UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended
December 31, 2014
or
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period
from ___________ to ___________
Commission File Number:
000-26777
China Yida Holding, Co.
(Exact name of registrant
as specified in its charter)
Nevada |
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50-0027826 |
(State or other jurisdiction of
incorporation or organization) |
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(I.R.S. Employer
Identification No.) |
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28/F Yifa Building
No. 111 Wusi Road
Fuzhou, Fujian, P. R. China, |
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350003 |
(Address of principal executive offices) |
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(Zip Code) |
Registrant’s telephone
number, including area code: (718) 838-9552
Securities registered pursuant to Section 12(b) of the Act: |
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Title of each class |
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Name of each exchange on which registered |
Common Stock, $0.001 par value per share |
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NASDAQ Capital Market |
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Securities registered under Section 12(g) of the Act: |
Not Applicable
(Title of Class)
Indicate by check
mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o
No x
Indicate by check
mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes o
No x
Indicate by check
mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by
check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files). Yes x No o
Indicate by check mark
if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§232.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨
Indicate by check mark
whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.
See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company”
in Rule 12b-2 of the Exchange Act.
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Large accelerated filer |
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Accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
x |
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(Do not check if a smaller reporting company) |
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Indicate by check
mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o
No x
The aggregate market value
of the voting and non-voting stock held by non-affiliates of the registrant, as of June 30, 2014, the last business day of the
registrant’s most recently completed second fiscal quarter, based on the closing price of the common stock on NASDAQ Capital
Market exchange on such date was $5.6 million.
The number of shares
outstanding of the registrant’s common stock as of March 20, 2015 was 3,914,580 shares.
FORM 10-K
INDEX
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Page |
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PART I |
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ITEM 1. |
Business |
1 |
ITEM 1A. |
Risk Factors |
13 |
ITEM 1B. |
Unresolved Staff Comments |
25 |
ITEM 2. |
Properties |
26 |
ITEM 3. |
Legal Proceedings |
27 |
ITEM 4. |
Mine Safety Disclosures |
27 |
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PART II |
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ITEM 5. |
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |
28 |
ITEM 6. |
Selected Financial Data |
29 |
ITEM 7. |
Management’s Discussion and Analysis of Financial Condition and Results of Operation |
29 |
ITEM 7A. |
Quantitative and Qualitative Disclosures About Market Risk |
40 |
ITEM 8. |
Financial Statements and Supplementary Data |
41 |
ITEM 9. |
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
42 |
ITEM 9A. |
Controls and Procedures |
42 |
ITEM 9B. |
Other Information |
43 |
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PART III |
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ITEM 10. |
Directors, Executive Officers and Corporate Governance |
44 |
ITEM 11. |
Executive Compensation |
44 |
ITEM 12. |
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
44 |
ITEM 13. |
Certain Relationships and Related Transactions, and Director Independence |
44 |
ITEM 14. |
Principal Accounting Fees and Services |
44 |
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PART IV |
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ITEM 15. |
Exhibits, Financial Statement Schedules |
45 |
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SIGNATURES |
47 |
STATEMENT REGARDING
FORWARD-LOOKING STATEMENTS
Except for the historical information contained
herein, some of the statements in this Report contain forward-looking statements that involve risks and uncertainties. These statements
are found in the sections entitled "Business," "Management's Discussion and Analysis of Financial Condition and
Results of Operations," and "Risk Factors." They include statements concerning: our business strategy; expectations
of market and customer response; liquidity and capital expenditures; future sources of revenues; expansion of our product lines;
addition of new product lines; and trends in industry activity generally. In some cases, you can identify forward-looking statements
by words such as "may," "will," "should," "expect," "plan," "could,"
"anticipate," "intend," "believe," "estimate," "predict," "potential,"
"goal," or "continue" or similar terminology. These statements are only predictions and involve known and unknown
risks, uncertainties and other factors, including, but not limited to, the risks outlined under "Risk Factors," that
may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from
any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. For
example, assumptions that could cause actual results to vary materially from future results include, but are not limited to: our
ability to successfully develop and market our products to customers; our ability to generate customer demand for our products
in our target markets; the development of our target markets and market opportunities; our ability to produce and deliver suitable
products at competitive cost; market pricing for our products and for competing products; the extent of increasing competition;
technological developments in our target markets and the development of alternate, competing technologies in them; and sales of
shares by existing shareholders. Although we believe that the expectations reflected in the forward-looking statements are reasonable,
we cannot guarantee future results, levels of activity, performance or achievements. Unless we are required to do so under U.S.
federal securities laws or other applicable laws, we do not intend to update or revise any forward-looking statements.
USE OF CERTAIN DEFINED TERMS
Except as otherwise indicated by the context,
references in this report to “we,” “us,” “our,” “our Company,” or “the Company”
are to the combined business of China Yida Holding, Co. and its subsidiaries.
PART I
ITEM 1. BUSINESS.
Corporate Overview
We, together with our subsidiaries, operate
various tourist destinations in Fujian and Jiangxi provinces in the People’s Republic of China. We develop, operate, manage
and market tourist destinations, including natural, cultural, and historical tourist destinations and theme parks. We also create/design
and construct new tourist concepts, attractions and properties.
We currently have three destinations
that are open to the public: (i) Yunding Recreational Park (a
large-scale recreational park, or the “Yunding Park”) in Yongtai County, Fujian, and (ii) Hua’An Tulou
Cluster (the “Earth Buildings” or “Tulou,” part of Fujian Tulou – a World Cultural Heritage
Site granted by UNESCO) in Hua’An County, Fujian, and (iii) the China Yang-sheng (Nourishing Life) Paradise
(“Yang-sheng Paradise”), a theme park style destination featuring a rare salt water hot spring located in
Zhangshu, Jiangxi. We also currently have one destination that is under construction, the City of Caves (“City of
Caves”), an underground natural attraction located in Xinyu, Jiangxi.
In 2011, we started to construct and develop
Yunding Park’s second phase of construction and new tourism projects, the China Yang-sheng (Nourishing Life) Paradise in
Zhangshu City, Jiangxi province, and the City of Caves in Fenyi City, Jiangxi province. The construction was in line with our schedule.
We completed the second phase of construction of Yunding Park by the end of 2012. We completed the first phase construction of
Yang-sheng Paradise and opened it to the public for trial in October, 2013. We started the first phase construction of
City of Caves in 2014 and expect to open it to the public by the 2nd quarter of 2015.
Our Corporate History and Structure
China Yida Holding Co. was organized as a Delaware
Corporation in June 4, 1999, formerly known as Apta Holdings, Inc. (“China Yida Delaware”). On August 1, 2012, our
board of directors and majority stockholders adopted written consents to approve an amendment to the Company’s Certificate
of Incorporation to effectuate a one-for-five reverse stock split of the Company’s common stock. On November 16, 2012, China
Yida Delaware filed a Certificate of Amendment of the Company’s Certificate of Incorporation (the “Certificate of Amendment”)
with the Secretary of State of the State of Delaware to effectuate the reverse stock split. Any fractional share was rounded to
the next whole share. On November 19, 2012, China Yida Delaware consummated a merger (the “Reincorporation”) with and
into its wholly-owned subsidiary, China Yida Holding Co., a Nevada corporation (“China Yida Nevada”), pursuant to the
terms and conditions of an Agreement and Plan of Merger entered into by China Yida Nevada and China Yida Delaware on November 19,
2012. As a result of the Reincorporation, we are now a Nevada corporation. In addition, the articles of incorporation and bylaws
of China Yida Nevada are now our governing documents.
Share Exchange Transaction and Our subsidiaries
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 Reverse Merger (defined below), Mr. Minhua Chen and his wife, Ms. Yanling Fan, 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 the then shareholders of Keenway Limited, including
Minhua Chen, Yanling Fan, Xinchen Zhang, 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 were transferred from some of our then existing shareholders (the “Reverse Merger”).
As a result of the closing of the Reverse 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 under the
laws as the holding company of our operating entities, (i) Fujian Jintai Tourism Development, Co, Ltd. (“Fujian Jintai Tourism”),
(ii) Yida (Fujian) Tourism Group., Ltd., formerly known as, Fujian Yunding Tourism Industrial Co., Ltd. (“Fujian Yida”),
(iii) Fujian Jiaoguang Media, Co., Ltd. (“Fujian Jiaoguang”), and (iv) Fujian Yida Tulou Tourism Development Co. Ltd.
(“Tulou”). Hong Kong Yi Tat does not have any other operations.
Hong Kong Yi Tat, a company incorporated laws
of Hong Kong, established its crucial operating PRC subsidiary, Fujian Jintai Tourism in October 2001. At the time when Fujian
Jintai Tourism was incorporated, a number of governmental tax incentives would be only applicable to foreign investment enterprises,
such as the tax reduction for the foreign investment enterprise located in economic development zone. Under the PRC income tax
laws effective prior to January 1, 2008, domestic companies typically were subject to an enterprise income tax rate of 33%, while
foreign invested manufacturing enterprises with operation terms of 10 or more years might enjoy preferential tax treatment of “two-year
tax exemption and three-year tax reduction of 50%,” subject to the approval of relevant tax authority. For these reasons,
Fujian Jintai Tourism was reorganized to be a subsidiary of a foreign parent company (in this case, a Hong Kong Company) to take
advantage of the tax treatment.
Moreover, the other reason to use a Cayman
Islands company is to facilitate the share transfer with a U.S. public entity at the later date. Transferring equity at both the
Hong Kong level or at the PRC level will require complicated governmental filings and/or approval procedures to effect the transfer,
as well as tax filings and payment of fees or taxes. Transferring equity of a Cayman Islands company, on the other hand, is subject
to a relatively simple governmental procedure for completion of the transfer and generally is free from any taxes under the laws
of Cayman Islands. Accordingly, we decided to use Keeway Limited, a Cayman Islands company as the parent of the Hong Kong company
which in turn owned the PRC operating entities.
Fujian Jintai Tourism
Fujian Jintai Tourism was formed on October
29, 2001. Its primary business is tourism operation at the Great Golden Lake. The Company offers bamboo rafting, parking lot service,
photography services and ethnic cultural communications.
Fujian Jintai Tourism has one wholly owned
subsidiary, Fuzhou Hongda Commercial Services Co., Ltd. (“Hongda”). Hongda currently does not have any operations.
On March 15, 2010, Hongda entered into an equity transfer agreement with Fujian Yida, pursuant to which Fujian Yida acquired 100%
of the issued and outstanding shares of Fuzhou Fuyu Advertising Co., Ltd. (“Fuyu”) from Hongda at the aggregate purchase
price of RMB 3,000,000 ($473,000 USD). As a result, Fujian Yida became the 100% holding company of Fuyu. Fuyu is engaged in the
mass media segment of our business. Its primary business is focused on advertising, including media publishing, television, cultural
and artistic communication activities, and performance operation and management activities. Hongda was deregistered on December
2, 2012.
Fujian Jintai Tourism also owned 100% of the
ownership interest in Fujian Yintai Tourism Co., Ltd. (“Yintai”). On March 15, 2010 Fujian Jintai Tourism entered into
an equity transfer agreement with Fujian Yida, pursuant to which Fujian Yida acquired 100% of the issued and outstanding common
stock of Yintai from Fujian Jintai Tourism at the aggregate purchase price of RMB 5,000,000 ($789,000). As a result, Yintai became
a wholly owned subsidiary of Fujian Yida. Yintai was deregistered on November 18, 2010.
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 “Fujian Taining”), an unrelated party, pursuant to which Hong Kong Yi Tat sold 100% of
its equity interest in Fujian Jintai Tourism to Fujiang Taining for a price of RMB 228,801,359, or approximately $37
million.
Fujian Yida
Fujian Yida’s primary business relates
to the operation of our Yunding Park 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. (“Yunding Resort Management”) with its address at No. 68 Xianfu
Road, Zhangcheng Town, Yongtai County, China. Yunding Resort Management has currently no material business operations. Yunding
Park was opened on September 28, 2010. We plan to develop Yunding Resort Management into a business entity primarily focusing on
the management services of Yunding Park when the second phase development of Yunding Park is completed.
On April 12, 2010, our operating subsidiary
Fujian Yida, which was called “Fujian Yunding Tourism Industrial Co., Ltd.,” changed its name to “Yida (Fujian)
Tourism Group Limited”. This was to reflect its new role of expanding our business in operations of domestic tourism destinations
in China by acquiring new tourism destinations.
On April 15, 2010, Fujian Yida entered into
agreement with Anhui Xingguang Group to set up a joint venture – Anhui Yida Tourism Development Co. Ltd. (“Anhui Yida”).
Fujian Yida and Anhui Xingguang Group own 60% and 40% of the equity interest of Anhui Yida, respectively. The primary business
of Anhui Yida was development of the Ming Dynasty Entertainment World. On June 3, 2013, Fujian Yida entered into a stock transfer
agreement with Anhui Xingguang Investment Group Ltd (“Anhui Xingguang”), pursuant to which Anhui Xingguang assumed
all the equity interest in Anhui Yida as well as all the assets and liabilities of Anhui Yida., including its two subsidiaries.
On July 6, 2010, Fujian Yida formed a wholly-owned
subsidiary, Jiangxi Zhangshu (Yida) Tourism Development Co., Ltd. (“Jiangxi Zhangshu”), in Zhangshu City, Jiangxi Province
to develop the Yang-sheng Paradise.
On July 7, 2010, Fujian Yida formed a wholly-owned
subsidiary, Jiangxi Fenyi (Yida) Tourism Development Co., Ltd. (“Jiangxi Fenyi”), in Xinyu City, Jiangxi Province to
develop the City of Caves.
On June 24, 2011, Fujian Yida formed a wholly
owned subsidiary, Fujian Yida Travel Service Co., Ltd. (“Yida Travel”). The total paid-in capital of Yida Travel was
$1,546,670 (RMB10 million). Its primary business is to conduct domestic and international traveling services in China, including
operating the direct sales of travel services for our current tourist destinations at the Great Golden Lake, Yunding Recreational
Park, and Hua’An Tulou Cluster, China Yang-sheng (Nourishing Life) Paradise, and the City of Caves which is under construction.
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. (“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. As a result
of the stock transfer agreement by and between Fujian Yi da and Anhui Xingguang dated June 3, 2013, Anhui Xingguang acquired all
the equity interests in Anhui Yida and assumed all the assets and liabilities of Anhui Yida including the equity interests in Bengbu
Yida.
On May 22, 2012, Jiangxi Zhangshu formed a
wholly owned subsidiary, Zhangshu (Yida) Investment Co., Ltd. (“Zhangshu Investment”). The total paid-in capital of
Zhangshu Investment was $792,532 (RMB 5 million). Its primary business is to conduct real estate investment, project management
and consulting in China.
On June 6, 2012, Jiangxi Fenyi formed a wholly
owned subsidiary, Fenyi (Yida) Property Development Co., Ltd. (“Fenyi Development”). The total paid-in capital of Fenyi
Development was $792,532 (RMB 5 million). Its primary business is to conduct business of real estate development and sales in China.
On July 20, 2012, Anhui Yida formed a wholly
owned subsidiary, Bengbu (Yida) Investment Co., Ltd. (“Bengbu Investment”). The total paid-in capital of Bengbu Investment
was $792,532 (RMB 5 million). Its primary business is to conduct real estate investment, project management and consulting in China.
As a result of the stock transfer agreement by and between Fujian Yi da and Anhui Xingguang dated June 3, 2013, Anhui Xingguang
acquired all the equity interests in Anhui Yida and assumed all the assets and liabilities of Anhui Yida including the equity interests
in Benhu Investment.
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 Yunding performance and show events.
On June 26, 2013, Fujian Yida formed a wholly
owned subsidiary, Yongtai Yunding Hotel Co, Ltd (“Yida Hotel”). The total paid-in capital of Yida Hotel was $4,860,000
(RMB 30 million). Its primary business is operating Yunding hotel services.
On June 3, 2013, Yida (Fujian) Tourism Group
Limited. (“Fujian Yida”), our subsidiary, entered into a stock transfer agreement with Anhui Xingguang Investment Group
Ltd (“Anhui Xingguang”), pursuant to which Fujian Yida agreed to transfer its 60% interest in Anhui Yida Tourism Development
Co. Ltd. (“Anhui Yida”) to Anhui Xingguang for RMB 60 million, or $9.72 million. Anhui Xingguang also assumed all the
assets and liabilities of Anhui Yida.
Fujian Jiaoguang
Fujian Jiaoguang and our contractual relationship
met the requirements of the Accounting Standard Codification ("ASC") 810, to consolidate Fujiang Jiaoguang’s financial
statements as a Variable Interest Entity. Fujian Jiaoguang has no material business operations.
Tulou
Tulou is 100% owned by Hong Kong Yi Tat. Tulou’s
primary business relates to the operation of Tulou, one of our tourism destinations.
The following chart depicts our current corporate structure:
![](img001.jpg)
* Each of Fujian Jiaoguang and Yunding Resort
Management currently has no material business operations.
Our Wholly Foreign Owned Enterprises
We have two wholly foreign owned Enterprises.
Fujian Yida Tulou Tourism Co., Ltd. and Yida (Fujian) Tourism Group, Ltd.
Our Variable Interest Entity Agreements
On December 30, 2004, Fujiang
Jiaoguang and its shareholders entered into a set of contractual arrangements with us which governs the relationships between Fujian
Jiaoguang and the Company. The Contractual Arrangements are comprised of a series of agreements, including a Consulting Agreement
and an Operating Agreement, through which we have the right to advise, consult, manage and operate Fujian Jiaoguang, and collect
and own all of Fujian Jiaoguang’s respective net profits. Additionally, under a Proxy and Voting Agreement and a Voting Trust
and Escrow Agreement, the shareholders of Fujian Jiaoguang have vested their voting control over Fujian Jiaoguang to the Company.
In order to further reinforce the Company’s rights to control and operate Fujian Jiaoguang, Fujian Jiaoguang and its shareholders
have granted us, under an Option Agreement, the exclusive right and option to acquire all of their equity interests in the Fujian
Jiaoguang or, alternatively, all of the assets of Fujian Jiaoguang. Further, the shareholders of Fujian Jiaoguang have pledged
all of their rights, titles and interests in Fujian Jiaoguang to us under an Equity Pledge Agreement. We effectuated this organizational
structure due to China’s limitations on foreign investments and ownership in Chinese domestic businesses. Generally, the
Chinese law prohibits foreign entities from directly owning certain types of businesses, such as the media industry.
The shareholders of Fujian Jiaoguang are also
our principal shareholders, Chairman Minhua Chen and Yanling Fan.
We have obtained an opinion from Allbright
Law Office, our Chinese legal counsel, that this structure is legal and valid and that the U.S. holding corporation can obtain
the same benefits and risks with this contractual structure as it would with a direct equity ownership. There is, however, a risk
with this contractual structure that the contracting party breaches its contract with us. If Fujian Jiaoguang fails to perform
its obligations under the contractual arrangements, we are required to enforce our rights through arbitration before the China
International Economic and Trade Arbitration Commission (CIETAC). To initiate a proceeding under the CIETAC we must first prepare
and submit an arbitration request for approval and acceptance. Once accepted, CIETAC will form an arbitration tribunal to hear
the matter, set a hearing date and notify the parties of the proceeding. The parties would be contractually bound by the decision
of the tribunal. While we do feel the possibility is remote, in the event such decision is unfavorable, we may effectively lose
control over Fujian Jiaoguang, which would materially affect our business, financial condition and results of operations.
Additionally, the pledge agreement that entered
into on December 30, 2004 is enforceable under the PRC law although it was not registered with local government agency. The PRC
Property Law went effective on October 1, 2007. At the time of the execution of the pledge agreement, no registration with local
administration for industry and commerce was required for the effectiveness and enforcement of pledge agreement. The PRC Property
Law does not have retrospective effect and nor does it require the registration of an executed pledge agreement before the effectiveness
of the PRC Property Law. The pledge agreement was effective upon execution and, therefore enforceable under the PRC laws.
Although Fujian Jiaoguang is still contractually
obligated to us pursuant to the agreements, it no longer is an operating entity. All the assets and revenue of Fujian Jiaoguang
have been transferred to Fuyu, our wholly owned subsidiary, on July 31, 2011 pursuant to an agreement by and among Fujian Jiaoguang,
Fuyu and Fujian Xinhengji Advertisement Co., Ltd. This transfer of assets has been completed in compliance with PRC laws and was
done so that we no longer had to rely on the contractual arrangements of our variable interest entities. We believe that this is
a more efficient and less risky corporate structure.
Our Products, Services and Customers
Advertisement
FETV
FETV, owned by the Fujian Education TV Station,
is a provincial comprehensive entertainment television channel .
On August 1, 2010, Fuyu, our wholly-owned subsidiary,
entered into a Fujian Education Television Channel Project Management Agreement (the “Management Agreement”), with
Fujian Education Media Limited Company, a wholly state-owned company organized by the Fujian Education TV Station under the laws
of the People’s Republic of China (“Fuijan Education Media”), pursuant to which, Fujian Education Media granted
to us five years of exclusive management rights for the FETV channel from August 1, 2010 to July 31, 2015 (the “Term”),
with the first three years of the Term, from August 1, 2010 to July 31, 2013, as phase I (the “Phase I”) and the remaining
two years of the Term, from August 1, 2013 to July 31, 2015, the phase II (the “Phase II”). At the end of Phase I,
we and Fujian Education Media shall conduct full performance review of our cooperation under the Management Agreement. If we and
Fujian Education mutually agree that there is no event of violation or breach of contract, the Management Agreement shall be extended
to Phase II. Additionally, Fujian Education Media will also review our operations and make an assessment as to whether it would
be profitable for them to continue the arrangement. If they determine that the future operations will not be successful, they can
terminate the Agreement and not move forward with Phase II. During the Phase I Period and Phase II Phase, we shall pay annual payment
of RMB 12,000,000 ($1,893,000 USD) to Fujian Education TV Station for the first year and shall be increased by 20% per year for
each of subsequent years during two phases.
Under the Management Agreement, we obtained
the full rights to provide programming and content management services and to re-sell all advertising airtime of FETV.
Certain
PRC regulations promulgated by the State Administration for Radio, Film and Television which bans certain television and radio
advertisements, has had a negative effect on our advertisement business model and a significant number of clients had discontinued
their agreements with us. As a result of these regulations, our revenues from the advertising business had declined significantly.
Therefore, when the Management Agreement with FETV expired in July 2013, we did not renew the Management Agreement and
discontinued the FETV operations.
Railway Media
In February 2009, our wholly owned
subsidiary, Fuzhou Fuyu Advertising Co., Ltd., entered into a six-year exclusive agreement with China’s Railway Media
Center to create “Journey through China on the Train” infomercial programs, pursuant to which we would produce 20
minute monthly episodes focused on tourist destinations around China and travel ideas and tips with product placement
advertisements. We were obligated to pay an annual fee of approximately $46,154 or RMB 300,000 to Railway Media Center for
the first three years and approximately $53,846 or RMB 350,000 for the second three years. The Company lost all the clients
since the railway program was broadcasted manually by train attendants and was generally not broadcasted. We had no control
over the frequency of program broadcasting. We terminated “Journey through China on the Train” program in March
of 2013.
Tourism
The Great Golden Lake
As discussed above, we sold our
equity interest in Fujian Jintai Tourism to an unrelated party in August 2014. Therefore, we no longer operate the Great
Golden Lake destination.
Yunding Park
On November 27, 2008, Hong Kong Yi Tat International
Limited, our wholly owned subsidiary, entered into the Tourist Destination Cooperative Development Agreement with the Yongtai County
People’s Government in Fuzhou, China which is effective until 2048. Pursuant to the agreement, we obtained the exclusive
right and special authorization to develop the Yunding Park located at Yongtai Beixi and Jiezhukou Lake for forty (40) years from
2008. The Yunding Park is approximately 50 kilometer from Fuzhou, the capital city of Fujian. We are obligated to construct, operate
and manage two tourist destinations, subject to specific terms and conditions negotiated between us and the Yongtai government.
We have the exclusive right to develop both Yongtai Beixi and Jiezhukou Lake and the government is prohibited from granting the
right of development, operation and management to any third party during the existence of our agreement. As of December 31, 2014,
we have invested approximately $83.5 million to build the tourism, transportation and entertainment facilities. In September 2010,
we timely announced the grand opening of our Yunding Park to the public. Fujian Yida was responsible for the development and operations
of Yunding Park. Now we have completed the second phase of Yunding Park. Yunding Resort Management will be responsible for the
management services of Yunding Park. We generate revenue from entrance fees, cable cars, restaurants, lodgings and entertainment
activities.
Hong Kong Yi Tat incorporated Fujian Yida for
handling the business operation and receiving revenues from the ticket sales at Yunding Park. Under the Tourist Destination Cooperative
Development Agreement, Hong Kong Yi Tat is entitled to: (1) the ticket sales revenue, provided, that, we are required to
pay a total of 5 million RMB ($790,000 USD) to the Yongtai County People’s Government over the course of the first 10 years
of the Agreement; (2) the earnings excluding 5% of the actual ticket sales during that time in the second ten years; (3) the earnings
excluding 6% of the actual ticket sales during that time in the third ten years and (4) the earnings excluding 7% of the actual
ticket sales during that time in the fourth ten years. By the end of 2013, we had fulfilled this obligation with total payments
made in the amount of approximately $818,036 (RMB 5.0 million). Hong Kong Yi Tat contributes the revenue to Fujian Yida, however,
there is no agreement between Hong Kong Yi Tat and Fujian Yida regarding payment or entitlement to revenue under the Tourist Destination
Cooperative Agreement or any other agreement.
Yunding Park opened to the public on September
28, 2010. In 2014, we had total gross ticket sales of 20.4 million RMB ($3.32 million USD) as compared to 21.2 million RMB ($3.47
million USD) in 2013. In 2014, we had 308,000 visitors to Yunding Park as compared to 259,000 visitors in 2013. The gross ticket
sales decreased 3.7% despite the increased number of visitors because we had to provide deeper ticket discount among the strong
competition.
Hua’an Tulou Cluster (“Earth Buildings” or the
“Tulou”)
The Tulou Cluster, composed of large multilayer
earth buildings built by ancient wealthy families as their residence, is known for their unique round shape, ingenious
structure and oriental mystery. The Tulou Cluster was recognized as part of Fujian Tulou World Cultural Heritage Site in 2008 by
UNESCO. The Tulou Cluster is a 1.5 hour drive from Xiamen City, one of Fujian’s most famous tourist coastal cities.
In December 2008, Hong Kong Yi Tat International
Limited, our wholly owned subsidiary, entered into a Tourist Resources Development Agreement with Hua’an County Government.
The agreement is effective until 2048. Pursuant to this agreement, we began to develop the Hua’an Tulou tourist destinations
with a right of priority to develop other scenic areas in Hua’an County. Hua’an Tulou Cluster requires a total capital
input of approximately 47,500,000 RMB ($7.5 million USD) to put it into infrastructure and facility constructions. The Hua’an
Tulou Cluster was closed during the construction and re-opened to the public before the fourth quarter of 2009. Currently, approximately
half of its visitors are from overseas, including Taiwan. Our revenue is generated from the sale of entrance ticket fees, fees
from rides on tour cars and food at our restaurants.
Under the contractual arrangements with respect
to Hua’an Tulou Cluster, when the ticket price of the Dadi Tulou Clusters is RMB60 ($9.50 USD) or above per person, the proportion
paid by Hong Kong Yi Tat to Hua’an County government shall be: (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; and (6) 30% of gross ticket sales from the
26th year. Currently, our average ticket price at Hua’an Tulou is 90RMB ($14.50 USD). In the event our ticket price is less
than RMB 60 ($9.50USD), the Hua’an County government shall be entitled to a reduced portion of the gross ticket sales.
Our ticket prices are subject to the approval
of the local PRC government. According to the PRC Pricing Law, the scope and level of the government-set and guided prices shall
properly be adjusted in light of the national economy. The Company may file an application with the government to request a price
change to our ticket prices. However, the government will use its discretion to decide whether or not to adjust the ticket price
and will use their discretion to determine the adequate price for the tickets to our park. Additionally, even if we do not apply
for a price adjustment, the local PRC government may adjust the price based on consumer or business operations or the national
economy.
In 2014, Hua’an Tulou Cluster had 57,000
visitors, an increase of 7%, and gross ticket sales of approximately $400,000 USD, a decrease of 5% as compared to 2013, and we
paid the Hua’an County government $56,896 USD. We are facing strong competition among the homogeneous tourism destinations
such as Nanjing Tulou Cluster and Yongding Tulou Cluster. The gross ticket sales decreased 5% despite the increased number of visitors
because we had to provide deeper ticket discount among the strong consumption and the tourist consumption was also decreased. We
expect this trend to continue in the future.
Ming Dynasty Entertainment World
On April 15, 2010, Yida (Fujian) Tourism Group
Ltd. jointly with Anhui Xingguang Investment Group Ltd., a privately held company engaged in real estate and commercial development
in Anhui province, entered into an Emperor Ming Taizu Cultural and Ecological Resort and Tourist Project Finance Agreement with
Anhui Province Bengbu Municipal Government, pursuant to which we and Anhui Xingguang formed a limited liability company, with a
total registered capital of RMB 100 million (approximately $14.6 million) to engage in construction and development of a new tourism
destination – Ming Dynasty Entertainment World in Bengbu City, Anhui Province.
On June 3, 2013, Fujian Yida entered into a
stock transfer agreement with Anhui Xingguang pursuant to which Fujian Yida transferred its 60% interest in Anhui Yida to
Anhui Xingguang for RMB 60 million, or $9.72 million. Anhui Xingguang also assumed all the assets and liabilities of Anhui Yida.
As such, the Ming Dynasty Entertainment World
operation was discontinued.
Yang-sheng Paradise
The Project is designed to focus on the theme
of famous Taoist practice – Yang-sheng (nourishing life), with Zhangshu City’s rare natural resources – salt
water hot spring, and reputation as one of China’s traditional medicine and herb center. Preliminarily, Yang-sheng Paradise
is planned to include (i) Salt Water Hot Spring SPA & Health Center, (ii) Yang-sheng Holiday Resort, (iii) World Yang-sheng
Cultural Museum, (iii) International Camphor Tree Garden, (iv) Chinese Medicine and Herb Museum, (v) Yang-sheng Sports Club, (vi)
Old Town of Chinese Traditional Medicine, and (vii) various other Yang-sheng related projects and tourism real estate projects.
We formed a limited liability company with a total registered capital of RMB 20 million (approximately $3 million) as of December
31. 2010.
The Project will be developed approximately
two (2) kilometers from Zhangshu’s downtown, and within one hour travel from the adjacent airport or Nanchang, the capital
city of Jiangxi Province. In addition, the Project is on the route from Nanchang to Lu Mountain, a World Natural Heritage Site,
and Jing-Gang Mountain, one of the most popular political education tourism destinations as it was at the origin of Chairman Mao’s
military force.
The capital expenditure planned for the first
development phase of Project is estimated at approximately RMB250 million (approximately $36.6 million), which includes the planned
construction of the Salt Water Hot Spring Spa & Health Center (the “SPA Center”), the Yang-sheng Holiday Resort
(the “Resort Hotel”), in-destination roads and lakes, and the purchase of the land use rights for a parcel of approximately
3,000 Mu (approximately 494 acres, commercial and residential land use, the “Commercial Land”) as well as the rental
payment for a parcel of approximately 3,000 Mu (approximately 494 acres) with the annual rent estimated at RMB0.5 million (approximately
$73,300). The rental of the additional parcel of approximately 3,000 Mu of land would be leased from the local PRC government but
we would not be required to obtain land-use rights because the lease will only be for the management rights of the land based on
a cooperative agreement that would be entered into at the time of the lease. No such arrangement, however, has been entered into.
The SPA Center and the Resort Hotel was open
to the public in October, 2013.
In addition to the SPA Center and the Resort
Hotel, Company plans to build additional attractions on the Project site that may include the World Yang-sheng Cultural Museum,
the International Camphor Tree Garden, the Chinese Medicine & Herb Museum, the Yang-sheng Sports Club, the Old Town of Chinese
Traditional Medicine and other Yang-sheng related projects and tourism real estate projects. The Company is now conducting in-depth
research, evaluation and preparation on these plans.
Zhangshu Municipal Government has agreed not
to approve any additional salt water hot spring or related tourism projects to any third parties to protect the exclusivity of
Project. It will also waive the usage fees of the project tourism resources and thermohaline spring water resources. In addition,
it will waive or reduce most of the administration fees throughout the Project’s constructions. It will also allow China
Yida to pay for its outdoor lighting at a cheaper rate as of city’s street lighting.
There are no other revenue sharing provisions
or other restrictions on the revenue that we will receive from such venue.
In 2014, Yang-sheng Paradise had 94,300 visitors and a gross ticket sales of $1.2 million.
The City of Caves
On June 1, 2010, Yida (Fujian) Tourism Group
Ltd., our wholly-owned subsidiary, entered into an agreement with Jiangxi Province People’s Government of Fenyi County in
Xinyu city, Jiangxi Province, to develop a brand new tourism project to be named “The City of Caves”, based on the
largest and most characteristic karst land underground caverns in China, for a management period of forty (40) years commencing
from 2010.
The Company has completed the
construction of the first phase, mainly composed of Altair Cave and Vega Cave, and plan to start trial operation by the
2nd quarter of 2015. The second phase includes the Hanmao Cave Cluster and the third phase will include the
tourism resources of Dagang Mountain. Investment budget for each of the three phases is RMB100 million ($14.7 million),
with a total budget of RMB300 million ($44.1 million). The City of Caves will attract tourists who are visiting the
several nearby world-class tourism destinations, including Sanqing Mountain, Longhu Mountain, Jinggang Mountain, and Lu
Mountain, all of which are famous and popular attractions in China. In addition, the Project is approximately a one-hour
drive from China Yida's Yang-sheng Paradise, which means the Company can integrate the resources of the two projects and
launch a very cost-effective and powerful integrated marketing campaign. The Project will be designed to provide
comprehensive cultural background and will feature a high level of interaction between natural views and entertainment
experiences, as compared to simple sightseeing of peer caves. We formed a limited liability company and committed RMB 60
million (approximately $9 million) of capital investment. As of December 31, 2014, the Company has paid RMB 131.6
million (approximately $21.5 million) for the construction of The City of Caves.
Fenyi County is located in the mid-west of
Xinyu City, 30 kilometers from downtown Xinyu. Xinyu is believed to have the highest industrialization among all cities of Jianxi
Province, featuring two key industries: (i) steel; and (ii) photovoltaic. Management estimates that a three-hour driving circle
will cover a population of approximately 50 million in 11 cities including the three provincial capital cities of Nanchang, Changsha
and Wuhan. Several rail lines and highways across Xinyu make transportation convenient.
Under the contractual arrangements, Fujian
Yida shall pay to the Fenyi County government the “use fees” of scenic resources. The “use fees” are payable
as follows: during the first five years of operations we will not be required to pay anything to the Fenyi County government, during
the second five years of operations we will be required to pay 5% of gross ticket sales per year to the Fenyi County government
and for all years thereafter we will pay 8% of gross ticket sales per year to the Fenyi County government.
The City of Caves did not have any
visitors in 2014 because this site has not officially opened to the public due to lack of construction funds and unexpected
storm in 2014. We expect to open it to the public for trial by the 2nd quarter of 2015.
Marketing and Distribution Methods of Products
and Services
The current marketing strategy of our tourist
and related operations has two major promotional elements. The first is promoting the unique brand and scenic locations through
traditional advertisement mediums. These traditional channels include television, radio and print media. To reduce costs, the Company
has implemented a cost minimization plan whereby the majority of the media advertisement and promotion of the tourist destination
is done through the media platforms available to the Company, including FETV and Railway Media. This cost minimization plan allows
our tourist and related operations to reduce its cost of advertising while maintaining a relatively high degree of exposure through
our provincial TV channel province-wide and through China’s high-speed railway network.
The second element of the Company's marketing
effort of tourist and related operations is promotion of the scenic destinations through the attainment of nationally and internationally
recognized merits of scenic achievement. To this end, the Great Golden Lake has received the designation of the Global Geo-park
from UNESCO and has become part of China Danxia – the World Natural Heritage Site by UNESCO and ranked in China’s Top
10 Most Appealing Destinations and Top 50 Places for Foreigners to Visit. During the second half of 2008, Dadi Tulou was included
on the World Cultural Heritage List as part of the Fujian Tulou. By achieving this high degree of recognition, the destination
becomes visible on a massive scale increasing the draw of tourists from a provincial to an international level. The goal is to
significantly increase the daily visitation rate through attainment of significant merit.
Each element of the marketing strategy has
been developed in order to increase the international consumer awareness of the Company's tourist destinations, to reduce the associated
costs of such awareness and to ultimately increase the usage rate and revenues of the park.
Because the tourist destination is a static
product/service, its distribution mainly consists of the promotional strategies described in the paragraphs above. The services
are promoted and distributed through traditional forms of advertising media. Information and marketing materials regarding the
park services are distributed on site.
Industry and Competitive Factors
New competitors are entering into the tourism
industry at a record pace. Competition is increasing and it is beginning to become difficult to gain market share and grow. There
are, however, certain factors that we believe will be critical for our growth:
1. maintaining its leading management
position by monitoring and making timely adjustment to tourism market changes; and
2. Experienced management team with more than
70 years of combined experience in China media, tourism and entertainment industry.
Our main competitor in the tourism business
is Wuyi Mountain and Yongding Tulou Cluster Tourism Destination. Muyi Mountain is a state owned enterprise located in Fujian province
and has been operating since 1980. It was added to the World Heritage List by UNESCO in 1999. Yongding Tulou Cluster is also located
in Fujian Province. It was established in September 2007 and is managed by Fujian Province Tourism Development Co., Ltd. Yongding
Tulou Cluster is a Yongding county government owned large-scale state-owned enterprises. It was added to the World Heritage List
in July 2008.
Our Intellectual Property
We have obtained a trademark and the exclusive
use permission for the “Great Golden Lake.” This trademark has been filed with Taining County State-owned Assets Investment
Operation Co., Ltd. We do not own nor do we intend to own any patents or have any of our products or services patented. In the
future, we intend to acquire other trademarks from companies that we acquire or file trademarks or patents in order to protect
our intellectual property.
Compliance with Environmental Law
We comply with the Environmental Protection
Law of PRC as well as applicable local regulations. In addition to statutory and regulatory compliance, we actively ensure the
environmental sustainability of our operations. Penalties would be levied upon us if we fail to adhere to and maintain certain
standards. Such failure has not occurred in the past, and we generally do not anticipate that it will occur in the future, but
no assurance can be given in this regard.
In accordance with the Environmental Protection
Law of the PRC adopted by the Standing Committee of the NPC on December 26, 1989, the bureau of environmental protection of the
State Council set the national guidelines for discharging pollutants. The provincial and municipal governments of each province,
autonomous region and municipalities may also set their own guidelines for the discharge of pollutants within their own province
or district. Enterprises producing environmental contamination and other public hazards must incorporate the relevant environmental
protection standards into their planning and establish environmental protections. These companies must also adopt effective measures
to prevent environmental contamination and hazardous emissions, such as waste gas, waste water, deposits, dusts, pungent gases
and radioactive matters, as well as noise, vibration and magnetic radiation. Companies discharging contaminated wastes in excess
of the discharge standards prescribed by the environmental protection authority must pay non-standard discharge fees in accordance
with national regulations and be responsible for the applicable remediation. Government authorities may impose different penalties
against persons or companies in violation of the environmental protection laws and regulations depending on individual circumstances.
Such penalties may include warnings, fines, imposition of deadlines for remediation, orders to cease certain operations, orders
to reinstall contamination prevention and remediation facilities that have been removed or left unused, imposition of administrative
actions against the responsible persons or orders to close down the company. Where the violation is egregious and deemed serious,
the responsible parties may be required to pay damages and may be subject to criminal liability.
Additionally, on November 29, 1998, the State
Council of the PRC promulgated the Regulations on the Administration of Construction Project Environmental Protection, or the Construction
Project Environmental Protection Regulations, which require construction projects that generate pollution to comply with both state
and local standards for the discharge of pollutant; requirements for aggregate control of discharge of major pollutants must also
be met in areas under aggregate control of discharge of major pollutants.
We have always complied with all applicable
laws, rules and regulations and have never faced any penalties or citations for violating any of the above laws, rules or regulations.
Regulations
The principal regulations governing our tourism
businesses tourism include:
● |
The
PRC Pricing Law |
● |
The
State Council’s Regulations on Scenic Spots |
● |
The
National Development and Reform Commission’s Circular on Further Standardizing the Administration over the Price of
Entrance Tickets to Sightseeing Spots (2005) and the Notice on Further Improving Administration of Scenic Spots’ Admission
Price (2007) |
● |
The
Notice on Regulating the Ticket Price of Scenic Spots (2008); and |
● |
The
State Council’s Opinions on Accelerating the Development of Tourism Industry (2009) |
PRC Pricing Law
The PRC Pricing Law was adopted by the Standing
Committee of National People's Congress on December 29, 1997 and effective on May 1, 1998. PRC Pricing Law governs all pricing
acts within the territory of the People's Republic of China, including the pricing for commodities and services. According to the
Pricing Law, the government gradually adjusts the market-oriented price mechanism under macroeconomic regulation and control. The
pricing shall be determined by the Law of Value. The prices of most commodities and services shall be the market-oriented and prices
of an extremely small number of commodities and services shall be the government-guided or the government-set. According to the
PRC Pricing Laws, if necessary, the government may enforce government-guided prices or government-set prices for the certain commodities
and services, such as: (1) an extremely small number of commodities vital for the development of the national economy and people's
life; (2) a small number of commodities the resources of which are rare or short; (3) commodities under natural monopoly management;
(4) essential public utilities; and (5) essential non-profit services. PRC center and local governments publish and amend their
guidelines for commodities or services with government-guided or government-set price, frequently. The price of Advertising currently
is not included in governmental guideline for commodities or services effective on August 1, 2001. Certain tickets for scenic spots,
however, are subject to government-guided or government-set prices.
The price of the tickets for our scenic spots
is approved by the Office of Price Administration. We believe that we are in all material respects in compliance with all PRC Pricing
Laws.
State’s Council’s Regulations
on Scenic Spots
Regulation on Scenic Spots and Historic Sites,
issued by State Council in September 19, 2006 and effective on December 1, 2006, governs the establishment, planning, protection,
utilization and management of Scenic Spots and Historic Sites. For example, the landscape and natural environment within Scenic
Spots and Historic Sites shall be protected strictly according to the principle of sustainable development and shall not be destroyed
or changed at will. The residents and visitors of Scenic Spots and Historic Sites shall protect scenic spots, water, planting,
wild animal and all other facilities. The management institution of Scenic Spots and Historic Site shall investigate, evaluate
and take necessary measures to protect the significant scenic spots.
PRC Regulations on Ticket Sales and Ticket
Prices
On April 29, 2005, the National Development
and Reform Commission issued a Circular on Further Standardizing the Administration over the Price of Entrance Tickets to Sightseeing
Spots (“Circular No. 712”). Circular No. 712 emphasized a number of issues regarding ticket pricing. For example, the
government shall review the entrance ticket price subject to government-guided or the government-set prices and prevent the rapid
increasing regarding the price of entrance ticket; the pricing for certain tickets shall be subject to hearing procedure; the representative
who attends the hearing shall be wide and typical enough.
The Notice on Further Improving Administration
of Scenic Spots’ Admission Price was issued by National Development and Reform Commission on January 29, 2007 (Notice No.
227). According to Notice No. 227, the pricing of entrance ticket shall reflect public interests. The planning for adjustment of
ticket shall make public 2 months prior to adjustment. The frequency for adjustment of the same ticket shall not be less than 3
years. For the scenic spots subject to government-guided or the government-set prices, certain discount or preferential policy
shall be provided to the elders, soldiers in active service, juveniles and students.
The Notice on Regulating the Ticket Price of
Scenic Spots, issued on April 9, 2008 by National Development and Reform Commission, Ministry of Finance and other six government
authorities jointly, mainly focus on ticket pricing and administration for pricing. For example, the government-guided or the government-set
prices are applicable to scenic spots built in reliance on national natural or cultural resources. For those scenic spots artificially
built by commercial investment without relying on national natural or cultural resources, market-oriented price is applicable.
The adjustment of ticket price subject to government-guided or the government-set prices is required to complete hearing procedure,
extensive discussion and improve the transparency of decision making. The ticket price, the scope and extent of preferential policies
of tickets, transportation price for trolley, sight-seeing buses, boats and hot-line shall be prominently displayed.
Opinions on Accelerating the Development of
Tourism Industry was issued by PRC State Council in December 2009 (“Opinion”) for the purpose of taking advantage of
functions of tourism industry in sustaining economic development, enlarging domestic demand and altering the economic structural.
Opinion stipulated general principle, goal for development, reform tourism industry in depth, improvement of consumer service,
civilization on tourism, infrastructural of tourism industry and so on.
The Company also has to comply with certain
local regulations in respect of scenic spots, such as Fujian Province Administration Measures for Natural Reserve issued on June
20, 2000, pursuant to which the revocation of natural reserve, and the adjustment or change of nature, scope and boundary of natural
reserve shall be approved by local government which establishes such natural reserve; Fujian Forest Regulation issued in 2001 by
local congress indicates that any unit or person who uses the forest land shall make use of the forest land according to planning
for protection of forest. Timber cutting without licensing shall be banned.
The price of the tickets for our Scenic Spots
is approved by The Office of Price Administration. The Company conducts its business in compliance in all material respects with
all applicable laws regarding scenic spots in material respects.
Regulations Applicable to Foreign Invested
Enterprises and Wholly Foreign Owned Enterprises
Foreign invested enterprises include sino-foreign
joint venture and the wholly foreign owned enterprise. The Company currently does not have any sino-foreign joint venture subsidiaries.
The Company’s indirect subsidiaries owned by Hong Kong Yi Tat shall be subject to Foreign-Owned Enterprise Law of the People's
Republic China and its implemental rules. According to Foreign-Owned Enterprise Law, the establishment of wholly foreign-owned
enterprises shall be examined and approved by the State Council department in charge of foreign economic relations and trade or
an organization authorized by the State Council, which usually refer to Ministry of Commerce and its local counterpart. In addition,
the foreign investors shall file application with Administration for Industry and Commerce within 30 days for the procurement of
business license. All indirect subsidiaries of the Company owned by Hong Kong Yi Tat, such as Yida (Fujian), Yida Tulou, Jintai
Tourism were incorporated with the approval of local counterpart of Ministry of Commerce and has obtained business license under
the PRC laws.
Employees
As of March 2015, we have a total of
656 full-time employees, including 22 executive officers and senior management.
ITEM 1A. RISK FACTORS.
Because of the following factors, as well
as other factors affecting the Company’s financial condition and operating results, past financial performance should not
be considered to be a reliable indicator of future performance, and investors should not use historical trends to anticipate results
or trends in future periods.
Risks Relating to Our Business
The substantial and continuing net
losses, and significant on-going working capital deficit incurred in the past few years, may require us to change our
business plan or even may cause us not to be able to continue our operations if sufficient funding and/or additional cash
from revenues is not realized. These matters raised substantial doubt about the Company’s ability to continue as a going concern.
We have incurred net losses
of $29,281,114 and $16,354,397 for the years ended December 31, 2014 and 2013, respectively. As of December 31, 2014 and
2013, our working capital deficits were $35.89 million and $43.04 million, respectively. Our independent auditors
have indicated in its audit report for fiscal year 2014 that these matters raised substantial doubt about our ability to
continue as a going concern.
We have incurred significant negative cash
flows from operative activities, and continuing net losses and working capital deficits that allow us to continue as a going concern.
Our ability to continue as a going concern is dependent on us obtaining adequate capital resources to fund operating losses until
we become profitable. Management’s plans to obtain additional capital resources 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) when needed. However, management cannot provide any assurance that we will be successful
in accomplishing any of its plans. If we are unable to secure additional capital, as circumstances require, or do not succeed in
meeting our profit objectives we may be required to change or cease our operations.
We may not be able to execute our business
plan for the tourism operations.
In 2013, we discontinued the advertisement
operations as we lost a significant number of our clients due to changes in certain PRC regulations. We may make changes to our
tourism business in case of competition and regulatory environment changes. We may not be able to adjust our business strategy
in response to fluctuation in microeconomic condition and regulatory environment which may lead to deviation or abandonment of
our business plan.
In order to increase our revenues, we
believe we must further expand our business operations. We cannot assure you that our internal growth strategy will be successful
which may result in a negative impact on our growth, financial condition, results of operations and cash flow.
In order to maximize the potential growth in
our current and potential markets, we believe that we must further expand the scope of our services in the tourism industry. One
of our strategies is to grow internally through increasing the customers and locations where we promote tourism by penetrating
existing markets in the PRC and entering new geographic markets in PRC as well as other parts of Asia and globally. However, many
obstacles to this expansion exist, including, but not limited to, increased competition from similar businesses, international
trade and tariff barriers, unexpected costs, costs associated with marketing efforts abroad and maintaining attractive foreign
exchange ratios. We cannot, therefore, assure you that we will be able to successfully overcome such obstacles and establish our
services in any additional markets. Our inability to implement this internal growth strategy successfully may have a negative impact
on our growth, future financial condition, results of operations or cash flows.
In addition to our internal growth strategy,
we may grow through strategic acquisitions. We cannot assure you that our acquisition growth strategy will be successful resulting
in our failure to meet growth and revenue expectations.
We also intend to pursue opportunities to acquire
businesses in the PRC that are complementary or related in product lines and business structure to us. However, we may not be able
to locate suitable acquisition candidates at prices that we consider appropriate or to finance acquisitions on terms that are satisfactory
to us. If we do identify an appropriate acquisition candidate, we may not be able to negotiate successfully the terms of an acquisition,
or, if the acquisition occurs, integrate the acquired business into our existing business. Acquisitions of businesses or other
material operations may require debt financing or additional equity financing, resulting in leverage or dilution of ownership.
We may not be able to secure such financing if we want to expand into other propects. Integration of acquired business operations
could disrupt our business by diverting management away from day-to-day operations. The difficulties of integration may be increased
by the necessity of coordinating geographically dispersed organizations, integrating personnel with disparate business backgrounds
and combining different corporate cultures.
We also may not be able to maintain key employees
or customers of an acquired business or realize cost efficiencies or synergies or other benefits we anticipated when selecting
our acquisition candidates. In addition, we may need to record write-downs from future impairments of intangible assets, which
could reduce our future reported earnings. At times, acquisition candidates may have liabilities or adverse operating issues that
we fail to discover through due diligence prior to the acquisition. In addition to the above, acquisitions in PRC, including state
owned businesses, will be required to comply with laws of the PRC, to the extent applicable. There can be no assurance that any
given proposed acquisition will be able to comply with PRC requirements, rules and/or regulations, or that we will successfully
obtain governmental approvals which are necessary to consummate such acquisitions, to the extent required. If our acquisition strategy
is unsuccessful, we will not grow our operations and revenues at the rate that we anticipate.
In the event of rapid growth of our business
operations, we may experience a significant strain on our management and operational infrastructure. Our failure to manage growth
will cause a disruption of our operations resulting in the failure to generate revenue.
If we expand our business through successful
implementation of our internal growth strategy and/or acquisition strategy, our management and our operational, accounting, and
information infrastructure may experience a significant strain caused by such expansion. In order to deal with the strain our anticipated
business expansion could put on our resources, we will need to continue to improve our financial controls, operating procedures,
and management information systems. We will also need to effectively train, motivate, and manage our employees. Our failure to
manage our growth could disrupt our operations and ultimately prevent us from generating the revenues we expect.
If we are not able to implement our strategies
or expand our tourism operations and acquire additional tourist attractions, our business operations and financial performance
may be adversely affected.
We expanded our business in 2010 by acquiring
the operation rights of additional tourist attractions under various agreements, including the City of Caves, Yang-sheng Paradise,
Ming Dynasty Entertainment World and FETV. Since 2008, we have entered various agreements for Yongtai Beixi and Jiezhukou Lake,
Hua’an Tulou, and Yang-sheng Paradise. Our continuous business development plan is based on a further expansion of our
tourism operation and acquisition of additional tourist attractions. There is inherent risks and uncertainties involved throughout
these stages of development. There is no assurance that we will be successful in continuously expanding our media operations or
acquiring additional tourist attractions, or that our strategies, even if implemented, will lead to the successful achievement
of our objectives. If we are not able to successfully implement these further development strategies, our business operations and
financial performance may be adversely affected.
Tourism is
a competitive business which could adversely affect our financial performance.
We operate in a competitive environment and
have to compete with other tourist destinations in order to attract visitors. In order to be successful
in attracting visitors or customers we may be forced to lower prices or spend more money on advertising to continue to compete
with our competitors. These competitive measures may result in lower net income.
Economic crisis or turmoil, or suppression on individual rights
may cause a downturn in china’s tourism industry.
A downturn in the world economic markets, or
just the Chinese economy, may have a negative impact on our business. Consumers with a lack of disposable incomes may decide not
to vacation or travel to our tourism destinations, which would negatively impact our business. Additionally, the perceived suppression
of individual rights by the Chinese government may deter tourists from visiting China, which may cause a decline in visitors to
our attraction.
Our business may be directly and indirectly
affected by unfavorable weather conditions or natural disasters that reduce the visits of our resorts and destinations
Poor or unusual weather conditions, can significantly
affect the visits of the tourists to our resorts and destinations. Insufficient levels of rain or drought can cause significant
affect to our tourist destination. Temperatures outside normal ranges can also reduce tourists’ volume. Natural calamities
such as regional floods, hurricanes, earthquakes, tsunamis, or other storms, and droughts can have significant negative effects
on our tourism business. In the second half of 2010, we had to close part of our tourist destination in Great Golden Lake due to
flooding, as a result we had reduced revenue.
The slow recovery of the global economic
crisis could affect the overall availability and cost of external financing for our operations.
The slow recovery of the global financial markets
from the global economic crisis and turmoil may adversely impact our business, the business and financial condition of our customers
and the business of potential investors from whom we expect to generate our potential sources of capital financing. Presently it
is unclear to what extent the economic stimulus measures and other actions taken or contemplated by the Chinese governments and
other governments throughout the world will mitigate the effects of the negative impact caused by the economic turmoil on our industry
and other industries that affect our business. Although these conditions have not presently impaired our ability to access credit
markets and finance our operations, the impact of the current crisis on our ability to obtain capital financing in the future,
and the cost and terms of same, is unclear.
We have not yet contracted with local
governments and may be unable to continue our land use rights from the government for our tourism development as we currently do
which could negatively impact our ability to continue to operate our tourist destinations
Our business and our revenue depend on the
operation of our tourist destinations, which in turn depends on our ability to acquire and continue to use land the land from the
PRC government whether by lease or by land use right. We have obtained certain land use rights for Yunding Park, Yang-sheng Paradise,
Ming Dynasty Entertainment World, and City of Caves. We currently have operated 3 tourist destinations: (i) Great Golden Lake,
(ii) Yunding Park, and (iii) Hua’an Tulou. For the 3 operating tourist destinations, with the exception of the Yunding Park,
we have not yet entered into contracts with local governments for the land-use rights for Great Golden Lake and Hua’an Tulou.
With respect to the Yunding Park, our land use rights include 130,513 square meters for scenic views, hotels and restaurant and
entertainment. The term is for 40 years beginning on August 9, 2010 and ending on August 9, 2050 for a total payment of 12,805,000RMB
(or approximately $2,033,000). A copy of the State-Owned Land Use Rights Agreement is attached hereto as Exhibit 10.26. With respect
to the Great Golden Lake and Tulou, we have obtained the management and operating rights on the land, although we have not obtained
the land-use rights. It is not required to obtain the land-use rights in order to operate on the land. The Company’s 3 new
projects, Ming Dynasty Entertainment World, Yang-sheng Paradise and City of Caves are currently under construction. We have already
obtained certain land use rights for these 3 new projects, and the Company will continue to obtain additional land-use rights under
the agreements entered into with local governments for all of our properties.
Pursuant to PRC laws, the assignment of land-use
rights is the responsibility of local government. The size, location, purpose of usage, term and other conditions under assignment
of land use right shall be planned by local land administration departments in conjunction with a number of governmental administrative
departments such as urban planning, construction and the housing administration. In addition, such plan shall be submitted to the
proper authorities for approval according to authorizations granted and stipulated by PRC State Council. After that, the local
land administration departments may implement the arrangements for the assignment of land use right. If, however, at any time the
local governments seek to terminate our land-use rights, we may be unable to operate our tourist destinations and will be forced
to close down our attractions.
The maximum term of land use right usually
is decided by its purpose of usage, e.g. 70 years term of land for residence, 50 years term of land for industrial use, 40 years
term of land for commerce, tourism and recreation, 50 years term of land for comprehensive purpose. Such term commonly will be
decided by the government.
The process for obtaining the land-use right
is lengthy and we have not completed it for any of the locations that we operate except for the land use rights that we obtained
from Yongtai County Municipal Bureau of Land and Resources. Our agreements with the local PRC governments who have not yet granted
us land-use rights does not set forth all details for assignment of land use right and most of the lands are subject to governmental
internal procedure.
Although we believe that the local PRC government
will not terminate our right to manage the land before we are able to obtain land-use agreements with each property, we cannot
assure you that the local government will continue to honor the understandings that we have with each local PRC government. We
are not able to own land in the PRC, we can only lease it from the PRC government. At the end of any land-use rights agreements
with local PRC governments, the land will return to the government and we will not receive any reimbursement or reward.
If we are unsuccessful in obtaining land-use
rights for each property, it is possible that the local PRC government may require us to leave the property and we would lose all
rights to the construction, buildings and improvements we have made on the land. However, not having land-use rights does not prohibit
us from operating our tourism destinations at those locations. We can still obtain the right to manage and operate on the land.
We may not be able to continually manage
and operate our tourism development and the termination of revenue sharing agreements will negatively impact our financial conditions
and revenues.
If the land use agreements are terminated,
then we will have to cease our tourism business if we cannot renew the agreements. According to tourism development and revenue
sharing agreement in respect to Great Golden Lake Resort, the agreement may be terminated before its expiration in case that (i)
the purpose of contract is failed due to the material breach of defaulting party or (ii) the occurrence of force majeure. When
any above events for termination occurs, the contractual parties shall terminate agreement through friendly negotiation or by initiating
a legal proceeding. The termination of revenue sharing agreements will negatively impact our revenues and results of operations.
We rely on ticket sales to pay off the loans on the property.
We depend on our key management personnel and the loss of
their services could adversely affect our business.
We place substantial reliance upon the efforts
and abilities of our executive officers, Mr. Minhua Chen, our Chairman and Chief Executive Officer and Ms. Yanling Fan, our Vice
President of Operations. The loss of the services of any of our executive officers could have a material adverse effect on our
business, operations, revenues or prospects. We do not maintain key man life insurance on the lives of these individuals. We may
not be able to attract or retain qualified management on acceptable terms in the future due to the intense competition for qualified
personnel in our industry and as a result, our business could be adversely affected.
We require various licenses to operate
our business, and the loss of or failure to renew any or all of these licenses could require us to suspend some or all of our operations.
Also, the loss or misappropriation of the corporate chops, seals, or other controlling non-tangible assets of our PRC subsidiaries
might delay or disrupt our business and adversely affect our revenues.
In accordance with PRC laws and regulations,
we are required to maintain various licenses in order to operate our business. The loss, suspension, or failure to renew our business
licenses could require us to temporarily or permanently suspend some or all of our operations. We also keep the business licenses,
corporate seal s, chops or other controlling nontangible assets under the Company’s Administration Department. Our staff
in the Administration Department are responsible to do the document recording and for the use of the corporate seals. The corporate
seals and licenses can only be used based on management’s written approval. If we lose the business license, corporate seal
and other related documents, the Company may have to file with local government for re-issuance of such documents which could delay
or disrupt our operations and adversely affect our revenues and profitability.
We may never pay any dividends to shareholders
and we are a holding company that is dependent on receiving dividends or other distributions from our operating subsidiaries and
variable interest entities, of which the operating subsidiaries are located in the PRC.
We have never paid any dividends. Our board
of directors does not intend to distribute dividends in the near future. The declaration, payment and amount of any future dividends
will be made at the discretion of the board of directors, and will depend upon, among other things, the results of our operations,
cash flows and financial condition, operating and capital requirements, and other factors as the board of directors considers relevant.
There is no assurance that future dividends will be paid, and, if dividends are paid, there is no assurance with respect to the
amount of any such dividend.
We are a holding company and our operating
subsidiaries and variable interest entity are entirely located and operate in the People’s Republic of China. There are significant
restrictions on dividends and distributions from companies located and operating in the People’s Republic of China. Foreign
exchange is regulated as well. The government needs to approve any dividends, payments or distributions to any offshore entity
or company not located in the People’s Republic of China. In the last two fiscal years, we have not received any dividends,
payments or distributions from any subsidiary or VIE located or operating in the People’s Republic of China.
We do not carry any business interruption insurance, product
liability or recall insurance or third-party liability insurance.
Operation of our business and facilities involves
many risks, including natural disasters, labor disturbances, business interruptions, property damage, personal injury and death.
We do not carry any business interruption insurance or third-party liability insurance for our business to cover claims in respect
of personal injury or property or environmental damage arising from accidents on our property or relating to our operations. Therefore,
we may not have insurance coverage sufficient to cover all risks associated with our business. As a result, we may be required
to pay for financial and other losses, damages and liabilities, including those caused by natural disasters and other events beyond
our control, out of our own funds, which could have a material adverse effect on our business, financial condition and results
of operations.
Management exercises significant control
over matters requiring shareholder approval which may result in the delay or prevention of a change in our control.
Mr. Minhua Chen, our Chairman and Chief Executive
Officer, through his common stock ownership, currently has voting power equal to approximately 28.81% of our voting securities.
Ms. Yanling Fan, our Vice President of Operations and the spouse of Mr. Minhua Chen, through her common stock ownership, currently
has voting power equal to approximately 28.70% of our voting securities. Mr. Minhua Chen and Ms. Yanling Fan are married and have
combined voting power in our Company equal to approximately 57.51% of our voting securities. As a result, management through such
stock ownership exercises significant control over all matters requiring shareholder approval, including the election of directors
and approval of significant corporate transactions. This concentration of ownership in management may also have the effect of delaying
or preventing a change in control of us that may be otherwise viewed as beneficial by shareholders other than management.
We may incur significant costs to ensure compliance with United
States corporate governance and accounting requirements.
We may incur significant costs associated with
our public company reporting requirements, costs associated with newly applicable corporate governance requirements, including
requirements under the Sarbanes-Oxley Act of 2002 and other rules implemented by the Securities and Exchange Commission. We expect
all of these applicable rules and regulations to significantly increase our legal and financial compliance costs and to make some
activities more time consuming and costly. We also expect that these applicable rules and regulations may make it more difficult
and more expensive for us to obtain director and officer liability insurance and we may be required to accept reduced policy limits
and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult
for us to attract and retain qualified individuals to serve on our board of directors or as executive officers. We are currently
evaluating and monitoring developments with respect to these newly applicable rules, and we cannot predict or estimate the amount
of additional costs we may incur or the timing of such costs. Even though we have been a reporting company since 1999, this risk
applies to us because we completed a share exchange with Keenway Limited in 2007 whereby a Chinese operating company became our
wholly owned subsidiary. This Chinese operating company is newly reporting and we are adjusting to the increased disclosure requirements
for us to comply with corporate governance and accounting requirements.
In our experience, we expect to incur approximately
$157,000 per year in additional costs to ensure compliance with all corporate governance and accounting requirements. These costs
consist of: (i) internal control and U.S. GAAP reporting consulting services: $97,000 and (ii) Legal fees: $60,000.
If we fail to maintain an effective system
of internal control over financial reporting, our ability to accurately and timely report our financial results or prevent fraud
may be adversely affected and investor confidence and the market price of our common shares may be adversely impacted.
As directed by Section 404 of the Sarbanes-Oxley
Act of 2002, or SOX 404, the Securities and Exchange Commission adopted rules requiring public companies to include a report of
management on the company’s internal controls over financial reporting in their annual reports, including Form 10-K. Our
management may conclude that our internal controls over our financial reporting are not effective. If our management concludes
that our internal controls over financial reporting are not effective, it might result in an adverse reaction in the financial
marketplace due to a loss of investor confidence in the reliability of such financial statements.
On May 20, 2010, BDO Li Xin Da Hua was appointed
as our independent auditors but never completed any interim review of our financial statements or issued any audit report on our
financial statement disclosure, or auditing scope or procedure and subsequently resigned on August 8, 2010. The reason for BDO
Li Xin Da Hua’s resignation was that they identified that the Company lacked a good system of internal controls, such as
inadequate documentation for certain transactions and lack of competent and well trained personnel to furnish U.S. GAAP based reporting
documents to be filed.
We took a series of remediation measures plan
to to cure the lacks of internal controls: Although we have rectified the lack of internal controls issue and hired external consultant
as a measure to improve our internal controls and strengthen our financial reporting, it is possible that our current auditor may
conclude that our controls over financial reporting are not effective which could result in an adverse reaction in the financial
marketplace due to a loss of investor confidence in the reliability of such financial statements.
Material weaknesses in our internal controls
and financial reporting and our lack of a chief financial officer with sufficient U.S. GAAP experience may limit our ability to
prevent or detect financial misstatements or omissions. As a result, our financial reports may not be in compliance with U.S. GAAP.
Any material weakness, misstatement or omission in our financial statements will negatively affect the market and the price of
our stock which could result in significant loss to our investors.
None of the members of our current management
has experience managing and operating a public company, and they rely in many instances on the professional experience and advice
of third parties. While we are obligated to hire a qualified chief financial officer to enable us to satisfy our reporting obligations
as a U.S. public company, we do not have a chief financial officer with any significant U.S. GAAP experience presently.
Although we are actively seeking such a chief financial officer, qualified individuals are often difficult to find, or the individual
may not have all of the qualifications that we require. Therefore, we may, in turn, experience “weakness” and potential
problems in implementing and maintaining adequate internal controls as required under Section 404 of the “Sarbanes-Oxley”
Act of 2002. This “weakness” also includes a deficiency, or combination of deficiencies, in internal controls over
financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial
statements will not be prevented or detected on a timely basis. If we fail to achieve and maintain the adequacy of our internal
controls, as such requirements are modified, supplemented or amended from time to time, we may not be able to ensure that we can
conclude on an ongoing basis that we have effective internal controls over financial reporting in accordance with Section 404 of
the Sarbanes-Oxley Act of 2002. Moreover, effective internal controls, particularly those related to revenue recognition, are necessary
for us to produce reliable financial reports and are important to help prevent financial fraud. If we cannot provide reliable financial
reports or prevent fraud, our business and operating results could be harmed, investors could lose confidence in our reported financial
information, and the trading price of our common stock, if a market ever develops, could drop significantly.
Pursuant to Section 404 of the Sarbanes-Oxley
Act, we are required to include in our annual reports our assessment of the effectiveness of our internal control over financial
reporting as of the end of our fiscal years. We have determined that our internal controls and procedures are not effective due
to the lack of U.S. GAAP experience from our management.
We may have difficulty raising necessary
capital to fund operations as a result of market price volatility for our shares of common stock.
In recent years, the securities markets in
the United States have experienced a high level of price and volume volatility, and the market price of securities of many companies
have experienced wide fluctuations that have not necessarily been related to the operations, performances, underlying asset values
or prospects of such companies. For these reasons, our shares of common stock can also be expected to be subject to volatility
resulting from purely market forces over which we will have no control. If our business development plans are successful, we may
require additional financing to continue to develop and exploit existing and new products and services related to our industries
and to expand into new markets. The exploitation of our services may, therefore, be dependent upon our ability to obtain financing
through debt and equity or other means.
We have a contractual relationship with
Fujian Jiaoguang which may be in non-compliance with PRC laws and does not provide the same operational control as a direct equity
interest.
Our contractual relationship with Fujian Jiaoguang
was structured as a contractual relationship as opposed to a direct equity interest in order to comply with PRC law. We have received
a PRC legal counsel attesting that this structure is in compliance with the PRC law. However, the PRC law may be subject to change
or the government may review the structure and determine that this contractual relationship is not in compliance with PRC laws
and force the termination of this relationship. Additionally, the contractual relationship between us and Fujian Jiaoguang does
not provide us with the same operational control as a direct equity interest. Therefore, we are subject to the risks associated
with contractual rights as opposed to owning the company. Such risks could include breach of contract or failure to honor the terms
of the contract. In the event that we are not unable to maintain effective control of this entity, we would not be able to continue
to consolidate our financial results. However, these risks are mitigated by the fact that the shareholders of Fujian Jiaoguang
are Chairman Minhua Chen and Ms. Yanling Fan who are also our majority shareholders.
Fujian Jiaoguang has transferred all its operations
to our wholly-owned subsidiaries and no longer contributes any revenue to us. All the revenue we have realized from this entity
is not realized directly from our wholly-owned subsidiary. Although Fujian Jiaoguang is no longer generating revenues, it continues
to incur expenses to maintain its business status as a corporate entity. Fujiang Jiaoguang has current assets and liabilities because
it is acting as an intercompany to transfer funds from and to the Company’s directly-owned subsidiaries, which resulted in
part of the intercompany receivables and payables. Fujian Jiaoguang is a variable interest entity subject to consolidation into
the Company and fully controlled by the Company’s management. Therefore, expenses incurred at Fujian Jiaoguang had been included
in the Company’s audited consolidated statement of income and comprehensive income. As a result of Fujian Jiaoguang being
a variable interest entity instead of a directly owned subsidiary, you may face increased risks associated with the possession,
security and control over the chops for this entity and control over the individuals who may have access to its bank accounts.
Risks Relating to the People's Republic
of China
Substantially all of our operating assets
are located in China and substantially all of our revenue will be derived from our operations in china so our business, results
of operations and prospects are subject to the economic, political and legal policies, developments and conditions in china.
The PRC’s economic, political and social
conditions, as well as government policies, could impair our business. The PRC economy differs from the economies of most developed
countries in many respects. China’s GDP has grown consistently since 1978 (National Bureau of Statistics of China). However,
we cannot assure you that such growth will be sustained in the future. If, in the future, China’s economy experiences a downturn
or grows at a slower rate than expected, there may be less demand for spending in certain industries. A decrease in demand for
spending in certain industries could impair our ability to remain profitable. The PRC’s economic growth has been uneven,
both geographically and among various sectors of the economy. The PRC government has implemented various measures to encourage
economic growth and guide the allocation of resources. Some of these measures benefit the overall PRC economy, but may have a negative
effect on us. For example, our financial condition and results of operations may be hindered by PRC government control over capital
investments or changes in tax regulations.
The PRC economy has been transitioning from
a planned economy to a more market-oriented economy. Although in recent years the PRC government has implemented measures emphasizing
the use of market forces for economic reform, the reduction of state ownership of productive assets and the establishment of sound
corporate governance in business enterprises, a substantial portion of productive assets in China is still owned by the PRC government.
In addition, the PRC government continues to play a significant role in regulating industry development by imposing industrial
policies. It also exercises significant control over PRC economic growth through the allocation of resources, controlling payment
of foreign currency-denominated obligations, setting monetary policy and providing preferential treatment to particular industries
or companies.
There
are significant uncertainties under the Draft Foreign
Investment Law relating
to the status of businesses in China controlled by foreign invested enterprises primarily through contractual arrangements, such
as our business.
On
January 19, 2015, MOFCOM published a draft of the PRC Law on Foreign Investment (Draft for Comment), or the Draft
Foreign Investment Law,
which is open for public comments until February 17, 2015. At the same time, MOFCOM published an
accompanying explanatory note of the Draft Foreign
Investment Law, or the
Explanatory Note, which contains important information about the Draft Foreign
Investment Law, including
its drafting philosophy and principles, main content, plans to transition to the new legal regime and treatment of business in
China controlled by foreign invested enterprises, or FIEs, primarily through contractual arrangements. The Draft FIL utilizes the
concept of “actual control” for determining whether an entity is considered to be a foreign-invested enterprise, and
defines “control” broadly to include, among other things, voting or board control through contractual arrangements.
The
Draft Foreign Investment
Law proposes significant changes to the PRC foreign investment legal regime and may have a material
impact on Chinese companies listed or to be listed overseas. The proposed Draft Foreign
Investment Law is to regulate
FIEs the same way as PRC domestic entities, except for those FIEs that operate in industries deemed to be either “restricted”
or “prohibited” in a “Negative List.” Because the Negative List has yet to be published, it is unclear
whether it will differ from the current list of industries subject to restrictions or prohibitions on foreign investment. The
Draft Foreign Investment
Law also provides that only FIEs operating in industries on
the Negative List will require entry clearance and other approvals that are not required of PRC domestic entities. As a result
of the entry clearance and approvals, certain FIE’s operating in industries on the Negative List may not be able to continue
to conduct their operations through contractual arrangements. It states that entities established in China but controlled by foreign
investors will be treated as foreign-invested enterprises, while entities set up outside of China which are controlled by PRC persons
or entities, would be treated as domestic enterprises after completion of market entry procedures.
There
is substantial uncertainty regarding the Draft Foreign
Investment Law, including,
among others, what the actual content of the law will be as well as the adoption and effective date of the final form of the law.
While such uncertainty exists, we cannot assure you that the new foreign investment law, when it is adopted and becomes effective,
will not have a material and adverse effect on our ability to conduct our business through our contractual arrangements.
If the ministry of finance and commerce,
or MOFCOM, China Securities Regulatory Commission, or CSRC, or another PRC regulatory agency, determines that MOFCOM and CSRC approval
of our merger was required or if other regulatory obligations are imposed upon us, we may incur sanctions, penalties or additional
costs which would damage our business.
On August 8, 2006, six PRC regulatory agencies,
including the MOFCOM and the CSRC, promulgated the Rules on Acquisition of Domestic Enterprises by Foreign Investors, or the M&A
Rules, regulations with respect to the mergers and acquisitions of domestic enterprises by foreign investors that became effective
on September 8, 2006. Article 11 of the M&A Rules requires PRC companies, enterprises or natural persons to obtain MOFCOM approval
in order to effectuate mergers or acquisitions between PRC companies and foreign companies legally established or controlled by
such PRC companies, enterprises or natural persons. Article 40 of the M&A Rules requires that an offshore special purpose vehicle
formed for overseas listing purposes and controlled directly or indirectly by PRC companies or individuals should obtain the approval
of the CSRC prior to the listing and trading of such offshore special purpose vehicle’s securities on an overseas stock exchange,
especially in the event that the offshore special purpose vehicle acquires shares of or equity interests in the PRC companies in
exchange for the shares of offshore companies. On September 21, 2006, the CSRC published on its official website procedures and
filing requirements for offshore special purpose vehicles seeking CSRC approval of their overseas listings.
On November 19, 2007, we completed a merger
transaction pursuant to a share exchange and stock purchase agreement, which resulted in our current ownership and corporate structure.
We believe, based on the opinion of our PRC legal counsel, Allbright Law Offices, that MOFCOM and CSRC approvals were not required
for our merger transaction or for the listing and trading of our securities on a trading market because we are not an offshore
special purpose vehicle that is directly or indirectly controlled by PRC companies or individuals. Although the merger and acquisition
regulations provide specific requirements and procedures, there are still many ambiguities in the meaning of many provisions. Further
regulations are anticipated in the future, but until there has been clarification either by pronouncements, regulation or practice,
there is some uncertainty in the scope of the regulations and the regulators have wide latitude in the enforcement of the regulations
and approval of transactions. If the MOFCOM, CSRC or another PRC regulatory agency subsequently determines that the MOFCOM and
CSRC approvals were required, we may face sanctions by the MOFCOM, CSRC or another PRC regulatory agency. If this happens, these
regulatory agencies may impose fines and penalties on our operations in China, limit our operating privileges in China, delay or
restrict the repatriation of proceeds into China, restrict or prohibit payment or remittance of dividends paid by Fujian Jintai
Tourism, or take other actions that could damage our business, financial condition, results of operations, reputation and prospects,
as well as the trading price of our securities. It is uncertain at this time to determine what, if any, fines or penalties would
be imposed for failure to obtain the necessary approvals because Circular 10 does not expressly provide any provision with respect
to fines or penalties and there has been no information provided or published precedent established to indicate what the fines
or penalties would be.
Circular 10 mainly governs
the foreign investors acquisition and merger of Chinese domestic enterprises, including (a) the acquisition of the equities of
PRC domestic non-foreign funded enterprises by foreign investors; (b) the subscription of the increased capital of a PRC domestic
company by foreign investors; and (c) the incorporation of a foreign-funded enterprise by foreign investors by purchasing the
operating assets of a PRC domestic enterprise. We do not believe that Circular 10 is applicable to us because: (i) Fujian Jintai
Tourism was incorporated as foreign-funded enterprise on October 19, 2011, with the approval of local Department of Commerce and
Administration for Industry and Commerce. There was no acquisition of the equities or assets of a “PRC domestic company”
as such term is defined under the new M&A Rules; (ii) Both Fujian Jintai Tourism and Hong Kong Yi Tat were incorporated prior
to the implementation of Circular 10; (iii) Hong Kong Yi Tat was incorporated for the purpose of operating or holding the equity
of Fujian Jintai Tourism; (iv) there is no provision in Circular 10 that clearly classifies contractual arrangements as a type
of transaction subject to regulation; and (v) CSRC currently has not issued any definitive rule or interpretation concerning whether
overseas share exchange like the Company’s are subject to this regulation.
The M&A Regulations establish more
complex procedures for some acquisitions of Chinese companies by foreign investors, which could make it more difficult for us
to pursue growth through acquisition in China.
The M&A Regulations establish additional
procedures and requirements that could make some acquisitions of PRC companies by foreign investors, such as ours, more time-consuming
and complex, including requirements in some instances that the approval of the Ministry of Commerce shall be required for transactions
involving the shares of an offshore listed company being used as the acquisition consideration by foreign investors. In the future,
we may grow our business in part by acquiring complementary businesses. Complying with the requirements of the M&A Regulations
to complete such transactions could be time-consuming, and any required approval processes, including obtaining approval from the
Ministry of Commerce, may delay or inhibit our ability to complete such transactions, which could affect our ability to expand
our business or maintain our market share.
If the PRC imposes restrictions designed
to reduce inflation, future economic growth in the PRC could be severely curtailed which could hurt our business and profitability.
While the economy of the PRC has experienced
rapid growth, this growth has been uneven among various sectors of the economy and in different geographical areas of the country.
Rapid economic growth often can lead to growth in the supply of money and rising inflation. In order to control inflation in the
past, the PRC has imposed controls on bank credits, limits on loans for fixed assets and restrictions on state bank lending. Imposition
of similar restrictions may lead to a slowing of economic growth, a decrease in travel among the population and less visitors to
our tourist attractions.
Fluctuations in exchange rates could harm our business and
the value of our securities.
The value of our ordinary shares will be indirectly
affected by the foreign exchange rate between U.S. dollars and RMB and between those currencies and other currencies in which our
sales may be denominated. Because substantially all of our earnings and cash assets are denominated in RMB, fluctuations in the
exchange rate between the U.S. dollar and the RMB will affect the relative purchasing power of these proceeds, our balance sheet
and our earnings per share in U.S. dollars. In addition, appreciation or depreciation in the value of the RMB relative to the U.S.
dollar would affect our financial results reported in U.S. dollar terms without giving effect to any underlying change in our business
or results of operations. Fluctuations in the exchange rate will also affect the relative value of any dividend we issue that will
be exchanged into U.S. dollars as well as earnings from, and the value of, any U.S. dollar-denominated investments we make in the
future. Since July 2005, the RMB has not been pegged to the U.S. dollar. Although the People’s Bank of China regularly intervenes
in the foreign exchange market to prevent significant short-term fluctuations in the exchange rate, the RMB may appreciate or depreciate
significantly in value against the U.S. dollar in the medium to long term. Moreover, it is possible that in the future PRC authorities
may lift restrictions on fluctuations in the RMB exchange rate and lessen intervention in the foreign exchange market.
Very limited hedging transactions are available
in China to reduce our exposure to exchange rate fluctuations. To date, we have not entered into any hedging transactions. While
we may enter into hedging transactions in the future, the availability and effectiveness of these transactions may be limited,
and we may not be able to successfully hedge our exposure at all. In addition, our foreign currency exchange losses may be magnified
by PRC exchange control regulations that restrict our ability to convert RMB into foreign currencies.
Exchange controls that exist in the PRC may limit our ability
to utilize our cash flow effectively.
We are subject to the PRC’s rules and
regulations on currency conversion. In the PRC, the State Administration for Foreign Exchange, or SAFE, regulates the conversion
between Renminbi and foreign currencies. Currently, foreign investment enterprises, or FIEs, are required to apply to the SAFE
for “Foreign Exchange Registration Certificates for FIEs.” As a result of our ownership of Fujian Jintai Tourism, Fujian
Jintai Tourism is a FIE and is only able to use the proceeds from any foreign currency-dominated capital for the daily operation
of the subsidiary and for the construction of the tourism destinations or for the purpose that is described on the loan agreement
documentation. With such registration certificates, which need to be renewed annually, FIEs are allowed to open foreign currency
accounts including a “current account” and “capital account.” Currency conversion within the scope of the
“current account,” such as remittance of foreign currencies for payment of dividends, can be effected without requiring
the approval of the SAFE. However, conversion of currency in the “capital account,” including capital items such as
direct foreign investment, loans and securities, still require approval of the SAFE. Further, any capital contributions to Fujian
Jintai Tourism by its offshore shareholder must be approved by the Ministry of Commerce in China or its local counterpart. We have
obtained such approval but cannot assure you that the PRC regulatory authorities will not impose further restrictions on the convertibility
of the Renminbi or revoke our government approval at any time in the future. Any future restrictions on currency exchanges may
limit our ability to use our cash flow for the distribution of dividends to our shareholders or to fund operations it may have
outside of the PRC.
In August 2008, SAFE promulgated Circular 142,
a notice regulating the conversion by FIEs of foreign currency into Renminbi by restricting how the converted Renminbi may be used.
Circular 142 requires that Renminbi converted from the foreign currency-dominated capital of a FIE may only be used for purposes
within the business scope approved by the applicable government authority and may not be used for equity investments within the
PRC unless specifically provided for otherwise. In addition, SAFE strengthened its oversight over the flow and use of Renminbi
funds converted from the foreign currency-dominated capital of a FIE. The use of such Renminbi may not be changed without approval
from SAFE, and may not be used to repay Renminbi loans if the proceeds of such loans have not yet been used. Violations of Circular
142 may result in severe penalties, including substantial fines as set forth in the SAFE rules. Accordingly, Fujian Jintai Tourism
is only able to use the proceeds from any foreign currency-dominated capital for the daily operation of the subsidiary and for
the construction of the tourism destinations or for the purpose that is described on the loan agreement documentation.
PRC regulation of loans and direct investment
by offshore holding companies to PRC entities may delay or prevent us from using the cash flows to make loans or additional capital
contribution to our PRC operating subsidiaries, which could materially and adversely affect our liquidity and our ability to fund
and expand our business.
In utilizing our cash flow, we are permitted
under PRC laws and regulations to provide funding to the PRC subsidiaries only through loans or capital contributions, and to our
affiliated PRC entities only through loans, in each case subject to satisfaction of applicable government registration and approval
requirements. We cannot assure you that we will be able to obtain these government registrations or approvals on a timely basis,
if at all. In the event that we are prevented from using the funds to fund the operation of our PRC subsidiaries, we will use our
best efforts to obtain the required approvals, however, we may not be able to utilize the funds in the event that the PRC laws
and regulations do not permit it.
In utilizing our cash flow, we, as an offshore
holding company of our PRC operating subsidiaries, may use the cash flow to make loans to our PRC subsidiaries, or make additional
capital contributions to our PRC subsidiaries. Any loans to our PRC subsidiaries are subject to PRC regulations and approvals.
For example, loans by us to finance the activities of our PRC subsidiary, which is a foreign-invested enterprise, cannot exceed
statutory limits and must be registered with SAFE or its local counterpart, and the accumulative amount of foreign currency loans
will not exceed the difference between the total investment and the registered capital of our PRC subsidiary, which is a foreign-invested
enterprise.
We may also decide to finance our PRC subsidiary
by means of capital contributions. Any additional capital contributions to our PRC subsidiaries, which are foreign-invested enterprises,
must be approved by the MOFCOM.
We cannot assure you that we can obtain the
necessary government registrations or approvals on a timely basis, if at all, with respect to future loans or capital contributions
by us to our PRC subsidiaries.
Regulations relating to offshore
investment activities by PRC residents may limit our ability to acquire PRC companies and could adversely affect our business.
In July 2014,
SAFE promulgated the Circular on Issues Concerning Foreign Exchange Administration Over the Overseas Investment and Financing
and Roundtrip Investment by Domestic Residents Via Special Purpose Vehicles, or Circular 37, which replaced Relevant Issues
Concerning Foreign Exchange Control on Domestic Residents’ Corporate Financing and Roundtrip Investment through Offshore
Special Purpose Vehicles, or Circular 75. Circular 37 requires PRC residents to register with local branches of SAFE in connection
with their direct establishment or indirect control of an offshore entity, referred to in Circular 37 as a “special purpose
vehicle” for the purpose of holding domestic or offshore assets or interests. Circular 37 further requires amendment to a
PRC resident’s registration in the event of any significant changes with respect to the special purpose vehicle, such as
an increase or decrease in the capital contributed by PRC individuals, share transfer or exchange, merger, division or other material
event. Under these regulations, PRC residents’ failure to comply with specified registration procedures may result in restrictions
being imposed on the foreign exchange activities of the relevant PRC entity, including the payment of dividends and other distributions
to its offshore parent, as well as restrictions on capital inflows from the offshore entity to the PRC entity, including restrictions
on its ability to contribute additional capital to its PRC subsidiaries. Further, failure to comply with the SAFE registration
requirements could result in penalties under PRC law for evasion of foreign exchange regulations.
As Circular
37 is newly-issued, it is unclear how these regulations will be interpreted and implemented. In addition, different local SAFE
branches may have different views and procedures as to the interpretation and implementation of the SAFE regulations, and it may
be difficult for our ultimate shareholders or beneficial owners who are PRC residents to provide sufficient supporting documents
required by the SAFE or to complete the required registration with the SAFE in a timely manner, or at all. Any failure by any of
our shareholders who is a PRC resident, or is controlled by a PRC resident, to comply with relevant requirements under these regulations
could subject us to fines or sanctions imposed by the PRC government, including restrictions on WFOE’s ability to pay dividends
or make distributions to us and on our ability to increase our investment in the WFOE.
Requirement of statutory reserve of certain
amount of our net income pursuant to PRC regulation may further restrict our PRC subsidiaries and variable interest entity’s
ability to distribute profits to us and have a material adverse effect on our ability to conduct our business.
Under PRC laws and regulations, our subsidiaries
in China, as wholly foreign-owned enterprises, are respectively required to set aside at least 10% of their accumulated after-tax
profits each year, if any, to fund certain statutory reserve funds, until the aggregate amount of fund set aside reaches 50% of
the registered capital of each of the entities. These reserve funds are not distributable as cash dividends. It is unclear that
if and what fine or penalties that a company may be subject to as a result of noncompliance of such requirement. As of December
31, 2013, each of our subsidiaries subject to the statutory reserve requirement has set aside 50% of its registered capital of
the subsidiaries. Such statutory requirement could limit our subsidiaries and variable interest entity ability to pay dividends
or make other distributions to us and could materially and adversely limit our ability to grow that could be beneficial to our
business, or otherwise fund and conduct our business.
Fujian Yida Travel Service Co., Ltd. was formed
on June 24, 2011 and there was a capital contribution made of 10 million RMB (approximately $1,570,000) which is 100% of its registered
capital. No portion of this capital contribution was used to fund its statutory reserve fund because there is no need for Fujian
Yida Travel Service Co., Ltd. to allocate any statutory reserve fund until it realizes a profit.
Any outbreak of widespread public health
problem in the PRC could adversely affect our operations.
There have been recent outbreaks of
contagious disease such as bird flu (avian influenza), caused by the H7N9 virus, in certain parts of
China, where all of our facilities are located and where all of our sales occur. Our business is dependent upon our ability
to attract a large volume of visitors to our tourism destinations, and an outbreak of widespread public health problem in
China, could have a negative effect on our operations. Any such outbreak could have an impact on our operations as a result
of:
· |
quarantines or closures of our tourist destinations |
· |
the sickness or death of our key officers and employees, and |
· |
a general slowdown in the Chinese economy. |
Any of the foregoing events or other unforeseen
consequences of public health problems could adversely affect our operations.
Because Chinese law governs many of our
material agreements, we may not be able to enforce our rights within the PRC or elsewhere, which could result in a significant
loss of business, business opportunities or capital.
Chinese law governs many of our material agreements,
some of which may be with Chinese governmental agencies. We cannot assure you that we will be able to enforce any of our material
agreements or that remedies will be available outside of the PRC. The system of laws and the enforcement of existing laws and contracts
in the PRC may not be as certain in implementation and interpretation as in the United States. The Chinese judiciary is relatively
inexperienced in enforcing corporate and commercial law, leading to a higher than usual degree of uncertainty as to the outcome
of any litigation. The inability to enforce or obtain a remedy under any of our future agreements could result in a significant
loss of business, business opportunities or capital.
Because our funds are held in banks in
uninsured PRC bank accounts, the failure of any bank in which we deposit our funds could affect our ability to continue in business.
Funds on deposit at banks and other financial
institutions in the PRC are often uninsured. A significant portion of our assets are in the form of cash deposited with banks in
the PRC, and in the event of a bank failure, we may not have access to our funds on deposit. Depending upon the amount of money
we maintain in a bank that fails, our inability to have access to our cash could impair our operations, and, if we are not able
to access funds to pay our suppliers, employees and other creditors, we may be unable to continue in business.
Our business could be severely harmed
if the Chinese government changes its policies, laws, regulations, tax structure or its current interpretations of its laws, rules
and regulations relating to our operations in china.
Our business is located in Fujian, China and
virtually all of our assets are located in China. We generate our sales revenue only from customers located in China. Our results
of operations, financial state of affairs and future growth are, to a significant degree, subject to China’s economic, political
and legal development and related uncertainties. Our operations and results could be materially affected by a number of factors,
including, but not limited to
· |
Changes in policies by the Chinese government resulting in changes in laws or regulations or the interpretation of laws or regulations, |
· |
changes in taxation, |
· |
changes in employment restrictions, |
· |
import duties, and |
· |
currency revaluation. |
Over the past several years, the Chinese government
has pursued economic reform policies including the encouragement of private economic activities and greater economic decentralization.
If the Chinese government does not continue to pursue its present policies that encourage foreign investment and operations in
China, or if these policies are either not successful or are significantly altered, then our business could be harmed. Following
the Chinese government’s policy of privatizing many state-owned enterprises, the Chinese government has attempted to augment
its revenues through increased tax collection. It also exercises significant control over China’s economic growth through
the allocation of resources, controlling payment of foreign currency-denominated obligations, setting monetary policy and providing
preferential treatment to particular industries or companies. Continued efforts to increase tax revenues could result in increased
taxation expenses being incurred by us. Economic development may be limited as well by the imposition of austerity measures intended
to reduce inflation, the inadequate development of infrastructure and the potential unavailability of adequate power and water
supplies, transportation and communications. In addition, the Chinese government continues to play a significant role in regulating
industry by imposing industrial policies.
The Chinese laws and regulations which
govern our current business operations are sometimes vague and uncertain and may be changed in a way that hurts our business.
China’s legal system is a civil law system
based on written statutes, in which system decided legal cases have little value as precedents, unlike the common law system prevalent
in the United States. There are substantial uncertainties regarding the interpretation and application of Chinese laws and regulations,
including but not limited to the laws and regulations governing our business, or the enforcement and performance of our arrangements
with customers in the event of the imposition of statutory liens, death, bankruptcy and criminal proceedings. The Chinese government
has been developing a comprehensive system of commercial laws, and considerable progress has been made in introducing laws and
regulations dealing with economic matters such as foreign investment, corporate organization and governance, commerce, taxation
and trade. However, because these laws and regulations are relatively new, and because of the limited volume of published cases
and judicial interpretation and their lack of force as precedents, interpretation and enforcement of these laws and regulations
involve significant uncertainties. New laws and regulations that affect existing and proposed future businesses may also be applied
retroactively. We are considered an FIE under Chinese laws, and as a result, we must comply with Chinese laws and regulations.
We cannot predict what effect the interpretation of existing or new Chinese laws or regulations may have on our business. If the
relevant authorities find us to be in violation of Chinese laws or regulations, they would have broad discretion in dealing with
such a violation, including, without limitation: levying fines; revoking our business and other licenses; requiring that we restructure
our ownership or operations; and requiring that we discontinue any portion or all of our business.
A slowdown or other adverse developments
in the Chinese economy may materially and adversely affect our customers’ demand for our services and our business.
All of our operations are conducted in China
and all of our revenues are generated from sales to businesses operating in China. Although the Chinese economy has grown significantly
in recent years, such growth may not continue. We do not know how sensitive we are to a slowdown in economic growth or other adverse
changes in Chinese economy which may affect demand for precision steel products. A slowdown in overall economic growth, an economic
downturn or recession or other adverse economic developments in China may materially reduce the demand for our services and in
turn reduce our results of operations.
Failure to comply with the U.S. foreign
corrupt practices act and Chinese anti-corruption laws could subject us to penalties and other adverse consequences.
Our executive officers, employees and other
agents may violate applicable law in connection with the marketing or sale of our products, including China’s anti-corruption
laws and the U.S. Foreign Corrupt Practices Act, or the FCPA, which generally prohibits United States companies from engaging in
bribery or other prohibited payments to foreign officials for the purpose of obtaining or retaining business. In addition, we are
required to maintain records that accurately and fairly represent our transactions and have an adequate system of internal accounting
controls. Foreign companies, including some that may compete with us, are not subject to these prohibitions, and therefore may
have a competitive advantage over us. The PRC also strictly prohibits bribery of government officials. However, corruption, extortion,
bribery, pay-offs, theft and other fraudulent practices occur from time-to-time in the PRC.
While we intend to implement measures to ensure
compliance with the FCPA and Chinese anti-corruption laws by all individuals involved with our company, our employees or other
agents may engage in such conduct for which we might be held responsible. If our employees or other agents are found to have engaged
in such practices, we could suffer severe penalties and other consequences that may have a material adverse effect on our business,
financial condition and results of operations. In addition, our brand and reputation, our sales activities or the price of our
ordinary shares could be adversely affected if we become the target of any negative publicity as a result of actions taken by our
employees or other agents.
We have not had, and do not intend to have,
any current or historic experience with non-compliance with FCPA or Chinese anti-corruption laws.
The implementation of the new PRC labor
contract law and increases in the labor costs in china may hurt our business and profitability.
A new labort contract law became effective
on January 1, 2008 in China. It imposes more stringent requirements on employers in relation to entry into fixed-term labort contracts,
recruitment of temporary employees and dismissal of employees. In addition, under the newly promulgated Regulations on Paid Annual
Leave for Employees, which also became effective on January 1, 2008, employees who have worked continuously for more than one year
are entitled to paid vacation ranging from 5 to 15 days, depending on the length of the employee’s service. Employees who
waive such vacation entitlements at the request of the employer will be compensated for three times their normal daily salaries
for each vacation day so waived. As a result of the new law and regulations, our labor costs may increase. There is no assurance
that disputes, work stoppages or strikes will not arise in the future. Increases in the labor costs or future disputes with our
employees could damage our business, financial condition or operating results.
Under the current EIT Law, China Yida
and Hong Kong Yi Tat may be classified as “resident enterprises” of China, which may subject China Yida and Hong Kong
Yi Tat to PRC income tax on their taxable global income.
China passed an Enterprise Income Tax Law,
or the EIT Law, and its implementation regulations, both of which became effective on January 1, 2008. Under the EIT Law, an enterprise
established outside of China with “de facto management bodies” within China is considered a “resident enterprise,”
meaning that it can be treated in a manner similar to a Chinese domestic enterprise for enterprise income tax purposes. The implementing
rules of the EIT Law define de facto management as “substantial and overall management and control over the production and
operations, personnel, accounting, and properties” of the enterprise. On April 22, 2009, the State Administration of Taxation
issued the Notice Concerning Relevant Issues Regarding Cognizance of Chinese Investment Controlled Enterprises Incorporated Offshore
as Resident Enterprises pursuant to Criteria of de facto Management Bodies, or the Notice, further interpreting the application
of the EIT Law and its implementation with respect to non-Chinese enterprises or group controlled offshore entities. Pursuant to
the Notice, an enterprise incorporated in an offshore jurisdiction and controlled by a Chinese enterprise or group will be classified
as a “non-domestically incorporated resident enterprise” if (i) its senior management in charge of daily operations
reside or perform their duties mainly in China; (ii) its financial or personnel decisions are made or approved by bodies or persons
in China; (iii) substantial assets and properties, accounting books, corporate chops, board and shareholder minutes are kept in
China; and (iv) at least half of its directors with voting rights or senior management often resident in China. A resident enterprise
would be generally subject to the uniform 25% enterprise income tax rate as to its worldwide income. Although the Notice is directly
applicable to enterprises registered in an offshore jurisdiction and controlled by Chinese domestic enterprises or groups, it is
uncertain whether the PRC tax authorities will make reference to the Notice when determining the resident status of other offshore
companies, such as Fujian Jin Tai. Since substantially all of our management is currently based in China, it is likely we may be
treated as a Chinese resident enterprise for enterprise income tax purposes. The tax consequences of such treatment are currently
unclear, as they will depend on how local tax authorities apply or enforce the EIT Law or the implementation regulations.
In addition, under the EIT Law and implementation
regulations, PRC income tax at the rate of 10% is applicable to dividends payable to investors that are “non-resident enterprises”
(and that do not have an establishment or place of business in the PRC, or that have such establishment or place of business but
the relevant income is not effectively connected with the establishment or place of business) to the extent that such dividends
have their source within the PRC unless there is an applicable tax treaty between the PRC and the jurisdiction in which an overseas
holder resides which reduces or exempts the relevant tax. Similarly, any gain realized on the transfer of shares by such investors
is also subject to the 10% PRC income tax if such gain is regarded as income derived from sources within the PRC.
If we are considered a PRC “resident
enterprise”, it is unclear whether the dividends we pay with respect to our shares, or the gain you may realize from the
transfer of our shares, would be treated as income derived from sources within the PRC and be subject to PRC tax. If we are required
under the EIT Law to withhold PRC income tax on our dividends payable to our foreign shareholders, or if you are required to pay
PRC income tax on the transfer of your shares, the value of your investment in our shares may be materially and adversely affected.
Risks Related to Our Common Stock
If our common stock were delisted and determined to be a “penny
stock,” a broker-dealer may find it more difficult to trade our common stock and an investor may find it more difficult to
acquire or dispose of our common stock in the secondary market.
If our common stock were removed from listing
with the NASDAQ, it may be subject to the so-called “penny stock” rules. The SEC has adopted regulations that define
a “penny stock” to be any equity security that has a market price per share of less than $5.00, subject to certain
exceptions, such as any securities listed on a national securities exchange. For any transaction involving a “penny stock,”
unless exempt, the rules impose additional sales practice requirements on broker-dealers, subject to certain exceptions. If our
common stock were delisted and determined to be a “penny stock,” a broker-dealer may find it more difficult to trade
our common stock and an investor may find it more difficult to acquire or dispose of our common stock on the secondary market.
Investors in penny stocks should be prepared for the possibility that they may lose their whole investment.
Our failure to meet the listing requirements of the Nasdaq
Capital Market could result in a de-listing of our common stock.
If after listing we fail to satisfy the continued
listing requirements of the NASDAQ Capital Market, such as the corporate governance requirements and the minimum closing bid price
requirement, NASDAQ may take steps to de-list our common stock, which could impair your ability to sell or purchase our common
stock when you wish to do so. In the event of a de-listing, we would take actions to restore our compliance with NASDAQ’s
listing requirements, but we can provide no assurance that any such action taken by us would allow our common stock to become listed
again, stabilize the market price or improve the liquidity of our common stock, prevent our common stock from dropping below the
NASDAQ minimum bid price requirement or prevent future non-compliance with NASDAQ’s listing requirements.
Our common stock is subject to price volatility unrelated
to our operations.
The market price of our common stock could
fluctuate substantially due to a variety of factors, including market perception of our ability to achieve our planned growth,
quarterly operating results of other companies in the same industry, trading volume in our common stock, changes in general conditions
in the economy and the financial markets or other developments affecting our competitors or us. In addition, the stock market is
subject to extreme price and volume fluctuations. This volatility has had a significant effect on the market price of securities
issued by many companies for reasons unrelated to their operating performance and could have the same effect on our common stock.
ITEM 1B. UNRESOLVED STAFF COMMENTS.
Not applicable.
ITEM 2. PROPERTIES.
Our principal executive offices are located
at 28/F, Yifa Building, No.111, Wusi Road, Fuzhou, Fujian Province, PRC. The office space is approximately 800 square meters in
area. The lease renews annually at an annual rate of approximately $8,800, which is the market rate in that area.
We currently operate and manage five tourist
destinations, including “City of Caves”, “Yang-sheng Paradise”, “the Great Golden Lake,” “Hua’an
Tulou Cluster” and “Yunding Park.” Summaries of their respective location are as follows:
● |
City of Caves project is located in Fengyi County, west of Xinyu City. |
● |
The Yang-sheng Paradise project is located approximately two (2) kilometers from Zhangshu’s downtown, and within one hour travel from the adjacent airport of Nanchang, the capital city of Jiangxi Province. The Jiangxi Province Zhangshu City Yang-sheng Tourism Development Project Investment Agreement refers to our ability to obtain land use rights for approximately 3,000 mu through a public listing transaction which means that the local government will submit our land use proposal along with our plan and project to the Department of Land Reserve for a public listing with China Yida as the only participant. Upon approval, we will be able to obtain the land-use rights. Additional 3,000 mu that is not subject to this land-use right will be leased from the local government which will give us management rights of the land The Company has obtained approximately 130 acres of land use rights for the Yang-sheng Paradise project and is in the process of obtaining additional land use rights. |
● |
The Great Golden Lake is located in Taining, surrounding Sanming and Nanping of Fujian Province and Nanchang of Jiangxi Province. |
● |
Hua’an Tulou is approximately one hour and half drive away from Xiamen City, Fujian Province. |
● |
Yunding Park is approximately thirty (30) km from Fuzhou, the capital city of Fujian Province. |
As of December 31, 2014, summaries and analysis of the property
rights of each tourist destination are as follows:
|
|
Land Use Rights |
|
Management Rights |
City of Caves |
|
Yes-approximately 10 acres, we are in the process of obtaining more land use right |
|
Yes |
Yang-sheng Paradise |
|
Yes – approximately 132 acres. We are in the process of obtaining more land use right. |
|
Yes |
Great Golden Lake |
|
No. |
|
Yes |
Hua’an Tulou |
|
No. |
|
Yes |
Yunding Park |
|
Yes - approximately 32 acres |
|
Yes |
Through the agreements, we are entitled to
obtain land-use rights of approximately 2,026 acres for our Yang-sheng Paradise, Yunding Park, and City of Caves destinations.
By the end of 2014, we obtained a total of approximately 32 acres of land use rights (no ownership) for Yunding Park and 132 acres
of land use rights (no ownership) for Yang-sheng Paradise. We expect to be able to obtain all the rights within three years. The
cost of the land will vary depending on the location. We expect the cost of the land to be between RMB 20,000 and RMB 600,000 per
Mu which is equal to $515 and $15,444 per acre. The large discrepancy in price is because land prices vary depending on the description
of the land. Typically, residential land is valued highest and the industrial land is the cheapest. We will try to obtain the land
at the most favorable price by classifying the land as for industrial use or commercial use, when possible. However, it is uncertain
as to how the PRC government will classify the land.
Land bidding process is usually as follows:
the government releases the notice of listed land transfer, announcing such information as the proposed land transfer situation,
bidding qualifications and application materials; each bidder is required to pay the deposit and submit bidding application materials
which will be reviewed and compared by the government; and finally the government will select the most competitive bidder to confirm
the land transaction and sign a “state-owned land use rights transfer contract.” The local governments will refund
the deposit after submitting the relatively land documents to governments.
It is anticipated that we will have the land
use rights for the tourism property for forty (40) years from the date of acquisition. Even though the application has been submitted
to the local government and land authority, the processing time is uncertain. We will provide disclosure once we have officially
obtained the land use rights from the local government authorities.
We do not need to obtain the land use rights
to manage the Golden Lake, Tulou and Yunding Park. As to Yang-Sheng Paradise and the City of Caves, we started the road construction
toward the tourist sites, but have not started the site construction. We do not need to obtain the land use rights to Yang-Sheng
Paradise, the City of Caves before we can proceed with our site construction. We anticipate our grand opening for these destinations
will occur by the 3rd quarter of 2014 but we do not anticipate that we will have the land-use rights at that time.
Fenyi Yida has made advance payments of $380,000
to the local government of Fenyi County for the acquisition of land use rights relatives to the City of Caves tourist destination.
The land-use rights the company obtained from Fenyi belonged to the local farmers. Pursuant to relevant PRC regulations, Fenyi
government should compensate the local farmers before issuing the land use rights to the company, these compensations are part
of the Company’s land expenditure. Fenyi government is willing to reimburse this part of land expenditure for the Company,
but the reimbursement procedure takes very long time. Therefore, the Company decided to compensate the local farmers for the Fenyi
government first in order to speed up the process of land use rights. The Company did not enter any agreement with Fenyi government
about the compensation prepayment. Fenyi government orally agrees to repay the Company by installment. The local government has
already reimbursed compensations prepayment to the Company in full amount by December 31, 2013.
There is no law or regulation
stating that we do not need land use rights before commencing construction on these projects. However, in practice, because we
have the management rights to these destinations, we are not required to obtain land certificates before commencing construction.
The management rights entitle us the right to develop the project and to receive any profits generated from the construction.
However, we do not have ownership to the construction because we do not have the land use rights. The Company is under procedure
to obtain its land use right. If we eventually fail to obtain land use right, we may fail to obtain ownership to the construction,
buildings and improvements we make on the land if it proceed with the construction before obtaining land-use rights.
We do not need to obtain the land-use rights
for the relevant properties to manage the Golden Lake, Tulou and Yunding Park locations because the local PRC governments allow
us to operate and manage the property without having the land-use rights. We expect to apply for the land-use rights but at the
present time only have management rights of the properties. In general, the land use right is an exclusive property right granted
under PRC Property law, pursuant to which a company has right to develop the land, for example, build a restaurant and hotel, etc.,
while the management rights are granted under the specific agreement, we only have the rights to manage the destinations, cannot
rent the land or build any construction building on the land without local government’s approval.
ITEM 3. LEGAL PROCEEDINGS.
Currently, we know of no material, active,
pending or threatened proceeding against us, or our subsidiaries, nor are we involved as a plaintiff in any material proceeding
or pending litigation.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON
EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
Market Information
Our common stock is listed on the NASDAQ Capital
Market exchange under the symbol “CNYD.” The table below sets forth the high and low sales prices for our common stock
for the period indicated as reported on the NASDAQ Capital Market.
| |
Common Stock Market Price | |
Financial Quarter Ended | |
High ($) | | |
Low ($) | |
December 31, 2014 | |
| 3.05 | | |
| 2.22 | |
September 30, 2014 | |
| 4.20 | | |
| 3.03 | |
June 30, 2014 | |
| 4.24 | | |
| 2.67 | |
March 31, 2014 | |
| 7.24 | | |
| 3.13 | |
| |
| | | |
| | |
December 31, 2013 | |
| 6.90 | | |
| 2.57 | |
September 30, 2013 | |
| 9.40 | | |
| 4.00 | |
June 30, 2013 | |
| 4.23 | | |
| 4.00 | |
March 31, 2013 | |
| 4.27 | | |
| 3.29 | |
Holders
At March 20, 2015, there were approximately
206 shareholders of record of our common stock. This does not reflect the number of persons or entities who held stock in nominee
or “street” name through various brokerage firms.
Holders of common stock do not have cumulative
voting rights. Therefore, holders of a majority of the shares of common stock voting for the election of directors can elect all
of the directors. Holders of our common stock representing a majority of the voting power of our capital stock issued and outstanding
and entitled to vote, represented in person or by proxy, are necessary to constitute a quorum at any meeting of our stockholders.
A vote by the holders of a majority of our outstanding shares is required to effectuate certain fundamental corporate changes such
as liquidation, merger or an amendment to our Articles of Incorporation.
Although there are no provisions in our charter
or by-laws that may delay, defer or prevent a change in control, we are authorized, without shareholder approval, to issue shares
of preferred stock that may contain rights or restrictions that could have this effect.
Holders of common stock are entitled to share
in all dividends that the board of directors, in its discretion, declares from legally available funds. In the event of liquidation,
dissolution or winding up, each outstanding share entitles its holder to participate pro rata in all assets that remain after payment
of liabilities and after providing for each class of stock, if any, having preference over the common stock. Holders of our common
stock have no pre-emptive rights, no conversion rights and there are no redemption provisions applicable to our common stock.
Dividends
There are no restrictions in our articles of
incorporation or bylaws that prevent us from declaring dividends. The Delaware General Corporation Law, however, does prohibit
us from declaring dividends where, after giving effect to the distribution of the dividend:
1. We would not be able to pay our debts as
they become due in the usual course of business; or
2. Our total assets would be less than the
sum of our total liabilities plus the amount that would be needed to satisfy the rights of shareholders who have preferential rights
superior to those receiving the distribution.
There are restrictions on how our operating
subsidiaries may pay dividends. Our board of directors has not declared a dividend on our common stock during the last two fiscal
years or the subsequent interim period. We currently anticipate that we will retain any future earnings for use in our business.
Consequently, we do not anticipate paying any cash dividends in the foreseeable future. The payment of dividends in the future
will depend upon our results of operations, as well as our short-term and long-term cash availability, working capital, working
capital needs and other factors, as determined by our board of directors. Currently, except as may be provided by applicable laws,
there are no contractual or other restrictions on our ability to pay dividends if we were to decide to declare and pay them.
Securities Authorized for Issuance Under
Equity Compensation Plans
For information on Securities Authorized for
Issuance Under Equity Compensation Plans, please see Part III, Item 12 Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters.
Recent Sales of Unregistered Securities
None.
ITEM 6. SELECTED FINANCIAL DATA.
Not applicable because we are a small reporting
company.
ITEM 7. MANAGEMENT’S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS.
The following discussion should be read
in conjunction with the Consolidated Financial Statements and Notes thereto appearing elsewhere in this Form 10-K. The following
discussion contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934 relating to future events or our future performance. Actual results may materially differ
from those projected in the forward-looking statements as a result of certain risks and uncertainties set forth in this prospectus.
Although management believes that the assumptions made and expectations reflected in the forward-looking statements are reasonable,
there is no assurance that the underlying assumptions will, in fact, prove to be correct or that actual results will not be different
from expectations expressed in this report.
Overview
We were formed on June 4, 1999 to serve as
a vehicle to effect a merger, capital stock exchange, asset acquisition or other similar business combination with a company having
its primary operations in the PRC. On November 19, 2007, we consummated the acquisition of Keenway Limited, Hong Kong Yi Tat International
Investment Co., Ltd (“Hong Kong Yi Tat”), and the then shareholders of Keenway Limited, including Minhua Chen, Yanling
Fan, Xinchen Zhang, Extra Profit International Limited, and Lucky Glory International Limited, received shares of our common stock.
We currently operate Hua’An Tulou
cluster (“Tulou” or the “Earth Buildings”) tourist destination (which is certified as a World Culture
Heritage), Yunding Recreational Park (Large-scale National Recreational Park), covering over 300 square kilometers, and China
Yang-Sheng Paradise. As of December 31, 2014, through our wholly owned subsidiaries in China, we have entered into two
cooperation agreements respectively with the local Chinese government agents, namely, (i) the Jiangxi Province Zhangshu
Municipal Government, and (ii) the Fenyi County, Xinyu City, Jiangxi Province Government. Under these agreements, we have
obtained the right to invest in the construction and development of China Yang-sheng (Nourishing Life) Paradise Project
(“Yang-sheng Paradise”) (including the projects: (a) Salt Water Hot Spring SPA & Health Center, (b)
Yang-sheng Holiday Resort, (c) World Yang-sheng Cultural Museum, (d) International Camphor Tree Garden, (e) Chinese Medicine
and Herb Museum, (f) Yang-sheng Sports Club, (g) Old Town of Chinese Traditional Medicine, and (h) various other Yang-sheng
related projects and tourism real estate projects) with a forty (40) year exclusive right to develop, operate and manage a
variety of caves, hot springs and other natural and cultural tourist resources identified in the Meng Mountain area, and
various caves and tourist resources of the Dagang Mountain located in Fenyi County, Xinyu City, Jiangxi Province (“City
of Caves”).
Advertising business had been our
primary source of revenue prior to January 2013 because the tourism business experienced serious disruptions from flooding
and severe weather while the new advertisement regulatory restriction was not enforced by the local government. Our tourism
business has become the primary source of our revenue since first quarter of 2013 as we discontinued the advertising business
during the first quarter of 2013. The revenue from advertising has ceased as the new advertisement regulatory restrictions
are enforced. The revenue from tourism has been increasing. However, any increase in tourism revenue will depend on the
recovery of Great Golden Lake from flooding and the progress we make in developing our existing and new projects in our other
tourist destinations. Our tourism business is seasonal, although we have visitors to our parks throughout the year. In 2015,
we will continue to develop and construct the new Jiangxi projects i.e. the second phase construction of Yang-sheng Paradise
and the City of Caves. As of December 31, 2014, the first phase of City of Caves in Jiangxi had been completed and is
expected to open in the second quarter of 2015.
Factors Affecting Our Performance
For the tourism business, our revenue is driven
by the reputation of our tourist destinations. We strive to present quality tourist attractions that offer our visitors diverse
entertainment, including catering, hotel, transportation, and shopping. We generate our revenue from our visitors and tourists.
We incur many costs associated with operating the tourist business, including, administration fees, business traveling fees, land
use rights fees, and revenue sharing fees.
We began to generate revenue after the grand
openings of Yang-sheng Paradise which opened in October 2013, due to the terrible weather, financial funding and the difficult
level of the cave construction, City of Caves has postponed the trial opening in the first quarter of 2015, we believe that we
will be able to maintain the high gross profit margins in the tourism segment. Also, we expect Yunding to continue to grow. Our
tourism business has become the primary source of our revenue since first quarter of 2013.
Discontinued Operations
On June 3, 2013, Yida (Fujian) Tourism
Group Limited. (“Fujian Yida”), our subsidiary, entered into a stock transfer agreement with Anhui Xingguang
Investment Group Ltd (“Anhui Xingguang”), pursuant to which Fujian Yida transferred its 60% interest in Anhui
Yida Tourism Development Co. Ltd. (“Anhui Yida”) to Anhui Xingguang for RMB 60 million, or $9.72 million. Anhui
Xingguang also assumed all the assets and liabilities of Anhui Yida.
On August 26, 2014, Hong Kong Yi Tat entered
into a certain share transfer agreement with Fujian Taining Great Golden Lake Tourism Economic Development Industrial Co., Ltd.
(the “Fujian Tainingr”), pursuant to which Hong Kong Yi Tat sold 100% of its equity interest in Fujian Jintai
to the Purchaser for a price of RMB 228,801,359, or approximately $37 million.
Net loss from the discontinued operations was
$616,732 and $643,355 for the years ended December 31, 2014 and 2013, respectively.
As a result of the share transactions described
above, the Results of Operation set forth below does not reflect the operations for Fujian Jintai, Anhui Yida and its wholly owned
subsidiaries: Bengbu (Yida) Real Estate Development Co., Ltd. (“Bengbu Yida”) and Bengbu (Yida) Investment Co., Ltd.
(“Bengbu Investment”). The results of operations of Fujian jintai, Anhui Yida and its subsidiaries have been presented
as discontinued operations. Therefore, management’s discussion and analysis set forth herein below are based on the results
of continuing operations.
Results of Operations
Results of Operations for the years ended December 31, 2014
and 2013
Prior to July 2013, the Company was organized
into two main business segments, tourism and advertisement. The following table presents a summary of operating information for
the years ended December 31, 2014 and 2013:
(All amounts, other than | |
For The Years Ended | |
Increase/
(Decrease) | | |
Increase/
(Decrease) | |
percentage, in U.S. | |
December 31, | | |
U.S. Dollar | | |
Percentage | |
Dollar) | |
2014 | | |
2013 | | |
($) | | |
(%) | |
Net revenue | |
| | |
| | |
| | |
| |
Advertisement | |
$ | - | | |
$ | 2,910,612 | | |
$ | (2,910,612 | ) | |
| (100.00 | ) |
Tourism | |
| 13,124,152 | | |
| 9,457,821 | | |
| 3,666,331 | | |
| 38.77 | |
Total net revenue | |
| 13,124,152 | | |
| 12,368,433 | | |
| 755,719 | | |
| 6.11 | |
| |
| | | |
| | | |
| | | |
| | |
Cost of revenue | |
| | | |
| | | |
| | | |
| | |
Advertisement | |
| - | | |
| 2,045,765 | | |
| (2,045,765 | ) | |
| (100.00 | ) |
Tourism | |
| 9,053,904 | | |
| 4,214,436 | | |
| 4,839,468 | | |
| 114.83 | |
Total cost of revenue | |
| 9,053,904 | | |
| 6,260,201 | | |
| 2,793,703 | | |
| 44.63 | |
| |
| | | |
| | | |
| | | |
| | |
Gross profit | |
| 4,070,248 | | |
| 6,108,232 | | |
| (2,037,984 | ) | |
| (33.36 | ) |
| |
| | | |
| | | |
| | | |
| | |
Selling expenses | |
| 10,037,292 | | |
| 9,582,502 | | |
| 454,790 | | |
| 4.75 | |
General and administrative expenses | |
| 7,595,484 | | |
| 7,527,230 | | |
| 68,254 | | |
| 0.91 | |
Loss from operations | |
| (13,562,528 | ) | |
| (11,001,500 | ) | |
| (2,561,028 | ) | |
| 23.28 | |
Other expense, net | |
| (394,144 | ) | |
| (119,700 | ) | |
| (274,444 | ) | |
| 229.28 | |
Interest income | |
| 10,672 | | |
| 82,821 | | |
| (72,149 | ) | |
| (87.11 | ) |
Interest expense | |
| (8,207,752 | ) | |
| (5,538,473 | ) | |
| (2,669,279 | ) | |
| 48.20 | |
Less: Provision for income tax | |
| - | | |
| 133,323 | | |
| (133,323 | ) | |
| (100.00 | ) |
Net loss from continuing operations | |
| (22,153,752 | ) | |
| (16,710,175 | ) | |
| (5,443,577 | ) | |
| 32.58 | |
Net
(loss) income from discontinued operations | |
| (7,127,362 | ) | |
| 355,778 | | |
| (7,483,140 | ) | |
| (2103.32 | ) |
| |
| | | |
| | | |
| | | |
| | |
Net loss | |
| (29,281,114 | ) | |
| (16,354,397 | ) | |
| (12,926,717 | ) | |
| 79.04 | |
Net loss attributable to non-controlling interest: | |
| - | | |
| 102,215 | | |
| (102,215 | ) | |
| (100.00 | ) |
Net loss attributable to China Yida Holding Co. | |
$ | (29,281,114 | ) | |
$ | (16,252,182 | ) | |
$ | (13,028,932 | ) | |
| 80.17 | |
Net Revenue
Net revenue from continuing operations increased
by approximately $0.75 million or approximately 6.11%, from approximately $12.37 million for the year ended December 31, 2013 to
approximately $13.12 million for the year ended December 31, 2014. The increase in net revenue was primarily due to the increase
in the revenue from tourism revenue which was partially offset by the decrease in advertisement revenue.
Advertisement
Advertisement revenue decreased by approximately
$2.91 million or 100%, from approximately $2.91 million for the year ended December 31, 2013 to $0 for the year ended December
31, 2014. The decrease was caused by the termination of the advertisement business in 2013.
We generated no sales from
the “Journey through China on the Train” program for the year ended December 31, 2014 as compared to
approximately $0.06 million for the year ended December 31, 2013. The Company lost all its advertising clients since the
railway program was broadcasted manually by train attendants and we had no control over the frequency of program broadcasting.
We terminated “Journey through China on the Train” program in March 2013.
Tourism
Tourism revenue increased by approximately
$3.66 million or approximately 38.77% from approximately $9.46 million for the year ended December 31, 2013 to approximately $13.12
million for the year ended December 31, 2014, including approximately $10.29 million from Yunding Park, an increase of $1.65 million
or 19%, $0.63 million from Hua’an Tulou, a decrease of $0.05 million or 7%, and $2.20 million from China Yang-sheng paradise,
an increase of $2.06 million or 1471%, for the year ended December 31, 2014, as compared to the same period in 2013. 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, the newly opened tourism destinations, and Yunding
Park due to effective marketing promotion activities and advertisement that led to an increase in number of tourists. We provided
deeper ticket discount due to the fierce competition among the destinations and the decreased tourist consumption had also decreased.
The gross revenue increased due to the increase in the number of tourists attracted by the reduced ticket fee. We expect the fierce
competition and the reduced tourist consumption to continue in the near future.
Cost of Revenue
Cost of revenues increased by approximately
$2.79 million or approximately 44.63%, from approximately $6.26 million for the year ended December 31, 2013 to approximately $9.05
million for the year ended December 31, 2014. The increase in cost of revenue was primarily due to the increase in cost of revenue
of tourism, partially offset by a decrease in cost of revenue of advertisement.
Advertisement
Cost of revenue from advertisement decreased
by approximately $2.05 million or 100%, from approximately $2.05 million for the year ended December 31, 2013 to $0 for the year
ended December 31, 2014. As we terminated advertisement business in 2013, there was no cost incurred with for the year ended December
31, 2014.
Tourism
Cost of revenue from tourism increased by approximately $4.84 million or approximately 114.83%, from approximately
$4.21 million for the year ended December 31, 2013 to approximately $9.05 million for the year ended December 31, 2014. The increase
was primarily due to the increase in tourists at China Yang-sheng paradise ,
and the increase of depreciation cost for the construction completed in China Yang-sheng paradise during the year of 2013.
Gross profit
Gross profit decreased approximately $2.04
million, or approximately 33.36%, from approximately $6.11 million for the year ended December 31, 2013 to $4.07 million for the
year ended December 31, 2014. Our gross margin was approximately 31.01% for the year ended December 31, 2014, compared to gross
profit margin of approximately 49.39% for the year ended December 31, 2013, representing a decrease of approximately18 percentage
points.
Advertisement
Gross profit from advertisement decreased by
approximately $0.86 million, or 100%, from approximately $0.86 million for the year ended December 31, 2013 to $0 for the year
ended December 31, 2014. Gross margin from advertisement was 0% for the year ended December 31, 2014, compared to approximately
29.71% for the year ended December 31, 2013. The decrease was because of the termination of our advertisement business in 2013.
Tourism
Gross profit from tourism decreased approximately
$1.17 million, or approximately 22.37%, from approximately $5.24 million for the year ended December 31, 2013 to approximately
$4.07 million for the year ended December 31, 2014. Our gross margin from tourism was approximately 31.01% for the year ended December
31, 2014, compared to gross profit margin of approximately 55.44% for the year ended December 31, 2013. The decrease of gross margin
was primarily attributable to the increase of the cost of revenue in connection to the increase in sales activities at China Yang-sheng
paradise, and the increase of depreciation cost for the construction completed in China Yang-sheng paradise during the year of
2013.
Selling Expenses
Selling expenses were approximately $10.04
million for the year ended December 31, 2014, compared to approximately $9.58 million for the year ended December 31, 2013, which
represents an increase of approximately $0.46 million, or approximately 4.75%. The increase in selling expense was primarily due
to the increase in variable costs and advertisement expenses at China Yang-sheng paradise during the year ended December 31, 2014.
General and Administrative Expenses
General and administrative expenses were approximately
$7.60 million for the year ended December 31, 2014, compared to approximately $7.53 million for the year ended December 31, 2013,
which represents an increase of approximately $0.07 million, or approximately 0.91%. This slight increase was due to the increase
of administrative expenses for the operation of China Yang-sheng paradise, City of Caves, and Yunding Park during the year ended
December 31, 2014.
Interest expense.
Interest expense was approximately $8.21
million for the year ended December 31, 2014, representing an increase of approximately $2.67 million or approximately 48.2%,
compared to the approximately $5.54 million for the year ended December 31, 2013. The increase in interest expense was
primarily because part of the interest expense for the year ended December 31, 2013 was capitalized as part of construction
in progress.
Income Tax
Income tax was $0 for the year ended December 31, 2014, representing a decrease of approximately $0.13 million
or 100%, compared to the approximately $0.13 million income tax for the year ended December 31, 2013. The decrease was due to the
income from tourism was negative in 2014 and we did not generate any revenue from our advertising business in 2014, while the income
tax of 2013 was resulted from our income from advertising business.
Net Loss
As a result of the above factors, we have net
loss of approximately $29.28 million for the year ended December 31, 2014 as compared to net loss of approximately $16.35 million
for the year ended December 31, 2013, representing an increase of loss of approximately $12.93 million or approximately 79.08%.
The increase of loss was primarily attributable to the decrease in advertisement revenue due to the termination of our advertisement
business in July 2013, the increase in cost of revenue and general and administrative expenses in connection with the operation
of China Yang-sheng paradise for the year ended December 31, 2014 as compared with that for the year ended December 31, 2013.
Liquidity and Capital Resources
Our principal source of liquidity during the
year ended December 31, 2014 was the proceeds from disposal of Fujian Jintai.
As of December 31, 2014, we had cash
and cash equivalents of approximately $0.96 million as compared to approximately $2.16 million as of December 31,
2013, representing a decrease of $1.2 million. Our principal source of liquidity during the year ended December 31, 2014 was
proceeds from disposal of Fujian Jintai of approximately $35.57 million.
As of December 31, 2014 and 2013, our working
capital deficits were approximately $35.89 million and $43.04 million, respectively.
The following table sets
forth a summary of our cash flows for the years indicated:
| |
For
the years ended
December 31, | |
| |
2014 | | |
2013 | |
| |
| | |
| |
Net cash used in operating activities of continuing operations | |
$ | (11,114,907 | ) | |
$ | (9,426,342 | ) |
Net cash provided by (used in) investing activities of continuing operations | |
$ | 27,825,916 | | |
$ | (66,170,882 | ) |
Net cash (used in) provided by financing activities of continuing operations | |
$ | (2,957,250 | ) | |
$ | 74,290,727 | |
Net cash used in discontinued operations | |
$ | (15,019,128 | ) | |
$ | (2,971,600 | ) |
Net cash used in operating activities of continuing
operations was approximately $11.11 million for the year ended December 31, 2014, compared to approximately $9.43 million for the
year ended December 31, 2013. The decrease of $1.68 million was primarily due to the net loss of $29.28 million for the year ended
December 31, 2014 as compared to the net loss of $16.35 million for the year ended December 31, 2013.
Net cash provided by investing activities of
continuing operations was approximately $27.83 million for the year ended December 31, 2014, compared to the net cash used in investing
activities of continuing operations of approximately $66.17 million for the year ended December 31, 2013. The increase of approximately
$94 million was primarily due to the decrease of $64.32 million of cash used in construction cost, and the increase of proceeds
from disposal of discontinued entities of approximately $25.95 million. The cash used in construction related to China Yang-sheng
paradise in year 2013 was approximately $71.09 million while the net cash used in construction related to City of Caves in year
2014 was approximately $6.77 million. In 2013, the proceeds from disposal of Anhui Yida and its subsidiaries were approximately
$9.62 million, while the proceeds from disposal of Jintai in 2014 were approximately $35.57 million.
Net cash used in financing activities of continuing
operations amounted to approximately $2.96 million for the year ended December 31, 2014, compared to the net cash provided by financing
activities of continuing operations of approximately $74.29 million for the year ended December 31, 2013, representing a decrease
of approximately $77.25 million. The decrease in net cash provided by financing activities was mainly because the decrease of $39.87
million in net proceeds from bank loans from $40.68 million (total proceeds from loans of $59.73 million netting total repayment
of loans of $19.05 million off) during the year ended December 31, 2013 to $0.81 million (total proceeds from loans of $53.36 million
netting total repayment of loans of $52.55 million off) during the year ended December 31, 2014.
Bank loans
As of December 31, 2014, the Company had seven
bank loans from three institutional lenders for the development of the tourism destinations.
1. |
A loan for approximately $1.95 million from Fujian Haixia Bank (formerly known as Merchant bank of Fuzhou). The loan bears interest
at 9.6% per annum, and is due on June 20, 2015. |
2. |
A loan for approximately $37.45 million from China Minsheng Banking Corp, Ltd. It bears interest rate at 9% per annum. $13,026,982
(RMB 80,000,000) and $24,425,592 (RMB 150,000,000) will be due in each twelve-month period as of December 31, 2018 and 2019, 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 $31.26 million from China
Construction Bank. It bears interest at 6.55% per annum. $1,302,698 (RMB 8,000,000), $1,628,373 (RMB 10,000,000), $3,256,746
(RMB 20,000,000), $3,256,746 (RMB 20,000,000), $4,885,118 (RMB 30,000,000), $4,885,118 (RMB 30,000,000), $6,513,491(RMB
40,000,000) and $5,536,467 (RMB 34,000,000) will be due in each twelve-month period as of December 31, 2015, 2016, 2017,
2018, 2019, 2020, 2021 and 2022, respectively. It is secured by the fixed assets of Fujian Yida, and collateralized by the
personal guarantees of two of the Company’s directors. |
4. |
A loan for approximately $4.89 million from China Construction Bank. It bears interest at 7.86% per annum.
$651,349 (RMB 4,000,000) will be due in each twelve-month period as of December 31, 2015, 2016, 2017, 2018, 2019, 2020 and 2021
respectively, and $325,675 (RMB 2,000,000) will be due in the twelve-month period as of December 31, 2022 respectively. It is secured
by the fixed assets of Fujian Yida, and collateralized by the personal guarantees of two of the Company’s directors. |
5. |
A loan for approximately $4.07 million from China Construction Bank. It bears interest at 7.86% per annum. $488,512 (RMB 3,000,000)
will be due in each twelve-month period as of December 31, 2015, 2016, 2017, 2018 and 2019 respectively, $651,349 (RMB 4,000,000)
will be due in each twelve-month period as of December 31, 2020 and 2021 respectively, and $325,675 (RMB 2,000,000) will be due
in the twelve-month period as of December 31, 2022. It is secured by the fixed assets of Fujian Yida, and collateralized by the
personal guarantees of two of the Company’s directors. |
6. |
A loan for approximately $3.75 million from China Construction Bank. It bears interest at 7.86% per annum.
$162,837 (RMB 1,000,000), $162,837 (RMB 1,000,000), $325,675 (RMB 2,000,000), $488,512 (RMB 3,000,000), $651,349 (RMB 4,000,000),
$651,349 (RMB 4,000,000), $651,349 (RMB 4,000,000) and $651,349 (RMB 4,000,000) will be due in each twelve-month period as of December
31, 2015, 2016, 2017, 2018, 2019, 2020, 2021 and 2022, respectively. It is secured by the fixed assets of Fujian Yida, and collateralized
by the personal guarantees of two of the Company’s directors. |
7. |
A loan for approximately $4.89 million from China Construction Bank. It bears interest at 7.86% per annum. $$651,349 (RMB 4,000,000)
will be due in each twelve-month period as of December 31, 2015, 2016, 2017, 2018, 2019, 2020 and 2021 respectively, and $325,675
(RMB 2,000,000) will be due in the twelve-month period as of December 31, 2022. It is secured by the fixed assets of Fujian Yida,
and collateralized by the personal guarantees of two of the Company’s directors. |
In the coming 12 months, we have approximately
$5.21 million in bank loans that will mature. We plan to replace these loans with new bank loans in approximately the same aggregate
amounts.
We believe we can arrange funding for the projects
based on the actual cash flow expenditures, which means we can accelerate the construction when we have more cash flows and we
can slow down the construction when we are lack of funds.
Obligations Under Material Contracts
Below is a table setting forth the Company’s material contractual
obligations as of December 31, 2014:
| |
| | |
Payment due by period | |
Contractual Obligations | |
Total | | |
1 year | | |
1-3 years | | |
3-5 years | | |
More than 5 years | |
| |
| | |
| | |
| | |
| | |
| |
Bank Loans | |
$ | 88,257,804 | | |
$ | 5,210,793 | | |
$ | 8,956,051 | | |
$ | 50,316,719 | | |
$ | 23,774,241 | |
Operating Lease Obligations | |
| 1,146,343 | | |
| 123,862 | | |
| 77,470 | | |
| 54,574 | | |
| 890,437 | |
Total | |
$ | 89,404,147 | | |
$ | 5,334,655 | | |
$ | 9,033,521 | | |
$ | 50,371,293 | | |
$ | 24,664,678 | |
Compensation For Using Nature Resources
Commitments
In December 2008, Tulou entered into a Tourist
Resources Development Agreement with Hua’an County Government (“Hua’an government”) which is related to
pay compensation fees for using natural resources in Tulou. The Company agreed to pay (1) 16% of gross ticket sales in the first
five years; (2) 20% of gross ticket sales in the second five years; (3) 23% of gross ticket sales in the third five years; (4)
25% of gross ticket sales in the fourth five years; (5) 28% of gross ticket sales in the fifth five years; (6) 30% in twenty six
years and thereafter when the ticket price of the Clusters is RMB60 ($9.50 USD) or above per person.
The Company paid approximately $56,891 and
$60,973 to the Hua’an government for the years ended December 31, 2014 and 2013, respectively, and recorded as selling expenses.
2015 Outlook
After termination of our advertising business
in July 2013, we have been focusing on the tourism business. In 2014, we continued the construction and development of two new
tourism projects, the Yang-sheng Paradise in Zhangshu City, Jiangxi province, and the City of Caves in Fenyi City, Jiangxi province,
which represent our commitment to expanding our business operations by applying our current business model to the development of
other valuable tourist destinations outside Fujian province and throughout China. We expect to open City of Caves to the public
in the second quarter of 2015. We expect to fund our operations with cash from operations and bank loans.
Critical Accounting Policies
The preparation of consolidated financial statements
in conformity with accounting principles generally accepted in the United States requires our management to make assumptions, estimates,
and judgments that affect the amounts reported, including the notes thereto, and related disclosures of commitments and contingencies,
if any. We have identified certain accounting policies that are significant to the preparation of our consolidated financial statements.
These accounting policies are important for an understanding of our financial condition and results of operations. Critical accounting
policies are those that are most important to the portrayal of our financial condition and results of operations and require management’s
difficult, subjective, or complex judgment, often as a result of the need to make estimates about the effect of matters that are
inherently uncertain and may change in subsequent periods. Certain accounting estimates are particularly sensitive because of their
significance to financial statements and because of the possibility that future events affecting the estimate may differ significantly
from management’s current judgments. We believe the following critical accounting policies involve the most significant estimates
and judgments used in the preparation of our consolidated financial statements.
Basis of presentation
The preparation of financial statements in
conformity with accounting principles generally accepted in the United States requires our management to make assumptions, estimates,
and judgments that affect the amounts reported, including the notes thereto, and related disclosures of commitments and contingencies,
if any. We have identified certain accounting policies that are significant to the preparation of our financial statements. These
accounting policies are important for an understanding of our financial condition and results of operations. Critical accounting
policies are those that are most important to the portrayal of our financial condition and results of operations and require management’s
difficult, subjective, or complex judgment, often as a result of the need to make estimates about the effect of matters that are
inherently uncertain and may change in subsequent periods. Certain accounting estimates are particularly sensitive because of their
significance to financial statements and because of the possibility that future events affecting the estimate may differ significantly
from management’s current judgments. We believe the following critical accounting policies involve the most significant estimates
and judgments used in the preparation of our financial statements.
Principles of consolidation
The accompanying consolidated financial statements
include the accounts of China Yida and its wholly-owned subsidiaries Keenway Limited, Hong Kong Yi Tat, Fuyu, Fujian Yida, Tulou,
Yongtai Yunding, Jiangxi Zhangshu, Jiangxi Fenyi, Yida Travel, Fenyi Development, Zhangshu Development, Zhangshu Investment, Yida
Arts, Yunding hotel, Jiangxi Travel and the accounts of its variable interest entity, Fujian Jiaoguang. All significant inter-company
accounts and transactions have been eliminated in consolidation.
Consolidation of Variable Interest Entities
According to the requirements of ASC 810, an
Interpretation of Accounting Research Bulletin No. 51 that requires a Variable Interest Entity ("VIE"), the Company has
evaluated the economic relationships of Fujian Jiaoguang which signed an exclusive right agreement with the Company. Therefore,
Fujian Jiaoguang is considered to be a VIE, as defined by ASC Topic 810-10, of which the Company is the primary beneficiary.
The carrying amount and classification of Fujian
Jiaoguang’s assets and liabilities included in the Consolidated Balance Sheets are as follows:
| |
December 31,
2014 | | |
December 31, 2013 | |
Total current assets * | |
$ | 4,407,430 | | |
$ | 12,244,845 | |
Total assets | |
$ | 4,415,085 | | |
$ | 12,252,536 | |
Total current liabilities # | |
$ | 13,352,110 | | |
$ | 11,193,422 | |
Total liabilities | |
$ | 13,352,110 | | |
$ | 11,193,422 | |
* Including intercompany receivables of $4,342,251
and $12,231,075 as at December 31, 2014 and 2013, respectively, to be eliminated in consolidation.
# Including intercompany payables of $13,321,547
and $11,169,092 as at December 31, 2014 and 2013, respectively, to be eliminated in consolidation.
Although Fujian Jiaoguang no longer had revenues,
its bank account still has to be maintained active with certain cash flows to support its expenses. As such, Fujian Jiaoguang transferred
funds from and to the Company’s directly-owned subsidiaries, which resulted in intercompany receivables and payables. Since
Fujian Jiaoguang is a variable interest entity subject to consolidation, the balances of its intercompany receivables and payables
are eliminated against the corresponding account balances at the Company’s directly-owned subsidiaries at the consolidation
level.
Use of estimates and assumptions
The preparation of the consolidated financial
statements in conformity with accounting principles generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the consolidated financial statements and the amount of revenues and expenses during the reporting periods. Management
makes these estimates using the best information available at the time the estimates are made. However, actual results could differ
materially from those results. The most significant estimates reflected in the consolidated financial statements include depreciation,
useful lives of property and equipment, deferred income taxes, useful life of intangible assets and contingencies. Estimates and
assumptions are periodically reviewed and the effects of revisions are reflected in the consolidated financial statements in the
period they are determined to be necessary.
Property and equipment
Property and equipment are recorded at cost
less accumulated depreciation. Gains or losses on disposals are reflected as gain or loss in the year of disposal. The cost of
improvements that extends the life of property, and equipment are capitalized. These capitalized costs may include structural improvements,
equipment, and fixtures. All ordinary repair and maintenance costs are expensed as incurred.
Depreciation for financial reporting purposes
is provided using the straight-line method over the estimated useful lives of the assets or lease term as follows:
Building |
20 years |
Electronic Equipment |
5 to 8 years |
Transportation Equipment |
8 years |
Office Furniture |
5 to 8 years |
Leasehold Improvement and Attractions |
Lesser of term of the lease or the estimated useful lives of the assets |
Intangible assets
Intangible assets consist of acquisition of
management right of tourism destinations, commercial airtime rights and land use rights for tourism destinations. They are amortized
on the straight line basis over their respective lease periods. The lease period of management right, commercial airtime rights
and land use rights is 30 years, 3 years and 40 years, respectively.
Impairment
The Company reviews long-lived assets for impairment
whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable through the estimated
undiscounted cash flows expected to result from the use and eventual disposition of the assets. Whenever any such impairment exists,
an impairment loss will be recognized for the amount by which the carrying value exceeds the fair value.
Assets are grouped and evaluated at the lowest
level for their identifiable cash flows that are largely independent of the cash flows of other groups of assets. The Company considers
historical performance and future estimated results in its evaluation of potential impairment and then compares the carrying amount
of the asset to the future estimated cash flows expected to result from the use of the asset. If the carrying amount of the asset
exceeds estimated expected undiscounted future cash flows, the Company measures the amount of impairment by comparing the carrying
amount of the asset to its fair value. The estimation of fair value is generally measured by discounting expected future cash flows
as the rate the Company utilizes to evaluate potential investments. The Company estimates fair value based on the information available,
judgments and projections are considered necessary. There was no impairment of long-lived assets as of December 31, 2014 and 2013.
Revenue recognition
Revenue is recognized at the date of service
rendered to customers when a formal arrangement exists, the price is fixed or determinable, the services rendered, no other significant
obligations of the Company exist and collectability is reasonably assured. Payments received before satisfaction of all of the
relevant criteria for revenue recognition are recorded as unearned revenue.
Revenues from advance tourism destinations
ticket sales are recognized when the tickets are used. Revenues from our contractors who have tourism contracts with us are generally
recognized over the period of the applicable agreements commencing with the tourists visiting the tourism destinations. The Company
also sells admission and activities tickets for a tourism destination which the Company has the management right.
The Company sold the television airtime to
third parties. The Company recorded advertising sales when advertisements were aired.
The Company has no allowance for product returns
or sales discounts because services that are rendered and accepted by the customers are normally not refundable and discounts are
normally not granted after service has been rendered.
Profit sharing costs are recorded as cost of
revenue. Profit sharing arrangements with the local governments for the management rights (see Note 14):
For the year ended December 31, 2014
| |
Tulou | |
| |
| |
Gross receipts | |
$ | 631,660 | |
| |
| | |
Profit sharing costs | |
| - | |
Nature resource compensation expenses | |
| 56,891 | |
Total paid to the local governments | |
| 56,891 | |
| |
| | |
Net receipts | |
$ | 574,769 | |
For the year ended December 31, 2013
| |
Tulou | |
| |
| |
Gross receipts | |
$ | 681,587 | |
| |
| | |
Profit sharing costs | |
| - | |
Nature resource compensation expenses | |
| 60,973 | |
Total paid to the local governments | |
| 60,973 | |
| |
| | |
Net receipts | |
$ | 620,614 | |
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 December 31, 2014 and 2013, respectively.
The Company applied the provisions of ASC 740-10-50,
“Accounting For Uncertainty In Income Taxes”, which provides clarification related to the process associated with accounting
for uncertain tax positions recognized in our financial statements. Audit periods remain open for review until the statute of limitations
has passed. The completion of review or the expiration of the statute of limitations for a given audit period could result in an
adjustment to the Company’s liability for income taxes. Any such adjustment could be material to the Company’s results
of operations for any given quarterly or annual period based, in part, upon the results of operations for the given period. At
December 31, 2014, management considered that the Company had no uncertain tax positions, and will continue to evaluate for uncertain
positions in the future.
China Yida is subject to U.S. Federal and California
state examination by tax authorities for years after 2008, and the PRC tax authority for years after 2007.
Fair values of financial instruments
The carrying amounts reported in the consolidated
financial statements for current assets and currently liabilities approximate fair value due to the short-term nature of these
financial instruments. The carrying amount of long-term loans approximates fair value since the interest rates associated with
the debts approximate the current market interest rates.
The Company adopted ASC 820-10, “Fair
Value Measurements and Disclosures”, which establishes a single authoritative definition of fair value and a framework for
measuring fair value and expands disclosure of fair value measurements for both financial and nonfinancial assets and liabilities.
This standard defines fair value, provides guidance for measuring fair value and requires certain disclosures. This standard does
not require any new fair value measurements, but discusses valuation techniques, such as the market approach (comparable market
prices), the income approach (present value of future income or cash flows) and the cost approach (cost to replace the service
capacity of an asset or replacement cost). For purposes of ASC 820-10-15, nonfinancial assets and nonfinancial liabilities would
include all assets and liabilities other than those meeting the definition of a financial asset or financial liability as defined
in ASC-820-10-15-15-1A.
Stock-based compensation
The Company records stock-based compensation
expense pursuant to ASC 718-10, "Share Based Payment Arrangement ” which requires companies to measure compensation
cost for stock-based employee compensation plans at fair value at the grant date and recognize the expense over the employee's
requisite service period. The Company’s expected volatility assumption is based on the historical volatility of Company’s
stock or the expected volatility of similar entities. The expected life assumption is primarily based on historical exercise patterns
and employee post-vesting termination behavior. The risk-free interest rate for the expected term of the option is based on the
U.S. Treasury yield curve in effect at the time of grant.
Stock-based compensation expense is recognized
based on awards expected to vest, and there were no estimated forfeitures as the Company has a short history of issuing options.
ASC 718-10 requires forfeitures to be estimated at the time of grant and revised in subsequent periods, if necessary, if actual
forfeitures differ from those estimates.
Recent accounting pronouncements
In August 2014, FASB issued ASU 2014-15 - Presentation
of Financial Statements - Going Concern (Subtopic 205-40). The amendments in this Update states the disclosure of uncertainties
about an entity’s ability to continue as a going concern. An entity’s management should evaluate whether there are
conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as
a going concern within one year after the date that the financial statements are issued (or available to be issued). When management
identifies conditions or events that raise substantial doubt, management should consider whether its plans will alleviate the substantial
doubt.
When substantial doubt is raised but is alleviated
by management’s plans, the entity should disclose following information: (a) Principal conditions or events that raised substantial
doubt (before consideration of management’s plans); (b) Management’s evaluation of the significance of those conditions
or events in relation to the entity’s ability to meet its obligations; (c) Management’s plans that alleviated the substantial
doubt.
When substantial doubt is raised but is not
alleviated by management’s plans,, an entity should include a statement in the footnotes indicating that there is substantial
doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements
are issued (or available to be issued), and disclose the following information: (a) Principal conditions or events that raise substantial
doubt; (b) Management’s evaluation of the significance of those conditions or events in relation to the entity’s ability
to meet its obligations; (c) Management’s plans that are intended to mitigate the conditions or events that raise the substantial
doubt.
The amendments in this Update are effective
for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application
is permitted. The Company is still in progress of evaluating future impact of adopting this standard.
In May 2014, the FASB issued ASU 2014-09, Revenue
from Contracts with Customers (Topic 606). The core principle of the guidance is that an entity should recognize revenue to depict
the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects
to be entitled in exchange for those goods or services. To achieve the core principle, an entity should apply the following steps:
Step 1: Identify the contract(s) with a customer.
Step 2: Identify the performance obligations
in the contract.
Step 3: Determine the transaction price.
Step 4: Allocate the transaction price to the
performance obligations in the contract.
Step 5: Recognize revenue when (or as) the
entity satisfies a performance obligation.
An entity should disclose sufficient information
to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising
from contracts with customers. For a public entity, the amendments in this Update are effective for annual reporting periods beginning
after December 15, 2016, including interim periods within that reporting period. Early application is not permitted. For all other
entities (nonpublic entities), the amendments in this Update are effective for annual reporting periods beginning after December
15, 2017, and interim periods within annual periods beginning after December 15, 2018. A nonpublic entity may elect to apply this
guidance earlier. The Company has begun evaluating future impact of adopting this standard on the Company’s consolidated
financial position and operating results.
In April 2014, the FASB issued ASU 2014-08,
Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360). The amendments in this Update
change the requirements for reporting discontinued operations in Subtopic 205-20. A discontinued operation may include a component
of an entity or a group of components of an entity, or a business or nonprofit activity. A disposal of a component of an entity
or a group of components of an entity is required to be reported in discontinued operations if the disposal represents a strategic
shift that has (or will have) a major effect on an entity’s operations and financial results. The amendments in this Update
require an entity to present, for each comparative period, the assets and liabilities of a disposal group that includes a discontinued
operation separately in the asset and liability sections, respectively, of the statement of financial position. The amendments
in this Update require a public business entity and a not-for-profit entity that has issued, or is a conduit bond obligor for,
securities that are traded, listed, or quoted on an exchange or an over-the-counter market to provide disclosures about a disposal
of an individually significant component of an entity that does not qualify for discontinued operations presentation in the financial
statements. The amendments in this Update require all other entities to provide disclosures about a disposal of an individually
significant component of an entity that does not qualify for discontinued operations presentation in the financial statements.
The amendments in this Update expand the disclosures about an entity’s significant continuing involvement with a discontinued
operation. Those disclosures are required until the results of operations of the discontinued operation in which an entity retains
significant continuing involvement are no longer presented separately as discontinued operations in the statement where net income
is reported (or statement of activities for a not-for-profit entity). The adoption of this standard is not expected to have a material
impact on the Company’s consolidated financial position and results of operations.
In January 2014, the FASB issued ASU 2014-02,
Intangibles-Goodwill and Other (Topic 350): Accounting for Goodwill. The amendments in this Update allow an accounting alternative
for the subsequent measurement of goodwill. An entity within the scope of the amendments that elects the accounting alternative
in this Update should amortize goodwill on a straight-line basis over 10 years, or less than 10 years if the entity demonstrates
that another useful life is more appropriate. An entity that elects the accounting alternative is further required to make an accounting
policy election to test goodwill for impairment at either the entity level or the reporting unit level. Goodwill should be tested
for impairment when a triggering event occurs that indicates that the fair value of an entity (or a reporting unit) may be below
its carrying amount. The disclosures required under this alternative are similar to existing U.S. generally accepted accounting
principles (GAAP). However, an entity that elects the accounting alternative is not required to present changes in goodwill in
a tabular reconciliation. The accounting alternative, if elected, should be applied prospectively to goodwill existing as of the
beginning of the period of adoption and new goodwill recognized in annual periods beginning after December 15, 2014, and interim
periods within annual periods beginning after December 15, 2015. Early application is permitted. The adoption of this standard
is not expected to have a material impact on the Company’s consolidated financial position and results of operations.
In December 2013, the FASB issued ASU 2013-12,
“Definition of a Public Business Entity”. The Board has decided that it should proactively determine which entities
would be within the scope of the Private Company Decision-Making Framework: A Guide for Evaluating Financial Accounting and Reporting
for Private Companies (Guide). This will aim to minimize the inconsistency and complexity of having multiple definitions of, or
a diversity in practice as to what constitutes, a nonpublic entity and public entity within U.S. generally accepted accounting
principles (GAAP) on a going-forward basis. This Update addresses those issues by defining public business entity. The Accounting
Standards Codification includes multiple definitions of the terms nonpublic entity and public entity. The amendment in this Update
improves U.S. GAAP by providing a single definition of public business entity for use in future financial accounting and reporting
guidance. The amendment does not affect existing requirements. There is no actual effective date for the amendment in this Update.
However, the term public business entity will be used in Accounting Standards Updates which are the first Updates that will use
the term public business entity. The adoption of this standard is not expected to have a material impact on the Company’s
consolidated financial position and results of operations.
In July 2013, the FASB issued ASU 2013-11,
“Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar
Tax Loss, or a Tax Credit Carryforward Exists.” An unrecognized tax benefit, or a portion of an unrecognized tax benefit,
should be presented in the financial statements as a reduction to a deferred tax asset. To the extent a net operating loss carryforward,
a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction
to settle any additional income taxes that would result from the disallowance of a tax position or the tax law of the applicable
jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose,
the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred
tax assets. The assessment of whether a deferred tax asset is available is based on the unrecognized tax benefit and deferred tax
asset that exist at the reporting date and should be made presuming disallowance of the tax position at the reporting date. For
public entities, the guidance is effective prospectively for reporting periods beginning after December 15, 2013. For nonpublic
entities, the guidance is effective prospectively for reporting periods beginning after December 15, 2014. Early adoption is permitted.
The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial position
and results of operations.
In February 2013, the FASB issued ASU 2013-02,
“Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income.”
This ASU does not change the current requirements for reporting net income or other comprehensive income in financial statements.
However, this guidance requires an entity to provide information about the amounts reclassified out of accumulated other comprehensive
income by component. In addition, an entity is required to present, either on the face of the statement where net income is presented
or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of
net income but only if the amount reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in
the same reporting period. For other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net
income, an entity is required to cross-reference to other disclosures required under U.S. GAAP that provide additional detail about
those amounts. For public entities, the guidance is effective prospectively for reporting periods beginning after December 15,
2012. For nonpublic entities, the guidance is effective prospectively for reporting periods beginning after December 15, 2013.
Early adoption is permitted. The adoption of this standard is not expected to have a material impact on the Company’s consolidated
financial position and results of operations.
Inflation and Seasonality
Our operating results and operating cash flows
historically have not been materially affected by inflation or seasonality.
Off Balance Sheet Arrangements
We do not have any off balance sheet arrangements
that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition,
sales or expenses, results of operations, liquidity or capital expenditures, or capital resources that are material to an investment
in our securities.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK.
Not applicable because we are a small reporting
company.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
CHINA YIDA HOLDING, CO. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
Index to consolidated financial statements
|
Page |
Report of Independent Registered Public Accounting Firm |
F-1 |
Consolidated Balance Sheets as of December 31, 2014 and 2013 |
F-2 |
Consolidated Statements of Income and Comprehensive Income for the years ended December 31, 2014 and 2013 |
F-3 |
Consolidated Statements of Equity for the years ended December 31, 2014 and 2013 |
F-4 |
Consolidated Statements of Cash Flows for the years ended December 31, 2014 and 2013 |
F-5 |
Notes to the Consolidated Financial Statements |
F-6 - F-32 |
![](image_001.jpg) |
Audit
• Tax•
Consulting • Financial
Advisory
Registered with Public Company
Accounting Oversight Board (PCAOB) |
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
of: China Yida Holding, Co.
We
have audited the accompanying consolidated balance sheets of China Yida Holding, Co. and Subsidiaries (the “Company”)
as of December 31, 2014 and 2013, and the related consolidated statements of income and comprehensive income, equity and cash flows
for the years then ended. The Company’s management is responsible for these consolidated financial statements. Our responsibility
is to express an opinion on these consolidated financial statements based on our audits.
We
conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial
reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s
internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial statements, assessing accounting principles used and significant
estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provide
a reasonable basis for our opinion.
In our
opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial
position of China Yida Holding, Co. and Subsidiaries as of December 31, 2014 and 2013, and the consolidated results of their operations
and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States
of America.
The
accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As
described in Note 2 of the consolidated financial statements, the Company has incurred significant negative cash flows from operative
activities, and continuing net losses and working capital deficits. The Company’s viability is dependent upon its ability
to obtain future financing and the success of its future operations. These matters raise substantial doubt about the Company’s
ability to continue as a going concern. Management’s plan in regard to these matters is also described in Note 2 to the consolidated
financial statements. The consolidated financial statements do not include any adjustments that might result from the outcome of
this uncertainty.
/s/ KCCW Accountancy Corp.
Diamond
Bar, California March 31, 2015
CHINA YIDA HOLDING CO. AND SUBSIDIARIES |
CONSOLIDATED BALANCE SHEETS |
| |
December 31, | | |
December 31, | |
| |
2014 | | |
2013 | |
| |
| | |
| |
ASSETS | |
| | |
| |
Current assets | |
| | |
| |
Cash and cash equivalents | |
$ | 958,664 | | |
$ | 2,157,738 | |
Accounts receivable | |
| 343,807 | | |
| 571,637 | |
Other receivables, net | |
| 148,828 | | |
| 268,835 | |
Advances and prepayments | |
| 838,933 | | |
| 1,361,194 | |
Prepayment - current portion | |
| 832,207 | | |
| 659,050 | |
Current assets of discontinued operations | |
| - | | |
| 587,329 | |
Total current assets | |
| 3,122,439 | | |
| 5,605,783 | |
| |
| | | |
| | |
Property and equipment, net | |
| 181,613,405 | | |
| 182,719,628 | |
Intangible assets, net | |
| 46,419,350 | | |
| 47,837,641 | |
Long-term prepayments | |
| 2,032,764 | | |
| 2,707,374 | |
Non-current assets of discontinued operations | |
| - | | |
| 37,730,857 | |
Total assets | |
$ | 233,187,958 | | |
$ | 276,601,283 | |
| |
| | | |
| | |
LIABILITIES AND STOCKHOLDERS' EQUITY | |
| | | |
| | |
Current liabilities | |
| | | |
| | |
Short-term loans | |
$ | 1,954,047 | | |
$ | 2,454,108 | |
Long-term debt, current portion | |
| 3,256,746 | | |
| 6,871,502 | |
Accounts payable | |
| 713,414 | | |
| 565,694 | |
Accrued expenses and other payables | |
| 1,364,863 | | |
| 1,019,391 | |
Due to related parties | |
| 31,680,942 | | |
| 35,596,962 | |
Taxes payable | |
| 38,922 | | |
| 27,895 | |
Current liabilities of discontinued operations | |
| - | | |
| 2,110,055 | |
Total current liabilities | |
| 39,008,934 | | |
| 48,645,607 | |
| |
| | | |
| | |
Long-term debt | |
| 83,047,011 | | |
| 78,531,462 | |
Non-current liabilities of discontinued operations | |
| - | | |
| 8,135,018 | |
Total liabilities | |
| 122,055,945 | | |
| 135,312,087 | |
| |
| | | |
| | |
Equity | |
| | | |
| | |
Preferred stock ($0.0001 par value, 10,000,000 shares authorized, none issued and outstanding) | |
| - | | |
| - | |
Common stock ($0.001 par value, 100,000,000 shares authorized, 3,914,580 and 3,914,580 shares issued and outstanding as of December 31, 2014 and 2013, respectively) | |
| 3,915 | | |
| 3,915 | |
Additional paid in capital | |
| 49,163,705 | | |
| 49,163,705 | |
Accumulated other comprehensive income | |
| 17,512,681 | | |
| 18,388,750 | |
Retained earnings | |
| 41,902,382 | | |
| 71,183,496 | |
Statutory reserve | |
| 2,549,330 | | |
| 2,549,330 | |
Total equity | |
| 111,132,013 | | |
| 141,289,196 | |
Total liabilities and equity | |
$ | 233,187,958 | | |
$ | 276,601,283 | |
The accompanying notes are an integral part of these consolidated financial statements.
CHINA YIDA HOLDING CO. AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME |
FOR THE YEARS ENDED DECEMBER 31 |
| |
2014 | | |
2013 | |
Net revenue | |
| | |
| |
Advertisement | |
$ | - | | |
$ | 2,910,612 | |
Tourism | |
| 13,124,152 | | |
| 9,457,821 | |
| |
| | | |
| | |
Total net revenue | |
| 13,124,152 | | |
| 12,368,433 | |
| |
| | | |
| | |
Cost of revenue | |
| | | |
| | |
Advertisement | |
| - | | |
| 2,045,765 | |
Tourism | |
| 9,053,904 | | |
| 4,214,436 | |
| |
| | | |
| | |
Total cost of revenue | |
| 9,053,904 | | |
| 6,260,201 | |
| |
| | | |
| | |
Gross profit | |
| 4,070,248 | | |
| 6,108,232 | |
| |
| | | |
| | |
Operating expenses | |
| | | |
| | |
Selling expenses | |
| 10,037,292 | | |
| 9,582,502 | |
General and administrative expenses | |
| 7,595,484 | | |
| 7,527,230 | |
| |
| | | |
| | |
Total operating expenses | |
| 17,632,776 | | |
| 17,109,732 | |
| |
| | | |
| | |
Loss from operations | |
| (13,562,528 | ) | |
| (11,001,500 | ) |
| |
| | | |
| | |
Other income (expense) | |
| | | |
| | |
Other expense, net | |
| (394,144 | ) | |
| (119,700 | ) |
Interest income | |
| 10,672 | | |
| 82,821 | |
Interest expense | |
| (8,207,752 | ) | |
| (5,538,473 | ) |
| |
| | | |
| | |
Total other expenses | |
| (8,591,224 | ) | |
| (5,575,352 | ) |
| |
| | | |
| | |
Loss before income tax and non-controlling interest | |
| (22,153,752 | ) | |
| (16,576,852 | ) |
| |
| | | |
| | |
Less: Provision for income tax | |
| - | | |
| 133,323 | |
| |
| | | |
| | |
Net loss from continuing operations | |
| (22,153,752 | ) | |
| (16,710,175 | ) |
| |
| | | |
| | |
Discontinued Operation | |
| | | |
| | |
Loss from discontinued operations, net of income taxes | |
| (616,732 | ) | |
| (643,355 | ) |
(Loss) gain on disposal of subsidiary, net of income
taxes | |
| (6,510,630 | ) | |
| 999,133 | |
| |
| | | |
| | |
Net (loss) income from discontinued
operations, net of income taxes | |
| (7,127,362 | ) | |
| 355,778 | |
| |
| | | |
| | |
Net loss | |
| (29,281,114 | ) | |
| (16,354,397 | ) |
| |
| | | |
| | |
Net loss attributable to non-controlling interest: | |
| | | |
| | |
Net loss from discontinued operation | |
| - | | |
| 102,215 | |
| |
| | | |
| | |
Net loss attributable to China Yida Holding Co. | |
$ | (29,281,114 | ) | |
$ | (16,252,182 | ) |
| |
| | | |
| | |
Net loss | |
$ | (29,281,114 | ) | |
$ | (16,354,397 | ) |
| |
| | | |
| | |
Other comprehensive income | |
| | | |
| | |
Foreign currency translation (loss) gain | |
| (876,069 | ) | |
| 4,308,861 | |
| |
| | | |
| | |
Comprehensive loss | |
| (30,157,183 | ) | |
| (12,045,536 | ) |
| |
| | | |
| | |
| |
| | | |
| | |
Comprehensive income attributable to non-controlling interest | |
| - | | |
| 390,730 | |
| |
| | | |
| | |
Comprehensive loss attributable to China Yida Holding Co. | |
$ | (30,157,183 | ) | |
$ | (11,654,806 | ) |
| |
| | | |
| | |
Amounts attributable to common stockholders: | |
| | | |
| | |
Net loss from continuing operations, net of income taxes | |
| (22,153,752 | ) | |
| (16,710,175 | ) |
Net (loss) income from
discontinued operations, net of income taxes | |
| (7,127,362 | ) | |
| 457,993 | |
Net loss attributable to common stockholders | |
| (29,281,114 | ) | |
| (16,252,182 | ) |
| |
| | | |
| | |
Net loss attributable to common stockholders per share - basic and diluted: | |
| | | |
| | |
- Basic & diluted earnings/(loss) per share from continuing operations | |
$ | (5.66 | ) | |
$ | (4.27 | ) |
- Basic & diluted earnings/(loss) per share from discontinued operations | |
$ | (1.82 | ) | |
$ | 0.12 | |
- Basic & diluted earnings/(loss) per share attributable to common stockholders | |
$ | (7.48 | ) | |
$ | (4.15 | ) |
| |
| | | |
| | |
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 consolidated financial statements.
CHINA YIDA HOLDING CO. AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF EQUITY |
FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013 |
| |
Common Stock | | |
Additional | | |
Accumulated other | | |
| | |
| | |
Non- | | |
| |
| |
Number
of shares | | |
Par
Value | | |
paid-in
capital | | |
comprehensive income | | |
Retained
earnings | | |
Statutory
reserve | | |
controlling interest | | |
Total | |
| |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
Balance at December 31, 2012 | |
| 3,914,580 | | |
$ | 3,915 | | |
$ | 49,163,705 | | |
$ | 13,791,374 | | |
$ | 87,435,678 | | |
$ | 2,549,330 | | |
$ | 5,789,048 | | |
$ | 158,733,050 | |
Foreign currency translation | |
| - | | |
| - | | |
| - | | |
| 4,597,376 | | |
| - | | |
| - | | |
| (288,515 | ) | |
| 4,308,861 | |
Deconsolidation of Anhui Yida | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (5,398,318 | ) | |
| (5,398,318 | ) |
Net loss for the year ended December 31, 2013 | |
| - | | |
| - | | |
| - | | |
| - | | |
| (16,252,182 | ) | |
| - | | |
| (102,215 | ) | |
| (16,354,397 | ) |
Balance at December 31, 2013 | |
| 3,914,580 | | |
$ | 3,915 | | |
$ | 49,163,705 | | |
$ | 18,388,750 | | |
$ | 71,183,496 | | |
$ | 2,549,330 | | |
$ | - | | |
$ | 141,289,196 | |
Foreign currency translation | |
| - | | |
| - | | |
| - | | |
| (876,069 | ) | |
| - | | |
| - | | |
| - | | |
| (876,069 | ) |
Net loss for the year ended December 31, 2014 | |
| - | | |
| - | | |
| - | | |
| - | | |
| (29,281,114 | ) | |
| - | | |
| - | | |
| (29,281,114 | ) |
Balance at December 31, 2014 | |
| 3,914,580 | | |
$ | 3,915 | | |
$ | 49,163,705 | | |
$ | 17,512,681 | | |
$ | 41,902,382 | | |
$ | 2,549,330 | | |
$ | - | | |
$ | 111,132,013 | |
The accompanying notes are an integral part of these consolidated financial statements.
CHINA YIDA HOLDING CO. AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF CASH FLOWS |
| |
2014 | | |
2013 | |
| |
| | |
(Restated) | |
CASH FLOWS FROM OPERATING ACTIVITIES | |
| |
Net loss | |
$ | (29,281,114 | ) | |
$ | (16,354,397 | ) |
Loss from discontinued operations | |
| 616,732 | | |
| 643,356 | |
Adjustments to reconcile net income to net cash provided by operating activities: | |
| | | |
| | |
Loss (gain) on disposal of discontinued operation | |
| 6,510,630 | | |
| (999,133 | ) |
Depreciation | |
| 8,476,262 | | |
| 5,014,150 | |
Amortization | |
| 1,192,192 | | |
| 1,656,201 | |
Amortization of financing costs | |
| - | | |
| 609,897 | |
Changes in operating assets and liabilities: | |
| | | |
| | |
Accounts receivable | |
| 224,949 | | |
| (381,179 | ) |
Other receivables, net | |
| 90,911 | | |
| (106,431 | ) |
Advances and prepayments | |
| 515,433 | | |
| (44,510 | ) |
Accounts payable | |
| 150,255 | | |
| 508,534 | |
Accrued expenses and other payables | |
| 349,953 | | |
| 496,683 | |
Taxes payable | |
| 38,889 | | |
| (469,513 | ) |
Net cash used in continuing operations | |
| (11,114,907 | ) | |
| (9,426,342 | ) |
Net cash provided by (used in) discontinued operations | |
| 705,499 | | |
| (300,087 | ) |
Net cash used in operating activities | |
| (10,409,408 | ) | |
| (9,726,429 | ) |
| |
| | | |
| | |
CASH FLOWS FROM INVESTING ACTIVITIES | |
| | | |
| | |
Proceeds from disposal of discontinued entities | |
| 35,570,385 | | |
| 9,616,155 | |
Additions to property and equipment | |
| (8,229,799 | ) | |
| (74,668,705 | ) |
Change in long-term prepayments for acquisition of property, equipment and land use rights | |
| 485,330 | | |
| (1,118,332 | ) |
Net cash provided by (used in) continuing operations | |
| 27,825,916 | | |
| (66,170,882 | ) |
Net cash provided by (used in) discontinued operations | |
| 471,410 | | |
| (552,054 | ) |
Net cash provided by (used in) investing activities | |
| 28,297,326 | | |
| (66,722,936 | ) |
| |
| | | |
| | |
CASH FLOWS FROM FINANCING ACTIVITIES | |
| | | |
| | |
Repayment of obligation under airtime rights commitment | |
| - | | |
| (1,572,953 | ) |
Proceeds from short-term loans | |
| 4,555,586 | | |
| 6,457,550 | |
Repayment of short-term loans | |
| (5,043,685 | ) | |
| (5,650,356 | ) |
Proceeds from long-term loans | |
| 48,807,057 | | |
| 53,274,785 | |
Repayment of long-term loans | |
| (47,508,257 | ) | |
| (13,399,416 | ) |
(Repayment of) proceeds from loans
from related parties | |
| (3,767,951 | ) | |
| 35,181,117 | |
Net cash (used in) provided by continuing operations | |
| (2,957,250 | ) | |
| 74,290,727 | |
Net cash used in discontinued operations | |
| (16,196,038 | ) | |
| (2,119,459 | ) |
Net cash (used in) provided by financing activities | |
| (19,153,288 | ) | |
| 72,171,268 | |
| |
| | | |
| | |
EFFECT OF EXCHANGE RATE CHANGES ON CASH | |
| (187,466 | ) | |
| 170,863 | |
| |
| | | |
| | |
NET DECREASE IN CASH AND CASH EQUIVALENTS | |
| (1,452,836 | ) | |
| (4,107,234 | ) |
| |
| | | |
| | |
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD | |
| 2,415,575 | (1) | |
| 6,572,995 | (2) |
CASH AND CASH EQUIVALENTS, ENDING OF PERIOD | |
$ | 962,739 | (3) | |
$ | 2,465,761 | (4) |
| |
| | | |
| | |
SUPPLEMENTAL DISCLOSURES: | |
| | | |
| | |
Non-cash investing activities: | |
| | | |
| | |
Transfer from advances and prepayments to intangible assets | |
$ | - | | |
$ | 439,629 | |
| |
| | | |
| | |
Cash paid during the period for: | |
| | | |
| | |
Income tax | |
$ | - | | |
$ | 133,323 | |
Interest | |
$ | 8,207,752 | | |
$ | 8,428,741 | |
(1) Included cash and cash equivalents from continuing
and discontinued operations of $2,157,738 and $257,837, respectively.
(2) Included cash and cash equivalents from continuing
and discontinued operations of $3,542,460 and $3,030,535, respectively.
(3) Included cash and cash equivalents from continuing
and discontinued operations of $958,664 and $4,075 respectively.
(4) Included cash and cash equivalents from continuing and discontinued operations of $2,157,738
and $308,023, respectively.
The accompanying notes are an integral part of these consolidated
financial statements.
CHINA
YIDA HOLDING, CO. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
1. |
ORGANIZATION
AND DESCRIPTION OF BUSINESS |
China
Yida Holding Co. (“China Yida”) and its subsidiaries (collectively the "Company”, “we”,
“us”, or “our”) engage in tourism and advertisement businesses in the People’s Republic of
China.
Keenway
Limited was incorporated under the laws of the Cayman Islands on May 9, 2007 for the purpose of functioning as an off-shore holding
company to obtain ownership interests in Hong Kong Yi Tat International Investment Co., Ltd (“Hong Kong Yi Tat”),
a company incorporated under the laws of Hong Kong. Immediately prior to the Merger (defined below), Mr. Chen Minhua and
his wife, Ms. Fan Yanling, were the majority shareholders of Keenway Limited.
On
November 19, 2007, we entered into a share exchange and stock purchase agreement with Keenway Limited, Hong Kong Yi Tat, and with the
shareholders of Keenway Limited at that time, including Chen Minhua, Fan Yanling, Zhang Xinchen, Extra Profit International Limited,
and Lucky Glory International Limited (collectively, the “Keenway Limited Shareholders”), pursuant to which in exchange
for all of their shares of Keenway Limited common stock, the Keenway Limited Shareholders received 18,180,649 newly issued shares
(or 90,903,246 shares prior to the reverse stock split on November 16, 2012) of our common stock and 728,359 shares (or 3,641,796
shares prior to the reverse stock split on November 16, 2012) of our common stock which was transferred from some of our then
existing shareholders (the “Merger”). As a result of the closing of the Merger, the Keenway Limited Shareholders
owned approximately 94.5% of our then issued and outstanding shares on a fully diluted basis and Keenway Limited became our wholly
owned subsidiary.
Hong
Kong Yi Tat was incorporated as the holding company of our operating entities, Fujian Jintai Tourism Development Co., Ltd., and
Fujian Jiaoguang Media Co., Ltd., Yida (Fujian) Tourism Group Limited, and Fujian Yida Tulou Tourism Development Co., Ltd. (“Tulou”). Hong
Kong Yi Tat does not have any other operation.
Fujian
Jintai Tourism Development Co., Ltd. (“Fujian Jintai”) has a wholly owned subsidiary, Fuzhou Hongda Commercial Services
Co., Ltd., (“Hongda”). The operation of Fujian Jintai is to develop the Great Golden Lake, one of our tourism
destinations.
Hongda
does not have any operation except for owning 100% of the ownership interest in Fuzhou Fuyu Advertising Co., Ltd. (“Fuyu”)
which is engaged in the operations of our media business. On March 15, 2010, Hongda entered into an equity transfer agreement
with Fujian Yunding Tourism Industrial Co., Ltd, (currently known as Yida (Fujian) Tourism Group Limited, “Fujian Yunding”),
pursuant to which Fujian Yunding acquired 100% of the issued and outstanding shares of Fuyu from Hongda at the aggregate purchase
price of RMB 3,000,000. As a result, Fujian Yunding became the 100% holding company of Fuyu. Hongda ceased business
and deregistered on December 2, 2011.
Fujian
Jintai originally also owned 100% of the ownership interest in Fujian Yintai Tourism Co., Ltd. (“Yintai”). On March
15, 2010, Fujian Jintai entered into an equity transfer agreement with Fujian Yunding, pursuant to which Fujian Yunding acquired
100% of the issued and outstanding common stock of Yintai from Fujian Jintai at the aggregate purchase price of RMB 5,000,000.
As a result, Yintai became a wholly owned subsidiary of Fujian Yunding. Yintai was deregistered on November 18, 2010.
Fujian
Yida Tulou Tourism Development Co., Ltd.’s (“Tulou”) primary business relates to the operation of the Hua’An
Tulou cluster, one of our tourism destinations.
On
April 12, 2010, our operating subsidiary “Fujian Yunding Tourism Industrial Co., Ltd.” changed its name to “Yida
(Fujian) Tourism Group Limited” for our expanding business in operations of domestic tourism destinations in China by acquiring
new tourism destinations. Yida (Fujian) Tourism Group Limited’s (“Fujian Yida”) primary business relates to
the operations of our Yunding tourism destination and all of our newly engaged tourism destinations, and the management of our
media business.
On
March 16, 2010, Fujian Yida formed a wholly owned subsidiary, Yongtai Yunding Resort Management Co., Ltd. (“Yongtai Yunding”)
which currently has no material business operations. We plan to develop Yongtai Yunding into a business entity primarily focusing
on the operations of our Yunding tourism destination.
Fujian
Jiaoguang Media Co., Ltd. (“Fujian Jiaoguang”) and the Company’s contractual relationship comply with the requirements
of the Accounting Standard Codification ("ASC") 810, to consolidate Fujian Jiaoguang’s financial statements as
a Variable Interest Entity. During the current period, Fujian Jiaoguang had no material business operations.
Fuzhou
Fuyu Advertising Co., Ltd. (“Fuyu”) concentrates on the mass media segment of our business. Its primary
business is focused on advertisements, including media publishing, television, cultural and artistic communication activities,
and performance operation and management activities.
On
April 15, 2010, we entered into agreement with Anhui Xingguang Group to set up a subsidiary - Anhui Yida Tourism Development Co.,
Ltd. ("Anhui Yida") by investing 60% of the equity interest, and Anhui Xingguang Group owns 40% of the equity interest
of Anhui Yida. The total paid-in capital of Anhui Yida was $14,687,307 (equals RMB 100 million). Anhui Yida's primary business
relates to the operation of our tourism destinations, specifically, Ming dynasty culture tourist destination.
CHINA
YIDA HOLDING, CO. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
1. |
ORGANIZATION
AND DESCRIPTION OF BUSINESS (CONTINUED) |
On
July 6, 2010, Fujian Yida formed a wholly owned subsidiary, Jiangxi Zhangshu (Yida) Tourism Development Co., Ltd. (“Jiangxi
Zhangshu”) which currently has no material business operations. The initial paid-in capital of Jiangxi Zhangshu was $2,937,461
(RMB 20 million). On July 5, 2011, Fujian Yida and Fuyu further injected capital amounted to RMB 49 million and RMB1 million,
respectively, to Jiangxi Zhangshu. On March 20, 2012, Fujian Yida and Fuyu further injected capital amounted to RMB 29.4 million
and RMB 0.6 million, respectively, to Jiangxi Zhangshu, and the total paid-in capital increased to $15,842,337 (RMB100 million).
We plan to develop Jiangxi Zhangshu into a business entity primarily focusing on the operations of a new tourist destination.
On
July 7, 2010, Fujian Yida formed a wholly owned subsidiary, Jiangxi Fenyi (Yida) Tourism Development Co., Ltd. (“Jiangxi
Fenyi”) which currently has no material business operations. The initial paid-in capital of Jiangxi Fenyi was $1,762,477
(RMB 12 million). On July 7, 2011, Fujian Yida further injected capital amounted to RMB 48 million to Jiangxi Fenyi
and the total paid-in capital increased to $9,391,876 (RMB 60 million). We plan to develop Jiangxi Fenyi into a business entity
primarily focusing on the operations of a new tourist destination.
On
June 24, 2011, Fujian Yida formed a wholly owned subsidiary, Fujian Yida Travel Service Co., Ltd (the “Yida Travel”).
The total paid-in capital of Yida Travel was $1,546,670 (RMB 10 million). Its primary business is to conduct domestic
and international traveling services in China, including operating the direct sales of travel services for our current tourist
destinations at the Great Golden Lake, Yunding Recreational Park, and Hua’An Tulou Cluster, and our three tourist destinations
currently under construction, Ming Dynasty Entertainment World, China Yang-sheng (Nourishing Life) Paradise, and the City of Caves.
On
May 11, 2012, Jiangxi Zhangshu formed a wholly owned subsidiary, Zhangshu (Yida) Real Estate Development Co., Ltd. (“Zhangshu
Development”). The total paid-in capital of Zhangshu Development was $792,532 (RMB 5 million). Its primary business is to
conduct business of real estate development and sales in China.
On
May 16, 2012, Anhui Yida formed a wholly owned subsidiary, Bengbu (Yida) Real Estate Development Co., Ltd. (the “Bengbu
Yida”). The total paid-in capital of Bengbu Yida was $1,268,050 (RMB 8 million). Its primary business is to conduct business
of real estate development in China.
On
May 22, 2012, Jiangxi Zhangshu formed a wholly owned subsidiary, Zhangshu (Yida) Investment Co., Ltd. (the “Zhangshu Investment”).
The total paid-in capital of Zhangshu Investment was $792,532 (RMB 5 million). Its primary business is to conduct real estate
investment, project management and consulting in China.
On
June 6, 2012, Jiangxi Fenyi formed a wholly owned subsidiary, Fenyi (Yida) Property Development Co., Ltd. (“Fenyi
Development”). The total paid-in capital of Fenyi Development was $792,532 (RMB 5 million). Its primary business is to conduct
business of real estate development and sales in China.
On
July 20, 2012, Anhui Yida formed a wholly owned subsidiary, Bengbu (Yida) Investment Co., Ltd. (“Bengbu Investment”).
The total paid-in capital of Bengbu Investment was $792,532 (RMB 5 million). Its primary business is to conduct real estate investment,
project management and consulting in China.
On
July 30, 2012, Fujian Yida formed a wholly owned subsidiary, Fujian (Yida) Culture and Tourism Performing Arts Co., Ltd. (“Yida
Arts”). The total paid-in capital of Yida Arts was $792,532 (RMB 5 million). Its primary business is to operate performance
and show events at Yunding Park.
On
June 3, 2013, Fujian Yida entered into a stock transfer agreement with Anhui Xingguang Investment Group Ltd (“Purchaser”),
pursuant to which Fujian Yida agreed to transfer its 60% interest in Anhui Yida to the Purchaser for 60 million RMB, or $9.72
million, The Purchaser assumed all the assets and liabilities of Anhui Yida.
On
June 26, 2013, Fujian Yida formed a wholly owned subsidiary, Yunding Hotel Management Co., Ltd. (“Yunding Hotel”).
The total paid-in capital of Yunding Hotel was $4,860,000 (RMB 30 million). Its primary business is to operate and manage
the hotel and its facilities at Yunding Park.
On
June 24, 2014, Jiangxi Zhangshu formed a wholly owned subsidiary, Jiangxi Yida Travel Service Co., Ltd (“Jiangxi Travel”).
The total paid-in capital of Zhangshu Development was $48,691 (RMB 0.3 million). Its primary business is to conduct domestic and
international traveling services in China.
On August 26, 2014, Hong Kong Yi Tat entered into a certain share transfer agreement
with Fujian Taining Great Golden Lake Tourism Economic Development Industrial Co., Ltd. (the “Purchaser”), pursuant
to which Hong Kong Yi Tat agreed to sell 100% of its equity interest in Fujian Jintai to the Purchaser for a price of RMB 228,801,359,
or approximately $37 million.
CHINA
YIDA HOLDING, CO. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
The
Company’s consolidated financial statements are prepared using generally accepted accounting principles in the United States
of America applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in
the normal course of business. The Company has incurred significant negative cash flows from operative activities, and continuing
net losses and working capital deficits that allow it to continue as a going concern. The ability of the Company to continue as
a going concern is dependent on the Company’s ability to obtain adequate capital to fund operating losses until it becomes
profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations. The accompanying consolidated
financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
Management’s
Plan to Continue as a Going Concern
In
order to continue as a going concern, the Company will need, among other things, additional capital resources. Management’s
plans to obtain such resources for the Company include (1) obtaining capital from the sale of its substantial assets, (2) generating
and recovery of tourism revenue, and (3) short-term and long-term borrowings from banks, stockholders or other related party(ies).
However, management cannot provide any assurance that the Company will be successful in accomplishing any of its plans.
The
ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described
in the preceding paragraph and eventually to secure other sources of financing and attain profitable operations.
3. |
BASIS
OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
a.
Basis of presentation
The
accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted
in the United States of America. The functional currency is the Chinese Renminbi, however the accompanying consolidated financial
statements have been translated and presented in United States Dollars ($).
b.
Principles of consolidation
The
accompanying consolidated financial statements include the accounts of China Yida and its wholly-owned subsidiaries
Keenway Limited, Hong Kong Yi Tat, Fuyu, Fujian Yida, Tulou, Yongtai Yunding, Jiangxi Zhangshu, Jiangxi Fenyi, Yida Travel, Fenyi
Development, Zhangshu Development, Zhangshu Investment, Yida Arts, Yunding hotel, Jiangxi Travel and the accounts of its
variable interest entity, Fujian Jiaoguang. All significant inter-company accounts and transactions have been eliminated in consolidation
Consolidation
of Variable Interest Entities
According
to the requirements of ASC 810, an Interpretation of Accounting Research Bulletin No. 51 that requires a Variable Interest Entity
("VIE"), the Company has evaluated the economic relationships of Fujian Jiaoguang which signed an exclusive right agreement
with the Company. Therefore, Fujian Jiaoguang is considered to be a VIE, as defined by ASC Topic 810-10, of which the Company
is the primary beneficiary.
The
carrying amount and classification of Fujian Jiaoguang’s assets and liabilities included in the Consolidated Balance Sheets
are as follows:
| |
December 31, 2014 | | |
December 31, 2013 | |
Total current assets * | |
$ | 4,407,430 | | |
$ | 12,244,845 | |
Total assets | |
$ | 4,415,085
| | |
$ | 12,252,536 | |
Total current liabilities # | |
$ | 13,352,110 | | |
$ | 11,193,422 | |
Total liabilities | |
$ | 13,352,110 | | |
$ | 11,193,422 | |
*
Including intercompany receivables of $4,342,251 and $12,231,075 as at December 31, 2014 and 2013, respectively, to be eliminated
in consolidation.
#
Including intercompany payables of $13,321,547 and $11,169,092 as at December 31, 2014 and 2013, respectively, to be eliminated
in consolidation.
CHINA
YIDA HOLDING, CO. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
3. |
BASIS
OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) |
Although
Fujian Jiaoguang no longer had revenues, its bank account still has to be maintained active with certain cash flows to support
its expenses. As such, Fujian Jiaoguang transferred funds from and to the Company’s directly-owned subsidiaries,
which resulted in intercompany receivables and payables. Since Fujian Jiaoguang is a variable interest entity subject to
consolidation, the balances of its intercompany receivables and payables are eliminated against the corresponding account balances
at the Company’s directly-owned subsidiaries at the consolidation level.
c.
Use of estimates and assumptions
The
preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United
States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the amount of revenues
and expenses during the reporting periods. Management makes these estimates using the best information available at the time the
estimates are made. However, actual results could differ materially from those results. The most significant estimates reflected
in the consolidated financial statements include depreciation, useful lives of property and equipment, deferred income taxes,
useful life of intangible assets and contingencies. Estimates and assumptions are periodically reviewed and the effects of revisions
are reflected in the consolidated financial statements in the period they are determined to be necessary.
d.
Cash and cash equivalents
The
Company considers all cash on hand and in banks, certificates of deposit and other highly-liquid investments with original maturities
of three months or less, when purchased, to be cash and cash equivalents. As of December 31, 2014 and 2013, the Company has uninsured
deposits in banks of approximately $943,000 and $2,147,000.
e.
Accounts receivable
The
Company maintains reserves for potential credit losses on accounts receivable. Management reviews the composition of accounts
receivable and analyzes historical bad debts, customer concentrations, customer credit worthiness, current economic trends and
changes in customer payment patterns to evaluate the adequacy of these reserves. Based on the management’s judgment, no
allowance for doubtful accounts is required at the balance sheet dates.
f.
Advances and prepayments
The
Company advances funds to certain vendors for purchase of its construction materials and necessary services. Based on the
management’s judgment, no allowance for advances and prepayments were assessed and recorded as of December 31, 2014 and
2013, respectively.
g.
Property and equipment
Property
and equipment are recorded at cost less accumulated depreciation. Gains or losses on disposals are reflected as gain or loss in
the year of disposal. The cost of improvements that extends the life of property, and equipment are capitalized. These capitalized
costs may include structural improvements, equipment, and fixtures. All ordinary repair and maintenance costs are expensed as
incurred.
Depreciation
for financial reporting purposes is provided using the straight-line method over the estimated useful lives of the assets or lease
term as follows:
Building |
20
years |
Electronic
Equipment |
5
to 8 years |
Transportation
Equipment |
8
years |
Office
Furniture |
5
to 8 years |
Leasehold
Improvement and Attractions |
Lesser
of term of the lease or the estimated useful lives of the assets |
h.
Intangible assets
Intangible
assets consist of acquisition of management right of tourist resort, commercial airtime rights and land use rights for tourism
resorts. They are amortized on the straight line basis over their respective lease periods. The lease period of management
right, commercial airtime rights and land use rights is 30 years, 3 years and 40 years, respectively.
CHINA
YIDA HOLDING, CO. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
3. |
BASIS
OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) |
i.
Impairment
The
Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount
of an asset may not be recoverable through the estimated undiscounted cash flows expected to result from the use and eventual
disposition of the assets. Whenever any such impairment exists, an impairment loss will be recognized for the amount by which
the carrying value exceeds the fair value.
Assets
are grouped and evaluated at the lowest level for their identifiable cash flows that are largely independent of the cash flows
of other groups of assets. The Company considers historical performance and future estimated results in its evaluation of potential
impairment and then compares the carrying amount of the asset to the future estimated cash flows expected to result from the use
of the asset. If the carrying amount of the asset exceeds estimated expected undiscounted future cash flows, the Company measures
the amount of impairment by comparing the carrying amount of the asset to its fair value. The estimation of fair value is generally
measured by discounting expected future cash flows as the rate the Company utilizes to evaluate potential investments. The Company
estimates fair value based on the information available, judgments and projections are considered necessary. There was no impairment
of long-lived assets as of December 31, 2014 and 2013.
j.
Revenue recognition
Revenue
is recognized at the date of service rendered to customers when a formal arrangement exists, the price is fixed or determinable,
the services rendered, no other significant obligations of the Company exist and collectability is reasonably assured. Payments
received before satisfaction of all of the relevant criteria for revenue recognition are recorded as unearned revenue.
Revenues
from advance resort ticket sales are recognized when the tickets are used. Revenues from our contractors who have tourism contracts
with us are generally recognized over the period of the applicable agreements commencing with the tourists visiting the resort.
The Company also sells admission and activities tickets for a resort which the Company has the management right.
The
Company sells the television airtime to third parties. The Company records advertising sales when advertisements are aired.
The
Company has no allowance for product returns or sales discounts because services that are rendered and accepted by the customers
are normally not refundable and discounts are normally not granted after service has been rendered.
Profit
sharing costs are recorded as cost of revenue. Profit sharing arrangements with the local governments for the management rights
(see Note 14):
For the year ended December 31, 2014 |
|
| |
Tulou | |
| |
| |
Gross receipts | |
$ | 631,660 | |
| |
| | |
Profit sharing costs | |
| - | |
Nature resource compensation expenses | |
| 56,891 | |
Total paid to the local governments | |
| 56,891 | |
| |
| | |
Net receipts | |
$ | 574,769 | |
For the year ended December 31, 2013 |
|
| |
Tulou | |
| |
| |
Gross receipts | |
$ | 681,587 | |
| |
| | |
Profit sharing costs | |
| - | |
Nature resource compensation expenses | |
| 60,973 | |
Total paid to the local governments | |
| 60,973 | |
| |
| | |
Net receipts | |
$ | 620,614 | |
CHINA
YIDA HOLDING, CO. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
3. |
BASIS
OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) |
k.
Advertising costs
The Company expenses the cost
of advertising as incurred or, as appropriate, the first time the advertising takes place. Advertising costs for the years ended
December 31, 2014 and 2013 were $2,304,545 and $1,991,820, 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 $310,660 and $213,271 for the years ended December 31, 2014
and 2013, respectively. Other than the above, neither the Company nor its subsidiaries provide any other post-retirement
or post-employment benefits.
m.
Foreign currency translation
The
Company uses the United States dollar ("U.S. dollars") for financial reporting purposes. The Company’s subsidiaries
maintain their books and records in their functional currency, being the primary currency of the economic environment in which
their operations are conducted. In general, for consolidation purposes, the Company translates the subsidiaries' assets and liabilities
into U.S. dollars using the applicable exchange rates prevailing at the balance sheet dates, and the statements of income are
translated at average exchange rates during the reporting periods. Gain or loss on foreign currency transactions are reflected
on the income statement. Gain or loss on financial statement translation from foreign currency are recorded as a separate component
in the equity section of the balance sheet and is included as part of accumulated other comprehensive income.
The functional currency of the Company and its subsidiaries in China is the Chinese Renminbi.
n.
Income taxes
Income
taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities
and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to
be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in
the period that includes the enactment date. A valuation allowance is recognized if it is more likely than not that some portion,
or all, of a deferred tax asset will not be realized. There were no deferred income tax assets as of December 31, 2014 and 2013,
respectively.
CHINA
YIDA HOLDING, CO. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
3. |
BASIS
OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) |
The
Company applied the provisions of ASC 740-10-50, “Accounting For Uncertainty In Income Taxes”, which provides
clarification related to the process associated with accounting for uncertain tax positions recognized in our financial statements.
Audit periods remain open for review until the statute of limitations has passed. The completion of review or the expiration of
the statute of limitations for a given audit period could result in an adjustment to the Company’s liability for income
taxes. Any such adjustment could be material to the Company’s results of operations for any given quarterly or annual period
based, in part, upon the results of operations for the given period. At December 31, 2014, management considered that the Company
had no uncertain tax positions, and will continue to evaluate for uncertain positions in the future.
China
Yida is subject to U.S. Federal and California state examination by tax authorities for years after 2008, and the PRC tax authority
for years after 2007.
o.
Fair values of financial instruments
The
carrying amounts reported in the consolidated financial statements for current assets and currently liabilities approximate fair
value due to the short-term nature of these financial instruments. The carrying amount of long-term loans approximates fair value
since the interest rates associated with the debts approximate the current market interest rates.
The
Company adopted ASC 820-10, “Fair Value Measurements and Disclosures”, which establishes a single authoritative definition
of fair value and a framework for measuring fair value and expands disclosure of fair value measurements for both financial and
nonfinancial assets and liabilities. This standard defines fair value, provides guidance for measuring fair value and requires
certain disclosures. This standard does not require any new fair value measurements, but discusses valuation techniques, such
as the market approach (comparable market prices), the income approach (present value of future income or cash flows) and the
cost approach (cost to replace the service capacity of an asset or replacement cost). For purposes of ASC 820-10-15, nonfinancial
assets and nonfinancial liabilities would include all assets and liabilities other than those meeting the definition of a financial
asset or financial liability as defined in ASC-820-10-15-15-1A.
p.
Stock-based compensation
The
Company records stock-based compensation expense pursuant to ASC 718-10, "Share Based Payment Arrangement ” which
requires companies to measure compensation cost for stock-based employee compensation plans at fair value at the grant date and
recognize the expense over the employee's requisite service period. The Company’s expected volatility assumption is based
on the historical volatility of Company’s stock or the expected volatility of similar entities. The expected life assumption
is primarily based on historical exercise patterns and employee post-vesting termination behavior. The risk-free interest rate
for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of grant.
Stock-based
compensation expense is recognized based on awards expected to vest, and there were no estimated forfeitures as the Company has
a short history of issuing options. ASC 718-10 requires forfeitures to be estimated at the time of grant and revised in subsequent
periods, if necessary, if actual forfeitures differ from those estimates.
q.
Earnings per share (EPS)
Earnings
per share is calculated in accordance with ASC 260. Basic earnings per share is based upon the weighted average number of common
shares outstanding. Diluted earnings per share is based on the assumption that all dilutive convertible shares and stock instruments
were converted or exercised. Options and warrants are assumed to be exercised at the beginning of the period if the average stock
price for the period is greater than the exercise price of the warrants and options.
r.
Statutory Reserves
In
accordance with the relevant laws and regulations of the PRC and the articles of association of the Company, the Company is required
to allocate 10% of their net income reported in the PRC statutory accounts, after offsetting any prior years’ losses, to
the statutory surplus reserve, on an annual basis. When the balance of such reserve reaches 50% of the respective registered capital
of the subsidiaries, any further allocation is optional.
As
at December 31, 2014, the statutory reserve of the subsidiaries already reached 50% of the registered capital of the subsidiaries
and the Company did not have any further allocation on it.
The
statutory surplus reserves can be used to offset prior years’ losses, if any, and may be converted into registered capital,
provided that the remaining balances of the reserve after such conversion is not less than 25% of registered capital. The statutory
surplus reserve is non-distributable.
CHINA
YIDA HOLDING, CO. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
3. |
BASIS
OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) |
s.
Segment reporting
ASC
250, "Disclosure About Segments of an Enterprise and Related Information" requires use of the "management approach"
model for segment reporting. The management approach model is based on the way a company’s management organizes segments
within the company for making operating decisions and assessing performance. Reportable segments are based on products and services,
geography, legal structure, management structure, or any other manner in which management disaggregates a company. Prior to July
2013, the Company had two reportable segments: advertisement and tourism. Now the company has only one reportable segment which
is tourism.
t.
Dividend Policy
Under
the laws governing foreign invested enterprises in China, dividend distribution and liquidation are allowed but subject to special
procedures under the relevant laws and rules. Any dividend payments will be subject to the decision of the Board of Directors
and subject to foreign exchange rules governing such repatriation. Any liquidation is subject to both the relevant government
agency’s approval and supervision as well as the foreign exchange control.
u.
Reclassifications
Except for the classification
for discontinued operations, certain classifications have been made to the prior year financial statements to conform to the current
year presentation. The reclassification had no impact on previously reported net loss or accumulated deficit.
v.
Recent accounting pronouncements
In
February 18, 2015, FASB issued ASU 2015-02—Consolidation (Topic 810). The amendments in this Update affect reporting entities
that are required to evaluate whether they should consolidate certain legal entities. All legal entities are subject to reevaluation
under the revised consolidation model. Specifically, the amendments: (1) Modify the evaluation of whether limited partnerships
and similar legal entities are variable interest entities (VIEs) or voting interest entities; (2) Eliminate the presumption that
a general partner should consolidate a limited partnership; (3) Affect the consolidation analysis of reporting entities that are
involved with VIEs, particularly those that have fee arrangements and related party relationships; (4) Provide a scope exception
from consolidation guidance for reporting entities with interests in legal entities that are required to comply with or operate
in accordance with requirements that are similar to those in Rule 2a-7 of the Investment Company Act of 1940 for registered money
market funds. The amendments in this Update are effective for public business entities for fiscal years, and for interim periods
within those fiscal years, beginning after December 15, 2015. The Company is still in progress of evaluating future impact of
adopting this standard.
In
August 2014, FASB issued ASU 2014-15 - Presentation of Financial Statements - Going Concern (Subtopic 205-40). The amendments
in this Update states the disclosure of uncertainties about an entity’s ability to continue as a going concern. An entity’s
management should evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about
the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued
(or available to be issued). When management identifies conditions or events that raise substantial doubt, management should consider
whether its plans will alleviate the substantial doubt.
When
substantial doubt is raised but is alleviated by management’s plans, the entity should disclose following information: (a)
Principal conditions or events that raised substantial doubt (before consideration of management’s plans); (b) Management’s
evaluation of the significance of those conditions or events in relation to the entity’s ability to meet its obligations;
(c) Management’s plans that alleviated the substantial doubt.
When
substantial doubt is raised but is not alleviated by management’s plans,, an entity should include a statement in the footnotes
indicating that there is substantial doubt about the entity’s ability to continue as a going concern within one year after
the date that the financial statements are issued (or available to be issued), and disclose the following information: (a) Principal
conditions or events that raise substantial doubt; (b) Management’s evaluation of the significance of those conditions or
events in relation to the entity’s ability to meet its obligations; (c) Management’s plans that are intended to mitigate
the conditions or events that raise the substantial doubt.
The
amendments in this Update are effective for the annual period ending after December 15, 2016, and for annual periods and interim
periods thereafter. Early application is permitted. The Company is still in progress of evaluating future impact of adopting this
standard.
CHINA
YIDA HOLDING, CO. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
3. |
BASIS
OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) |
In
May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). The core principle of the guidance is
that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects
the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve the core principle,
an entity should apply the following steps:
Step
1: Identify the contract(s) with a customer.
Step
2: Identify the performance obligations in the contract.
Step
3: Determine the transaction price.
Step
4: Allocate the transaction price to the performance obligations in the contract.
Step
5: Recognize revenue when (or as) the entity satisfies a performance obligation.
CHINA
YIDA HOLDING, CO. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
3. |
BASIS
OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) |
An
entity should disclose sufficient information to enable users of financial statements to understand the nature, amount, timing,
and uncertainty of revenue and cash flows arising from contracts with customers. For a public entity, the amendments in this Update
are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting
period. Early application is not permitted. For all other entities (nonpublic entities), the amendments in this Update are effective
for annual reporting periods beginning after December 15, 2017, and interim periods within annual periods beginning after December
15, 2018. A nonpublic entity may elect to apply this guidance earlier. The Company has begun evaluating future impact of adopting
this standard on the Company’s consolidated financial position and operating results.
In
April 2014, the FASB issued ASU 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic
360). The amendments in this Update change the requirements for reporting discontinued operations in Subtopic 205-20. A discontinued
operation may include a component of an entity or a group of components of an entity, or a business or nonprofit activity. A disposal
of a component of an entity or a group of components of an entity is required to be reported in discontinued operations if the
disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results.
The amendments in this Update require an entity to present, for each comparative period, the assets and liabilities of a disposal
group that includes a discontinued operation separately in the asset and liability sections, respectively, of the statement of
financial position. The amendments in this Update require a public business entity and a not-for-profit entity that has issued,
or is a conduit bond obligor for, securities that are traded, listed, or quoted on an exchange or an over-the-counter market to
provide disclosures about a disposal of an individually significant component of an entity that does not qualify for discontinued
operations presentation in the financial statements. The amendments in this Update require all other entities to provide disclosures
about a disposal of an individually significant component of an entity that does not qualify for discontinued operations presentation
in the financial statements. The amendments in this Update expand the disclosures about an entity’s significant continuing
involvement with a discontinued operation. Those disclosures are required until the results of operations of the discontinued
operation in which an entity retains significant continuing involvement are no longer presented separately as discontinued operations
in the statement where net income is reported (or statement of activities for a not-for-profit entity). The adoption of this standard
is not expected to have a material impact on the Company’s consolidated financial position and results of operations.
In
January 2014, the FASB issued ASU 2014-02, Intangibles-Goodwill and Other (Topic 350): Accounting for Goodwill. The amendments
in this Update allow an accounting alternative for the subsequent measurement of goodwill. An entity within the scope of the amendments
that elects the accounting alternative in this Update should amortize goodwill on a straight-line basis over 10 years, or less
than 10 years if the entity demonstrates that another useful life is more appropriate. An entity that elects the accounting alternative
is further required to make an accounting policy election to test goodwill for impairment at either the entity level or the reporting
unit level. Goodwill should be tested for impairment when a triggering event occurs that indicates that the fair value of an entity
(or a reporting unit) may be below its carrying amount. The disclosures required under this alternative are similar to existing
U.S. generally accepted accounting principles (GAAP). However, an entity that elects the accounting alternative is not required
to present changes in goodwill in a tabular reconciliation. The accounting alternative, if elected, should be applied prospectively
to goodwill existing as of the beginning of the period of adoption and new goodwill recognized in annual periods beginning after
December 15, 2014, and interim periods within annual periods beginning after December 15, 2015. Early application is permitted.
The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial position
and results of operations.
In
December 2013, the FASB issued ASU 2013-12, “Definition of a Public Business Entity”. The Board has decided that it
should proactively determine which entities would be within the scope of the Private Company Decision-Making Framework: A Guide
for Evaluating Financial Accounting and Reporting for Private Companies (Guide). This will aim to minimize the inconsistency and
complexity of having multiple definitions of, or a diversity in practice as to what constitutes, a nonpublic entity and public
entity within U.S. generally accepted accounting principles (GAAP) on a going-forward basis. This Update addresses those issues
by defining public business entity. The Accounting Standards Codification includes multiple definitions of the terms nonpublic
entity and public entity. The amendment in this Update improves U.S. GAAP by providing a single definition of public business
entity for use in future financial accounting and reporting guidance. The amendment does not affect existing requirements. There
is no actual effective date for the amendment in this Update. However, the term public business entity will be used in Accounting
Standards Updates which are the first Updates that will use the term public business entity. The adoption of this standard is
not expected to have a material impact on the Company’s consolidated financial position and results of operations.
CHINA
YIDA HOLDING, CO. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
3. |
BASIS
OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) |
w. Restatement of Previously
Issued Financial Statements
The Company has restated its consolidated
financial statements as of and for the year ended December 31, 2013 to correct errors identified in the Statement of Cash Flows.
The restatement corrects the following items:
(1) |
To reconcile cash (used) in operating activities to net loss; |
(2) |
To present the reconciling item of gain on disposal of discontinued entity; |
(3) |
To correct the classification of cash flow resulted from proceeds from disposal of discontinued entity from financing to investing activities; |
(4) |
To eliminate intercompany cash flows between continuing and discontinued operations; |
The restatement has no impact on the
Company’s Consolidated Balance Sheets, Consolidated Statements of Income and Comprehensive Income, and the Consolidated Statements
of Equity.
CHINA
YIDA HOLDING, CO. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
3. |
BASIS
OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) |
The effects of the adjustments on the
Company’s previously issued financial statements for the year ended December 31, 2013 are summarized as follows:
Selected Consolidation Statements
of Cash Flows information for the year ended December 31, 2013
| |
Previously | | |
Effect of | | |
As | |
| |
Reported | | |
Restatement | | |
Restated | |
CASH FLOWS FROM OPERATING ACTIVITIES | |
| | |
| | |
| |
Net loss | |
$ | - | | |
$ | (16,354,397 | ) | |
$ | (16,354,397 | ) |
Net loss attributable to common stockholders | |
| (16,252,182 | ) | |
| 16,252,182 | | |
| - | |
Loss from discontinued operations | |
| (845,812 | ) | |
| 1,101,348 | | |
| 255,536 | |
Gain on disposal of discontinued operation | |
| - | | |
| (999,133 | ) | |
| (999,133 | ) |
| |
| | | |
| . | | |
| | |
CASH FLOWS FROM INVESTING ACTIVITIES | |
| | | |
| | | |
| | |
Proceeds from disposal of discontinued entity | |
| - | | |
| 9,616,155 | | |
| 9,616,155 | |
Net cash used in continuing operations | |
| (75,769,232 | ) | |
| 9,616,155 | | |
| (66,153,077 | ) |
Net cash used in investing activities | |
| (76,339,091 | ) | |
| 9,616,155 | | |
| (66,722,936 | ) |
| |
| | | |
| | | |
| | |
CASH FLOWS FROM FINANCING ACTIVITIES | |
| | | |
| | | |
| | |
Proceeds from disposal of discontinued entity | |
| 9,616,155 | | |
| (9,616,155 | ) | |
| - | |
Proceeds from Anhui Yida | |
| 2,235,257 | | |
| (2,235,257 | ) | |
| - | |
Repayment to Anhui Yida | |
| (3,837,909 | ) | |
| 3,837,909 | | |
| - | |
Net cash provided by continuing operations | |
| 80,184,769 | | |
| (8,013,503 | ) | |
| 72,171,266 | |
Net cash provided by (used in) discontinued operations | |
| 1,602,653 | | |
| (1,602,653 | ) | |
| - | |
Net cash provided by financing activities | |
| 81,787,422 | | |
| (9,616,156 | ) | |
| 72,171,266 | |
4. |
OTHER
RECEIVABLES, NET |
Other
receivables consist of the following:
| |
December 31, 2014 | | |
December 31, 2013 | |
| |
| | |
| |
Advance to employees | |
$ | 74,451 | | |
$ | 121,775
| |
Security deposits | |
| 42,670 | | |
| 104,648
| |
Other | |
| 31,707 | | |
| 42,412
| |
| |
| 148,828 | | |
| 268,835 | |
Less: Allowance | |
| - | | |
| - | |
| |
$ | 148,828 | | |
$ | 268,835 | |
5. |
ADVANCES
AND PREPAYMENTS |
Advances
and prepayments consist of the following:
| |
December 31, 2014 | | |
December 31, 2013 | |
| |
| | |
| |
Advance payments related to consumables of Yang-Sheng Paradise | |
$ | 493,013 | | |
$ | 128,807 | |
Advance payments related to facilities of Yang-Sheng Paradise | |
| 226,344 | | |
| 27,900 | |
Advance payments related to hotel facilities of Yunding resort | |
| 116,104 | | |
| 354,461 | |
Advance payments related to land use rights | |
| - | | |
| 814,000 | |
Other | |
| 3,472 | | |
| 36,026 | |
| |
| 838,933 | | |
| 1,361,194 | |
Less: Allowance | |
| - | | |
| - | |
| |
$ | 838,933 | | |
$ | 1,361,194 | |
As of December 31, 2014 and
2013, advance payments related to the consumables to be used in Yang-Sheng Paradise were $493,013 and $128,807, respectively.
As of December 31, 2014 and 2013, advance payments related to the facilities of Yang-Sheng Paradise were $226,344 and $27,900,
respectively.
As of December 31, 2014 and 2013, advance
payments related to hotel facilities of Yunding resort were $116,104 and $354,461, respectively.
As of December 31, 2013, advance payments
related to land use rights represents the payment made by Fujian Yida. Fujian Yida made advance payments to the local government
of Yongtai County of $814,000 (RMB 4.98 million) for the acquisition of land use rights. Such advance payments have been collected
in full amount during the year ended December 31, 2014.
CHINA
YIDA HOLDING, CO. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
6. |
PROPERTY
AND EQUIPMENT, NET |
Property
and equipment consist of the following:
| |
December 31, 2014 | | |
December 31, 2013 | |
| |
| | |
| |
Buildings, improvements, and attractions | |
$ | 192,727,526
| | |
$ | 187,404,825 | |
Electronic equipment | |
| 4,832,741
| | |
| 3,705,166 | |
Transportation equipment | |
| 2,705,322 | | |
| 2,602,218 | |
Office furniture | |
| 1,005,977 | | |
| 235,306 | |
| |
| 201,271,566 | | |
| 193,947,515 | |
Less: Accumulated depreciation | |
| (19,658,161 | ) | |
| (11,227,887 | ) |
Property and equipment, net | |
$ | 181,613,405 | | |
$ | 182,719,628 | |
Depreciation
expense for the years ended December 31, 2014 and 2013 were $8,476,262 and $5,014,150 respectively.
7. |
INTANGIBLE
ASSETS, NET |
Intangible
assets consist of the following:
| |
December 31, 2014 | | |
December 31, 2013 | |
| |
| | |
| |
Land use right | |
$ | 48,071,885 | | |
$ | 48,299,182 | |
Commercial airtime rights | |
| - | | |
| 6,882,616 | |
| |
| 48,071,885 | | |
| 55,181,798 | |
Accumulated amortization | |
| (1,652,535 | ) | |
| (7,344,157 | ) |
Intangible assets, net | |
$ | 46,419,350 | | |
$ | 47,837,641 | |
Commercial
airtime rights
On
August 1, 2010, the Company entered into a commercial airtime rights agreement with a television station. Under the terms of the
agreement, the Company can obtain commercial airtime and resell to advertisers from August 1, 2010 to July 31, 2013 for a monthly
fee of $163,607 (RMB 1,000,000) for the period from August 1, 2010 to July 31, 2011. The fee is increased by 20% annually
on every August 1. From August 1, 2011 to July 31, 2012, the monthly fee is $196,329 (RMB 1,200,000). From
August 31, 2012 to July 30, 2013, the monthly fee will be $235,594 (RMB 1,440,000) for the period. The agreement
can be renewed for two additional years, with mutual agreement between the parties. Since the Company is reselling the commercial
airtime to advertisers, the Company has present-valued the monthly payments, including the 20% annual increase, using
the market borrowing rate of 7% for three years and recorded $6,882,616 (RMB 42,067,917) as commercial airtime rights
as an intangible asset, $7,146,363 (RMB 43,680,000) as an obligation under airtime rights commitment, and
$263,747 (RMB 1,612,083) as deferred interest at inception.
At
inception, the Company had made an initial assessment that there is no assurance the Company will exercise the option for two
additional years and therefore, the Company has only considered the present value of the monthly fee for the first three years
under the terms of the agreement.
As
of December 31, 2014, the commercial airtime rights have been fully amortized.
CHINA
YIDA HOLDING, CO. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
7. |
INTANGIBLE
ASSETS, NET (CONTINUED) |
For the years ended December
31, 2014 and 2013, amortization expense of all intangible assets amounted to $1,192,192 and $1,656,201, respectively.
Estimated
amortization for the next five years and thereafter is as follows:
As of December 31, | |
| |
2015 | |
$ | 1,192,164 | |
2016 | |
| 1,192,164 | |
2017 | |
| 1,192,164 | |
2018 | |
| 1,192,164 | |
2019 | |
| 1,192,164 | |
Thereafter | |
| 40,458,530 | |
| |
$ | 46,419,350 | |
Long-term
prepayments consist of the following:
| |
December 31, 2014 | | |
December 31, 2013 | |
Prepayments for project planning, assessments and consultation fees | |
$ | 1,408,991 | | |
$ | 1,989,648 | |
Prepayment for cooperative development | |
| 387,573 | | |
| 488,828 | |
Others | |
| 236,201 | | |
| 228,898 | |
| |
$ | 2,032,764 | | |
$ | 2,707,374 | |
Prepayments
for project planning, assessments and consultation fees represent advances relating to the planning, assessment and consultation
for the development of tourism destinations in Jiangxi province.
In
2008, Hong Kong Yi Tat entered into a Tourist Destination Cooperative Development Agreement with Yongtai County Government with
respect to the development of Yunding Park pursuant to which Fujian Yida is obligated to pay RMB 5.0 million, or approximately
$0.82 million, to the Yongtai County People’s Government over the course of the first 10 years of the Agreement. By the
end of 2013, the Company had fulfilled this obligation with total payments made in the amount of approximately $818,036 (RMB 5.0
million) recorded as prepayments for cooperative development to be expensed throughout the term of the Agreement. As of December
31, 2014 and 2013, prepayments for cooperative development amounted to $387,573 and $488,828, respectively.
Short-term
loans
Short-term
loans represent borrowings from commercial banks that are due within one year. These loans consisted of the following:
| |
December 31, 2014 | | |
December 31, 2013 | |
| |
| | |
| |
Loan from Fujian Haixia Bank (formerly known as Merchant bank of Fuzhou), interest rate at 9.6% per annum, due June 20, 2015, collateralized by the personal guarantees by two of the Company’s directors. (a) | |
$ | 1,954,047 | | |
$ | - | |
| |
| | | |
| | |
Loan from Fujian Haixia Bank (formerly known as Merchant bank of Fuzhou), interest rate at 8.7% per annum, due October 17, 2014, guaranteed by Fujian Jintai Tourism Development Co., Ltd. and Yida Travel Service Co. Ltd. (b) | |
| - | | |
| 2,454,108 | |
Total | |
$ | 1,954,047 | | |
$ | 2,454,108 | |
CHINA
YIDA HOLDING, CO. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
9. |
BANK LOANS (CONTINUED) |
|
(a) |
In
June 2014, the Company borrowed an amount of $1,954,047 (RMB 12 million) due on June 20, 2015 from Fujian Haixia Bank, with the
interest rate at 9.6% per annum. |
|
(b) |
In
October 2013, the Company borrowed an amount of $2,454,108 (RMB 15 million) due on October 17, 2014 from Fujian Haixia Bank, with
the interest rate at 8.7% per annum. The Company repaid the loan of $2,454,108 (RMB 15 million) during the year of 2014. |
Interest expense for the
years ended December 31, 2014 and 2013 amounted to $280,597 and $285,491, respectively. The interest expense for the
years ended December 31, 2014 and 2013 of $0 and $62,907, respectively was capitalized as part of construction in progress.
Long-term debt
Long term debt consists of the following:
| |
December 31,
2014 | | |
December 31,
2013 | |
| |
| | |
| |
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 (a)) | |
$ | 31,264,757 | | |
$ | - | |
| |
| | | |
| | |
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 (b)) | |
$ | 4,885,118 | | |
$ | - | |
| |
| | | |
| | |
Loan from China Construction Bank, interest rate at 7.86% per annum, final installment due on August 5, 2022, collateralized by the fixed assets of Fujian Yida and personal guarantees by two of the Company’s directors as additional collateral. (Note (c)) | |
$ | 4,070,932 | | |
$ | - | |
| |
| | | |
| | |
Loan from China Construction Bank, interest rate at 7.86% per annum, final installment due on August 5, 2022, collateralized by the fixed assets of Fujian Yida and personal guarantees by two of the Company’s directors as additional collateral. (Note (d)) | |
$ | 3,745,257 | | |
$ | - | |
| |
| | | |
| | |
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)) | |
$ | 4,885,118 | | |
$ | - | |
| |
| | | |
| | |
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 (f)) | |
| 37,452,574 | | |
| 53,990,380 | |
| |
| | | |
| | |
Loan from China Minsheng Banking Corp, Ltd., interest rate at 12.50% per annum, final installment due on March 6, 2015, secured by the land use rights of Fujian Yida and the right to collect resort ticket sales at Yunding resort as additional collateral. (Note (g)) | |
| - | | |
| 24,541,082 | |
| |
| | | |
| | |
Loan from China Minsheng Banking Corp, Ltd., interest rate at 11.97% per annum, final installment due on November 20, 2014, secured by credit guarantee of Fujian Jintai, collateralized by the fixed assets of Fujian Yida, and collateralized by the personal guarantees by two of the Company’s directors. (Note (h)) | |
| - | | |
| 6,871,502 | |
| |
| | | |
| | |
| |
| 86,303,757 | | |
| 85,402,964 | |
Less: current portion | |
| (3,256,746 | ) | |
| (6,871,502 | ) |
Total | |
$ | 83,047,011 | | |
$ | 78,531,462 | |
CHINA YIDA
HOLDING, CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. |
BANK LOANS (CONTINUED) |
Note:
(a) |
$1,302,698 (RMB 8,000,000), $1,628,373
(RMB 10,000,000), $3,256,746 (RMB 20,000,000), $3,256,746 (RMB 20,000,000), $4,885,118 (RMB 30,000,000), $4,885,118 (RMB 30,000,000),
$6,513,491 (RMB 40,000,000) and $5,536,467 (RMB 34,000,000) will be due in each twelve-month period as of December 31, 2015, 2016,
2017, 2018, 2019, 2020, 2021 and 2022, respectively.
|
(b) |
$651,349 (RMB 4,000,000) will be due
in each twelve-month period as of December 31, 2015, 2016, 2017, 2018, 2019, 2020 and 2021, respectively, and $325,675 (RMB 2,000,000)
will be due in the twelve-month period as of December 31, 2022.
|
(c) |
$488,512 (RMB 3,000,000) will be due
in each twelve-month period as of December 31, 2015,2016, 2017, 2018 and 2019, respectively, $651,349 (RMB 4,000,000) will be due
in each twelve-month period as of December 31, 2020 and 2021, respectively, and $325,675 (RMB 2,000,000) will be due in the twelve-month
period as of December 31, 2022.
|
(d) |
$162,837 (RMB 1,000,000), $162,837 (RMB
1,000,000), $325,675 (RMB 2,000,000), $488,512 (RMB 3,000,000), $651,349 (RMB 4,000,000), $651,349 (RMB 4,000,000), $651,349 (RMB
4,000,000) and $651,349 (RMB 4,000,000) will be due in each twelve-month period as of December 31, 2015,2016, 2017, 2018, 2019,
2020, 2021 and 2022, respectively.
|
(e) |
$651,349 (RMB 4,000,000) will be due
in each twelve-month period as of December 31, 2015, 2016, 2017, 2018, 2019, 2020, and 2021 respectively, and $325,675 (RMB 2,000,000)
will be due in the twelve-month period as of December 31, 2022.
|
(f) |
$13,026,982 (RMB 80,000,000) and $24,425,592 (RMB 150,000,000) will be due in each twelve-month period as of December 31, 2018 and 2019, respectively. |
|
|
(g) |
$24,541,082 (RMB 150,000,000) has been repaid in full amount during the year of 2014. |
|
|
(h) |
$6,871,502 (RMB 42,000,000) has been repaid in full amount during the year of 2014. |
Interest expense for the years ended
December 31, 2014 and 2013 amounted to $7,927,155 and $8,143,250, respectively. The interest expense for the years ended
December 31, 2014 and 2013 of $0 and $2,872,531, respectively was capitalized as part of construction in progress.
10. |
ACCRUED EXPENSES AND OTHER PAYABLES |
Accrued expenses and other payables consist
of the following:
| |
December 31, 2014 | | |
December 31, 2013 | |
| |
| | |
| |
Accrued payroll | |
$ | 550,573 | | |
$ | 587,176 | |
Accrued local government fees | |
| 347,040 | | |
| 210,895 | |
Security deposits payable | |
| 224,125 | | |
| 93,235 | |
Unearned revenue | |
| 100,508 | | |
| 78,058 | |
Welfare payable | |
| 13,228 | | |
| 13,291 | |
Other | |
| 129,389 | | |
| 36,736 | |
| |
$ | 1,364,863 | | |
$ | 1,019,391 | |
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 years ended December
31, 2014 and 2013. Net operating loss at December 31, 2014, which can be used to offset future taxable income, was approximately
$3,860,839. 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
11. |
INCOME TAX (CONTINUED) |
Cayman Islands
Keenway Limited, a wholly owned subsidiary
of the Company, is incorporated in the Cayman Islands and, under the current laws of the Cayman Islands, is not subject to income
taxes.
Hong Kong
Hong Kong Yi Tat, a wholly owned subsidiary
of the Company, is incorporated in Hong Kong. Hong Kong Yi Tat is subject to Hong Kong taxation on its activities conducted in
Hong Kong and income arising in or derived from Hong Kong. No provisions for income taxes have been made as Hong Kong Yi Tat has
no taxable income for the period. The applicable statutory tax rate for the subsidiary was 16.5% for each of the years ended December
31, 2014 and 2013.
PRC
Effective on January 1, 2008, the PRC Enterprise
Income Tax Law, EIT Law, and Implementing Rules impose an unified enterprise income tax rate of 25% on all domestic-invested enterprises
and foreign investment enterprises in PRC, unless they qualify under certain limited exceptions. As such, starting from January
1, 2008, the Company’s subsidiaries in PRC are subject to an enterprise income tax rate of 25%.
Provision for income tax consists of the following:
| |
For The Years Ended December 31, | |
| |
2014 | | |
2013 | |
| |
| | |
| |
Current | |
| | |
| |
USA | |
$ | - | | |
$ | - | |
China | |
| - | | |
| 133,323 | |
| |
| - | | |
| 133,323 | |
| |
| | | |
| | |
Deferred | |
| | | |
| | |
USA | |
| | | |
| | |
Deferred tax asset for NOL carry forwards | |
| 81,207 | | |
| 99,170 | |
Valuation allowance | |
| (81,207 | ) | |
| (99,170 | ) |
Net changes in deferred income tax under non-current portion | |
| - | | |
| - | |
| |
| | | |
| | |
China | |
| | | |
| | |
Deferred tax asset for NOL carry forwards | |
| 7,902,501 | | |
| 4,327,116 | |
Valuation allowance | |
| (7,902,501 | ) | |
| (4,327,116 | ) |
Net changes in deferred income tax under non-current portion | |
| - | | |
| - | |
| |
| | | |
| | |
Net deferred income tax expenses | |
| - | | |
| - | |
| |
| | | |
| | |
Provision for income tax | |
$ | - | | |
$ | 133,323 | |
CHINA YIDA HOLDING, CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. |
INCOME TAX (CONTINUED) |
The following is a reconciliation of the provision
for income taxes at the PRC and Hong Kong tax rate to the income taxes reflected in the Statement of Income:
| |
For The Years Ended December 31, | |
| |
2014 | | |
2013 | |
| |
| | |
| |
Tax expense at statutory rate - US | |
| 35.0 | % | |
| 35.0 | % |
Changes in valuation allowance - US | |
| (35.0 | %) | |
| (35.0 | %) |
Tax expense at statutory rate - HK | |
| 16.5 | % | |
| 16.5 | % |
Changes in valuation allowance - HK | |
| (16.5 | %) | |
| (16.5 | %) |
Foreign income tax rate - PRC | |
| 25.0 | % | |
| 25.0 | % |
Other (a) | |
| (25.0 | %) | |
| (25.8 | %) |
Effective income tax rates | |
| (0.0 | %) | |
| (0.8 | %) |
(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 years ended December 31, 2014 and 2013, respectively. |
In assessing the realizability of deferred
tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not
be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the
periods in which the net operating losses and temporary differences become deductible. Management considered projected future taxable
income and tax planning strategies in making this assessment.
The change in total allowance for the years
ended December 31, 2014 and 2013 was an increase of $7,983,708 and $4,426,286, respectively.
(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
(3) STOCK-BASED COMPENSATION
On June 10, 2009 (the “Grant Date”),
the Company entered into a Non-qualified Stock Option Agreement with one of the Company’s directors, pursuant to which, the
Company issued the director non-qualified stock options (the “Stock Options”) to purchase a total of 6,000 shares of
the Company’s common stock as compensation for his services to be rendered as the Company’s director. One
half of the Stock Options shall vest on the sixth month anniversary of the Grant Date (the “First Vesting Date”) and
become exercisable at an exercise price equal to the market price of the Company’s common stock on the First Vesting Date
and the second half of Stock Options shall vest on the twelfth month anniversary of the Grant Date (the “Second Vesting Date”)
and become exercisable at an exercise price equal to the market price of the Company’s common stock on the Second Vesting
Date.
On January 21, 2011 (the “CFO Stock Option
Grant Date”), the Company entered into a Non-qualified Stock Option Agreement with the Company’s former Chief Financial
Officer, pursuant to which, the Company issued non-qualified stock options (the “CFO Stock Options”) to purchase a
total of 15,000 shares of the Company’s common stock as compensation for his services to be rendered as the Company’s
Chief Financial Officer. 3,000 CFO Stock Options vested on the CFO Stock Option Grant Date; 4,000 CFO Stock Options shall vest
on the one-year anniversary of the CFO Grant Date; 4,000 CFO Stock Options shall vest on the second-year anniversary of the CFO
Grant Date; and 4,000 CFO Stock Options shall vest on the third-year anniversary of the CFO Grant Date. The exercise
price for all of the shares was determined as the fair value of our common stock using the closing price on the grant date.
On November 5, 2011, our former CFO submitted
a letter of resignation resigning from his position. The resignation was effective as of December 31, 2011. Under the Non-qualified
Stock Option Agreement, if CFO is removed from office for cause prior to the 21 st day of January, 2012, any outstanding
stock options held by him which are not vested and exercisable by him immediately prior to resignation shall terminate as of the
date of removal, and any outstanding stock options held by CFO which is vested and exercisable immediately prior to removal shall
be exercisable at any time prior to the expiration date of such stock option or within one-year after the date of removal, whichever
is shorter. As a result, 12,000 CFO Stock Options were forfeited as of December 31, 2011. On January 6, 2012, our former CFO transferred
options to purchase 3,000 shares to Mr. Minhua Chen, our Chief Executive Officer, as a gift.
CHINA YIDA HOLDING, CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
On January 21, 2011 (the “VPIR Stock
Option Grant Date”), the Company entered into a Non-qualified Stock Option Agreement with the Company’s former Corporate
Secretary and VP of Investor Relation (“VPIR”), pursuant to which, the Company issued non-qualified stock options (the
“VPIR Stock Options”) to purchase a total of 15,000 shares of the Company’s common stock as compensation for
his services to be rendered as the Company’s VP of Investor Relation. 3,000 VPIR Stock Options shall vest on the VPIR Stock
Option Grant Date; 4,000 VPIR Stock Options shall vest on the one-year anniversary of the VPIR Grant Date; 4,000 VPIR Stock Options
shall vest on the second-year anniversary of the VPIR Grant Date; and 4,000 VPIR Stock Options shall vest on the third-year anniversary
of the VPIR Grant Date. The exercise price for all of the shares was determined as the fair value of our common stock using the
closing price on the grant date.
On November 5, 2011, our former VPIR submitted
a letter of resignation resigning from his position. The resignation was effective as of December 31, 2011. Under the Non-qualified
Stock Option Agreement, if VPIR is removed from office for cause prior to the 21 st day of January, 2012, any outstanding
stock option held by him which is not vested and exercisable by him immediately prior to resignation shall terminate as of the
date of removal, and any outstanding stock options held by VPIR which is vested and exercisable immediately prior to removal shall
be exercisable at any time prior to the expiration date of such stock option or within one-year after the date of removal, whichever
is shorter. As a result, 12,000 VPIR Stock Options were forfeited as of December 31, 2011. On January 6, 2012, our former VPIR
transferred options to purchase 3,000 shares to Mr. Minhua Chen, our Chief Executive Officer, as a gift.
On March 17, 2011 (the “ID Stock Option
Grant Date”), the Company entered into a Non-qualified Stock Option Agreement with the Company’s Independent Director,
pursuant to which, the Company issued non-qualified stock options (the “ID Stock Options”) to purchase a total of 6,000
shares of the Company’s common stock as compensation for his services to be rendered as the Company’s Independent Director.
One half of the ID Stock Options vested on the ID Grant Date and the second half of ID Stock Options vested on June 10, 2011. The
exercise price for all of the shares was determined as the fair value of our common stock using the closing price on the grant
date.
On July 27, 2011, the Company entered into
an agreement with the Company’s Independent Director, pursuant to which, the Company granted 4,000 restricted shares of the
Company’s common stock as compensation for his services to be rendered as the Company’s Independent Director from June
10, 2011 to June 9, 2012. The estimated value of the 4,000 shares was $73,000 on June 10, 2011. On May 24, 2012, the 4,000 restricted
shares were issued.
The Company valued the stock options using
the Black-Scholes model with the following assumptions:
Type of Stock Option | |
Number of Options | | |
Expected Term | | |
Expected Volatility | | |
Dividend Yield | | |
Risk Free Interest Rate | |
Options to Independent Director, June 10, 2009 | |
| 6,000 | | |
| 5.25 | | |
| 356 | % | |
| 0 | % | |
| 3.11 | % |
Options to Chief Financial Officer, January 21, 2011 | |
| 15,000 | | |
| 6.25 | | |
| 60 | % | |
| 0 | % | |
| 3.44 | % |
Options to VP of Investor Relation, January 21, 2011 | |
| 15,000 | | |
| 6.25 | | |
| 60 | % | |
| 0 | % | |
| 3.44 | % |
Options to Independent Director, March 17, 2011 | |
| 6,000 | | |
| 6.25 | | |
| 60 | % | |
| 0 | % | |
| 3.25 | % |
The following is a summary of the option activity:
| |
Number of Options | |
| |
| |
Outstanding as of December 31, 2013 | |
| 18,000 | |
Granted | |
| - | |
Exercised | |
| - | |
Forfeited | |
| - | |
Outstanding as of December 31, 2014 | |
| 18,000 | |
For the years ended December 31, 2014 and 2013,
the Company recognized $0 and $0, respectively, as stock-based compensation expense, which was included in general and
administrative expenses.
CHINA YIDA HOLDING, CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. |
DISCONTINUED OPERATIONS |
On June 3, 2013, Fujian Yida entered into a
stock transfer agreement with Anhui Xingguang Investment Group Ltd (“Purchaser”), pursuant to which Fujian Yida agreed
to transfer its 60% interest in Anhui Yida to the Purchaser for RMB 60 million, or $9.72 million and the Purchaser agreed to assume
all the assets and liabilities of Anhui Yida.
On August 26, 2014, Hong Kong Yi Tat entered
into a certain share transfer agreement with Fujian Taining Great Golden Lake Tourism Economic Development Industrial Co., Ltd.
(the “Purchaser”), pursuant to which Hong Kong Yi Tat agreed to sell 100% of its equity interest in Fujian Jintai to
the Purchaser (the “Sale”) for a price of RMB 228,801,359, or approximately $37 million (the “Purchase Price”).
The Company has reclassified the assets and liabilities of the discontinued
entity in the accompanied financial statements.
Following table summarizes the classification of assets and liabilities
of the discontinued entity as at December 31, 2013.
Fujian Jintai |
Current assets | |
| |
Cash | |
$ | 257,837 | |
Other receivable | |
| 169,728 | |
Others | |
| 159,764 | |
Current assets of discontinued operations | |
| 587,329 | |
Add back: Intercompany receivable elimination | |
| 38,562,409 | |
Current assets of discontinued operations before intercompany elimination | |
| 39,149,738 | |
| |
| | |
Non-current assets | |
| | |
Property, plant & equipment, net | |
| 33,917,060 | |
Long-term prepayments | |
| 457,576 | |
Intangible assets, net | |
| 3,356,220 | |
Non-current assets of discontinued operations | |
| 37,730,856 | |
| |
| | |
Current liabilities | |
| | |
Long-term loan, current portion | |
| 2,032,002 | |
Accrued expenses and other payables | |
| 78,053 | |
Current liabilities of discontinued operations | |
| 2,110,055 | |
Add back: Intercompany receivable elimination | |
| 23,705,298 | |
Current liabilities of discontinued operations before intercompany elimination | |
| 25,815,353 | |
| |
| | |
Non-current liabilities | |
| | |
Long-term loan | |
| 8,135,018 | |
Non-current liabilities of discontinued operations | |
$ | 8,135,018 | |
At the date of disposal August 26, 2014, the
Company recorded $616,732 as loss from operations of discontinued entity and $6,510,630 as loss on disposal of discontinued entity.
Following is the Gain/Loss Calculation for
disposal of Fujian Jintai.
Fujian Jintai Gain/Loss calculation |
| |
| |
Net assets of the Company as of December 31, 2013 | |
$ | 42,930,223 | |
| |
| | |
Less: Loss from discontinued operations through December 31, 2014 | |
| 616,732 | |
Less: Other comprehensive loss through December 31, 2014 | |
| 229,044 | |
Net assets of the Company at the date of disposal | |
$ | 42,084,447 | |
Proceeds from disposal, gross | |
| 37,175,063 | |
Less: Capital gains tax | |
| (1,601,246 | ) |
| |
| | |
Proceeds from disposal, net of capital gains tax | |
$ | 35,573,817 | |
| |
| | |
Loss on disposal of discontinued operations | |
$ | 6,510,630 | |
CHINA YIDA HOLDING, CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. |
DISCONTINUED OPERATIONS (CONTINUED) |
The results of Anhui Yida and Fujian Jintai
have been presented as a discontinued operation in the consolidated statements of income and comprehensive income. Selected operating
results for the discontinued business are presented in the following tables:
| |
For The Years Ended December 31, 2014 | | |
| |
| |
Fujian Jintai | | |
Anhui Yida | | |
Total | |
| |
| | |
| | |
| |
Net revenue | |
$ | 3,492,327 | | |
$ | - | | |
$ | 3,492,327 | |
Cost of revenue | |
| (1,828,348 | ) | |
| - | | |
| (1,828,348 | ) |
Selling expenses | |
| (904,667 | ) | |
| - | | |
| (904,667 | ) |
General, and administrative expenses | |
| (605,331 | ) | |
| - | | |
| (605,331 | ) |
Interest expense | |
| (443,108 | ) | |
| | | |
| (443,108 | ) |
Interest income | |
| 692 | | |
| - | | |
| 692 | |
Other expense, net | |
| (328,297 | ) | |
| - | | |
| (328,297 | ) |
Net Loss | |
$ | (616,732 | ) | |
$ | - | | |
$ | (616,732 | ) |
| |
For The Years
Ended
December 31, 2013 | | |
| |
| |
Fujian Jintai | | |
Anhui Yida | | |
Total | |
| |
| | |
| | |
| |
Net Revenue | |
$ | 5,472,453 | | |
$ | - | | |
$ | 5,472,453 | |
Cost of Revenue | |
| (2,719,067 | ) | |
| - | | |
| (2,719,067 | ) |
Selling expenses | |
| (1,634,585 | ) | |
| - | | |
| (1,634,585 | ) |
General, and administrative expenses | |
| (1,008,744 | ) | |
| (256,306 | ) | |
| (1,265,050 | ) |
Interest expense | |
| (398,165 | ) | |
| - | | |
| (398,165 | ) |
Interest Income | |
| 7,896 | | |
| 1,007 | | |
| 8,903 | |
Other expense, net | |
| (107,607 | ) | |
| (237 | ) | |
| (107,844 | ) |
Net Loss | |
$ | (387,819 | ) | |
$ | (255,536 | ) | |
$ | (643,355 | ) |
CHINA YIDA HOLDING, CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 December 31, | |
| |
2015 | |
$ | 123,862 | |
2016 | |
| 50,251 | |
2017 | |
| 27,219 | |
2018 | |
| 27,264 | |
2019 | |
| 27,310 | |
Thereafter | |
| 890,437 | |
Total minimum payments | |
$ | 1,146,343 | |
The Company incurred rental expenses of $219,774
and $197,672 for the years ended December 31, 2014 and 2013, respectively.
CHINA YIDA HOLDING, CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. |
COMMITMENTS AND CONTINGENCIES (CONTINUED) |
(2) Compensation for using natural resources
commitments
In December 2008, Tulou entered into a Tourist
Resources Development Agreement with Hua’an County Government (“Hua’an government”) which is related to
pay compensation fees for using natural resources in Tulou. The Company agreed to pay (1) 16% of gross ticket sales
in the first five years; (2) 20% of gross ticket sales in the second five years; (3) 23% of gross ticket sales in the third five
years; (4) 25% of gross ticket sales in the fourth five years; (5) 28% of gross ticket sales in the fifth five years; (6) 30% in
twenty six years and thereafter when the ticket price of the Clusters is RMB60 ($9.50 USD) or above per person.
The Company paid approximately $56,891 and
$60,973 to the Hua’an government for the years ended December 31, 2014 and 2013, respectively, and recorded as selling expenses.
(3) Litigation
The Company’s management does not expect
the legal proceedings involving the Company would have a material impact on the Company’s consolidated financial position
or results of operations.
15. |
DUE TO RELATED PARTIES |
As of December 31, 2014, the Company had $28,921,820
and $2,759,122 due to Fujian Xinhengji Advertisement Co., Ltd and Mr. Minhua Chen, respectively. As of December 31, 2013, the
Company had $31,397,840 and $4,199,122 due to Fujian Xinhengji Advertisement Co., Ltd and Mr. Minhua Chen, respectively. Mr. Minhua
Chen, the Chief Executive Officer and Chairman of the Company, is the Chairman of Fujian Xinhengji Advertisement Co., Ltd. Those
loans are unsecured, bear no interest, and due on demand.
CHINA YIDA HOLDING, CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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:
| |
December 31, 2014 | | |
December 31, 2013 | |
Amounts attributable to common stockholders: | |
| | |
| |
Net loss from continuing operations, net of income taxes | |
$ | (22,153,752 | ) | |
$ | (16,710,175 | ) |
Net (loss) income from discontinued operations, net of income
taxes | |
| (7,127,362 | ) | |
| 457,993 | |
Net loss attributable to common stockholders | |
$ | (29,281,114 | ) | |
$ | (16,252,182 | ) |
Net (loss) income attributable to common stockholders per share - basic and diluted: | |
| | | |
| | |
- Basic & diluted earnings/(loss) per share from continuing operations | |
$ | (5.66 | ) | |
$ | (4.27 | ) |
- Basic & diluted earnings/(loss) per share from discontinued operations | |
| (1.82 | ) | |
| 0.12 | |
- Basic & diluted earnings/(loss) per share attributable to common stockholders | |
$ | (7.48 | ) | |
$ | (4.15 | ) |
Basic and Diluted weighted average outstanding shares of common stock | |
| 3,914,580 | | |
| 3,914,580 | |
Potential common shares outstanding As of December 31, 2014: | |
| | | |
| | |
Warrants outstanding | |
| - | | |
| - | |
Options outstanding | |
| 18,000 | | |
| 18,000 | |
For both years ended December 31, 2014 and 2013, 18,000 options
were not included in the diluted earnings per share because the average stock price was lower than the strike price of these options.
CHINA YIDA HOLDING, CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
During the years ended December 31, 2014 and
2013, the Company was organized into two main business segments: advertisement and tourism. The primary business relates to tourism
at Yunding resort, Yang-sheng Paradise, and Tulou resort. The Company offers bamboo rafting, parking lot service, photography services,
hotel lodging and ethnic cultural communications. The primary business related to advertisement is focused on advertisements, including
media publishing, television, cultural and artistic communication activities, and performance operation and management activities.
The following table presents a summary of operating information and certain balance sheet information for the two segments for
the three months ended:
| |
December 31, 2014 | | |
December 31, 2013 | |
Revenues: | |
| | |
| |
Advertisement | |
$ | - | | |
$ | 2,910,612 | |
Tourism | |
| 13,124,152 | | |
| 9,457,821 | |
Total | |
$ | 13,124,152 | | |
$ | 12,368,433 | |
| |
| | | |
| | |
Operating income (loss): | |
| | | |
| | |
Advertisement | |
$ | - | | |
$ | 351,716 | |
Tourism | |
| (13,562,528 | ) | |
| (11,071,741 | ) |
Other | |
| - | | |
| (281,475 | ) |
Total | |
$ | (13,562,528 | ) | |
$ | (11,001,500 | ) |
| |
| | | |
| | |
Net income (loss): | |
| | | |
| | |
Advertisement | |
$ | - | | |
$ | 176,014 | |
Tourism | |
| (22,153,752 | ) | |
| (16,602,697 | ) |
Other | |
| - | | |
| (283,492 | ) |
Net loss from continuing operations | |
| (22,153,752 | ) | |
| (16,710,175 | ) |
Net (loss) income from discontinued operations | |
| (7,127,362 | ) | |
| 355,778 | |
Total | |
$ | (29,281,114 | ) | |
$ | (16,354,397 | ) |
| |
| | | |
| | |
Capital expenditure: | |
| | | |
| | |
Advertisement | |
$ | - | | |
$ | - | |
Tourism | |
| - | | |
| 74,668,705 | |
Total | |
$ | - | | |
$ | 74,668,705 | |
| |
December 31, 2014 | | |
December 31, 2013 | |
Intangible assets: | |
| | |
| |
Advertisement | |
$ | - | | |
$ | - | |
Tourism | |
| 46,419,350 | | |
| 47,837,641 | |
Total | |
$ | 46,419,350 | | |
$ | 47,837,641 | |
| |
| | | |
| | |
Identifiable assets: | |
| | | |
| | |
Advertisement | |
$ | - | | |
$ | 33,537 | |
Tourism | |
| 233,187,958 | | |
| 238,239,127 | |
Others | |
| - | | |
| 10,433 | |
Assets of continuing operations | |
| 233,187,958 | | |
| 238,283,097 | |
Assets of discontinued operations | |
| - | | |
| 38,318,186 | |
Total | |
$ | 233,187,958 | | |
$ | 276,601,283 | |
Others represent reconciling amounts including
certain assets which are excluded from segments and adjustments to eliminate inter-company transactions.
CHINA YIDA HOLDING, CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Management has evaluated subsequent events
through the date which the consolidated financial statements were issued. All subsequent events requiring recognition as of December
31, 2014 have been incorporated into these unaudited consolidated financial statements and there are no subsequent events that
require disclosure in accordance with FASB ASC Topic 855, “Subsequent Events”.
ITEM 9. CHANGES IN AND DISAGREEMENTS
WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None
ITEM 9A. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls
and Procedures
Pursuant to Rule 13a-15(b) under the
Securities Exchange Act of 1934 (“Exchange Act”), the Company carried out an evaluation, with the participation of
the Company’s management, including the Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer
(“CFO”) (the Company’s principal financial and accounting officer), of the effectiveness of the Company’s
disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the end of the period covered
by this report. Based upon that evaluation, the Company’s CEO and CFO concluded that the Company’s disclosure controls
and procedures are not effective to ensure that information required to be disclosed by the Company in the reports that the Company
files or submits under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in
the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including
the Company’s CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.
Management’s Annual Report
on Internal Control over Financial Reporting
Our management is responsible for establishing
and maintaining adequate internal controls over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange
Act and for assessing the effectiveness of internal controls over financial reporting. As defined by the Securities and Exchange
Commission (Rule 13a-15(f) under the Exchange Act of 1934, as amended), internal controls over financial reporting is a process
designed by, or under the supervision of the Company’s principal executive and principal financial officers and effected
by its Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of the consolidated financial statements in accordance with U.S. generally accepted accounting principles.
Our internal control system was designed
to, in general, provide reasonable assurance to the Company’s management and board regarding the preparation and fair presentation
of published financial statements, but no matter how well designed because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject
to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies
or procedures may deteriorate. Therefore, even effective internal controls over financial reporting can only provide reasonable
assurance with respect to the financial statement preparation and presentation.
Our management assessed the effectiveness
of the Company’s internal control over financial reporting as of December 31, 2014. The framework used by management
in making that assessment was the criteria set forth in the document entitled “ Internal Control – Integrated Framework”
issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that assessment, our management has determined
that as of December 31, 2013, the Company identified deficiencies that were determined to be a material weakness. A
material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there
is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not
be prevented or detected on a timely basis. Because of the material weakness described below, management concluded that our internal
controls over financial reporting were not effective as of December 31, 2014.
The specific material weakness identified
by the Company’s management as of December 31, 2014 is described as follows:
We did not have sufficient skilled accounting
personnel that are either qualified as Certified Public Accountants in the U.S. or that have received education from U.S. institutions
or other educational programs that would provide enough relevant education relating to U.S. GAAP. The Company’s CFO and Financial
Manager have limited experience with U.S. GAAP and are not U.S. Certified Public Accountants. Further, our operating subsidiaries
are based in China, and in accordance with PRC laws and regulations, are required to comply with PRC GAAP, rather than U.S. GAAP.
Thus, the accounting skills and understanding necessary to fulfill the requirements of U.S. GAAP-based reporting, including the
preparation of consolidated financial statements, are inadequate, and determined to be a material weakness.
In an effort to remedy this material
weakness, we started to take the following remediation measures:
● |
develop a comprehensive training and development plan, for our finance, accounting and internal audit personnel, including our Chief Financial Officer, Financial Manager, and others, in the principles and rules of U.S. GAAP, SEC reporting requirements and the application thereof. |
● |
design and implement a program to provide ongoing company-wide training regarding the Company’s internal controls, with particular emphasis on our finance and accounting staff. |
● |
implement an internal review process over financial reporting to review all recent accounting pronouncements and to verify that the accounting treatment identified in such report have been fully implemented and confirmed by our internal control department. In the future, we will continue to improve our ongoing review and supervision of our internal control over financial reporting. |
● |
hire an individual that possesses the requisite U.S. GAAP experience and education. |
This annual report does not include
an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting.
Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to rules
of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.
Changes in Internal Control over Financial Reporting
No change in our system of internal
control over financial reporting occurred during the period covered by this report, fourth quarter of the fiscal year ended December
31, 2014 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION.
None.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS
AND CORPORATE GOVERNANCE.
The information required by this Item
is set forth in the Company’s 2015 Proxy Statement to be filed with the U.S. Securities and Exchange Commission (“SEC”)
in connection with the solicitation of proxies for the Company’s 2015 Annual Meeting of Shareholders (“2015 Proxy Statement”)
and is incorporated herein by reference. Such Proxy Statement will be filed with the SEC within 120 days after the end of the fiscal
year to which this report relates.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this Item
is set forth in the Company’s 2015 Proxy Statement and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
The information required by this Item
is set forth in the Company’s 2015 Proxy Statement and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
The information required by this Item
is set forth in the Company’s 2015 Proxy Statement and is incorporated herein by reference.
ITEM 14. PRINCIPAL ACCOUNTING FEES
AND SERVICES.
The information required by this Item
is set forth in the Company’s 2015 Proxy Statement and is incorporated herein by reference.
PART IV
ITEM 15. EXHIBITS, FINANCIAL
STATEMENT SCHEDULES.
(a) |
Documents filed as part of this report |
Exhibit
Number |
|
Description |
2.1 |
|
Share
Exchange Agreement, dated November 19, 2007, among the Company, the stockholders of the Company, Keenway Limited and Hong
Kong Yi Tat International Investment, Ltd. (1) |
2.2 |
|
Agreement
and Plan of Merger, dated November 19, 2012 (16) |
3.1 |
|
Articles
of Incorporation of the Company as filed with the Secretary of State of Delaware on June 4, 1999 (7) |
3.2 |
|
Certificate
of Amendment to Certificate of Incorporation changing the corporate name from Apta Holdings, Inc. to InteliSys Aviation Systems
of America, Inc. filed with the Secretary of State of Delaware on July 21, 2007 (1) |
3.3 |
|
Certificate
of Amendment to Articles of Incorporation filed on November 28, 2007 (2) |
3.4 |
|
Certificate
of Amendment to the Certificate of Incorporation of China Yida Holding Co., a Delaware corporation (16) |
3.5 |
|
Articles
of Incorporation of China Yida Holding Co., a Nevada corporation (16) |
3.6 |
|
Bylaws
of China Yida Holding Co., a Nevada corporation (16) |
3.7 |
|
Articles
of Merger of China Yida Holding Co., a Nevada corporation (16) |
3.8 |
|
Certificate
of Merger of China Yida Holding Co., a Delaware corporation (16) |
4.1 |
|
Sample
Warrant (3) |
10.1 |
|
Securities
Purchase Agreement (3) |
10.2 |
|
Registration
Rights Agreement (3) |
10.3 |
|
Lock-Up
Agreement (3) |
10.4 |
|
Make
Good Agreement (3) |
10.5 |
|
Operating
Agreement dated October 9, 2004 between Hong Kong Yi Tat International Investment Limited and Fujian Jiaoguang Media Co, Ltd.
(1) |
10.6 |
|
Proxy
Agreement dated October 9, 2004 between Hong Kong Yi Tat International Investment Limited and Fujian Jiaoguang Media Co, Ltd.
(1) |
10.7 |
|
Consulting
Services Agreement dated October 9, 2004 between Hong Kong Yi Tat International Investment Limited and Fujian Jiaoguang Media
Co, Ltd. (1) |
10.8 |
|
Option
Agreement dated October 9, 2004 between Hong Kong Yi Tat International Investment Limited and Fujian Jiaoguang Media Co, Ltd.
(1) |
10.9 |
|
Equity
Pledge Agreement dated October 9, 2004 between Hong Kong Yi Tat International Investment Limited and Fujian Jiaoguang Media
Co, Ltd. (1) |
10.10 |
|
Leasing
Agreement (4) |
10.11 |
|
Leasing Agreement
(4) |
10.12 |
|
Employment
Agreement with George Wung (5) |
10.13 |
|
Placement
Agency Agreement (8) |
10.14 |
|
Form
of Subscription Agreement (8) |
10.15 |
|
Equity
Transfer Agreements Dated March 15, 2010 (9) |
10.16 |
|
Fujian
Education Television Channel Project Management Agreement between Fuzhou Fuyu Advertising, Co. and Fujian Education Media
Limited Company, dated August 1, 2010. (10) |
10.17 |
|
Six-Year
Exclusive Agreement with China Railway Media Center dated February 2009 (14) |
10.18 |
|
Tourism
Management Revenue Sharing Agreement with Taining government to operate Great Golden Lake from 2001 to 2032 dated 2001 (14) |
10.19 |
|
Tourist
Destination Cooperative Development Agreement with Yongtai County Government dated November 2008 (14) |
10.20 |
|
Tourist
Resources Development Agreement with Hua’an County Government dated December 2008 (14) |
10.21 |
|
Emperor
Ming Taizu Cultural and Ecological Resort and Tourist Project Finance Agreement dated April 15, 2010 with Anhui Province Bengbu
Municipal Government (14) |
10.22 |
|
China
Yang-sheng (Nourishing Life) Tourism Project Finance Agreement dated April 2010 with Jianxi Province Zhangshu Municipal Government
(14) |
10.23 |
|
Agreement
with Jianxi Province People’s Government of Fenyi County dated June 1, 2010 (14) |
10.24 |
|
Lease
Agreement for our principal offices located at 28/F, Yifa Building, No.111, Wusi Road, Fuzhou, Fujian Province, PRC. (14) |
10.25 |
|
Lease
Agreement for our office located at 20955 Pathfinder Rd., #200-2, Diamond Bar, CA 91765. (11) |
Exhibit
Number |
|
Description |
10.26 |
|
Land Use Rights Agreement with Yongtai County Municipal Bureau of Land and Resources (14) |
10.27 |
|
Cooperative agreement between us and Anhui Xingguang (14) |
10.28 |
|
Lease Transfer Agreement with Xingguang (14) |
10.29 |
|
Lease Agreement for Great Golden Lake (14) |
10.30 |
|
Contract between Xin Hengji Holding Company Limited (“XHJ”) and Fujian Education Media Limited Company (14) |
10.31 |
|
Assignment of XHJ agreement from XHJ to Fuzhou Fuyu (14) |
10.32 |
|
Mountain and Forest Land Lease Contract with Caoxiang Village, dated July 17, 2008 and Supplement, dated July 19, 2008 (14) |
10.33 |
|
Mountain and Forest Land Lease Contract with Dalu Village, dated November 20, 2008 (14) |
10.34 |
|
Mountain and Forest Land Lease Contract with Hongta Village, dated November 20, 2008 (14) |
10.35 |
|
Mountain and Forest Land Lease Contract with Caoxiang Village, dated November 10, 2009 (14) |
10.36 |
|
Mountain and Forest Land Lease Contract with Zhangxiang Village, dated November 10, 2009 (14) |
10.37 |
|
Bank Loan Agreement, dated November 18, 2011 (14) |
10.38 |
|
Bank Loan Agreement, dated January 26, 2011 (14) |
10.39 |
|
Bank Loan Agreement, dated October 25, 2011 (14) |
10.40 |
|
Bank Loan Agreement, dated November 7, 2011 (14) |
10.41 |
|
Director Agreement between the Company and Michael Marks, dated June 10, 2011 (13) |
10.42 |
|
Loan agreement with China Minsheng Banking Corp, Ltd., dated April 19, 2012 (15) |
10.43 |
|
Loan agreement with China Minsheng Banking Corp, Ltd., dated February 20, 2012(16) |
10.44 |
|
Loan Agreement with Fujian Haixia Bank, dated August 16, 2012 (16) |
10.45 |
|
Loan Agreement with China Minsheng Banking Corp, Ltd., dated November 23, 2012(16) |
10.46 |
|
Current Capital Loan Agreement with Fujian Haixia Bank, dated October 17, 2013 (17) |
10.47 |
|
Share Transfer Agreement between Yida (Fujian) Tourism Group Ltd. and Anhui Xingguang Investment Group Ltd., dated June 3,
2013 (Incorporated by reference to Exhibit 10.1 to Form 8-K filed on June 7, 2013)
|
10.48 |
|
Share Transfer Agreement between the Management Committee of the Fujian Taining Great Golden Lake Tourism Economic Development
Zone, Fujian Taining Great Golden Lake Tourism Economic Development Industrial Co., Ltd., Fujian Jintai Tourism Industrial Development
Co., Ltd. and Hong Kong Yi Tat International Investment Co., Ltd., dated August 26, 2014. (Incorporated by reference to Exhibit
10.1 to Form 8-K filed on September 2, 2014)
|
14.1 |
|
Code of Ethics (6) |
21.1 |
|
List of Subsidiaries (17) |
31.1 |
|
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 * |
31.2 |
|
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 * |
32.1 |
|
Certification of 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 * |
99.1 |
|
2008 Development Report of Chinese Radio and Television (4) |
101.INS |
|
XBRL Instance
Document * |
101.SCH |
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XBRL Taxonomy
Extension Schema Document * |
101.CAL |
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XBRL Taxonomy
Extension Calculation Linkbase Document * |
101.DEF |
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XBRL Taxonomy
Extension Definition Linkbase Document * |
101.LAB |
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XBRL Taxonomy
Extension Label Linkbase Document * |
101.PRE |
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XBRL Taxonomy
Extension Presentation Linkbase Document * |
______________
* Filed herewith.
(1) |
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Previously filed as Exhibits to Form 8-K filed on November 26, 2007. |
(2) |
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Previously filed as Exhibits to Form 8-K filed on March 6, 2008. |
(3) |
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Previously filed as Exhibits to Form 8-K filed on March 11, 2008. |
(4) |
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Previously filed as Exhibits to Form S-1/A filed on July 8, 2008. |
(5) |
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Previously filed as Exhibits to Form 8-K filed on January 14, 2009. |
(6) |
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Previously filed as Exhibits to Form 8-K filed on June 30, 2009. |
(7) |
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Previously filed as Exhibits to Form S-3 filed on December 11, 2009. |
(8) |
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Previously filed as Exhibits to Form 8-K filed on January 22, 2010. |
(9) |
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Previously filed as Exhibits to Form 8-K filed on May 14, 2010. |
(10) |
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Previously filed as Exhibits to Form 8-K filed on August 4, 2010. |
(11) |
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Previously filed as Exhibits to Form 10-K/A filed on February 3, 2012. |
(12) |
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Previously filed as Exhibits to Form 10-K filed on March 29, 2012. |
(13) |
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Previously filed as Exhibits to Form 10-K/A filed on June 4, 2012. |
(14) |
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Previously filed as Exhibits to Form 10-K/A filed on December 19, 2012. |
(15) |
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Previously filed as Exhibits to Form 10-Q/A filed on December 19, 2012. |
(16) |
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Previously filed as Exhibits to Form 8-K filed on November 20, 2012. |
SIGNATURES
In accordance with Section 13 or 15(d)
of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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CHINA YIDA HOLDING, CO. |
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Date: March 31, 2015 |
By: |
/s/ Minhua Chen |
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Minhua Chen
Chief Executive Officer
(Principal Executive Officer) |
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By: |
/s/ Yongxi Lin |
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Yongxi Lin |
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Chief Financial Officer
(Principal Accounting Officer) |
Pursuant to the requirements of the
Securities Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities
and on the dates indicated.
Signature |
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Capacity |
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Date |
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/s/ Minhua Chen |
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Chief Executive Officer and Chairman |
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March 31, 2015 |
Minhua Chen |
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(Principal Executive Officer) |
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/s/ Yongxi Lin |
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Chief Financial Officer |
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March 31, 2015 |
Yongxi Lin |
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(Principal Financial Officer; Principal Accounting Officer) |
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/s/ Yanling Fan |
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Chief Operating Officer and Director |
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March 31, 2015 |
Yanling Fan |
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/s/ Renjiu Pei |
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Director |
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March 31, 2015 |
Renjiu Pei |
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/s/ Fucai Huang |
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Director |
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March 31, 2015 |
Fucai Huang |
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/s/ Chunyu Yin |
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Director |
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March 31, 2015 |
Chunyu Yin |
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47
Exhibit 31.1
CERTIFICATION
OF CHIEF EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 302
OF
THE SARBANES-OXLEY ACT OF 2002
I, Chen Minhua, certify that:
1. I have reviewed this annual report
on Form 10-K of China Yida Holding, Co.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods present in this report; |
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13-a-15(f) and 15d-15(f)) for the registrant and have: |
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principals;
(c)
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on
such evaluation; and
(d)
Disclosed in this report any change in the registrant's internal control over financing reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected,
or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information;
and
(b)
Any fraud, whether or not material, that involved management or other employees who have a significant role in the registrant's
internal control over financial reporting.
March 31, 2015 |
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/s/
Chen Minhua |
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Chen Minhua |
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Chief Executive Officer (Principal Executive Officer) |
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Exhibit 31.2
CERTIFICATION
OF CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 302
OF
THE SARBANES-OXLEY ACT OF 2002
I, Yongxi Lin, certify that:
1. I have reviewed this annual report
on Form 10-K of China Yida Holding, Co.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods present in this report; |
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13-a-15(f) and 15d-15(f)) for the registrant and have: |
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principals;
(c)
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on
such evaluation; and
(d)
Disclosed in this report any change in the registrant's internal control over financing reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected,
or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have
disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the
audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information;
and
(b)
Any fraud, whether or not material, that involved management or other employees who have a significant role in the registrant's
internal control over financial reporting.
March 31, 2015 |
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/s/ Yongxi
Lin |
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Yongxi Lin |
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Chief Financial Officer (Principal Financial and Accounting Officer) |
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Exhibit 32.1
Certification Pursuant To
18 U.S.C. Section 1350,
As Adopted Pursuant To
Section 906 Of The Sarbanes-Oxley
Act Of 2002
In connection with the Annual Report
of China Yida Holding, Co. (the "Company") on Form 10-K for the year ended December 31, 2014 as filed with the Securities
and Exchange Commission (the "Report"), I, Chen Minhua, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the
requirements of Section 13(a) or 15 (d) of the Securities Exchange Act of 1934; and
(2) The information contained in the
Report fairly presents, in all material respects, the financial condition of the Company as of the dates presented and the results
of operations of the Company.
/s/ Chen
Minhua |
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Chen Minhua |
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Chief Executive Officer (Principal Executive Officer) |
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Dated: March 31, 2015
The foregoing certification is being furnished solely pursuant
to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States
Code) and is not being filed as part of a separate disclosure document.
Exhibit 32.2
Certification Pursuant To
18 U.S.C. Section 1350,
As Adopted Pursuant To
Section 906 Of The Sarbanes-Oxley
Act Of 2002
In connection with the Annual Report
of China Yida Holding, Co. (the "Company") on Form 10-K for the year ended December 31, 2014 as filed with the Securities
and Exchange Commission (the "Report"), I, Yongxi Lin, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the
requirements of Section 13(a) or 15 (d) of the Securities Exchange Act of 1934; and
(2) The information contained in the
Report fairly presents, in all material respects, the financial condition of the Company as of the dates presented and the results
of operations of the Company.
/s/ Yongxi
Lin |
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Yongxi Lin |
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Chief Financial Officer (Principal Financial and Accounting Officer) |
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Dated: March 31, 2015
The foregoing certification is being furnished solely pursuant
to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States
Code) and is not being filed as part of a separate disclosure document.
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