UNITED STATES 

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2014

or

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

For the transition period from ______to______

Commission File Number: 001-34567

CHINA YIDA HOLDING, CO.

(Exact name of registrant as specified in its charter)

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

+ 86 (591) 28082230

(Registrant's telephone number, including area code)

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

Yes x No o

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

Yes x No o

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

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

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

Yes o    No x

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

Class	Shares outstanding as of August 14, 2014
Common stock, $.001 par value	3,914,580

PART 1 -FINANCIAL INFORMATION

Item 1. Financial Statements.

CHINA YIDA HOLDING, CO. AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Index to consolidated financial statements

	Page
Consolidated Balance Sheets as of June 30, 2014 and December 31, 2013	2
Consolidated Statements of Income and Comprehensive Income for the six months and three months ended June 30, 2014 and 2013	3
Consolidated Statements of Cash Flows for the six months ended June 30, 2014 and 2013	4
Notes to the Consolidated Financial Statements	5 - 26

CHINA YIDA HOLDING CO. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
	June 30,		December 31,
	2014		2013
	(UNAUDITED)		(AUDITED)
ASSETS
Current assets
Cash and cash equivalents	$	2,349,515	$	2,415,576
Accounts receivable		794,851		571,637
Other receivables, net		301,746		410,668
Advances and prepayments		1,729,075		1,424,224
Prepayment -current portion		973,211		783,678
Total current assets		6,148,398		5,605,783
Property and equipment, net		210,517,826		216,636,688
Intangible assets, net		50,096,588		51,193,862
Long-term prepayments		2,844,591		3,164,950
Total assets	$	269,607,403	$	276,601,283
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Short-term loans	$	4,544,495	$	2,454,108
Long-term debt, current portion		31,879,636		8,903,504
Accounts payable		520,529		565,694
Accrued expenses and other payables		1,429,828		1,239,864
Due to related parties		42,927,604		35,482,437
Total current liabilities		81,302,092		48,645,607
Long-term debt		60,621,715		86,666,480
Total liabilities		141,923,807		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 June 30, 2014 and December 31, 2013, respectively)		3,915		3,915
Additional paid in capital		49,163,705		49,163,705
Accumulated other comprehensive income		17,106,543		18,388,750
Retained earnings		58,860,103		71,183,496
Statutory reserve		2,549,330		2,549,330
Total equity		127,683,596		141,289,196
Total liabilities and equity	$	269,607,403	$	276,601,283

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

2

CHINA YIDA HOLDING CO. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(UNAUDITED)

	Six Months Ended June 30,						Three Months Ended June 30,
	2014			2013			2014			2013
Net revenue
Advertisement	$	-		$	2,581,410		$	-		$	981,599
Tourism		7,146,130			6,140,564			4,492,098			4,042,327
Total net revenue		7,146,130			8,721,974			4,492,098			5,023,926
Cost of revenue
Advertisement		-			1,766,983			-			847,839
Tourism		5,544,286			3,152,029			2,856,041			1,682,403
Total cost of revenue		5,544,286			4,919,012			2,856,041			2,530,242
Gross profit		1,601,844			3,802,962			1,636,057			2,493,684
Operating expenses
Selling expenses		5,405,846			4,965,717			2,496,885			2,574,209
General and administrative expenses		4,062,942			3,011,374			1,883,351			1,406,653
Total operating expenses		9,468,788			7,977,091			4,380,236			3,980,862
Loss from operations		(7,866,944	)		(4,174,129	)		(2,744,179	)		(1,487,178	)
Other income (expense)
Other expense, net		355,451			(85,910	)		138,928			(38,134	)
Interest income		5,152			75,688			1,938			66,504
Interest expense		(4,817,052	)		(2,558,423	)		(2,429,035	)		(2,534,826	)
Total other expenses		(4,456,449	)		(2,568,645	)		(2,288,169	)		(2,506,456	)
Loss before income tax and non-controlling interest		(12,323,393	)		(6,742,774	)		(5,032,348	)		(3,993,634	)
Less: Provision for income tax		-			131,869			-			943
Net loss from continuing operations		(12,323,393	)		(6,874,643	)		(5,032,348	)		(3,994,577	)
Discontinued Operation
Loss from discontinued operations, net of income taxes		-			(255,536	)		-			(198,351	)
Gain on Disposal of Subsidiary		-			999,133			-			999,133
Net income from discontinued operations, net of income taxes		-			743,597			-			800,782
Net loss		(12,323,393	)		(6,131,046	)		(5,032,348	)		(3,193,795	)
Net loss attributed to non-controlling interest:
Net loss from discontinued operation		-			102,215			-			79,364
Net loss attributable to China Yida Holding Co.	$	(12,323,393	)	$	(6,028,831	)	$	(5,032,348	)	$	(3,114,431	)
Net loss	$	(12,323,393	)	$	(6,131,046	)	$	(5,032,348	)	$	(3,193,795	)
Other comprehensive income
Foreign currency translation (loss) gain		(1,282,207	)		2,891,810			(183,568	)		1,532,088
Comprehensive loss		(13,605,600	)		(3,239,236	)		(5,215,916	)		(1,661,707	)
Comprehensive income attributable to non-controlling interest		-			390,730			-			330,030
Comprehensive loss attributable to China Yida Holding Co.	$	(13,605,600	)	$	(2,848,506	)	$	(5,215,916	)	$	(1,331,677	)
Amounts attributable to common stockholders:
Net loss from continuing operations, net of income taxes		(12,323,393	)		(6,874,643	)		(5,032,348	)		(3,994,577	)
Net income from discontinued operations, net of income taxes		-			845,812			-			880,146
Net loss attributable to common stockholders		(12,323,393	)		(6,028,831	)		(5,032,348	)		(3,114,431	)
Net loss attributable to common stockholders per share -basic and diluted:
-Basic & diluted earnings/(loss) per share from continuing operations	$	(3.15	)	$	(1.76	)	$	(1.29	)	$	(1.02	)
-Basic & diluted earnings/(loss) per share from discontinued operations	$	-		$	0.22		$	-		$	0.22
-Basic & diluted earnings/(loss) per share attributable to common stockholders	$	(3.15	)	$	(1.54	)	$	(1.29	)	$	(0.80	)
Weighted average shares outstanding
-Basic		3,914,580			3,914,580			3,914,580			3,914,580
-Diluted		3,914,580			3,914,580			3,914,580			3,914,580

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

3

CHINA YIDA HOLDING CO. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	For The Six Months Ended June 30,
	2014			2013
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss attributable to common stockholders	$	(12,323,393	)	$	(6,131,046	)
Net loss from discontinued operations		-			255,536
Adjustments to reconcile net income to net cash provided by operating activities:
Gain on disposal of discontinued operation		-			(999,133	)
Depreciation		4,800,275			2,866,169
Amortization		691,380			1,243,612
Amortization of financing costs		-			111,976
Changes in operating assets and liabilities:
Accounts receivable		(228,455)			(312,117	)
Other receivables, net		71,262			(290,300	)
Advances and prepayments		(317,151	)		(1,347,622	)
Accounts payable		(40,780	)		(18,255	)
Accrued expenses and other payables		235,151			292,429
Taxes payable		-			(406,366	)
Net cash used in continuing operations		(7,111,711	)		(4,735,117	)
Net cash used in discontinued operations		-			(1,910,479	)
Net cash used in operating activities		(7,111,711	)		(6,645,596	)
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property and equipment		(394,584	)		(350,897	)
Additions to construction in progress		-			(45,609,518	)
Decrease in long-term prepayments for acquisition of property, equipment and land use rights		99,658			(722,937	)
Net cash used in continuing operations		(294,926	)		(46,683,352	)
Net cash used in discontinued operations		-			(569,859	)
Net cash used in investing activities		(294,926	)		(47,253,211	)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of obligation under airtime rights commitment		-			(1,345,163	)
Proceed from disposal of discontinued entity		-			9,616,155
Proceeds from Anhui Yida		-			2,239,627
Repayment to Anhui Yida		-			(3,838,409	)
Payment of deferred financing costs		-			-
Proceeds from short-term loans		4,558,182			-
Repayment of short-term loans		(2,441,883	)		-
Proceeds from long-term loans		-			52,888,853
Repayment of long-term loans		(2,313,975	)		(12,214,807	)
Repayment of loans from related parties		7,721,576			1,289,515
Net cash provided by continuing operations		7,523,900			48,635,771
Net cash provided by discontinued operations		-			1,602,653
Net cash provided by financing activities		7,523,900			50,238,424
EFFECT OF EXCHANGE RATE CHANGES ON CASH		(183,324	)		99,149
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS		(66,061	)		(3,561,234	)
NET (DECREASE) INCREASE IN CASH & CASH EQUIVALENTS  FROM DISCONTINUED OPERATIONS		-			(864,491	)
NET (DECREASE) INCREASE IN CASH & CASH EQUIVALENTS FROM CONTINUING OPERATIONS		(66,061	)		(2,696,743	)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		2,415,576			5,658,319
CASH AND CASH EQUIVALENTS, ENDING OF PERIOD	$	2,349,515		$	2,961,576
SUPPLEMENTAL DISCLOSURES:
Non-cash investing activities:
Capitalized interest in construction in progress	$	-		$	1,634,840
Cash paid during the period for:
Income tax	$	-		$	523,158
Interest	$	4,817,052		$	4,157,557

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

4

CHINA YIDA HOLDING, CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1. ORGANIZATION AND DESCRIPTION OF BUSINESS

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

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

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

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

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

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

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

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

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

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

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

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

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

5

CHINA YIDA HOLDING, CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED) 

1.  ORGANIZATION AND DESCRIPTION OF BUSINESS (CONTINUED)

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

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

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

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

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

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

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

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

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

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

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

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

6

CHINA YIDA HOLDING, CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

2. GOING CONCERN

The Company’s consolidated financial statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred significant negative cash flows from operative activities, and continuing net losses and working capital deficits that allow it to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company’s ability to obtain adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations. The accompanying consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

Management’s Plan to Continue as a Going Concern

In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management’s plans to obtain such resources for the Company include (1) obtaining capital from the sale of its substantial assets, (2) generating and recovery of tourism revenue, and (3) short-term and long-term borrowings from banks, stockholders or other related party(ies). However, management cannot provide any assurance that the Company will be successful in accomplishing any of its plans.

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

3. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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, 2013 was derived from the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K.  These interim financial statements should be read in conjunction with that report.  Certain comparative amounts have been reclassified to conform to the current period's presentation.

a. Basis of presentation

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

b. Principles of consolidation

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

	June 30, 2014		December 31, 2013
Total current assets *	$	14,671,846	$	12,244,845
Total assets	$	14,679,476	$	12,252,536
Total current liabilities #	$	13,791,135	$	11,193,422
Total liabilities	$	13,791,135	$	11,193,422

* Including intercompany receivables of $14,651,409 and $12,231,075 as at June 30, 2014 and December 31, 2013, respectively, to be eliminated in consolidation.

# Including intercompany payables of $13,757,997 and $11,169,092 as at June 30, 2014 and December 31, 2013, respectively, to be eliminated in consolidation.

7

CHINA YIDA HOLDING, CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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

Although Fujian Jiaoguang no longer had revenues, its bank account still has to be maintained active with certain cash flows to support its expenses.  As such, Fujian Jiaoguang transferred funds from and to the Company’s directly-owned subsidiaries, which resulted in part of the intercompany receivables and payables.  Another significant portion of the intercompany receivable recorded at Fujian Jiaoguang represented payments that Fujian Jiaoguang paid on behalf of Jintai previously, which remained due from Jintai.  Nonetheless, 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 June 30, 2014 and December 31, 2013, the Company has uninsured deposits in banks of approximately $2,336,000 and $2,405,000. 

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, allowance for advances and prepayments of $3,197 and $3,223 were assessed and recorded as of June 30, 2014 and December 31, 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.

8

CHINA YIDA HOLDING, CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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

i. Impairment

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

Assets are grouped and evaluated at the lowest level for their identifiable cash flows that are largely independent of the cash flows of other groups of assets. The Company considers historical performance and future estimated results in its evaluation of potential impairment and then compares the carrying amount of the asset to the future estimated cash flows expected to result from the use of the asset. If the carrying amount of the asset exceeds estimated expected undiscounted future cash flows, the Company measures the amount of impairment by comparing the carrying amount of the asset to its fair value. The estimation of fair value is generally measured by discounting expected future cash flows as the rate the Company utilizes to evaluate potential investments. The Company estimates fair value based on the information available, judgments and projections are considered necessary. There was no impairment of long-lived assets as of June 30, 2014 and December 31, 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 six months ended June 30, 2014
	Fujian Jintai		Tulou
Gross receipts	$	1,986,153	$	359,308
Profit sharing costs		293,327		-
Nature resource compensation expenses		162,047		32,415
Total paid to the local governments		455,374		32,415
Net receipts	$	1,530,779	$	326,893

For the six months ended June 30, 2013
	Fujian Jintai		Tulou
Gross receipts	$	1,865,491	$	335,212
Profit sharing costs		268,693		-
Nature resource compensation expenses		153,781		30,315
Total paid to the local governments		422,474		30,315
Net receipts	$	1,443,018	$	304,897

9

CHINA YIDA HOLDING, CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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

For the three months ended June 30, 2014
	Fujian Jintai		Tulou
Gross receipts	$	1,339,187	$	209,189
Profit sharing costs		196,476		-
Nature resource compensation expenses		109,564		18,664
Total paid to the local governments		306,040		18,664
Net receipts	$	1,033,147	$	190,525

For the three months ended June 30, 2013 

	Fujian Jintai		Tulou
Gross receipts	$	1,318,271	$	150,538
Profit sharing costs		188,153		-
Nature resource compensation expenses		109,070		13,137
Total paid to the local governments		297,223		13,137
Net receipts	$	1,021,049	$	137,401

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 six months ended June 30, 2014 and 2013 were $869,345 and $807,510, respectively. Advertising costs for the three months ended June 30, 2014 and 2013 were $562,264 and $560,130, 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 $177,207 and $142,710 for the six months ended June 30, 2014 and 2013, respectively, and were $91,749 and 69,834 for the three months ended June 30, 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 June 30, 2014 and December 31, 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 June 30, 2014, management considered that the Company had no uncertain tax positions, and will continue to evaluate for uncertain positions in the future. 

10

CHINA YIDA HOLDING, CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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

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 June 30, 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.

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. The Company has two reportable segments: advertisement and 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 reclassifications have no impact on the Company’s 2013 Consolidated Statements of Income and Comprehensive Income and Consolidated Statements of Cash Flows.

11

CHINA YIDA HOLDING, CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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

v. Recent accounting pronouncements 

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. 

12

CHINA YIDA HOLDING, CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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

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.

4. OTHER RECEIVABLES, NET

Other receivables consist of the following:

	June 30, 2014			December 31, 2013
Advance to employees	$	113,495		$	125,824
Security deposits		34,965			104,730
Other		174,643			201,643
		323,103			432,197
Less: Allowance		(21,357	)		(21,529	)
	$	301,746		$	410,668

5. ADVANCES AND PREPAYMENTS

Advances and prepayments consist of the following:

	June 30, 2014			December 31, 2013
Advance payments related to land use rights	$	818,758		$	814,000
Advance payments related to facilities of Yang-Sheng Paradise		354,234			27,900
Advance payments related to hotel facilities of Yunding resort		239,973			354,461
Advance payments related to construction cost of Great Golden Lake		-			52,305
Other		319,307			178,781
		1,732,272			1,427,447
Less: Allowance		(3,197	)		(3,223	)
	$	1,729,075		$	1,424,224

As of June 30, 2014, advance payments related to land use rights represents the payment made by Fujian Yida and Fenyi Yida. Fujian Yida made advance payments to the local government of Yongtai County of $807,512 (RMB 4.98 million) for the acquisition of land use rights. Fenyi Yida made advance payments to the local government of $11,245 (RMB 0.07 million) for the acquisition of land use rights during the six months ended June 30, 2014.

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.

As of June 30, 2014 and December 31, 2013, advance payments related to facilities of Yang-Sheng Paradise were $354,234 and $27,900, respectively.

As of June 30, 2014 and December 31, 2013, advance payments related to hotel facilities of Yunding resort were $239,973 and $354,461, respectively.

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CHINA YIDA HOLDING, CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

6. PROPERTY AND EQUIPMENT, NET

Property and equipment consist of the following:

	June 30, 2014			December 31, 2013
Buildings, Improvements and Attractions	$	227,958,734		$	230,000,535
Electronic Equipment		4,130,778			3,784,064
Transportation Equipment		2,820,570			2,727,333
Office Furniture		354,853			246,354
		235,264,935			236,758,286
Less: Accumulated Depreciation		(24,747,109	)		(20,121,598	)
Property and equipment, net	$	210,517,826		$	216,636,688

Depreciation expense for the six months ended June 30, 2014 and 2013 were $4,800,275 and $2,866,169 respectively.

Depreciation expense for the three months ended June 30, 2014 and 2013 were $2,399,795 and $1,403,136, respectively.

7. INTANGIBLE ASSETS, NET

Intangible assets consist of the following:

	June 30, 2014			December 31, 2013
Land use right	$	47,914,280		$	48,299,182
Management right of tourist resort		5,680,619			5,726,252
Commercial airtime rights		-			6,882,616
		53,594,899			60,908,050
Accumulated amortization		(3,498,311	)		(9,714,188	)
Intangible assets, net	$	50,096,588		$	51,193,862

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 June 30, 2014, the commercial airtime rights have been fully amortized.

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CHINA YIDA HOLDING, CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

7. INTANGIBLE ASSETS, NET (CONTINUED)

Land use right

For the six months ended June 30, 2014 and 2013, amortization expense amounted to $691,380 and $1,243,612, respectively.

For the three months ended June 30, 2014 and 2013, amortization expense amounted to $344,271 and $625,511, respectively.

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

As of June 30,
2015	$	1,382,760
2016		1,382,760
2017		1,382,760
2018		1,382,760
2019		1,382,760
Thereafter		43,182,788
	$	50,096,588

8. LONG-TERM PREPAYMENTS

Long-term prepayments consist of the following:

	June 30, 2014		December 31, 2013
Prepayments for project planning, assessments and consultation fees	$	1,760,233	$	1,989,648
Prepayment for cooperative development		435,617		488,828
Deferred financing costs		345,434		400,440
Others		303,307		286,034
	$	2,844,591	$	3,164,950

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 June 30, 2014 and December 31, 2013, prepayments for cooperative development amounted to $435,617 and $488,828, respectively.

Deferred financing costs represent fees paid prior to 2014, amounted to $714,054 (RMB 4.40 million), in order to obtain additional debt used to construct various resort projects.  These fees were deferred and amortized on a straight line basis over the life of the debt.

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

As of June 30,
2015	$	103,630
2016		103,630
2017		103,630
2018		103,630
2019		34,544
Total minimum payments	$	449,064
Current portion recorded under prepayments – current portion		(103,630	)
Long term portion	$	345,434

15

CHINA YIDA HOLDING, CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

9.  BANK LOANS

Short-term loans

Short-term loans represent borrowings from commercial banks that are due within one year. These loans consisted of the following:

		June 30, 2014		December 31, 2013
Loan from China Minsheng Banking Corp, Ltd., interest rate at 7% per annum, due June 10, 2015, (a)	$	2,596,855	$	-
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. (b)		1,947,640		-
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. (c)		-		2,454,108
Total	$	4,544,495	$	2,454,108

(a) On June 2014, the Company borrowed the loan of $2,596,855 (RMB 16 million) due on June 10, 2015 from China Minsheng Banking Corp, Ltd., with the interest rate at 7% per annum.

(b) On June 2014, the Company borrowed the loan of $1,947,640 (RMB 12 million) due on June 20, 2015 from Fujian Haixia Bank, with the interest rate at 9.6% per annum.

(c) On October 2013, the Company borrowed the loan 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. For the six months ended June 30, 2014, the Company repaid the loan of $2,454,108 (RMB 15 million).

Interest expense for the six months ended June 30, 2014 and 2013 amounted to $106,222 and $68,061, respectively. Interest expense for the three months ended June 30, 2014 and 2013 amounted to $52,893 and $34,605, respectively. The interest expense for the six months ended June 30, 2014 and 2013 of $0 and $33,657, respectively, was capitalized as part of construction in progress. The interest expense for the three months ended June 30, 2014 and 2013 that amounted to $0 and $0, respectively, was capitalized as part of construction in progress.

Long-term debt

Long term debt consists of the following: 

	June 30, 2014			December 31, 2013
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))	$	53,560,126		$	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 (b))		24,345,511			24,541,082
Loan from Industrial and Commercial Bank of China Limited, interest rate at 7.76% per annum, final installment due on October 25, 2018, collateralized by the right to collect resort ticket sales at the Great Golden Lake. (Note (c))		9,077,398			10,167,020
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 personal guarantees by two of the Company’s directors as additional collateral. (Note (d))		5,518,316			6,871,502
		92,501,351			95,569,984
Less: current portion		(31,879,636	)		(8,903,504	)
Total	$	60,621,715		$	86,666,480

16

CHINA YIDA HOLDING, CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

9.  BANK LOANS (CONTINUED)

Note:

(a)	$8,115,170 (RMB 50,000,000), $8,115,170 (RMB 50,000,000), $12,984,273 (RMB 80,000,000) and $24,345,513 (RMB 150,000,000) will be due in each twelve-month period as of June 30, 2017, 2018, 2019 and 2020, respectively.
(b)	$24,345,511 (RMB 150,000,000) will be due in the twelve-month period as of June 30, 2015.
(c)	$2,015,808 (RMB 12,420,000) will be due in each twelve-month period as of June 30, 2015, 2016, 2017, and 2018, respectively, and $1,014,166 (RMB 6,270,000) will be due in the twelve-month period as of June 30, 2019. In November 2011 and in March 2012, $486,910 and $227,144 of financing costs were paid in connection with this loan and subject to amortization, with $231,862 and $113,572 recorded in long-term prepayments as of June 30, 2014, respectively.
(d)	$5,518,316 (RMB 34,000,000) will be due in the twelve-month period as of June 30, 2015.

Interest expense for the six months ended June 30, 2014 and 2013 amounted to $4,710,830 and $4,089,496, respectively.  Interest expense for the three months ended June 30, 2014 and 2013 amounted to $2,376,142 and $2,497,852, respectively. The interest expense for the six months ended June 30, 2014 and 2013 of $0 and $1,601,184, respectively, was capitalized as part of construction in progress. The interest expense for the three months ended June 30, 2014 and 2013 that amounted to $0 and $0, was capitalized as part of construction in progress. 

10. ACCRUED EXPENSES AND OTHER PAYABLES

Accrued expenses and other payables consist of the following:

	June 30, 2014		December 31, 2013
Accrued payroll	$	635,884	$	646,074
Security deposits payable		258,259		158,215
Unearned revenue		223,928		89,347
Accrued local government fees		209,215		237,426
Welfare payable		13,185		13,291
Other		89,357		95,511
	$	1,429,828	$	1,239,864

17

CHINA YIDA HOLDING, CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

11. INCOME TAX

The Company is subject to Hong Kong (“HK”) and People’s Republic of China (“PRC”) profit tax. For certain operations in HK and PRC, the Company has incurred net accumulated operating losses for income tax purposes.

United States

The Company is incorporated in the United States of America and is subject to United States federal taxation. No provisions for income taxes have been made as the Company has no taxable income for the period. The applicable income tax rate for the Company was 35% for the each of the six months ended June 30, 2014 and 2013. Net operating loss at June 30, 2014, which can be used to offset future taxable income, was approximately $3,757,609. No tax benefit has been realized since a valuation allowance has offset the deferred tax asset resulting from the net operating losses.

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 six months ended June 30, 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 Six Months Ended June 30,						For The Three Months Ended June 30,
	2014			2013			2014			2013
Current
USA	$	-		$	-		$	-		$	-
China		-			131,869			-			943
		-			131,869			-			943
Deferred
USA
Deferred tax asset for NOL carry forwards		45,076			66,941			23,921			37,806
Valuation allowance		(45,076	)		(66,941	)		(23,921	)		(37,806	)
		-			-			-			-
China
Current portion
Temporary difference from general and administrative expenses		-			-			-			-
Net changes in deferred income tax under current portion		-			-			-			-
Non current portion
Deferred tax asset for NOL carry forwards		3,038,314			1,843,180			1,245,057			1,016,906
Temporary difference from airtime rights expenses		-			-			-			-
Temporary difference from capitalized interest		-			-			-			-
Valuation allowance		(3,038,314	)		(1,843,180	)		(1,245,057	)		(1,016,906	)
Net changes in deferred income tax under non-current portion		-			-			-			-
Net deferred income tax expenses (benefit)		-			-			-			-
Total provision for income tax	$	-		$	131,869		$	-		$	943

18

CHINA YIDA HOLDING, CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

11. INCOME TAX (CONTINUED)

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

	For The six months Ended June 30,
	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)		(25.00	%)		(24.95	%)
Effective income tax rates		(0.00	%)		0.05	%

(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 six months ended June 30, 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 six months ended June 30, 2014 and 2013 was an increase of $3,083,390 and $1,910,122 respectively.

The change in total allowance for the three months ended June 30, 2014 and 2013 was an increase of $1,268,978 and $1,054,712 respectively. 

12. EQUITY

(1)  REVERSE SPLIT

Effective November 19, 2012, the Company conducted a 1-for-5 Reverse Stock Split of all issued and outstanding shares of its common stock. Upon the effect of the Reverse Stock Split, the Company’s issued and outstanding shares reduced from 19,571,785 to 3,914,580. Except as otherwise specified, all information in these consolidated financial statements and notes and all share and per share information has been retroactively adjusted for all periods presented to reflect the reverse stock split, as if the Reverse Stock Split had occurred at the beginning of the earliest period presented.

(2) WARRANTS

The remaining 773,812 Class A Warrants expired on September 6, 2011.

(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.

19

CHINA YIDA HOLDING, CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

12. EQUITY (CONTINUED)

On January 21, 2011 (the “VPIR Stock Option Grant Date”), the Company entered into a Non-qualified Stock Option Agreement with the Company’s former Corporate Secretary and VP of Investor Relation (“VPIR”), pursuant to which, the Company issued non-qualified stock options (the “VPIR Stock Options”) to purchase a total of 15,000 shares of the Company’s common stock as compensation for his services to be rendered as the Company’s VP of Investor Relation. 3,000 VPIR Stock Options shall vest on the VPIR Stock Option Grant Date; 4,000 VPIR Stock Options shall vest on the one-year anniversary of the VPIR Grant Date; 4,000 VPIR Stock Options shall vest on the second-year anniversary of the VPIR Grant Date; and 4,000 VPIR Stock Options shall vest on the third-year anniversary of the VPIR Grant Date. The exercise price for all of the shares was determined as the fair value of our common stock using the closing price on the grant date.

On November 5, 2011, our former VPIR submitted a letter of resignation resigning from his position. The resignation was effective as of December 31, 2011. Under the Non-qualified Stock Option Agreement, if VPIR is removed from office for cause prior to the 21 st  day of January, 2012, any outstanding stock option held by him which is not vested and exercisable by him immediately prior to resignation shall terminate as of the date of removal, and any outstanding stock options held by VPIR which is vested and exercisable immediately prior to removal shall be exercisable at any time prior to the expiration date of such stock option or within one-year after the date of removal, whichever is shorter. As a result, 12,000 VPIR Stock Options were forfeited as of December 31, 2011. On January 6, 2012, our former VPIR transferred options to purchase 3,000 shares to Mr. Minhua Chen, our Chief Executive Officer, as a gift.

On March 17, 2011 (the “ID Stock Option Grant Date”), the Company entered into a Non-qualified Stock Option Agreement with the Company’s Independent Director, pursuant to which, the Company issued non-qualified stock options (the “ID Stock Options”) to purchase a total of 6,000 shares of the Company’s common stock as compensation for his services to be rendered as the Company’s Independent Director. One half of the ID Stock Options vested on the ID Grant Date and the second half of ID Stock Options vested on June 10, 2011.  The exercise price for all of the shares was determined as the fair value of our common stock using the closing price on the grant date.

On July 27, 2011, the Company entered into an agreement with the Company’s Independent Director, pursuant to which, the Company granted 4,000 restricted shares of the Company’s common stock as compensation for his services to be rendered as the Company’s Independent Director from June 10, 2011 to June 9, 2012. The estimated value of the 4,000 shares was $73,000 on June 10, 2011. On May 24, 2012, the 4,000 restricted shares were issued.

The Company valued the stock options using the Black-Scholes model with the following assumptions:

Type of Stock Option	Number of Options		Expected Term		Expected Volatility			Dividend Yield			Risk Free Interest  Rate
Options to Independent Director, June 10, 2009		6,000		5.25		356	%		0	%		3.11	%
Options to Chief Financial Officer, January 21, 2011		15,000		6.25		60	%		0	%		3.44	%
Options to VP of Investor Relation, January 21, 2011		15,000		6.25		60	%		0	%		3.44	%
Options to Independent Director, March 17, 2011		6,000		6.25		60	%		0	%		3.25	%

The following is a summary of the option activity:

	Number of  Options
Outstanding as of December 31, 2013		18,000
Granted		-
Exercised		-
Forfeited		-
Outstanding as of June 30, 2014		18,000

For the six months ended June 30, 2014 and 2013, the Company recognized $0 and $0, respectively, as stock-based compensation expense, which was included in general and administrative expenses.

For the three months ended June 30, 2014 and 2013, the Company recognized $0 and $0, respectively, as stock-based compensation expense, which was included in general and administrative expenses.

20

CHINA YIDA HOLDING, CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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 60 million RMB, or $9.72 million and the Purchaser agreed to assume all the assets and liabilities of Anhui Yida.

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

	For The six months Ended June 30,
	2014		2013
Net Revenue	$	-	$	-
General, and administrative expenses		-		(256,306	)
Other expense, net		-		(237	)
Interest Income		-		1,007
Net loss	$	-	$	(255,536	)

	For The three months Ended June 30,
	2014		2013
Net Revenue	$	-	$	-
General, and administrative expenses		-		(198,366	)
Other expense, net		-		-
Interest Income		-		15
Net loss	$	-	$	(198,351	)

21

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 June 30,
2015	$	199,296
2016		123,172
2017		66,703
2018		68,342
2019		70,080
Thereafter		1,125,300
Total minimum payments	$	1,652,893

The Company incurred rental expenses of $124,665 and $166,917 for the six months ended June 30, 2014 and 2013, respectively and which included $0 and $4,808, respectively, paid to Xin Hengji Holding Company Limited, a related party.

The Company incurred rental expenses of $72,018 and $74,590 for the three months ended June 30, 2014 and 2013, respectively and which included $0 and $2,418, respectively, paid to Xin Hengji Holding Company Limited, a related party. 

(2) Management rights commitments

In 2001, Fujian Jintai entered into a tourism management revenue sharing agreement which is related to the management rights with Fujian Taining Great Golden Lake Tourism Economic Development Zone Management Committee (“Taining government”) to operate and to manage the Great Golden Lake resort from 2001 through 2032.  The Company agreed to pay (1) 8% of the revenue from 2001 to 2005; (2) 10% of the revenue from 2006 to 2010; (3)12% of the revenue from 2011 to 2015; (4) 14% of the revenue from 2016 to 2020; (5) 16% of the revenue from 2021 to 2025; 18% from 2026 to 2032 to the Taining government.

The Company paid approximately $293,327 and $268,693 to the Taining government for the six months ended June 30, 2014 and 2013, respectively, and recorded as cost of revenue.

The Company paid approximately $196,476 and $188,153 to the Taining government for the three months ended June 30, 2014 and 2013, respectively, and recorded as cost of revenue.

22

CHINA YIDA HOLDING, CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

14. COMMITMENTS AND CONTINGENCIES (CONTINUED)

(3) Compensation for using natural resources commitments

In 2007, Fujiang Jintai entered into an agreement with Taining government which is related to compensation fees for using nature resources in the Great Golden Lake resort. The Company agreed to pay 10% of the revenue from sale of resort tickets after deduction of the profit sharing with Taining government (see above).  

The Company paid approximately $162,047 and $153,781 to the Taining government for the six months ended June 30, 2014 and 2013, respectively, and recorded as selling expenses.

The Company paid approximately $109,564 and $109,070 to the Taining government for the three months ended June 30, 2014 and 2013, respectively, and recorded as selling expenses. 

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 $32,415 and $30,315 to the Hua’an government for the six months ended June 30, 2014 and 2013, respectively, and recorded as selling expenses.

The Company paid approximately $18,664 and $13,137 to the Hua’an government for the three months ended June 30, 2013 and 2013, 4respectively, and recorded as selling expenses. 

(4) 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 June 30, 2014, the Company had $40,005,470 and $2,922,134 due to Fujian Xinhengji Advertisement Co., Ltd and Mr. Minhua Chen, respectively. As of December 31, 2013, the Company had $31,283,315 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 Advitisement Co., Ltd. Those loans are unsecured, bear no interest, and due on demand.

23

CHINA YIDA HOLDING, CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

16. EARNINGS PER SHARE

Basic earnings per share is computed by dividing net income attributable to common shareholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share reflects the potential dilution of securities by including other potential common stock, including convertible preferred stock, stock options and warrants, in the weighted average number of common shares outstanding for the period, if dilutive.  The numerators and denominators used in the computations of basic and dilutive earnings per share are presented in the following table:

Basic and diluted: 

	For The Six Months Ended June 30,						For The Three Months Ended June 30,
	2014			2013			2014			2013
Amounts attributable to common stockholders:
Net loss from continuing operations, net of income taxes	$	(12,323,393	)	$	(6,874,643	)	$	(5,032,348	)	$	(3,994,577	)
Net income from discontinued operations, net of income taxes		-			845,812			-			880,146
Net loss attributable to common stockholders	$	(12,323,393	)	$	(6,028,831	)	$	(5,032,348	)	$	(3,114,431	)
Net loss attributable to common stockholders per share - basic and diluted:
- Basic & diluted loss per share from continued operations	$	(3.15	)	$	(1.76	)	$	(1.29	)	$	(1.02	)
- Basic & diluted earnings per share from discontinued operations		-			0.22			-			0.22
- Basic & diluted loss per share attributable to common stockholders	$	(3.15	)	$	(1.54	)	$	(1.29	)	$	(0.80	)

Basic and Diluted weighted average outstanding shares of common stock	3,914,580	3,914,580	3,914,580	3,914,580
Potential common shares outstanding as of June 30, 2014:
Warrants outstanding	-	-	-	-
Options outstanding	18,000	18,000	18,000	18,000

For the three months and six months ended June 30, 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.

24

CHINA YIDA HOLDING, CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

17. BUSINESS SEGMENTS

During the three months ended June 30, 2014 and 2013, the Company was organized into two main business segments: advertisement and tourism. The primary business relates to tourism at the Great Golden Lake, Yunding resort 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:

	For The Six Months Ended June 30,						For The Three Months Ended June 30,
	2014			2013			2014			2013
Revenues:
Advertisement	$	-		$	2,581,410		$	-		$	981,599
Tourism		7,146,130			6,140,564			4,492,098			4,042,327
Total		7,146,130			8,721,974			4,492,098			5,023,926
Operating income:
Advertisement		-			502,522			-			(16,716	)
Tourism		(7,866,944	)		(4,486,454	)		(2,744,179	)		(1,363,084	)
Other		-			(190,197	)		-			(107,378	)
Total		(7,866,944	)		(4,174,129	)		(2,744,179	)		(1,487,178	)
Net income (loss):
Advertisement		-			335,709			-			(29,374	)
Tourism		(12,323,393	)		(7,019,091	)		(5,032,348	)		(3,857,186	)
Other		-			(191,261	)		-			(108,017	)
Net loss from continuing operations		(12,323,393	)		(6,874,643	)		(5,032,348	)		(3,994,577	)
Net income from discontinued operations		-			743,597			-			800,782
Total		(12,323,393	)		(6,131,046	)		(5,032,348	)		(3,193,795	)
Capital expenditure:
Advertisement		-			-			-			-
Tourism		394,584			45,960,415			139,998			462,147
Total	$	394,584		$	45,960,415		$	139,998		$	462,147

	June 30, 2014		December 31, 2013
Intangible assets:
Advertisement	$	-	$	-
Tourism		50,096,588		51,193,862
Total	$	50,096,588	$	51,193,862

Identifiable assets:
Advertisement	$	-	$	33,537
Tourism		269,607,403		276,557,313
Others		-		10,433
Total	$	269,607,403	$	276,601,283

Others represent reconciling amounts including certain assets which are excluded from segments and adjustments to eliminate inter-company transactions.

25

CHINA YIDA HOLDING, CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

18. SUBSEQUENT EVENTS

Management has evaluated subsequent events through the date which the consolidated financial statements were issued. All subsequent events requiring recognition as of June 30, 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”.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS.

The following discussion of our financial condition and results of operations should also be read in conjunction with our unaudited consolidated financial statements and the notes to those financial statements appearing elsewhere in this Form 10-Q. The following discussion contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 relating to future events or our future performance. Actual results may materially differ from those projected in the forward-looking statements as a result of certain risks and uncertainties set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013, filed on March 31, 2014 (the “Annual Report”). Although management believes that the assumptions made and expectations reflected in the forward-looking statements are reasonable, there is no assurance that the underlying assumptions will, in fact, prove to be correct or that actual results will not be different from expectations expressed in this report.

Overview

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

We currently operate the Great Golden Lake tourist destination (Global Geo-park, World Nature Heritage), Hua’An Tulou cluster (“Tulou” or the “Earth Buildings”) tourist destination (World Culture Heritage), Yunding Recreational Park (Large-scale National Recreational Park), covering over 300 square kilometers in total, and China Yang-Sheng Paradise. As of June 30, 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, (ii) the Fenyi County, Xinyu City, Jiangxi Province Government. Under these agreements, we have obtained:

(i)

the right to construction and development of the Royal Hot Spring World project,

(ii)

the right to invest in 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”), and

Advertising business had been our primary source of revenue for the last two years before January 2013 because the tourism business has 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. The revenue from advertising has ceased as the new advertisement regulatory restrictions are enforced and the revenue from tourism has been increased. However, any increase in 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, we have visitors to our parks throughout the year. In 2014, we will continue to develop and construct the new Jiangxi projects.  

We are subject to risks common to companies operating in China, including risks inherent in our commercialization efforts, uncertainty of regulatory approvals and laws, the need for future capital, and retention of key employees. We cannot provide assurance that we will generate revenues or achieve and sustain profitability in the future.

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Factors Affecting Our Performance

Tourism Business

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 entered into tourism management revenue sharing agreement with the Taining government with respect to the Great Golden Lake resort. We have contracted to share the revenue over the course of the agreement as follows: (i) from 2001 to 2006 we received 92% of the revenue and the Taining government received 8% of the revenue; (ii) from 2006 to 2012 we received 90% of the revenue and the Taining government received 10% of the revenue; (iii) from 2012 to 2016 we will receive 88% of the revenue and the Taining government will receive 12% of the revenue; (iv) from 2016 to 2022 we will receive 86% of the revenue and the Taining government will receive 14% of the revenue; (v) from 2022 to 2026 we will receive 84% of the revenue and the Taining government will receive 16% of the revenue; and (vi) from 2026 to 2032 we will receive 82% of the revenue and the Taining government will receive 18% of the revenue. Due to our decreasing revenue share in the Great Golden Lake resort, combined with the fact that the resort has not fully recovered to the state before the flood in 2010, we may not be able to maintain our revenues from Great Golden Lake at the same level as comparable periods.

However, as the Great Golden Lake resort continues to recover and we begin to generate revenue after the grand openings of Yang-sheng Paradise which opened in October 2013 and City of Caves expected to open in third quarter of 2014, 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 and Great Golden Lake to recover completely from the flooding.  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 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.

Net income from discontinued operation were $0 and $845,812 for the six months ended June 30, 2014 and 2013, respectively.

Net income from discontinued operation were $0 and $880,146 for the three months ended June 30, 2014 and 2013, respectively.

As a result of the share transfer described above, the Results of Operation set forth below does not reflect the operations for 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 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.

2014 Outlook

As we terminated our advertising business in March 2013, we plan to focus on tourism business only. 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 during the 3rd quarter of 2014.

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Results of Operations

Results of Operations for the three months ended June 30, 2014 and 2013

The Company is organized into two main business segments, tourism and advertisement. The following table presents a summary of operating information for the three months ended June 30, 2014 and 2013:

(All amounts, other than percentage, in U.S.  Dollar)	For The Three Months Ended June 30,						Increase/ (Decrease) U.S. Dollar			Increase/ (Decrease) Percentage
	2014			2013			($)			(%)
Net revenue
Advertisement	$	-			981,599		$	(981,599	)		(100.00	)
Tourism		4,492,098			4,042,327			449,771			11.13
Total net revenue		4,492,098			5,023,926			(531,828	)		(10.59	)
Cost of revenue
Advertisement		-			847,839			(847,839	)		(100.00	)
Tourism		2,856,041			1,682,403			1,173,638			69.76
Total cost of revenue		2,856,041			2,530,242			325,799			12.88
Gross profit		1,636,057			2,493,684			(857,627	)		(34.39	)
Selling expenses		2,496,885			2,574,209			(77,324	)		(3.00	)
General and administrative expenses		1,883,351			1,406,653			476,698			33.89
Loss from operations		(2,744,179	)		(1,487,178	)		(1,257,001	)		84.52
Other expense, net		138,928			(38,134	)		177,062			(464.32	)
Interest income		1,938			66,504			(64,566	)		(97.09	)
Interest expense		(2,429,035	)		(2,534,826	)		105,791			(4.17	)
Less: Provision for income tax		-			943			(943	)		(100.00	)
Net loss from continuing operations		(5,032,349	)		(3,994,577	)		(1,032,772	)		25.98
Net income on Discontinued Operations		-			800,782			(800,782	)		(100.00	)
Net loss		(5,032,348	)		(3,193,795	)		(1,838,553	)		57.57
Net income attributed to non-controlling interest:		-			79,364			(79,364	)		(100.00	)
Net loss attributable to China Yida Holding Co.	$	(5,032,348	)	$	(3,114,431	)	$	(1,917,917	)		61.58

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Net Revenue

Net revenue decreased by approximately $0.53 million or approximately 10.59%, from approximately $5.02 million for the three months ended June 30, 2013 to approximately $4.49 million for the three months ended June 30, 2014. The decrease in net revenue was primarily due to the decrease in the revenue from advertisement revenue which was partially offset by an increase in tourism.

Advertisement

Advertisement revenue decreased by approximately $0.98 million or 100%, from approximately $0.98 million for the three months ended June 30, 2013 to $0 for the three months ended June 30, 2014. The decrease was because the agreement with FETV expired in July 2013 which caused the decrease in advertisement revenue from FETV.

We generated no revenue from the “Journey through China on the Train” program for the three months ended June 30, 2014 and 2013. The Company lost all the clients since the railway program was broadcasted manually by train attendants and we had no control over the frequency of program broadcasting. We terminated the “Journey throught China on the Train” program from March of 2013.

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Tourism 

Tourism revenue increased by approximately $0.45 million or approximately 11.13% from approximately $4.04 million for the three months ended June 30, 2013 to approximately $4.49 million for the three months ended June 30, 2014, including approximately $1.33 million from Great Golden Lake resort, an increase of $0.01 million or 1%, $2.66 million from Yunding Park, an increase of $0.09 million or 4%, $0.21 million from Hua’an Tulou, an increase of $0.06 million or 40%, and $0.30 million from China Yang-sheng paradise for the three months ended June 30, 2014, as compared to the same period in 2013. The primary sources of the revenues are ticket sales, tour shuttle bus fees, and restaurants.  The increase in tourism business was primarily due to the revenue increase at China Yang-sheng paradise, the newly opened tourism destinations, and an increase in the number of tourists at Yunding Park due to effective promotion. We have to provide deeper ticket discount due to the fierce competition among the destinations. Also the tourist consumption had also decreased. The gross revenue increased due to increase in the number of tourist 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 $0.33 million or approximately 12.88%, from approximately $2.53 million for the three months ended June 30, 2013 to approximately $2.86 million for the three months ended June 30, 2014. The increase in cost of revenue was primarily due to an 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 $0.85 million or 100%, from approximately $0.85 million for the three months ended June 30, 2013 to $0 for the three months ended June 30, 2014. The decrease was because the agreement with FETV expired in July 2013 so there was no cost incurred with for the three months ended June 30, 2014.

Tourism

Cost of revenue from tourism increased by approximately $1.17 million or approximately 69.76%, from approximately $1.68 million for the three months ended June 30, 2013 to approximately $2.85 million for the three months ended June 30, 2014. The increase was primarily due to the increase in tourists and sales activities at China Yang-sheng paradise and Yunding Park, and depreciation cost for the new construction completed for tourism destinations.

Gross profit

Gross profit decreased approximately $0.86 million, or approximately 34.39%, from approximately $2.49 million for the three months ended June 30, 2013 to $1.63 million for the three months ended June 30, 2014. Our gross profit margin was approximately 36.42% for the three months ended June 30, 2014, compared to gross profit margin of approximately 49.64% for the three months ended June 30, 2013, representing a decrease of approximately 13 percentage points.

Advertisement

Gross profit from advertisement decreased by approximately $0.13 million, or 100%, from approximately $0.13 million for the three months ended June 30, 2013 to $0 for the three months ended June 30, 2014. Gross profit margin from advertisement was 0% for the three months ended June 30, 2014, compared to approximately 13.63% for the three months ended June 30, 2013. The decrease was because the agreement with FETV expired in July 2013.

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Tourism

Gross profit from tourism decreased approximately $0.72 million, or approximately 30.67%, from approximately $2.36 million for the three months ended June 30, 2013 to approximately $1.64 million for the three months ended June 30, 2014. Our gross profit margin from tourism was approximately 36.42% for the three months ended June 30, 2014, compared to gross profit margin of approximately 58.38% for the three months ended June 30, 2013. The decrease of gross profit margin was primarily attributable to the increase of the cost of revenue which include the increase in sales activities at China Yang-sheng paradise and Yunding Park, and depreciation cost for the new construction completed for tourism destinations.

Selling Expenses

Selling expenses were approximately $2.50 million for the three months ended June 30, 2014, compared to approximately $2.57 million for the three months ended June 30, 2013, which represents a decrease of approximately $0.08 million, or approximately 3.00%. The decrease in selling expense was primarily due to the decrease in variable costs at Yunding Park during the three months ended June 30, 2014.

General and Administrative Expenses

General and administrative expenses were approximately $1.88 million for the three months ended June 30, 2014, compared to approximately $1.41 million for the three months ended June 30, 2013, which represents an increase of approximately $0.47 million, or approximately 33.89%. This increase was due to the increase of administrative expenses for the operation of China Yang-sheng paradise.

Interest expense.

Interest expense was approximately $2.43 million for the three months ended June 30, 2014, representing a slight decrease of approximately $0.10 million or approximately 4.17%, compared to the approximately $2.53 million for the three months ended June 30, 2013.

Net Loss 

As a result of the above factors, we have net loss of approximately $5.03 million for the three months ended June 30, 2014 as compared to net loss of approximately $3.11 million for the three months ended June 30, 2013, representing an increase of loss of approximately $1.92 million or approximately 61.58%. The increase of loss was primarily attributable to the decrease in advertisement revenue because the agreement with FETV expired in July 2013, the increase in cost of revenue and general and administrative expenses for the operation of China Yang-sheng paradise for the three months ended June 30, 2014 as compared with that for the three months ended June 30, 2013. 

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Results of Operations for the six months ended June 30, 2014 and 2013

The Company is organized into two main business segments, tourism and advertisement. The following table presents a summary of operating information for the six months ended June 30, 2014 and 2013: 

(All amounts, other than percentage, in U.S. Dollar)	For The Six Months Ended June 30,						Increase/ (Decrease) U.S. Dollar			Increase/ (Decrease) Percentage
	2014			2013			($)			(%)
Net revenue
Advertisement	$	-		$	2,581,410		$	(2,581,410	)		(100.00	)
Tourism		7,146,130			6,140,564			1,005,566			16.38
Total net revenue		7,146,130			8,721,974			(1,575,844	)		(18.07	)
Cost of revenue
Advertisement		-			1,766,983			(1,766,983	)		(100.00	)
Tourism		5,544,286			3,152,029			2,392,257			75.90
Total cost of revenue		5,544,286			4,919,012			625,274			12.71
Gross profit		1,601,844			3,802,962			(2,201,118	)		(57.88	)
Selling expenses		5,405,846			4,965,717			440,129			8.86
General and administrative expenses		4,062,942			3,011,374			1,051,568			34.92
Loss from operations		(7,866,944	)		(4,174,129	)		(3,692,815	)		88.47
Other expense, net		355,451			(85,910	)		441,361			(513.75	)
Interest income		5,152			75,688			(70,536	)		(93.19	)
Interest expense		(4,817,052	)		(2,558,423	)		(2,258,629	)		88.28
Less: Provision for income tax		-			131,869			(131,869	)		(100.00	)
Net loss from continuing operations		(12,323,393	)		(6,874,643	)		(5,448,750	)		79.26
Net income on Discontinued Operations		-			743,597			(743,597	)		(100.00	)
Net loss		(12,323,393	)		(6,131,046	)		(6,192,347	)		101.00
Net income attributed to non-controlling interest:		-			102,215			(102,215	)		(100.00	)
Net loss attributable to China Yida Holding Co.	$	(12,323,393	)	$	(6,028,831	)	$	(6,294,562	)		104.41

Net Revenue

Net revenue decreased by approximately $1.57 million or approximately 18.07%, from approximately $8.72 million for the six months ended June 30, 2013 to approximately $7.15 million for the six months ended June 30, 2014. The decrease in net revenue was primarily due to the decrease in the revenue from advertisement revenue which was partially offset by an increase in tourism.

Advertisement

Advertisement revenue decreased by approximately $2.58 million or 100%, from approximately $2.58 million for the six months ended June 30, 2013 to $0 for the six months ended June 30, 2014. The decrease was because the agreement with FETV expired in July 2013 which caused the decrease in advertisement revenue from FETV.

We generated no sales from the “Journey through China on the Train” program for the six months ended June 30, 2014 as compared to approximately $0.06 million for the six months ended June 30, 2013. The Company lost all the clients since the railway program is 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 of 2013.

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Tourism

Tourism revenue increased by approximately $1.01 million or approximately 16.38% from approximately $6.14 million for the six months ended June 30, 2013 to approximately $7.15 million for the six months ended June 30, 2014, including approximately $1.98 million from Great Golden Lake resort, an increase of $0.11 million or 6%, $4.26 million from Yunding Park, an increase of $0.32 million or 8%, $0.36 million from Hua’an Tulou, an increase of $0.03 million or 9%, and $0.55 million from China Yang-sheng paradise for the six months ended June 30, 2014, as compared to the same period in 2013. The primary sources of the revenues are ticket sales, tour shuttle bus fees, and 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 in China that led to an increase in number of tourists. We have to provide deeper ticket discount due to the fierce competition among the destinations. Also the 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 $0.62 million or approximately 12.71%, from approximately $4.92 million for the six months ended June 30, 2013 to approximately $5.54 million for the six months ended June 30, 2014. The increase in cost of revenue was primarily due to an 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 $1.77 million or 100%, from approximately $1.77 million for the six months ended June 30, 2013 to $0 for the six months ended June 30, 2014. The decrease was also because the agreement with FETV expired in July 2013 so there was no cost incurred with for the six months ended June 30, 2014.

Tourism

Cost of revenue from tourism increased by approximately $2.39 million or approximately 75.90%, from approximately $3.15 million for the six months ended June 30, 2013 to approximately $5.54 million for the six months ended June 30, 2014. The increase was primarily due to the increase in tourists and sales activities at China Yang-sheng paradise and Yunding Park, and depreciation cost for the new construction completed for tourism destinations.

Gross profit

Gross profit decreased approximately $2.2 million, or approximately 57.88%, from approximately $3.8 million for the six months ended June 30, 2013 to $1.6 million for the six months ended June 30, 2014. Our gross profit margin was approximately 22.42% for the six months ended June 30, 2014, compared to gross profit margin of approximately 43.60% for the six months ended June 30, 2013, representing a decrease of approximately 21 percentage points.

Advertisement

Gross profit from advertisement decreased by approximately $0.81 million, or 100%, from approximately $0.81 million for the six months ended June 30, 2013 to $0 for the six months ended June 30, 2014. Gross profit margin from advertisement was 0% for the six months ended June 30, 2014, compared to approximately 31.55% for the six months ended June 30, 2013. The decrease was because the agreement with FETV expired in July 2013.

Tourism

Gross profit from tourism decreased approximately $1.39 million, or approximately 46.4%, from approximately $2.99 million for the six months ended June 30, 2013 to approximately $1.6 million for the six months ended June 30, 2014. Our gross profit margin from tourism was approximately 22.42% for the six months ended June 30, 2014, compared to gross profit margin of approximately 48.67% for the six months ended June 30, 2013. The decrease of gross profit margin was primarily attributable to the increase of the cost of revenue which include the increase in sales activities at China Yang-sheng paradise and Yunding Park, and depreciation cost for the new construction completed for tourism destinations.

Selling Expenses

Selling expenses were approximately $5.41 million for the six months ended June 30, 2014, compared to approximately $4.97 million for the six months ended June 30, 2013, which represents an increase of approximately $0.44 million, or approximately 8.86%. The increase in selling expense was primarily due to the increase in variable costs and advertisement expenses at China Yang-sheng paradise during the six months ended June 30, 2014.

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General and Administrative Expenses

General and administrative expenses were approximately $4.06 million for the six months ended June 30, 2014, compared to approximately $3.01 million for the six months ended June 30, 2013, which represents an increase of approximately $1.05 million, or approximately 34.92%. This increase was due to the increase of administrative expenses for the operation of China Yang-sheng paradise.

Interest expense.

Interest expense was approximately $4.82 million for the six months ended June 30, 2014, representing an increase of approximately $2.26 million or approximately 88.28%, compared to the approximately $2.56 million for the six months ended June 30, 2013. The increase in interest expense was primarily because part of the interest expense for the six months ended June 30, 2013 was capitalized as part of construction in progress.

Income Tax

Income tax was $0 for the six months ended June 30, 2014, representing a decrease of approximately $0.13 million or 100%, compared to the approximately $0.13 million income tax for the six months ended June 30, 2013. The decrease was because the agreement with FETV expired in July 2013.

Net Loss 

As a result of the above factors, we have net loss of approximately $12.32 million for the six months ended June 30, 2014 as compared to net loss of approximately $6.03 million for the six months ended June 30, 2013, representing an increase of loss of approximately $6.29 million or approximately 104.41%. The increase of loss was primarily attributable to the decrease in advertisement revenue because the agreement with FETV expired in July 2013, the increase in cost of revenue and general and administrative expenses for the operation of China Yang-sheng paradise for the six months ended June 30, 2014 as compared with that for the six months ended June 30, 2013, and the increase in interest expense because part of the interest expense for the six months ended June 30, 2013 was capitalized as part of construction in progress

Liquidity and Capital Resources

Our principal source of liquidity during the three months ended June 30, 2014 was primarily the proceeds from loans from related parties.

As of June 30, 2014, we had cash and cash equivalents of approximately $2.35 million as compared to approximately $2.41 million as of December 31, 2013, representing a decrease of $0.06 million. Our principal source of liquidity during the six months ended June 30, 2014 was primarily resulted from proceeds from loans from related parties.  The proceeds from loans from related parties was approximately $7.72 million for the six months ended June 30, 2014.

As of June 30, 2014 and December 31, 2013, our working capital deficits were approximately $75.15 million and $43.04 million, respectively. 

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

	For the Six Months Ended June 30,
	2014			2013
Net cash used in operating activities of continuing operations	$	(7,111,711	)	$	(4,735,117	)
Net cash used in investing activities of continuing operations	$	(294,926	)	$	(46,683,352	)
Net cash provided by financing activities of continuing operations	$	7,523,900		$	48,635,771
Net cash used in discontinued operations	$	-		$	(864,491	)

Net cash used in operating activities of continuing operations was approximately $7.11 million for the six months ended June 30, 2014, compared to approximately $4.74 million for the six months ended June 30, 2013.  The increase of $2.37 million was primarily due to the net loss of $12.32 million for the six months ended June 30, 2014 as compared to the net loss of $6.13 million for the six months ended June 30, 2013.

Net cash used in investing activities of continuing operations was approximately $0.29 million for the six months ended June 30, 2014, compared to approximately $46.68 million for the six months ended June 30, 2013.  The decrease of $46.39 million was primarily due to the decrease of $45.61 million in the construction cost related to China Yang-sheng Paradise which had been completed during the year ended December 31, 2013. 

Net cash provided by financing activities of continuing operations amounted to approximately $7.52 million for the six months ended June 30, 2014, compared to approximately $48.64 million for the six months ended June 30, 2013, representing a decrease of approximately $41.12 million.  The decrease in net cash provided by financing activities was mainly because no additional long-term loans were obtained during the six months ended June 30, 2014 as compared to $52.89 million long-term loan obtained for the six months ended June 30, 2013.

Bank loans

As of June 30, 2014, the Company had six bank loans from three institutional lenders for the development of the tourism destinations.

1.	A loan for approximately $2.6 million from China Minsheng Banking Corp, Ltd. The loan bears interest at 7% per annum, and is due on June 10, 2015.
2.	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.
3.	A loan for approximately $53.56 million from China Minsheng Banking Corp, Ltd. It bears interest rate at 9% per annum. $8,115,170 (RMB 50,000,000), $8,115,170 (RMB 50,000,000), $12,984,273 (RMB 80,000,000) and $24,345,513 (RMB 150,000,000) will be due in each twelve-month period as of June 30, 2017, 2018, 2019 and 2020, respectively. It is secured by the land use right of Jiangxi Zhangshu, collateralized by the personal guarantees by two of the Company’s directors.

4.	A loan for approximately $24.35 million from China Minsheng Banking Corp, Ltd.  It bears interest at 12.50% per annum. $24,345,511 (RMB 150,000,000) will be due on March 6, 2015. It is secured by the land use rights of Fujian Yida and the right to collect resort ticket sales at Yunding resort as additional collateral.
5.	A loan for approximately $9.08 million from Industrial and Commercial Bank of China Limited.  The loan bears interest at 7.76% per annum. $2,015,808 (RMB 12,420,000) will be due in each twelve-month period as of June 30, 2015, 2016, 2017, and 2018, respectively, and $1,014,166 (RMB 6,270,000) will be due in the twelve-month period as of June 30, 2019. It is collateralized by the right to collect ticket sales at the Great Golden Lake.
6.	A loan for approximately $5.52 million from China Minsheng Banking Corp, Ltd. The loan bears interest at 11.97% per annum. $5,518,316 (RMB 34,000,000) will be due in the twelve-month period as of June 30, 2015. It is secured by credit guarantee of Fujian Jintai, collateralized by the fixed assets of Fujian Yida and personal guarantees by two of the Company’s directors as additional collateral.

In the coming 12 months, we have approximately $36.42 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 capitals or funds for construction 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.

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Obligations Under Material Contracts

Below is a table setting forth the Company’s material contractual obligations as of June 30, 2014:

			Payment due by period
Contractual Obligations	Total		1 year		1-3 years		3-5 years		More than 5 years
Bank Loans	$	97,045,846	$	36,424,130	$	12,146,786	$	24,129,417	$	24,345,513
Operating Lease Obligations		1,652,893		199,296		189,875		138,422		1,125,300
Total	$	98,698,739	$	36,623,426	$	12,336,661	$	24,267,839	$	25,470,813

 Management Rights Commitments

In 2001, Fujian Jintai entered into a tourism management revenue sharing agreement which is related to the management rights with Fujian Taining Great Golden Lake Tourism Economic Development Zone Management Committee (“Taining government”) to operate and to manage the Great Golden Lake resort from 2001 through 2032.  The Company agreed to pay (1) 8% of the revenue from 2001 to 2005; (2) 10% of the revenue from 2006 to 2010; (3)12% of the revenue from 2011 to 2015; (4) 14% of the revenue from 2016 to 2020; (5) 16% of the revenue from 2021 to 2025; 18% from 2026 to 2032 to the Taining government.

The Company paid approximately $293,327 and $268,693 to the Taining government for the six months ended June 30, 2014 and 2013, respectively, and recorded as cost of revenue.

The Company paid approximately $196,476 and $188,153 to the Taining government for the three months ended June 30, 2014 and 2013, respectively, and recorded as cost of revenue.

Compensation For Using Nature Resources Commitments

In 2007, Fujiang Jintai entered into an agreement with Taining government which is related to compensation fees for using nature resources in the Great Golden Lake resort. The Company agreed to pay 10% of the revenue from sale of resort tickets after deduction of the profit sharing with Taining government (see above).  

The Company paid approximately $162,047 and $153,781 to the Taining government for the six months ended June 30, 2014 and 2013, respectively, and recorded as selling expenses.

The Company paid approximately $109,564 and $109,070 to the Taining government for the three months ended June 30, 2014 and 2013, respectively, and recorded as selling expenses.

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 nature 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 $32,415 and $30,315 to the Hua’an government for the six months ended June 30, 2014 and 2013, respectively, and recorded as selling expenses.

The Company paid approximately $18,664 and $13,137 to the Hua’an government for the three months ended June 30, 2014 and 2013, respectively, and recorded as selling expenses.

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.

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Basis of presentation

The unaudited consolidated financial statements of China Yida Holding, Co. and Subsidiaries have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and pursuant to the requirements for reporting on Form 10-Q.  Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States of America for annual financial statements.  However, the information included in these interim financial statements reflects all adjustments (consisting solely of normal recurring adjustments) which are, in the opinion of management, necessary for the fair presentation of the consolidated financial position and the consolidated results of operations.  Results shown for interim periods are not necessarily indicative of the results to be obtained for a full year.  The consolidated balance sheet information as of December 31, 2013 was derived from the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K.  These interim financial statements should be read in conjunction with that report.  Certain comparative amounts have been reclassified to conform to the current period's presentation.

Principles of consolidation

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

	June 30, 2014		December 31, 2013
Total current assets *	$	14,671,846	$	12,244,845
Total assets	$	14,679,476	$	12,252,536
Total current liabilities #	$	13,791,135	$	11,193,422
Total liabilities	$	13,791,135	$	11,193,422

* Including intercompany receivables of $14,651,409 and $12,231,075 as at June 30, 2014 and December 31, 2013, respectively, to be eliminated in consolidation.

# Including intercompany payables of $13,757,997 and $11,169,092 as at June 30, 2014 and December 31, 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 part of the intercompany receivables and payables.  Another significant portion of the intercompany receivable recorded at Fujian Jiaoguang represented payments that Fujian Jiaoguang paid on behalf of Jintai previously, which remained due from Jintai.  Nonetheless, 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.

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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 June 30, 2014 and December 31, 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 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.

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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 six months ended June 30, 2014
	Fujian Jintai		Tulou
Gross receipts	$	1,986,153	$	359,308
Profit sharing costs		293,327		-
Nature resource compensation expenses		162,047		32,415
Total paid to the local governments		455,374		32,415
Net receipts	$	1,530,779	$	326,893

For the six months ended June 30, 2013
	Fujian Jintai		Tulou
Gross receipts	$	1,865,491	$	335,212
Profit sharing costs		268,693		-
Nature resource compensation expenses		153,781		30,315
Total paid to the local governments		422,474		30,315
Net receipts	$	1,443,018	$	304,897

For the three months ended June 30, 2014
	Fujian Jintai		Tulou
Gross receipts	$	1,339,187	$	209,189
Profit sharing costs		196,476		-
Nature resource compensation expenses		109,564		18,664
Total paid to the local governments		306,040		18,664
Net receipts	$	1,033,147	$	190,525

For the three months ended June 30, 2013
	Fujian Jintai		Tulou
Gross receipts	$	1,318,271	$	150,538
Profit sharing costs		188,153		-
Nature resource compensation expenses		109,070		13,137
Total paid to the local governments		297,223		13,137
Net receipts	$	1,021,049	$	137,401

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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 June 30, 2014 and December 31, 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 June 30, 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.

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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 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. 

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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 3. QUANTITATIVE AND QUALITATIVE DISCLOUSURES ABOUT MARKET RISK.

Not applicable because we are a small reporting company.

Item 4. Controls and Procedures. 

Evaluation of disclosure controls and procedures.

Our disclosure controls and procedures are designed to ensure (i) that information required to be disclosed by us in the reports we file or submit under the Exchange Act are recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms; and (ii) that information required to be disclosed by us in the reports it files or submits under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. As of June 30, 2014, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of the end of the period covered by this report, our disclosure controls and procedures were not effective at the reasonable assurance level due to the following reason:

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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 financial statements and consolidation, are inadequate, and determined to be a material weakness.

In an effort to remedy this material weakness in the future, we plan to:
●	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 intend to continue to improve our ongoing review and supervision of our internal control over financial reporting.
We believe that the foregoing steps will remediate the significant deficiencies identified above, and we will continue to monitor the effectiveness of these steps and make any changes that our management deems appropriate.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
Changes in internal control over financial reporting. During the period covered by this report, there was no change in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect our internal control over financial reporting.

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PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

None.

Item 1A. Risk Factors.

There has been no material change to our risk factors from those presented in our Form 10-K for the fiscal year ended December 31, 2013.

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

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

Item 6. Exhibits.

No.	Description
31.1	Certification of Chief Executive Officer Required by Rule 13a-14(a) (17 CFR 240.13a-14(a))
31.2	Certification of Chief Financial Officer Required by Rule 13a-14(a) (17 CFR 240.13a-14(a))
32.1	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 *
32.2	Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 *
101.INS	XBRL Instance Document †
101.SCH	XBRL Taxonomy Extension Schema Document †
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document †
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document †
101.LAB	XBRL Taxonomy Extension Label Linkbase Document †
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document †
*	In accordance with SEC Release 33-8238, Exhibits 32.1 and 32.2 are furnished and not filed.
†	Furnished herewith. XBRL (eXtensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

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 SIGNATURES

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

	CHINA YIDA HOLDING, CO.
Date: August 14, 2014	By:	/s/ Minhua Chen
		Minhua Chen Chief Executive Officer (Principal Executive Officer)
Date: August 14, 2014	By:	/s/ Yongxi Lin
		Yongxi Lin Chief Financial Officer (Principal Financial Officer)

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