NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1.
|
ORGANIZATION
AND DESCRIPTION OF BUSINESS
|
China
Yida Holding Co. (“China Yida”) and its subsidiaries (collectively the "Company,” “we,”
“us,” or “our”) engage in the tourism and advertisement businesses in the People’s Republic
of China.
Keenway
Limited was incorporated under the laws of the Cayman Islands on May 9, 2007 for the purpose of functioning as an off-shore holding
company to obtain ownership interests in Hong Kong Yi Tat International Investment Co., Ltd (“Hong Kong Yi Tat”),
a company incorporated under the laws of Hong Kong. Immediately prior to the Merger (defined below), Mr. Chen Minhua and
his wife, Ms. Fan Yanling, were the majority shareholders of Keenway Limited.
On
November 19, 2007, we entered into a share exchange and stock purchase agreement with Keenway Limited, Hong Kong Yi Tat, and with the
shareholders of Keenway Limited at that time, including Chen Minhua, Fan Yanling, Zhang Xinchen, Extra Profit International Limited,
and Lucky Glory International Limited (collectively, the “Keenway Limited Shareholders”), pursuant to which in exchange
for all of their shares of Keenway Limited common stock, the Keenway Limited Shareholders received 18,180,649 newly issued shares
(or 90,903,246 shares prior to the reverse stock split on November 16, 2012) of our common stock and 728,359 shares (or 3,641,796
shares prior to the reverse stock split on November 16, 2012) of our common stock which was transferred from some of our then
existing shareholders (the “Merger”). As a result of the closing of the Merger, the Keenway Limited Shareholders
owned approximately 94.5% of our then issued and outstanding shares on a fully diluted basis and Keenway Limited became our wholly
owned subsidiary.
Hong
Kong Yi Tat was incorporated as the holding company of our operating entities, Fujian Jintai Tourism Development Co., Ltd., and
Fujian Jiaoguang Media Co., Ltd., Yida (Fujian) Tourism Group Limited, and Fujian Yida Tulou Tourism Development Co., Ltd. (“Tulou”). Hong
Kong Yi Tat does not have any other operations.
Fujian
Jintai Tourism Development Co., Ltd. (“Fujian Jintai”) has a wholly owned subsidiary, Fuzhou Hongda Commercial Services
Co., Ltd., (“Hongda”). The operation of Fujian Jintai is to develop the Great Golden Lake, one of our tourism
destinations.
Hongda
does not have any operations except for owning 100% of the ownership interest in Fuzhou Fuyu Advertising Co., Ltd. (“Fuyu”),
which is engaged in the operations of our media business. On March 15, 2010, Hongda entered into an equity transfer agreement
with Fujian Yunding Tourism Industrial Co., Ltd (currently known as Yida (Fujian) Tourism Group Limited, “Fujian Yunding”)
pursuant to which Fujian Yunding acquired 100% of the issued and outstanding shares of Fuyu from Hongda at the aggregate purchase
price of RMB 3,000,000. As a result, Fujian Yunding became the 100% holding company of Fuyu. Hongda ceased business
and deregistered on December 2, 2011.
Fujian
Jintai originally also owned 100% of the ownership interest in Fujian Yintai Tourism Co., Ltd. (“Yintai”). On March
15, 2010, Fujian Jintai entered into an equity transfer agreement with Fujian Yunding, pursuant to which Fujian Yunding acquired
100% of the issued and outstanding common stock of Yintai from Fujian Jintai at the aggregate purchase price of RMB 5,000,000.
As a result, Yintai became a wholly owned subsidiary of Fujian Yunding. Yintai was deregistered on November 18, 2010.
Fujian
Yida Tulou Tourism Development Co., Ltd.’s (“Tulou”) primary business relates to the operation of the Hua’An
Tulou cluster, one of our tourism destinations.
On
April 12, 2010, our operating subsidiary “Fujian Yunding Tourism Industrial Co., Ltd.” changed its name to “Yida
(Fujian) Tourism Group Limited” for our expanding business in operations of domestic tourism destinations in China by acquiring
new tourism destinations. Yida (Fujian) Tourism Group Limited’s (“Fujian Yida”) primary business relates to
the operations of our Yunding tourism destination and all of our newly engaged tourism destinations, and the management of our
media business.
On
March 16, 2010, Fujian Yida formed a wholly owned subsidiary, Yongtai Yunding Resort Management Co., Ltd. (“Yongtai Yunding”)
which currently has no material business operations. We plan to develop Yongtai Yunding into a business entity primarily focusing
on the operations of our Yunding tourism destination.
Fujian
Jiaoguang Media Co., Ltd. (“Fujian Jiaoguang”) and the Company’s contractual relationship comply with the requirements
of the Accounting Standard Codification ("ASC") 810, to consolidate Fujian Jiaoguang’s financial statements as
a Variable Interest Entity. During the current period, Fujian Jiaoguang had no material business operations.
Fuzhou
Fuyu Advertising Co., Ltd. (“Fuyu”) concentrates on the mass media segment of our business. Its primary
business is focused on advertisements, including media publishing, television, cultural and artistic communication activities,
and performance operations and management activities.
On
April 15, 2010, we entered into agreement with Anhui Xingguang Group to set up a subsidiary - Anhui Yida Tourism Development Co.,
Ltd. ("Anhui Yida") by investing 60% of the equity interest and Anhui Xingguang Group owning 40% of the equity interest
of Anhui Yida. The total paid-in capital of Anhui Yida was $14,687,307 (equals RMB 100 million). Anhui Yida's primary business
relates to the operation of our tourism destinations, specifically, Ming dynasty culture tourist destination.
CHINA
YIDA HOLDING, CO. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1.
|
ORGANIZATION
AND DESCRIPTION OF BUSINESS (CONTINUED)
|
On
July 6, 2010, Fujian Yida formed a wholly owned subsidiary, Jiangxi Zhangshu (Yida) Tourism Development Co., Ltd. (“Jiangxi
Zhangshu”) which currently has no material business operations. The initial paid-in capital of Jiangxi Zhangshu was $2,937,461
(RMB 20 million). On July 5, 2011, Fujian Yida and Fuyu further injected capital amounted to RMB 49 million and RMB1 million,
respectively, to Jiangxi Zhangshu. On March 20, 2012, Fujian Yida and Fuyu further injected capital amounted to RMB 29.4 million
and RMB 0.6 million, respectively, to Jiangxi Zhangshu, and the total paid-in capital increased to $15,842,337 (RMB100 million).
We plan to develop Jiangxi Zhangshu into a business entity primarily focusing on the operations of a new tourist destination.
On
July 7, 2010, Fujian Yida formed a wholly owned subsidiary, Jiangxi Fenyi (Yida) Tourism Development Co., Ltd. (“Jiangxi
Fenyi”) which currently has no material business operations. The initial paid-in capital of Jiangxi Fenyi was $1,762,477
(RMB 12 million). On July 7, 2011, Fujian Yida further injected capital amounted to RMB 48 million to Jiangxi Fenyi
and the total paid-in capital increased to $9,391,876 (RMB 60 million). We plan to develop Jiangxi Fenyi into a business entity
primarily focusing on the operations of a new tourist destination.
On June 24, 2011, Fujian Yida formed
a wholly owned subsidiary, Fujian Yida Travel Service Co., Ltd (the “Yida Travel”). The total paid-in capital of Yida
Travel was $1,546,670 (RMB 10 million). Its primary business is to conduct domestic and international traveling services
in China, including operating the direct sales of travel services for our tourist destinations at the Great Golden Lake,
Yunding Recreational Park, and Hua’An Tulou Cluster, and our three tourist destinations, Ming
Dynasty Entertainment World, China Yang-sheng (Nourishing Life) Paradise and City of Caves.
On
May 11, 2012, Jiangxi Zhangshu formed a wholly owned subsidiary, Zhangshu (Yida) Real Estate Development Co., Ltd. (“Zhangshu
Development”). The total paid-in capital of Zhangshu Development was $792,532 (RMB 5 million). Its primary business is to
conduct business of real estate development and sales in China.
On
May 16, 2012, Anhui Yida formed a wholly owned subsidiary, Bengbu (Yida) Real Estate Development Co., Ltd. (the “Bengbu
Yida”). The total paid-in capital of Bengbu Yida was $1,268,050 (RMB 8 million). Its primary business is to conduct business
of real estate development in China.
On
May 22, 2012, Jiangxi Zhangshu formed a wholly owned subsidiary, Zhangshu (Yida) Investment Co., Ltd. (the “Zhangshu Investment”).
The total paid-in capital of Zhangshu Investment was $792,532 (RMB 5 million). Its primary business is to conduct real estate
investment, project management and consulting in China.
On
June 6, 2012, Jiangxi Fenyi formed a wholly owned subsidiary, Fenyi (Yida) Property Development Co., Ltd. (“Fenyi
Development”). The total paid-in capital of Fenyi Development was $792,532 (RMB 5 million). Its primary business is to conduct
the business of real estate development and sales in China.
On
July 20, 2012, Anhui Yida formed a wholly owned subsidiary, Bengbu (Yida) Investment Co., Ltd. (“Bengbu Investment”).
The total paid-in capital of Bengbu Investment was $792,532 (RMB 5 million). Its primary business is to conduct real estate investment,
project management and consulting in China.
On
July 30, 2012, Fujian Yida formed a wholly owned subsidiary, Fujian (Yida) Culture and Tourism Performing Arts Co., Ltd. (“Yida
Arts”). The total paid-in capital of Yida Arts was $792,532 (RMB 5 million). Its primary business is to operate performance
and show events at Yunding Park.
On
June 3, 2013, Fujian Yida entered into a stock transfer agreement with Anhui Xingguang Investment Group Ltd (“Purchaser”),
pursuant to which Fujian Yida agreed to transfer its 60% interest in Anhui Yida to the Purchaser for 60 million RMB, or $9.72
million, The Purchaser assumed all the assets and liabilities of Anhui Yida.
On
June 26, 2013, Fujian Yida formed a wholly owned subsidiary, Yunding Hotel Management Co., Ltd. (“Yunding Hotel”).
The total paid-in capital of Yunding Hotel was $4,860,000 (RMB 30 million). Its primary business is to operate and manage
the hotel and its facilities at Yunding Park. The subsidiary has changed its name, Ant Colony Hotel Co., Ltd. on April 17, 2015.
On
June 24, 2014, Jiangxi Zhangshu formed a wholly owned subsidiary, Jiangxi Yida Travel Service Co., Ltd (“Jiangxi Travel”).
The total paid-in capital of Zhangshu Development was $48,691 (RMB 0.3 million). Its primary business is to conduct domestic and
international traveling services in China.
On
August 26, 2014, Hong Kong Yi Tat entered into a certain share transfer agreement with Fujian Taining Great Golden Lake Tourism
Economic Development Industrial Co., Ltd. (the “Purchaser”), pursuant to which Hong Kong Yi Tat agreed to sell 100%
of its equity interest in Fujian Jintai to the Purchaser for a price of RMB 228,801,359, or approximately $37 million.
CHINA
YIDA HOLDING, CO. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
2.
|
RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS
|
During the six-month period ended
June 30, 2015, the Company reviewed its measurement for valuation of long-lived assets of Tulou Resort, and determined that
the value of those long-lived assets has declined. Tulou Resort had experienced consecutive declines in revenue generated from
its visitors and tourists and incurred net operating losses since the year 2012. In considering the above factors, the
Company performed a long-lived asset recoverability test in accordance with ASC 360-10-35-15, “Impairment or Disposal
of Long-Lived Assets,” on the lowest level of identifiable cash flows. The recoverability test compared the carrying
value of the long-lived assets held by Tulou Resort to the undiscounted cash flows. As a result of this recoverability test,
the Company determined that the value of the assets was not recoverable. The Company then determined the fair
value for the long-lived assets of Tulou Resort using a discounted cash flow methodology, which resulted in a $4,384,335
long-lived assets impairment loss.
Despite that net operating losses were significantly lower
in the year ended December 31, 2014 as compared to the prior year. While such losses increased again in year 2015, the Company
believes that such impairment should have been recorded as of December 31, 2014. The balances as of and for the period ended March
31, 2015 in the accompanying unaudited financial statements have been restated.
In addition, the restatement corrects
a classification made to the amortization of long-term prepayment in the prior period unaudited consolidated statement of cash
flows to conform to the current year presentation, and an error previously not identified related to foreign translation gain (loss)
on the unaudited consolidated statement of income and comprehensive income for the three months ended March 31, 2015.
The impact of the restatement of selected financial information on the consolidated
financial statements is presented in the following tables within this Note below.
Consolidated Statements
of Income and Comprehensive Income
|
|
For The Three Months Ended
March 31, 2015
|
|
|
|
Previously
Reported
|
|
|
Impact of
Restatement
|
|
|
Restated
|
|
Cost of revenue
|
|
$
|
2,169,091
|
|
|
$
|
(31,910
|
)
|
|
$
|
2,137,181
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
403,871
|
|
|
|
31,910
|
|
|
|
435,781
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(4,313,454
|
)
|
|
|
31,910
|
|
|
|
(4,281,544
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income tax
|
|
|
(6,266,495
|
)
|
|
|
31,910
|
|
|
|
(6,234,585
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
(6,266,495
|
)
|
|
|
31,910
|
|
|
|
(6,234,585
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation gain (loss)
|
|
|
(876,069
|
)
|
|
|
1,219,572
|
|
|
|
343,503
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss
|
|
|
(7,142,564
|
)
|
|
|
1,251,482
|
|
|
|
(5,891,082
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) Earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
- Basic
|
|
$
|
(1.60
|
)
|
|
$
|
0.01
|
|
|
$
|
(1.59
|
)
|
- Diluted
|
|
$
|
(1.60
|
)
|
|
$
|
0.01
|
|
|
$
|
(1.59
|
)
|
CHINA
YIDA HOLDING, CO. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
2.
|
RESTATEMENT
OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS (CONTINUED)
|
Consolidated
Statements of Cash Flows
|
|
For The Three Months Ended
March 31, 2015
|
|
|
|
Previously
Reported
|
|
|
Impact of
Restatement / Reclassification
|
|
|
Restated
|
|
CASH FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(6,266,495
|
)
|
|
$
|
31,910
|
|
|
$
|
(6,234,585
|
)
|
Depreciation
|
|
|
2,065,975
|
|
|
|
(31,910
|
)
|
|
|
2,034,065
|
|
Amortization of long-term prepayments
|
|
|
-
|
|
|
|
213,360
|
|
|
|
213,360
|
|
Net cash used in operating activities
|
|
|
(4,122,308
|
)
|
|
|
213,360
|
|
|
|
(3,908,948
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions of long-term prepayments for acquisition of property, equipment and land use rights
|
|
|
(22,793
|
)
|
|
|
(213,360
|
)
|
|
|
(236,153
|
)
|
Net cash used in investing activities
|
|
|
(112,604
|
)
|
|
|
(213,360
|
)
|
|
|
(325,964
|
)
|
The Company’s consolidated
financial statements are prepared using generally accepted accounting principles in the United States of America applicable
to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of
business. The Company has incurred significant negative cash flows from operating activities, and continuing net losses and
working capital deficits that may affect its ability to continue as a going concern. The ability of the Company to continue
as a going concern is dependent on the Company’s ability to obtain adequate capital to fund operating losses until it
becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations.
The accompanying consolidated financial statements do not include any adjustments that might be necessary if the Company
is unable to continue as a going concern.
Management’s
Plan to Continue as a Going Concern
In
order to continue as a going concern, the Company will need, among other things, additional capital resources. Management’s
plans to obtain such resources for the Company include (1) obtaining capital from the sale of its substantial assets, (2) generating
and recovery of tourism revenue, and (3) short-term and long-term borrowings from banks, stockholders or other related party(ies).
However, management cannot provide any assurance that the Company will be successful in accomplishing any of its plans.
The
ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described
in the preceding paragraph and eventually to secure other sources of financing and attain profitable operations.
CHINA
YIDA HOLDING, CO. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
4.
|
BASIS
OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
The
unaudited consolidated financial statements of China Yida Holding, Co. and Subsidiaries have been prepared in accordance
with U.S. generally accepted accounting principles for interim financial information and pursuant to the requirements
for reporting on Form 10-Q. Accordingly, they do not include all the information and footnotes required by
accounting principles generally accepted in the United States of America for annual financial statements. However,
the information included in these interim financial statements reflects all adjustments (consisting solely of normal recurring
adjustments) which are, in the opinion of management, necessary for the fair presentation of the consolidated financial
position and the consolidated results of operations. Results shown for interim periods are not necessarily
indicative of the results to be obtained for a full year. The consolidated balance sheet information as of
December 31, 2015 was derived from the audited consolidated financial statements included in the Company’s Annual
Report on Form 10-K. These interim financial statements should be read in conjunction with that report. Certain
comparative amounts have been reclassified to conform to the current period's presentation.
a.
Basis of presentation
The
accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted
in the United States of America. The Company’s functional currency is the Chinese Renminbi, however, the accompanying consolidated
financial statements have been translated and presented in United States Dollars ($).
b.
Principles of consolidation
The
accompanying consolidated financial statements include the accounts of China Yida and its wholly-owned subsidiaries
Keenway Limited, Hong Kong Yi Tat, Fuyu, Fujian Yida, Tulou, Yongtai Yunding, Jiangxi Zhangshu, Jiangxi Fenyi, Yida Travel, Fenyi
Development, Zhangshu Development, Zhangshu Investment, Yida Arts, Yunding hotel, Jiangxi Travel, and the accounts of its
variable interest entity, Fujian Jiaoguang. All significant inter-company accounts and transactions have been eliminated in consolidation.
Consolidation
of Variable Interest Entities
According to the requirements of ASC 810,
an Interpretation of Accounting Research Bulletin No. 51 that requires the financial statements of a Variable Interest Entity
("VIE") to be consolidated, the Company has evaluated the economic relationships of Fujian Jiaoguang which signed an
exclusive right agreement with the Company. Therefore, Fujian Jiaoguang is considered to be a VIE, as defined by ASC Topic 810-10,
of which the Company is the primary beneficiary.
The
carrying amount and classification of Fujian Jiaoguang’s assets and liabilities included in the Consolidated Balance Sheets
are as follows:
|
|
March 31,
2016
|
|
|
December 31,
2015
|
|
Total current assets *
|
|
$
|
27,663,671
|
|
|
$
|
17,865,630
|
|
Total assets
|
|
$
|
27,670,959
|
|
|
$
|
17,872,871
|
|
Total current liabilities #
|
|
$
|
36,528,533
|
|
|
$
|
26,607,548
|
|
Total liabilities
|
|
$
|
36,528,533
|
|
|
$
|
26,607,548
|
|
*
Including intercompany receivables of $27,651,875 and $16,979,261 as at March 31, 2016 and December 31, 2015, respectively, to
be eliminated in consolidation.
#
Including intercompany payables of $36,501,099 and $26,580,316 as March 31, 2016 and December 31, 2015, respectively, to
be eliminated in consolidation.
Although
Fujian Jiaoguang no longer had revenues, its bank account still has to be maintained active with certain cash flows to support
its expenses. As such, Fujian Jiaoguang transferred funds from and to the Company’s directly-owned subsidiaries,
which resulted in intercompany receivables and payables. Since Fujian Jiaoguang is a variable interest entity subject to
consolidation, the balances of its intercompany receivables and payables are eliminated against the corresponding account balances
at the Company’s directly-owned subsidiaries at the consolidation level.
c.
Use of estimates and assumptions
The
preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United
States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the amount of revenues
and expenses during the reporting periods. Management makes these estimates using the best information available at the time the
estimates are made. However, actual results could differ materially from those results. The most significant estimates reflected
in the consolidated financial statements include depreciation, useful lives of property and equipment, deferred income taxes,
useful life of intangible assets and contingencies. Estimates and assumptions are periodically reviewed and the effects of revisions
are reflected in the consolidated financial statements in the period they are determined to be necessary.
CHINA
YIDA HOLDING, CO. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
4.
|
BASIS
OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
|
d.
Cash and cash equivalents
The
Company considers all cash on hand and in banks, certificates of deposit and other highly-liquid investments with original maturities
of three months or less, when purchased, to be cash and cash equivalents. As of March 31, 2016 and December 31, 2015, the Company
has uninsured deposits in banks of approximately $3,738,000 and $5,448,000, respectively.
e.
Accounts receivable
The
Company maintains reserves for potential credit losses on accounts receivable. Management reviews the composition of accounts
receivable and analyzes historical bad debts, customer concentrations, customer credit worthiness, current economic trends and
changes in customer payment patterns to evaluate the adequacy of these reserves. Based on the management’s judgment, no
allowance for doubtful accounts is required at the balance sheet dates.
f.
Advances and prepayments
The
Company advances funds to certain vendors for purchase of its construction materials and necessary services. Based on the
management’s judgment, no allowance for advances and prepayments were assessed and recorded as of March 31, 2016 and December
31, 2015, respectively.
g.
Property and equipment
Property
and equipment are recorded at cost less accumulated depreciation. Gains or losses on disposals are reflected as gain or loss in
the year of disposal. The cost of improvements that extends the life of property and equipment are capitalized. These capitalized
costs may include structural improvements, equipment and fixtures. All ordinary repair and maintenance costs are expensed as
incurred.
Depreciation
for financial reporting purposes is provided using the straight-line method over the estimated useful lives of the assets or lease
term as follows:
Building
|
|
20 years
|
Electronic Equipment
|
|
5 to 8 years
|
Transportation Equipment
|
|
8 years
|
Office Furniture
|
|
5 to 8 years
|
Leasehold Improvement and Attractions
|
|
Lesser of term of the lease or the estimated useful lives of the assets
|
h.
Intangible assets
Intangible assets consist of acquisition
of land use rights for tourism resorts. They are amortized on the straight line basis over their respective lease periods.
The lease period of land use rights is 40 years.
i.
Impairment
The
Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount
of an asset may not be recoverable through the estimated undiscounted cash flows expected to result from the use and eventual
disposition of the assets. Whenever any such impairment exists, an impairment loss will be recognized for the amount by which
the carrying value exceeds the fair value.
Assets are grouped and evaluated at the
lowest level for their identifiable cash flows that are largely independent of the cash flows of other groups of assets. The
Company considers historical performance and future estimated results in its evaluation of potential impairment and then
compares the carrying amount of the asset to the future estimated cash flows expected to result from the use of the asset. If
the carrying amount of the asset exceeds estimated expected undiscounted future cash flows, the Company measures the amount
of impairment by comparing the carrying amount of the asset to its fair value. The estimation of fair value is generally
measured by discounting expected future cash flows as the rate the Company utilizes to evaluate potential investments. The
Company estimates fair value based on the information available, judgments and projections that are considered necessary.
There was no impairment loss recorded for the three months ended March 31, 2016 and 2015.
j.
Revenue recognition
Revenue
is recognized at the date of service rendered to customers when a formal arrangement exists, the price is fixed or
determinable, the services have been rendered, no other significant obligations of the Company exist and collectability is
reasonably assured. Payments received before satisfaction of all of the relevant criteria for revenue recognition are
recorded as unearned revenue.
CHINA
YIDA HOLDING, CO. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
4.
|
BASIS
OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
|
Revenues
from advance resort ticket sales are recognized when the tickets are used. Revenues from our contractors who have tourism contracts
with us are generally recognized over the period of the applicable agreements commencing with the tourists visiting the resort.
The Company also sells admission and activities tickets for a resort which the Company has the management right.
The
Company has no allowance for product returns or sales discounts because services that are rendered and accepted by the customers
are normally not refundable and discounts are normally not granted after service has been rendered.
Profit sharing costs are recorded as
selling expenses for profit sharing arrangements with the local governments for the management rights (see Note 14).
For
the three months ended March 31, 2016
|
|
Tulou
|
|
|
|
|
|
Gross receipts
|
|
$
|
122,630
|
|
|
|
|
|
|
Profit sharing costs
|
|
|
-
|
|
Nature resource compensation expenses
|
|
|
14,135
|
|
Total paid to the local governments
|
|
|
14,135
|
|
|
|
|
|
|
Net receipts
|
|
$
|
108,495
|
|
For the three months ended March 31, 2015
|
|
|
|
|
Tulou
|
|
|
|
|
|
|
Gross receipts
|
|
$
|
101,190
|
|
|
|
|
|
|
Profit sharing costs
|
|
|
-
|
|
Nature resource compensation expenses
|
|
|
8,964
|
|
Total paid to the local governments
|
|
|
8,964
|
|
|
|
|
|
|
Net receipts
|
|
$
|
92,226
|
|
k.
Advertising costs
The
Company expenses the cost of advertising as incurred or, as appropriate, the first time the advertising takes place. Advertising
costs for the three months ended March 31, 2016 and 2015 were $212,122 and $281,768, respectively.
l.
Post-retirement and post-employment benefits
Full
time employees of subsidiaries of the Company participate in a government mandated multi-employer defined contribution plan pursuant
to which certain pension benefits, medical care, employee housing, and other welfare benefits are provided to employees. Chinese
labor regulations require that the subsidiaries of the Company make contributions to the government for these benefits based on
a certain percentages of employees’ salaries. The Company has no legal obligation for the benefits beyond the contributions
made. The total amounts for such employee benefits, which were expensed as incurred, were $94,471 and $83,266 for the three months
ended March 31, 2016 and 2015, respectively. Other than the above, neither the Company nor its subsidiaries provide
any other post-retirement or post-employment benefits.
m.
Foreign currency translation
The
Company uses the United States dollar ("U.S. dollars") for financial reporting purposes. The Company’s subsidiaries
maintain their books and records in their functional currency, being the primary currency of the economic environment in which
their operations are conducted. In general, for consolidation purposes, the Company translates the subsidiaries' assets and liabilities
into U.S. dollars using the applicable exchange rates prevailing at the balance sheet dates, and the statements of income are
translated at average exchange rates during the reporting periods. Gain or loss on foreign currency transactions are reflected
on the income statement. Gain or loss on financial statement translation from foreign currency are recorded as a separate component
in the equity section of the balance sheet and is included as part of accumulated other comprehensive income.
The functional currency of the Company and its subsidiaries in China is the Chinese Renminbi.
CHINA
YIDA HOLDING, CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
4.
|
BASIS
OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
|
n.
Income taxes
Income
taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities
and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to
be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in
the period that includes the enactment date. A valuation allowance is recognized if it is more likely than not that some portion,
or all, of a deferred tax asset will not be realized. There were no deferred income tax assets as of March 31, 2016 and December
31, 2015, respectively.
The
Company applied the provisions of ASC 740-10-50, “Accounting For Uncertainty In Income Taxes,” which provides
clarification related to the process associated with accounting for uncertain tax positions recognized in our financial statements.
Audit periods remain open for review until the statute of limitations has passed. The completion of review or the expiration of
the statute of limitations for a given audit period could result in an adjustment to the Company’s liability for income
taxes. Any such adjustment could be material to the Company’s results of operations for any given quarterly or annual period
based, in part, upon the results of operations for the given period. At December 31, 2015, management considered that the Company
had no uncertain tax positions, and will continue to evaluate for uncertain positions in the future.
China
Yida is subject to U.S. Federal and California state examination by tax authorities for years after 2008, and the PRC tax authority
for years after 2007.
o.
Fair values of financial instruments
The
carrying amounts reported in the consolidated financial statements for current assets and currently liabilities approximate fair
value due to the short-term nature of these financial instruments. The carrying amount of long-term loans approximates fair value
since the interest rates associated with the debts approximate the current market interest rates.
The
Company adopted ASC 820-10, “Fair Value Measurements and Disclosures,” which establishes a single authoritative definition
of fair value and a framework for measuring fair value and expands disclosure of fair value measurements for both financial and
nonfinancial assets and liabilities. This standard defines fair value, provides guidance for measuring fair value and requires
certain disclosures. This standard does not require any new fair value measurements, but discusses valuation techniques, such
as the market approach (comparable market prices), the income approach (present value of future income or cash flows) and the
cost approach (cost to replace the service capacity of an asset or replacement cost). For purposes of ASC 820-10-15, nonfinancial
assets and nonfinancial liabilities would include all assets and liabilities other than those meeting the definition of a financial
asset or financial liability as defined in ASC-820-10-15-15-1A.
p.
Stock-based compensation
The
Company records stock-based compensation expense pursuant to ASC 718-10, "
Share Based Payment Arrangement
, ” which
requires companies to measure compensation cost for stock-based employee compensation plans at fair value at the grant date and
recognize the expense over the employee's requisite service period. The Company’s expected volatility assumption is based
on the historical volatility of Company’s stock or the expected volatility of similar entities. The expected life assumption
is primarily based on historical exercise patterns and employee post-vesting termination behavior. The risk-free interest rate
for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of grant.
Stock-based
compensation expense is recognized based on awards expected to vest, and there were no estimated forfeitures as the Company has
a short history of issuing options. ASC 718-10 requires forfeitures to be estimated at the time of grant and revised in subsequent
periods, if necessary, if actual forfeitures differ from those estimates.
q.
Earnings per share (EPS)
Earnings
per share is calculated in accordance with ASC 260. Basic earnings per share is based upon the weighted average number of common
shares outstanding. Diluted earnings per share is based on the assumption that all dilutive convertible shares and stock instruments
were converted or exercised. Options and warrants are assumed to be exercised at the beginning of the period if the average stock
price for the period is greater than the exercise price of the warrants and options.
CHINA
YIDA HOLDING, CO. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
4.
|
BASIS
OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
|
r.
Statutory Reserves
In
accordance with the relevant laws and regulations of the PRC and the articles of association of the Company, the Company is required
to allocate 10% of their net income reported in the PRC statutory accounts, after offsetting any prior years’ losses, to
the statutory surplus reserve, on an annual basis. When the balance of such reserve reaches 50% of the respective registered capital
of the subsidiaries, any further allocation is optional.
As
of March 31, 2016, the statutory reserve of the subsidiaries already reached 50% of the registered capital of the subsidiaries
and the Company did not have any further allocation on it.
The
statutory surplus reserves can be used to offset prior years’ losses, if any, and may be converted into registered capital,
provided that the remaining balances of the reserve after such conversion is not less than 25% of registered capital. The statutory
surplus reserve is non-distributable.
s.
Dividend Policy
Under
the laws governing foreign invested enterprises in China, dividend distribution and liquidation are allowed but subject to special
procedures under the relevant laws and rules. Any dividend payments will be subject to the decision of the Board of Directors
and subject to foreign exchange rules governing such repatriation. Any liquidation is subject to both the relevant government
agency’s approval and supervision as well as the foreign exchange control.
t.
Reclassifications
Except
for the classification for discontinued operations, certain classifications have been made to the prior year financial statements
to conform to the current year presentation. The reclassification had no impact on previously reported net loss or accumulated
deficit.
u.
Recent accounting pronouncements
In
February 25, 2016, FASB issued ASU-2016-02-Leases (Topic 842). Topic 842 is to establish the principles that lessees and
lessors shall apply to report useful information to users of financial statements about the amount, timing, and uncertainty
of cash flows arising from a lease. The FASB is issuing this Update to increase transparency and comparability among
organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information
about leasing arrangements. Topic 842 affects any entity that enters into a lease (as that term is defined in this Update),
with some specified scope exemptions. The guidance in this Update supersedes Topic 840, Leases. The main difference
between previous GAAP and Topic 842 is the recognition of lease assets and lease liabilities by lessees for those leases
classified as operating leases under previous GAAP. The core principle of Topic 842 is that a lessee should recognize the
assets and liabilities that arise from leases. All leases create an asset and a liability for the lessee in accordance
with FASB Concepts Statement No. 6, Elements of Financial Statements, and, therefore, recognition of those lease assets
and lease liabilities represents an improvement over previous GAAP, which did not require lease assets and lease liabilities
to be recognized for most leases. A lessee should recognize in the statement of financial position a liability to make lease
payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease
term. When measuring assets and liabilities arising from a lease, a lessee (and a lessor) should include payments to be made
in optional periods only if the lessee is reasonably certain to exercise an option to extend the lease or not to exercise an
option to terminate the lease. Similarly, optional payments to purchase the underlying asset should be included in the
measurement of lease assets and lease liabilities only if the lessee is reasonably certain to exercise that purchase option.
Reasonably certain is a high threshold that is consistent with and intended to be applied in the same way as the reasonably
assured threshold in the previous leases guidance. In addition, also consistent with the previous leases guidance, a lessee
(and a lessor) should exclude most variable lease payments in measuring lease assets and lease liabilities, other than those
that depend on an index or a rate or are in substance fixed payments. For leases with a term of 12 months or less, a lessee
is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease
liabilities. If a lessee makes this election, it should recognize lease expense for such leases generally on a straight-line
basis over the lease term. The amendments in this Update are effective for fiscal years beginning after December 15, 2018,
including interim periods within those fiscal years. The Company is still in the process of evaluating the future impact of
adopting this standard.
CHINA
YIDA HOLDING, CO. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
4.
|
BASIS
OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
|
In
November 20, 2015, FASB issued ASU-2015-17-Income Taxes.
The
Board is issuing this Update as part of its initiative to reduce complexity in accounting standards (the Simplification Initiative).
The objective of the Simplification Initiative is to identify, evaluate, and improve areas of generally accepted accounting principles
(GAAP) for which cost and complexity can be reduced while maintaining or improving the usefulness of the information provided
to users of financial statements. Current GAAP requires an entity to separate deferred income tax liabilities and assets into
current and noncurrent amounts in a classified statement of financial position. To simplify the presentation of deferred income
taxes, the amendments in this Update require that deferred tax liabilities and assets be classified as noncurrent in a classified
statement of financial position. The amendments in this Update apply to all entities that present a classified statement of financial
position. The current requirement that deferred tax liabilities and assets of a tax-paying component of an entity be offset and
presented as a single amount is not affected by the amendments in this Update. For public business entities, the amendments in
this Update are effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods
within those annual periods. Earlier application is permitted for all entities as of the beginning of an interim or annual reporting
period. The Company is still in the process of evaluating future impact of adopting this standard.
In
April 7, 2015, FASB issued ASU-2015-03-Interest-Imputation of Interest. The Board is issuing this Update as part of its initiative
to reduce complexity in accounting standards (the Simplification Initiative). The objective of the Simplification Initiative is
to identify, evaluate, and improve areas of generally accepted accounting principles (GAAP) for which cost and complexity can
be reduced while maintaining or improving the usefulness of the information provided to users of financial statements. To simplify
presentation of debt issuance costs, the amendments in this Update require that debt issuance costs related to a recognized debt
liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent
with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this
Update. For public business entities, the amendments in this Update are effective for financial statements issued for fiscal years
beginning after December 15, 2015, and interim periods within those fiscal years. The Company has adopted this standard and the
debt liability as of March 31, 2016 has been presented net of debt issuance costs.
In
February 18, 2015, FASB issued ASU 2015-02-Consolidation (Topic 810). The amendments in this Update affect reporting entities
that are required to evaluate whether they should consolidate certain legal entities. All legal entities are subject to reevaluation
under the revised consolidation model. Specifically, the amendments: (1) Modify the evaluation of whether limited partnerships
and similar legal entities are variable interest entities (VIEs) or voting interest entities; (2) Eliminate the presumption that
a general partner should consolidate a limited partnership; (3) Affect the consolidation analysis of reporting entities that are
involved with VIEs, particularly those that have fee arrangements and related party relationships; (4) Provide a scope exception
from consolidation guidance for reporting entities with interests in legal entities that are required to comply with or operate
in accordance with requirements that are similar to those in Rule 2a-7 of the Investment Company Act of 1940 for registered money
market funds. The amendments in this Update are effective for public business entities for fiscal years, and for interim periods
within those fiscal years, beginning after December 15, 2015. The adoption of this standard is not expected to have a material
impact on the Company’s consolidated financial position and results of operations.
In
August 2014, FASB issued ASU 2014-15 - Presentation of Financial Statements - Going Concern (Subtopic 205-40). The amendments
in this Update states the disclosure of uncertainties about an entity’s ability to continue as a going concern. An entity’s
management should evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about
the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued
(or available to be issued). When management identifies conditions or events that raise substantial doubt, management should consider
whether its plans will alleviate the substantial doubt.
When
substantial doubt is raised but is alleviated by management’s plans, the entity should disclose following information: (a)
Principal conditions or events that raised substantial doubt (before consideration of management’s plans); (b) Management’s
evaluation of the significance of those conditions or events in relation to the entity’s ability to meet its obligations;
(c) Management’s plans that alleviated the substantial doubt.
When
substantial doubt is raised but is not alleviated by management’s plans, an entity should include a statement in the footnotes
indicating that there is substantial doubt about the entity’s ability to continue as a going concern within one year after
the date that the financial statements are issued (or available to be issued), and disclose the following information: (a) Principal
conditions or events that raise substantial doubt; (b) Management’s evaluation of the significance of those conditions or
events in relation to the entity’s ability to meet its obligations; (c) Management’s plans that are intended to mitigate
the conditions or events that raise the substantial doubt.
The
amendments in this Update are effective for the annual period ending after December 15, 2016, and for annual periods and
interim periods thereafter. Early application is permitted. The Company is still in the process of evaluating future impact
of adopting this standard.
CHINA
YIDA HOLDING, CO. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
5.
|
OTHER
RECEIVABLES, NET
|
Other
receivables consist of the following:
|
|
March 31,
2016
|
|
|
December 31,
2015
|
|
|
|
|
|
|
|
|
Advance to employees
|
|
$
|
215,266
|
|
|
$
|
143,423
|
|
Security deposits
|
|
|
57,435
|
|
|
|
30,670
|
|
Other
|
|
|
33,797
|
|
|
|
27,301
|
|
|
|
$
|
306,498
|
|
|
$
|
201,394
|
|
6.
|
ADVANCES
AND PREPAYMENTS
|
Advances
and prepayments consist of the following:
|
|
March 31,
2016
|
|
|
December 31,
2015
|
|
|
|
|
|
|
|
|
Advance payments related to consumables of Yang-Sheng Paradise
|
|
$
|
359,443
|
|
|
$
|
345,536
|
|
Advance payments related to facilities of City of Caves
|
|
|
57,246
|
|
|
|
59,134
|
|
Advance payments related to facilities of Yang-Sheng Paradise
|
|
|
49,290
|
|
|
|
43,106
|
|
Advance payments related to facilities of Yunding resort
|
|
|
19,134
|
|
|
|
53,915
|
|
Other
|
|
|
33,408
|
|
|
|
34,617
|
|
|
|
$
|
518,521
|
|
|
$
|
536,308
|
|
As of March 31, 2016 and December 31,
2015, advance payments related to the consumables to be used in Yang-sheng Paradise were $359,443 and $345,536, respectively.
As of March 31, 2016 and December 31,
2015, advance payments related to facilities of City of Caves, opened to public in May, 2015, were $57,246 and $59,134, respectively.
As of March 31, 2016 and December 31, 2015, advance payments related to facilities of Yang-sheng Paradise
were $49,290 and $43,106, respectively.
CHINA
YIDA HOLDING, CO. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
7.
|
PROPERTY
AND EQUIPMENT, NET
|
Property
and equipment consist of the following:
|
|
March 31,
2016
|
|
|
December 31,
2015
|
|
|
|
|
|
|
|
|
Buildings, improvements and attractions
|
|
$
|
190,233,865
|
|
|
$
|
188,994,299
|
|
Electronic equipment
|
|
|
4,811,137
|
|
|
|
4,778,455
|
|
Transportation equipment
|
|
|
3,087,651
|
|
|
|
2,941,910
|
|
Office furniture
|
|
|
965,559
|
|
|
|
959,267
|
|
|
|
|
199,098,212
|
|
|
|
197,673,931
|
|
Less: Accumulated depreciation
|
|
|
(28,579,562
|
)
|
|
|
(26,346,577
|
)
|
Less: Accumulated impairment
|
|
|
(4,178,286
|
)
|
|
|
(4,151,061
|
)
|
Property and equipment, net
|
|
$
|
166,340,364
|
|
|
$
|
167,176,293
|
|
Depreciation expense for the three
months ended March 31, 2016 and 2015 were $2,031,489 and $2,034,065 respectively.
8.
|
INTANGIBLE
ASSETS, NET
|
Intangible
assets consist of the following:
|
|
March 31,
2016
|
|
|
December 31,
2015
|
|
|
|
|
|
|
|
|
Land use right
|
|
$
|
45,773,909
|
|
|
$
|
45,475,647
|
|
Accumulated amortization
|
|
|
(3,002,269
|
)
|
|
|
(2,698,204
|
)
|
Intangible assets, net
|
|
$
|
42,771,640
|
|
|
$
|
42,777,443
|
|
CHINA
YIDA HOLDING, CO. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
8.
|
INTANGIBLE
ASSETS, NET (CONTINUED)
|
For
the three months ended March 31, 2016 and 2015, amortization expense amounted to $282,381 and $298,130, respectively.
Estimated
amortization for the next five years and thereafter is as follows:
As of March 31,
|
|
|
|
2017
|
|
$
|
1,128,408
|
|
2018
|
|
|
1,128,408
|
|
2019
|
|
|
1,128,408
|
|
2020
|
|
|
1,128,408
|
|
2021
|
|
|
1,128,408
|
|
Thereafter
|
|
|
37,129,600
|
|
|
|
$
|
42,771,640
|
|
Long-term
prepayments consist of the following:
|
|
March 31,
2016
|
|
|
December 31,
2015
|
|
Prepayments for project planning, assessments and consultation fees
|
|
$
|
1,080,748
|
|
|
$
|
1,024,289
|
|
Prepayment for cooperative development
|
|
|
251,265
|
|
|
|
273,031
|
|
Others
|
|
|
100,048
|
|
|
|
128,815
|
|
|
|
$
|
1,432,061
|
|
|
$
|
1,426,135
|
|
Prepayments
for project planning, assessments and consultation fees represent advances relating to the planning, assessment and consultation
for the development of tourism destinations in Jiangxi province.
In
2008, Hong Kong Yi Tat entered into a Tourist Destination Cooperative Development Agreement with Yongtai County Government with
respect to the development of Yunding Park pursuant to which Fujian Yida is obligated to pay RMB 5.0 million, or approximately
$0.82 million, to the Yongtai County People’s Government over the course of the first 10 years of the Agreement. By the
end of 2013, the Company had fulfilled this obligation with total payments made in the amount of approximately $818,036 (RMB 5.0
million) recorded as prepayments for cooperative development to be expensed throughout the term of the Agreement. As of March
31, 2016 and December 31, 2015, prepayments for cooperative development amounted to $251,265 and $273,031, respectively.
CHINA
YIDA HOLDING, CO. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Short-term
loans
Short-term
loans represent borrowings from commercial banks that are due within one year. These loans consisted of the following:
|
|
March 31,
2016
|
|
|
December 31,
2015
|
|
|
|
|
|
|
|
|
Loan from Fujian Haixia Bank (formerly known as Merchant bank of Fuzhou), interest rate at 8.245% per annum, due June 29, 2016, collateralized by the personal guarantees by two of the Company’s directors.
|
|
$
|
1,860,638
|
|
|
$
|
1,848,514
|
|
In
June 2015, the Company borrowed an amount of $1,860,638 (RMB 12 million) due on June 29, 2016 from Fujian Haixia Bank, with the
interest rate at 8.245% per annum.
Interest
expense for the three months ended March 31, 2016 and 2015 amounted to $38,238 and $46,872, respectively.
Long-term
debt
Long
term debt consists of the following:
|
|
March 31,
2016
|
|
|
December 31,
2015
|
|
|
|
|
|
|
|
|
Loan from China Minsheng Banking Corp, Ltd., interest rate at 9% per annum, final installment due on November 30, 2019, secured by the land use right of Jiangxi Zhangshu, collateralized by the personal guarantees by two of the Company’s directors. (Note (a))
|
|
$
|
35,662,232
|
|
|
$
|
35,429,857
|
|
Loan from China Construction Bank, interest rate at 6.55% per annum, final installment due on July 15, 2022, collateralized by the fixed assets of Fujian Yida and personal guarantees by two of the Company’s directors as additional collateral. (Note (b))
|
|
|
28,529,786
|
|
|
|
28,343,885
|
|
Loan from Industrial and Commercial Bank of China Limited in the amount of $27,115,701, net of deferred financing costs amounted to $384,689, interest rate from 5.64% to 7.07% per annum, final installment due on December 16, 2021, collateralized by the land use rights of Jiangxi Fenyi, guaranteed by Fujian Yida, and personal guarantees by two of the Company’s directors as additional collateral. (Note (c))
|
|
|
26,731,012
|
|
|
|
26,798,230
|
|
Loan from China Minsheng Banking Corp, Ltd., interest rate at 6.5% and 8.5% per annum for the periods then ended March 31, 2016 and December 31, 2015, respectively, final installment due on December 18, 2020, collateralized by the right to collect resort ticket sales at China Yang-sheng Paradise resort, guaranteed by Fujian Xinhengji Advertisement Co., Ltd, Fujian Yida, Yongtai Yunding, Jiangxi Fenyi, and personal guarantees by two of the Company’s directors as additional collateral. (Note (d))
|
|
|
26,359,040
|
|
|
|
26,187,286
|
|
Loan from China Construction Bank, interest rate at 7.86% per annum, final installment due on August 5, 2022, collateralized by the fixed assets of Fujian Yida and personal guarantees by two of the Company’s directors as additional collateral. (Note (e))
|
|
|
4,031,383
|
|
|
|
4,005,114
|
|
Loan from China Construction Bank, interest rate at 7.86% per annum, final installment due on August 5, 2022, collateralized by the fixed assets of Fujian Yida and personal guarantees by two of the Company’s directors as additional collateral. (Note (f))
|
|
|
4,031,383
|
|
|
|
4,005,114
|
|
Loan from China Construction Bank, interest rate at 7.86% per annum, final installment due on August 5, 2022, collateralized by the fixed assets of Fujian Yida and personal guarantees by two of the Company’s directors as additional collateral. (Note (g))
|
|
|
3,411,170
|
|
|
|
3,388,943
|
|
Loan from China Construction Bank, interest rate at 7.86% per annum, final installment due on August 5, 2022, collateralized by the fixed assets of Fujian Yida and personal guarantees by two of the Company’s directors as additional collateral. (Note (h))
|
|
|
3,411,170
|
|
|
|
3,388,943
|
|
|
|
|
132,167,176
|
|
|
|
131,547,372
|
|
Less: current portion
|
|
|
(3,411,170
|
)
|
|
|
(3,388,943
|
)
|
Total
|
|
$
|
128,756,006
|
|
|
$
|
128,158,429
|
|
CHINA
YIDA HOLDING, CO. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
10.
|
BANK
LOANS (CONTINUED)
|
Note:
(a)
|
$12,404,255
(RMB 80,000,000) and $23,257,977 (RMB 150,000,000) will be due in each twelve-month period as of March 31, 2019 and 2020,
respectively.
|
|
|
(b)
|
$1,550,532
(RMB 10,000,000), $3,101,064 (RMB 20,000,000), $3,101,064 (RMB 20,000,000), $4,651,595 (RMB 30,000,000), $4,651,595 (RMB 30,000,000),
$6,202,128 (RMB 40,000,000), and $5,271,808 (RMB 34,000,000) will be due in each twelve-month period as of March 31, 2017,
2018, 2019, 2020, 2021, 2022 and 2023, respectively.
|
|
|
(c)
|
$27,115,701
(RMB 174,880,000) will be due on December 16, 2021. Deferred financing costs of $542,686 (RMB 3.50 million) was paid in order
to obtain such additional debt used to construct resort project. These fees were deferred and amortized on a straight
line basis over the life of the debt. The balance was amounted to $384,689 as of March 31, 2016.
|
|
|
(d)
|
$4,651,595
(RMB 30,000,000), $6,202,127 (RMB 40,000,000), $6,202,127 (RMB 40,000,000), and $9,303,191 (RMB 60,000,000) will be due
in each twelve-month period as of March 31, 2018, 2019, 2020 and 2021, respectively.
|
|
|
(e)
|
$620,213
(RMB 4,000,000) will be due in each twelve-month period as of March 31, 2017, 2018, 2019, 2020, 2021 and 2022, respectively,
and $310,105 (RMB 2,000,000) will be due in the twelve-month period as of March 31, 2023.
|
|
|
(f)
|
$620,213
(RMB 4,000,000) will be due in each twelve-month period as of March 31, 2017, 2018, 2019, 2020, 2021 and 2022, respectively,
and $310,105 (RMB 2,000,000) will be due in the twelve-month period as of March 31, 2023.
|
|
|
(g)
|
$465,160
(RMB 3,000,000) will be due in each twelve-month period as of March 31, 2017, 2018, 2019, and 2020, respectively, $620,213
(RMB 4,000,000), $620,213 (RMB 4,000,000), and $310,104 (RMB 2,000,000) will be due in each twelve-month period as of
March 31, 2021, 2022 and 2023, respectively.
|
|
|
(h)
|
$155,053
(RMB 1,000,000), $310,105 (RMB 2,000,000), $465,160 (RMB 3,000,000), $620,213 (RMB 4,000,000), $620,213 (RMB 4,000,000), $620,213
(RMB 4,000,000), and $620,213 (RMB 4,000,000) will be due in each twelve-month period as of March 31, 2017, 2018, 2019, 2020,
2021, 2022 and 2023, respectively.
|
Interest
expense for the three months ended March 31, 2016 and 2015 amounted to $2,260,633 and $1,901,536, respectively.
11.
|
ACCRUED
EXPENSES AND OTHER PAYABLES
|
Accrued
expenses and other payables consist of the following:
|
|
March 31,
2016
|
|
|
December 31,
2015
|
|
|
|
|
|
|
|
|
Accrued payroll
|
|
$
|
494,956
|
|
|
$
|
469,968
|
|
Accrued local government fees
|
|
|
448,399
|
|
|
|
445,477
|
|
Unearned revenue
|
|
|
206,316
|
|
|
|
119,979
|
|
Security deposits payable
|
|
|
199,780
|
|
|
|
150,004
|
|
Welfare payable
|
|
|
12,596
|
|
|
|
12,514
|
|
Other
|
|
|
126,618
|
|
|
|
140,079
|
|
|
|
$
|
1,488,665
|
|
|
$
|
1,338,021
|
|
The
Company is subject to Hong Kong (“HK”) and People’s Republic of China (“PRC”) profit tax. For certain
operations in HK and PRC, the Company has incurred net accumulated operating losses for income tax purposes.
United
States
The
Company is incorporated in the United States of America and is subject to United States federal taxation. No provisions for income
taxes have been made as the Company has no taxable income for the period. The applicable income tax rate for the Company was 35%
for the each of the periods ended March 31, 2016 and 2015. Net operating loss at March 31, 2016, which can be used to offset future
taxable income, was approximately $4,812,776. No tax benefit has been realized since a valuation allowance has offset the deferred
tax asset resulting from the net operating losses.
CHINA
YIDA HOLDING, CO. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
12.
|
INCOME
TAX (CONTINUED)
|
Cayman
Islands
Keenway
Limited, a wholly owned subsidiary of the Company, is incorporated in the Cayman Islands and, under the current laws of the Cayman
Islands, is not subject to income taxes.
Hong
Kong
Hong
Kong Yi Tat, a wholly owned subsidiary of the Company, is incorporated in Hong Kong. Hong Kong Yi Tat is subject to Hong Kong
taxation on its activities conducted in Hong Kong and income arising in or derived from Hong Kong. No provisions for income taxes
have been made as Hong Kong Yi Tat has no taxable income for the period. The applicable statutory tax rate for the subsidiary
was 16.5% for each of the years ended March 31, 2016 and 2015.
PRC
Effective
on January 1, 2008, the PRC Enterprise Income Tax Law, EIT Law, and Implementing Rules impose an unified enterprise income tax
rate of 25% on all domestic-invested enterprises and foreign investment enterprises in PRC, unless they qualify under certain
limited exceptions. As such, starting from January 1, 2008, the Company’s subsidiaries in PRC are subject to an enterprise
income tax rate of 25%.
Provision
for income tax consists of the following:
|
|
For The Three Months Ended
March 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
USA
|
|
$
|
-
|
|
|
$
|
-
|
|
China
|
|
|
-
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Deferred
|
|
|
|
|
|
|
|
|
USA
|
|
|
|
|
|
|
|
|
Deferred tax asset for NOL carry forwards
|
|
|
170,849
|
|
|
|
32,480
|
|
Valuation allowance
|
|
|
(170,849
|
)
|
|
|
(32,480
|
)
|
|
|
|
-
|
|
|
|
-
|
|
China
|
|
|
|
|
|
|
|
|
Non current portion
|
|
|
|
|
|
|
|
|
Deferred tax asset for NOL carry forwards
|
|
|
1,240,193
|
|
|
|
1,549,422
|
|
Valuation allowance
|
|
|
(1,240,193
|
)
|
|
|
(1,549,422
|
)
|
Net changes in deferred income tax under non-current portion
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Net deferred income tax expenses
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Provision for income tax
|
|
$
|
-
|
|
|
$
|
-
|
|
CHINA
YIDA HOLDING, CO. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
12.
|
INCOME
TAX (CONTINUED)
|
The
following is a reconciliation of the provision for income taxes at the PRC and Hong Kong tax rate to the income taxes reflected
in the Statement of Income:
|
|
For The three months Ended
March 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
Tax expense at statutory rate - US
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
Changes in valuation allowance - US
|
|
|
(35.0
|
%)
|
|
|
(35.0
|
%)
|
Tax expense at statutory rate - HK
|
|
|
16.5
|
%
|
|
|
16.5
|
%
|
Changes in valuation allowance - HK
|
|
|
(16.5
|
%)
|
|
|
(16.5
|
%)
|
Foreign income tax rate - PRC
|
|
|
25.0
|
%
|
|
|
25.0
|
%
|
Other (a)
|
|
|
(25.0
|
%)
|
|
|
(25.0
|
%)
|
Effective income tax rates
|
|
|
(0.0
|
%)
|
|
|
(0.0
|
%)
|
(a)
|
Other
represents expenses incurred by the Company that are not deductible for PRC income taxes and changes in valuation allowance
for PRC entities for the three months ended March 31, 2016 and 2015, respectively.
|
In
assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion
or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the
generation of future taxable income during the periods in which the net operating losses and temporary differences become deductible.
Management considered projected future taxable income and tax planning strategies in making this assessment.
The
change in total allowance for the three months ended March 31, 2016 and 2015 was an increase of $1,411,042 and $1,581,902, respectively.
(1) REVERSE
SPLIT
Effective
November 19, 2012, the Company conducted a 1-for-5 Reverse Stock Split of all issued and outstanding shares of its common stock.
Upon the effect of the Reverse Stock Split, the Company’s issued and outstanding shares reduced from 19,571,785 to 3,914,580.
Except as otherwise specified, all information in these consolidated financial statements and notes and all share and per share
information has been retroactively adjusted for all periods presented to reflect the reverse stock split, as if the Reverse Stock
Split had occurred at the beginning of the earliest period presented.
(2) WARRANTS
The
remaining 773,812 Class A Warrants expired on September 6, 2011.
CHINA
YIDA HOLDING, CO. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(3) STOCK-BASED
COMPENSATION
On
June 10, 2009 (the “Grant Date”), the Company entered into a Non-qualified Stock Option Agreement with one of the
Company’s directors, pursuant to which the Company issued the director non-qualified stock options (the “Stock Options”)
to purchase a total of 6,000 shares of the Company’s common stock as compensation for his services to be rendered as the
Company’s director. One half of the Stock Options shall vest on the sixth month anniversary of the Grant Date
(the “First Vesting Date”) and become exercisable at an exercise price equal to the market price of the Company’s
common stock on the First Vesting Date and the second half of Stock Options shall vest on the twelfth month anniversary of the
Grant Date (the “Second Vesting Date”) and become exercisable at an exercise price equal to the market price of the
Company’s common stock on the Second Vesting Date.
On
January 21, 2011 (the “CFO Stock Option Grant Date”), the Company entered into a Non-qualified Stock Option Agreement
with the Company’s former Chief Financial Officer, pursuant to which the Company issued non-qualified stock options (the
“CFO Stock Options”) to purchase a total of 15,000 shares of the Company’s common stock as compensation for
his services to be rendered as the Company’s Chief Financial Officer. 3,000 CFO Stock Options vested on the CFO Stock Option
Grant Date; 4,000 CFO Stock Options shall vest on the one-year anniversary of the CFO Grant Date; 4,000 CFO Stock Options shall
vest on the second-year anniversary of the CFO Grant Date; and 4,000 CFO Stock Options shall vest on the third-year anniversary
of the CFO Grant Date. The exercise price for all of the shares was determined as the fair value of our common stock
using the closing price on the grant date.
On
November 5, 2011, our former CFO submitted a letter of resignation resigning from his position. The resignation was effective
as of December 31, 2011. Under the Non-qualified Stock Option Agreement, if the CFO is removed from office for cause prior to
the 21st day of January, 2012, any outstanding stock options held by him which are not vested and exercisable by him
immediately prior to resignation shall terminate as of the date of removal, and any outstanding stock options held by the CFO
which are vested and exercisable immediately prior to removal shall be exercisable at any time prior to the expiration date of
such stock option or within one-year after the date of removal, whichever is shorter. As a result, 12,000 CFO Stock Options were
forfeited as of December 31, 2011. On January 6, 2012, our former CFO transferred options to purchase 3,000 shares to Mr. Minhua
Chen, our Chief Executive Officer, as a gift.
CHINA
YIDA HOLDING, CO. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
On
January 21, 2011 (the “VPIR Stock Option Grant Date”), the Company entered into a Non-qualified Stock Option Agreement
with the Company’s former Corporate Secretary and VP of Investor Relations (“VPIR”) pursuant to which the Company
issued non-qualified stock options (the “VPIR Stock Options”) to purchase a total of 15,000 shares of the Company’s
common stock as compensation for his services to be rendered as the Company’s VP of Investor Relation. 3,000 VPIR Stock
Options shall vest on the VPIR Stock Option Grant Date; 4,000 VPIR Stock Options shall vest on the one-year anniversary of the
VPIR Grant Date; 4,000 VPIR Stock Options shall vest on the second-year anniversary of the VPIR Grant Date; and 4,000 VPIR Stock
Options shall vest on the third-year anniversary of the VPIR Grant Date. The exercise price for all of the shares was determined
as the fair value of our common stock using the closing price on the grant date.
On
November 5, 2011, our former VPIR submitted a letter of resignation resigning from his position. The resignation
was effective as of December 31, 2011. Under the Non-qualified Stock Option Agreement, if VPIR is removed from office for
cause prior to the 21st day of January, 2012, any outstanding stock option held by him which were not vested
and exercisable by him immediately prior to resignation terminated as of the date of removal, and any outstanding
stock options held by VPIR which had vested and exercisable immediately prior to removal shall be exercisable at any time
prior to the expiration date of such stock option or within one-year after the date of removal, whichever is shorter. As a
result, 12,000 VPIR Stock Options were forfeited as of December 31, 2011. On January 6, 2012, our former VPIR transferred
options to purchase 3,000 shares to Mr. Minhua Chen, our Chief Executive Officer, as a gift.
On
March 17, 2011 (the “ID Stock Option Grant Date”), the Company entered into a Non-qualified Stock Option Agreement
with the Company’s Independent Director pursuant to which the Company issued non-qualified stock options (the “ID
Stock Options”) to purchase a total of 6,000 shares of the Company’s common stock as compensation for his services
to be rendered as the Company’s Independent Director. One half of the ID Stock Options vested on the ID Grant Date and the
second half of ID Stock Options vested on June 10, 2011. The exercise price for all of the shares was determined as
the fair value of our common stock using the closing price on the grant date.
On
July 27, 2011, the Company entered into an agreement with the Company’s Independent Director, pursuant to which, the Company
granted 4,000 restricted shares of the Company’s common stock as compensation for his services to be rendered as the Company’s
Independent Director from June 10, 2011 to June 9, 2012. The estimated value of the 4,000 shares was $73,000 on June 10, 2011.
On May 24, 2012, the 4,000 restricted shares were issued.
The
Company valued the stock options using the Black-Scholes model with the following assumptions:
Type of Stock Option
|
|
Number of
Options
|
|
|
Expected
Term
|
|
|
Expected
Volatility
|
|
|
Dividend
Yield
|
|
|
Risk Free
Interest
Rate
|
|
Options to Independent Director, June 10, 2009
|
|
|
6,000
|
|
|
|
5.25
|
|
|
|
356
|
%
|
|
|
0
|
%
|
|
|
3.11
|
%
|
Options to Chief Financial Officer, January 21, 2011
|
|
|
15,000
|
|
|
|
6.25
|
|
|
|
60
|
%
|
|
|
0
|
%
|
|
|
3.44
|
%
|
Options to VP of Investor Relation, January 21, 2011
|
|
|
15,000
|
|
|
|
6.25
|
|
|
|
60
|
%
|
|
|
0
|
%
|
|
|
3.44
|
%
|
Options to Independent Director, March 17, 2011
|
|
|
6,000
|
|
|
|
6.25
|
|
|
|
60
|
%
|
|
|
0
|
%
|
|
|
3.25
|
%
|
The
following is a summary of the option activity:
|
|
Number of
Options
|
|
|
|
|
|
Outstanding as of December 31, 2015
|
|
|
18,000
|
|
Granted
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
Forfeited
|
|
|
-
|
|
Outstanding as of March 31, 2016
|
|
|
18,000
|
|
For
the three months ended March 31, 2016 and 2015, the Company recognized $0 and $0, respectively, as stock-based compensation
expense, which was included in general and administrative expenses.
CHINA
YIDA HOLDING, CO. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
14.
|
COMMITMENTS
AND CONTINGENCIES
|
(1)
Operating commitments
Operating
commitments consist of leases for office space under various operating lease agreements which expire in April 2021.
Operating
lease agreements generally contain renewal options that may be exercised at the Company’s discretion after the completion
of the terms. The Company’s obligations under various operating leases are as follows:
As of March 31,
|
|
|
|
2017
|
|
$
|
31,783
|
|
2018
|
|
|
25,929
|
|
2019
|
|
|
25,971
|
|
2020
|
|
|
26,016
|
|
2021
|
|
|
26,063
|
|
Thereafter
|
|
|
780,646
|
|
Total minimum payments
|
|
$
|
916,408
|
|
The Company incurred rental expenses of $23,264 and $84,332 for the three months ended March 31, 2016 and
2015, respectively.
(2)
Compensation for using natural resources commitments
In
December 2008, Tulou entered into a Tourist Resources Development Agreement with Hua’an County Government (“Hua’an
government”) which is related to pay compensation fees for using natural resources in Tulou. The Company agreed
to pay (1) 16% of gross ticket sales in the first five years; (2) 20% of gross ticket sales in the second five years; (3) 23%
of gross ticket sales in the third five years; (4) 25% of gross ticket sales in the fourth five years; (5) 28% of gross ticket
sales in the fifth five years; (6) 30% in twenty six years and thereafter when the ticket price of the Clusters is RMB60 ($9.50
USD) or above per person.
The
Company paid approximately $14,135 and $8,964 to the Hua’an government for the three months ended March 31, 2016 and 2015,
respectively, and recorded as selling expenses.
(3)
Litigation
The
Company’s management does not expect the legal proceedings involving the Company would have a material impact on the Company’s
consolidated financial position or results of operations.
15.
|
DUE
TO RELATED PARTIES
|
As
of March 31, 2016 and December 31, 2015, the Company had $4,519,087 and $2,082,013 due to Fujian Xinhengji Advertisement Co.,
Ltd. Mr. Minhua Chen, the Chief Executive Officer and Chairman of the Company, is the Chairman of Fujian Xinhengji Advertisement
Co., Ltd. Those loans are unsecured, bear no interest and are due on demand.
CHINA
YIDA HOLDING, CO. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Basic
earnings per share is computed by dividing net income attributable to common shareholders by the weighted average number of common
shares outstanding during the period. Diluted earnings per share reflects the potential dilution of securities by including other
potential common stock, including convertible preferred stock, stock options and warrants, in the weighted average number of common
shares outstanding for the period, if dilutive. The numerators and denominators used in the computations of basic and
dilutive earnings per share are presented in the following table:
Basic
and diluted:
|
|
For The three
months Ended
March 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
(Restated)
|
|
Numerator for basic and diluted earnings per share attributable to the Company’s common stockholders:
|
|
|
|
|
|
|
Net loss attributable to common stockholders
|
|
$
|
(5,380,773
|
)
|
|
$
|
(6,234,585
|
)
|
|
|
|
|
|
|
|
|
|
Basic & diluted earnings/(loss) per share attributable to common stockholders
|
|
$
|
(1.37
|
)
|
|
$
|
(1.59
|
)
|
|
|
|
|
|
|
|
|
|
Basic and diluted weighted average outstanding shares of common stock
|
|
|
3,914,580
|
|
|
|
3,914,580
|
|
Potential common shares outstanding as of March 31, 2016:
|
|
|
|
|
|
|
|
|
Options outstanding
|
|
|
18,000
|
|
|
|
18,000
|
|
For
the three months ended March 31, 2016 and 2015, 18,000 options were not included in the diluted earnings per share because the
average stock price was lower than the strike price of these options.
On
April 12, 2016, The Company entered into an Amended and Restated Agreement and Plan of Merger, amended and restated its
previously announced Agreement and Plan of Merger (the “Original Merger Agreement”), dated March 8, 2016, with
China Yida Holding Acquisition Co., a Nevada corporation (“Acquisition Co.”).
Having determined that a
merger in which the Company survives is a more efficient structure, the Parties agreed to amend the Original Merger
Agreement principally to change the structure of the merger such that Acquisition Co. will merge with and into the Company,
with the Company surviving the Merger (the “Merger”). As a result of the Merger, (1) all of the shares of
Acquisition Co. common stock issued and outstanding immediately prior to the effective time of the Merger will be cancelled,
and (2) each of the Company’s shares of common stock issued and outstanding immediately prior to the effective time of
the Merger (the “Shares”) will be cancelled and automatically converted into a right to receive US$3.32 in cash
without interest, except for the Shares (the “Principal Shares”) owned by Mr. Minhua Chen and Mrs. Yanling Fan
(the “Principal Shareholders”) and the Shares held by shareholders who have exercised their rights to dissent
from the Merger. After completion of the Merger, the Principal Shares will be the only issued and outstanding shares of the
surviving company. Shares with respect to which dissenters’ rights have been properly exercised and not withdrawn or
lost will be cancelled in consideration for the right to receive the fair value of such dissenting shares in accordance with
the Nevada Revised Statutes.