradise, which represents a decrease of $0.14 million or 19%, and $0.88 million from the City of Caves, which represents an increase of $0.88 million or 100%, for the three months ended March 31, 2016, as compared to that of the three months ended March 31, 2015. The primary sources of the revenues are ticket sales, tour shuttle bus fees, accommodation and sales from restaurants. The increase in tourism business was primarily due to the revenue increase at China Yang-sheng Paradise and the City of Caves due to effective marketing and promotions that led to an increase in number of visitors. We provided deeper ticket discounts due to the fierce competition among the destinations and the decreased tourist consumption. We expect the fierce competition and the reduced tourist consumption to continue in the near future. 

 

Cost of Revenue

 

Cost of revenues increased by approximately $0.24 million or approximately 11.16%, from approximately $2.14 million for the three months ended March 31, 2015 to approximately $2.38 million for the three months ended March 31, 2016. The increase in cost of revenue was primarily due to an increase in the depreciation cost of City of Caves, which was opened to public in May, 2015.

 

Gross profit

 

Gross profit increased approximately $0.68 million, or approximately 157.46%, from approximately $0.44 million for the three months ended March 31, 2015 to approximately $1.12 million for the three months ended March 31, 2016. Our gross profit margin was approximately 32.08% for the three months ended March 31, 2016, compared to gross profit margin of approximately 16.94% for the three months ended March 31, 2015, representing an increase of approximately 15 percentage points. The increase of gross profit margin was primarily due to the revenue increase at China Yang-sheng Paradise and the City of Caves. 

 

Selling Expenses

 

Selling expenses were approximately $2.22 million for the three months ended March 31, 2016, compared to approximately $2.51 million for the three months ended March 31, 2015, which represents a decrease of approximately $0.29 million, or approximately 11.55%. The decrease in selling expense was primarily due to the decrease in variable costs, including operation costs of shuttle buses and cable cars, hotel maintaining costs, and marketing expenses at China Yang-sheng Paradise, Yunding and Tulou during the three months ended March 31, 2016.

  

General and Administrative Expenses

 

General and administrative expenses were approximately $2.01 million for the three months ended March 31, 2016, compared to approximately $2.21 million for the three months ended March 31, 2015, which represents a decrease of approximately $0.20 million, or approximately 8.84%. This decrease was due to the decrease of administrative expenses for the operation of China Yang-sheng Paradise, Yunding Park, and City of Caves during the three months ended March 31, 2016. 

 

Interest expense

 

Interest expense was approximately $2.30 million for the three months ended March 31, 2016, representing an increase of approximately $0.35 million or approximately 17.99%, compared to approximately $1.95 million for the three months ended March 31, 2015. The increase was primarily due to Company obtaining more bank loans in after the first quarter of 2015, thus causing the Company to incur an increase in interest payments in 2016. 

 

 

Net Loss

 

As a result of the above factors, we experienced a net loss of approximately $5.38 million for the three months ended March 31, 2016 as compared to a net loss of approximately $6.23 million for the three months ended March 31, 2015, representing a decrease of loss of approximately $0.85 million or approximately 13.69%. The decrease in net loss was primarily attributable to the revenue increase at China Yang-sheng Paradise and City of Caves for the three months ended March 31, 2016 as compared to three months ended March 31, 2015.

 

Liquidity and Capital Resources

 

Our 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. We have incurred significant negative cash flows from operating activities, and continuing net losses and working capital deficits may effect our ability to continue as a going concern. Our ability to continue as a going concern is dependent on our ability to obtain adequate capital to fund operating losses until we become profitable. If we are unable to obtain adequate capital, we could be forced to cease operations. The accompanying consolidated financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.

 

Management’s Plan to Continue as a Going Concern

 

In order to continue as a going concern, we will need, among other things, additional capital resources. Management’s plans to obtain such resources for us 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 we will be successful in accomplishing any of its plans.

 

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

 

Our principal source of liquidity during the three months ended March 31, 2016 was primarily the proceeds from loans from related parties.

 

As of March 31, 2016, we had cash and cash equivalents of approximately $3.82 million as compared to approximately $5.48 million as of December 31, 2015, representing a decrease of $1.66 million. Our principal source of liquidity during the three months ended March 31, 2016 was primarily the net proceeds from loans from related parties of approximately $2.39 million. 

 

As of March 31, 2016 and December 31, 2015, our working capital deficits were approximately $5.24 million and $1.75 million, respectively.

 

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

 

		For the three months Ended March 31,
		2016				2015
Net cash used in operating activities		$	(3,458,627	)		$	(3,908,948	)
Net cash used in investing activities		$	(345,400	)		$	(325,964	)
Net cash provided by financing activities		$	2,134,619			$	12,594,349

 

 

Net cash used in operating activities was approximately $3.46 million for the three months ended March 31, 2016, compared to approximately $3.91 million for the three months ended March 31, 2015. The decrease of $0.45 million cash used was primarily due to the net loss of $5.38 million for the three months ended March 31, 2016 as compared to the net loss of $6.23 million for the three months ended March 31, 2015.

 

Net cash used in investing activities was approximately $0.35 million for the three months ended March 31, 2016, compared to approximately $0.33 million of cash used in investing activities for the three months ended March 31, 2015.

 

Net cash provided by financing activities amounted to approximately $2.13 million for the three months ended March 31, 2016, compared to approximately $12.59 million of cash provided by financing activities for the three months ended March 31, 2015, representing a decrease of approximately $10.46 million. The decrease in net cash provided by financing activities was mainly because, during the three months ended March 31, 2015, the primary source of cash provided by financing activities was proceeds from long-term loans of approximately $29.29 million in 2015, offset by the repayment of related party loans of approximately $16.13 million, while in the same period of 2016, the primary source of cash provided by financing activities was proceeds from related party loans of approximately $2.39 million. 

 

Bank loans

 

As of March 31, 2016, the Company had nine bank loans from three institutional lenders for the development of tourism destinations, as follows:

  

1.	A loan for approximately $1.86 million from Fujian Haixia Bank (formerly known as Merchant bank of Fuzhou). The loan bears interest at 8.245% per annum and is due on June 29, 2016, collateralized by the personal guarantees of two of the Company’s directors.

  

2.

A loan for approximately $35.66 million from China Minsheng Banking Corp, Ltd. It bears interest rate at 9% per annum. $12,404,255 (RMB 80,000,000) and $23,257,977 (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.

 

3.

A loan for approximately $28.53 million from China Construction Bank. It bears interest at 6.55% per annum. $1,550,532 (RMB 10,000,000), $3,101,064 (RMB 20,000,000), $3,101,064 (RMB 20,000,000), $4,651,595 (RMB 30,000,000), $4,651,595 (RMB 30,000,000), $6,202,128 (RMB 40,000,000) and $5,271,808 (RMB 34,000,000) will be due in each twelve-month period as of March 31, 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.

 

4.

A loan for approximately $26.73 million from Industrial and Commercial Bank of China Limited. The loan bears interest at from 5.64% to 7.07% per annum, and is due on December 16, 2021. It is collateralized by the land use rights of Jiangxi Fenyi, guaranteed by Fujian Yida, and personal guarantees by two of the Company’s directors. Deferred financing costs of $542,686 (RMB 3.50 million) was paid in order to obtain such additional debt used to construct the resort project.  These fees were deferred and amortized on a straight line basis over the life of the debt. The balance amounted to $384,689 as of March 31, 2016.

 

5.	A loan for approximately $26.36 million from China Minsheng Banking Corp, Ltd. It bears interest rate at 6.5% per annum during the three months ended March 31, 2016. $4,651,595 (RMB 30,000,000), $6,202,127 (RMB 40,000,000), $6,202,127 (RMB 40,000,000), and $9,303,191 (RMB 60,000,000) will be due in each twelve-month period as of March 31, 2018, 2019, 2020 and 2021, respectively. It is collateralized by the right to collect resort ticket sales at China Yang-sheng Paradise resort, guaranteed by Fujian Xinhengji Advertisement Co., Ltd, Fujian Yida, Yongtai Yunding, Jiangxi Fenyi and personal guarantees by two of the Company’s directors as additional collateral.
6.	A loan for approximately $4.03 million from China Construction Bank. It bears interest at 7.86% per annum. $620,213 (RMB 4,000,000) will be due in each twelve-month period as of March 31, 2017, 2018, 2019, 2020, 2021 and 2022, respectively, and $310,105 (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 $4.03 million from China Construction Bank. It bears interest at 7.86% per annum, $620,213 (RMB 4,000,000) will be due in each twelve-month period as of March 31, 2017, 2018, 2019, 2020, 2021 and 2022, respectively, and $310,105 (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.
8.	A loan for approximately $3.41 million from China Construction Bank. It bears interest at 7.86% per annum. $465,160 (RMB 3,000,000) will be due in each twelve-month period as of March 31, 2017, 2018, 2019, and 2020, respectively, $620,213 (RMB 4,000,000), $620,213 (RMB 4,000,000), and $310,104 (RMB 2,000,000) will be due in each twelve-month period as of March 31, 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.

 

9.

A loan for approximately $3.41 million from China Construction Bank. It bears interest at 7.86% per annum. $155,053 (RMB 1,000,000), $310,105 (RMB 2,000,000), $465,160 (RMB 3,000,000), $620,213 (RMB 4,000,000), $620,213 (RMB 4,000,000), $620,213 (RMB 4,000,000), and $620,213 (RMB 4,000,000) will be due in each twelve-month period as of March 31, 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.

 

Over the next 12 months, the Company has approximately $5.27 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 for the projects’ funding based upon the actual cash flow expenditures required, which means we expect to be able to accelerate the construction as we have more cash flow and we can slow down the construction if and when we are lacking funds.

 

 

Obligations Under Material Contracts

 

Below is a table setting forth the Company’s material contractual obligations as of March 31, 2016:

 

						Payment due by period
Contractual Obligations		Total				1 year				1-3 years				3-5 years				More than 5 years*
Bank Loans		$	134,412,506			$	5,271,809			$	33,646,542			$	52,873,136			$	42,621,019
Operating Lease Obligations			916,408				31,783				51,900				52,079				780,646
Total		$	135,328,914			$	5,303,592			$	33,698,442			$	52,925,215			$	43,401,665

   

*Representing gross amount to be repaid, excluding net deferred financing costs of $384,689.

 

Compensation For Using Natural Resources Commitments

 

In December 2008, Tulou entered into a Tourist Resources Development Agreement with the Hua’an County Government (“Hua’an Government”) related to paying compensation fees to the Hua’an Government 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% at twenty-six years and thereafter when the ticket price of the Clusters is expected to be RMB60 ($9.50 USD) or above per person.

 

The Company paid approximately $14,135 and $8,964 to the Hua’an government for the three months ended March 31, 2016 and 2015, respectively, and recorded the payments as selling expenses. 

 

2016 Outlook

 

In 2016, we will continue the development of two new tourism projects, Yang-sheng Paradise in Zhangshu City, Jiangxi province, and City of Caves in Fenyi City, Jiangxi province, which represent our commitment to expanding our business operations by applying our current business model to the development of other valuable tourist destinations outside Fujian province and throughout China. Now that the Company has more cash generated from two new opened tourism sites, we will continue to develop the projects.

  

Critical Accounting Policies

 

The 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, 2015 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.

 

 

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 Company’s functional currency is the Chinese Renminbi, however, the accompanying consolidated financial statements have been translated and presented in United States Dollars ($).

 

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 the financial statements of a Variable Interest Entity ("VIE") to be consolidated, 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, 2016				December 31, 2015
Total current assets *		$	27,663,671			$	17,865,630
Total assets		$	27,670,959			$	17,872,871
Total current liabilities #		$	36,528,533			$	26,607,548
Total liabilities		$	36,528,533			$	26,607,548

 

* Including intercompany receivables of $27,651,875 and $16,979,261 as at March 31, 2016 and December 31, 2015, respectively, to be eliminated in consolidation.

 

# Including intercompany payables of $36,501,099 and $26,580,316 as March 31, 2016 and December 31, 2015, 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. 

 

 

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, 2016 and December 31, 2015, the Company has uninsured deposits in banks of approximately $3,738,000 and $5,448,000, respectively.

 

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. 

 

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, 2016 and December 31, 2015, respectively.

 

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 land use rights for tourism resorts.  They are amortized on the straight line basis over their respective lease periods. The lease period of land use rights is 40 years.  

 

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 that are considered necessary. There was no impairment loss recorded for the three months ended March 31, 2016 and 2015.

 

Revenue recognition

 

Revenue is recognized at the date of service rendered to customers when a formal arrangement exists, the price is fixed or determinable, the services have been 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 selling expenses for profit sharing arrangements with the local governments for the management rights (see Note 14).

 

For the three months ended March 31, 2016

 

		Tulou
Gross receipts		$	122,630
Profit sharing costs			-
Nature resource compensation expenses			14,135
Total paid to the local governments			14,135
Net receipts		$	108,495

 

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

 

 

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, 2016 and December 31, 2015, 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 December 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.

 

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.

 

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, 2016, 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.

 

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.

 

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.

 

Recent accounting pronouncements

 

In February 25, 2016, FASB issued ASU-2016-02 — Leases (Topic 842). Topic 842 is to establish the principles that lessees and lessors shall apply to report useful information to users of financial statements about the amount, timing, and uncertainty of cash flows arising from a lease. The FASB is issuing this Update to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. Topic 842 affects any entity that enters into a lease (as that term is defined in this Update), with some specified scope exemptions. The guidance in this Update supersedes Topic 840, Leases. The main difference between previous GAAP and Topic 842 is the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous GAAP. The core principle of Topic 842 is that a lessee should recognize the assets and liabilities that arise from leases. All leases create an asset and a liability for the lessee in accordance with FASB Concepts Statement No. 6, Elements of Financial Statements, and, therefore, recognition of those lease assets and lease liabilities represents an improvement over previous GAAP, which did not require lease assets and lease liabilities to be recognized for most leases. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. When measuring assets and liabilities arising from a lease, a lessee (and a lessor) should include payments to be made in optional periods only if the lessee is reasonably certain to exercise an option to extend the lease or not to exercise an option to terminate the lease. Similarly, optional payments to purchase the underlying asset should be included in the measurement of lease assets and lease liabilities only if the lessee is reasonably certain to exercise that purchase option. Reasonably certain is a high threshold that is consistent with and intended to be applied in the same way as the reasonably assured threshold in the previous leases guidance. In addition, also consistent with the previous leases guidance, a lessee (and a lessor) should exclude most variable lease payments in measuring lease assets and lease liabilities, other than those that depend on an index or a rate or are in substance fixed payments. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. If a lessee makes this election, it should recognize lease expense for such leases generally on a straight-line basis over the lease term. The amendments in this Update are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is still in the process of evaluating future impact of adopting this standard. 

 

 

In November 20, 2015, FASB issued ASU-2015-17 — Income Taxes. The Board is issuing this Update as part of its initiative to reduce complexity in accounting standards (the Simplification Initiative). The objective of the Simplification Initiative is to identify, evaluate, and improve areas of generally accepted accounting principles (GAAP) for which cost and complexity can be reduced while maintaining or improving the usefulness of the information provided to users of financial statements. Current GAAP requires an entity to separate deferred income tax liabilities and assets into current and noncurrent amounts in a classified statement of financial position. To simplify the presentation of deferred income taxes, the amendments in this Update require that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. The amendments in this Update apply to all entities that present a classified statement of financial position. The current requirement that deferred tax liabilities and assets of a tax-paying component of an entity be offset and presented as a single amount is not affected by the amendments in this Update. For public business entities, the amendments in this Update are effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Earlier application is permitted for all entities as of the beginning of an interim or annual reporting period. The Company is still in the process of evaluating future impact of adopting this standard.

 

In April 7, 2015, FASB issued ASU-2015-03 — Interest-Imputation of Interest. The Board is issuing this Update as part of its initiative to reduce complexity in accounting standards (the Simplification Initiative). The objective of the Simplification Initiative is to identify, evaluate, and improve areas of generally accepted accounting principles (GAAP) for which cost and complexity can be reduced while maintaining or improving the usefulness of the information provided to users of financial statements. To simplify presentation of debt issuance costs, the amendments in this Update require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this Update. For public business entities, the amendments in this Update are effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. The Company has adapted this standard and the debt liability as of March 31, 2015 has been presented net of debt issuance costs.

  

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 the process 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 state 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 the process of evaluating future impact of adopting this standard.

 

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 smaller 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, 2016, 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, 2015.

 

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
2.1		Amended and restated Agreement and Plan of Merger, dated as of April 12, 2016, by and between the Company and China Yida Holding Acquisition Co.*
9.1		Voting Agreement dated as of April 12, 2016, by and among the Company, Mr. Minhua Chen and Mrs. Yanling Fan.*
9.2		Termination Agreement, dated as of April 12, 2016, by Mr. Minhua Chen and Mrs. Yanling Fan in favor of the Company.*
9.3		Termination Agreement, dated as of April 12, 2016, by and among the Company, Mr. Minhua Chen and Mrs. Yanling Fan.*
31.1		Certification of Chief Executive Officer Required by Rule 13a-14(a) (17 CFR 240.13a-14(a))**
31.2		Certification of Chief Financial Officer Required by Rule 13a-14(a) (17 CFR 240.13a-14(a))**
32.1		Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002***
32.2		Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002***
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		XBRL Taxonomy Extension Label Linkbase Document
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

 

* Filed April 13, 2016 on Form 8-K.

** Filed herewith.

*** Furnished herewith.

  

 

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.

 

Dated: May 16, 2016

	CHINA YIDA HOLDING, CO.
	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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