UNITED STATES
 SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
  AMENDMENT NO. 3 TOFORM 10-K
 (Mark One)
 x
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2011
  or
  o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from ___________ to ___________
  Commission File Number: 000-26777
  China Yida Holding, Co.
 (Exact name of registrant as specified in its charter)
  Nevada

50-0027826(State or other jurisdiction ofincorporation 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) 2830 8999
 (Registrant’s telephone number, including area code)
  Securities registered pursuant to Section 12(b) of the Act:Title of each class

Name of each exchange on which registeredCommon Stock, $0.001 par value per share

NASDAQ Capital MarketSecurities registered under Section 12(g) of the Act
  Not Applicable
 (Title of Class)
  Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
 Yes o                                        No  x
  Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.
 Yes o                                        No  x
  Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
 Yes x                                        No  o
  INDEX
  Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
 Yes x                                        No  o
  Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§232.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.
  ̈
  Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
  Large accelerated filer
 ̈
Accelerated filer
 ̈Non-accelerated filer
 ̈
Smaller reporting company
x(Do not check if a smaller reporting company)
  Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
 Yes o                                        No  x
  The aggregate market value of the voting and non-voting stock held by non-affiliates of the registrant, as of June 30, 2011, the last business day of the registrant’s most recently completed second fiscal quarter, based on the closing price of the common stock on NASDAQ Capital Market exchange on such date was $24,317,260.
  The number of shares outstanding of the registrant’s common stock as of March 28, 2012 was 19,551,785 shares.
  DOCUMENTS INCORPORATED BY REFERENCE
  Document

Parts Into Which IncorporatedRegistrant’s Proxy Statement for the 2012 Annual Meeting of Stockholders which the registrant plans to file with the Securities and Exchange Commission within 120 days of the registrant’s fiscal year ended December 31, 2011

Part III
  INDEX
  EXPLANATORY NOTE
  This Amendment No. 3 (“Amendment No. 3”) to the Annual Report on Form 10-K of China Yida Holding, Co. (together with its subsidiaries, the “Company,” “we,” “our” or “us”) for the fiscal year ended December 31, 2011 as filed with the Securities and Exchange Commission (“SEC”) on March 29, 2012 (the “201 1 Annual Report”), is being filed to incorporate the Company’s revisions and responses pursuant to certain comment letters from the staff of the SEC dated August 6, 2012, August 31, 2012 and September 20, 2012 (the “SEC Comment Letters”).
 
 As required by Rule 12b-15 of the Securities Exchange Act of 1934, new certifications by the Company’s principal executive officer and principal financial officer are filed herewith as exhibits to this Amendment No. 3.
 
 This Amendment No. 3 does not affect any other portion of the 2011 Annual Report. Additionally, except as specifically referenced herein, this Amendment No. 3 does not reflect any event occurring after March 29, 2012, the filing date of the 2011 Annual Report.
 INDEX
 
 FORM 10-K/A
 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2011
  INDEX
  PAGEPART IITEM 1.

Business

1ITEM 1A.

Risk Factors

14ITEM 1B.

Unresolved Staff Comments

26ITEM 2.

Properties

26ITEM 3.

Legal Proceedings

28ITEM 4.

Mine Safety Disclosures

28PART IIITEM 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

28ITEM 6.

Selected Financial Data

29ITEM 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operation

29ITEM 7A.

Quantitative and Qualitative Disclosures About Market Risk

37ITEM 8.

Financial Statements and Supplementary Data

F-1ITEM 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

38ITEM 9A.

Controls and Procedures

38ITEM 9B.

Other Information

39PART IIIITEM 10.

Directors, Executive Officers and Corporate Governance

39ITEM 11.

Executive Compensation

39ITEM 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

39ITEM 13.

Certain Relationships and Related Transactions, and Director Independence

39ITEM 14.

Principal Accounting Fees and Services

39PART IVITEM 15.

Exhibits, Financial Statement Schedules

40SIGNATURES
  INDEX
  STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
  Except for the historical information contained herein, some of the statements in this Report contain forward-looking statements that involve risks and uncertainties. These statements are found in the sections entitled "Business," "Management's Discussion and Analysis of Financial Condition and Results of Operations," and "Risk Factors." They include statements concerning: our business strategy; expectations of market and customer response; liquidity and capital expenditures; future sources of revenues; expansion of our product lines; addition of new product lines; and trends in industry activity generally. In some cases, you can identify forward-looking statements by words such as "may," "will," "should," "expect," "plan," "could," "anticipate," "intend," "believe," "estimate," "predict," "potential," "goal," or "continue" or similar terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including, but not limited to, the risks outlined under "Risk Factors," that may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. For example, assumptions that could cause actual results to vary materially from future results include, but are not limited to: our ability to successfully develop and market our products to customers; our ability to generate customer demand for our products in our target markets; the development of our target markets and market opportunities; our ability to produce and deliver suitable products at competitive cost; market pricing for our products and for competing products; the extent of increasing competition; technological developments in our target markets and the development of alternate, competing technologies in them; and sales of shares by existing shareholders. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Unless we are required to do so under U.S. federal securities laws or other applicable laws, we do not intend to update or revise any forward-looking statements.
  INDEX
 PART I
  ITEM 1. BUSINESS.
  Corporate Overview
  We, together with our subsidiaries, operate as a diversified entertainment company in the People’s Republic of China, headquartered in Fuzhou, Fujian, China. Our business consists of two segments, advertisement and tourism.  Our advertisement segment includes the operation and management of a domestic television channel and outdoor on-train programming. This segment manages the content and re-sells airtime to advertisers and agencies for the television channel, and produces the content for outdoor on-train programming. Our tourism segment develops, operates, manages and markets domestic tourist destinations, including natural, cultural, and historical tourist destinations and theme parks. This segment also creates / designs and constructs new tourist concepts, attractions and properties for our tourist destinations.
  Our advertisement segment currently operates and manages the Fujian Education Television Channel (“FETV”), a province wide television channel in Fujian, and the “Journey through China on the Train” programming (or the “Railway Media”) on China’s high-speed railway networks.
  Our tourism segment currently has three destinations that are open to the public. They are (i) the Great Golden Lake tourist destination (the “Great Golden Lake”, titled with Global Geopark and the part of China Danxia – a World Natural Heritage Site granted by the United Nations Educational, Scientific and Cultural Organization (“UNESCO”)) in Taining County, Fujian, (ii) Yunding Recreational Park (a large-scale recreational park, or the “Yunding Park”) in Yongtai County, Fujian, and (iii) Hua’An Tulou cluster (or the “Earth Buildings” or the “Tulou”, part of Fujian Tulou – a World Cultural Heritage Site granted by UNESCO) in Hua’An County, Fujian.
  We also currently have three other destinations that are under the construction. These include, (i) Ming Dynasty Entertainment World (“Ming Dynasty Entertainment World”), a theme park style destination located in Bengbu, Anhui, (ii) the China Yang-sheng (Nourishing Life) Paradise (“Yang-sheng Paradise”), a theme park style destination featuring a rare salt water hot spring located in Zhangshu, Jiangxi, and (iii) the City of Caves (“City of Caves”), an underground natural attraction located in Xinyu, Jiangxi.
  To operate our business in China, we need to enter into cooperation agreements with certain China government agencies / branches or government-owned-entities. In 2010, through our various wholly owned subsidiaries in China, we entered into four cooperation agreements. They are (i) an agreement with the Anhui Province Bengbu Municipal Government to obtain land-use-rights and develop, operate and manage Ming Dynasty Entertainment World, (ii) an agreement with Jiangxi Province Zhangshu Municipal Government to obtain land-use-rights and develop, operate and manage Yang-sheng Paradise, (iii) an agreement with Jiangxi Province People’s Government of Fenyi County to develop, operate and manage City of Caves, and (iv) an exclusive management rights agreement with Fujian Education Media Limited Company, a wholly state-owned entity by Fujian Education Television Station, for the operation of FETV with three years exclusive management rights for the operation of FETV with an option to renew for two additional years.
  In 2011, we have been start to construct and develop Yunding Park’s second phase of construction and new tourism projects, the China Yang-sheng (Nourishing Life) Paradise in Zhangshu City, Jiangxi province, and the City of Caves in Fenyi City, Jiangxi province, The construction was in line with our schedule. We expect that we will complete the first phase construction of these new projects and open them to the public by the end of 2012. To better market our tourism destinations, we established our new subsidiary, Fujian Yida Travel Service Co., Ltd. in June 2011.
  Our Corporate History and Structure
  China Yida Holding Co. was organized as a Delaware Corporation in June 4, 1999, formerly known as Apta Holdings, Inc. (“Apta”).  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. Minhua Chen and his wife, Ms. Yanling Fan, were the majority shareholders of Keenway Limited.
  On November 19, 2007, we entered into a share exchange and stock purchase agreement with Keenway Limited, Hong Kong Yi Tat, and the then shareholders of Keenway Limited, including Minhua Chen, Yanling Fan, Xinchen Zhang, Extra Profit International Limited, and Lucky Glory International Limited (collectively, the “Keenway Limited Shareholders”), pursuant to which in exchange for all of their shares of Keenway Limited common stock, the Keenway Limited Shareholders received 90,903,246 newly issued shares of our common stock and 3,641,796 shares of our common stock which were 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, (i) Fujian Jintai Tourism Development, Co, Ltd. (“Fujian Jintai Tourism”), (ii) Yida (Fujian) Tourism Group., Ltd. (formerly known as, Fujian Yunding Tourism Industrial Co., Ltd.) (“Fujian Yida”), (iii) Fujian Jiaoguang Media, Co., Ltd. (“Fujian Jiaoguang”), and (iv) Fujian Yida Tulou Tourism Development Co. Ltd (“Tulou”).  Hong Kong Yi Tat does not have any other operations.
  Hong Kong Yi Tat, a company incorporated laws of Hong Kong, established its crucial operating PRC subsidiary, Fujian Jintai Tourism in October 2001. At the time when Fujian Jintai Tourism was incorporated, a number of governmental tax incentives would be only applicable to foreign investment enterprises, such as the tax reduction for the foreign investment enterprise located in economic development zone. Under the PRC income tax laws effective prior to January 1, 2008, domestic companies typically were subject to an enterprise income tax rate of 33%, while foreign invested manufacturing enterprises with operation terms of 10 or more years might enjoy preferential tax treatment of “two-year tax exemption and three-year tax reduction of 50%,” subject to the approval of relevant tax authority.  For these reasons, Fujian Jintai  Tourism was reorganized to be a subsidiary of a foreign parent company (in this case, a Hong Kong Company) to take advantage of the tax treatment.
  Moreover, the other reason to use a Cayman Islands company is to facilitate the share transfer with a U.S. public entity at the later date. Transferring equity at both the Hong Kong level or at the PRC level will require complicated governmental filings and/or approval procedures to effect the transfer, as well as tax filings and payment of fees or taxes. Transferring equity of a Cayman Islands company, on the other hand, is subject to a relatively simple governmental procedure for completion of the transfer and generally is free from any taxes under the laws of Cayman Islands.  Accordingly, we decided to use the Cayman Islands company as the parent of the Hong Kong company which in turned owned the PRC operating entity.
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 INDEX
  Fujian Jintai Tourism
  Fujian Jintai Tourism was formed on October 29, 2001.  Its primary business is tourism at the Great Golden Lake.  The Company also offers bamboo rafting, parking lot service, photography services and ethnic cultural communications.
  Fujian Jintai Tourism has one wholly owned subsidiary, Fuzhou Hongda Commercial Services Co., Ltd, (“Hongda”).  Hongda currently does not have any operations.  On March 15, 2010, Hongda entered into an equity transfer agreement with Fujian Yida, pursuant to which Fujian Yida acquired 100% of the issued and outstanding shares of Fuzhou Fuyu Advertising Co., Ltd. (“Fuyu”) from Hongda at the aggregate purchase price of RMB 3,000,000 ($473,000 USD).  As a result, Fujian Yida became the 100% holding company of Fuyu.  Fuyu is engaged in the mass media segment of our business.  Its primary business is focused on advertising, including media publishing, television, cultural and artistic communication activities, and performance operation and management activities. Hongda was deregistered on December 2, 2012.
  Fujian Jintai Tourism also owned 100% of the ownership interest in Fujian Yintai Tourism Co., Ltd. (“Yintai”). On March 15, 2010 Fujian Jintai Tourism entered into an equity transfer agreement with Fujian Yida, pursuant to which Fujian Yida acquired 100% of the issued and outstanding common stock of Yintai from Fujian Jintai Tourism at the aggregate purchase price of RMB 5,000,000 ($789,000). As a result, Yintai became a wholly owned subsidiary of Fujian Yida. Yintai was deregistered on November 18, 2010.
  Fujian Yida
  Fujian Yida’s primary business relates to the operation of our Yunding Park tourism destination and all of our newly engaged tourism destinations, and the management of our media business.
  On March 16, 2010, Fujian Yida formed a wholly-owned subsidiary, Yongtai Yunding Resort Management Co., Ltd. (“Yunding Resort Management”) with its official address at No. 68 Xianfu Road, Zhangcheng Town, Yongtai County, China.  Yunding Resort Management has currently no material business operations.  Yunding Park was open on September 28, 2010. We plan to develop Yunding Resort Management into a business entity primarily focusing on the management services of Yunding Park when the second phase development of Yunding Park is completed.
  On April 12, 2010, our operating subsidiary Fujian Yida, which was called “Fujian Yunding Tourism Industrial Co., Ltd.,” changed its name to “Yida (Fujian) Tourism Group Limited”.  This was to reflect its new role of expanding our business in operations of domestic tourism destinations in China by acquiring new tourism destinations.
  On April 15, 2010, Fujian Yida entered into agreement with Anhui Xingguang Group to set up a joint venture – Anhui Yida Tourism Development Co. Ltd. (“Anhui Yida”) by investing 60% of the equity interest.  Anhui Xingguang Group owns 40% of the equity interest of Anhui Yida.  The primary business of Anhui Yida focuses on developing the Ming Dynasty Entertainment World.
  On July 6, 2010, Fujian Yida formed a wholly-owned subsidiary, Jiangxi Zhangshu (Yida) Tourism Development Co., Ltd. (“Jiangxi Zhangshu”), in Zhangshu City, Jiangxi Province to develop the Yang-sheng Paradise.
  On July 7, 2010, Fujian Yida formed a wholly-owned subsidiary, Jiangxi Fenyi (Yida) Tourism Development Co., Ltd. (“Jiangxi Fenyi”), in Xinyu City, Jiangxi Province to develop the City of Caves.
  On June 24, 2011, Fujian Yida formed a wholly owned subsidiary, Fujian Yida Travel Service Co., Ltd. (“Yida Travel”). The total paid-in capital of Yida Travel was $1,546,670 (RMB10 million).  Its primary business is to conduct domestic and international traveling services in China, including operating the direct sales of travel services for our current tourist destinations at the Great Golden Lake, Yunding Recreational Park, and Hua’An Tulou Cluster, and our three tourist destinations currently under construction, Ming Dynasty Entertainment World, China Yang-sheng (Nourishing Life) Paradise, and the City of Caves.
  Fujian Jiaoguang
  Fujian Jiaoguang and our contractual relationship met the requirements of the Accounting Standard Codification ("ASC") 810, to consolidate Jiaoguang’s financial statements as a Variable Interest Entity. Fujian Jiaoguang has no material business operations.
  Tulou
  Tulou is 100% owned by Hong Kong Yi Tat.  Tulou’s primary business relates to the operation of Tulou, one of our tourism destinations.
  2
 INDEX
  The following chart depicts our current corporate structure:
  
  * Each of Fujian Jiaoguang and Yunding Resort Management currently has no material business operations.
  3
 INDEX
  Our Wholly Foreign Owned Enterprises
  We have three Wholly Foreign Owned Enterprises. Fujian Jintai Tourism Development Co., Ltd., Fujian Yida Tulou Tourism Co., Ltd. and Yida (Fujian) Tourism Group, Ltd. are each of our three wholly foreign owned enterprises. A copy of each entities business license along with an English translation is attached hereto as exhibits.
  Our Variable Interest Entity Agreements
  We do not have a direct ownership interest in Fujian Jiaoguang.   We do not derive any revenues from Fujian Jiaoguang. On December 30, 2004, Jiaoguang and its shareholders entered into a set of contractual arrangements with us which governs the relationships between Fijian Jiaoguang and the Company. The Contractual Arrangements are comprised of a series of agreements, including a Consulting Agreement and an Operating Agreement, through which we have the right to advise, consult, manage and operate Fujian Jiaoguang, and collect and own all of Fujian Jiaoguang’s respective net profits. Additionally, under a Proxy and Voting Agreement and a Voting Trust and Escrow Agreement, the shareholders of Fujian Jiaoguang have vested their voting control over Fujian Jiaoguang to the Company. In order to further reinforce the Company’s rights to control and operate Fujian Jiaoguang, Fujian Jiaoguang and its shareholders have granted us, under an Option Agreement, the exclusive right and option to acquire all of their equity interests in the Fujian Jiaoguang or, alternatively, all of the assets of Fujian Jiaoguang.  Further, the shareholders of Fujian Jiaoguang have pledged all of their rights, titles and interests in Fujian Jiaoguang to us under an Equity Pledge Agreement. We effectuated this organizational structure due to China’s limitations on foreign investments and ownership in Chinese domestic businesses.  Generally, the Chinese law prohibits foreign entities from directly owning certain types of businesses, such as the media industry.
  The shareholders of Fujian Jiaoguang are also our principal shareholders, Chairman Minhua Chen and Yanling Fan.
  We have obtained an opinion from Allbright Law Office, our Chinese legal counsel, that this structure is legal and valid and that the U.S. holding corporation can obtain the same benefits and risks with this contractual structure as it would with a direct equity ownership. There is, however, a risk with this contractual structure that the contracting party breaches its contract with us. If Fujian Jiaoguang fails to perform its obligations under the contractual arrangements, we are required to enforce our rights through arbitration before the China International Economic and Trade Arbitration Commission (CIETAC). To initiate a proceeding under the CIETAC we must first prepare and submit an arbitration request for approval and acceptance. Once accepted, CIETAC will form an arbitration tribunal to hear the matter, set a hearing date and notify the parties of the proceeding. The parties would be contractually bound by the decision of the tribunal. While we do feel the possibility is remote, in the event such decision is unfavorable, we may effectively lose control over Fujian Jiaoguang, which would materially affect our business, financial condition and results of operations.
  Additionally, the pledge agreement that entered into on December 30, 2004 is enforceable under the PRC law although it was not registered with local government agency. The PRC Property Law went effective on October 1, 2007. At the time of the execution of the pledge agreement, no registration with local administration for industry and commerce was required for the effectiveness and enforcement of pledge agreement. The PRC Property Law does not have retrospective effect and nor does it require the registration of an executed pledge agreement before the effectiveness of the PRC Property Law. The pledge agreement was effective upon execution and, therefore enforceable under the PRC laws.
  Although Fujian Jiaoguang is still contractually obligated to us pursuant to the agreements, it no longer is an operating entity. All the assets and revenue of Fujian Jiaoguang have been transferred to Fuyu, our wholly owned subsidiary, on July 31, 2011 pursuant to an agreement by and among Fujian Jiaoguang, Fuyu and Fujian Xinhengji Advitisement Co., Ltd. This transfer of assets has been completed in compliance with PRC laws and was done so that we no longer had to rely on the contractual arrangements of our variable interest entities. We believe that this is a more efficient and less risky corporate structure.
  Our Products, Services and Customers
  Advertisement
  FETV
  FETV, owned by the Fujian Education TV Station, is a provincial comprehensive entertainment television channel ranked #4 out of a total 11 television channels in Fujian province (Source: ACNielsen 2008 Survey). FETV covers approximately 92% of the broadcasting area for the FETV television signal throughout Fujian province. Fujian province is located in southeastern China and has a population of over 35 million. Pursuant to the Fujian government (http://www.fujian.gov.cn/bmdd/shsh/rmsh/), it is relatively common for families living in Fujian province, including in rural areas, to own at least 1 television set. The website states that as of 2009, “there were 169.48 color television sets per 100 urban households, an increase of 1.5%.”
  4
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  On August 1, 2010, Fuyu, our wholly-owned subsidiary,  entered into a Fujian Education Television Channel Project Management Agreement (the “Agreement”), with Fujian Education Media Limited Company, a wholly state-owned company organized by the Fujian Education TV Station under the laws of the People’s Republic of China (“Fuijan Education Media”), pursuant to which, Fujian Education Media granted to us five years of exclusive management rights for the FETV channel from August 1, 2010 to July 31, 2015 (the “Term”), with the first three years of the Term, from August 1, 2010 to July 31, 2013, as phase I (the “Phase I”) and the remaining two years of the Term, from August 1, 2013 to July 31, 2015, the phase II (the “Phase II”). At the end of Phase I, we and Fujian Education Media shall conduct full performance review of our cooperation under the Agreement. If we and Fujian Education mutually agree that there is no event of violation or breach of contract, the Agreement shall be extended to Phase II. Additionally, Fujian Education Media will also review our operations and make an assessment as to whether it would be profitable for them to continue the arrangement. If they determine that the future operations will not be successful, they can terminate the Agreement and not move forward with Phase II. There is no assurance that the Agreement will be extended to Phase II. During the Phase I Period and Phase II Phase, we shall pay annual payment of RMB 12,000,000 ($1,893,000 USD) to Fujian Education TV Station for the first year and shall be increased by 20% per year for each of subsequent years during two phases.
  Under the management contract, we obtained the full rights to provide programming and content management services and to re-sell all advertising airtime of FETV.  We have leveraged the FETV assets to produce high quality TV programming focused on tourism, successfully promoting our own tourist attractions branding the FETV station around the tourism theme and creating a network of potential partners for our tourism business, including hotels, travel agents, and entertainment resorts.
  The scope of Fuyu’s business activities in its business license is for the design, production, distribution and agency of all kinds of domestic advertisement. Fuyu mainly engages in the business of advertisement through television channels and Fuyu does not conduct any operations outside the business scope of its business license. Our advertisement business, however, is not restricted or prohibited by Guideline Catalogue for Foreign Investors. According to Administration Rules of Foreign Invested Advertisement Enterprise, foreign investors are allowed to invest in the business of advertisements. We decided to shift our contractual agreement with FETV from Jiaoguang Media to Fuyu since we believe that the wholly-owned, direct subsidiary relationship would provide our shareholders with additional comfort because the income is generated by our direct subsidiary. We are able to structure the transaction in this manner because neither Circular 75 nor Circular 10 covers the issue regarding the daily business operation of Fuyu because Fuyu has obtained business license from the SAIC and is able to conduct its business according to its business license.
  According to Administrative Measures for the Broadcasting of Radio and TV Advertisements issued by State Administration of Radio, Film and Television on September 8, 2009, the length of time for broadcasting commercial advertisements within one hour for each program of a broadcasting institution shall be no more than 12 minutes, of which total length of time for broadcasting commercial advertisements shall be no more than 18 minutes per hour between 19:00 and 21:00.
  FETV is broadcasting 24 hours per day. The maximum advertising minutes is about 20% of daily broadcasting hours. We do not devote any advertising minutes to our own tourist attractions and only introduce our tourist attractions within the TV program. In 2009, we sold an aggregate of 770 hours of advertising, or approximately 44% of the total advertising time available. In 2010, we sold an aggregate of 790 hours of advertising, or approximately 45% of the total advertising time available. In 2011, we sold an aggregate of 800 hours of advertising, or approximately 40% of the total advertising time available. In 2009, 2010 and 2011, the maximum amount of advertisements on FETV is about 4.8 hours per day.
  We do not have any advertising customers, including advertising agencies, which account for more than 10% of our revenues.
  Railway Media
  In February 2009, our wholly owned subsidiary, Fuzhou Fuyu Advertising Co., Ltd., entered into a six-year exclusive agreement with China’s Railway Media Center to create “Journey through China on the Train” infomercial programs, pursuant to which we will produce 20 minute monthly episodes focused on tourist destinations around China and travel ideas and tips with product placement advertisements. The infomercial programs will be broadcast on seven railway lines into Tibet, all high speed motor trains in China with TV panels made available by Ministry of Railways of P. R. China and cable TV channels covering 18 railway bureaus. We will pay an annual fee of approximately $46,154 or RMB 300,000 to Railway Media Center for the first three years and approximately $53,846 or RMB 350,000 for the second three years. We will generate revenue from selling product placement advertisements. At the end of 2011, “Journey through China on the Train” was shown on approximately 108 railroad lines.
  5
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  Tourism
  The Great Golden Lake
  TheGreat Golden Lake is located in Taining County, surrounding Sanming, Nanping of Fujian Province and Nanchang of Jiangxi Province. This tourist attraction covers more than approximately 230 square kilometers, including five main scenic areas: (1) the Golden Lake; (2) Shangqing River; (3) Zhuangyuan Rock; (4) Luohan Mountain; and (5) Taining Old Town.
  We charge our visitors to visit our parks and to experience the natural amusements located at the Great Golden Lake. The following is a list of the typical fees we charge our visitors: (i) entrance to the Great Golden Lake is $12.50 per person (RMB 80); (ii) Shangqing River is $15 per person (RMB 95); (iii) Zhuangyuan Rock is $6.25 per person (RMB 40); (iv) Luohan Mountain is $6.25 per person (RMB 40); Dadi Tulou cluster is $14.07 per person (RMB 90); Shangping Tulou cluster is $9.38 per person (RMB 60); and Yunding Park is $18.76 per person (RMB 120). We offer a group discount of between 20 to 60% depending on the group size and time of year/week visiting the park. In 2011, we had approximately 312,000 visitors to the Great Golden Lake, as compared to 470,000 visitors in 2010.
  In 2001, our subsidiary, Fujian Jintai Tourism Developments Co., Ltd., entered into a tourism management revenue sharing agreement with Fujian Taining Great Golden Lake Tourism Economic Development Zone Management Committee, to operate and to manage the Great Golden Lake destination from 2001 through 2032. We initially invested approximately 190,000,000 RMB ($30 million USD) to improve the infrastructure, and through a well-designed marketing campaign, we have succeeded in increasing the number of the visitors from approximately 30,000 in 2001 to approximately 470,000 in 2010. Currently most visitors to the Great Golden Lake are from Fujian, Shanghai, Guangdong and Jiangxi. With easier transportation and increased marketing, we expect that the Great Golden Lake should be able to attract more visitors from other provinces of China and even foreign countries. Our revenue from the operations of the Great Golden Lake is generated from entrance ticket fees. The Great Golden Lake as recognized as theGlobal Geopark and part of China Danxia – the World Natural Heritage Site grant by UNESCO in 2005 and 2010, respectively.
 
 Pursuant to the tourism management revenue sharing agreement with the Taining government, we agreed to share the revenue over the course of the agreement as follows: (i) from 2001 to 2006 we will receive 92% of the revenue and the Taining government will receive 8% of the revenue; (ii) from 2006 to 2012 we will receive 90% of the revenue and the Taining government will receive 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.
  Yunding Park
  On November 27, 2008, Hong Kong Yi Tat International Limited, our wholly owned subsidiary, entered into the Tourist Destination Cooperative Development Agreement with the Yongtai County People’s Government in Fuzhou, China which is effective until 2048. Pursuant to the agreement, we obtained the exclusive right and special authorization to develop the Yunding Park located at Yongtai Beixi and Jiezhukou Lake for forty (40) years from 2008. The Yunding Park is approximately 50 kilometer from Fuzhou, the capital city of Fujian. We are obligated to construct, operate and manage two tourist destinations, subject to specific terms and conditions negotiated between us and the Yongtain government. We have the exclusive right to develop both Yongtai Beixi and Jiezhukou Lake and the government is prohibited from granting the right of development, operation and management to any third party during the existence of our agreement. As of December 31, 2011, we have invested approximately $73 million to build the tourism, transportation and entertainment facilities. We generate revenue from entrance fees, cable cars and other entertainment activities. In September 2010, we timely announced the grand opening of our Yunding Park to the public. Fujian Yida is currently responsible for the development and operations of Yuding Park. We are still in construction of the second phase of Yunding Park. Once the second phase development is completed, Yunding Resort Management will be responsible for the management services of Yunding Park
  Hong Kong Yi Tat incorporated Fujian Yida for handling the business operation and receiving revenues from the ticket sales at Yunding Park. Under the Tourist Destination Cooperative Development Agreement, Hong Kong Yi Tatis entitled to: (1) the ticket sales revenue, provided, that, we are required to pay a total of 5 million RMB ($790,000 USD) to the Yongtai County People’s Government over the course of the first 10 years of the Agreement; (2) the earnings excluding 5% of the actual ticket sales during that time in the second ten years; (3) the earnings excluding 6% of the actual ticket sales during that time in the third ten years and (4) the earnings excluding 7% of the actual ticket sales during that time in the fourth ten years. As of May 24, 2012, we have paid to the Yongtai County local government 3 million RMB. We plan to pay to the local government the remaining 2 million RMB by 2018. Hong Kong Yi Tat contributes the revenue to Fujian Yida, however, there is no agreement between Hong Kong Yi Tat and Fujian Yida regarding payment or entitlement to revenue under the Tourist Destination Cooperative Agreement or any other agreement.
 
 Yunding Park opened to the public on September 28, 2010. From that date until the end of 2010, we had total gross ticket sales of 1,760,000 RMB ($260,000 USD). In 2011, we had total gross ticket sales of 3,360,000 RMB ($520,000 USD).
  In 2009, Yunding Park did not have any visitors because it was not opened. Yunding Park opened on September 28, 2010 and had 25,000 visitors from opening until the end of 2010. In 2011, we had 54,000 visitors to Yunding Park.
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  Hua’an Tulou Cluster (“Earth Buildings” or the “Tulou”)
  The Tulou Cluster, composed of large multilayer earth buildings built by ancient wealthy families as their residence, is knownfor their unique round shape, ingenious structure and oriental mystery. The Tulou Cluster was recognized as part of Fujian Tulou World Cultural Heritage Site in 2008 by UNESCO. The Tulou Cluster is a 1.5 hour drive from Xiamen City, one of Fujian’s most famous tourist coastal cities.
  In December 2008, Hong Kong Yi Tat International Limited, our wholly owned subsidiary, entered into a Tourist Resources Development Agreement with Hua’an County Government.  The agreement is effective until 2048. Pursuant to this agreement, we began to develop the Hua’an Tulou tourist destinations with a right of priority to develop other scenic areas in Hua’an County. Hua’an Tulou Cluster requires a total capital input of approximately 47,500,000 RMB ($7.5 million USD) to put it into infrastructure and facility constructions. The Hua’an Tulou Cluster was closed during the construction and re-opened to the public before the fourth quarter of 2009. Currently, approximately half of its visitors are from overseas, including Taiwan. Our revenue is generated from the sale of entrance ticket fees, fees from rides on tour cars and food at our restaurants.
  Under the contractual arrangements with respect to Hua’an Tulou Cluster,  when the ticket price of the Dadi Tulou Clusters is RMB60 ($9.50 USD) or above per person, the proportion paid by Hong Kong Yi Tat to Hua’an County government shall be: (1) 16% of gross ticket sales in the first five years; (2) 20% of gross ticket sales in the second five years; (3) 23% of gross ticket sales in the third five years; (4) 25% of gross ticket sales in the fourth five years; (5) 28% of gross ticket sales in the fifth five years; and (6) 30% of gross ticket sales from the 26th year.  Currently, our average ticket price at Hua’an Tuluo is 90RMB ($14.50 USD). In the event our ticket price is less than RMB 60 ($9.50USD), the Hua’an County government shall be entitled to a reduced portion of the gross ticket sales.
  Our ticket prices are subject to the approval of the local PRC government. According to the PRC Pricing Law, the scope and level of the government-set and guided prices shall properly be adjusted in light of the national economy.  The Company may file an application with the government to request a price change to our ticket prices. However, the government will use its discretion to decide whether or not to adjust the ticket price and will use their discretion to determine the adequate price for the tickets to our park. Additionally, even if we do not apply for a price adjustment, the local PRC government may adjust the price based on consumer or business operations or the national economy
  In 2010, Hua’an Tulou Cluster had 235,000 visitors and gross ticket sales of 26,680,000 RMB ($3,935,800 USD) and we paid the Hua’an County government 3,625,000 RMB ($534,900 USD). In 2011, Hua’an Tulou Cluster had 203,000 visitors, a decrease of 13.6% , and gross ticket sales of 15,700,000 RMB ($2,429,000 USD), a decrease of 41.2% as compared to 2010, and we paid the Hua’an County government 2,160,000 RMB ($334,600 USD). We are facing strong competition among the homogeneous tourism destinations such as Nanjing Tulou Cluster and Yongding Tulou Cluster. The gross ticket sales decrease of 41.2% because we have to provide deeper ticket discount among the strong completion and the tourist consumption was also decreased. We expect this trend to continue in the future.
 Ming Dynasty Entertainment World
  On April 15, 2010, Yida (Fujian) Tourism Group Ltd. jointly with Anhui Xingguang Investment Group Ltd., a privately held company engaged in real estate and commercial development in Anhui province, entered into an Emperor Ming Taizu Cultural and Ecological Resort and Tourist Project Finance Agreement (the “Agreement”) with Anhui Province Bengbu Municipal Government, pursuant to which we and Anhui Xingguang formed a limited liability company, with a total registered capital of RMB 100 million (approximately $14.6 million) to engage in construction and development of a new tourism destination -- Ming Dynasty Entertainment World in Bengbu City, Anhui Province.
  The Ming Dynasty Entertainment World will be built on approximately 5,000 mu of land (approximately 824 acres, 1 acre = 6.07 mu, the “Project Land”), and is planned to include recreational developments of Royal Hot Spring World, Royal Tour Town, Filial Piety Temple and Royal Hunting Garden.
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  Bengbu, located in the rich and populous Changjiang River Delta, is believed to be one of the most important transportation hubs in China given its proximity to the existing Beijing-Shanghai railway and Huai River. The Company expects Bengbu to become very accessible to a population of over 200 million within the 3-hour economic circle. The first emperor of the Ming Dynasty, Majesty Yuanzhang Zhu, was born in region of Bengbu in 1328. This city has a rich history, with several historical sites related to the Ming Dynasty, including the tomb of Majesty Yuanzhang Zhu's parents. The Ming Dynasty Entertainment World plans to include Royal Hot Spring World (a resort hotel), Royal Tour Town, Filial Piety Temple and Royal Hunting Garden.  The destination will reproduce the royal life of the Ming Dynasty at its height of power and splendor. Management's vision is for visitors to experience the recreational activities of the ancient royal families. The Filial Piety Temple will commemorate his Majesty Yuanzhang Zhu, who embraced the Confucian ideal of filial piety, for respect for parents and ancestors throughout his life and introduced several related laws and policies. This temple, which could be as splendid as the Temple of Heaven in Beijing, is expected to serve as an important educational base and contribute other social and economic benefits.
  On April 20, 2010, a new project company, Anhui Yida Tourism Development Co., Ltd. (hereinafter the Project Company), was established with a total registered capital of RMB100 million (approximately $14.6 million USD). The Project Company has been formed by China Yida and Anhui Xingguang as a joint project with China Yida owning 60% and Anhui Xingguang owning 40%. The business scope of Anhui Yida Tourism Development Co., Ltd. is tourism destination, project development, parking services, photo services and real estate management services. A copy of our cooperative agreement between us and Anhui Xingguang is attached hereto as Exhibit 10.27. China Yida is required to contribute approximately RMB60 million (approximately $8.78 million) to retain 60% equity of the Project Company, and Anhui Xingguang is required to contribute approximately RMB40 million (approximately $5.8 million) to retain 40% equity of the Project Company. Anhui Xingguang is a reputable private company with businesses in the real estate and commercial sectors locally. This Project Company is expected to combine the expertise in real estate development, tourism and commerce from both shareholders. China Yida will be responsible for the planning and operation of the Ming Dynasty Entertainment World. For the first phase of construction, the Project Company is budgeting approximately RMB250 million (approximately $36.6 million), with China Yida and Anhui Xingguang contributing on a pro rata basis, and includes the purchase of the 40-year land use rights for a parcel of approximately 41.185 acres (commercial land use, "Commercial Land") and another parcel of approximately 82.37 acres (industrial land use, "Industrial Land") as well as the construction of the Royal Hot Spring World. Management expects to open the first phase of the Ming Dynasty Entertainment World to visitors by the end of 2012. Pursuant to the terms of a lease transfer agreement, the Project Company will be allowed to lease a larger piece of land with approximately 4,500 Mu (approximately 740 acres, ecological land use, "Ecological Land") for approximately RMB350,000 (approximately $51,300) per annum from the local residents. Copies of the lease transfer agreement and the original lease agreements are attached hereto as Exhibit 10.28 and Exhibits 10.32 to 10.36. This lease transfer agreement is only for the management rights of the property and, therefore, we would not be required to obtain land-use rights from the local PRC government.




As of December 31, 2011, China Yida and Anhui Xingguang have contributed a total of RMB 100 million ($15,800,000 USD) to the Project Company. Of the RMB 100 million ($15,800,000 USD) that has been contributed, we have contributed RMB 60 million ($9,500,000 USD) and Anhui Xingguang has contributed RMB 40 million ($6,300,000 USD). Anhui Xingguang is responsible for 40% of profits and losses while China Yida is responsible for 60% of profits and losses. We have not started the first phase of site construction. We will receive 60% of the revenue generated from this project.
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  The Company's management believes that it is able to fund the first phase construction from current cash and operating cash flow over the next two years, and does not expect to require additional equity financing. After the Royal Hot Spring World starts operation, the Company expects to obtain loans from local banks backed by fixed assets, including the land.
  The revenues from Ming Dynasty Entertainment World will include entrance fees, hotel rental, conference room fees, and entertainment service fees. In addition, the Company has planned a Ming Dynasty featured shopping street in the Royal Tour Town and expects to generate revenues from commercial real estate rent and maintenance fees. On the Commercial Land, tourism real estate could be planned to generate additional revenues.
  Ming Dynasty did not have any visitors in 2011 because this site has not officially opened to the public.
  Yang-sheng Paradise
  The Project is designed to focus on the theme of famous Taoist practice – Yang-sheng (nourishing life), with Zhangshu City’s rare natural resources – salt water hot spring, and reputation as one of China’s traditional medicine and herb center. Preliminarily, Yang-sheng Paradise is planned to include (i) Salt Water Hot Spring SPA & Health Center, (ii) Yang-sheng Holiday Resort, (iii) World Yang-sheng Cultural Museum, (iii) International Camphor Tree Garden, (iv) Chinese Medicine and Herb Museum, (v) Yang-sheng Sports Club, (vi) Old Town of Chinese Traditional Medicine, and (vii) various other Yang-sheng related projects and tourism real estate projects. We formed a limited liability company with a total registered capital of RMB 20 million (approximately $3 million) as of December 31. 2010.
  The Project will be developed approximately two (2) kilometers from Zhangshu’s downtown, and within one hour travel from the adjacent airport or Nanchang, the capital city of Jiangxi Province. In addition, the Project is on the route from Nanchang to Lu Mountain, a World Natural Heritage Site, and Jing-Gang Mountain, one of the most popular political education tourism destinations as it was at the origin of Chairman Mao’s military force.
  The capital expenditure planned for the first development phase of Project is estimated at approximately RMB250 million (approximately $36.6 million), which includes the planned construction of the Salt Water Hot Spring Spa & Health Center (the “SPA Center”), the Yang-sheng Holiday Resort (the “Resort Hotel”), in-destination roads and lakes, and the purchase of the land use rights for a parcel of approximately 3,000 Mu (approximately 494 acres, commercial and residential land use, the “Commercial Land”) as well as the rental payment for a parcel of approximately 3,000 Mu (approximately 494 acres) with the annual rent estimated at RMB0.5 million (approximately $73,300). The rental of the additional parcel of approximately 3,000 Mu of land would be leased from the local PRC government but we would not be required to obtain land-use rights because the lease will only be for the management rights of the land based on a cooperative agreement that would be entered into at the time of the lease. No such arrangement, however, has been entered into.
 
 Management expects that the SPA Center and the Resort Hotel will be open to the public by the end of 2012.
  In addition to the SPA Center and the Resort Hotel, Company plans to build additional attractions on the Project site that may include the World Yang-sheng Cultural Museum, the International Camphor Tree Garden, the Chinese Medicine & Herb Museum, the Yang-sheng Sports Club, the Old Town of Chinese Traditional Medicine and other Yang-sheng related projects and tourism real estate projects. The Company is now conducting in-depth research, evaluation and preparation on these plans.
  Zhangshu Municipal Government has agreed not to approve any additional salt water hot spring or related tourism projects to any third parties to protect the exclusivity of Project.  It will also waive the usage fees of the project tourism resources and thermohaline spring water resources. In addition, it will waive or reduce most of the administration fees throughout the Project’s constructions. It will also allow China Yida to pay for its outdoor lighting at a cheaper rate as of city’s street lighting.




There are no other revenue sharing provisions or other restrictions on the revenue that we will receive from such venue.
  Yang-Sheng did not have any visitors in 2011 because this site has not officially opened to the public and does not expect to open until the end of 2012.
  The City of Caves
  On June 1, 2010, Yida (Fujian) Tourism Group Ltd., our wholly-owned subsidiary, entered into an agreement with Jiangxi Province People’s Government of Fenyi County in Xinyu city, Jiangxi Province, to develop a brand new tourism project to be named “The City of Caves”, based on the largest and most characteristic karst land underground caverns in China, for a management period of forty (40) years commencing from 2010.
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  The first phase, mainly composed of Altair Cave and Vega Cave, is scheduled to start trial operation at the end of 2012. The second phase will include the Hanmao Cave Cluster and the third phase will include the tourism resources of Dagang Mountain. Investment budget for each phase will be RMB100 million ($14.7 million), with a total budget of RMB300 million ($44.1 million). The City of Caves will attract tourists who are visiting the several nearby world-class tourism destinations, including Sanqing Mountain, Longhu Mountain, Jinggang Mountain, and Lu Mountain, all of which are famous and popular attractions in China. In addition, the Project is approximately a one-hour drive from China Yida's Yang-sheng Paradise, which means the Company can integrate the resources of the two projects and launch a very cost-effective and powerful integrated marketing campaign. The Project will be designed to provide comprehensive cultural background and will feature a high level of interaction between natural views and entertainment experiences, as compared to simple sightseeing of peer caves. We formed a limited liability company and committed RMB 60 million (approximately $9 million) of capital investment.  As of December 31, 2011, a total of RMB 60 million (approximately $9 million USD) was contributed to the company.
  Fenyi County is located in the mid-west of Xinyu City, 30 kilometers from downtown Xinyu. Xinyu is believed to have the highest industrialization among all cities of Jianxi Province, featuring two key industries: (i) steel; and (ii) photovoltaic. Management estimates that a three-hour driving circle will cover a population of approximately 50 million in 11 cities including the three provincial capital cities of Nanchang, Changsha and Wuhan. Several rail lines and highways across Xinyu make transportation convenient.
  Under the contractual arrangements, Fujian Yida shall pay to the Fenyi County government the “use fees” of scenic resources. The “use fees” are payable as follows: during the first five years of operations we will not be required to pay anything to the Fenyi County government, during the second five years of operations we will be required to pay 5% of gross ticket sales per year to the Fenyi County government and for all years thereafter we will pay 8% of gross ticket sales per year to the Fenyi County government.
 
 The City of Caves did not have any visitors in 2011 because this site has not officially opened to the public and does not expect to open until the end of 2012.
  Marketing and Distribution Methods of Products and Services
  Tourist and related Operations
  The current marketing strategy of our tourist and related operations has two major promotional elements. The first is promoting the unique brand and scenic locations through traditional advertisement mediums.  These traditional channels include television, radio and print media.  To reduce costs, the Company has implemented a cost minimization plan whereby the majority of the media advertisement and promotion of the tourist destination is done through the media platforms available to the Company, including FETV and Railway Media. This cost minimization plan allows our tourist and related operations to reduce its cost of advertising while maintaining a relatively high degree of exposure through our provincial TV channel province-wide and through China’s high-speed railway network.
  The second element of the Company's marketing effort of tourist and related operations is promotion of the scenic destinations through the attainment of nationally and internationally recognized merits of scenic achievement.  To this end, the Great Golden Lake has received the designation of the Global Geo-park from UNESCO and has become part of China Danxia – the World Natural Heritage Site by UNESCO and ranked in China’s Top 10 Most Appealing Destinations and Top 50 Places for Foreigners to Visit.  During the second half of 2008, Dadi Tulou was included on the World Cultural Heritage List as part of the Fujian Tulou.  By achieving this high degree of recognition, the destination becomes visible on a massive scale increasing the draw of tourists from a provincial to an international level.  The goal is to significantly increase the daily visitation rate through attainment of significant merit.
  Each element of the marketing strategy has been developed in order to increase the international consumer awareness of the Company's tourist destinations, to reduce the associated costs of such awareness and to ultimately increase the usage rate and revenues of the park.
  Because the tourist destination is a static product/service, its distribution mainly consists of the promotional strategies described in the paragraphs above. The services are promoted and distributed through traditional forms of advertising media.  Information and marketing materials regarding the park services are distributed on site.
  Media and Related Operations
  The marketing efforts of our media and related operations can also be split into two elements. The first is promoting advertising revenue through program contents with high viewing rates. The second is promoting advertising revenue through larger media coverage.
  Promotion through viewing rate: Through our tourist destinations, network of partners and content exchange programs, we create and promote our own educational and entertainment contents which can increase consumer awareness of its contents. The goal of promoting its programming is to increase its daily viewing rates and in turn increase the fees it can charge to third party advertisers. By achieving high rankings in China's television statistics, the Company becomes better known by potential advertising clients. With a high degree of coverage, advertisers are willing to pay more for the Company’s services.  The Company has not but may in the future decide to engage in strategic partnerships with other content providers by which they may share and promote each other’s advertising client base.
  Promotion through media coverage: we attract a lot of our advertising clients through our media coverage.  Our FETV channels reach an approximate coverage rate of 92% in Fujian Province which covers approximately 36 million people.
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  Industry and Competitive Factors
  We are currently involved in the tourism and advertisement industries in China.  Both industries are experiencing significant growth in China.  New competitors are entering these industries at a record pace.  Competition is increasing and it is beginning to become difficult to gain market share and grow.  There are, however, certain factors that we believe will be critical for our growth:
  1. Successful track record of operating both businesses and maintaining its leading management position; and
 2. Experienced management team with more than 70 years of combined experience in China media, tourism and entertainment industry.
  Tourism Business
  Our main competitor in the tourism business is Wuyi Mountain and Yongding Tulou Cluster Tourism Destination. Muyi Mountain is a state owned enterprise located in Fujian province and has been operating since 1980.  It was added to the World Heritage List by UNESCO in 1999. Yongding Tulou Cluster is also located in Fujian Province. It was established in September 2007 and is managed by Fujian Province Tourism Development Co., Ltd. Yongding Tulou Cluster is a Yongding county government owned large-scale state-owned enterprises. It was added to the World Hertiage List in July 2008.
  Advertising Business
  Our main competitor in the advertising business is Fujian News Channel. Fujian News Channel is a state owned enterprise located in Fujian province and has been operating since 1999.
  Our Intellectual Property
  We have obtained a trademark and the exclusive use permission for the “Great Golden Lake.”  This trademark has been filed with Taining County State-owned Assets Investment Operation Co., Ltd. We do not own nor do we intend to own any patents or have any of our products or services patented. In the future, we intend to acquire other trademarks from companies that we acquire or file trademarks or patents in order to protect our intellectual property.
  Compliance with Environmental Law
  We comply with the Environmental Protection Law of PRC as well as applicable local regulations. In addition to statutory and regulatory compliance, we actively ensure the environmental sustainability of our operations. Penalties would be levied upon us if we fail to adhere to and maintain certain standards. Such failure has not occurred in the past, and we generally do not anticipate that it will occur in the future, but no assurance can be given in this regard.
  In accordance with the Environmental Protection Law of the PRC adopted by the Standing Committee of the NPC on December 26, 1989, the bureau of environmental protection of the State Council set the national guidelines for discharging pollutants. The provincial and municipal governments of each province, autonomous region and municipalities may also set their own guidelines for the discharge of pollutants within their own province or district. Enterprises producing environmental contamination and other public hazards must incorporate the relevant environmental protection standards into their planning and establish environmental protections. These companies must also adopt effective measures to prevent environmental contamination and hazardous emissions, such as waste gas, waste water, deposits, dusts, pungent gases and radioactive matters, as well as noise, vibration and magnetic radiation. Companies discharging contaminated wastes in excess of the discharge standards prescribed by the environmental protection authority must pay non-standard discharge fees in accordance with national regulations and be responsible for the applicable remediation. Government authorities may impose different penalties against persons or companies in violation of the environmental protection laws and regulations depending on individual circumstances. Such penalties may include warnings, fines, imposition of deadlines for remediation, orders to cease certain operations, orders to reinstall contamination prevention and remediation facilities that have been removed or left unused, imposition of administrative actions against the responsible persons or orders to close down the company. Where the violation is egregious and deemed serious, the responsible parties may be required to pay damages and may be subject to criminal liability.
  Additionally, on November 29, 1998, the State Council of the PRC promulgated the Regulations on the Administration of Construction Project Environmental Protection, or the Construction Project Environmental Protection Regulations, which require construction projects that generate pollution to comply with both state and local standards for the discharge of pollutant; requirements for aggregate control of discharge of major pollutants must also be met in areas under aggregate control of discharge of major pollutants.
  We have always complied with all applicable laws, rules and regulations and have never faced any penalties or citations for violating any of the above laws, rules or regulations.
  Regulations
  The principal regulations governing advertising businesses in China include:
  ●
The Advertising Law (1994);●
The Advertising Administrative Regulations (1987); and
 ●
The Implementing Rules for the Advertising Administrative Regulations (2004).●
The PRC Pricing Law●
The State Council’s Regulations on Scenic Spots●
The National Development and Reform Commission’s Circular on Further Standardizing the Administration over the Price of Entrance Tickets to Sightseeing Spots (2005) and the Notice on Further Improving Administration of Scenic Spots’ Admission Price (2007)●
The Notice on Regulating the Ticket Price of Scenic Spots (2008); and●
The State Council’s Opinions on Accelerating the Development of Tourism Industry (2009)
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  These regulations stipulate that companies that engage in advertising activities must obtain from the SAIC or its local branches a business license which specifically includes operating an advertising business within its business scope. Companies conducting advertising activities without such business license may be subject to penalties, including fines, confiscation of advertising income and orders to cease advertising operations. The business license of an advertising company is valid for the duration of its existence, unless the license is suspended or revoked due to a violation of any relevant law or regulation. Fuyu currently have business license with business scope of design, production, distribution and agency of all kinds of advertisement.
  PRC advertising laws and regulations set forth certain content requirements for advertisements in China, which include prohibitions on, among other things, misleading content, superlative wording, socially destabilizing content or content involving obscenities, superstition, violence, discrimination or infringement of the public interest. Advertisements for anesthetic, psychotropic, toxic or radioactive drugs are prohibited. It is prohibited to disseminate tobacco advertisements via broadcast or print media. It is also prohibited to display tobacco advertisements in any waiting lounge, theater, cinema, conference hall, stadium or other public area. There are also specific restrictions and requirements regarding advertisements that relate to matters such as patented products or processes, pharmaceuticals, medical instruments, agrochemicals, foodstuff, alcohol and cosmetics. In addition, all advertisements relating to pharmaceuticals, medical instruments, agrochemicals and veterinary pharmaceuticals advertised through radio, film, television, newspaper, magazine, out-of-home and other forms of media, together with any other advertisements which are subject to censorship by administrative authorities according to relevant laws and administrative regulations, must be submitted to the relevant administrative authorities for content approval prior to dissemination.
  Advertisers, advertising operators and advertising distributors are required by PRC advertising laws and regulations to ensure that the content of the advertisements they prepare or distribute are true and in full compliance with applicable law. In providing advertising services, advertising operators and advertising distributors must review the prescribed supporting documents provided by advertisers for advertisements and verify that the content of the advertisements comply with applicable PRC laws and regulations. In addition, prior to distributing advertisements for certain commodities which are subject to government censorship and approval, advertising distributors are obligated to ensure that such censorship has been performed and approval has been obtained. Violation of these regulations may result in penalties, including fines, confiscation of advertising income, orders to cease dissemination of the advertisements and orders to publish an advertisement correcting the misleading information. In circumstances involving serious violations, the SAIC or its local branches may revoke violators’ licenses or permits for advertising business operations. Furthermore, advertisers, advertising operators or advertising distributors may be subject to civil liability if they infringe on the legal rights and interests of third parties in the course of their advertising business.
  All advertisements that will be broadcast on FETV are reviewed and examined by the top management of FETV and needs to be approved before any broadcast on FETV is permitted. FETV will not permit broadcasting of any advertisement which is not in complete compliance with PRC advertising laws and regulations
  However, it cannot be assured that each advertisement an advertising client or agency provides to us is in compliance with relevant PRC advertising laws and regulations, nor can the company assure that the advertisements that our regional distributors have procured for broadcasting have received required approval from the relevant local supervisory bodies or are content compliant.
  PRC Pricing Law
  The PRC Pricing Law was adopted by the Standing Committee of National People's Congress on December 29, 1997 and effective on May 1, 1998. PRC Pricing Law governs all pricing acts within the territory of the People's Republic of China, including the pricing for commodities and services. According to the Pricing Law, the government gradually adjusts the market-oriented price mechanism under macroeconomic regulation and control. The pricing shall be determined by the Law of Value. The prices of most commodities and services shall be the market-oriented and prices of an extremely small number of commodities and services shall be the government-guided or the government-set. According to the PRC Pricing Laws, if necessary, the government may enforce government-guided prices or government-set prices for the certain commodities and services, such as: (1) an extremely small number of commodities vital for the development of the national economy and people's life; (2) a small number of commodities the resources of which are rare or short; (3) commodities under natural monopoly management; (4) essential public utilities; and (5) essential non-profit services. PRC center and local governments publish and amend their guidelines for commodities or services with government-guided or government-set price, frequently. The price of Advertising currently is not included in governmental guideline for commodities or services effective on August 1, 2001. Certain tickets for scenic spots, however, are subject to government-guided or government-set prices.
  The price of the tickets for our scenic spots is approved by the Office of Price Administration. We believe that we are in all material respects in compliance with all PRC Pricing Laws.
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  State’s Council’s Regulations on Scenic Spots
  Regulation on Scenic Spots and Historic Sites, issued by State Council in September 19, 2006 and effective on December 1, 2006, governs the establishment, planning, protection, utilization and management of Scenic Spots and Historic Sites. For example, the landscape and natural environment within Scenic Spots and Historic Sites shall be protected strictly according to the principle of sustainable development and shall not be destroyed or changed at will. The residents and visitors of Scenic Spots and Historic Sites shall protect scenic spots, water, planting, wild animal and all other facilities. The management institution of Scenic Spots and Historic Site shall investigate, evaluate and take necessary measures to protect the significant scenic spots.
  PRC Regulations on Ticket Sales and Ticket Prices
  On April 29, 2005, the National Development and Reform Commission issued a Circular on Further Standardizing the Administration over the Price of Entrance Tickets to Sightseeing Spots (“Circular No. 712”).  Circular No. 712 emphasized a number of issues regarding ticket pricing. For example, the government shall review the entrance ticket price subject to government-guided or the government-set prices and prevent the rapid increasing regarding the price of entrance ticket; the pricing for certain tickets shall be subject to hearing procedure; the representative who attends the hearing shall be wide and typical enough.
  The Notice on Further Improving Administration of Scenic Spots’ Admission Price was issued by National Development and Reform Commission on January 29, 2007 (Notice No. 227). According to Notice No. 227, the pricing of entrance ticket shall reflect public interests. The planning for adjustment of ticket shall make public 2 months prior to adjustment. The frequency for adjustment of the same ticket shall not be less than 3 years. For the scenic spots subject to government-guided or the government-set prices, certain discount or preferential policy shall be provided to the elders, soldiers in active service, juveniles and students.
  The Notice on Regulating the Ticket Price of Scenic Spots, issued on April 9, 2008 by National Development and Reform Commission, Ministry of Finance and other six government authorities jointly, mainly focus on ticket pricing and administration for pricing. For example, the government-guided or the government-set prices are applicable to scenic spots built in reliance on national natural or cultural resources. For those scenic spots artificially built by commercial investment without relying on national natural or cultural resources, market-oriented price is applicable. The adjustment of ticket price subject to government-guided or the government-set prices is required to complete hearing procedure, extensive discussion and improve the transparency of decision making. The ticket price, the scope and extent of preferential policies of tickets, transportation price for trolley, sight-seeing buses, boats and hot-line shall be prominently displayed.
  Opinions on Accelerating the Development of Tourism Industry was issued by PRC State Council in December 2009 (“Opinion”) for the purpose of taking advantage of functions of tourism industry in sustaining economic development, enlarging domestic demand and altering the economic structural. Opinion stipulated general principle, goal for development, reform tourism industry in depth, improvement of consumer service, civilization on tourism, infrastructural of tourism industry and so on.
  The Company also has to comply with certain local regulations in respect of scenic spots, such as Fujian Province Administration Measures for Natural Reserve issued on June 20, 2000, pursuant to which the revocation of natural reserve, and the adjustment or change of nature, scope and boundary of natural reserve shall be approved by local government which establishes such natural reserve; Fujian Forest Regulation issued in 2001 by local congress indicates that any unit or person who uses the forest land shall make use of the forest land according to planning for protection of forest. Timber cutting without licensing shall be banned.
  The price of the tickets for our Scenic Spots is approved by The Office of Price Administration. The Company conducts its business in compliance in all material respects with all applicable laws regarding scenic spots in material respects.
  Regulations Applicable to Foreign Invested Enterprises and Wholly Foreign Owned Enterprises
  Foreign invested enterprises include sino-foreign joint venture and the wholly foreign owned enterprise. The Company currently does not have any sino-foreign joint venture subsidiaries. The Company’s indirect subsidiaries owned by Hong Kong Yi Tat shall be subject to Foreign-Owned Enterprise Law of the People's Republic China and its implemental rules. According to Foreign-Owned Enterprise Law, the establishment of wholly foreign-owned enterprises shall be examined and approved by the State Council department in charge of foreign economic relations and trade or an organization authorized by the State Council, which usually refer to Ministry of Commerce and its local counterpart. In addition, the foreign investors shall file application with Administration for Industry and Commerce within 30 days for the procurement of business license. All indirect subsidiaries of the Company owned by Hong Kong Yi Tat, such as Yida (Fujian), Yida Tulou, Jintai Tourism were incorporated with the approval of local counterpart of Ministry of Commerce and has obtained business license under the PRC laws.
  13
 INDEX
  Administrative Measure on Foreign Invested Advertising Enterprises
  The Administrative Measure on Foreign-Invested Advertising Enterprises stipulates the procedure for the incorporation of Foreign-Invested Advertising Enterprises, including wholly foreign-owned advertising enterprise. According to above administration measure, the feasible study report shall be reviewed and approved by State Administration for Industry and Commerce and its local counterparts; and the articles of association of the company shall be reviewed and approved by Ministry of Commerce and its local counterparts. We are not subject to this PRC regulation because we do not have a foreign invested advertising enterprise. If, however, the Company incorporates a foreign-invested advertising enterprise in the future, such administration measure shall be applicable.  Fuyu, however, is neither a sino-foreign advertising JV nor an advertising WFOE.
  FETV is a television station or channel provider which is in charge of the operation of television programs.  Fuyu is only providing certain services for FETV internally under contract.
  Administration Rules for Foreign-invested Advertising Enterprises governs the administration of Foreign-Invested Advertising Enterprise. According to section 2 of Administration Rules for Foreign-Invested Advertising Enterprises, Foreign-Invested Advertising Enterprises only refers to sino-foreign equity joint venture advertising enterprise, sino-foreign cooperative joint venture advertising enterprise (“collectively sino-foreign advertising JV”) and wholly owned foreign advertising enterprise, i.e. advertising WFOE.  Fuyu is neither a sino-foreign advertising JV nor an advertising WFOE and it is a company owned by WFOE, Yida (Fujian) Tourism Group.
  According to Article 2 of Laws of the PRC on Foreign-Funded Enterprises (the “WFOE Law”), “foreign-funded enterprises” refers to those enterprises established in China by foreign investors, exclusively with their own capital, in accordance with relevant Chinese laws and such term does not include branches set up in China by foreign enterprises and other foreign economic organizations. Such enterprise, exclusively with capital of foreign investors, commonly is named as “Wholly Foreign-owned Enterprise, that is, “WFOE.” In addition, according to Article 8 of WFOE Law, an enterprise with foreign capital which meets the conditions for being considered a legal person under Chinese law shall be recognized as a Chinese legal person in accordance with the law. WFOE, therefore, is a Chinese legal person, rather than a foreign investor, as long as it meets the conditions for Chinese legal person. Yida (Fujian) Tourism Group is a limited liability company, a type of Chinese legal person, according to its business license and pursuant to Article 3 of PRC Company Law. Fuyu is currently owned by a Chinese legal person. It is therefore not qualified as a WFOE which is subject to WFOE Law. In addition, the business license of Fuyu shows that the type of enterprise is a limited liability company wholly owned by a legal person of wholly foreign owned enterprise, rather than owned by a legal person in Taiwan, Hong Kong or Macao or overseas as indicated in the business license of Yida (Fujian) Tourism Group.




Fuyu is neither a sino-foreign advertising JV nor an advertising WFOE.
 
 Prohibition by Local and Domestic Media Authorities
  On September 8, 2009, the State Administration for Radio, Film and Television issued Measures for the Administration of the Broadcasting of Radio and Television Commercials (“Broadcasting Measures”), which was effective on January 1, 2010. Broadcasting Measures expressly banned certain TV and radio advertisements, such as advertisement with form of news report; advertisement for tobacco products, advertisement for prescription drugs; advertisement for the drug, food, medical device or medical treatment for the treatment of tumor, live complaint, cypridopathy or for the improvement of sexual abilities; advertisement for name analysis, fate analysis, testing for pre-destination relationship, friends making service or other voice and online services; advertisements for dairy products with wording like “substitution for breast milk” and other advertisements banned by laws and regulations.
  All the advertisement that is arranged by the Company is and has been reviewed and approved by the head of FETV in order to broadcast on FETV.  This policy has been in effect prior to the implementation of these new Broadcasting Measures. FETV will refuse to broadcast if the advertisements are not complied with the Broadcasting Measure.
  Employees
  As of March 2012, we have a total of 476 full-time employees in our Creation Division, Management Division and Marketing Division, including 16 executive officers and senior management.
  ITEM 1A. RISK FACTORS.
  Because of the following factors, as well as other factors affecting the Company’s financial condition and operating results, past financial performance should not be considered to be a reliable indicator of future performance, and investors should not use historical trends to anticipate results or trends in future periods.
  Risks Relating to Our Business
  14
 INDEX
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IN ORDER TO INCREASE OUR REVENUES, WE BELIEVE WE MUST FURTHER EXPAND OUR BUSINESS OPERATIONS. WE CANNOT ASSURE YOU THAT OUR INTERNAL GROWTH STRATEGY WILL BE SUCCESSFUL WHICH MAY RESULT IN A NEGATIVE IMPACT ON OUR GROWTH, FINANCIAL CONDITION, RESULTS OF OPERATIONS AND CASH FLOW.
  In order to maximize the potential growth in our current and potential markets, we believe that we must further expand the scope of our services in the tourism and mass media industry. One of our strategies is to grow internally through increasing the customers we target for advertising campaigns and locations where we promote tourism by penetrating existing markets in the PRC and entering new geographic markets in PRC as well as other parts of Asia and globally.  However, many obstacles to this expansion exist, including, but not limited to, increased competition from similar businesses, international trade and tariff barriers, unexpected costs, costs associated with marketing efforts abroad and maintaining attractive foreign exchange ratios.  We cannot, therefore, assure you that we will be able to successfully overcome such obstacles and establish our services in any additional markets.  Our inability to implement this internal growth strategy successfully may have a negative impact on our growth, future financial condition, results of operations or cash flows.
  ●
IN ADDITION TO OUR INTERNAL GROWTH STRATEGY, WE MAY GROW THROUGH STRATEGIC ACQUISITIONS. WE CANNOT ASSURE YOU THAT OUR ACQUISITION GROWTH STRATEGY WILL BE SUCCESSFUL RESULTING IN OUR FAILURE TO MEET GROWTH AND REVENUE EXPECTATIONS.
  We also intend to pursue opportunities to acquire businesses in the PRC that are complementary or related in product lines and business structure to us. However, we may not be able to locate suitable acquisition candidates at prices that we consider appropriate or to finance acquisitions on terms that are satisfactory to us.  If we do identify an appropriate acquisition candidate, we may not be able to negotiate successfully the terms of an acquisition, or, if the acquisition occurs, integrate the acquired business into our existing business.  Acquisitions of businesses or other material operations may require debt financing or additional equity financing, resulting in leverage or dilution of ownership.  Integration of acquired business operations could disrupt our business by diverting management away from day-to-day operations. The difficulties of integration may be increased by the necessity of coordinating geographically dispersed organizations, integrating personnel with disparate business backgrounds and combining different corporate cultures.
  We also may not be able to maintain key employees or customers of an acquired business or realize cost efficiencies or synergies or other benefits we anticipated when selecting our acquisition candidates.  In addition, we may need to record write-downs from future impairments of intangible assets, which could reduce our future reported earnings.  At times, acquisition candidates may have liabilities or adverse operating issues that we fail to discover through due diligence prior to the acquisition.  In addition to the above, acquisitions in PRC, including state owned businesses, will be required to comply with laws of the PRC, to the extent applicable. There can be no assurance that any given proposed acquisition will be able to comply with PRC requirements, rules and/or regulations, or that we will successfully obtain governmental approvals which are necessary to consummate such acquisitions, to the extent required.  If our acquisition strategy is unsuccessful, we will not grow our operations and revenues at the rate that we anticipate.
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IN THE EVENT OF RAPID GROWTH OF OUR BUSINESS OPERATIONS, WE MAY EXPERIENCE A SIGNIFICANT STRAIN ON OUR MANAGEMENT AND OPERATIONAL INFRASTRUCTURE. OUR FAILURE TO MANAGE GROWTH WILL CAUSE A DISRUPTION OF OUR OPERATIONS RESULTING IN THE FAILURE TO GENERATE REVENUE.
  If we expand our business through successful implementation of our internal growth strategy and/or acquisition strategy, our management and our operational, accounting, and information infrastructure may experience a significant strain caused by such expansion.  In order to deal with the strain our anticipated business expansion could put on our resources, we will need to continue to improve our financial controls, operating procedures, and management information systems.  We will also need to effectively train, motivate, and manage our employees.  Our failure to manage our growth could disrupt our operations and ultimately prevent us from generating the revenues we expect.
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IF WE ARE NOT ABLE TO IMPLEMENT OUR STRATEGIES OR EXPAND OUR MEDIA OPERATIONS AND ACQUIRE ADDITIONAL TOURIST ATTRACTIONS, OUR BUSINESS OPERATIONS AND FINANCIAL PERFORMANCE MAY BE ADVERSELY AFFECTED.
  We expanded our business in 2010 by acquiring the operation rights of additional tourist attractions under various agreements, including the City of Caves, Yang-sheng Paradise, Ming Dynasty Entertainment World and FETV.  Since 2008, we have entered various agreements for Yongtai Beixi and Jiezhukou Lake, Hua’an Tulou, and the Great Golden Lake, and establishing collaboration with Railway Media Center to produce programs titled “Journey through China on the Train.” Our continuous business development plan is based on a further expansion of our media services and acquisition of additional tourist attractions. There is inherent risks and uncertainties involved throughout these stages of development.  There is no assurance that we will be successful in continuously expanding our media operations or acquiring additional tourist attractions, or that our strategies, even if implemented, will lead to the successful achievement of our objectives.  If we are not able to successfully implement these further development strategies, our business operations and financial performance may be adversely affected.
  15
 INDEX
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TOURISM AND MEDIA ARE COMPETITVE BUSINESS ENVIRONMENTS WHICH COULD ADVERSELY AFFECT OUR FINANCIAL PERFORMANCE.
  We operate in a competitive environment and have to compete with other tourist destinations and media outlets in order to attract visitors and customers.  In order to be successful in attracting visitors or customers we may be forced to lower prices or spend more money on advertising to continue to compete with our competitors.  These competitive measures may result in lower net income.
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ECONOMIC CRISIS OR TURMOIL, OR SUPPRESSION ON INDIVIDUAL RIGHTS MAY CAUSE A DOWNTURN IN CHINA’S TOURISM INDUSTRY.
  A downturn in the world economic markets, or just the Chinese economy, may have a negative impact on our business.  Consumers with a lack of disposable incomes may decide not to vacation or travel to our tourism destinations, which would negatively impact our business.  Additionally, the perceived suppression of individual rights by the Chinese government may deter tourists from visiting China, which may cause a decline in visitors to our attraction.
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OUR BUSINESS MAY BE DIRECTLY AND INDIRECTLY AFFECTED BY UNFAVORABLE WEATHER CONDITIONS OR NATURAL DISASTERS THAT REDUCE THE VISITS OF OUR RESORTS AND DESTINATIONS
  Poor or unusual weather conditions, can significantly affect the visits of the tourists to our resorts and destinations. Insufficient levels of rain or drought can cause significant affect to our tourist destination. Temperatures outside normal ranges can also reduce tourists’ volume. Natural calamities such as regional floods, hurricanes, earthquakes, tsunamis, or other storms, and droughts can have significant negative effects on our tourism business. In the second half of 2010, we had to close part of our tourist destination in Great Golden Lake due to flooding, as a result we had reduced revenue.
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THE SLOW RECOVERY OF THE GLOBAL ECONOMIC CRISIS COULD AFFECT THE OVERALL AVAILABILITY AND COST OF EXTERNAL FINANCING FOR OUR OPERATIONS.
  The slow recovery of the global financial markets from the global economic crisis and turmoil may adversely impact our business, the business and financial condition of our customers and the business of potential investors from whom we expect to generate our potential sources of capital financing. Presently it is unclear to what extent the economic stimulus measures and other actions taken or contemplated by the Chinese governments and other governments throughout the world will mitigate the effects of the negative impact caused by the economic turmoil on our industry and other industries that affect our business. Although these conditions have not presently impaired our ability to access credit markets and finance our operations, the impact of the current crisis on our ability to obtain capital financing in the future, and the cost and terms of same, is unclear.
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WE HAVE NOT YET CONTRACTED WITH LOCAL GOVERNMENTS AND MAY BE UNABLE TO CONTINUE OUR LAND USE RIGHTS FROM THE GOVERNMENT FOR OUR TOURISM DEVELOPMENT AS WE CURRENTLY DO WHICH COULD NEGATIVELY IMPACT OUR ABILITY TO CONTINUE TO OPERATE OUR TOURIST DESTINATIONS
  Our business and our revenue depend on the operation of our tourist destinations, which in turn depends on our ability to acquire and continue to use land the land from the PRC government whether by lease or by land use right. We have obtained certain land use rights for Yunding Park, Yang-sheng Paradise, Ming Dynasty Entertainment World, and City of Caves.  We currently have operated 3 tourist destinations: (i) Great Golden Lake, (ii) Yunding Park, and (iii) Hua’an Tulou. For the 3 operating tourist destinations, with the exception of the Yunding Park, we have not yet entered into contracts with local governments for the land-use rights for Great Golden Lake and Hua’an Tulou. With respect to the Yunding Park, our land use rights include 130,513 square meters for scenic views, hotels and restaurant and entertainment. The term is for 40 years beginning on August 9, 2010 and ending on August 9, 2050 for a total payment of 12,805,000RMB (or approximately $2,033,000). A copy of the State-Owned Land Use Rights Agreement is attached hereto as Exhibit 10.26. With respect to the Great Golden Lake and Tulou, we have obtained the management and operating rights on the land, although we have not obtained the land-use rights. It is not required to obtain the land-use rights in order to operate on the land. The Company’s 3 new projects, Ming Dynasty Entertainment World, Yang-sheng Paradise and City of Caves are currently under construction. We have already obtained certain land use rights for these 3 new projects, and the Company will continue to obtain additional land-use rights under the agreements entered into with local governments for all of our properties.
 Pursuant to PRC laws, the assignment of land-use rights is the responsibility of local government. The size, location, purpose of usage, term and other conditions under assignment of land use right shall be planned by local land administration departments in conjunction with a number of governmental administrative departments such as urban planning, construction and the housing administration. In addition, such plan shall be submitted to the proper authorities for approval according to authorizations granted and stipulated by PRC State Council. After that, the local land administration departments may implement the arrangements for the assignment of land use right. If, however, at any time the local governments seek to terminate our land-use rights, we may be unable to operate our tourist destinations and will be forced to close down our attractions.
  16
 INDEX
  The maximum term of land use right usually  is decided by its purpose of usage, e.g. 70 years term of land for residence , 50 years term of land for industrial use,  40 years term of land for commerce, tourism and recreation, 50 years term of land for comprehensive purpose.  Such term commonly will be decided by the government.
  The process for obtaining the land-use right is lengthy and we have not completed it for any of the locations that we operate except for the land use rights that we obtained from Yongtai County Municipal Bureau of Land and Resources.  Our agreements with the local PRC governments who have not yet granted us land-use rights does not set forth all details for assignment of land use right and most of the lands are subject to governmental internal procedure.
  Although we believe that the local PRC government will not terminate our right to manage the land before we are able to obtain land-use agreements with each property, we cannot assure you that the local government will continue to honor the understandings that we have with each local PRC government. We are not able to own land in the PRC, we can only lease it from the PRC government. At the end of any land-use rights agreements with local PRC governments, the land will return to the government and we will not receive any reimbursement or reward.
  If we are unsuccessful in obtaining land-use rights for each property, it is possible that the local PRC government may require us to leave the property and we would lose all rights to the construction, buildings and improvements we have made on the land. However, not having land-use rights does not prohibit us from operating our tourism destinations at those locations. We can still obtain the right to manage and operate on the land.
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WE MAY NOT BE ABLE TO CONTINUALLY MANAGE AND OPERATE OUR TOURISM DEVELOPMENT AND THE TERMINATION OF REVENUE SHARING AGREEMENTS WILL NEGATIVELY IMPACT OUR FINANCIAL CONDITIONS AND REVENUES.
  If the land use agreements are terminated, then we will have to cease our tourism business if we cannot renew the agreements. According to tourism development and revenue sharing agreement in respect to Great Golden Lake Resort, the agreement may be terminated before its expiration in case that (i) the purpose of contract is failed due to the material breach of defaulting party or (ii) the occurrence of force majeure. When any above events for termination occurs, the contractual parties shall terminate agreement through friendly negotiation or by initiating a legal proceeding. The termination of revenue sharing agreements will negatively impact our revenues and results of operations.
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A FAILURE TO EXPAND OUR MEDIA OPERATIONS OR GOVERNMENT REGULATIONS RESTRICTING THE MEDIA INDUSTRY IN CHINA COULD HAVE A NEGATIVE IMPACT ON OUR OPERATIONS.
  If our advertising and media operations fail to grow, this would have a negative impact on our future operating results.  Further, government regulations, if enacted, restricting media content would negatively affect our media operations.  Any restriction on media content would limit the potential amount of customers able to use our media services and negatively impact our financial results. Recently, the local government and domestic media authorities has prohibited specialized channels, such as FETV, from broadcasting shopping programs, mini ads and certain medical advertisements which constituted approximately 30% of our advertising revenues. On September 8, 2009, the State Administration for Radio, Film and Television issued Measures for the Administration of the Broadcasting of Radio and Television Commercials (“PRC Broadcasting Measures”), which is effective on January 1, 2010. PRC Broadcasting Measures expressly bans certain TV and radio advertisements, such as advertisement with form of news report; advertisement for tobacco products, advertisement for prescription drugs; advertisement for the drug, food, medical device or medical treatment for the treatment of tumor, live complaint, cypridopathy or for the improvement of sexual abilities; advertisement for name analysis, fate analysis, testing for pre-destination relationship, friends making service or other voice and online services; advertisements for dairy products with wording like “substitution for breast milk” and other advertisements banned by laws and regulations. We do expect the government restrictions to have a negative impact on our ability to sell advertising space on our television channel which would have a negative impact on our gross revenue. We have already experienced some clients refraining from advertising with us due to the PRC Broadcasting Measure and other clients withdrew the banned ad and replaced it with regular advertisements. It is difficult for us to be able to quantify the impact on our operations, however, we do expect our advertising sales to decrease because of this new regulation.
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WE DEPEND ON OUR KEY MANAGEMENT PERSONNEL AND THE LOSS OF THEIR SERVICES COULD ADVERSELY AFFECT OUR BUSINESS.
  We place substantial reliance upon the efforts and abilities of our executive officers, Mr. Minhua Chen, our Chairman and Chief Executive Officer and Ms. Yanling Fan, our Vice President of Operations.  The loss of the services of any of our executive officers could have a material adverse effect on our business, operations, revenues or prospects.  We do not maintain key man life insurance on the lives of these individuals. We may not be able to attract or retain qualified management on acceptable terms in the future due to the intense competition for qualified personnel in our industry and as a result, our business could be adversely affected.
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WE REQUIRE VARIOUS LICENSES TO OPERATE OUR BUSINESS, AND THE LOSS OF OR FAILURE TO RENEW ANY OR ALL OF THESE LICENSES COULD REQUIRE US TO SUSPEND SOME OR ALL OF OUR OPERATIONS. ALSO, THE LOSS OR MISAPPROPRIATION OF THE CORPORATE CHOPS, SEALS, OR OTHER CONTROLLING NONTANGIBLE ASSETS OF OUR PRC SUBSIDIARIES MIGHT DELAY OR DISRUPT OUR BUSINESS AND ADVERSELY AFFECT OUR REVENUES.
 In accordance with PRC laws and regulations, we are required to maintain various licenses in order to operate our business. The loss of or failure to renew our business licenses could require us to temporarily or permanently suspend some or all of our operations. We also keep the business licenses, corporate seal s, chops or other controlling nontangible assets under the Company’s Administration Department. Our staff in the Administration Department are responsible to do the document recording and for the use of the corporate seals. The corporate seals and licenses can only be used based on management’s written approval. If we lose the business license, corporate seal and other related documents, the Company may have to file with local government for re-issuance of such documents which could delay or disrupt our operations and adversely affect our revenues and profitability.
  17
 INDEX
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WE MAY NEVER PAY ANY DIVIDENDS TO SHAREHOLDERS AND WE ARE A HOLDING COMPANY THAT IS DEPENDENT ON RECEIVING DIVIDENDS OR OTHER DISTRIBUTIONS FROM OUR OPERATING SUBSIDIARIES AND VARIABLE INTEREST ENTITIES, OF WHICH THE OPERATING SUBSIDIAIRIES ARE LOCATED IN THE PRC.
  We have never paid any dividends.  Our board of directors does not intend to distribute dividends in the near future.  The declaration, payment and amount of any future dividends will be made at the discretion of the board of directors, and will depend upon, among other things, the results of our operations, cash flows and financial condition, operating and capital requirements, and other factors as the board of directors considers relevant.  There is no assurance that future dividends will be paid, and, if dividends are paid, there is no assurance with respect to the amount of any such dividend.
  We are a holding company and our operating subsidiaries and variable interest entity are entirely located and operate in the People’s Republic of China. There are significant restrictions on dividends and distributions from companies located and operating in the People’s Republic of China. Foreign exchange is regulated as well. The government needs to approve any dividends, payments or distributions to any offshore entity or company not located in the People’s Republic of China. In the last two fiscal years, we have not received any dividends, payments or distributions from any subsidiary or VIE located or operating in the People’s Republic of China.
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WE DO NOT CARRY ANY BUSINESS INTERRUPTION INSURANCE, PRODUCT LIABILITY OR RECALL INSURANCE OR THIRD-PARTY LIABILITY INSURANCE.
  Operation of our business and facilities involves many risks, including natural disasters, labor disturbances, business interruptions, property damage, personal injury and death.  We do not carry any business interruption insurance or third-party liability insurance for our business to cover claims in respect of personal injury or property or environmental damage arising from accidents on our property or relating to our operations. Therefore, we may not have insurance coverage sufficient to cover all risks associated with our business. As a result, we may be required to pay for financial and other losses, damages and liabilities, including those caused by natural disasters and other events beyond our control, out of our own funds, which could have a material adverse effect on our business, financial condition and results of operations.
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MANAGEMENT EXERCISES SIGNIFICANT CONTROL OVER MATTERS REQUIRING SHAREHOLDER APPROVAL WHICH MAY RESULT IN THE DELAY OR PREVENTION OF A CHANGE IN OUR CONTROL.
  Mr. Minhua Chen, our Chairman and Chief Executive Officer, through his common stock ownership, currently has voting power equal to approximately 28.81% of our voting securities. Ms. Yanling Fan, our Vice President of Operations and the spouse of Mr. Minhua Chen, through her common stock ownership, currently has voting power equal to approximately 28.70% of our voting securities.  Mr. Minhua Chen and Ms. Yanling Fan are married and have combined voting power in our Company equal to approximately 57.51% of our voting securities. As a result, management through such stock ownership exercises significant control over all matters requiring shareholder approval, including the election of directors and approval of significant corporate transactions.  This concentration of ownership in management may also have the effect of delaying or preventing a change in control of us that may be otherwise viewed as beneficial by shareholders other than management.
 
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WE MAY INCUR SIGNIFICANT COSTS TO ENSURE COMPLIANCE WITH UNITED STATES CORPORATE GOVERNANCE AND ACCOUNTING REQUIREMENTS.
  We may incur significant costs associated with our public company reporting requirements, costs associated with newly applicable corporate governance requirements, including requirements under the Sarbanes-Oxley Act of 2002 and other rules implemented by the Securities and Exchange Commission. We expect all of these applicable rules and regulations to significantly increase our legal and financial compliance costs and to make some activities more time consuming and costly.  We also expect that these applicable rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage.  As a result, it may be more difficult for us to attract and retain qualified individuals to serve on our board of directors or as executive officers.  We are currently evaluating and monitoring developments with respect to these newly applicable rules, and we cannot predict or estimate the amount of additional costs we may incur or the timing of such costs. Even though we have been a reporting company since 1999, this risk applies to us because we completed a share exchange with Keenway Limited in 2007 whereby a Chinese operating company became our wholly owned subsidiary.  This Chinese operating company is newly reporting and we are adjusting to the increased disclosure requirements for us to comply with corporate governance and accounting requirements.
  In our experience, we expect to incur approximately $157,000 per year in additional costs to ensure compliance with all corporate governance and accounting requirements. These costs consist of: (i) internal control and U.S. GAAP reporting consulting services: $97,000 and (ii) Legal fees: $60,000.
  18
 INDEX
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IF WE FAIL TO MAINTAIN AN EFFECTIVE SYSTEM OF INTERNAL CONTROL OVER FINANCIAL REPORTING, OUR ABILITY TO ACCURATELY AND TIMELY REPORT OUR FINANCIAL RESULTS OR PREVENT FRAUD MAY BE ADVERSELY AFFECTED AND INVESTOR CONFIDENCE AND THE MARKET PRICE OF OUR COMMON SHARES MAY BE ADVERSELY IMPACTED.
 
 As directed by Section 404 of the Sarbanes-Oxley Act of 2002, or SOX 404, the Securities and Exchange Commission adopted rules requiring public companies to include a report of management on the company’s internal controls over financial reporting in their annual reports, including Form 10-K. Our management may conclude that our internal controls over our financial reporting are not effective.  If our management concludes that our internal controls over financial reporting are not effective, it might result in an adverse reaction in the financial marketplace due to a loss of investor confidence in the reliability of such financial statements.
  On May 20, 2010, BDO Li Xin Da Hua was appointed as our independent auditors but never completed any interim review of our financial statements or issued any audit report on our financial statement disclosure, or auditing scope or procedure and subsequently resigned on August 8, 2010. The reason for BDO Li Xin Da Hua’s resignation was that they identified that the Company lacked a good system of internal controls, such as inadequate documentation for certain transactions and lack of competent and well trained personnel to furnish U.S. GAAP based reporting documents to be filed.
 We have taken or plan to take the following steps to cure the lacks of internal controls:
 (i)
we hired a financial expert to chair our audit committee who has 14 years experience in financial industry in the U.S. The chair of audit committee oversees the financial reporting process closely;(ii)
our chief financial officer has strong financial background with more than 10 years experience, and he involved closely on the review function of our transactions; and
 (iii)
we also hired a U.S. GAAP consulting firm to help the Company to draft the financial statements in accordance with the U.S. GAAP and SEC requirements. The consulting firm also helped us to set up our internal controls and document our internal control policy and procedures as follows:-
perform assessment of the design and operating effectiveness of internal controls over financial reporting;
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perform walkthrough and document assessment in Risk Control Matrix;-
provide remediation suggestions on deficiencies found;
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develop a testing plan;-
perform testing of key controls; and
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preparation of written accounting policy manual and procedures.
  Although we have rectified the lack of internal controls issue and hired Audit Prep Limited as a measure to improve our internal controls and U.S. GAAP reporting, it is possible that our current auditor may conclude that our controls over financial reporting are not effective which could result in an adverse reaction in the financial marketplace due to a loss of investor confidence in the reliability of such financial statements.
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MATERIAL WEAKNESSES IN OUR INTERNAL CONTROLS AND FINANCIAL REPORTING AND OUR LACK OF A CHIEF FINANCIAL OFFICER WITH SUFFICIENT U.S.GAAP EXPERIENCE MAY LIMIT OUR ABILITY TO PREVENT OR DETECT FINANCIAL MISSTATEMENTS OR OMISSIONS. AS A RESULT, OUR FINANCIAL REPORTS MAY NOT BE IN COMPLIANCE WITH U.S. GAAP. ANY MATERIAL WEAKNESS, MISSTATEMENT OR OMISSION IN OUR FINANCIAL STATEMENTS WILL NEGATIVELY AFFECT THE MARKET AND THE PRICE OF OUR STOCK WHICH COULD RESULT IN SIGNIFICANT LOSS TO OUR INVESTORS.
  None of the members of our current management has experience managing and operating a public company, and they rely in many instances on the professional experience and advice of third parties. While we are obligated to hire a qualified chief financial officer to enable us to satisfy our reporting obligations as a U.S. public company, we do not have a chief financial officer with any significant U.S. GAAP experience presently.Although we are actively seeking such a chief financial officer, qualified individuals are often difficult to find, or the individual may not have all of the qualifications that we require. Therefore, we may, in turn, experience “weakness” and potential problems in implementing and maintaining adequate internal controls as required under Section 404 of the “Sarbanes-Oxley” Act of 2002. This “weakness” also includes a deficiency, or combination of deficiencies, in internal controls over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. If we fail to achieve and maintain the adequacy of our internal controls, as such requirements are modified, supplemented or amended from time to time, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controls over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002.  Moreover, effective internal controls, particularly those related to revenue recognition, are necessary for us to produce reliable financial reports and are important to help prevent financial fraud.  If we cannot provide reliable financial reports or prevent fraud, our business and operating results could be harmed, investors could lose confidence in our reported financial information, and the trading price of our common stock, if a market ever develops, could drop significantly.
  Pursuant to Section 404 of the Sarbanes-Oxley Act, we are required to include in our annual reports our assessment of the effectiveness of our internal control over financial reporting as of the end of our fiscal years.  We have determined that our internal controls and procedures are not effective due to the lack of U.S. GAAP experience from our management.
 ●
WE MAY HAVE DIFFICULTY RAISING NECESSARY CAPITAL TO FUND OPERATIONS AS A RESULT OF MARKET PRICE VOLATILITY FOR OUR SHARES OF COMMON STOCK.
  In recent years, the securities markets in the United States have experienced a high level of price and volume volatility, and the market price of securities of many companies have experienced wide fluctuations that have not necessarily been related to the operations, performances, underlying asset values or prospects of such companies.  For these reasons, our shares of common stock can also be expected to be subject to volatility resulting from purely market forces over which we will have no control.  If our business development plans are successful, we may require additional financing to continue to develop and exploit existing and new products and services related to our industries and to expand into new markets.  The exploitation of our services may, therefore, be dependent upon our ability to obtain financing through debt and equity or other means.
  19
 INDEX
 ●
WE HAVE A CONTRACTUAL RELATIONSHIP WITH FUJIAN JIAOGUANG MEDIA WHICH MAY BE IN NON-COMPLIANCE WITH PRC LAWS AND DOES NOT PROVIDE THE SAME OPERATIONAL CONTROL AS A DIRECT EQUITY INTEREST.
  Our contractual relationship with Fujian Jiaoguang Media was structured as a contractual relationship as opposed to a direct equity interest in order to comply with PRC law. We have received a PRC legal counsel attesting that this structure is in compliance with the PRC law.  However, the PRC law may be subject to change or the government may review the structure and determine that this contractual relationship is not in compliance with PRC laws and force the termination of this relationship.  Additionally, the contractual relationship between us and Fujian Jiaoguang Media does not provide us with the same operational control as a direct equity interest.  Therefore, we are subject to the risks associated with contractual rights as opposed to owning the company.  Such risks could include breach of contract or failure to honor the terms of the contract. In the event that we are not unable to maintain effective control of this entity, we would not be able to continue to consolidate our financial results. However, these risks are mitigated by the fact that the shareholders of Fujian Jiaoguang Media are Chairman Minhua Chen and Ms. Yanling Fan who are also our majority shareholders.
 Fujian Jiaoguang Media has transferred all its operations to our wholly-owned subsidiaries and no longer contributes any revenue to us. All the revenue we have realized from this entity is not realized directly from our wholly-owned subsidiary. Although Fujian Jiaoguang is no longer generating revenues, it continues to incur expenses to maintain its business status as a corporate entity.  Fujiang Jiaoguang has current assets and liabilities because it is acting as an intercompany to transfer funds from and to the Company’s directly-owned subsidiaries, which resulted in part of the intercompany receivables and payables. Fujian Jiaoguang is a variable interest entity subject to consolidation into the Company and fully controlled by the Company’s management.  Therefore, expenses incurred at Fujian Jiaoguang had been included in the Company’s audited consolidated statement of income and comprehensive income. As a result of Fujian Jiaoguang being a variable interest entity instead of a directly owned subsidiary, you may face increased risks associated with the possession, security and control over the chops for this entity and control over the individuals who may have access to its bank accounts.
  ●
THE FAILURE TO EXTEND OUR EXCLUSIVE AGREEMENT WITH FUIJAN EDUCATION MEDIA, WHICH ALLOWS US TO OPERATE THE FUJIAN TELEVISION STATION (FETV), COULD ADVERSELY AFFECT OUR REVENUES.
  On August 1, 2010, Fuyu, our wholly-owned subsidiary, entered into an agreement with Fujian Education Media, a wholly state-owned company organized by the Fujian Education TV Station under the laws of the People’s Republic of China, pursuant to which Fujian Education Media granted to us a five year exclusive management right to operate the FETV channel.  The term of the agreement is from August 1, 2010 to July 31, 2015.  At the end of the first three years of the agreement, we and Fujian Education Media are obligated to conduct a full performance review of our cooperation under the agreement, and evaluation of our operating revenue and potential for future operating results. If we and Fujian Education mutually agree that there is no event of violation or breach of contract, the Agreement shall be extended for an additional two years. However, if our operating revenue continually declines, then it is possible that Fujian Education Media may not renew the contract with us. There are no restrictions on Fujian Education Media’s ability to choose not to renew the contract and there is no assurance that the Agreement will be extended for an additional two years until 2015.  If we are unable extend the exclusive agreement our financial condition and results of operations could suffer.
  Risks Relating to the People's Republic of China
  ●
SUBSTANTIALLY ALL OF OUR OPERATING ASSETS ARE LOCATED IN CHINA AND SUBSTANTIALLY ALL OF OUR REVENUE WILL BE DERIVED FROM OUR OPERATIONS IN CHINA SO OUR BUSINESS, RESULTS OF OPERATIONS AND PROSPECTS ARE SUBJECT TO THE ECONOMIC, POLITICAL AND LEGAL POLICIES, DEVELOPMENTS AND CONDITIONS IN CHINA.
  The PRC’s economic, political and social conditions, as well as government policies, could impair our business.  The PRC economy differs from the economies of most developed countries in many respects.  China’s GDP has grown consistently since 1978 (National Bureau of Statistics of China).  However, we cannot assure you that such growth will be sustained in the future. If, in the future, China’s economy experiences a downturn or grows at a slower rate than expected, there may be less demand for spending in certain industries. A decrease in demand for spending in certain industries could impair our ability to remain profitable.  The PRC’s economic growth has been uneven, both geographically and among various sectors of the economy. The PRC government has implemented various measures to encourage economic growth and guide the allocation of resources. Some of these measures benefit the overall PRC economy, but may have a negative effect on us.  For example, our financial condition and results of operations may be hindered by PRC government control over capital investments or changes in tax regulations.
  The PRC economy has been transitioning from a planned economy to a more market-oriented economy. Although in recent years the PRC government has implemented measures emphasizing the use of market forces for economic reform, the reduction of state ownership of productive assets and the establishment of sound corporate governance in business enterprises, a substantial portion of productive assets in China is still owned by the PRC government. In addition, the PRC government continues to play a significant role in regulating industry development by imposing industrial policies. It also exercises significant control over PRC economic growth through the allocation of resources, controlling payment of foreign currency-denominated obligations, setting monetary policy and providing preferential treatment to particular industries or companies.
  ●
IF THE MINISTRY OF FINANCE AND COMMERCE, OR MOFCOM, CHINA SECURITIES REGULATORY COMMISSION, OR CSRC, OR ANOTHER PRC REGULATORY AGENCY, DETERMINES THAT MOFCOM AND CSRC APPROVAL OF OUR MERGER WAS REQUIRED OR IF OTHER REGULATORY OBLIGATIONS ARE IMPOSED UPON US, WE MAY INCUR SANCTIONS, PENALTIES OR ADDITIONAL COSTS WHICH WOULD DAMAGE OUR BUSINESS.
  On August 8, 2006, six PRC regulatory agencies, including the MOFCOM and the CSRC, promulgated the Rules on Acquisition of Domestic Enterprises by Foreign Investors, or the M&A Rules, a new regulation with respect to the mergers and acquisitions of domestic enterprises by foreign investors that became effective on September 8, 2006.  Article 11 of the M&A Rules requires PRC companies, enterprises or natural persons to obtain MOFCOM approval in order to effectuate mergers or acquisitions between PRC companies and foreign companies legally established or controlled by such PRC companies, enterprises or natural persons.  Article 40 of the M&A Rules requires that an offshore special purpose vehicle formed for overseas listing purposes and controlled directly or indirectly by PRC companies or individuals should obtain the approval of the CSRC prior to the listing and trading of such offshore special purpose vehicle’s securities on an overseas stock exchange, especially in the event that the offshore special purpose vehicle acquires shares of or equity interests in the PRC companies in exchange for the shares of offshore companies.  On September 21, 2006, the CSRC published on its official website procedures and filing requirements for offshore special purpose vehicles seeking CSRC approval of their overseas listings.
  20
 INDEX
  On November 19, 2007, we completed a merger transaction pursuant to a share exchange and stock purchase agreement, which resulted in our current ownership and corporate structure.  We believe, based on the opinion of our PRC legal counsel, Allbright Law Offices, that MOFCOM and CSRC approvals were not required for our merger transaction or for the listing and trading of our securities on a trading market because we are not an offshore special purpose vehicle that is directly or indirectly controlled by PRC companies or individuals.  Although the merger and acquisition regulations provide specific requirements and procedures, there are still many ambiguities in the meaning of many provisions.  Further regulations are anticipated in the future, but until there has been clarification either by pronouncements, regulation or practice, there is some uncertainty in the scope of the regulations and the regulators have wide latitude in the enforcement of the regulations and approval of transactions. If the MOFCOM, CSRC or another PRC regulatory agency subsequently determines that the MOFCOM and CSRC approvals were required, we may face sanctions by the MOFCOM, CSRC or another PRC regulatory agency.  If this happens, these regulatory agencies may impose fines and penalties on our operations in China, limit our operating privileges in China, delay or restrict the repatriation of proceeds into China, restrict or prohibit payment or remittance of dividends paid by Fujian Jintai Tourism, or take other actions that could damage our business, financial condition, results of operations, reputation and prospects, as well as the trading price of our securities. It is uncertain at this time to determine what, if any, fines or penalties would be imposed for failure to obtain the necessary approvals because Circular 10 does not expressly provide any provision with respect to fines or penalties and there has been no information provided or published precedent established to indicate what the fines or penalties would be.
  Circular 10 mainly governs the foreign investors acquisition and merger of Chinese domestic enterprises, including (a) the acquisition of the equities of PRC domestic non-foreign funded enterprises by foreign investors; (b) the subscription of the increased capital of a PRC domestic company by foreign investors; and (c) the incorporation of a foreign-funded enterprise by foreign investors by purchasing the operating assets of a PRC domestic enterprise. We do not believe that Circular 10 is applicable to us because: (i) Fujian Jintai Tourism was incorporated as foreign-funded enterprise on October 19, 2011, with the approval of local Department of Commerce and Administration for Industry and Commerce. There was no acquisition of the equities or assets of a “PRC domestic company” as such term is defined under the new M&A Rules; (ii) Both Fujian Jintai Tourism and Hong Kong Yi Tat were incorporated prior to the implementation of Circular 10; (iii) Hong Kong Yi Tat was incorporated for the purpose of operating or holding the equity of Fujian Jintai Tourism; (iv) there is no provision in Circular 10 that clearly classifies contractual arrangements as a type of transaction subject to regulation; and (v) CSRC currently has not issued any definitive rule or interpretation concerning whether overseas share exchange like the Company’s are subject to this regulation.
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THE NEW M&A REGULATIONS ESTABLISH MORE COMPLEX PROCEDURES FOR SOME ACQUISITIONS OF CHINESE COMPANIES BY FOREIGN INVESTORS, WHICH COULD MAKE IT MORE DIFFICULT FOR US TO PURSUE GROWTH THROUGH ACQUISITION IN CHINA.
  The New M&A Regulations establish additional procedures and requirements that could make some acquisitions of PRC companies by foreign investors, such as ours, more time-consuming and complex, including requirements in some instances that the approval of the Ministry of Commerce shall be required for transactions involving the shares of an offshore listed company being used as the acquisition consideration by foreign investors.  In the future, we may grow our business in part by acquiring complementary businesses.  Complying with the requirements of the New M&A Regulations to complete such transactions could be time-consuming, and any required approval processes, including obtaining approval from the Ministry of Commerce, may delay or inhibit our ability to complete such transactions, which could affect our ability to expand our business or maintain our market share.
  ●
IF THE PRC IMPOSES RESTRICTIONS DESIGNED TO REDUCE INFLATION, FUTURE ECONOMIC GROWTH IN THE PRC COULD BE SEVERELY CURTAILED WHICH COULD HURT OUR BUSINESS AND PROFITABILITY.
  While the economy of the PRC has experienced rapid growth, this growth has been uneven among various sectors of the economy and in different geographical areas of the country.  Rapid economic growth often can lead to growth in the supply of money and rising inflation.  In order to control inflation in the past, the PRC has imposed controls on bank credits, limits on loans for fixed assets and restrictions on state bank lending.  Imposition of similar restrictions may lead to a slowing of economic growth, a decrease in travel among the population and less visitors to our tourist attractions.
 
 ●
FLUCTUATIONS IN EXCHANGE RATES COULD HARM OUR BUSINESS AND THE VALUE OF OUR SECURITIES.
  The value of our ordinary shares will be indirectly affected by the foreign exchange rate between U.S. dollars and RMB and between those currencies and other currencies in which our sales may be denominated. Because substantially all of our earnings and cash assets are denominated in RMB, fluctuations in the exchange rate between the U.S. dollar and the RMB will affect the relative purchasing power of these proceeds, our balance sheet and our earnings per share in U.S. dollars.  In addition, appreciation or depreciation in the value of the RMB relative to the U.S. dollar would affect our financial results reported in U.S. dollar terms without giving effect to any underlying change in our business or results of operations.  Fluctuations in the exchange rate will also affect the relative value of any dividend we issue that will be exchanged into U.S. dollars as well as earnings from, and the value of, any U.S. dollar-denominated investments we make in the future.  Since July 2005, the RMB has not been pegged to the U.S. dollar. Although the People’s Bank of China regularly intervenes in the foreign exchange market to prevent significant short-term fluctuations in the exchange rate, the RMB may appreciate or depreciate significantly in value against the U.S. dollar in the medium to long term. Moreover, it is possible that in the future PRC authorities may lift restrictions on fluctuations in the RMB exchange rate and lessen intervention in the foreign exchange market.
  21
 INDEX
  Very limited hedging transactions are available in China to reduce our exposure to exchange rate fluctuations. To date, we have not entered into any hedging transactions. While we may enter into hedging transactions in the future, the availability and effectiveness of these transactions may be limited, and we may not be able to successfully hedge our exposure at all. In addition, our foreign currency exchange losses may be magnified by PRC exchange control regulations that restrict our ability to convert RMB into foreign currencies.
  ●
EXCHANGE CONTROLS THAT EXIST IN THE PRC MAY LIMIT OUR ABILITY TO UTILIZE OUR CASH FLOW EFFECTIVELY.
  We are subject to the PRC’s rules and regulations on currency conversion.  In the PRC, the State Administration for Foreign Exchange, or SAFE, regulates the conversion between Renminbi and foreign currencies. Currently, foreign investment enterprises, or FIEs, are required to apply to the SAFE for “Foreign Exchange Registration Certificates for FIEs.” As a result of our ownership of Fujian Jintai Tourism, Fujian Jintai Tourism is a FIE and is only able to use the proceeds from any foreign currency-dominated capital for the daily operation of the subsidiary and for the construction of the tourism destinations or for the purpose that is described on the loan agreement documentation.  With such registration certificates, which need to be renewed annually, FIEs are allowed to open foreign currency accounts including a “current account” and “capital account.” Currency conversion within the scope of the “current account,” such as remittance of foreign currencies for payment of dividends, can be effected without requiring the approval of the SAFE.  However, conversion of currency in the “capital account,” including capital items such as direct foreign investment, loans and securities, still require approval of the SAFE. Further, any capital contributions to Fujian Jintai Tourism by its offshore shareholder must be approved by the Ministry of Commerce in China or its local counterpart. We have obtained such approval but cannot assure you that the PRC regulatory authorities will not impose further restrictions on the convertibility of the Renminbi or revoke our government approval at any time in the future. Any future restrictions on currency exchanges may limit our ability to use our cash flow for the distribution of dividends to our shareholders or to fund operations it may have outside of the PRC.
  In August 2008, SAFE promulgated Circular 142, a notice regulating the conversion by FIEs of foreign currency into Renminbi by restricting how the converted Renminbi may be used.  Circular 142 requires that Renminbi converted from the foreign currency-dominated capital of a FIE may only be used for purposes within the business scope approved by the applicable government authority and may not be used for equity investments within the PRC unless specifically provided for otherwise.  In addition, SAFE strengthened its oversight over the flow and use of Renminbi funds converted from the foreign currency-dominated capital of a FIE.  The use of such Renminbi may not be changed without approval from SAFE, and may not be used to repay Renminbi loans if the proceeds of such loans have not yet been used.  Violations of Circular 142 may result in severe penalties, including substantial fines as set forth in the SAFE rules. Accordingly, Fujian Jintai Tourism is only able to use the proceeds from any foreign currency-dominated capital for the daily operation of the subsidiary and for the construction of the tourism destinations or for the purpose that is described on the loan agreement documentation.
  ●
PRC REGULATION OF LOANS AND DIRECT INVESTMENT BY OFFSHORE HOLDING COMPANIES TO PRC ENTITIES MAY DELAY OR PREVENT US FROM USING THE CASH FLOWS TO MAKE LOANS OR ADDITIONAL CAPITAL CONTRIBUTION TO OUR PRC OPERATING SUBSIDIARIES, WHICH COULD MATERIALLY AND ADVERSELY AFFECT OUR LIQUIDITY AND OUR ABILITY TO FUND AND EXPAND OUR BUSINESS.
  In utilizing our cash flow, we are permitted under PRC laws and regulations to provide funding to the PRC subsidiaries only through loans or capital contributions, and to our affiliated PRC entities only through loans, in each case subject to satisfaction of applicable government registration and approval requirements. We cannot assure you that we will be able to obtain these government registrations or approvals on a timely basis, if at all. In the event that we are prevented from using the funds to fund the operation of our PRC subsidiaries, we will use our best efforts to obtain the required approvals, however, we may not be able to utilize the funds in the event that the PRC laws and regulations do not permit it.
  In utilizing our cash flow, we, as an offshore holding company of our PRC operating subsidiaries, may use the cash flow to make loans to our PRC subsidiaries, or make additional capital contributions to our PRC subsidiaries. Any loans to our PRC subsidiaries are subject to PRC regulations and approvals. For example, loans by us to finance the activities of our PRC subsidiary, which is a foreign-invested enterprise, cannot exceed statutory limits and must be registered with SAFE or its local counterpart, and the accumulative amount of foreign currency loans will not exceed the difference between the total investment and the registered capital of our PRC subsidiary, which is a foreign-invested enterprise.
  22
 INDEX
  We may also decide to finance our PRC subsidiary by means of capital contributions. Any additional capital contributions to our PRC subsidiaries, which are foreign-invested enterprises, must be approved by the MOFCOM.
  We cannot assure you that we can obtain the necessary government registrations or approvals on a timely basis, if at all, with respect to future loans or capital contributions by us to our PRC subsidiaries.
 
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PRC REGULATIONS RELATING TO THE ESTABLISHMENT OF OFFSHORE SPECIAL PURPOSE COMPANIES BY PRC RESIDENTS MAY SUBJECT OUR PRC RESIDENT SHAREHOLDERS TO PERSONAL LIABILITY AND LIMIT OUR ABILITY TO INJECT CAPITAL INTO OUR PRC SUBSIDIARIES, LIMIT OUR PRC SUBSIDIARIES’ ABILITY TO DISTRIBUTE PROFITS TO US, OR OTHERWISE ADVERSELY AFFECT US.
  SAFE issued a public notice in October 2005, or the SAFE notice, requiring PRC residents to register with the local SAFE branch before establishing or controlling any company outside of China for the purpose of capital financing with assets or equities of PRC companies, referred to in the notice as an “offshore special purpose company.” PRC residents that are shareholders of offshore special purpose companies established before November 1, 2005 and where a “round trip” investment was completed were required to register with the local SAFE branch before March 31, 2006. We have determined that our PRC resident shareholders, Chairman Minhua Chen and Ms. Yanling Fan, incorporated Hong Kong Yi Tat in 2001, before SAFE Circular 75 was adopted but no “round trip” investment has occurred. Accordingly, it is our belief that Chairman Minhua Chen and Ms. Yanling Fan are not required to make the required SAFE Circular 75 registrations. However, if the PRC government determines that our PRC residents are required to register, the failure of our beneficial owners to timely amend their SAFE registrations pursuant to the SAFE notice or the failure of future beneficial owners of our company who are PRC residents to comply with the registration procedures set forth in the SAFE notice may subject such beneficial owners to fines and legal sanctions and may also limit our ability to contribute additional capital into our PRC subsidiaries, limit our PRC subsidiaries’ ability to distribute dividends to our company or otherwise adversely affect our business.
  For purposes of SAFE, a “round trip” investment is an investment made by a PRC resident in a Chinese domestic company through an offshore special purpose vehicle.
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REQUIREMENT OF STATUTORY RESERVE OF CERTAIN AMOUNT OF OUR NET INCOME PURSUANT TO PRC REGULATION MAY FURTHER RESTRICT OUR PRC SUBSIDIARIES AND VARIABLE INTEREST ENTITY’S ABILITY TO DISTRIBUTE PROFITS TO US AND HAVE A MATERIAL ADVERSE EFFECT ON OUR ABILITY TO CONDUCT OUR BUSINESS.
  Under PRC laws and regulations, our subsidiaries in China, as wholly foreign-owned enterprises, are respectively required to set aside at least 10% of their accumulated after-tax profits each year, if any, to fund certain statutory reserve funds, until the aggregate amount of fund set aside reaches 50% of the registered capital of each of the entities. These reserve funds are not distributable as cash dividends. It is unclear that if and what fine or penalties that a company may be subject to as a result of noncompliance of such requirement.  As of December 31, 2011, each of our subsidiaries subject to the statutory reserve requirement has set aside 50% of its registered capital of the subsidiaries. Such statutory requirement could limit our subsidiaries and variable interest entity ability to pay dividends or make other distributions to us and could materially and adversely limit our ability to grow that could be beneficial to our business, or otherwise fund and conduct our business.
  Fujian Yida Travel Service Co., Ltd. was formed on June 24, 2011 and there was a capital contribution made of 10 million RMB (approximately $1,570,000) which is 100% of its registered capital.  No portion of this capital contribution was used to fund its statutory reserve fund because there is no need for Fujian Yida Travel Service Co., Ltd. to allocate any statutory reserve fund until it realizes a profit.
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ANY OUTBREAK OF THE SWINE FLU (H1N1), SEVERE ACUTE RESPIRATORY SYNDROME, OR SARS, THE AVIAN FLU, OR ANOTHER WIDESPREAD PUBLIC HEALTH PROBLEM IN THE PRC COULD ADVERSELY AFFECT OUR OPERATIONS.
  There have been recent outbreaks of the highly pathogenic Swine Flu, caused by the H1N1 virus, in certain regions of the world, including parts of China, where all of our facilities are located and where all of our sales occur.  Our business is dependent upon our ability to attract a large volume of visitors to our tourism destinations, and an outbreak of the Swine Flu, or a renewed outbreak of SARS, the Avian Flu, or another widespread public health problem in China, could have a negative effect on our operations.  Any such outbreak could have an impact on our operations as a result of:
  ●
quarantines or closures of our tourist destinations●
the sickness or death of our key officers and employees, and●
a general slowdown in the Chinese economy.
  Any of the foregoing events or other unforeseen consequences of public health problems could adversely affect our operations.
  23
 INDEX
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BECAUSE CHINESE LAW GOVERNS MANY OF OUR MATERIAL AGREEMENTS, WE MAY NOT BE ABLE TO ENFORCE OUR RIGHTS WITHIN THE PRC OR ELSEWHERE, WHICH COULD RESULT IN A SIGNIFICANT LOSS OF BUSINESS, BUSINESS OPPORTUNITIES OR CAPITAL.
  Chinese law governs many of our material agreements, some of which may be with Chinese governmental agencies. We cannot assure you that we will be able to enforce any of our material agreements or that remedies will be available outside of the PRC.  The system of laws and the enforcement of existing laws and contracts in the PRC may not be as certain in implementation and interpretation as in the United States. The Chinese judiciary is relatively inexperienced in enforcing corporate and commercial law, leading to a higher than usual degree of uncertainty as to the outcome of any litigation. The inability to enforce or obtain a remedy under any of our future agreements could result in a significant loss of business, business opportunities or capital.
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BECAUSE OUR FUNDS ARE HELD IN BANKS IN UNINSURED PRC BANK ACCOUNTS, THE FAILURE OF ANY BANK IN WHICH WE DEPOSIT OUR FUNDS COULD AFFECT OUR ABILITY TO CONTINUE IN BUSINESS.
  Funds on deposit at banks and other financial institutions in the PRC are often uninsured.  A significant portion of our assets are in the form of cash deposited with banks in the PRC, and in the event of a bank failure, we may not have access to our funds on deposit.  Depending upon the amount of money we maintain in a bank that fails, our inability to have access to our cash could impair our operations, and, if we are not able to access funds to pay our suppliers, employees and other creditors, we may be unable to continue in business.
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OUR BUSINESS COULD BE SEVERELY HARMED IF THE CHINESE GOVERNMENT CHANGES ITS POLICIES, LAWS, REGULATIONS, TAX STRUCTURE OR ITS CURRENT INTERPRETATIONS OF ITS LAWS, RULES AND REGULATIONS RELATING TO OUR OPERATIONS IN CHINA.
  Our business is located in Fujian, China and virtually all of our assets are located in China.  We generate our sales revenue only from customers located in China.  Our results of operations, financial state of affairs and future growth are, to a significant degree, subject to China’s economic, political and legal development and related uncertainties. Our operations and results could be materially affected by a number of factors, including, but not limited to
  ●
Changes in policies by the Chinese government resulting in changes in laws or regulations or the interpretation of laws or regulations,●
changes in taxation,●
changes in employment restrictions,●
import duties, and●
currency revaluation.
  Over the past several years, the Chinese government has pursued economic reform policies including the encouragement of private economic activities and greater economic decentralization. If the Chinese government does not continue to pursue its present policies that encourage foreign investment and operations in China, or if these policies are either not successful or are significantly altered, then our business could be harmed.  Following the Chinese government’s policy of privatizing many state-owned enterprises, the Chinese government has attempted to augment its revenues through increased tax collection.  It also exercises significant control over China’s economic growth through the allocation of resources, controlling payment of foreign currency-denominated obligations, setting monetary policy and providing preferential treatment to particular industries or companies.  Continued efforts to increase tax revenues could result in increased taxation expenses being incurred by us.  Economic development may be limited as well by the imposition of austerity measures intended to reduce inflation, the inadequate development of infrastructure and the potential unavailability of adequate power and water supplies, transportation and communications.  In addition, the Chinese government continues to play a significant role in regulating industry by imposing industrial policies.
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THE CHINESE LAWS AND REGULATIONS WHICH GOVERN OUR CURRENT BUSINESS OPERATIONS ARE SOMETIMES VAGUE AND UNCERTAIN AND MAY BE CHANGED IN A WAY THAT HURTS OUR BUSINESS.
  China’s legal system is a civil law system based on written statutes, in which system decided legal cases have little value as precedents, unlike the common law system prevalent in the United States. There are substantial uncertainties regarding the interpretation and application of Chinese laws and regulations, including but not limited to the laws and regulations governing our business, or the enforcement and performance of our arrangements with customers in the event of the imposition of statutory liens, death, bankruptcy and criminal proceedings.  The Chinese government has been developing a comprehensive system of commercial laws, and considerable progress has been made in introducing laws and regulations dealing with economic matters such as foreign investment, corporate organization and governance, commerce, taxation and trade.  However, because these laws and regulations are relatively new, and because of the limited volume of published cases and judicial interpretation and their lack of force as precedents, interpretation and enforcement of these laws and regulations involve significant uncertainties. New laws and regulations that affect existing and proposed future businesses may also be applied retroactively.   We are considered an FIE under Chinese laws, and as a result, we must comply with Chinese laws and regulations.  We cannot predict what effect the interpretation of existing or new Chinese laws or regulations may have on our business.  If the relevant authorities find us to be in violation of Chinese laws or regulations, they would have broad discretion in dealing with such a violation, including, without limitation: levying fines; revoking our business and other licenses; requiring that we restructure our ownership or operations; and requiring that we discontinue any portion or all of our business.
  24
 INDEX
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A SLOWDOWN OR OTHER ADVERSE DEVELOPMENTS IN THE CHINESE ECONOMY MAY MATERIALLY AND ADVERSELY AFFECT OUR CUSTOMERS’ DEMAND FOR OUR SERVICES AND OUR BUSINESS.
  All of our operations are conducted in China and all of our revenues are generated from sales to businesses operating in China.  Although the Chinese economy has grown significantly in recent years, such growth may not continue. We do not know how sensitive we are to a slowdown in economic growth or other adverse changes in Chinese economy which may affect demand for precision steel products.  A slowdown in overall economic growth, an economic downturn or recession or other adverse economic developments in China may materially reduce the demand for our services and in turn reduce our results of operations.
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FAILURE TO COMPLY WITH THE U.S. FOREIGN CORRUPT PRACTICES ACT AND CHINESE ANTI-CORRUPTION LAWS COULD SUBJECT US TO PENALTIES AND OTHER ADVERSE CONSEQUENCES.
  Our executive officers, employees and other agents may violate applicable law in connection with the marketing or sale of our products, including China’s anti-corruption laws and the U.S. Foreign Corrupt Practices Act, or the FCPA, which generally prohibits United States companies from engaging in bribery or other prohibited payments to foreign officials for the purpose of obtaining or retaining business.  In addition, we are required to maintain records that accurately and fairly represent our transactions and have an adequate system of internal accounting controls.  Foreign companies, including some that may compete with us, are not subject to these prohibitions, and therefore may have a competitive advantage over us. The PRC also strictly prohibits bribery of government officials.  However, corruption, extortion, bribery, pay-offs, theft and other fraudulent practices occur from time-to-time in the PRC.
  While we intend to implement measures to ensure compliance with the FCPA and Chinese anti-corruption laws by all individuals involved with our company, our employees or other agents may engage in such conduct for which we might be held responsible.  If our employees or other agents are found to have engaged in such practices, we could suffer severe penalties and other consequences that may have a material adverse effect on our business, financial condition and results of operations.  In addition, our brand and reputation, our sales activities or the price of our ordinary shares could be adversely affected if we become the target of any negative publicity as a result of actions taken by our employees or other agents.
  We have not had, and do not intend to have, any current or historic experience with non-compliance with FCPA or Chinese anti-corruption laws.
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THE IMPLEMENTATION OF THE NEW PRC EMPLOYMENT CONTRACT LAW AND INCREASES IN THE LABOR COSTS IN CHINA MAY HURT OUR BUSINESS AND PROFITABILITY.
  A new employment contract law became effective on January 1, 2008 in China. It imposes more stringent requirements on employers in relation to entry into fixed-term employment contracts, recruitment of temporary employees and dismissal of employees. In addition, under the newly promulgated Regulations on Paid Annual Leave for Employees, which also became effective on January 1, 2008, employees who have worked continuously for more than one year are entitled to paid vacation ranging from 5 to 15 days, depending on the length of the employee’s service. Employees who waive such vacation entitlements at the request of the employer will be compensated for three times their normal daily salaries for each vacation day so waived. As a result of the new law and regulations, our labor costs may increase. There is no assurance that disputes, work stoppages or strikes will not arise in the future. Increases in the labor costs or future disputes with our employees could damage our business, financial condition or operating results.
  ●
UNDER THE CURRENT EIT LAW, CHINA YIDA AND HONG KONG YI TAT MAY BE CLASSIFIED AS “RESIDENT ENTERPRISES” OF CHINA, WHICH MAY SUBJECT CHINA YIDA AND HONG KONG YI TAT TO PRC INCOME TAX ON THEIR TAXABLE GLOBAL INCOME.
  China passed an Enterprise Income Tax Law, or the EIT Law, and its implementation regulations, both of which became effective on January 1, 2008.  Under the EIT Law, an enterprise established outside of China with “de facto management bodies” within China is considered a “resident enterprise,” meaning that it can be treated in a manner similar to a Chinese domestic enterprise for enterprise income tax purposes. The implementing rules of the EIT Law define de facto management as “substantial and overall management and control over the production and operations, personnel, accounting, and properties” of the enterprise.  On April 22, 2009, the State Administration of Taxation issued the Notice Concerning Relevant Issues Regarding Cognizance of Chinese Investment Controlled Enterprises Incorporated Offshore as Resident Enterprises pursuant to Criteria of de facto Management Bodies, or the Notice, further interpreting the application of the EIT Law and its implementation with respect to non-Chinese enterprises or group controlled offshore entities.  Pursuant to the Notice, an enterprise incorporated in an offshore jurisdiction and controlled by a Chinese enterprise or group will be classified as a “non-domestically incorporated resident enterprise” if (i) its senior management in charge of daily operations reside or perform their duties mainly in China; (ii) its financial or personnel decisions are made or approved by bodies or persons in China; (iii) substantial assets and properties, accounting books, corporate chops, board and shareholder minutes are kept in China; and (iv) at least half of its directors with voting rights or senior management often resident in China.  A resident enterprise would be generally subject to the uniform 25% enterprise income tax rate as to its worldwide income.  Although the Notice is directly applicable to enterprises registered in an offshore jurisdiction and controlled by Chinese domestic enterprises or groups, it is uncertain whether the PRC tax authorities will make reference to the Notice when determining the resident status of other offshore companies, such as Fujian Jin Tai.  Since substantially all of our management is currently based in China, it is likely we may be treated as a Chinese resident enterprise for enterprise income tax purposes.  The tax consequences of such treatment are currently unclear, as they will depend on how local tax authorities apply or enforce the EIT Law or the implementation regulations.
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  In addition, under the EIT Law and implementation regulations, PRC income tax at the rate of 10% is applicable to dividends payable to investors that are “non-resident enterprises” (and that do not have an establishment or place of business in the PRC, or that have such establishment or place of business but the relevant income is not effectively connected with the establishment or place of business) to the extent that such dividends have their source within the PRC unless there is an applicable tax treaty between the PRC and the jurisdiction in which an overseas holder resides which reduces or exempts the relevant tax.  Similarly, any gain realized on the transfer of shares by such investors is also subject to the 10% PRC income tax if such gain is regarded as income derived from sources within the PRC.
  If we are considered a PRC “resident enterprise”, it is unclear whether the dividends we pay with respect to our shares, or the gain you may realize from the transfer of our shares, would be treated as income derived from sources within the PRC and be subject to PRC tax.  If we are required under the EIT Law to withhold PRC income tax on our dividends payable to our foreign shareholders, or if you are required to pay PRC income tax on the transfer of your shares, the value of your investment in our shares may be materially and adversely affected.
  Risks Related to Our Common Stock
 
 ●
IF OUR COMMON STOCK WERE DELISTED AND DETERMINED TO BE A “PENNY STOCK,” A BROKER-DEALER MAY FIND IT MORE DIFFICULT TO TRADE OUR COMMON STOCK AND AN INVESTOR MAY FIND IT MORE DIFFICULT TO ACQUIRE OR DISPOSE OF OUR COMMON STOCK IN THE SECONDARY MARKET.
  If our common stock were removed from listing with the NASDAQ, it may be subject to the so-called “penny stock” rules. The SEC has adopted regulations that define a “penny stock” to be any equity security that has a market price per share of less than $5.00, subject to certain exceptions, such as any securities listed on a national securities exchange. For any transaction involving a “penny stock,” unless exempt, the rules impose additional sales practice requirements on broker-dealers, subject to certain exceptions. If our common stock were delisted and determined to be a “penny stock,” a broker-dealer may find it more difficult to trade our common stock and an investor may find it more difficult to acquire or dispose of our common stock on the secondary market. Investors in penny stocks should be prepared for the possibility that they may lose their whole investment.
  ●
OUR FAILURE TO MEET THE LISTING REQUIREMENTS OF THE NASDAQ CAPITAL MARKET COULD RESULT IN A DE-LISTING OF OUR COMMON STOCK.
  If after listing we fail to satisfy the continued listing requirements of the NASDAQ Capital Market, such as the corporate governance requirements and the minimum closing bid price requirement, NASDAQ may take steps to de-list our common stock, which could impair your ability to sell or purchase our common stock when you wish to do so. In the event of a de-listing, we would take actions to restore our compliance with NASDAQ’s listing requirements, but we can provide no assurance that any such action taken by us would allow our common stock to become listed again, stabilize the market price or improve the liquidity of our common stock, prevent our common stock from dropping below the NASDAQ minimum bid price requirement or prevent future non-compliance with NASDAQ’s listing requirements.
  ●
OUR COMMON STOCK IS SUBJECT TO PRICE VOLATILITY UNRELATED TO OUR OPERATIONS.
  The market price of our common stock could fluctuate substantially due to a variety of factors, including market perception of our ability to achieve our planned growth, quarterly operating results of other companies in the same industry, trading volume in our common stock, changes in general conditions in the economy and the financial markets or other developments affecting our competitors or us. In addition, the stock market is subject to extreme price and volume fluctuations. This volatility has had a significant effect on the market price of securities issued by many companies for reasons unrelated to their operating performance and could have the same effect on our common stock.
 
 ITEM 1B. UNRESOLVED STAFF COMMENTS.
  Not applicable.
  ITEM 2. PROPERTIES.  Our principal executive offices are located at 28/F, Yifa Building, No.111, Wusi Road, Fuzhou, Fujian Province, PRC. The office space is approximately 800 square meters in area.  The lease renews annually at an annual rate of approximately $8,800, which is the market rate in that area.
  We lease approximately 200 square feet of office space located at 20955 Pathfinder Rd., #200-2, Diamond Bar, CA 91765 for our U.S. office. The term of the lease was for 12 months, from March 2009 to March 2010, at an annual rent of approximately $10,200, which is the market rate in that area.  After March 2010 the lease extends on a month to month basis.
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  We currently operate and manage six tourist destinations, including “City of Caves”, “Yang-sheng Paradise”, “Ming Dynasty Entertainment World”, “the Great Golden Lake,” “Hua’an Tulou’s Cluster” and “Yunding Park.” Summaries of their respective location are as follows:
 ●
City of Caves project is located in Fengyi County, west of Xinyu City.●
The Yang-sheng Paradise project is located approximately two (2) kilometers from Zhangshu’s downtown, and within one hour travel from the adjacent airport of Nanchang, the capital city of Jiangxi Province. The Jiangxi Province Zhangshu City Yang-sheng Tourism Development Project Investment Agreement refers to our ability to obtain land use rights for approximately 3,000 mu through a public listing transaction which means that the local government will submit our land use proposal along with our plan and project to the Department of Land Reserve for a public listing with China Yida as the only participant. Upon approval, we will be able to obtain the land-use rights. Additional 3,000 mu that is not subject to this land-use right will be leased from the local government which will give us management rights of the land The Company has obtained approximately 130 acres of land use rights for the Yang-sheng Paradise project and is in the process of obtaining additional land use rights.●
Ming Dynasty Entertainment World is located in Bengbu, Anhui Province. Pursuant to the Anhui Province Bengbu City Emperor Ming Taizu Cultural and Ecological Resort and Tourism Project Investment Agreement, they refer to a State-owned Land Use Rights Agreement. The Company has obtained approximately 145 acres of land use rights for the Ming Dynasty Entertainment World project and is in the process of obtaining additional land use rights.●
The Great Golden Lake is located in Taining, surrounding Sanming and Nanping of Fujian Province and Nanchang of Jiangxi Province.●
Hua’an Tulou is approximately one hour and half drive away from Xiamen City, Fujian Province.●
Yunding Park is approximately thirty (30) km from Fuzhou, the capital city of Fujian Province.




Summaries and analysis of the property rights of each tourist destination are as follows:


Land Use Rights

Management RightsCity of Caves

Yes-approximately 10 acres, we are in the process of obtaining more land use right

YesYang-sheng Paradise

Yes – approximately 130 acres. We are in the process of obtainging more land use right.

YesMing Dynasty Entertainment World

Yes,-approximately 145 acres, we are in the process of obtaining more land use right

YesGreat Golden Lake

No.

YesHua’an Tulou

No.

YesYunding Park

Yes - approximately 32 acres, we plan to obtain land use right to more lands

Yes


Through the agreements, we are entitled to obtain land-use rights of approximately 2,026 acres for our Yang-sheng Paradise, Yunding Park, Ming Dynasty Entertainment World and City of Caves destinations. By the end of 2011, we obtained a total of approximately 32 acres of land use rights (no ownership) for Yunding Park and 65 acres of land use rights (no ownership) for Yang-sheng Paradise.   We expect to be able to obtain all the rights within three years. The cost of the land will vary depending on the location.  We expect the cost of the land to be between RMB 20,000 and RMB 600,000 per Mu which is equal to $515 and $15,444 per acre.  The large discrepancy in price is because land prices vary depending on the description of the land. Typically, residential land is valued highest and the industrial land is the cheapest. We will try to obtain the land at the most favorable price by classifying the land as for industrial use or commercial use, when possible. However, it is uncertain as to how the PRC government will classify the land.


Land bidding process is usually as follows: the government releases the notice of listed land transfer, announcing such information as the proposed land transfer situation, bidding qualifications and application materials; each bidder is required to pay the deposit and submit bidding application materials which will be reviewed and compared by the government; and finally the government will select the most competitive bidder to confirm the land transaction and sign a “state-owned land use rights transfer contract.” Anhui Yida has obtained the land-use rights certificate of 145 acres in February 2012, Fenyi Yida has obtained the land-use rights certificate of 10 acres in March 2012, Zhangshu Yida has obtained the land-use rights certificate of 65 acres in May 2012. The local governments will refund the deposit after submitting the relatively land documents to governments.




It is anticipated that we will have the land use rights for the tourism property for forty (40) years from the date of acquisition. Even though the application has been submitted to the local government and land authority, the processing time is uncertain. We will provide disclosure once we have officially obtained the land use rights from the local government authorities.




We do not need to obtain the land use rights to manage the Golden Lake, Tulou and Yunding Park. As to Yang-Sheng Paradise and the City of Caves, we started the road construction toward the tourist sites, but have not started the site construction. As to Ming Dynasty, we only finished the design and plan of the site and have not started the site construction. We do not need to obtain the land use rights to Yang-Sheng Paradise, the City of Caves or the Ming Dynasty before we can proceed with our site construction. We anticipate our grand opening for these destinations will occur at the end of 2012 but we do not anticipate that we will have the land-use rights at that time.


Fenyi Yida has made advance payments of $380,000 to the local government of Fenyi County for the acquisition of land use rights relatives to the City of Caves tourist destination. The land-use rights the company obtained from Fenyi belonged to the local farmers.  Pursuant to relevant PRC regulations, Fenyi government should compensate the local farmers before issuing the land use rights to the company, these compensations are part of the Company’s land expenditure.  Fenyi government is willing to reimburse this part of land expenditure for the Company, but the reimbursement procedure takes very long time. Therefore, the Company decided to compensate the local farmers for the Fenyi government first in order to speed up the process of land use rights. The Company did not enter any agreement with Fenyi government about the compensation prepayment. Fenyi government orally agrees to repay the Company by installment. The Company expects the local government will reimburse such prepayment by December 31, 2012.




There is no law or regulation stating that we do not need land use rights before commencing construction on these projects. However, in practice, because we have the management rights to these destinations, we are not required to obtain land certificates before commencing construction. The management rights entitle us the right to develop the project and to receive any profits generated from the construction. However, we do not have ownership to the construction because we do not have the land use rights. The Company is under procedure to obtain its land use right. If we eventually fail to obtain land use right, we may fail to obtain ownership to the construction, buildings and improvements we make on the land if it proceed with the construction before obtaining land-use rights.





27
 INDEX


ITEM 3. LEGAL PROCEEDINGS.
  Currently, we know of no material, active, pending or threatened proceeding against us, or our subsidiaries, nor are we involved as a plaintiff in any material proceeding or pending litigation.





ITEM 4. MINE SAFETY DISCLOSURES.




Not applicable.




PART II




ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.




Market Information




We have two classes of equity securities: (i) common stock, par value $.001 per share, 19,551,785 shares of which were outstanding as of December 31, 2011, and (ii) preferred stock, par value $.001 per share, of which no shares were outstanding as of December 31, 2011.




Our common stock is listed on the NASDAQ Capital Market exchange under the symbol “CNYD.” The table below sets forth the high and low sales prices for our common stock for the period indicated as reported on the NASDAQ Capital Market.




Common Stock Market PriceFinancial Quarter Ended

High ($)


Low ($)December 31, 2011


3.27



1.91September 30, 2011


4.59



2.92June 30, 2011


7.60



2.48March 31, 2011


9.77



7.69December 31, 2010


12.78



8.32September 30, 2010


13.10



8.01June 30, 2010


15.32



11.05March 31, 2010


14.00



10.65




Holders




At December 31, 2011, there were approximately 260 shareholders of record of our common stock. This does not reflect the number of persons or entities who held stock in nominee or “street” name through various brokerage firms.




Holders of common stock do not have cumulative voting rights. Therefore, holders of a majority of the shares of common stock voting for the election of directors can elect all of the directors. Holders of our common stock representing a majority of the voting power of our capital stock issued and outstanding and entitled to vote, represented in person or by proxy, are necessary to constitute a quorum at any meeting of our stockholders. A vote by the holders of a majority of our outstanding shares is required to effectuate certain fundamental corporate changes such as liquidation, merger or an amendment to our Articles of Incorporation.




Although there are no provisions in our charter or by-laws that may delay, defer or prevent a change in control, we are authorized, without shareholder approval, to issue shares of preferred stock that may contain rights or restrictions that could have this effect.




Holders of common stock are entitled to share in all dividends that the board of directors, in its discretion, declares from legally available funds. In the event of liquidation, dissolution or winding up, each outstanding share entitles its holder to participate pro rata in all assets that remain after payment of liabilities and after providing for each class of stock, if any, having preference over the common stock. Holders of our common stock have no pre-emptive rights, no conversion rights and there are no redemption provisions applicable to our common stock.




Dividends




There are no restrictions in our articles of incorporation or bylaws that prevent us from declaring dividends. The Delaware General Corporation Law, however, does prohibit us from declaring dividends where, after giving effect to the distribution of the dividend:




1. We would not be able to pay our debts as they become due in the usual course of business; or


2. Our total assets would be less than the sum of our total liabilities plus the amount that would be needed to satisfy the rights of shareholders who have preferential rights superior to those receiving the distribution.




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Our board of directors has not declared a dividend on our common stock during the last two fiscal years or the subsequent interim period. We currently anticipate that we will retain any future earnings for use in our business. Consequently, we do not anticipate paying any cash dividends in the foreseeable future. The payment of dividends in the future will depend upon our results of operations, as well as our short-term and long-term cash availability, working capital, working capital needs and other factors, as determined by our board of directors. Currently, except as may be provided by applicable laws, there are no contractual or other restrictions on our ability to pay dividends if we were to decide to declare and pay them.




Securities Authorized for Issuance Under Equity Compensation Plans




For information on Securities Authorized for Issuance Under Equity Compensation Plans, please see Part III, Item 12 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.




Recent Sales of Unregistered Securities




None.




ITEM 6. SELECTED FIANANCIAL DATA.




Not applicable because we are a small reporting company.




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




The following discussion should be read in conjunction with the Consolidated Financial Statements and Notes thereto appearing elsewhere in this Form 10-K /A. The following discussion contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 relating to future events or our future performance. Actual results may materially differ from those projected in the forward-looking statements as a result of certain risks and uncertainties set forth in this prospectus. Although management believes that the assumptions made and expectations reflected in the forward-looking statements are reasonable, there is no assurance that the underlying assumptions will, in fact, prove to be correct or that actual results will not be different from expectations expressed in this report.




General




We currently operate the Great Golden Lake tourist destination (Global Geo-park), Hua’An Tulou cluster (or the “Earth Buildings”) tourist destination (World Culture Heritage), and Yunding Recreational Park (Large-scale National Recreational Park), covering over 300 square kilometers in total. Our media business provides operating management service, including channel and advertisement management for the FETV since 2004 and the “Journey through China on the Train” on-board railway program (“Railway Media”). As of December 31, 2011, we, through our wholly owned subsidiaries in China, have entered into four additional cooperation agreements respectively with the local Chinese government agents, namely, (i) the Anhui Province Bengbu Municipal Government; (ii) the Jiangxi Province Zhangshu Municipal Government; (iii) the Fenyi County, Xinyu City, Jiangxi Province Government; and (iv) the Fujian Education Media Limited Company, a wholly state-owned company organized by the Fujian Education Television Station (“FETV”). Under these agreements, we have obtained the right to construction and development of the Ming Dynasty Entertainment World Project (“Ming Dynasty Entertainment World”) including the purchase of the forty (40) years land use rights for a parcel of approximately 250 Mu for commercial land use purpose and another parcel of approximately 82.37 acres for industry land use purpose, as well as the construction of the Royal Hot Spring World project; the right to invest in construction and development of China Yang-sheng (Nourishing Life) Paradise Project (“Nourishing Life”) (including the following projects: (i) Salt Water Hot Spring SPA & Health Center, (ii) Yang-sheng Holiday Resort, (iii) World Yang-sheng Cultural Museum, (iii) International Camphor Tree Garden, (iv) Chinese Medicine and Herb Museum, (v) Yang-sheng Sports Club, (vi) Old Town of Chinese Traditional Medicine, and (vii) various other Yang-sheng related projects and tourism real estate projects) 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 (“The City of Caves”); and the five years (three year agreement with two year renewal) of exclusive management rights for the operation of the FETV channel (“FETV”).




We expect that our tourism business will be the primary source of our revenue over the next few years. Advertising business has been our primary source of revenue for the last two year because the tourism business has experienced the serious flooding and weather and the ads restriction was not executed by the local government. The revenue from advertising will decrease because of the new restriction on the advertisement and we expect that the revenue from tourism will increase. However, any increase in revenue will depend on the recovery of Great Golden Lake and the progress we make in our other tourist destinations. This expectation is also based on our new projects and construction of tourism destinations. Last year we experienced a significant flood at the Great Golden Lake which resulted in a sharp decrease of revenue because we had to close the park. It has taken a considerable amount of time for the natural beauty to be restored after the flood but we believe that the Great Golden Lake has started to recover and visitors will return to the park. Flooding does not occur on a regular basis either at the Great Golden Lake or in the province and we do not expect to see additional floods or other natural disasters affect our operations in the future. In 2012, at Great Golden Lake and at Hua’an Tulou, we do not anticipate much new construction as we are maintaining our existing operations and restoring what is already built and in operation. We do not expect any construction or restoration to affect our operations.  Our advertising and tourism businesses are not seasonal. We have visitors to our parks throughout the year.




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 INDEX




Overview




Advertising Business




For the advertising business, our advertising revenue is driven by the popularity of our television programs and the number of viewers tuning into our television station. If more people tune into our station, we will be able to attract more advertisers and charge more for each advertising spot. This will increase our revenues. We strive to keep our audience rating high in order to be able to sell all our advertising air time.




We generate our advertising revenue by selling air time to sponsors and companies that are interested in marketing their products to our television viewers. We incur administrative fees, business traveling fees, salaries, depreciation, automobile and interest costs in operating the advertising business.




The new PRC regulations set forth by the State Administration for Radio, Film and Television which bans certain television and radio advertisements has had a negative effect on our revenues and certain clients have not continued to advertise. Accordingly, we expect our revenues to decline.




Tourism Business




For the tourism business, our revenue is driven by the reputation of our tourist destinations. We strive to offer quality tourist attractions that offer our visitors diverse entertainment, including catering, hotel, transportation and shopping. We generate our revenue from our visitors and tourists who are looking to enjoy our tourist location. 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 will receive 92% of the revenue and the Taining government will receive 8% of the revenue; (ii) from 2006 to 2012 we will receive 90% of the revenue and the Taining government will receive 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. Because of the decreasing revenue share that we will receive from the Great Golden Lake resort and the resort has not been fully recovered to its previous level due to the flood, we may not be able to maintain our revenues from Great Golden Lake.




However, with the recovery of Great Golden Lake and the expected grand openings of three new tourism projects in the future, we believe that we will be able to generate more revenues in order to maintain the high gross profit margins in the tourism segment.




We do expect our tourism business to be our primary source of revenue over the next few years. Although Ming Dynasty, Yang-Sheng Paradise and City of Caves are not yet operating, we do expect them to be opened by the end of 2012 and to start generating revenue by 2013. Also, we expect Yunding to continue to grow and for the Great Golden Lake to recover from the flooding.




Results of Operations




The Company is organized into two main business segments, tourism and advertisement. The following table presents a summary of operating information for the years ended December 31, 2011 and 2010:




For the Year Ended December 31,


Increase/


Increase/2011


2010


(Decrease)


(Decrease)US Dollar ($)


US Dollar ($)


US Dollar ($)


PercentageNet revenueAdvertisement


32,969,701



37,902,286



(4,932,585
)


-13.01
%Tourism


9,240,159



16,623,761



(7,383,602
)


-44.42
%Total net revenue


42,209,860



54,526,047



(12,316,187
)


-22.59
%Cost of revenueAdvertisement


8,463,917



8,096,232



367,685



4.54
%Tourism


5,050,485



4,206,057



844,428



20.08
%Total cost of revenue


13,514,402



12,302,289



1,212,113



9.85
%Gross profit


28,695,458



42,223,758



(13,528,300
)


-32.04
%Selling expenses


4,917,097



3,741,285



1,175,812



31.43
%General and administrative expenses


4,793,723



3,883,009



910,714



23.45
%Loss on construction in progress


-



403,057



(403,057
)


-100
%Operating income


18,984,638



34,196,407



(15,211,769
)


-44.48
%Other income (expense)


(101,528
)


(9,399
)


(92,129
)


980.20
%Interest income


94,910



91,866



3,044



3.31
%Interest expenses


(257,472
)


(41,654
)


(215,818
)


-518.12
%Income tax expenses


6,770,841



8,990,470



(2,219,629
)


-24.68
%Net income


11,949,707



25,246,750



(13,297,043
)


-52.66
%Net loss attributable to non-controlling interest


195,823



25,751



170,072



660.45
%Net income attributable to China Yida


12,145,530



25,272,501



(13,126,971
)


-51.94
%




30
 INDEX




Net Revenue:




Net revenue decreased by approximately $12.32 million or approximately 22.6%, from approximately $54.53 million for the year ended December 31, 2010 to approximately $42.21 million for the year ended December 31, 2011.




Advertisement


Advertisement revenue decreased by approximately $4.93 million or approximately 13% from approximately $37.90 million for the year ended December 31, 2010, to approximately $32.97 million for the year ended December 31, 2011. We generated approximately $29.69 million from the operation of FETV in 2011 as compared to $31.32 million in 2010, and $3.28 million from the “Journey through China on the Train” program in 2011 as compared to $6.58 million in 2010.




This decrease was primarily due to the instability of the railway media broadcast revenue as compared with 2010. Instability means that the program is broadcasting manually by the train attendant, we cannot monitor how he/she broadcasts the tape, or whether he/she has inserted the program tape or not. Railway program is a 20 minute infomercial program, the content of the programs are tourism news and information. Advertising clients choose the length of the advertisement during the program, and the period of time they want the advertisement to be broadcasted.  Recently some clients decide to purchase less advertisement from the company, and they may consider give up the railway promotion and terminate the cooperation with the company due to the instability of the railway program. The operators determine in their sole discretion to broadcast the railway program or not. We cannot monitor the operator’s daily work. The advertisers were concerned about our lack of control over the frequency of program broadcasting and therefore purchased fewer advertising spots from us which resulted in the decrease in revenue from railway media broadcast.




We generate revenue from the “Journey through China on the Train” program which is the only railway media broadcast we produced so far. In February 2009, our wholly owned subsidiary, Fuzhou Fuyu Advertising Co., Ltd., entered into a six-year exclusive agreement with China’s Railway Media Center to create an infomercial program named “Journey through China on the Train”, pursuant to which we produce 20 minute monthly episodes focused on tourist destinations around China and travel ideas and tips with infomercial advertisements. The infomercial program is broadcast on seven railway lines into Tibet, all high speed motor trains in China with TV panels made available by Ministry of Railways of P. R. China and cable TV channels covering 18 railway bureaus. We agree to pay an annual fee of approximately $46,154 or RMB 300,000 to Railway Media Center for the first three years and approximately $53,846 or RMB 350,000 for the second three years.  At the end of 2011, “Journey through China on the Train” was shown on approximately 108 railroad lines.




Advertisement revenue from FETV also has experienced a 5.2% fall from $31.32 million to $29.69 million due to actions by domestic media authorities restricting the broadcasting manner and content of TV advertising. The new restricting content of TV advertising included shopping programs, mini ads and certain medical advertisements. On August 1, 2010, Fuyu, our wholly-owned subsidiary,  entered into a Fujian Education Television Channel Project Management Agreement (the “Agreement”), with Fujian Education Media Limited Company, a wholly state-owned company organized by the Fujian Education TV Station under the laws of the People’s Republic of China (“Fuijan Education Media”), pursuant to which, Fujian Education Media granted to us five years of exclusive management rights for the FETV channel from August 1, 2010 to July 31, 2015. Under the management contract, we obtained the full rights to provide programming and content management services and to re-sell all advertising airtime of FETV.  We have leveraged the FETV assets to produce high quality TV programming focused on tourism, successfully promoting our own tourist attractions branding the FETV station around the tourism theme and creating a network of potential partners for our tourism business, including hotels, travel agents, and entertainment resorts.




Tourism


Tourism revenue decreased by approximately $7.38 million or approximately 44.4%, from approximately $16.62 million to approximately $9.24 million, including $4.94 million from the Great Golden Lake resort, $1.28 million from Yunding Park and $3.02 million from Hua’an Tulou. The primary sources of the revenues are entrance fees, tour shuttle bus fees and restaurants. The decrease was primarily due to a decrease in the number of tourists visiting the Great Golden Lake Resort in the year of 2011. The effect of the flooding that occurred at the Great Golden Lake Resort during the second half of 2010 reduced the number of tourists visiting in the whole year of 2011. The decrease in revenue is also attributed to the strong competition among the homogeneous tourism destinations, including Nanjing and Yongding Tulou Cluster and the poor road condition that connect from Yongtai Town to Yunding Park.




Great Golden Lake. In 2011, we had approximately 312,000 visitors to the Great Golden Lake, as compared to 470,000 visitors in 2010. The number tourists decreased 33.62% and the revenue generated from the site decreased 57.71% in 2011. The decrease in revenue not only contributed to the decrease in the number of tourists, also contributed to our deeper ticket discount.
  Yunding Park. In 2011, we had 54,000 visitors to Yunding Park and compared to 25,000 in 2010. The number of tourists increased 116% and the revenue increased 141.51% in 2011. The dramatically increase in revenue is because Yunding Park only started operation in the 4th quarter of 2010.
  Hua’an Tulou Cluster. In 2011, Hua’an Tulou Cluster had 203,000 visitors as compared to 235,000 in 2010, a decrease of 13.6% , and gross ticket sales of approximately $2.43 million as compared to $3.94 million in 2010, a decrease of 41.2%. We are facing strong competition among the homogeneous tourism destinations such as Nanjing Tulou Cluster and Yongding Tulou Cluster. The gross ticket sales decrease of 41.2% because we have to provide deeper ticket discount among the strong completion and the tourist consumption was also decreased. We expect this trend to continue in the future.




Cost of Revenue:




Cost of revenues increased by approximately $1.21 million or approximately 9.85%, from approximately $12.30 million for the year ended December 31, 2010 to approximately $13.51 million for the year ended December 31, 2011.




Advertisement


Cost of revenue from advertisement increased by approximately $0.36 million or approximately 4.54%, from approximately $8.10 million to approximately $8.46 million. The increase was due to production costs for the railway media broadcasting and the acquisition of the commercial airtime rights to resell the commercial airtime to advertisers commencing August 1, 2010 through July 31, 2013 for FETV.




31
 INDEX




Tourism


Cost of revenue from tourism increased by approximately $0.84 million or approximately 20.08%, from approximately $4.21 million to approximately $5.05 million. The increase was due to the increase of depreciation cost for the new construction of tourism destination in Yunding.




Gross profit:




Gross profit decreased approximately $13.52 million, or approximately 32.04%, from approximately $42.22 million for the year ended December 31, 2010 to approximately $28.70 million for the year ended December 31, 2011. Our gross profit margin was approximately 68% in 2011, as compared to approximately 77% for the same period in 2010.




Advertisement


Gross profit from advertisement decreased by approximately $5.30 million, or approximately 18%, from approximately $29.81 million to approximately $24.51 million. Gross profit margin from advertisement was approximately 74% for 2011, as compared to approximately 79% for the same period in 2010. This decrease was primarily attributable to the instability of revenue generated from the railway media broadcasts, as compared with the same period in 2010 and that the increase in contracting costs associated with FETV’s commercial airtime.




Tourism


Gross profit from tourism decreased by approximately $8.22 million, or approximately 66%, from approximately $12.41 million to approximately $4.19 million. Gross profit margin from tourism was approximately 45% in 2011, as compared to approximately 75% for the same period in 2010. The decrease of gross profit margin was primarily attributable to the effect of the flooding that occurred at the Great Golden Lake Resort during the second half of 2010. The fixed costs at the resorts remained constant except for the increase in depreciation expenses under cost for the new construction of tourism destination in Yunding.




Selling Expenses:




Selling expenses were approximately $4.92 million for the year ended December 31, 2011, compared to approximately $3.74 million for the year ended December 31, 2010, which represents an increase of approximately $1.18 million, or approximately 31%. The selling expense increases according with the increase in variable costs due to the business expansions in our newly opened Yunding resort during 2011, as the resort had not been operational during the same period in 2010.




General and Administrative Expenses:




General and administrative expenses were approximately $4.79 million for the year ended December 31, 2011, as compared to approximately $3.88 million for the year ended December 31, 2010, an increase of approximately $0.91 million, or approximately 23%. The increase was primarily due to an increase in stock based compensation expense related to the issuance of stock options and an increase in management fees for new projects in 2011.




Income Tax:




Income tax expense was approximately $6.77 million for the year ended December 31, 2011, a decrease of approximately $2.22 million or approximately 25%, as compared to the approximately $8.99 million income tax expense for the year ended December 31, 2010. The decrease was primarily attributable to lower revenue generated from Great Golden Lake and the railway media broadcasts.




Net Income:




As a result of the above factors, net income was approximately $12.15 million for the year ended December 31, 2011, as compared to net income of approximately $25.27 million for the year ended December 31, 2010, a decrease of approximately $13.12 million or approximately 52%. The decrease was primarily attributable to the decrease in revenue generated from Great Golden Lake and railway media broadcasts, as compared with the same period in 2010.




Liquidity and Capital Resources




Our principal sources of liquidity include cash from operations and proceeds from long term debt. The debt provided net proceeds of approximately $25.79 million.




At December 31, 2011, we had cash and cash equivalents of approximately $5.68 million as compared to approximately $7.15 million as of December 31, 2010, representing a decrease of $1.47 million. The decrease was primarily due to no issuance of common stock in connection with a registered direct offering that we closed in the same period in 2010, the adverse effect of restoration of the Great Golden Lake Resort which was offset by the proceeds from long term debt and repayment of loan from non-controlling interest. At December 31, 2011, our working capital was approximately $3.76 million.




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 INDEX




Net cash provided by operating activities was approximately $17.41 million for 2011 as compared to approximately $30.17 million in 2010. The decrease of $12.76 million was primarily due to a decrease in net income resulting from a decrease in the number of tourists visiting the Great Golden Lake Resort during the restoration of the resort and decrease in the number of advertisers because of the instability of the railway media broadcast.  The increase of accounts receivable, advances and prepayments and payment to accounts payable contribute adverse effect to net cash provided by operating activities.




Net cash used in investing activities was approximately $47.95 million in 2011 as compared to approximately $55.21 million in 2010, representing a decrease in capital expenditures of approximately $7.26 million due to the fact that the construction of the various resorts was nearly complete during the year ended December 31, 2011.The decrease in net cash used in investing activities was mainly due to: (i) most of Yunding Park constructions have been completed in 2010, so the construction in progress reduced drastically. The cash has been reduced about $46.8 million; and (ii) we increased the expenditures for obtaining land use right in Zhangshu city. The payment in cash was $20.9 million more than previous year. After offsetting $46.8 million by $20.9 million, our totally net cash used in investing activities was still decreasing.




Net cash provided by financing activities amounted to approximately $28.87 million in 2011, compared to approximately $26.11 million in 2010, representing an increase of approximately $2.76 million, mainly due to the proceeds from long term debt offset by the increase of repayment of obligation under airtime rights commitment in 2011.




Bank loans




The Company has four bank loans from four institutional lenders for the development of the tourism destinations.




1.
A loan for approximately $0.94 million from Fujian Haixia Bank (formerly known as Merchant bank of Fuzhou). The loan bears interest at 9.184% per annum, and is due November 4, 2012. It is guaranteed by Fujian Jintai Tourism Development Co., Ltd.




2.
A loan for approximately $13.68 million from Industrial and Commercial Bank of China Limited. The loan bears interest at 7.76% per annum. $1,953,291 (RMB12,420,000) will be due in 2012,2013, 2014, 2015, 2016, 2017 respectively and $1,962,727 (RMB12,480,000) will be due in 2018 and the final installment due October 25, 2018. It is collateralized by the right to collect resort ticket sales at the Great Golden Lake.




3.
A loan for approximately $10.62 million from Industrial and Commercial Bank of China Limited.  It bears interest at 6.40% per annum.  $1,022,254 (RMB6,500,000) will be due in 2012; $1,336,793 (RMB8,500,000) will be due in 2013; $1,729,968 (RMB11,000,000) will be due in 2014; $2,123,142 (RMB13,500,000) will be due in 2015; $2,201,777 (RMB14,000,000) will be due in 2016 and $2,201,777 (RMB14,000,000) will be due in 2017 and the final installment due December 15, 2017.  It is secured by credit guarantee of Fujian Jintai and the right to collect resort ticket sales at Yunding resort as additional collateral.




4.
A loan for approximately $5.50 million from Industrial and Commercial Bank of China Limited.  The loan bears interest at 7.76% per annum. $786,349 (RMB5,000,000) will be due in 2012,2013, 2014, 2015, 2016, 2017 and 2018 respectively and the final installment due November 22, 2018.  It is collateralized by the right to collect resort ticket sales at the Tulou resort, fixed assets of Fujian Tulou and personal guarantee by directors as additional collateral.




In the coming 12 months, we have approximately $4.71 million in bank loans that will mature. We plan to replace these loans with new bank loans in approximately the same aggregate amounts.




We do not expect any large mandatory capital expenditure in the long term period. 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.We believe that our currently available working capital, credit facilities referred to above and the expected additional credit facility should be adequate to sustain our operations at the current level for the next twelve months.




Capital commitment




Jiangxi Zhangshu Yangsheng TianTang Resort


As at December 31, 2011, the total estimated contract costs to complete Jiangxi Zhangshu Yangsheng TianTang resort are approximately $14,244,000 (RMB90.57 million) of which the Company has completed and paid for approximately $12,050,000 (RMB76.62 million). The remaining $2,194,000 (RMB13.95 million) will be completed and paid for by the end of 2012.




Jiangxi Fenyi Dongdou Resort


As at December 31, 2011, the total estimated contract costs to complete Jiangxi Fenyi Dongdou resort are approximately $14,507,000 (RMB92.24 million) of which the Company has completed and paid for approximately $11,281,000 (RMB71.73 million). The remaining $3,226,000 (RMB20.51 million) will be completed and paid for by the beginning of 2013.




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 $638,070 and $1,378,555 to the Taining government for the year ended December 31, 2011 and 2010, respectively, and recorded as cost of revenue.




33
 INDEX




Compensation for using nature resources commitments




In 2007, Fujian 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 $416,000 and $1,004,000 to the Taining government for the year ended December 31, 2011 and 2010, 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 $334,600 and $534,900 to the Hua’an government for the year ended December 31, 2011 and 2010, respectively, and recorded as selling expenses.




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 5 million RMB, or approximately $0.80 million, to the Yongtai County People’s Government over the course of the first 10 years of the Agreement. As of May 24, 2012, we have paid to the Yongtai County local government 3 million RMB, or $0.48 million. We plan to pay to the local government the remaining 2 million RMB, or $0.32 million, by 2018.




2011-2012 Outlook




In 2011, we have been constructing and developing Yunding Park’s second phase of construction and new tourism projects, the China Yang-sheng (Nourishing Life) Paradise in Zhangshu City, Jiangxi province, and the City of Caves in Fenyi City, Jiangxi province, which represent our commitment to expanding our business operations by applying our current business model to the development of other valuable tourist destinations out of Fujian province, and throughout China. We will start the site constructing of Ming Dynasty Entertainment World in early 2012. The construction was in line with our schedule. We expect that we will complete the first phase construction of these two new projects and open them to the public by the end of 2012. In addition, in June 2011, we announced the establishment of our new subsidiary, Fujian Yida Travel Service Co., Ltd. Over the next three years, we will mainly focus on developing our existing six tourist destinations.  All required construction funds will be funded either from our net income and operating cash flow or will be financed through bank loans.




Critical Accounting Policies




Basis of Presentation




The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires our management to make assumptions, estimates, and judgments that affect the amounts reported, including the notes thereto, and related disclosures of commitments and contingencies, if any. We have identified certain accounting policies that are significant to the preparation of our financial statements. These accounting policies are important for an understanding of our financial condition and results of operations. Critical accounting policies are those that are most important to the portrayal of our financial condition and results of operations and require management’s difficult, subjective, or complex judgment, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. Certain accounting estimates are particularly sensitive because of their significance to financial statements and because of the possibility that future events affecting the estimate may differ significantly from management’s current judgments. We believe the following critical accounting policies involve the most significant estimates and judgments used in the preparation of our financial statements.




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, Hongda, Fujian Yida, Tulou, Anhui Yida, Yongtai Yunding, Jiangxi Zhangshu, Jiangxi Fenyi, Yida 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.




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.




34
 INDEX




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 yearsElectronic Equipment
5 to 8 yearsTransportation Equipment
8 yearsOffice Furniture
5 to 8 yearsLeasehold 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 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.




Impairment




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




Assets are grouped and evaluated at the lowest level for their identifiable cash flows that are largely independent of the cash flows of other groups of assets. The Company considers historical performance and future estimated results in its evaluation of potential impairment and then compares the carrying amount of the asset to the future estimated cash flows expected to result from the use of the asset. If the carrying amount of the asset exceeds estimated expected undiscounted future cash flows, the Company measures the amount of impairment by comparing the carrying amount of the asset to its fair value. The estimation of fair value is generally measured by discounting expected future cash flows as the rate the Company utilizes to evaluate potential investments. The Company estimates fair value based on the information available, judgments and projections are considered necessary. There was no impairment of long-lived assets as of December 31, 2011 and 2010.




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.




35
 INDEX




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.




The Company applied the provisions of ASC 740-10-50, “Accounting For Uncertainty In Income Taxes”, which provides clarification related to the process associated with accounting for uncertain tax positions recognized in our financial statements. Audit periods remain open for review until the statute of limitations has passed. The completion of review or the expiration of the statute of limitations for a given audit period could result in an adjustment to the Company’s liability for income taxes. Any such adjustment could be material to the Company’s results of operations for any given quarterly or annual period based, in part, upon the results of operations for the given period. At December 31, 2011, management considered that the Company had no uncertain tax positions, and will continue to evaluate for uncertain positions in the future.




Fair values of financial instruments




The carrying amounts reported in the condensed 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 rate associated with the debt approximates the current market interest rate.




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 December 2011, FASB issued Accounting Standards Update No. 2011-12, Comprehensive Income (“ASU 2011-12”). Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05.  Among the new provisions in ASU 2011-05 was a requirement for entities to present reclassification adjustments out of accumulated other comprehensive income by component in both the statement in which net income is presented and the statement in which other comprehensive income is presented (for both interim and annual financial statements); however this reclassification requirement is indefinitely deferred by ASU 2011-12 and will be further deliberated by the FASB at a future date.




36
 INDEX




In September 2011, the FASB has issued Accounting Standards Update (ASU) No. 2011-08, Intangibles—Goodwill and Other (Topic 350): Testing Goodwill for Impairment. ASU 2011-08 is intended to simplify how entities, both public and nonpublic, test goodwill and other intangible assets such as patents for impairment. ASU 2011-08 permits an entity to first assess qualitative factors to determine whether it is "more likely than not" that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test described in Topic 350, Intangibles-Goodwill and Other. The more-likely-than-not threshold is defined as having a likelihood of more than 50%. ASU 2011-08 is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption is permitted, including for annual and interim goodwill impairment tests performed as of a date before September 15, 2011, if an entity’s financial statements for the most recent annual or interim period have not yet been issued or, for nonpublic entities, have not yet been made available for issuance.  The Company does not expect the adoption of ASU 2011-08 to have a material effect on the Company’s consolidated financial statements.




In June 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU No. 2011-05), Presentation of Comprehensive Income, an amendment to ASC Topic 220, Comprehensive Income.  Under this amendment, an entity has the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements.  The new guidance eliminates the current option to report other comprehensive income and its components in the statement of changes in stockholders’ equity.  While the new guidance changes the presentation of comprehensive income, there are no changes to the components that are recognized in net income or other comprehensive income under current accounting guidance.  The guidance for public entities is effective for fiscal years or interim periods beginning after December 15, 2011 with early adoption permitted.  The amendments in this update are to be applied retrospectively.  The Company does not expect the adoption of ASU 2011-05 to have a material effect on the Company’s consolidated financial statements.




Inflation and Seasonality




Our operating results and operating cash flows historically have not been materially affected by inflation or seasonality.





Off Balance Sheet Arrangements




We do not have any off balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, sales or expenses, results of operations, liquidity or capital expenditures, or capital resources that are material to an investment in our securities.





ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOUSURES ABOUT MARKET RISK.




Not applicable because we are a small reporting company.




37
 INDEX





ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.




CHINA YIDA HOLDING, CO. AND SUBSIDIARIES


CONSOLIDATED FINANCIAL STATEMENTS
 Index to consolidated financial statements
  PageReport of Independent Registered Public Accounting Firm
F-2Consolidated Balance Sheets as of December 31, 2011 and December 31, 2010
F-3Consolidated Statements of Income and Comprehensive Income for the years ended December 31, 2011 and 2010
F-4Consolidated Statement of Equity for the years ended December 31, 2011 and 2010
F-5Consolidated Statements of Cash Flows for the years ended December 31, 2011 and 2010
F-6Notes to the Consolidated Financial Statements
F-7 - F-25
  F-1
 INDEX
  REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
  To the Board of Directors and Stockholders China Yida Holding, Co.
  We have audited the accompanying consolidated balance sheets of China Yida Holding, Co. and Subsidiaries as of December 31, 2011 and 2010, and the related consolidated statements of income and comprehensive income, equity and cash flows for the years then ended. China Yida Holding, Co.’s management is responsible for these consolidated financial statements. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
  We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
  In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of China Yida Holding, Co. and Subsidiaries as of December 31, 2011 and 2010, and the consolidated results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.
  /s/ Friedman LLP
  New York, New York
 March 29, 2012
  F-2
 INDEX
  CHINA YIDA HOLDING, CO. AND SUBSIDIARIES
 CONSOLIDATED BALANCE SHEETS
  December 31,


December 31,2011


2010ASSETSCurrent assetsCash and cash equivalents

$
5,684,847


$
7,146,684Accounts receivable


129,849



27,724Other receivables, net


4,940,389



160,133Advances and prepayments


1,881,427



1,020,000Prepayments – current portion


207,117



-Deferred tax assets


-



280,266Total current assets


12,843,629



8,634,807Property and equipment, net


110,593,580



89,739,372Construction in progress


25,964,029



35,191,692Intangible assets, net


32,355,010



14,042,432Long-term prepayments


12,758,763



193,593Deferred tax assets


104,078



19,913Total assets

$
194,619,089


$
147,821,809LIABILITIES AND EQUITYCurrent liabilitiesShort-term loans

$
943,619


$
1,784,687Long-term debt, current portion


3,761,894



-Accounts payable


91,385



1,229,237Current obligation under airtime rights commitment


2,359,169



1,890,657Accrued expenses and other payables


638,175



638,026Taxes payable


1,223,528



2,255,208Deferred tax liabilities


67,644



-Total current liabilities


9,085,414



7,797,815Long-term obligation under airtime rights commitment


1,548,928



3,758,376Long-term debt


26,040,732



2,571,161Total liabilities


36,675,074



14,127,352Commitments and contingenciesEquityPreferred stock ($0.001 par value, 10,000,000 shares authorized, none issued and outstanding)


-



-Common stock ($0.0001 par value, 100,000,000 shares authorized, 19,551,785 and 19,551,785 issued and outstanding as of December 31, 2011 and 2010, respectively)


1,955



1,955Additional paid in capital


49,129,165



48,478,086Accumulated other comprehensive income


12,484,116



7,000,839Retained earnings


87,715,182



75,569,652Statutory reserve


2,549,330



2,549,330Total China Yida Holding, Co. Stockholders’ equity


151,879,748



133,599,862Non-controlling interest


6,064,267



94,595Total equity


157,944,015



133,694,457Total liabilities and equity

$
194,619,089


$
147,821,809
 The accompanying notes are an integral part of these consolidated financial statements.
   F-3
 INDEX
  CHINA YIDA HOLDING, CO. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
 FOR THE YEARS ENDED DECEMBER 31
  2011


2010Net revenueAdvertisement

$
32,969,701


$
37,902,286Tourism


9,240,159



16,623,761Total net revenue


42,209,860



54,526,047Cost of revenueAdvertisement


8,463,917



8,096,232Tourism


5,050,485



4,206,057Total cost of revenue


13,514,402



12,302,289Gross profit


28,695,458



42,223,758Operating expensesSelling expenses


4,917,097



3,741,285General and administrative expenses


4,793,723



3,883,009Loss on construction in progress


-



403,057Total operating expenses


9,710,820



8,027,351Income from operations


18,984,638



34,196,407Other income (expense)Other income (expense), net


(101,528
)


(9,399
)Interest income


94,910



91,866Interest expenses


(257,472
)


(41,654
)(264,090
)


40,813Income before income tax and non-controlling interest


18,720,548



34,237,220Less: Provision for income tax


6,770,841



8,990,470Net income


11,949,707



25,246,750Net loss attributed to non-controlling interest


195,823



25,751Net income attributable to China Yida Holding Co.

$
12,145,530


$
25,272,501Net income

$
11,949,707


$
25,246,750Other comprehensive incomeForeign currency translation gain


5,719,978



3,810,027Comprehensive income


17,669,685



29,056,777Comprehensive (income) loss attributable to non-controlling interest


(40,878
)


26,401Comprehensive income attributable to China Yida Holding Co.

$
17,628,807


$
29,083,178Earnings per share- Basic

$
0.62


$
1.30- Diluted

$
0.62


$
1.27Weighted average shares outstanding- Basic


19,551,785



19,395,982- Diluted


19,562,024



19,836,128
  The accompanying notes are an integral part of these consolidated financial statements.
   F-4
 INDEX
  CHINA YIDA HOLDING, CO. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF EQUITY
 FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010
  CHINA YIDA HOLDING, CO. AND SUBSIDIARIES
 Common Stock





Accumulated otherNumber of shares


Par Value


Additional paid-in capital


comprehensive income


Retained earnings


Statutory reserve


Non-controlling interest


TotalBalance at December 31, 2009


17,062,064


$
1,706


$
21,711,384


$
3,190,162


$
50,297,151


$
2,549,330


$
-


$
77,749,733Contribution of non-controlling interest










-



-



-



-



6,049,790



6,049,790Cashless exercised warrants


-



-



83,994



-



-



-



-



83,994Shares issued for cash


2,489,721



249



26,682,708



-



-



-



-



26,682,957Foreign currency translation


-



-



-



3,810,677



-



-



(650
)


3,810,027Net income (loss) for the year ended December 31, 2010


-



-



-



-



25,272,501



-



(25,751
)


25,246,750Loan to non-controlling interest


-



-



-



-



-



-



(5,928,794
)


(5,928,794
)Balance at December 31, 2010


19,551,785



1,955



48,478,086



7,000,839



75,569,652



2,549,330



94,595



133,694,457Stock based compensation


-



-



651,079



-



-



-



-



651,079Repayment from non-controlling interest


-



-



-



-



-



-



5,928,794



5,928,794Foreign currency translation


-



-



-



5,483,277



-



-



236,701



5,719,978Net income (loss) for the year ended December 31, 2011


-



-



-



-



12,145,530



-



(195,823
)


11,949,707Balance at December 31, 2011


19,551,785


$
1,955


$
49,129,165


$
12,484,116


$
87, 715,182


$
2,549,330


$
6,064,267


$
157,944,015
  The accompanying notes are an integral part of these consolidated financial statements.
    F-5
 INDEX
  CHINA YIDA HOLDING, CO. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 FOR THE YEARS ENDED DECEMEBER 31
  2011


2010CASH FLOWS FROM OPERATING ACTIVITIESNet income

$
11,949,707


$
25,246,750Adjustments to reconcile net income to net cash provided by operating activities:Depreciation


3,613,094



2,020,087Amortization


3,336,913



2,373,869Stock based compensation


651,079



83,994Deferred tax expense (benefit)


263,745



(300,179
)Amortization of financing costs


67,297



-Loss on construction in progress


-



403,057Changes in operating assets and liabilities:Accounts receivable


(99,372
)


(25,027
)Other receivables, net


22,479



27,895Advances and prepayments


(94,990
)


382,929Accounts payable


(1,167,108
)


1,058,874Accrued expenses and other payables


(24,854
)


(446,794
)Taxes payable


(1,103,215
)


(651,835
)Net cash provided by operating activities


17,414,775



30,173,620CASH FLOWS FROM INVESTING ACTIVITIESAdditions to property and equipment


(5,874,525
)


(1,987,263
)Additions to construction in progress


(4,279,774
)


(51,090,719
)Additions to intangible asset including land use rights and management right of tourist resorts


(22,880,972
)


(1,945,661
)Proceeds from disposal of intangible assets


2,080,636



-Increase in refundable deposits – land use rights


(4,718,441
)


-Increase in long-term prepayments for acquisition of property and land use rightequipment


(12,285,745
)


(188,825
)Net cash used in investing activities


(47,958,821
)


(55,212,468
)CASH FLOWS FROM FINANCING ACTIVITIESRepayment of loan from (loan to) non-controlling interest


6,064,356



(5,782,777
)Capital contributed by non-controlling interest


-



5,900,793Net proceeds from issuance of common stock


-



26,682,957Repayment of obligation under airtime rights commitment


(1,933,887
)


(695,945
)Payment of deferred financing costs


(1,050,201
)


-Proceeds from short-term loans


928,218



1,740,734Repayment of short-term loans


(1,825,495
)


(1,740,734
)Proceeds from long-term loans


29,702,970



-Repayment of long-term loans


(3,016,708
)


-Net cash provided by financing activities


28,869,253



26,105,028EFFECT OF EXCHANGE RATE CHANGES ON CASH


212,956



303,826NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS


(1,461,837
)


1,370,006CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR


7,146,684



5,776,678CASH AND CASH EQUIVALENTS, ENDING OF YEAR

$
5,684,847


$
7,146,684SUPPLEMENTAL DISCLOSURES:Non-cash investing activities:Transfer from construction in progress to property and equipment

$
14,735,861


$
53,284,688Transfer from advances and prepayments to property and equipment

$
-


$
1,107,744Capitalized interest in construction in progress

$
848,969


$
288,155Capitalized airtime rights commitment

$
-


$
5,512,955Cash paid during the year for:Income taxes paid

$
7,450,528


$
9,970,251Interest paid

$
1,029,190


$
288,155
  The accompanying notes are an integral part of these consolidated financial statements.
  F-6
 INDEX
  CHINA YIDA HOLDING, CO. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   1.
ORGANIZATION AND DESCRIPTION OF BUSINESS
  China Yida Holding Co. (“China Yida”) and its subsidiaries (collectively the "Company”, “we”, “us”, or “our”) engage in tourism and advertisement businesses in the People’s Republic of China.
  Keenway Limited was incorporated under the laws of the Cayman Islands on May 9, 2007 for the purpose of functioning as an off-shore holding company to obtain ownership interests in Hong Kong Yi Tat International Investment Co., Ltd (“Hong Kong Yi Tat”), a company incorporated under the laws of Hong Kong. Immediately prior to the Merger (defined below), Mr. Chen Minhua and his wife, Ms. Fan Yanling, were the majority shareholders of Keenway Limited.
  On November 19, 2007, we entered into a share exchange and stock purchase agreement with Keenway Limited, Hong Kong Yi Tat, and with the shareholders of Keenway Limited at that time, including Chen Minhua, Fan Yanling, Zhang Xinchen, Extra Profit International Limited, and Lucky Glory International Limited (collectively, the “Keenway Limited Shareholders”), pursuant to which in exchange for all of their shares of Keenway Limited common stock, the Keenway Limited Shareholders received 90,903,246 newly issued shares of our common stock and 3,641,796 shares 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 RMB3,000,000.  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 RMB5,000,000. 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 new 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 RMB100 million). Anhui Yida's primary business relates to the operation of our tourism destinations, specifically, Ming dynasty culture tourist destination.
  F-7
 INDEX
  CHINA YIDA HOLDING, CO. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   1.
ORGANIZATION AND DESCRIPTION OF BUSINESS (CONTINUED)
  On July 6, 2010 Fujian Yida formed a wholly owned subsidiary, Jiangxi Zhangshu (Yida) Tourism Development Co., Ltd. (“Jiangxi Zhangshu”) which currently has no material business operations. The initial paid-in capital of Jiangxi Zhangshu was $2,937,461 (RMB20 million). On July 5, 2011, Fujian Yida and Fuyu further injected capital amounted to RMB49 million and RMB1 million, respectively, to Jiangxi Zhangshu.  The total paid-in capital increased to $10,957,189 (RMB70 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 (RMB12 million).  On July 7, 2011, Fujian Yida further injected capital amounted to RMB48 million to Jiangxi Fenyi and the total paid-in capital increased to $9,391,876 (RMB60 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 $1,546,670 (RMB10 million).  Its primary business is to conduct domestic and international traveling services in China, including operating the direct sales of travel services for our current tourist destinations at the Great Golden Lake, Yunding Recreational Park, and Hua’An Tulou Cluster, and our three tourist destinations currently under construction, Ming Dynasty Entertainment World, China Yang-sheng (Nourishing Life) Paradise, and the City of Caves.
  2.
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
  a. Basis of presentation
  The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America. The functional currency is the Chinese Renminbi, however the accompanying consolidated financial statements have been translated and presented in United States Dollars ($).
  b. Principles of consolidation
  The accompanying consolidated financial statements include the accounts of China Yida and its wholly-owned subsidiaries Keenway Limited, Hong Kong Yi Tat, Fujian Jintai, Fuyu, Hongda, Fujian Yida, Tulou, Anhui Yida, Yongtai Yunding, Jiangxi Zhangshu, Jiangxi Fenyi, Yida 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 Condensed Consolidated Balance Sheets are as follows:
  December 31,

2011


December 31,

2010Total current assets *

$
12,091,197


$
11,005,172Total assets

$
12,098,729


$
11,020,336Total current liabilities #

$
10,011,732


$
8,398,261Total liabilities

$
10,011,732


$
8,398,261
  * Including intercompany receivables of $12,090,456 and $11,001,921 as at December 31, 2011 and December 31, 2010, respectively, to be eliminated in consolidation.
  # Including intercompany payables of $9,009,187 and $7,086,393 as at December 31, 2011 and December 31, 2010, respectively,  to be eliminated in consolidation.
  F-8
 INDEX
  CHINA YIDA HOLDING, CO. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   2.
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
  c. Use of estimates and assumptions
  The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the amount of revenues and expenses during the reporting periods. Management makes these estimates using the best information available at the time the estimates are made. However, actual results could differ materially from those results. The most significant estimates reflected in the consolidated financial statements include depreciation, useful lives of property and equipment, deferred income taxes, useful life of intangible assets and contingencies. Estimates and assumptions are periodically reviewed and the effects of revisions are reflected in the consolidated financial statements in the period they are determined to be necessary.
  d. Cash and cash equivalents
  The Company considers all cash on hand and in banks, certificates of deposit and other highly-liquid investments with original maturities of three months or less, when purchased, to be cash and cash equivalents. As of December 31, 2011 and 2010, the Company has uninsured deposits in banks of approximately $5,435,000 and $6,897,000.
  e. Accounts receivable
  The Company maintains reserves for potential credit losses on accounts receivable. Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves. Based on the management’s judgment, no allowance for doubtful accounts is required at the balance sheet dates.
  f. Advances and prepayments
  The Company advances funds to certain vendors for purchase of its construction materials and necessary services. Based on the management’s judgment, no allowance for advances and prepayments is required at the balance sheet dates.
  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 yearsElectronic Equipment
5 to 8 yearsTransportation Equipment
8 yearsOffice Furniture
5 to 8 yearsLeasehold 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.
  F-9
 INDEX
  CHINA YIDA HOLDING, CO. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  2.
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
 i. Impairment
  The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable through the estimated undiscounted cash flows expected to result from the use and eventual disposition of the assets. Whenever any such impairment exists, an impairment loss will be recognized for the amount by which the carrying value exceeds the fair value.
  Assets are grouped and evaluated at the lowest level for their identifiable cash flows that are largely independent of the cash flows of other groups of assets. The Company considers historical performance and future estimated results in its evaluation of potential impairment and then compares the carrying amount of the asset to the future estimated cash flows expected to result from the use of the asset. If the carrying amount of the asset exceeds estimated expected undiscounted future cash flows, the Company measures the amount of impairment by comparing the carrying amount of the asset to its fair value. The estimation of fair value is generally measured by discounting expected future cash flows as the rate the Company utilizes to evaluate potential investments. The Company estimates fair value based on the information available, judgments and projections are considered necessary. There was no impairment of long-lived assets as of December 31, 2011 and 2010.
  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 15):
  For the year ended December 31, 2011Fujian Jintai


TulouGross receipts

$
4,938,004


$
3,019,101Profit sharing costs


638,070



-Nature resource compensation expenses


415,570



334,623Total paid to the local governments


1,053,640



334,623Net receipts

$
3,884,364


$
2,684,478
  For the year ended December 31, 2010Fujian Jintai


TulouGross receipts

$
11,680,722


$
4,416,732Profit sharing costs


1,378,555



-Nature resource compensation expenses


1,003,910



534,862Total paid to the local governments


2,382,465



534,862Net receipts

$
9,298,257


$
3,881,870
  F-10
 INDEX
  CHINA YIDA HOLDING, CO. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   2.
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
 k. Advertising costs
  The Company expenses the cost of advertising as incurred or, as appropriate, the first time the advertising takes place. Advertising costs for the years ended December 31, 2011 and 2010 were $496,106 and $618,025, 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 $210,600 and $139,676 for the years ended December 31, 2011 and 2010, respectively.  Other than the above, neither the Company nor its subsidiary 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. The deferred income tax assets were $104,078 and $300,179 as December 31, 2011 and 2010, respectively.
  The Company applied the provisions of ASC 740-10-50, “Accounting For Uncertainty In Income Taxes”, which provides clarification related to the process associated with accounting for uncertain tax positions recognized in our financial statements. Audit periods remain open for review until the statute of limitations has passed. The completion of review or the expiration of the statute of limitations for a given audit period could result in an adjustment to the Company’s liability for income taxes. Any such adjustment could be material to the Company’s results of operations for any given quarterly or annual period based, in part, upon the results of operations for the given period. At December 31, 2011, 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 2007, and the PRC tax authority for years after 2006.
  o. Fair values of financial instruments
  The carrying amounts reported in the condensed 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 rate associated with the debt approximates the current market interest rate.
  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.
  F-11
 INDEX
  CHINA YIDA HOLDING, CO. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  2.
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
 p. Stock-based compensation
  The Company records stock-based compensation expense pursuant to ASC 718-10, "Share Based Payment Arrangement ,” which requires companies to measure compensation cost for stock-based employee compensation plans at fair value at the grant date and recognize the expense over the employee's requisite service period. The Company’s expected volatility assumption is based on the historical volatility of Company’s stock or the expected volatility of similar entities. The expected life assumption is primarily based on historical exercise patterns and employee post-vesting termination behavior. The risk-free interest rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of grant.
  Stock-based compensation expense is recognized based on awards expected to vest, and there were no estimated forfeitures as the Company has a short history of issuing options. ASC 718-10 requires forfeitures to be estimated at the time of grant and revised in subsequent periods, if necessary, if actual forfeitures differ from those estimates.
  q. Earnings per share (EPS)
  Earnings per share is calculated in accordance with ASC 260. Basic earnings per share is based upon the weighted average number of common shares outstanding. Diluted earnings per share is based on the assumption that all dilutive convertible shares and stock instruments were converted or exercised. Options and warrants are assumed to be exercised at the beginning of the period if the average stock price for the period is greater than the exercise price of the warrants and options.
  r. Statutory Reserves
  In accordance with the relevant laws and regulations of the PRC and the articles of association of the Company, the Company is required to allocate 10% of their net income reported in the PRC statutory accounts, after offsetting any prior years’ losses, to the statutory surplus reserve, on an annual basis. When the balance of such reserve reaches 50% of the respective registered capital of the subsidiaries, any further allocation is optional.
  As at December 31, 2011, 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. Reclassification
  Certain reclassifications have been made to the 2010 consolidated financial statements to conform to the 2011 consolidated financial statement presentation. These reclassifications had no effect on net loss or cash flows as previously reported.
  F-12
 INDEX
 CHINA YIDA HOLDING, CO. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 2.
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
  v. Recent accounting pronouncements
  In December 2011, FASB issued Accounting Standards Update No. 2011-12, Comprehensive Income (“ASU 2011-12”).  Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05.  Among the new provisions in ASU 2011-05 was a requirement for entities to present reclassification adjustments out of accumulated other comprehensive income by component in both the statement in which net income is presented and the statement in which other comprehensive income is presented (for both interim and annual financial statements); however this reclassification requirement is indefinitely deferred by ASU 2011-12 and will be further deliberated by the FASB at a future date.
  In September 2011, the FASB has issued Accounting Standards Update (ASU) No. 2011-08, Intangibles—Goodwill and Other (Topic 350): Testing Goodwill for Impairment. ASU 2011-08 is intended to simplify how entities, both public and nonpublic, test goodwill and other intangible assets such as patents for impairment. ASU 2011-08 permits an entity to first assess qualitative factors to determine whether it is "more likely than not" that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test described in Topic 350, Intangibles-Goodwill and Other. The more-likely-than-not threshold is defined as having a likelihood of more than 50%. ASU 2011-08 is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption is permitted, including for annual and interim goodwill impairment tests performed as of a date before September 15, 2011, if an entity’s financial statements for the most recent annual or interim period have not yet been issued or, for nonpublic entities, have not yet been made available for issuance.  The Company does not expect the adoption of ASU 2011-08 to have a material effect on the Company’s consolidated financial statements.
  In June 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU No. 2011-05), Presentation of Comprehensive Income, an amendment to ASC Topic 220, Comprehensive Income.  Under this amendment, an entity has the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements.  The new guidance eliminates the current option to report other comprehensive income and its components in the statement of changes in stockholders’ equity.  While the new guidance changes the presentation of comprehensive income, there are no changes to the components that are recognized in net income or other comprehensive income under current accounting guidance.  The guidance for public entities is effective for fiscal years or interim periods beginning after December 15, 2011 with early adoption permitted.  The amendments in this update are to be applied retrospectively.  The Company does not expect the adoption of ASU 2011-05 to have a material effect on the Company’s consolidated financial statements.
  3.
OTHER RECEIVABLES, NET
  Other receivables consist of the following:
  December 31, 2011


December 31, 2010Refundable deposits - land use rights

$
4,718,094


$
-Other


242,990



180,0354,961,084



180,035Less: Allowance


(20,695
)


(19,902
)$
4,940,389


$
160,133
  Anhui Yida participates in a bid for land use rights in Anhui Province, with the intention to develop tourism destinations. Anhui Yida deposited $4,718,094 (RMB30 million) with the local government of Anhui province to participate in the bid. The amount will be used as payment for the land use rights if the Company wins the bid or the funds will be refunded by the government to the Company.
  F-13
 INDEX
  CHINA YIDA HOLDING, CO. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   4.
ADVANCES AND PREPAYMENTS
  Advances and prepayments consist of the following:
  December 31, 2011


December 31, 2010Advance payments related to land use rights

$
1,072,144


$
574,730Advance payments related to hotel facilities of Yunding resort


142,781



-Advance payments related to construction cost of Great Golden Lake


240,969



-Other


428,631



448,2491,884,525



1,022,979Less: Allowance


(3,098
)


(2,979
)$
1,881,427


$
1,020,000
  As of December 31, 2011, advance payments related to land use rights represents the payment made by Fuijian Yida and Fenyi Yida. Fuijian Yida made advance payments to the local government of Yongtai County of $691,987 (RMB4.4million) for the acquisition of land use rights. Fenyi Yida made advance payment of $380,157 (RMB2.4 million) on behalf of the local government to the existing user of the land to compensate for the acquisition of land for the development of the tourism destinations in Fenyi County. The local government repaid $267,358 (RMB 1.7 million) to the Company at the end of January, 2012.
  As of December 31, 2010, an advance payment made by Fujian Yida for the acquisition of land use rights was $574,730 (RMB3.8 million).
  5.
PROPERTY AND EQUIPMENT, NET
  Property and equipment consist of the following:
  December 31, 2011


December 31, 2010Buildings, Improvements and Attractions

$
116,009,545


$
91,824,909Electronic Equipment


523,108



315,037Transportation Equipment


2,399,339



2,099,199Office Furniture


53,606



38,417118,985,598



94,277,562Less: Accumulated Depreciation


(8,392,018
)


(4,538,190
)Property and equipment, net

$
110,593,580


$
89,739,372
  For the year ended December 31, 2011, depreciation expense was $3,613,094, of which $3,560,429 and $52,665 was included in cost of sales and in general and administrative expenses, respectively.
  For the year ended December 31, 2010, depreciation expense was $2,020,087 of which $1,987,920 and $32,167 was included in cost of sales and in general and administrative expenses, respectively.
  F-14
 INDEX
  CHINA YIDA HOLDING, CO. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  6.
CONSTRUCTION IN PROGRESS
  The construction in progress consists of the projects related to the construction of the following:
  December 31, 2011


December 31, 2010Great Golden Lake

$
2,980,653


$
2,785,712Yunding resort (Phases I and II)


-



14,406,456Jiangxi Zhangshu Yangsheng TianTang resort


12,049,824



9,127,911Jiangxi Fenyi Dongdou resort


10,933,552



8,871,613$
25,964,029


$
35,191,692
  The construction in progress mainly related to the construction of new tourist resorts which the Company has developed. The estimated completion date of all these construction projects in progress will be September 30, 2012. The amount of capitalized interest included in construction in progress for the years ended December 31, 2011 and 2010 amounted to $848,969 and $288,155, respectively.
  The tourist resort in Yunding resort opened on September 28, 2010 at which time the Company then transferred the related construction in progress of $50,019,707 to property and equipment during the year ended December 31, 2010. The second phase of construction of the Yunding resort was completed and transferred to property and equipment as of September 30, 2011.  Construction in progress of $14,735,861 and $53,284,688 were transferred to property and equipment during the years ended December 31, 2011 and 2010, respectively.
  7.
INTANGIBLE ASSETS, NET
  Intangible assets consist of the following:
  December 31, 2011


December 31, 2010Management right of tourist resort

$
5,504,443


$
5,293,566Advertising boards


-



6,806,013Commercial airtime rights


6,616,013



6,362,551Land use right


25,334,867



1,994,79037,455,323



20,456,920Accumulated amortization


(5,100,313
)


(6,414,488
)Intangible assets, net

$
32,355,010


$
14,042,432
  The Company acquired a 40 year land use rights in Jiangxi in December 2011 for consideration of $23,260,613 (RMB147,902,605).
  The Company entered into an agreement with a third party on February 29, 2008 and obtained a five-year advertising right for 30 outside advertising boards in Fuzhou City for purchase consideration of $6,961,635 (RMB45,000,000). The agreement had a five-year term. However, due to the expansion of the highways in Fuzhou City, the advertising boards needed to be demolished.  On August 31, 2011, the Company entered into an agreement with the original third party supplier to have early termination of the term of the advertising right due to the expansion of the highways by the government and the Company recorded $928,218(RMB6,000,000) as amortization expense up to August 31, 2011. The original third party supplier agreed to compensate the Company at the net book value in cash of $2,123,142 (RMB13,500,000). The accumulated amortization at the date of disposal was $4,953,999 (RMB31,500,000) and there was no gain or loss on disposition of the advertising boards.
  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 $157,270 (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 $188,724 (RMB1,200,000).  From August 31, 2012 to July 30, 2013, the monthly fee will be $226,469 (RMB1,440,000) 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 $6,616,013 (RMB42,067,917) as commercial airtime rights as an intangible asset, $6,869,545 (RMB43,680,000) as an obligation under airtime rights commitment, and $253,532 (RMB1,612,083) as deferred interest at inception (See note 10).
  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.
  F-15
 INDEX
  CHINA YIDA HOLDING, CO. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  7.
INTANGIBLE ASSETS, NET(CONTINUED)
  Land use right
  On October 31, 2010, the Company entered into an agreement with the local government in the PRC to acquire the land use rights for 40 years for the development of the Yunding resort. The purchase consideration was $1,994,790 (RMB13,189,150).
  In November 2011, the Company obtained five land use rights certificates from the local PRC governments for the purchase of the land use rights in Jiangxi to develop Jiangxi Zhongzhu Yang Sheng Tian Tang resort. The total purchase consideration was $23,340,077 (RMB147,902,605).
  For the years ended December 31, 2011 and 2010, amortization expense amounted to $3,336,913 and $2,373,869, respectively.
  Estimated amortization for the next five years and thereafter is as follows:
  2012

$
3,022,1912013


2,103,3002014


816,8532015


816,8532016


816,853Thereafter


24,778,960$
32,355,010
  8.
LONG-TERM PREPAYMENTS
  Long-term prepayments consist of the following:
  December 31, 2011


December 31, 2010Prepayments for project planning, assessments and consultation fees

$
2,136,883


$
193,593Prepayments for acquisition of land use right and management right of tourist resort


9,481,598



-Deferred financing costs, net of accumulated amortization of $67,297


846,695



-Others


293,587



-$
12,758,763


$
193,593
  Prepayments for project planning, assessments and consultation fees represent advances relating to the planning, assessment and consultation for the development of other tourism destinations in Anhui province and Jiangxi province.
  In 2011, the Company paid approximately $1,067,000 (RMB6.8 million) of fees in order to obtain additional debt used to construct various resort projects. These fees are deferred and will be 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:
  2012

$
152,5182013


152,5182014


152,5182015


152,5182016


152,518Thereafter


236,623Total minimum payments

$
999,213Current portion recorded under prepayments – current portion


(152,518
)Long term portion

$
846,695
  F-16
 INDEX
  CHINA YIDA HOLDING, CO. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  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:
  December 31, 2011


December 31, 2010Loan from Construction Bank, interest rate at 5.56% per annum, due December 15, 2011, collateralized by the Tulou’s property with a net book value of $1,206,200. The Company repaid the loan in December 2011.

$
-


$
574,730Loan from Fujian Haixia Bank (formerly known as Merchant bank of Fuzhou), interest rate at 9.184% per annum, due November 4, 2012, guaranteed by Fujian Jintai Tourism Development Co., Ltd.


943,619



1,209,957Total

$
943,619


$
1,784,687
  The Company repaid the short-term loan of $1,209,957 (RMB 8 million) and renewed the loan of $943,619 (RMB 6 million) in November 2011from Fujian Haixia Bank and the due date to be November 4, 2012 with the interest rate at 9.184%.
  Interest expense for the years ended December 31, 2011 and 2010 amounted to $92,539 and $109,659, respectively. The interest expense for the years ended December 31, 2011 and 2010 of $62,435 and $109,659, respectively was capitalized as part of construction in progress.
  Long-term debt
  Long term debt consists of the following:
  December 31, 2011


December 31, 2010Loan from Taining Credit Union, interest rate at 7.02% per annum, due March 20, 2012, collateralized by the management rights of the Great Golden Lake. The Company repaid the loan in November 2011 before the due date.

$
-


$
2,571,161Loan from Industrial and Commercial Bank of China Limited, interest rate at 7.76% per annum, final installment due October 25, 2018, collateralized by the right to collect resort ticket sales at the Great Golden Lake. (Note (a))


13,682,472



-Loan from Industrial and Commercial Bank of China Limited, interest rate at 6.40% per annum, final installment due December 15, 2017, secured by credit guarantee of Fujian Jintai and the right to collect resort ticket sales at Yunding resort as additional collateral. (Note (b))


10,615,711



-Loan from Industrial and Commercial Bank of China Limited, interest rate at 7.76% per annum, final installment due November 22, 2018, collateralized by the right to collect resort ticket sales at the Tulou resort, secured by the fixed assets of Fujian Tulou and personal guarantees by two of the Company’s directors as additional collateral. (Note (c))


5,504,443



-29,802,626



2,571,161Less: current portion


3,761,894



-Total

$
26,040,732


$
2,571,161
  Note:
 (a)
$1,953,291 (RMB12,420,000) will be due in 2012,2013, 2014, 2015, 2016, 2017 respectively and $1,962,726 (RMB12,480,000) will be due in 2018. In November 2011, $471,709 of financing costs was paid in connection with this loan.
  F-17
 INDEX
  CHINA YIDA HOLDING, CO. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  9.
BANK LOANS (CONTINUED)
 Long-term debt (continued)
  (b)
$1,022,254 (RMB6,500,000) will be due in 2012; $1,336,793 (RMB8,500,000) will be due in 2013; $1,729,968 (RMB11,000,000) will be due in 2014; $2,123,142 (RMB13,500,000) will be due in 2015; $2,201,777 (RMB14,000,000) will be due in 2016 and $2,201,777 (RMB14,000,000) will be due in 2017. In January 2011, $382,380 of financing costs was paid in connection with this loan.
  (c)
$786,349 (RMB5,000,000) will be due in 2012,2013, 2014, 2015, 2016, 2017 and 2018 respectively. In December 2011, $213, 336 of financing costs was paid in connection with this loan.
  Interest expense for the years ended December 31, 2011 and 2010 amounted to $936,650 and $178,496, respectively. Interest expense for the years ended December 31, 2011 and 2010 of $786,534 and $178,496, respectively was capitalized as part of construction in progress.
  10.
OBGLIATION UNDER AIRTIME RIGHTS COMMITMENT
  Obligation under airtime rights commitment (See note 7) consists of the following:
  2012

$
2,453,4092013


1,585,2804,038,689Less: deferred interest


(130,592
)3,908,097Less: current portion


(2,359,169
)$
1,548,928Maturities of the long-term debt:2012

$
2,359,1692013


1,548,928$
3,908,097
  11.
ACCRUED EXPENSES AND OTHER PAYABLES
  Accrued expenses and other payables consist of the following:
  December 31, 2011


December 31, 2010Unearned revenue

$
30,155


$
22,616Accrued payroll


298,810



179,935Welfare payables


23,428



125,403Other


285,782



310,072$
638,175


$
638,026
  12.
INCOME TAX
  The Company is subject to Hong Kong (“HK”) and People’s Republic of China (“PRC”) profit tax. For certain operations in HK and PRC, the Company has incurred net accumulated operating losses for income tax purposes.
  United States
  The Company is incorporated in the United States of America and is subject to United States federal taxation. No provisions for income taxes have been made as the Company has no taxable income for the year. The applicable income tax rate for the Company was 35% for the each of the years ended December 31, 2011 and 2010. Net operating loss at December 31, 2011, which can be used to offset future taxable income, was approximately $1,303,000. 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.
  F-18
 INDEX
  CHINA YIDA HOLDING, CO. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  12.
INCOME TAX (CONTINUED)
  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 year. The applicable statutory tax rate for the subsidiary was 16.5% for each of the years ended December 31, 2011 and 2010.
  PRC
  Effective on January 1, 2008, the PRC Enterprise Income Tax Law, EIT Law, and Implementing Rules impose an unified enterprise income tax rate of 25% on all domestic-invested enterprises and foreign investment enterprises in PRC, unless they qualify under certain limited exceptions. As such, starting from January 1, 2008, the Company’s subsidiaries in PRC are subject to an enterprise income tax rate of 25%.
  Provision for income tax consists of the following:
  For The Years Ended December 31,2011


2010CurrentUSA

$
-


$
-China


6,507,096



9,290,6496,507,096



9,290,649DeferredUSADeferred tax asset for NOL carry forwards


735,643



442,902Valuation allowance


(735,643
)


(442,902
)-



-ChinaCurrent portionTemporary difference from general and administrative expenses


-



(274,546
)Allowance for doubtful accounts for other receivables


-



(5,720
)Net deferred income tax liabilities under current liabilities


-



(280,266
)Non current portionDeferred tax asset for NOL carry forwards


2,410,718



(98,373
)Temporary difference from airtime rights expenses


196,101



34,040Temporary difference from capitalized interest


67,644



(54,253
)Valuation allowance


(2,410,718
)


98,673Net deferred income tax assets under non current assets


263,745



(19,913
)Net deferred income tax expenses (benefit)


263,745



(300,179
)Provision of income tax

$
6,770,841


$
8,990,470
  F-19
 INDEX
  CHINA YIDA HOLDING, CO. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  12.
INCOME TAX (CONTINUED)
  The following is a reconciliation of the provision for income taxes at the PRC and Hong Kong tax rate to the income taxes reflected in the Statement of Income:
 December 31,


December 31,2011


2010Tax 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)


11.2
%


1.3
%Effective income tax rates


36.2
%


26.3
%
 (a)
Other represents expenses incurred by the Company that are not deductible for PRC income taxes for the years ended December 31, 2011 and 2010, respectively.
  In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which the net operating losses and temporary differences become deductible. Management considered projected future taxable income and tax planning strategies in making this assessment.
  The change in total allowance for the years ended December 31, 2011 and 2010 was an increase of $3,030,010 and $179,559, respectively.
  13.
EQUITY
  1) WARRANTS
  The remaining 773,812 Class A Warrants expired on September 6, 2011.
  2) STOCK-BASED COMPENSATION
  On January 21, 2011 (the “CFO Stock Option Grant Date”), the Company entered into a Non-qualified Stock Option Agreement with the Company’s Chief Financial Officer, pursuant to which, the Company issued non-qualified stock options (the “CFO Stock Options”) to purchase a total of 75,000 shares of the Company’s common stock as compensation for his services to be rendered as the Company’s Chief Financial Officer. 15,000 CFO Stock Options vested on the CFO Stock Option Grant Date; 20,000 CFO Stock Options shall vest on the one-year anniversary of the CFO Grant Date; 20,000 CFO Stock Options shall vest on the second-year anniversary of the CFO Grant Date; and 20,000 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 January 21, 2011 (the “VPIR Stock Option Grant Date”), the Company entered into a Non-qualified Stock Option Agreement with the Company’s VP of Investor Relation, pursuant to which, the Company issued non-qualified stock options (the “VPIR Stock Options”) to purchase a total of 75,000 shares of the Company’s common stock as compensation for his services to be rendered as the Company’s VP of Investor Relation. 15,000 VPIR Stock Options shall vest on the VPIR Stock Option Grant Date; 20,000 VPIR Stock Options shall vest on the one-year anniversary of the VPIR Grant Date; 20,000 VPIR Stock Options shall vest on the second-year anniversary of the VPIR Grant Date; and 20,000 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 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 30,000 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 20,000 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 20,000 shares was $73,000 on June 10, 2011. The unrecognized share based compensation expense as of December 31, 2011 was approximately $36,500 which is expected to be recognized over a weighted average period of approximately 0.5 year.
  F-20
 INDEX
  CHINA YIDA HOLDING, CO. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 13.
EQUITY (CONTINUED)
 On November 5, 2011, our CFO submitted a letter of resignation resigning from his position. The resignation will be effective as of December 31, 2011. Under the Non-qualified Stock Option Agreement, if CFO is removed from office for cause prior to the 21st day of January, 2012, any outstanding stock options held by him which are not vested and exercisable by him immediately prior to resignation shall terminate as of the date of removal, and any outstanding stock options held by 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. 60,000 CFO Stock Options were forfeited as of December 31, 2011.
  On November 5, 2011, our Corporate Secretary and Vice President of Investor Relations (“VPIR”) submitted a letter of resignation resigning from his position. The resignation will be effective as of December 31, 2011. Under the Non-qualified Stock Option Agreement, if VPIR is removed from office for cause prior to the 21st day of January, 2012, any outstanding stock option held by him which 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. 60,000 VPIR Stock Options were forfeited as of December 31, 2011.
  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

RateOptions to Chief Financial Officer


75,000



6.25



60
%


0
%


3.44
%Options to VP of Investor Relation


75,000



6.25



60
%


0
%


3.44
%Options to Independent Director


30,000



6.25



60
%


0
%


3.25
%180,000
  The following is a summary of the option activity:
  Number of OptionsOutstanding as of December 31, 2009 and 2010


30,000Granted


180,000Exercised


-Forfeited


120,000Outstanding as of December 31, 2011


90,000
  For the years ended December 31, 2011 and 2010, the Company recognized approximately $651,079 and $83,994, respectively, as stock-based compensation expense, in which $623,879 and $83,994 for its stock option plan and $27,200 and nil for its restricted shares, which was included in general and administrative expenses.
  The total unrecognized share-based compensation expense as of December 31, 2011 was approximately $36,500 which is expected to recognized over 6 months.
  F-21
 INDEX
  CHINA YIDA HOLDING, CO. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  14.
NON-CONTROLLING INTEREST
  On April 15, 2010, the Company established a new subsidiary, Anhui Yida.  The Company has a 60% interest and Anhui Xingguang Group, an unrelated entity, holds a 40% interest.  Anhui Yida has not commenced operations as of December 31, 2011.  Non-controlling interest consisted of the following:
  December 31, 2011


December 31, 2010Balance bought forward

$
94,595


$
-Capital contributed by non-controlling interest


-



6,049,790Accumulated deficits


(195,823
)


(25,751
)Accumulated other comprehensive income


236,701



(650
)135,473



6,023,389Add: Repayment from non-controlling interest


5,928,794



-Less: Loan to non-controlling interest


-



(5,928,794
)Balance carry forward

$
6,064,267


$
94,595
  15.
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:
  2012

$
290,5372013


271,5002014


265,3312015


267,3562016


272,296Thereafter


13,479,245Total minimum payments

$
14,846,265
  The Company incurred rental expenses of $153,716 and $96,500 for the year ended December 31, 2011 and 2010, respectively and which included $9,282 and $8,851, respectively, paid to Xin Hengji Holding Company Limited, a related party.
  (2) Capital commitments
  Jiangxi Zhangshu Yangsheng TianTang Resort
 As at December 31, 2011, the total estimated contract costs to complete Jiangxi Zhangshu Yangsheng TianTang resort are approximately $14,244,000 (RMB90.57 million) of which the Company has completed and paid for approximately $12,050,000 (RMB76.62 million). The remaining $2,194,000 (RMB13.95 million) will be completed and paid for by the end of 2012.
  Jiangxi Fenyi Dongdou Resort
 As at December 31, 2011, the total estimated contract costs to complete Jiangxi Fenyi Dongdou resort are approximately $14,507,000 (RMB92.24 million) of which the Company has completed and paid for approximately $11,281,000 (RMB71.73 million). The remaining $3,226,000 (RMB20.51 million) will be completed and paid for by the beginning of 2013.
  (3) 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 $638,070 and $1,378,555 to the Taining government for the year ended December 31, 2011 and 2010, respectively, and recorded as cost of revenue.
 
 F-22
 INDEX
  CHINA YIDA HOLDING, CO. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  15.
COMMITMENTS AND CONTINGENCIES (CONTINUED)
  (4) 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 $416,000 and $1,004,000 to the Taining government for the year ended December 31, 2011 and 2010, 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 $334,600 and $534,900 to the Hua’an government for the year ended December 31, 2011 and 2010, respectively, and recorded as selling expenses.
  (5) Litigation
  The Company’s management does not expect the legal matters involving the Company would have a material impact on the Company’s consolidated financial position or results of operations.
  F-23
 INDEX
  CHINA YIDA HOLDING, CO. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
   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:
  December 31,


December 31,2011


2010BASICNumerator for basic earnings per share attributable to the Company’s common stockholders:Net income used in computing basic earnings per share

$
12, 145,530


$
25,272,501Basic earnings per share

$
0.62


$
1.30Basic weighted average shares outstanding


19,551,785



19,395,982December 31,


December 31,2011



2010DILUTEDNumerator for basic earnings per share attributable to the Company’s common stockholders:Net income used in computing diluted earnings per share

$
12,145,530


$
25,272,501Diluted earnings per share

$
0.62


$
1.27Weighted average outstanding shares of common stock


19,551,785



19,395,982Warrants


-



440,146Restricted common shares


10,239



-Diluted weighted average shares outstanding


19,562,024



19,836,128Potential common shares outstanding as of December 31:Warrants outstanding


-



773,812Options outstanding


90,000



-Unvested restricted common shares


20,000



-
  For the years ended December 31, 2011 and 2010, 90,000 and 30,000 options, respectively were not included in the diluted earnings per share because the average stock price was lower than the strike price of these options.
  F-24
 INDEX
  CHINA YIDA HOLDING, CO. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   17.
BUSINESS SEGMENTS
  During the years ended December 31, 2011 and 2010, the Company is 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 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 years ended:
  December 31,


December 31,2011


2010Revenues:Advertisement

$
32,969,701


$
37,902,286Tourism


9,240,159



16,623,761Total

$
42,209,860


$
54,526,047Operating income:Advertisement

$
23,716,395


$
28,183,691Tourism


(3,283,765
)


7,363,617Other


(1,447,992
)


(1,350,901
)Total

$
18,984,638


$
34,196,407Net income:Advertisement

$
17,504,447


$
20,913,896Tourism


(3,863,194
)


4,981,549Other


(1,691,546
)


(648,695
)Total

$
11,949,707


$
25,246,750Capital expenditure:Advertisement

$
2,333


$
5,659Tourism


10,151,966



53,056,759Total

$
10,154,299


$
53,062,418Intangible assets:Advertisement

$
3,491,785


$
8,428,136Tourism


28,863,225



5,614,296Total

$
32,355,010


$
14,042,432Identifiable assets:Advertisement

$
4,134,036


$
9,990,752Tourism


189,882,849



136,088,730Others


602,213



1,742,327$
194,619,098


$
147,821,809
  Others represent reconciling amounts including certain assets which are excluded from segments and adjustments to eliminate inter-company transactions.
  F-25
 INDEX
 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
  On August 8, 2010, the Company accepted the resignation of BDO China Li Xin Da Hua CPA Co., Ltd (“BDO Li Xin Da Hua”), ceasing to act as our independent auditors and, on August 9, 2010 we engaged Friedman LLP (“Friedman”), an Independent Registered Public Accounting Firm, to serve as our independent auditors. The engagement of Friedman LLP was approved by our Audit Committee on August 9, 2010. BDO Li Xin Da Hua was appointed as our independent auditors on May 20, 2010.  BDO Li Xin Da Hua did not complete any interim reviews for us or issue any audit report on our financial statements from the appointment date of May 20, 2010 to the date of resignation, August 8, 2010. The Company and BDO Li Xin Da Hua did not have any disagreements with regard to any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure for the audited financials from the date of engagement, May 20, 2010, through the date of resignation, August 8, 2010, which disagreements, if not resolved to the satisfaction of BDO Li Xin Da Hua, would have caused it to make reference to the subject matter of the disagreements in connection with its reports.  However, as noted, BDO Li Xin Da Hua did not audit any financial statements prior to its resignation. During the period from May 20, 2010 to the date of resignation, the Company did not experience any reportable events as set forth in Item 304(a)(1)(v) of Regulation S-K except that BDO Li Xin Da Hua identified that the Company lacks a good system of internal controls, such as inadequate documentation for certain transactions and lack of competent and well trained personnel to furnish US GAAP based reporting documents to be filed. The lack of a good system of internal controls, such as inadequate documentation for certain transactions and lack of competent and well trained personnel to furnish US GAAP based reporting documents has been addressed and we have hired Audit Prep Limited as an outside consultant to assist us in maintain effective controls and to implement the necessary controls and procedures to ensure that we have adequate management of our financial books and records. We believe that this step has remedied any deficiency that BDO Li Xin Da Hua recognized. Prior to engaging Friedman, the Company has not consulted Friedman regarding the application of accounting principles to a specified transaction, completed or proposed, the type of audit opinion that might be rendered on our financial statements or a reportable event, nor did the Company consult with Friedman regarding any disagreements with our prior auditor on any matter of accounting principles or practices, financial statement disclosure, or auditing scope of procedure, which disagreements, if not resolved to the satisfaction of the prior auditor, would have caused it to make a reference to the subject matter of the disagreements in connection with its reports. The Company obtained a letter from BDO Li Xin Da Hua addressed to the United States Securities and Exchange Commission stating it agrees with the statements presented in the Form 8-K the Company filed on August 11, 2010 and the letter was attached to the Form 8-K as Exhibit 16.1.
  On May 20, 2010, the Company dismissed Kabani & Company, Inc. (“Kabani”) as our independent auditors and engaged BDO China Li Xin Da Hua CPA Co., Ltd. (BDO China), an Independent Registered Public Accounting Firm, to serve as our independent auditors. Kabani was dismissed as our independent registered public accounting firm effective on May 20, 2010. Kabani was dismissed as our independent registered public accounting firm effective on May 20, 2010.For the two most recent fiscal years ended December 31, 2009 and 2008, Kabani’s report on the financial statements did not contain any adverse opinions or disclaimers of opinion, and were not qualified or modified as to uncertainty, audit scope, or accounting principles. The dismissal of Kabani and engagement of BDO China were approved by our Audit Committee. Kabani and the Company did not have any disagreements with regard to any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure for the audited financials for the fiscal year ended December 31, 2009 and 2008, and subsequent interim period ended March 31, 2010 and through the date of dismissal, which disagreements, if not resolved to the satisfaction of Kabani, would have caused it to make reference to the subject matter of the disagreements in connection with its reports. During the fiscal years ended December 31, 2009 and 2008, and subsequent interim period ended March 31, 2010 and through the date of dismissal, we did not experience any reportable events. Prior to engaging BDO China, we have not consulted BDO China regarding the application of accounting principles to a specified transaction, completed or proposed, the type of audit opinion that might be rendered on our financial statements or a reportable event, nor did us consult with BDO China regarding any disagreements with our prior auditor on any matter of accounting principles or practices, financial statement disclosure, or auditing scope of procedure, which disagreements, if not resolved to the satisfaction of the prior auditor, would have caused it to make a reference to the subject matter of the disagreements in connection with its reports. We did not have any disagreements with BDO China, and therefore, did not discuss any past disagreements with BDO China. The Company obtained a letter from Kabani addressed to the United States Securities and Exchange Commission stating it agrees with the statements presented in the Form 8-K the Company filed on May 24, 2010 and the letter was attached to the Form 8-K as Exhibit 16.1.
  ITEM 9A. CONTROLS AND PROCEDURES.
  Evaluation of Disclosure Controls and Procedures
  Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 (“Exchange Act”), the Company carried out an evaluation, with the participation of the Company’s management, including the Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) (the Company’s principal financial and accounting officer), of the effectiveness of the Company’s disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, the Company’s CEO and CFO concluded that the Company’s disclosure controls and procedures are not effective to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.
 Management’s Annual Report on Internal Control over Financial Reporting
  Our management is responsible for establishing and maintaining adequate internal controls over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act and for assessing the effectiveness of internal controls over financial reporting. As defined by the Securities and Exchange Commission (Rule 13a-15(f) under the Exchange Act of 1934, as amended), internal controls over financial reporting is a process designed by, or under the supervision of the Company’s principal executive and principal financial officers and effected by its Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the consolidated financial statements in accordance with U.S. generally accepted accounting principles.
  Our internal control system was designed to, in general, provide reasonable assurance to the Company’s management and board regarding the preparation and fair presentation of published financial statements, but no matter how well designed because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Therefore, even effective internal controls over financial reporting can only provide reasonable assurance with respect to the financial statement preparation and presentation.
 38
 INDEX
 Our management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2011.  The framework used by management in making that assessment was the criteria set forth in the document entitled “ Internal Control – Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that assessment, our management has determined that as of December 31, 2011, the Company identified deficiencies that were determined to be a material weakness.
  A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. Because of the material weakness described below, management concluded that our internal controls over financial reporting were not effective as of December 31, 2011.
 
 The specific material weakness identified by the Company’s management as of December 31, 2011 is described as follows:
 
 We did not have sufficient skilled accounting personnel that are either qualified as Certified Public Accountants in the U.S. or that have received education from U.S. institutions or other educational programs that would provide enough relevant education relating to U.S. GAAP. The Company’s CFO and Financial Manager have limited experience with U.S. GAAP and are not U.S. Certified Public Accountants. Further, our operating subsidiaries are based in China, and in accordance with PRC laws and regulations, are required to comply with PRC GAAP, rather than U.S. GAAP. Thus, the accounting skills and understanding necessary to fulfill the requirements of U.S. GAAP-based reporting, including the preparation of consolidated financial statements, are inadequate, and determined to be a material weakness.
 
 In an effort to remedy this material weakness in the future, we will do the following:
  ●

develop a comprehensive training and development plan, for our finance, accounting and internal audit personnel, including our Chief Financial Officer, Financial Manager, and others, in the principles and rules of U.S. GAAP, SEC reporting requirements and the application thereof.●

design and implement a program to provide ongoing company-wide training regarding the Company’s internal controls, with particular emphasis on our finance and accounting staff.●

implement an internal review process over financial reporting to review all recent accounting pronouncements and to verify that the accounting treatment identified in such report have been fully implemented and confirmed by our internal control department. In the future, we will continue to improve our ongoing review and supervision of our internal control over financial reporting.●

hire an individual that possesses the requisite U.S. GAAP experience and education.
 
 Despite the material weakness and deficiencies reported above, our management believes that our consolidated financial statements included in this report fairly present in all material respects our financial condition, results of operations and cash flows for the periods presented and that this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report.
 This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.
 
 Changes in Internal Control over Financial Reporting
 
 No change in our system of internal control over financial reporting occurred during the period covered by this report, fourth quarter of the fiscal year ended December 31, 2011 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
  ITEM 9B. OTHER INFORMATION.
 
 None.
 
 PART III
 
 ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
 
 The information required by this Item is set forth in the Company’s 2012 Proxy Statement to be filed with the U.S. Securities and Exchange Commission (“SEC”) in connection with the solicitation of proxies for the Company’s 2012 Annual Meeting of Shareholders (“2012 Proxy Statement”) and is incorporated herein by reference. Such Proxy Statement will be filed with the SEC within 120 days after the end of the fiscal year to which this report relates.
 
 ITEM 11. EXECUTIVE COMPENSATION.
 
 The information required by this Item is set forth in the Company’s 2012 Proxy Statement and is incorporated herein by reference.
 
 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
 
 The information required by this Item is set forth in the Company’s 2012 Proxy Statement and is incorporated herein by reference.
 
 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
 
 The information required by this Item is set forth in the Company’s 2012 Proxy Statement and is incorporated herein by reference.
 
 ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.
 
 The information required by this Item is set forth in the Company’s 2012 Proxy Statement and is incorporated herein by reference.
  39
 INDEX
 
 PART IV
 
 ITEM 15.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
 
 (a)
Documents filed as part of this report
 
 (1)
All financial statements
 
 Index to Consolidated Financial Statements

PageReport of Independent Registered Public Accounting Firm – Friedman LLP


F-2Consolidated Balance Sheets as of December 31, 2011 and December 31, 2010


F-3Consolidated Statements of Income and Comprehensive Income for the years ended December 31, 2011 and 2010


F-4Consolidated Statement of Equity for the years ended December 31, 2011 and 2010


F-5Consolidated Statements of Cash Flows for the years ended December 31, 2011 and 2010


F-6Notes to the Consolidated Financial Statements


F-7 - F-25
 (2)
Financial Statement Schedules
 
 All financial statement schedules have been omitted, since the required information is not applicable or is not present in amounts sufficient to require submission of the schedule, or because the information required is included in the consolidated financial statements and notes thereto.
 
 (b)
Exhibits required by Item 601 of Regulation S-K
 
 Exhibit

Number

Exhibit Description2.1

Share Exchange Agreement, dated November 19, 2007, among the Company, the stockholders of the Company, Keenway Limited and Hong Kong Yi Tat International Investment, Ltd.  (1)3.1

Articles of Incorporation of the Company as filed with the Secretary of State of Delaware on June 4, 1999 (7)3.2

Certificate of Amendment to Certificate of Incorporation changing the corporate name from Apta Holdings, Inc. to InteliSys Aviation Systems of America, Inc. filed with the Secretary of State of Delaware on July 21, 2007 (1)3.3

Certificate of Amendment to Articles of Incorporation filed on November 28, 2007 (2)4.1

Sample Warrant (3)10.1

Securities Purchase Agreement (3)10.2

Registration Rights Agreement (3)10.3

Lock-Up Agreement (3)10.4

Make Good Agreement (3)10.5

Operating Agreement dated October 9, 2004 between Hong Kong Yi Tat International Investment Limited and Fujian Jiaoguang Media Co, Ltd. (1)10.6

Proxy Agreement dated October 9, 2004 between Hong Kong Yi Tat International Investment Limited and Fujian Jiaoguang Media Co, Ltd. (1)10.7

Consulting Services Agreement dated October 9, 2004 between Hong Kong Yi Tat International Investment Limited and Fujian Jiaoguang Media Co, Ltd. (1)10.8

Option Agreement dated October 9, 2004 between Hong Kong Yi Tat International Investment Limited and Fujian Jiaoguang Media Co, Ltd. (1)10.9

Equity Pledge Agreement dated October 9, 2004 between Hong Kong Yi Tat International Investment Limited and Fujian Jiaoguang Media Co, Ltd. (1)10.10

Leasing Agreement (4)10.11

Leasing Agreement (4)10.12

Employment Agreement with George Wung (5)10.13

Placement Agency Agreement (8)10.14

Form of Subscription Agreement (8)10.15

Equity Transfer Agreements Dated March 15, 2010 (9)10.16

Fujian Education Television Channel Project Management Agreement between Fuzhou Fuyu Advertising, Co. and Fujian Education Media Limited Company, dated August 1, 2010. (10)10.17

Six-Year Exclusive Agreement with China Railway Media Center dated February 2009 *10.18

Tourism Management Revenue Sharing Agreement with Taining government to operate Great Golden Lake from 2001 to 2032 dated 2001 *10.19

Tourist Destination Cooperative Development Agreement with Yongtai County Government dated November 2008 *10.20

Tourist Resources Development Agreement with Hua’an County Government dated December 2008 *10.21

Emperor Ming Taizu Cultural and Ecological Resort and Tourist Project Finance Agreement dated April 15, 2010 with Anhui Province Bengbu Municipal Government *10.22

China Yang-sheng (Nourishing Life) Tourism Project Finance Agreement dated April 2010 with Jianxi Province Zhangshu Municipal Government *10.23

Agreement with Jianxi Province People’s Government of Fenyi County dated June 1, 2010 *10.24

Lease Agreement for our principal offices located at 28/F, Yifa Building, No.111, Wusi Road, Fuzhou, Fujian Province, PRC. *10.25

Lease Agreement for our office located at 20955 Pathfinder Rd., #200-2, Diamond Bar, CA 91765. (11)10.26

Land Use Rights Agreement with Yongtai County Municipal Bureau of Land and Resources  *10.27

Cooperative agreement between us and Anhui Xingguang *10.28

Lease Transfer Agreement with Xingguang *10.29

Lease Agreement for Great Golden Lake *10.30

Contract between Xin Hengji Holding Company Limited (“XHJ”) and Fujian Education Media Limited Company *10.31

Assignment of XHJ agreement from XHJ to Fuzhou Fuyu *10.32

Mountain and Forest Land Lease Contract with Caoxiang Village, dated July 17, 2008 and Supplement, dated July 19, 2008 *10.33

Mountain and Forest Land Lease Contract with Dalu Village, dated November 20, 2008 *10.34

Mountain and Forest Land Lease Contract with Hongta Village, dated November 20, 2008 *10.35

Mountain and Forest Land Lease Contract with Caoxiang Village, dated November 10, 2009 *10.36

Mountain and Forest Land Lease Contract with Zhangxiang Village, dated November 10, 2009 *
 40
 INDEX
  10.37

Bank Loan Agreement, dated November 18, 2011 *10.38

Bank Loan Agreement, dated January 26, 2011 *10.39

Bank Loan Agreement, dated October 25, 2011 *10.40

Bank Loan Agreement, dated November 7, 2011 *10.41

Director Agreement between the Company and Michael Marks, dated June 10, 2011 (13)14.1

Code of Ethics (6)21.1

List of Subsidiaries (12)31.1

Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 *31.2

Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 *32.1

Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 **32.2

Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 **99.1

2008 Development Report of Chinese Radio and Television (4)
 101.INS

XBRL Instance Document †101.SCH

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 †
  (1)

Previously filed as Exhibits to Form 8-K filed on November 26, 2007.(2)

Previously filed as Exhibits to Form 8-K filed on March 6, 2008.(3)

Previously filed as Exhibits to Form 8-K filed on March 11, 2008.(4)

Previously filed as Exhibits to Form S-1/A filed on July 8, 2008.(5)

Previously filed as Exhibits to Form 8-K filed on January 14, 2009.(6)

Previously filed as Exhibits to Form 8-K filed on June 30, 2009.(7)

Previously filed as Exhibits to Form S-3 filed on December 11, 2009.(8)

Previously filed as Exhibits to Form 8-K filed on January 22, 2010.(9)

Previously filed as Exhibits to Form 8-K filed on May 14, 2010.(10)

Previously filed as Exhibits to Form 8-K filed on August 4, 2010.(11)

Previously filed as Exhibits to Form 10-K/A filed on February 3, 2012.(12)

Previously filed as Exhibits to Form 10-K filed on March 29, 2012.(13)

Previously filed as Exhibits to Form 10-K filed on June 4, 2012.
  * Filed herewith.
 ** In accordance with SEC Release 33-8238, Exhibits 32.1 and 32.2 are being furnished and not filed.
 † Incorporated by reference to the Exhibit 101 filed with the Company’s Annual Report on Form 10-K/A for the year ended December 31, 2011 filed on June 4, 2012.
 
 41
 INDEX
 
 SIGNATURES
 
 In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 CHINA YIDA HOLDING, CO.Date:    December 19, 2012
By:
/s/Minhua ChenMinhua Chen

Chief Executive Officer

(Principal Executive Officer)By:
/s/ Yongxi LinYongxi LinChief Financial Officer

(Principal Accounting Officer)
 
 Pursuant to the requirements of the Securities Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
 
 Signature

Capacity

Date/s/Minhua Chen

Chief Executive Officer, Chairman and Director.

December 19, 2012Minhua Chen/s/Yongxi Lin

Chief Financial Officer

December 19, 2012Yongxi Lin

(Principal Financial Officer; PrincipalAccounting Officer)/s/Yanling Fan

Chief Operating Officer and Director

December 19, 2012Yanling Fan/s/Michael Marks

Director

December 19, 2012Michael  Marks/s/Fucai Huang

Director

December 19, 2012Fucai Huang/s/Chunyu Yin

Director

December 19, 2012Chunyu Yin