PROSPECTUS SUMMARY
This
summary highlights selected information contained elsewhere in this prospectus. This summary does not contain all the information
that you should consider before investing in the common stock. You should carefully read the entire prospectus, including
“Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations”
and the consolidated financial statements, before making an investment decision.
In
this prospectus, unless otherwise noted or as the context otherwise requires, the
“Company,” “YERR,”
“we,” “us,” and “our”
refer to the combined business of Yangtze River Development
Limited, a corporation formed under the laws of the State of Nevada, Energetic Mind Limited (“Energetic Mind”), which
is our wholly-owned subsidiary formed under the laws of the British Virgin Islands, Energetic Mind’s wholly-owned subsidiary
Ricofeliz Capital (HK) Ltd. (“Ricofeliz”), a company formed under the laws of Hong Kong, and Ricofeliz’s wholly-owned
subsidiary, Wuhan Yangtze River Newport Logistics Co., Ltd. (“Wuhan Newport”), a wholly foreign-owned enterprise formed
under the laws of the People’s Republic of China. “China” or “PRC” refers to the People’s
Republic of China, excluding Hong Kong Special Administrative Region of China, Macau Special Administrative Region of China and
the Taiwan Region.
This
prospectus contains translations of certain Chinese currency Renminbi or RMB amounts, into U.S. dollar amounts at specified rates
solely for the convenience of the reader. The relevant exchange rates are listed below:
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For the years ended
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December 31,
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2016
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2015
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2014
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Period Ended RMB: USD exchange rate
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6.9447
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6.4917
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6.1484
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Period Average RMB: USD exchange rate
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6.6431
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6.2288
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6.1457
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For
the sake of clarity, this prospectus follows English naming convention of first name followed by last name, regardless of whether
an individual’s name is Chinese or English. For example, the name of our Chief Executive Officer will be presented as “Xiangyao
Liu,” even though, in Chinese, Mr. Liu’s name is presented as “Liu Xiangyao.”
We
have relied on statistics provided by a variety of publicly-available sources regarding China’s expectations of growth.
We did not, directly or indirectly, sponsor or participate in the publication of such materials, and these materials are not incorporated
in this prospectus other than to the extent specifically cited in this prospectus. We have sought to provide current information
in this prospectus and believe that the statistics provided in this prospectus remain up-to-date and reliable, and these materials
are not incorporated in this prospectus other than to the extent specifically cited in this prospectus.
Overview
Yangtze
River Development Limited is a Nevada corporation that operates through its wholly-owned subsidiary Energetic Mind Limited, a
British Virgin Islands company, which holds 100% capital stock of Ricofeliz Capital (HK) Ltd., a Hong Kong company that holds
100% capital stock of Wuhan Yangtze River Newport Logistics Co., Ltd., a wholly foreign-owned enterprise formed under the laws
of the People’s Republic of China that primarily engages in the business of real estate and infrastructural development
with a port logistics center located in Wuhan, Hubei Province of China. Situated in the middle reaches of the Yangtze River, Wuhan
Newport focuses on a large infrastructure development project implemented under China’s latest “One Belt One Road” initiative
and is believed to be strategically positioned in the anticipated “Pilot Free Trade Zone” of the Wuhan Port, a crucial
trading window among China, the Middle East and Europe. To be fully developed upon completion, within the logistics center, there
will be six operating zones: port operation area, warehouse and distribution area, cold chain logistics area, rail cargo loading
area, exhibition area and business-related area. The logistics center is also expected to provide a number of shipping berths
for cargo ships of various sizes. Wuhan Newport is expected to provide domestic and foreign businesses direct access to the anticipated
Pilot Free Trade Zone in Wuhan. The project will include commercial buildings, professional logistic supply chain centers, direct
access to the Yangtze River, Wuhan-Xinjiang-Europe Railway and ground transportation, storage and processing centers, and IT supporting
services, among others.
Income
generated from the use of warehouses, cargo loading and unloading, railway and highway transportation and logistics services and
other logistics supporting services is expected to be the main source of our expected income upon completion of the entire logistics
center. It is also expected that income from real estate sales and leasing would be a relatively minor portion of our expected
income, since we are planning to sell or lease only a certain portion of our real estate properties, such as office spaces, in
the near future for the sole purpose of recouping our initial capital investment. We plan to use the major area of our real estate
properties for the development of our logistics center, from which our main source of expected income can be derived. These sources
of income include, but are not limited to, the service fees we charge for our clients’ usage of warehouses, online information
platform, ship berths, cold-chain storage, cargo handling, and shipment loading and unloading.
Wuhan
Yangtze River Newport Logistics Center
The
Wuhan Yangtze River Newport Logistics Center (the “Logistics Center”), is expected to be an extensive complex located
in Wuhan, the capital of the Hubei Province of China, a major transportation hub with numerous railways, roads and expressways
passing through the city and connecting to major cities in China, as well as other international centers of commerce and business.
The
Logistics Center is expected to occupy approximately 1,918,000 square meters, for which the construction and development are expected
to be completed in three phases in three years and reach its target maximum annual profit by the end of 2021 assuming the entire
funding required for construction of the Logistics Center of $1.03 billion is in place by 2020 and the Logistics Center is in
operation according to our business plan. The following table illustrates the timeframe of our investment and construction progress.
Time
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Phase of
Investment/Construction
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Percentage of Total
Anticipated
Investment/Construction (1)
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Production Capacity (2)
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1
st
Year (2017)
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1
st
Phase
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40
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%
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30
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%
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2
nd
Year (2018)
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2
nd
Phase
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70
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%
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40
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%
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3
rd
Year (2019)
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3
rd
Phase
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100
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%
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60
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%
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4
th
Year (2020)
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Completed
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100
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%
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75
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%
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5
th
Year (2021)
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Completed
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100
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%
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100
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%
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(1)
|
The
percentage of construction in a certain phase reflects the anticipated contribution of the investment in such particular phase.
For example, contribution of 40% of the total investment in Phase 1 will lead to construction of 40% of total value of the
Logistics Center.
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(2)
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The
percentage of Production Capacity shows the fraction of the target maximum annual profit to be earned under the full operation
of the Logistics Center. We target to reach our maximum annual profit by the end of 2021 assuming the entire funding required
for construction of the Logistics Center of $1.03 billion is in place by 2020 and the Logistics Center is in operation according
to our business plan.
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The
Logistics Center is projected to be constructed within the Wuhan Newport Yangluo Port, on the upper stream of the Yangtze River,
and close to the northern base of Wuhan Iron and Steel, China’s first mega-sized iron and steel production complex. The Logistics
Center is expected to include a port terminal that will be located approximately 26.5km from the Wuhan Guan and 5.5km from the
Yangluo Yangtze River Bridge. The operation area of the port is expected to consist of a riverbank of 1,039 meters with eight
5,000-to-10,000-ton berths, two of which are multi-purpose berths and the other six are general cargo berths. It is designed to
be able to handle up to 5,000,000 tons of cargo annually, including up to 100,000 TEU for annual container throughput (including
20,000 TEU in freezers areas), 1,000,000 tons of iron and steel and 3,000,000 tons of general cargo.
Within
the Logistics Center, functional areas will be divided into six operating zones: a port operation area, a warehouse and distribution
area, a cold chain supply logistics area, a rail cargo loading area, an exhibition area and a business related area. The Logistics
Center will also be complemented with container storage areas, multi-functional areas, general storage areas, multi-functional
warehouse and infrastructural development, including new roads, gas stations, parking areas, gas and water pipes, electricity
lines and all other facilities and equipment to operate the Logistics Center.
Aside
from being situated in the Wuhan Yangluo Comprehensive Bonded Zone, Yangluo development area is amongst the third group of China’s
Pilot Free Trade Zone (FTZ) applicants to submit FTZ applications to the State Council through the Wuhan municipal government
for approval. Thus far, approvals have been granted to Shanghai, Tianjin, Guangdong and Fujian. Corporations within the approved
free trade zones are typically entitled to a series of favorable regulations and policies that could help the businesses grow
and succeed.
Wuhan
Newport has signed a twenty-year lease agreement, the maximum number of years permitted by the applicable PRC laws, and with rights
to renew at its sole discretion effective April 27, 2015 to lease approximately 1,200,000 square meters of land for building logistics
warehouses in support of the Logistics Center. The warehouses are expected to comprise of port terminal zones, warehouse logistics
zones, cold chain supply zones and railroad loading and unloading zones. The warehouses, once constructed, will connect the port
terminal along the Yangtze River and the railways leading to Europe, satisfying the requirements of China’s latest “One
Belt One Road” initiative. It will also be able to support large logistics companies in Wuhan and other nearby provinces,
which we anticipate, will rent the warehouses, terminals and offices within the Logistics Center.
OFFERING
SUMMARY
Shares
Offered:
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[●]
shares of common stock
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Shares
Outstanding Prior to the Completion of the Offering:
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172,269,446
shares common stock
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Shares
to be Outstanding After the Offering:
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[●]
shares of common stock.
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Proposed
Offering Price per Share:
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$[●]
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Gross
Proceeds to Us, Net of Underwriting Discount but Before Expenses:
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$38,000,000
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Symbol:
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YERR
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Transfer
Agent:
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VStock
Transfer, LLC
18
Lafayette Place
Woodmere,
NY 11598
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Use
of Proceeds
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We
plan to devote the net proceeds of the offering for i) construction of the facilities, including the warehouse, cold-chain
logistics area, and exhibition center; ii) construction of the rail-cargo operating area; iii) construction of the port terminal;
and iv) general working capital to meet the needs of the continued development of the Logistics Center. See the “Use
of Proceeds” section beginning on page 23.
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Risk
Factors
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The
common stock offered hereby involves a high degree of risk and should not be purchased by investors who cannot afford the
loss of their entire investment. See “Risk Factors” beginning on Page 4.
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Dividend
Policy:
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We
have no present plans to declare dividends and plan to retain our earnings to continue to grow our business.
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Corporate
information
Our
principal executive office is located at 183 Broadway, Suite 5, New York, NY 10007 and our telephone number is (646) 861-3315.
Our website address is www.yerr.com.cn. The information contained therein or connected thereto shall not be deemed to be incorporated
into this prospectus or the registration statement of which it forms a part.
RISK FACTORS
An
investment in our common stock involves a high degree of risk. You should carefully consider the risks described below, together
with all of the other information included in this prospectus, before making an investment decision. If any of the following risks
actually occurs, our business, financial condition or results of operations could suffer. In that case, the trading price of our
shares of common stock could decline, and you may lose all or part of your investment. You should read the section entitled “Cautionary
Note Regarding Forward Looking Statements” below for a discussion of what types of statements are forward-looking statements,
as well as the significance of such statements in the context of this prospectus.
Risks
Relating to Our Business
MAJORITY
OF OUR BUSINESS, ASSETS AND OPERATIONS ARE LOCATED IN THE PEOPLE’S REPUBLIC OF CHINA.
The
majority of our business, assets and operations are located in the People’s Republic of China. The economy of the PRC differs
from the economies of most developed countries in many respects. The economy of the PRC has been transitioning from a planned
economy to a market-oriented economy. Although in recent years the PRC’s government has implemented measures emphasizing
the utilization 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 the PRC is still owned by
the PRC’s government. In addition, the PRC’s government continues to play a significant role in regulating industry
by imposing industrial policies. The PRC’s government exercises significant control over the PRC’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. Some of these measures benefit the overall economy
of the PRC, but may have a negative effect on us.
ACTIONS
OF GOVERNMENT OR CHANGE OF POLICIES MAY ADVERSELY AFFECT OUR BUSINESS, FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
We
are at risk from significant and rapid change in the legal systems, regulatory controls, and practices in areas in which we operate.
These affect a wide range of areas including the real estate development approval system, employment practices, transportation,
cargo storage, logistics, financing and sale of the buildings; our property rights; data protection; environment, health and safety
issues; macro-economic policies, central government directions and instructions, China’s Five Year Plan, “One Belt
One Road” initiative; and accounting, taxation and stock exchange regulation. Accordingly, changes to, or violation of,
these systems, controls or practices could increase costs and have material and adverse impacts on the reputation, performance
and financial condition of our development and operation.
IF WE NEED ADDITIONAL CAPITAL TO FUND
OUR FUTURE OPERATIONS, WE MAY NOT BE ABLE TO OBTAIN SUFFICIENT CAPITAL AND MAY BE FORCED TO LIMIT THE SCOPE OF OUR OPERATIONS.
If adequate additional financing is not
available on reasonable terms, we may not be able to undertake ongoing real estate construction or continue to develop and expand
the services of our Logistics Center, which may as a result impact our cash flow and we would have to modify our business plans
accordingly. We will not be able to fully implement our business plan unless the $1 billion funding (as described in the prospectus
summary) is in place by 2020 and we do not have any definitive agreement nor letter of intent for such financing except for
this offering. There is no assurance that additional financing will be available to us.
In connection with our growth strategies,
we may experience increased capital needs and accordingly, we may not have sufficient capital to fund our future operations without
additional capital investments. Our capital needs will depend on numerous factors, including (i) our profitability; (ii) the development
of competitive projects undertaken by our competition; and (iii) the level of our investment in construction and development.
We cannot assure you that we will be able to obtain capital in the future to meet our needs.
If we cannot obtain additional funding,
we may be required to: (i) limit our operations and expansion; (ii) limit our marketing efforts; and (iii) decrease or eliminate
capital expenditures. Such reductions could have a materially adverse effect on our business and our ability to compete.
Even if we do find a source of additional
capital, we may not be able to negotiate terms and conditions for receiving such additional capital that are favorable to us.
Any future capital investments could dilute or otherwise materially and adversely affect the holdings or rights of our existing
shareholders. In addition, new equity or convertible debt securities issued by us to obtain financing could have rights, preferences
and privileges senior to the common stock offered hereof. We cannot give you any assurances that any additional financing will
be available to us, or if available, will be on terms favorable to us.
WE
HAVE SUSTAINED SIGNIFICANT RECURRING OPERATING LOSSES AND EXPERIENCED NEGATIVE CASH FLOW FOR OPERATIONS SINCE INCEPTION.
We
have sustained recurring losses and experienced negative cash flow from operations since inception. Since inception, we have focused
on developing and implementing our business plan. As of December 31, 2016, we have generated cumulative losses of approximately
$29 million since inception, and we expect to continue to incur losses until 2018. We believe that our existing cash resources
will not be sufficient to sustain operations during the next twelve months. We need to generate revenue and raise funding in order
to sustain our operations and continue to implement our business plan. If we are unable to obtain additional funds when they are
needed or if such funds cannot be obtained on terms acceptable to us, we would likely be unable to execute upon the business plan
or pay expenses as they are incurred, which would have a material, adverse effect on our business, financial condition and results
of operations. The amount of future losses and when, if ever, we will achieve profitability are uncertain.
WE
DERIVE THE MAJORITY OF OUR REVENUES FROM SALES IN THE PRC AND ANY DOWNTURN IN THE CHINESE ECONOMY COULD HAVE A MATERIAL ADVERSE
EFFECT ON OUR BUSINESS AND FINANCIAL CONDITION.
The
majority of our revenues are expected to be generated from sales of our properties and services in the PRC and we anticipate that
revenues from such sales will continue to represent the substantial portion of our total revenues in the near future. Our sales
and earnings can also be affected by changes in the general economy. Our success is influenced by a number of economic factors
which affect consumer income, such as employment levels, business conditions, interest rates, oil and gas prices and taxation
rates. Adverse changes in these economic factors, among others, may restrict consumer spending, thereby negatively affecting our
sales and profitability.
WE
ARE SUBJECT TO EXTENSIVE GOVERNMENT REGULATION THAT COULD CAUSE US TO INCUR SIGNIFICANT LIABILITIES OR RESTRICT OUR BUSINESS ACTIVITIES.
Regulatory
requirements could cause us to incur significant liabilities and operating expenses and could restrict our business activities.
We are subject to statutes and rules regulating, among other things, certain developmental matters, building and site design,
and matters concerning the protection of health and the environment. Our operating expenses may be increased by governmental regulations,
such as building permit allocation ordinances and impact and other fees and taxes that may be imposed to defray the cost of providing
certain governmental services and improvements. Any delay or refusal from government agencies to grant us necessary licenses,
permits, and approvals could have an adverse effect on our operations.
OUR
SALES WILL BE AFFECTED IF MORTGAGE FINANCING BECOMES MORE COSTLY OR OTHERWISE BECOMES LESS ATTRACTIVE.
Certain
purchasers of our properties are expected to rely on mortgages to finance their purchases. An increase in interest rates may significantly
increase the cost of mortgage financing, thus affecting the affordability of our properties. The PRC’s government and commercial
banks may also increase the down payment requirement, impose other conditions or otherwise change the regulatory framework in
a manner that would make mortgage financing unavailable or unattractive to potential property purchasers. If the availability
or attractiveness of mortgage financing is reduced or limited, many of our prospective customers may not be able to purchase our
properties and, as a result, our business, liquidity and results of operations could be adversely affected.
THE
PRACTICE OF PRE-SELLING PROJECTS MAY EXPOSE US TO SUBSTANTIAL LIABILITIES.
It
is common practice by property developers in China to pre-sell properties (while still under construction), which involves certain
risks. For example, we may fail to complete a property development that may have been fully or partially pre-sold, which
would leave us liable to purchasers of pre-sold units for losses suffered by them without adequate resources to pay the liability
if funds have been used on the project. In addition, if a pre-sold property development is not completed on time, the purchasers
of pre-sold units may be entitled to compensation for late delivery. If the delay extends beyond a certain period, the purchasers
may be entitled to terminate the pre-sale agreement and pursue a claim for damages that exceeds the amount paid and our ability
to recoup the resulting liability from future sales.
WE
ARE DEPENDENT ON THIRD-PARTY SUBCONTRACTORS, MANUFACTURERS, AND DISTRIBUTORS FOR ALL ARCHITECTURE, ENGINEERING AND CONSTRUCTION
SERVICES, AND CONSTRUCTION MATERIALS. A DISCONTINUED SUPPLY OF SUCH SERVICES AND MATERIALS WILL ADVERSELY AFFECT OUR PROJECTS.
We
are dependent on third-party subcontractors, manufacturers, and distributors for all architecture, engineering and construction
services, and construction materials. A discontinued supply of such services and materials will adversely affect our construction
projects and the success of the Company.
WE
MAY BE ADVERSELY AFFECTED BY FLUCTUATIONS IN THE PRICE OF RAW MATERIALS AND SELLING PRICES OF OUR PROPERTIES.
The
land and raw materials that are used in our projects have experienced significant price fluctuations in the past. There is no
assurance that they will not be subject to future price fluctuations or pricing control. The land and raw materials that are used
in our projects may experience price volatility caused by events such as market fluctuations or changes in governmental programs.
The market price of land and raw materials may also experience significant upward adjustment, if, for instance, there is a material
under-supply or over-demand in the market. These price changes may ultimately result in increases in the selling prices of our
properties, and may, in turn, adversely affect our sales volume, sales, operating income, and net income.
WE
FACE INTENSE COMPETITION FROM OTHER REAL ESTATE DEVELOPERS AND/OR LOGISTICS COMPANIES.
The
real estate and logistics industries in the PRC are both highly competitive. Many of our competitors are well capitalized and
have greater financial, marketing, and other resources than we do. Some of our competitors also have larger land banks, greater
economies of scale, broader name recognition, a longer track record, and more established relationships in certain markets. Competition
among property developers may result in increased costs for the acquisition of land for development, increased costs for raw materials,
shortages of skilled contractors, oversupply of properties, decrease in property prices in certain parts of the PRC, a slowdown
in the rate at which new buildings are approved and/or reviewed by the relevant government authorities and an increase in administrative
costs for hiring or retaining qualified personnel, any of which may adversely affect our business and financial condition. Furthermore,
property developers that are better capitalized than we are may be more competitive in acquiring land through the auction process.
If we cannot respond to changes in market conditions as promptly and effectively as our competitors or effectively compete for
land acquisition through the auction systems and acquire other factors of production, our business and financial condition will
be adversely affected.
OVER-SUPPLY
OF REAL ESTATE PROPERTIES COULD HAVE A MATERIAL ADVERSE AFFECT ON OUR RESULTS OF OPERATIONS.
Most
of our assets consist of real estate properties within the premise of our Logistics Center. While our business will primarily
revolve around the services provided by the Logistics Center, we expect to sell and/or lease properties to other businesses to
generate revenue. Although we expect the value of our real estate properties to appreciate upon Yangluo Port’s obtaining
the approval of the “Free Trade Zone” status, risk of property over-supply is increasing in parts of China on a macro-level,
where property investment, trading and speculation have become overly active. We are exposed to the risk that in the event of
actual or perceived over-supply, property prices may fall drastically, and our revenue and profitability will be adversely affected.
If we cannot sell or lease our properties at a favorable price, we may not have the necessary capital resources to fully execute
our business plan and therefore our results of operations will be adversely affected.
WE
MAY NOT HAVE SUFFICIENT EXPERIENCE AS A COMPANY CONDUCTING STORAGE AND PROCESSING SERVICES, INFORMATION SERVICES AND LOGISTICS
FINANCING, OR IN OTHER AREAS REQUIRED FOR THE SUCCESSFUL IMPLEMENTATION OF OUR BUSINESS PLAN.
We
may not have sufficient experience as a company in conducting storage and processing services, information services, logistics
financing or other areas required for the successful implementation of our business plan. This may result in the Company
experiencing difficulty in adequately operating and growing its business. If our operating or management abilities
consistently perform below expectations, then our business is unlikely to thrive.
WE
ARE HEAVILY DEPENDENT UPON THE SERVICES OF EXPERIENCED PERSONNEL WHO POSSESS SKILLS THAT ARE VALUABLE IN OUR INDUSTRY, AND WE
MAY HAVE TO ACTIVELY COMPETE FOR THEIR SERVICES.
We
are heavily dependent upon our ability to attract, retain and motivate skilled personnel to serve our customers. Many of our personnel
possess skills that would be valuable to all companies engaged in our industry. Consequently, we expect that we will have to actively
compete for these employees. Some of our competitors may be able to pay our employees more than we are able to pay to retain them.
Our ability to profitably operate is substantially dependent upon our ability to locate, hire, train and retain our personnel.
There can be no assurance that we will be able to retain our current personnel, or that we will be able to attract and assimilate
other personnel in the future. If we are unable to effectively obtain and maintain skilled personnel, the development and quality
of our services could be materially impaired.
DEFAULTING
ON BANK LOANS COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR RESULTS OF OPERATIONS
We plan to develop a full-service
logistics center using the properties we have obtained land-use rights to. To finance the development, part of Company’s
properties held for development and land lots under development have been pledged as collateral for financial institution loans.
As of December 31, 2016, we have an outstanding loan payable to China Construction Bank totaling $41,456,074. The loan has a maturity
date of May 29, 2020. The loan is a
floating rate loan whose rate (2016: 5.58% per annum
and 2015: 6.33% per annum) is set at 5% above the over 5 years base borrowing rate stipulated by the People’s Bank of China.
The secured bank loan with China Construction Bank contains certain protective contractual provisions that limit our activities
in order to protect the lender. The risk of default may increase in the event of an economic downturn or due to our failure to
successfully execute our business plan. Defaulting on our bank loans could result in loss of our collateralized assets and cause
a material adverse effect on our results of operations.
WE
HAVE LIMITED INSURANCE COVERAGE AGAINST DAMAGES OR LOSS WE MIGHT SUFFER.
We
do not carry business interruption insurance and therefore any business disruption or natural disaster could result in substantial
damages or losses to us. In addition, there are certain types of losses (such as losses from forces of nature) that are generally
not insured because either they are uninsurable or insurance cannot be obtained on commercially reasonable terms. Should an uninsured
loss or a loss in excess of insured limits occur, our business could be materially adversely affected. If we were to suffer any
losses or damages to our properties, our business, financial condition and results of operations would be materially and adversely
affected.
OUR
OPERATING COMPANIES MUST COMPLY WITH ENVIRONMENTAL PROTECTION LAWS THAT COULD ADVERSELY AFFECT OUR PROFITABILITY.
We
are required to comply with the environmental protection laws and regulations promulgated by the national and local governments
of the PRC. Some of these regulations govern the level of fees payable to government entities providing environmental protection
services and the prescribed standards relating to construction. Although construction technologies allow us to efficiently control
the level of pollution resulting from our construction process, due to the nature of our business, wastes are unavoidably generated
in the process. If we fail to comply with any of the environmental laws and regulations of the PRC, depending on the type and
severity of the violation, we may be subject to, among other things, warnings from relevant authorities, imposition of fines,
specific performance and/or criminal liability, forfeiture of profits made, or an order to close down our business operations
and suspension of relevant permits.
THE
OPERATING HISTORIES OF OUR OPERATING COMPANIES MAY NOT SERVE AS ADEQUATE BASES TO JUDGE OUR FUTURE PROSPECTS AND RESULTS OF OPERATIONS.
The
operating histories of Wuhan Newport may not provide a meaningful basis for evaluating our business following consummation of
the Second Share Exchange. Although the business of Wuhan Newport has grown rapidly since its inception, we cannot guarantee
that we can achieve profitability or that we will have net profit in the future. We will encounter risks and difficulties that
companies at a similar stage of development frequently experience, including the potential failure to:
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obtain
sufficient working capital to support our development and construction;
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manage
our expanding operations and continue to meet customers’ demands;
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●
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maintain
adequate control of our expenses allowing us to realize anticipated income growth;
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●
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implement,
adapt and modify our property development, sales, and business strategies as needed;
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●
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successfully
integrate any future acquisitions; and
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●
|
anticipate
and adapt to changing conditions in the real estate industry resulting from changes in government regulations, mergers and
acquisitions involving our competitors, technological developments and other significant competitive and market dynamics.
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If
we are not successful in addressing any or all of the foregoing risks, our business may be materially and adversely affected.
WE
MAY NOT BE ABLE TO SUCCESSFULLY EXECUTE OUR BUSINESS STRATEGY, WHICH COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS AND
RESULTS OF OPERATIONS.
Since
China is a large and diverse market, consumer trends and demands can vary significantly by region and Wuhan Newport’s experience
in the markets in which it currently operates may not be applicable in other parts of China. As a result, we may not be able to
leverage Wuhan Newport’s experience to fully execute our business strategy and plan. When we enter new markets, we may face
intense competition from companies with greater experience or a more established presence in the targeted geographical areas or
from other companies with similar business strategies. Therefore, we may not be able to adequately grow our sales due to intense
competitive pressures and/or the substantial costs involved.
OUR
FAILURE TO EFFECTIVELY MANAGE GROWTH MAY CAUSE A DISRUPTION OF OUR OPERATIONS RESULTING IN THE FAILURE TO GENERATE REVENUE AT
THE LEVELS WE EXPECT.
In
order to maximize potential growth in Wuhan Newport’s current and potential markets, we believe that we must be able to
sell our properties and obtain clients to use the services provided by our Logistics Center to ensure the sustainable development
capability of the Company and to maintain our operations. This strategy may place a significant strain on our management and our
operational, accounting, and information systems. We expect that 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 effectively manage our operations could prevent us from generating the revenues we expect and therefore have a material
adverse effect on the results of our operations.
WE
MAY NEED ADDITIONAL EMPLOYEES TO MEET OUR OPERATIONAL NEEDS.
Our
future success also depends upon our ability to attract and retain highly qualified personnel. We may need to hire additional
managers and employees with industry experience from time to time, and our success will be highly dependent on our ability to
attract and retain skilled management personnel and other employees. There can be no assurance that we will be able to attract
or retain highly qualified personnel. Competition for skilled personnel in the real estate and logistics industries is significant.
This competition may make it more difficult and expensive to attract, hire and retain qualified managers and employees.
WE
WILL INCUR SIGNIFICANT COSTS TO ENSURE COMPLIANCE WITH UNITED STATES CORPORATE GOVERNANCE AND ACCOUNTING REQUIREMENTS.
We
will 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 SEC. 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 or retain qualified individuals to serve on our board of directors or as executive
officers. We cannot predict or estimate the amount of additional costs we may incur or the timing of such costs.
WE
HAVE IDENTIFIED MATERIAL WEAKNESSES IN OUR INTERNAL CONTROL OVER FINANCIAL REPORTING WHICH HAVE RESULTED IN MATERIAL MISSTATEMENTS
IN OUR PREVIOUSLY ISSUED FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED DECEMBER 31, 2015.
We
have concluded that there are material weaknesses in our internal control over financial reporting for the fiscal year ended December
31, 2015, as we did not maintain effective controls over the selection and application of GAAP related to classification of capital
transactions. Specifically, the members of our management team with the requisite level of accounting knowledge, experience and
training commensurate with our financial reporting requirements did not analyze certain accounting issues at the level of detail
required to ensure the proper application of GAAP in certain circumstances. These material weaknesses resulted in the restatement
of our financial statements for the year ended December 31, 2015. Our management concluded that the Company’s previously
issued financial statements for the year ended December 31, 2015 should no longer be relied upon. In light of the errors, management
re-evaluated its assessment of our disclosure controls and procedures and internal control over financial reporting as of December
31, 2015 and concluded each was ineffective as of December 31, 2015.
A
material weakness is a deficiency, or combination of deficiencies, in internal control 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 and corrected on a timely basis.
Management
identified the following material weaknesses in its assessment of the effectiveness of internal control over financial reporting
as of December 31, 2015:
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Lack
of adequate policies and procedures in internal audit function, which resulted in: (1) lack of communication between the internal
audit department and the Audit Committee and the Board of Directors; (2) insufficient internal audit work to ensure that the
Company’s policies and procedures have been carried out as planned;
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Lack
of sufficient full-time accounting staff in our accounting department that have experience and knowledge in identifying and
resolving complex accounting issues under U.S. Generally Accepted Accounting Principles (“GAAP”); and
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Lack
of sufficient accounting personnel which would provide segregation of duties within our internal control procedures to support
the accurate reporting of our financial results.
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Any
actions we have taken or may take to address the material weaknesses we had for the fiscal year ended December 31, 2015 are subject
to continued management review supported by testing, as well as oversight by the Audit Committee of our Board of Directors. Although
we believe that the steps we have taken sufficiently remediate the material weaknesses we had for the fiscal year ended December
31, 2015, we cannot assure you that these material weaknesses will not occur in the future and that we will be able to remediate
such weaknesses in a timely manner, which could impair our ability to accurately and timely report our financial position, results
of operations or cash flows. If our remedial measures are again insufficient to address the material weaknesses, or if additional
material weaknesses or significant deficiencies in our internal control over financial reporting are discovered or occur in the
future, our consolidated financial statements may contain material misstatements and we could be required to further restate our
financial results. In addition, if we are unable to successfully remediate the material weaknesses in our internal controls or
if we are unable to produce accurate and timely financial statements, our stock price may be adversely affected and we may be
unable to maintain compliance with applicable stock exchange listing requirements.
OUR
CERTIFICATES, PERMITS, AND LICENSES RELATED TO OUR OPERATIONS ARE SUBJECT TO GOVERNMENTAL CONTROL AND RENEWAL, AND FAILURE TO
OBTAIN OR RENEW SUCH CERTIFICATES, PERMITS, AND LICENSES WILL CAUSE ALL OR PART OF OUR OPERATIONS TO BE TERMINATED.
Our
operations require licenses, permits and, in some cases, renewals of these licenses and permits from various governmental authorities
in the PRC. Our ability to obtain, maintain, or renew such licenses and permits on acceptable terms is subject to change, as are,
among other things, the regulations and policies of applicable governmental authorities.
If
our land use permits are revoked or suspended or we are unable to renew the permits for any reason, we cannot assure you that
our business operations will not be stopped and, accordingly, our financial performance would be adversely affected.
IF
THE LEGALITY OR VALIDITY OF OUR LEASE OF THE COLLECTIVE-OWNED LAND USE RIGHTS IS CHALLENGED, THERE MAY BE DISRUPTION TO THE DEVELOPMENT
OF THE LAND AND SUCH DISRUPTION COULD HAVE A MATERIALLY ADVERSE EFFECT ON OUR RESULTS OF OPERATIONS.
We
leased collective-owned land use rights from the Chunfeng Villagers’ Committees. The right to operate and manage such land
is vested in the relevant local villagers’ committee or rural collective leadership who are allowed to divide the land into
parcels and contracts the rights to operate such parcels of land to individual farmer households or, subject to the approval of
local governments and the requisite vote of the farmer households, to any entity or person outside that village or rural collective.
Any
change in law and the administrative system could render our lease unenforceable. According to the PRC Law on Land Administration,
all lands in the PRC are either state-owned or collectively owned. Generally, lands in the urban areas of a city or town are state-owned,
whereas lands in the rural areas of a city or town and all rural lands are, unless otherwise specified by law, collectively owned.
When required, the state has the right to reclaim the collectively owned lands in accordance with law if such reclaim is beneficial
to the public.
Additionally,
the lease may subject to the preemptive rights of other farmers in the same village or rural collective. If the preemptive rights
are not exercised within two months from the date on which we start using the parcels of land, it is very likely that the PRC
courts will not enforce such preemptive rights. As of the date of this prospectus, two months or more have passed since we started
using the land we leased from Chunfeng villagers’ committee and we have not received any claim from person purporting to
assert the pre-emption rights.
If
the legality or validity of our leases become subject to disputes or challenges, we may need to suspend at least part of our constructions
on the respective land areas. We may incur costs and losses if we are required to remove our improvements, such as buildings and
facilities that we have constructed or purchased. We could also lose our rights to use the land and our business, financial condition
and results of operations could be materially and adversely affected.
OUR
FACILITIES AND INVENTORY MAY BE AFFECTED BY FIRE OR NATURAL CALAMITIES. OUR OPERATIONS ARE ALSO SUBJECT TO THE RISK OF POWER OUTAGES,
EQUIPMENT FAILURES OR LABOR DISTURBANCES AND OTHER BUSINESS INTERRUPTIONS. WE HAVE LIMITED INSURANCE COVERAGE AND DO NOT CARRY
ANY BUSINESS INTERRUPTION INSURANCE.
A
fire, floods or other natural calamity may result in significant damage to our production facilities and inventory. Our operations
are subject to risks of various business interruptions, including power outages, equipment failures or disturbances from labor
unrest. If we are unable to obtain timely replacements of damaged inventory or equipment, or if we are unable to find an acceptable
contract manufacturer in the event our production facilities are damaged by a catastrophic event, then major disruptions to our
production would result, which would have significant adverse effect on our operations and financial results. Our property insurance
may not be sufficient to cover damages to our production facilities, and we do not carry any business interruption insurance covering
lost profits as a result of the disruption to our production.
Risks
Relating to Doing Business in China
IF
OUR LAND USE RIGHTS ARE REVOKED, WE WOULD HAVE NO OPERATIONAL CAPABILITIES.
Under
the PRC law, land is owned by the state or rural collective economic organizations. The state issues to tenants the rights to
use property. Use rights can be revoked and the tenants may be forced to vacate at any time when redevelopment of the land is
in the public interest. The public interest rationale is interpreted quite broadly and the process of land appropriation may be
less than transparent. If this happens, we may be forced to (i) delay the construction of commercial facilities or (ii) curtail
or cease construction on that land. We relied on these land use rights as the cornerstone of our operations, and the loss of such
rights would have a material adverse effect on our business and results of operation.
IN
THE EVENT THE ACQUISITION OF WUHAN NEWPORT BY RICOFELIZ REQUIRES MOFCOM’S APPROVAL AND WE ARE NOT ABLE TO OBTAIN SUCH APPROVAL,
THE ACQUISITION MAY BE UNWOUND.
On
August 8, 2006, the PRC Ministry of Commerce (“
MOFCOM
”), the State Assets Supervision and Administration Commission,
the State Administration for Taxation, the State Administration for Industry and Commerce, the China Securities Regulatory Commission
and the State Administration of Foreign Exchange jointly promulgated the Provisions on the Acquisition of Domestic Enterprises
by Foreign Investors (the “
M&A Rules
”), as amended by the Ministry of Commerce of the PRC on June 22, 2009.
The M&A Rules require that a merger and acquisition of a domestic company with a “related party relationship”
by a domestic company, enterprise or natural person in the name of an overseas company legitimately incorporated or controlled
by the domestic company, enterprise or natural person shall be subject to examination and approval by MOFCOM. However, there is
no definition or explanation of what constitutes a “related party relationship” in the M&A Rules, and, as a result,
we are uncertain as to the interpretation of the M&A Rules with regard to the existing relationship between Mr. Xiangyao Liu,
Ricofeliz and Wuhan Newport at the moment immediately before the acquisition of Wuhan Newport by Ricofeliz. If such relationship
is considered as a “related party relationship”, the acquisition of Wuhan Newport by Ricofeliz, which has been approved
by the local Wuhan Bureau of MOFCOM, may be subject to the approval of the national MOFCOM. Although M&A Rules have been effective
since September 2006, we are not aware of any precedent for approval by MOFCOM of any related party acquisition conducted
by PRC domestic individuals. Since there is no clear guidance under the M&A Rules, it is difficult to determine
whether MOFCOM or other PRC regulatory agencies would consider such approval necessary and, if so, whether we would be able to
obtain MOFCOM approval, or if we fail to obtain such approval, what would be the consequence of such failure. Failure to obtain
MOFCOM’s approval may result in regulatory actions or other sanctions (including administrative order to unwind the acquisition)
from MOFCOM or other PRC regulatory agencies. These regulatory agencies may impose fines and penalties on our operations in the
PRC, limit our operating privileges in the PRC, delay or restrict the repatriation of the proceeds from our financing, investment,
or operating activities into the PRC, or take other actions that could have a material adverse effect on our business, financial
condition, results of operations, reputation and prospects.
LABOR
LAWS IN THE PRC MAY ADVERSELY AFFECT OUR RESULTS OF OPERATIONS.
On
June 29, 2007, the PRC’s government promulgated the Labor Contract Law of the PRC, which became effective on January 1,
2008. The Labor Contract Law imposes greater liabilities on employers and significantly affects the cost of an employer’s
decision to reduce its workforce. Further, the law requires certain terminations be based upon seniority and not merit. In the
event that we decide to significantly change or decrease our workforce, the Labor Contract Law could adversely affect our ability
to enact such changes in a manner that is most advantageous to our business or in a timely and cost-effective manner, thus materially
and adversely affecting our financial condition and results of operations.
WE
MAY BE EXPOSED TO LIABILITIES UNDER THE FOREIGN CORRUPT PRACTICES ACT AND CHINESE ANTI-CORRUPTION LAW.
In
connection with this offering, we will become subject to the U.S. Foreign Corrupt Practices Act (“FCPA”), and other
laws that prohibit improper payments or offers of payments to foreign governments and their officials and political parties by
U.S. persons and issuers as defined by the statute for the purpose of obtaining or retaining business. We are also subject to
Chinese anti-corruption laws, which strictly prohibit the payment of bribes to government officials. We have operations, agreements
with third parties, and make sales in China, which may experience corruption. Our activities in China create the risk of unauthorized
payments or offers of payments by one of the employees, consultants or distributors of our company, because these parties are
not always subject to our control. We are in the process of implementing an anticorruption program, which will prohibit the offering
or giving of anything of value to foreign officials, directly or indirectly, for the purpose of obtaining or retaining business.
The anticorruption program also requires that clauses mandating compliance with our policy be included in all contracts with foreign
sales agents, sales consultants and distributors and that they certify their compliance with our policy annually. It further requires
that all hospitality involving promotion of sales to foreign governments and government-owned or controlled entities be in accordance
with specified guidelines. In the meantime, we believe to date we have complied in all material respects with the provisions of
the FCPA and Chinese anti-corruption laws. However, our existing safeguards and any future improvements may prove to be less than
effective, and the employees, consultants and/or distributors of our Company may engage in conduct for which we might be held
responsible. Violations of the FCPA or Chinese anti-corruption laws may result in severe criminal or civil sanctions, and we may
be subject to other liabilities, which could negatively affect our business, operating results and financial condition. In addition,
the government may seek to hold our Company liable for successor liability FCPA violations committed by companies in which we
invest or that we acquire.
UNCERTAINTIES
WITH RESPECT TO THE PRC’S LEGAL SYSTEM COULD ADVERSELY AFFECT US.
We
conduct a substantial amount of our business through our subsidiary in China. Our operations in China are governed by PRC laws
and regulations. Our PRC subsidiary is generally subject to laws and regulations applicable to foreign investments in China and,
in particular, laws and regulations applicable to wholly foreign-owned enterprises. The PRC legal system is based on statutes.
Prior court decisions may be cited for reference but have limited precedential value.
Since
1979, PRC legislation and regulations have significantly enhanced the protections afforded to various forms of foreign investments
in China. However, China has not developed a fully integrated legal system and recently enacted laws and regulations may not sufficiently
cover all aspects of economic activities in China. In particular, because some of these laws and regulations are relatively new,
and because of the limited volume of published decisions and their nonbinding nature, the interpretation and enforcement of these
laws and regulations involve uncertainties. In addition, the PRC legal system is based in part on government policies and internal
rules (some of which are not published on a timely basis or at all) that may have a retroactive effect. As a result, we may not
be aware of our violation of these policies and rules until sometime after the violation. In addition, any litigation in China
may be protracted and result in substantial costs and diversion of resources and management attention.
GOVERNMENTAL
CONTROL OF CURRENCY CONVERSION MAY AFFECT THE VALUE OF YOUR INVESTMENT.
The
PRC government imposes controls on the convertibility of the Renminbi, or “RMB” into foreign currencies and, in certain
cases, the remittance of currency out of China. We receive some revenue and incur some expenses in U.S. dollars but incur other
expenses primarily in RMB. Although our main business is based in mainland China or based in Hong Kong with Chinese operating
subsidiaries, some of our business may require us to use U.S. dollars. We choose quotations based on price competitiveness.
Under
our current corporate structure, our income is primarily derived from dividend payments from our PRC subsidiaries. Shortages in
the availability of foreign currency may restrict the ability of our PRC subsidiary to remit sufficient foreign currency to pay
dividends or other payments to us, or otherwise satisfy their foreign currency denominated obligations. Under existing PRC foreign
exchange regulations, payments of current account items, including profit distributions, interest payments and expenditures from
trade-related transactions can be made in foreign currencies without prior approval from SAFE by complying with certain procedural
requirements. However, approval from appropriate government authorities is required where RMB is to be converted into foreign
currency and remitted out of China to pay capital expenses such as the repayment of loans denominated in foreign currencies. The
PRC government may also, at its discretion, restrict access in the future to foreign currencies for current account transactions.
If the foreign exchange control system prevents us from obtaining sufficient foreign currency to satisfy our currency demands,
we may not be able to pay dividends in foreign currencies to our security-holders.
WE
ARE A HOLDING COMPANY AND WE RELY ON FUNDING FOR DIVIDEND PAYMENTS FROM OUR SUBSIDIARIES, WHICH ARE SUBJECT TO RESTRICTIONS UNDER
PRC LAWS.
We
are a holding company incorporated in Nevada and we operate our core businesses through our subsidiaries in the PRC. Therefore,
the availability of funds for us to pay dividends to our shareholders and to service our indebtedness depends upon dividends received
from such PRC subsidiary. If our subsidiary incurs debt or losses, its ability to pay dividends or other distributions to us may
be impaired. As a result, our ability to pay dividends and to repay our indebtedness will be restricted. PRC laws require that
dividends be paid only out of the after-tax profit of our PRC subsidiary calculated according to PRC accounting principles, which
differ in many aspects from generally accepted accounting principles in other jurisdictions. PRC laws also require enterprises
established in the PRC to set aside part of their after-tax profits as statutory reserves. These statutory reserves are not available
for distribution as cash dividends. In addition, restrictive covenants in bank credit facilities or other agreements that we or
our subsidiary may enter into in the future may also restrict the ability of our subsidiary to pay dividends to us. These restrictions
on the availability of our funding may impact our ability to pay dividends to our shareholders and to service our indebtedness.
OUR
BUSINESS MAY BE MATERIALLY AND ADVERSELY AFFECTED IF ANY OF OUR PRC SUBSIDIARIES DECLARES BANKRUPTCY OR BECOMES SUBJECT TO A DISSOLUTION
OR LIQUIDATION PROCEEDING.
The
Enterprise Bankruptcy Law of the PRC, or the Bankruptcy Law, came into effect on June 1, 2007. The Bankruptcy Law provides that
an enterprise will be liquidated if the enterprise fails to settle its debts as and when they fall due and if the enterprise’s
assets are, or are demonstrably, insufficient to clear such debts.
Our
PRC subsidiaries hold certain assets that are important to our business operations. If our PRC subsidiaries undergo a voluntary
or involuntary liquidation proceeding, unrelated third-party creditors may claim rights to some or all of these assets, thereby
hindering our ability to operate our business, which could materially and adversely affect our business, financial condition and
results of operations.
According
to the SAFE’s Notice of the State Administration of Foreign Exchange on Further Improving and Adjusting Foreign Exchange
Administration Policies for Direct Investment, effective on December 17, 2012, and the Provisions for Administration of Foreign
Exchange Relating to Inbound Direct Investment by Foreign Investors, effective May 13, 2013, if our PRC subsidiaries undergo a
voluntary or involuntary liquidation proceeding, prior approval from the SAFE for remittance of foreign exchange to our shareholders
abroad is no longer required, but we still need to conduct a registration process with the SAFE local branch. It is not clear
whether “registration” is a mere formality or involves the kind of substantive review process undertaken by SAFE and
its relevant branches in the past.
FLUCTUATIONS
IN EXCHANGE RATES COULD ADVERSELY AFFECT OUR BUSINESS AND THE VALUE OF OUR SECURITIES.
Changes
in the value of the RMB against the U.S. dollar, Euro and other foreign currencies are affected by, among other things, changes
in China’s political and economic conditions. Any significant revaluation of the RMB may have a material adverse effect
on our revenues and financial condition, and the value of, and any dividends payable on our shares in U.S. dollar terms. For example,
to the extent that we need to convert U.S. dollars we receive from our offering into RMB for our operations, appreciation of the
RMB against the U.S. dollar would have an adverse effect on the RMB amount we would receive from the conversion. Conversely, if
we decide to convert our RMB into U.S. dollars for the purpose of paying dividends on our common stock or for other business purposes,
appreciation of the U.S. dollar against the RMB would have a negative effect on the U.S. dollar amount available to us.
Since
July 2005, the RMB is no longer pegged to the U.S. dollar. Although the People’s Bank of China regularly intervenes in the
foreign exchange market to prevent significant short-term fluctuations in the exchange rate, the RMB may appreciate or depreciate
significantly in value against the U.S. dollar in the medium to long term. Moreover, it is possible that in the future, PRC authorities
may lift restrictions on fluctuations in the RMB exchange rate and lessen intervention in the foreign exchange market.
Very
limited hedging transactions are available in China to reduce our exposure to exchange rate fluctuations. To date, we have not
entered into any hedging transactions. While we may enter into hedging transactions in the future, the availability and effectiveness
of these transactions may be limited, and we may not be able to successfully hedge our exposure at all. In addition, our foreign
currency exchange losses may be magnified by PRC exchange control regulations that restrict our ability to convert RMB into foreign
currencies.
IF
WE BECOME DIRECTLY SUBJECT TO THE RECENT SCRUTINY, CRITICISM AND NEGATIVE PUBLICITY INVOLVING U.S.-LISTED CHINESE COMPANIES, WE
MAY HAVE TO EXPEND SIGNIFICANT RESOURCES TO INVESTIGATE AND RESOLVE THE MATTER WHICH COULD HARM OUR BUSINESS OPERATIONS, THIS
OFFERING AND OUR REPUTATION AND COULD RESULT IN A LOSS OF YOUR INVESTMENT IN OUR SHARES, ESPECIALLY IF SUCH MATTER CANNOT BE ADDRESSED
AND RESOLVED FAVORABLY.
Recently,
U.S. public companies that have substantially all of their operations in China, have been the subject of intense scrutiny, criticism
and negative publicity by investors, financial commentators and regulatory agencies, such as the SEC. Much of the scrutiny, criticism
and negative publicity has centered around financial and accounting irregularities, a lack of effective internal controls over
financial accounting, inadequate corporate governance policies or a lack of adherence thereto and, in some cases, allegations
of fraud. As a result of the scrutiny, criticism and negative publicity, the publicly traded stock of many U.S. listed Chinese
companies has sharply decreased in value and, in some cases, has become virtually worthless. Many of these companies are now subject
to shareholder lawsuits and SEC enforcement actions and are conducting internal and external investigations into the allegations.
It is not clear what effect this sector-wide scrutiny, criticism and negative publicity will have on our company, our business
and this offering. If we become the subject of any unfavorable allegations, whether such allegations are proven to be true or
untrue, we will have to expend significant resources to investigate such allegations and/or defend the Company. This situation
may be a major distraction to our management. If such allegations are not proven to be groundless, our company and business operations
will be severely hampered and your investment in our shares could be rendered worthless.
CERTAIN
POLITICAL AND ECONOMIC CONSIDERATIONS RELATING TO THE PRC COULD ADVERSELY AFFECT OUR COMPANY.
While
the PRC’s government has pursued economic reforms since its adoption of the open-door policy in 1978, a large portion of
the PRC’s economy is still operating under five-year plans and annual state plans. Through these plans and other economic
measures, such as control on foreign exchange, taxation and restrictions on foreign participation in the domestic market of various
industries, the PRC’s government exerts considerable direct and indirect influence on the economy. Many of the economic
reforms carried out by the PRC’s government are unprecedented or experimental, and are expected to be refined and improved.
Other political, economic and social factors can also lead to further readjustment of such reforms. This refining and readjustment
process may not necessarily have a positive effect on our operations or future business development. Our operating results may
be adversely affected by changes in the PRC’s economic and social conditions as well as by changes in the policies of the
PRC government, such as changes in laws and regulations (or the official interpretation thereof), measures which may be introduced
to control inflation, changes in the interest rate or method of taxation, and the imposition of restrictions on currency conversion
in addition to those described below.
SINCE
MOST OF OUR ASSETS ARE LOCATED IN PRC, ANY DIVIDENDS OF PROCEEDS FROM LIQUIDATION WILL BE SUBJECT TO THE APPROVAL OF THE RELEVANT
CHINESE GOVERNMENT AGENCIES.
Our
operating assets are located inside the PRC. Under the laws governing Foreign Invested Enterprise (“FIE”) in the PRC,
dividend distribution and liquidation are allowed but subject to special procedures under the relevant laws and rules. Any dividends
of proceeds from liquidation will be paid through Wuhan Newport, our PRC subsidiary, which is subject to the decision of the board
of directors and subject to foreign exchange rules governing such repatriation. Any liquidation of a FIE is subject to the relevant
commerce authority’s approval, registration in relevant Administration for Industry and Commerce and supervision as well
as the foreign exchange control. Though the dividends of proceeds from liquidation can be remitted out of China to the investor
after they have been approved by the commerce authority and SAFE, we cannot assure that we can always obtain such approvals. This
may generate additional risk for our investors in case of dividend payment and liquidation.
IT
MAY BE DIFFICULT TO EFFECT SERVICE OF PROCESS AND ENFORCEMENT OF LEGAL JUDGMENTS UPON OUR COMPANY AND OUR OFFICERS AND DIRECTORS
BECAUSE THEY RESIDE OUTSIDE THE UNITED STATES.
As
our operations are based in the PRC and a majority of our directors and officers reside in the PRC, service of process on the
Company and such foreign directors and officers may be difficult to effect within the United States. Also, our main assets are
located in the PRC and any judgment obtained in the United States against us may not be enforceable outside the United States.
THE
CHINESE GOVERNMENT EXERTS SUBSTANTIAL INFLUENCE OVER THE MANNER IN WHICH WE MUST CONDUCT OUR BUSINESS ACTIVITIES.
We
are dependent on our relationship with the local government in the provinces in which we operate our business. The Chinese government
has exercised and continues to exercise substantial control over virtually every sector of the Chinese economy through regulation
and state ownership. Our ability to operate in China may be harmed by changes in its laws and regulations, including those relating
to taxation, environmental regulations, land use rights, property and other matters. We believe that Wuhan Newport’s operations
in China are in material compliance with all applicable legal and regulatory requirements. However, the central or local governments
of these jurisdictions may impose new, stricter regulations or interpretations of existing regulations that would require additional
expenditures and efforts on our part to ensure our compliance with such regulations or interpretations. Accordingly, government
actions in the future, including any decision not to continue to support recent economic reforms and to return to a more centrally
planned economy or regional or local variations in the implementation of economic policies, could have a significant effect on
economic conditions in China or particular regions thereof, and could require us to divest ourselves of any interest we then hold
in Chinese properties.
Future
inflation in China may inhibit our ability to conduct business in China. In recent years, the Chinese economy has experienced
periods of rapid expansion and high rates of inflation. Rapid economic growth can lead to growth in the money supply and rising
inflation. If prices for our properties rise at a rate that is insufficient to compensate for the rise in the costs of supplies,
it may have an adverse effect on profitability. These factors have led to the adoption by Chinese government, from time to time,
of various corrective measures designed to restrict the availability of credit or regulate growth and contain inflation. High
inflation may in the future cause the Chinese government to impose controls on credit and/or prices, or to take other action,
which could inhibit economic activity in China, and thereby harm the market for our products.
OUR
SALES AND OPERATING REVENUES COULD DECLINE DUE TO MACRO-ECONOMIC AND OTHER FACTORS OUTSIDE OF OUR CONTROL, SUCH AS CHANGES IN
CLIENT CONFIDENCE AND DECLINES IN EMPLOYMENT LEVELS.
The
real estate and logistics markets in China are susceptible to fluctuations in economic conditions. Our business substantially
depends on the prevailing economic conditions in China. Changes in national and regional economic conditions, as well as local
economic conditions where we conduct our operations and where prospective purchasers of the Company’s properties live, may
result in more caution on the part of market participants and consequently fewer purchases. These economic uncertainties involve,
among other things, conditions of supply and demand in local markets and changes in client confidence and income, employment levels,
and government regulations. These risks and uncertainties could periodically have an adverse effect on consumer demand for and
the pricing of our homes, which could cause our operating revenues to decline. A reduction in our revenues could in turn negatively
affect the market price of our securities.
LIMITATIONS
ON CHINESE ECONOMIC MARKET REFORMS MAY DISCOURAGE FOREIGN INVESTMENT IN CHINESE BUSINESSES.
The
value of investments in Chinese businesses could be adversely affected by political, economic and social uncertainties in China.
The economic reforms introduced in China in recent years are regarded by China’s national government as a way to introduce
economic market forces into China. Given the overriding desire of the national government leadership to maintain stability in
China amid rapid social and economic changes in the country, the economic market reforms of recent years could be slowed, or even
reversed.
PRC
REGULATIONS RELATING TO THE ESTABLISHMENT OF OFFSHORE SPECIAL PURPOSE COMPANIES BY PRC RESIDENTS MAY SUBJECT OUR PRC RESIDENT
SHAREHOLDERS TO PENALTIES 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.
The
SAFE promulgated the Notice on Relevant Issues Relating to Domestic Resident’s Investment and Financing and Roundtrip Investment
through Special Purpose Vehicles, or Notice 37, in July 2014 that requires PRC residents or entities to register with SAFE or
its local branch in connection with their establishment or control of an offshore entity established for the purpose of overseas
investment or financing. In addition, such PRC residents or entities must update their SAFE registrations when the offshore special
purpose vehicle undergoes material events relating to material change of capitalization or structure of the PRC resident itself
(such as capital increase, capital reduction, share transfer or exchange, merger or spin off). As of November 21, 2016, Mr. Xiangyao
Liu, Mr. Linyu Chen and Mr. Long Zhao who are Chinese residents have completed the registration with SAFE under this Notice.
FAILURE
TO COMPLY WITH THE INDIVIDUAL FOREIGN EXCHANGE RULES RELATING TO THE OVERSEAS DIRECT INVESTMENT OR THE ENGAGEMENT IN THE ISSUANCE
OR TRADING OF SECURITIES OVERSEAS BY OUR PRC RESIDENT STOCKHOLDERS MAY SUBJECT SUCH STOCKHOLDERS TO FINES OR OTHER LIABILITIES.
Other
than Notice 37, our ability to conduct foreign exchange activities in the PRC may be subject to the interpretation and enforcement
of the Implementation Rules of the Administrative Measures for Individual Foreign Exchange promulgated by SAFE in January 2007
(as amended and supplemented, the “
Individual Foreign Exchange Rules
”). Under the Individual Foreign Exchange
Rules, any PRC individual seeking to make a direct investment overseas or engage in the issuance or trading of negotiable securities
or derivatives overseas must make the appropriate registrations in accordance with SAFE provisions. PRC individuals who fail to
make such registrations may be subject to warnings, fines or other liabilities.
We
may not be fully informed of the identities of all our beneficial owners who are PRC residents. For example, because the investment
in or trading of our shares will happen in an overseas public or secondary market where shares are often held with brokers in
brokerage accounts, it is unlikely that we will know the identity of all of our beneficial owners who are PRC residents. Furthermore,
we have no control over any of our future beneficial owners and we cannot assure you that such PRC residents will be able to complete
the necessary approval and registration procedures required by the Individual Foreign Exchange Rules.
It
is uncertain how the Individual Foreign Exchange Rules will be interpreted or enforced and whether such interpretation or enforcement
will affect our ability to conduct foreign exchange transactions. Because of this uncertainty, we cannot be sure whether the failure
by any of our PRC resident stockholders to make the required registration will subject our PRC subsidiaries to fines or legal
sanctions on their operations, delay or restriction on repatriation of proceeds of this offering into the PRC, restriction on
remittance of dividends or other punitive actions that would have a material adverse effect on our business, results of operations
and financial condition.
PRC
REGULATIONS RELATING TO ACQUISITIONS OF PRC COMPANIES BY FOREIGN ENTITIES MAY LIMIT OUR ABILITY TO ACQUIRE PRC COMPANIES AND ADVERSELY
AFFECT THE IMPLEMENTATION OF OUR ACQUISITION STRATEGY AS WELL AS OUR BUSINESS AND PROSPECTS.
The
PRC State Administration of Foreign Exchange, or SAFE, issued a public notice in January 2005 concerning foreign exchange regulations
on mergers and acquisitions in China. The public notice states that if an offshore company controlled by PRC’s residents
intends to acquire a PRC company, such acquisition will be subject to strict examination by the relevant foreign exchange authorities.
The public notice also states that the approval of the relevant foreign exchange authorities is required for any sale or transfer
by the PRC’s residents of a PRC company’s assets or equity interests to foreign entities, such as us, for equity interests
or assets of the foreign entities.
In
April 2005, SAFE issued another public notice further explaining the January notice. In accordance with the April notice, if an
acquisition of a PRC company by an offshore company controlled by PRC residents has been confirmed by a Foreign Investment Enterprise
Certificate prior to the promulgation of the January notice, the PRC residents must each submit a registration form to the local
SAFE branch with respect to their respective ownership interests in the offshore company, and must also file an amendment to such
registration if the offshore company experiences material events, such as changes in the share capital, share transfer, mergers
and acquisitions, spin-off transactions or use of assets in China to guarantee offshore obligations.
On
May 31, 2007, SAFE issued another official notice known as “Circular 106,” which requires the owners of any Chinese
company to obtain SAFE’s approval before establishing any offshore holding company structure to facilitate foreign financing
or subsequent acquisitions in China.
If
we decide to acquire a company organized under the laws of the PRC, we cannot assure investors that we or the owners of such company,
as the case may be, will be able to obtain the necessary approvals, filings and registrations for the acquisition. This may restrict
our ability to implement our acquisition strategy and adversely affect our business and prospects.
CAPITAL
OUTFLOW POLICIES IN CHINA MAY HAMPER OUR ABILITY TO REMIT INCOME TO THE UNITED STATES AND RESTRICTIONS ON CURRENCY EXCHANGE MAY
LIMIT OUR ABILITY TO UTILIZE OUR REVENUES EFFECTIVELY.
The
PRC’s government imposes controls on the convertibility of the RMB into foreign currencies and, in certain cases, the remittance
of currency out of China. We receive all of our revenue in RMB. Under our current corporate structure, our U.S. holding company
may rely on dividend payments from our PRC subsidiary to fund any cash and financing requirements we may have. Under existing
PRC foreign exchange regulations, payments of current account items, including profit distributions, interest payments and trade
and service-related foreign exchange transactions, can be made in foreign currencies without prior approval from the State Administration
of Foreign Exchange (“SAFE”) by complying with certain procedural requirements. Therefore, our PRC subsidiary is able
to pay dividends in foreign currencies to us without prior approval from SAFE by complying with certain procedural requirements.
However, approval from or registration with appropriate government authorities is required where RMB is to be converted into a
foreign currency and remitted out of China to pay capital expenses such as the repayment of loans denominated in foreign currencies.
This could affect the ability of our PRC subsidiary to obtain foreign exchange through debt or equity financings, including by
means of loans or capital contributions from us. In the future, the PRC government may also, at its discretion, restrict access
to foreign currencies for current account transactions. If the foreign exchange control system prevents us from obtaining sufficient
foreign currencies to satisfy our foreign currency demands, we may not be able to pay dividends in foreign currencies to our stockholders.
The
majority of our revenues and operating expenses are denominated in RMB. The PRC government imposes controls on the convertibility
of the RMB into foreign currencies and, in certain cases, the remittance of currency out of China. Pursuant to the Foreign Currency
Administration Rules, promulgated on January 29, 1996 and amended on January 14, 1997, and various regulations issued by SAFE
and other relevant PRC government authorities, RMB is freely convertible only to the extent of current account items, such as
trade-related receipts and payments, interest and dividends. Capital account items, such as direct equity investments, loans and
repatriation of investments, require the prior approval from SAFE or its local branch for conversion of RMB into a foreign currency
such as U.S. dollars, and remittance of the foreign currency outside the PRC. Shortages in the availability of foreign currency
may restrict the ability of our PRC subsidiary to remit sufficient foreign currency to pay dividends or other payments to us,
or otherwise satisfy its foreign currency-denominated obligations. Currently, each of our PRC subsidiary and affiliates may purchase
foreign exchange for settlement of “current account transactions,” including payment of dividends to us and payment
of licensing fees and service fees to foreign licensors and service providers, without the approval of SAFE. However, approval
from the SAFE or its local branch is required where RMB is to be converted into foreign currency and remitted out of China to
pay capital expenses, such as the repayment of loans denominated in foreign currencies.
BECAUSE
OUR FUNDS ARE HELD IN BANKS THAT DO NOT PROVIDE INSURANCE, THE FAILURE OF ANY BANK IN WHICH WE DEPOSIT OUR FUNDS MAY AFFECT OUR
ABILITY TO CONTINUE TO OPERATE.
Banks
and other financial institutions in the PRC do not provide insurance for funds held on deposit. As a result, in the event of a
bank failure, we may not have access to funds on deposit. Depending upon the amount of money we maintain in a bank that fails,
our inability to have access to our cash may 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 to operate.
IF
WE ARE UNABLE TO OBTAIN BUSINESS INSURANCE IN THE PRC, WE MAY NOT BE PROTECTED FROM RISKS THAT ARE CUSTOMARILY COVERED BY INSURANCE
IN THE UNITED STATES.
Business
insurance is not readily available in the PRC. To the extent that we suffer a loss of a type that would normally be covered by
insurance in the United States, such as product liability and general liability insurance, we would incur significant expenses
in both defending any action and in paying any claims that result from a settlement or judgment. We have not obtained fire, casualty
and theft insurance, and there is no insurance coverage for our raw materials, goods and merchandise, furniture or buildings in
China. Any losses incurred by us will have to be borne by us without any assistance, and we may not have sufficient capital to
cover material damage to, or the loss of, our production facility due to fire, severe weather, flood or other causes, and such
damage or loss may have a material adverse effect on our financial condition, business and prospects.
UNDER
THE NEW ENTERPRISE INCOME TAX LAW, WE MAY BE CLASSIFIED AS A “RESIDENT ENTERPRISE” OF CHINA. SUCH CLASSIFICATION MAY
RESULT IN UNFAVORABLE TAX CONSEQUENCES TO US AND OUR NON-PRC SHAREHOLDERS.
China
passed a New Enterprise Income Tax Law, or the New EIT Law, which became effective on January 1, 2008. Under the New 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 enterprise for enterprise income tax purposes. The implementing rules
of the New 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. In addition, a circular issued by the State Administration
of Taxation on April 22, 2009 clarified that dividends and other income paid by such resident enterprises will be considered to
be the PRC’s source income and subject to the PRC’s withholding tax. This recent circular also subjects such resident
enterprises to various reporting requirements with the PRC’s tax authorities.
Although
substantially all of our management is currently located in the PRC, it remains unclear whether the PRC’s tax authorities
would require or permit our overseas registered entities to be treated as PRC resident enterprises. We do not currently consider
our company to be a PRC resident enterprise. However, if the PRC’s tax authorities determine that we are a resident enterprise
for the PRC’s enterprise income tax purposes, a number of unfavorable PRC tax consequences may follow. First, we may be
subject to the enterprise income tax at a rate of 25% on our worldwide taxable income as well as the PRC’s enterprise income
tax reporting obligations. This would also mean that income such as interest on offering proceeds and non-China source income
would be subject to the PRC’s enterprise income tax at a rate of 25%. Second, although under the New EIT Law and its implementing
rules, dividends paid to us from our PRC subsidiary would qualify as tax-exempt income, we cannot guarantee that such dividends
will not be subject to a 10% withholding tax, as the PRC authorities responsible for enforcing the withholding tax have not yet
issued guidance with respect to the processing of outbound remittances to entities that are treated as resident enterprises for
the PRC’s enterprise income tax purposes. Finally, dividends paid to stockholders with respect to their shares of our common
stock or any gains realized from transfer of such shares may generally be subject to the PRC’s withholding taxes on such
dividends or gains at a rate of 10% if the shareholders are deemed to be non-resident enterprises or at a rate of 20% if the shareholders
are deemed to be non-resident individuals.
PRICE
INFLATION IN CHINA COULD AFFECT OUR RESULTS OF OPERATIONS IF WE ARE UNABLE TO PASS ALONG RAW MATERIAL PRICE INCREASES TO OUR CUSTOMERS.
Inflation
in China has continued to rise over the last few years. Because we purchase raw materials from suppliers in China, price inflation
has caused an increase in the cost of our raw materials. Price inflation may affect the results of our operations if
we are unable to pass along the price increases to our customers. Similarly, the cost of constructing our new facility
and the installation of equipment may increase as a result of these recent inflationary trends, which are expected to continue
for the near future. In addition, if inflation continues to rise in China, China could lose its competitive advantage
as a low-cost manufacturing venue, which may in turn lessen the competitive advantages of our being based in China. Accordingly,
inflation in China may weaken our competitiveness domestically and in international markets.
WE
MAY RELY PRINCIPALLY ON DIVIDENDS AND OTHER DISTRIBUTIONS OF EQUITY PAID BY OUR PRC SUBSIDIARY TO FUND ANY CASH AND FINANCING
REQUIREMENTS WE MAY HAVE, AND ANY LIMITATION ON THE ABILITY OF OUR PRC SUBSIDIARY TO PAY DIVIDENDS TO US COULD HAVE A MATERIAL
ADVERSE EFFECT ON OUR ABILITY TO CONDUCT OUR BUSINESS.
We
are a holding company, and we may rely principally on dividends and other distributions of equity paid by our PRC subsidiary for
our cash and financing requirements, which include the funds necessary to pay dividends and other cash distributions to our stockholders
and to service any debt we may incur. In the future, if our PRC subsidiary incurs debt on its own behalf, the instruments governing
the debt may restrict its ability to pay dividends or make other distributions to us.
Under
PRC laws and regulations, our PRC subsidiary, as a foreign-invested enterprise in the PRC, may pay dividends only out of accumulated
profits as determined in accordance with PRC accounting standards and regulations. In addition, a foreign-invested enterprise
is required to set aside at least 10% of its accumulated after-tax profits each year, if any, to fund certain statutory reserve
funds, until the aggregate amount of such fund reaches 50% of its registered capital. At its discretion, it may allocate a portion
of its after-tax profits based on PRC accounting standards to staff welfare and bonus funds. These reserve funds and staff welfare
and bonus funds are not distributable as cash dividends.
Any
limitation on the ability of our PRC subsidiary to pay dividends or make other distributions to us could materially and adversely
limit our ability to grow, make investments or acquisitions that could be beneficial to our business, pay dividends, or otherwise
fund and conduct our business.
THE
PRC GOVERNMENT MAY ISSUE FURTHER RESTRICTIVE MEASURES IN THE FUTURE.
We
cannot assure you that the PRC’s government will not issue further restrictive measures in the future. The PRC government’s
restrictive regulations and measures could increase our operating costs in adapting to these regulations and measures, limit our
access to capital resources or even restrict our business operations, which could further adversely affect our business and prospects.
OUR
PRC SUBSIDIARY HAS TAKEN THE POSITION THAT IT IS COMPLIANT WITH THE TAXATION, ENVIRONMENTAL, EMPLOYMENT AND SOCIAL SECURITY RULES
OF CHINA, AND IF THAT POSITION TURNS OUT TO BE WRONG, THEY MAY FACE PENALTIES IMPOSED BY THE PRC GOVERNMENT.
While
we believe our PRC subsidiary has been in compliance with PRC taxation, environmental, employment and social security rules during
their operations in China, we have not obtained letters from the PRC government authorities confirming such compliance. If any
PRC government authority takes the position that there is non-compliance with the taxation, environmental protection, employment
and/or social security rules by our PRC subsidiary, they may be exposed to penalties from PRC government authorities, in which
case the operation of our PRC subsidiary in question may be adversely affected.
IF
RELATIONS BETWEEN THE UNITED STATES AND CHINA WORSEN, OUR STOCK PRICE MAY DECREASE AND WE MAY HAVE DIFFICULTY ACCESSING THE U.S.
CAPITAL MARKETS.
At
various times during recent years, the United States and China have had disagreements over political and economic issues. Controversies
may arise in the future between these two countries. Any political or trade conflicts between the United States and China could
adversely affect the market price of our common stock and our ability to access U.S. capital markets.
INTERPRETATION
OF PRC LAWS AND REGULATIONS INVOLVES UNCERTAINTY.
Our
core business is conducted within China and is governed by PRC’s laws and regulations. The PRC’s legal system is based
on written statutes, and prior court decisions can only be used as a reference. Since 1979, the PRC’s government has promulgated
laws and regulations in relation to economic matters such as foreign investment, corporate organization and governance, commerce,
taxation and trade, with a view to developing a comprehensive system of commercial law, including laws relating to property ownership
and development. However, due to the fact that these laws and regulations have not been fully developed, and because of the limited
volume of published cases and the non-binding nature of prior court decisions, interpretation of PRC’s laws and regulations
involves a degree of uncertainty. Some of these laws may be changed without immediate publication or may be amended with retroactive
effect. Depending on the government agency or how an application or case is presented to such agency, we may receive less favorable
interpretations of laws and regulations than our competitors, particularly if a competitor has long been established in the locality
of, and has developed a relationship with such agency. In addition, any litigation in China may be protracted and result in substantial
costs and a diversion of resources and management attention. All of these uncertainties may cause difficulties in the enforcement
of our land use rights, entitlements under our permits and other statutory and contractual rights and interests.
Risks
Related to Our Offering and Ownership of Our Common stock
THE
MARKET PRICE OF OUR COMMON STOCK MAY BE VOLATILE OR MAY DECLINE REGARDLESS OF OUR OPERATING PERFORMANCE, AND YOU MAY NOT BE ABLE
TO RESELL YOUR SHARES AT OR ABOVE THE OFFERING PRICE.
The
offering price for our common stock will be determined through negotiations between the underwriter and our Company and may vary
from the market price of our common stock following our offering. If you purchase our common stock in our offering, you may not
be able to resell those shares at or above the offering price. We cannot assure you that the offering price of our common stock,
or the market price following our offering, will equal or exceed prices in privately negotiated transactions of our shares that
have occurred from time to time prior to our offering. The market price of our common stock may fluctuate significantly in response
to numerous factors, many of which are beyond our control, including:
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or anticipated fluctuations in our revenue and other operating results;
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financial projections we may provide to the public, any changes in these projections or our failure to meet these projections;
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actions
of securities analysts who initiate or maintain coverage of us, changes in financial estimates by any securities analysts
who follow our company, or our failure to meet these estimates or the expectations of investors;
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announcements
by us or our competitors of significant products or features, technical innovations, acquisitions, strategic partnerships,
joint ventures, or capital commitments;
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price
and volume fluctuations in the overall stock market, including as a result of trends in the economy as a whole;
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lawsuits
threatened or filed against us; and
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other
events or factors, including those resulting from war or incidents of terrorism, or responses to these events.
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addition, the stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the
market prices of equity securities of many companies. Stock prices of many companies have fluctuated in a manner unrelated or
disproportionate to the operating performance of those companies. In the past, stockholders have filed securities class action
litigation following periods of market volatility. If we were to become involved in securities litigation, it could subject us
to substantial costs, divert resources and the attention of management from our business, and adversely affect our business.
WE
HAVE BROAD DISCRETION IN THE USE OF THE NET PROCEEDS FROM OUR OFFERING AND MAY NOT USE THEM EFFECTIVELY.
To
the extent (i) we raise more money than required for the purposes explained in the section titled “Use of Proceeds”
or (ii) we determine that the proposed uses set forth in that section are no longer in the best interests of our Company, we cannot
specify with any certainty the particular uses of such net proceeds that we will receive from our offering. Our management will
have broad discretion in the application of such net proceeds, including working capital, possible acquisitions, and other general
corporate purposes, and we may spend or invest these proceeds in a way with which our stockholders disagree. The failure by our
management to apply these funds effectively could harm our business and financial condition. Pending their use, we may invest
the net proceeds from our offering in a manner that does not produce income or that loses value.
WE
DO NOT INTEND TO PAY DIVIDENDS FOR THE FORESEEABLE FUTURE.
We
currently intend to retain any future earnings to finance the operation and expansion of our business, and we do not expect to
declare or pay any dividends in the foreseeable future. As a result, you may only receive a return on your investment in our common
stock if the market price of our common stock increases.
SHARES
ELIGIBLE FOR FUTURE SALE MAY ADVERSELY AFFECT THE MARKET PRICE OF OUR COMMON STOCK, AS THE FUTURE SALE OF A SUBSTANTIAL AMOUNT
OF OUTSTANDING COMMON STOCK IN THE PUBLIC MARKETPLACE COULD REDUCE THE PRICE OF OUR COMMON STOCK.
The
market price of our shares could decline as a result of sales of substantial amounts of our shares in the public market, or the
perception that these sales could occur. In addition, these factors could make it more difficult for us to raise funds through
future offerings of our common stock. An aggregate of 172,269,446 shares will be outstanding before the consummation of this offering
and [●] shares will be outstanding immediately after this offering. All of the shares sold in the offering will be freely
transferable without restriction or further registration under the Securities Act. The remaining shares will be “restricted
securities” as defined in Rule 144. These shares may be sold in the future without registration under the Securities Act
to the extent permitted by Rule 144 or other exemptions under the Securities Act. See “Shares Eligible for Future Sale.”
YOU
WILL EXPERIENCE IMMEDIATE AND SUBSTANTIAL DILUTION.
The
offering price of our shares is substantially higher than the pro forma net tangible book value per share of our common stock.
Upon the completion of this offering, if you purchase shares in this offering, you will incur immediate dilution of approximately
$[●] or approximately [●]% in the pro forma net tangible book value per share from the price per share that you pay
for the shares. Accordingly, if you purchase shares in this offering, you will incur immediate and substantial dilution of your
investment. See “Dilution” on page 26.
NEITHER
MANAGEMENT NOR THE UNDERWRITERS HAVE PERFORMED DUE DILIGENCE ON MARKET AND INDUSTRY DATA CITED IN THIS PROSPECTUS.
This
prospectus includes market and industry data that has been obtained from third-party sources, including industry publications,
as well as industry data prepared by our management on the basis of its knowledge of and experience in the industries in which
we operate (including our management’s estimates and assumptions relating to such industries based on that knowledge). Management’s
knowledge of such industries has been developed through its experience and participation in these industries. Neither we nor our
management have conducted due diligence or independently verified any of the data from such sources referred to in this prospectus
or ascertained the underlying economic assumptions relied upon by such sources. Internally prepared and third-party market forecasts,
in particular, are estimates only and may be inaccurate, especially over long periods of time. In addition, the underwriter has
not independently verified any of the industry data prepared by management or ascertained the underlying estimates and assumptions
relied upon by management. Furthermore, references in this prospectus to any publications, reports, surveys or articles prepared
by third parties should not be construed as depicting the complete findings of the entire publication, report, survey or article.
If such market and industry data turned out to be inaccurate, management’s belief and perception of our competitive strength
may need to be adjusted and, as a result, our business strategy may need to be changed which may have a negative effect on our
results of operations.
JASPER
LAKE HOLDINGS LIMITED, OUR MAJORITY STOCKHOLDER, MAY HAVE SIGNIFICANT INFLUENCE OVER THE OUTCOME OF MATTERS SUBMITTED TO OUR STOCKHOLDERS
FOR APPROVAL, WHICH MAY PREVENT US FROM ENGAGING IN CERTAIN TRANSACTIONS.
As
of March 17, 2017 Jasper Lake Holdings Limited beneficially owns 52.96% of our outstanding common stock. Mr. Xiangyao
Liu, our CEO and President, has sole voting and dispositive power of Jasper Lake Holdings Limited. As a result, this majority
stockholder may exercise significant influence over all matters requiring stockholder approval, including the appointment of
our directors and the approval of significant corporate transactions. This ownership and control may also have the effect of
delaying or preventing a future change in control, impeding a merger, consolidation, takeover or other business combination
that may be in the best interest of the Company.
IF
WE FAIL TO MAINTAIN AN EFFECTIVE SYSTEM OF INTERNAL CONTROLS, WE MAY NOT BE ABLE TO ACCURATELY REPORT OUR FINANCIAL RESULTS OR
PREVENT FRAUD.
The
SEC, as required by Section 404 of the Sarbanes-Oxley Act of 2002, adopted rules requiring every public company to include a management
report on such company’s internal controls over financial reporting in its annual report, which contains management’s
assessment of the effectiveness of internal controls over financial reporting.
Our
reporting obligations as a public company place a significant strain on our management and operational and financial resources
and systems. Effective internal controls, particularly those related to revenue recognition, are necessary for us to produce reliable
financial reports and are important to prevent fraud. As a result, our failure to achieve and maintain effective internal controls
over financial reporting may result in the loss of investor confidence in the reliability of our financial statements, which in
turn may harm our business and negatively impact the trading price of our stock. Furthermore, we anticipate that we will continue
to incur considerable costs and use significant management time and other resources in an effort to comply with Section 404 and
other requirements of the Sarbanes-Oxley Act.
THERE
IS A LIMITED MARKET FOR OUR COMMON STOCK, WHICH MAY MAKE IT DIFFICULT FOR HOLDERS OF OUR COMMON STOCK TO SELL THEIR STOCK.
We
plan to apply to be listed on NASDAQ Global Select Market, but there is no assurance that we will be approved for the listing
at this point. Our common stock currently trades on the OTC Markets under the symbol “YERR”. There is a limited trading
market for our common stock and at times there is no trading in our common stock. Accordingly, there can be no assurance as to
the liquidity of any markets that may develop for our common stock, the ability of holders of our common stock to sell our common
stock, or the prices at which holders may be able to sell our common stock. Further, many brokerage firms will not process transactions
involving low price stocks, especially those that come within the definition of a “penny stock.” If we cease to be
quoted, holders of our common stock may find it more difficult to dispose of, or to obtain accurate quotations as to the market
value of our common stock, and the market value of our common stock would likely decline.
WE
MAY BE SUBJECT TO THE PENNY STOCK RULES WHICH WILL MAKE SHARES OF OUR COMMON STOCK MORE DIFFICULT TO SELL.
We
may be subject now and in the future to the SEC’s “penny stock” rules if our shares of common stock sell below
$5.00 per share. Penny stocks generally are equity securities with a price of less than $5.00. The penny stock rules require
broker-dealers to deliver a standardized risk disclosure document prepared by the SEC which provides information about penny stocks
and the nature and level of risks in the penny stock market. The broker-dealer must also provide the customer with current bid
and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson, and monthly account statements
showing the market value of each penny stock held in the customer’s account. The bid and offer quotations, and the broker-dealer
and salesperson compensation information must be given to the customer orally or in writing prior to completing the transaction
and must be given to the customer in writing before or with the customer’s confirmation.
In
addition, the penny stock rules require that prior to a transaction, the broker dealer must make a special written determination
that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. The
penny stock rules are burdensome and may reduce purchases of any offerings and reduce the trading activity for shares of our common
stock. As long as our shares of common stock are subject to the penny stock rules, the holders of such shares of common stock
may find it more difficult to sell their securities.
IF
A MORE ACTIVE TRADING MARKET FOR OUR COMMON STOCK DEVELOPS, THE MARKET PRICE OF OUR COMMON STOCK IS LIKELY TO BE HIGHLY VOLATILE
AND SUBJECT TO WIDE FLUCTUATIONS, AND HOLDERS OF OUR COMMON STOCK MAY BE UNABLE TO SELL THEIR SHARES AT OR ABOVE THE PRICE AT
WHICH THEY WERE ACQUIRED.
The
market price of our common stock is likely to be highly volatile and could be subject to wide fluctuations in response to a number
of factors that are beyond our control, including:
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variations in our revenues and operating expenses;
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in the financial markets and worldwide economies;
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of innovations or new products or services by us or our competitors;
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by the PRC government relating to regulations that govern our industry;
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sales of our common stock or other securities in the open market;
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variations
in interest rates;
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in the market valuations of other comparable companies; and
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in accounting principles.
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addition, the market for Chinese companies that went public in the U.S. through reverse mergers, such as ours, is currently extremely
volatile primarily due to recent allegations and, in some instances, findings of fraud among some of these companies. If
a stockholder were to file a class action suit against us following a period of volatility in the price of our securities, we
would incur substantial legal fees and our management’s attention and resources would be diverted from operating our business
to responding to such litigation, which may harm our business and reputation.
THE
RIGHTS OF THE HOLDERS OF OUR COMMON STOCK MAY BE IMPAIRED BY THE POTENTIAL ISSUANCE OF PREFERRED STOCK.
Our
board of directors has the right to create a new series of preferred stock. As a result, the Board of Directors may, without stockholder
approval, issue preferred stock with voting, dividend, conversion, liquidation or other rights that may adversely affect the voting
power and equity interest of the holders of our common stock. Although we have no present intention to issue any additional shares
of preferred stock or to create any new series of preferred stock, we may issue such shares in the future.
CAUTIONARY NOTE
REGARDING FORWARD-LOOKING STATEMENTS
This
prospectus contains forward looking statements that involve risks and uncertainties, principally in the sections entitled “Description
of Business,” “Risk Factors,” and “Management’s Discussion and Analysis of Financial Condition and
Results of Operations.” All statements other than statements of historical fact contained in this prospectus, including
statements regarding future events, our future financial performance, business strategy and plans and objectives of management
for future operations, are forward-looking statements. We have attempted to identify forward-looking statements by terminology
including “anticipates,” “believes,” “can,” “continue,” “could,” “estimates,”
“expects,” “intends,” “may,” “plans,” “potential,” “predicts,”
“should,” or “will” or the negative of these terms or other comparable terminology. Although we do not
make forward looking statements unless we believe we have a reasonable basis for doing so, we cannot guarantee their accuracy.
These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks
outlined under “Risk Factors” or elsewhere in this prospectus, which may cause our or our industry’s actual
results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Moreover, we
operate in a very competitive and rapidly changing environment. New risks emerge from time to time and it is not possible for
us to predict all risk factors, nor can we address the impact of all factors on our business or the extent to which any factor,
or combination of factors, may cause our actual results to differ materially from those contained in any forward-looking statements.
All forward-looking statements included in this document are based on information available to us on the date hereof, and we assume
no obligation to update any such forward-looking statements
You
should not place undue reliance on any forward-looking statement, each of which applies only as of the date of this prospectus. Before
you invest in our securities, you should be aware that the occurrence of the events described in the section entitled “Risk
Factors” and elsewhere in this prospectus could negatively affect our business, operating results, financial condition and
stock price. Except as required by law, we undertake no obligation to update or revise publicly any of the forward-looking
statements after the date of this prospectus to conform our statements to actual results or changed expectations.
USE
OF PROCEEDS
We
estimate that our net proceeds from the sale of the common stock that we are offering will be approximately $[●] assuming
a public offering price of $[●] per share, after deducting estimated underwriting discounts and commissions and estimated
offering expenses payable by us. A $1.00 increase (or decrease) in the assumed offering price of $[●] per share, would increase
(or decrease) the net proceeds to us from this offering by $[●], assuming the number of shares offered by us, as set forth
on the cover page of this prospectus, remains the same, after deducting estimated underwriting discounts and commissions.
We
intend to use the net proceeds to us from this offering to fund i) the construction of facilities, including the warehouse, cold-chain
logistics area, and exhibition center; ii) the construction of the rail-cargo operating area; iii) the construction of the port
terminal; and iv) general working capital to assist in the continued development of the Logistics Center.
Pending
other uses, we intend to invest the proceeds to us in investment-grade, interest-bearing securities such as money market funds,
certificates of deposit, or direct or guaranteed obligations of the U.S. government, or hold as cash. We cannot predict whether
the proceeds invested will yield a favorable return. Our management will have broad discretion in the application of the net proceeds
we receive from this offering, and investors will be relying on the judgment of our management regarding the application of the
net proceeds.
We
intend to use the net proceeds of this offering as follows after we complete the remittance process, and we have ordered the specific
uses of proceeds in order of priority.
Description of Use
|
|
Estimated Amount of Net Proceeds
|
|
Construction of the facilities, including the warehouse, cold-chain logistics area, and exhibition center
|
|
$
|
13,000,000
|
|
Construction of the rail-cargo operating area
|
|
|
7,000,000
|
|
Construction of the port terminals and business related area
|
|
|
10,000,000
|
|
Working capital
|
|
|
6,000,000
|
|
General corporate use
|
|
|
2,000,000
|
|
Total
|
|
$
|
38,000,000
|
|
In
order to continue our project constructions on the operating zones, we need to be able to perform more projects on different functional
zones within the Logistics Center. Due to the capital-intensive construction project and limited unrestricted cash to pay for
advances to subcontractors and third parties in different phases of various projects, we are limited to focusing our attention
on the major infrastructure and facilities. We are targeting to complete the construction in three years and to complete 40% of
the Logistics center by the end of Phase 1. We will start constructing major infrastructures and facilities in major operating
zones, such as warehouses, office buildings, loading and unloading facilities and business centers, with the net proceeds from
this offering.
DIVIDEND POLICY
We
plan to retain any earnings, for the foreseeable future, for our operations. We have never paid any dividends on our common stock
and do not anticipate paying any cash dividends in the foreseeable future. Any future determination to pay cash dividends will
be at the discretion of our Board of Directors and will depend on our financial condition, operating results, capital requirements
and such other factors as our Board of Directors deem relevant. In addition, our credit facility restricts our ability to pay
dividends.
CAPITALIZATION
The
following tables set forth our capitalization as of December 31, 2016 on a pro forma as adjusted basis giving effect to the sale
of the offering at an assumed public offering price of $[●] per share and to reflect the application of the proceeds after
deducting the estimated underwriter fees. You should read this table in conjunction with our financial statements and related
notes appearing elsewhere in this prospectus and “Use of Proceeds” and “Description of Securities.”
|
●
|
On
a pro forma basis to give effect to the sale of the offering at an assumed public offering price of $[●] per share
|
|
|
Actual
|
|
|
Pro forma (1)
|
|
ASSETS
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
63,092
|
|
|
|
|
|
Other assets and receivables
|
|
|
4,151,752
|
|
|
|
|
|
Real estate property completed
|
|
|
29,507,108
|
|
|
|
|
|
Real estate properties and land lots under development
|
|
|
341,427,234
|
|
|
|
|
|
Property and equipment, net
|
|
|
89,742
|
|
|
|
|
|
Deferred tax assets
|
|
|
4,472,581
|
|
|
|
|
|
Total Assets
|
|
$
|
379,711,509
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
5,159,212
|
|
|
|
|
|
Due to related parties
|
|
|
31,870,222
|
|
|
|
|
|
Other taxes payable
|
|
|
49,918
|
|
|
|
|
|
Other payables and accrued liabilities
|
|
|
8,895,719
|
|
|
|
|
|
Real estate property refund and compensation payable
|
|
|
24,997,563
|
|
|
|
|
|
Convertible note
|
|
|
75,000,000
|
|
|
|
-
|
|
Loans payable
|
|
|
41,456,074
|
|
|
|
|
|
Total liabilities
|
|
$
|
187,518,708
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
Preferred stock at $0.0001 par value; 100,000,000 shares authorized; none issued or outstanding
|
|
$
|
-
|
|
|
|
-
|
|
Common stock at $0.0001 par value; 500,000,000 shares authorized; 172,254,446 and 151,000,000
shares issued and outstanding at December 31, 2015 and December 31, 2014, respectively
|
|
|
27,227
|
|
|
|
|
|
Additional paid-in capital (2)
|
|
|
242,696,445
|
|
|
|
|
|
Accumulated losses
|
|
|
28,989,090
|
|
|
|
|
|
Accumulated other comprehensive (loss) income
|
|
|
(21,541,781
|
)
|
|
|
|
|
Total Equity
|
|
$
|
192,192,801
|
|
|
|
|
|
Total Liabilities and Equity
|
|
$
|
379,711,509
|
|
|
|
|
|
(1)
|
Gives
effect to completion of the offering of [●] shares, at an assumed public offering price of $[●] per share and
to reflect the application of the proceeds after deducting the estimated underwriting fee and our estimated offering expenses.
(See note 2 below.)
|
(2)
|
Pro
forma additional paid in capital reflects the net proceeds we expect to receive, after deducting underwriting fees, Underwriter
expense allowances and other expenses. We expect to receive net proceeds of approximately $38,000,000 ($40,000,000 offering,
less underwriting fees of $2,000,000 and offering expenses of approximately $[●]).
|
DILUTION
The
as adjusted net tangible book value of our common stock as of [●], was $[●], or approximately $[●] per share
based upon [●] shares of common stock outstanding on such date. As adjusted net tangible book value per share represents
the amount of our total tangible assets reduced by the amount of our total liabilities, divided by the total number of shares
of common stock outstanding after giving effect to the sale of [●] shares of the common stock we are offering based upon
an assumed combined public offering price of $[●] per share, the closing price of our common stock on the OTC Markets on
[●], and after deducting underwriting discounts and commissions and estimated offering expenses of approximately $[●]
million.
If
you participate in this offering, your interest will be diluted to the extent of the difference between the offering price per
share and the as adjusted net tangible book value per share of our common stock immediately after completion after this offering.
This represents an immediate increase in as adjusted net tangible book value of $[●] per share to our existing stockholders
and an immediate dilution of $[●] per share to investors participating in this offering.
The
following table illustrates this dilution on a per share basis to new investors:
|
|
Post-offering (1)
|
|
Assumed public offering price per share
|
|
$
|
|
|
As adjusted net tangible book value per share as of [●] before giving effect to this offering
|
|
$
|
|
|
Increase in as adjusted net tangible book value per share attributed to new investors purchasing shares of common stock from us in this offering
|
|
$
|
|
|
As adjusted net tangible book value per share after giving effect to this offering
|
|
$
|
|
|
Dilution in as adjusted net tangible book value per share to new investors in this offering
|
|
$
|
|
|
(1)
|
Assumes
gross proceeds from offering of [●] common stock.
|
DESCRIPTION OF
BUSINESS
Overview
Yangtze
River Development Limited is a Nevada corporation that operates through its wholly-owned subsidiary Energetic Mind, which operates through
its wholly-owned subsidiary Ricofeliz Capital, which operates through its wholly-owned subsidiary Wuhan Newport, a wholly foreign-owned
enterprise that primarily engages in the business of real estate and infrastructural development with a port logistics center
located in Wuhan, Hubei Province of China. Situated in the middle reaches of the Yangtze River, Wuhan Newport is a large infrastructure
development project implemented under China’s latest “One Belt One Road” initiative and is believed to be strategically
positioned in the anticipated “Pilot Free Trade Zone” of the Wuhan Port, a crucial trading window among China, the Middle
East and Europe. To be fully developed upon completion, within the logistics center, there will be six operating zones: port operation
area, warehouse and distribution area, cold chain logistics area, rail cargo loading area, exhibition area and business related
area. The Logistics Center is also expected to provide a number of shipping berths for cargo ships of various sizes. Wuhan Newport
is expected to provide domestic and foreign businesses direct access to the anticipated Pilot Free Trade Zone in Wuhan. The project
will include commercial buildings, professional logistic supply chain centers, direct access to the Yangtze River, Wuhan-Xinjiang-Europe
Railway and ground transportation, storage and processing centers, and IT supporting services, among others.
Income
generated from the use of the warehouses, cargo loading and unloading, railway and highway transportation and logistics services
and other logistics supporting services is expected to be the main source of our expected income. It is also expected that income
from real estate sales and leasing would be a relatively minor portion of our expected income since we are planning to sell or
lease only a small portion of our real estate properties such as office spaces. We plan to use the major area of our real estate
properties for the development of our Logistics Center, from which our main source of expected income can be derived. Theses income
includes but not limited to the service fees we charge for our clients’ usage of warehouses, online information platform,
ship berths, cold-chain storages, cargo handling, shipment loading and unloading.
Wuhan
Yangtze River Newport Logistics Center
The
Wuhan Yangtze River Newport Logistics Center (the “Logistics Center”), is an extensive complex located in Wuhan, the
capital of the Hubei Province of China, a major transportation hub city with access to numerous railways, roads and expressways
passing through the city and connecting to major cities in China, as well as other international centers of commerce and business.
The
Logistics Center is expected to occupy approximately 1,918,000 square meters, for which the construction and development are expected
to be completed in three phases in three years and reach its target maximum annual profit by the end of 2021 assuming the entire
funding required for construction of the Logistics Center of $1.03 billion is in place by 2020 and the Logistics Center is in
operation according to our business plan. The following table illustrates the timeframe of our investment and construction progress.
Time
|
|
Phase of
Investment/Construction
|
|
Percentage of Total
Anticipated
Investment/Construction (1)
|
|
|
Production Capacity (2)
|
|
1
st
Year (2017)
|
|
1
st
Phase
|
|
|
40
|
%
|
|
|
30
|
%
|
2
nd
Year (2018)
|
|
2
nd
Phase
|
|
|
70
|
%
|
|
|
40
|
%
|
3
rd
Year (2019)
|
|
3
rd
Phase
|
|
|
100
|
%
|
|
|
60
|
%
|
4
th
Year (2020)
|
|
Completed
|
|
|
100
|
%
|
|
|
75
|
%
|
5
th
Year (2021)
|
|
Completed
|
|
|
100
|
%
|
|
|
100
|
%
|
(1)
|
The
percentage of construction in a certain phase reflects the anticipated contribution of the investment in such particular phase.
For example, contribution of 40% of the total investment in Phase 1 will lead to construction of 40% of total value of the
Logistics Center.
|
(2)
|
The
percentage of Production Capacity shows the fraction of the target maximum annual profit to be earned under the full operation
of the Wuhan Project. We target to reach its maximum annual profit by the end of 2021 assuming the entire funding required
for construction of the Logistics Center of $1.03 billion is in place by 2020 and the Logistics Center is in operation according
to our business plan.
|
The
Logistics Center is located within the Wuhan Newport Yangluo Port, on the upper stream of the Yangtze River, and close to the
northern base of Wuhan Iron and Steel, China’s first mega-sized iron and steel production complex. The Logistics Center is expected
to include a port terminal that will be located approximately 26.5km from the Wuhan Guan and 5.5km from the Yangluo Yangtze River
Bridge. The operation area of the port is expected to consist of a riverbank of 1,039 meters with eight 5,000-to-10,000-ton berths,
two of which are multi-purpose berths and the other six are general cargo berths. It is designed to be able to handle up to 5,000,000
tons of cargo annually, including up to 100,000 TEU for annual container throughput (including 20,000 TEU in freezer areas), 1,000,000
tons of iron and steel and 3,000,000 tons of general cargo.
Within
the Logistics Center, functional areas will be divided into six operating zones: a port operation area, a warehouse and distribution
area, a cold chain supply logistics area, a rail cargo loading area, an exhibition area and a business related area. The Logistics
Center will also be complemented with container storage areas, multi-functional areas, general storage areas, a multi-functional
warehouse and infrastructural development, including new roads, gas stations, parking areas, gas and water pipes, electricity
lines and all other facilities and equipment to operate the Logistics Center.
Aside
from being situated in the Wuhan Yangluo Comprehensive Bonded Zone, the Yangluo development area is amongst the third group of
China’s Pilot Free Trade Zone (FTZ) applicants to submit FTZ applications to the State Council. As of the date hereof, approvals
have been granted to Shanghai, Tianjin, Guangdong and Fujian. Corporations within the approved free-trade zones are typically
entitled to a series of favorable regulations and policies that could help the businesses grow and succeed.
Wuhan
Newport has signed a twenty-year lease agreement, the maximum number of years permitted by the applicable PRC laws, and with rights
to renew at its sole discretion effective April 27, 2015, to lease approximately 1,200,000 square meters of land for building
logistics warehouses in support of the Logistics Center. The warehouses are expected to be comprised of port terminal zones, warehouse
logistics zones, cold chain supply zones and railroad loading and unloading zones. The warehouses, once constructed, will connect
the port terminal along the Yangtze River and the railway leading to Europe, satisfying the requirement of China’s latest
“One Belt, One Road” initiative. It will also be able to support large logistics companies in Wuhan and other nearby
provinces which will rent the warehouses, terminals and offices within the Logistics Center.
Logistics
Center Highlights:
|
●
|
The
shipping center will be implemented under China’s latest “One Belt, One Road” initiative to promote the
“Yangtze River Economic Belt”;
|
|
|
|
|
●
|
Wuhan
Newport is part of the Yangluo port, which is part of the area that is currently seeking approval for status as a “Free-Trade
Zone”;
|
|
|
|
|
●
|
Wuhan
Newport is part of the “Yangluo Comprehensive Bonded Zone”, which allows the enterprises in the zone to receive
certain favorable tax treatments such as export tax rebates and less or free of value-added tax and consumption tax;
|
The
“One Belt, One Road” Initiative
According
to the
Vision and Actions on Jointly Building Belt and Road
issued by the National Development and Reform Commission, Ministry
of Foreign Affairs, and Ministry of Commerce of the People’s Republic of China, with State Council authorization in March 2015,
“One Belt, One Road” (the “Initiative”) is a infrastructural development concept initiated by the leaders
of the Chinese government in 2013. It refers to the New Silk Road Economic Belt, which will link China with Europe through Central
and Western Asia, and the 21st Century Maritime Silk Road, which will connect China with Southeast Asian countries, Africa and
Europe through the Pacific and Indian Ocean. Neither the belt, nor the road, follow a designated route, but serve as a conceptual
roadmap for China’s plan to expand its presence commercially to the regions outside of the country and strengthen its economic
relationships with the nations in these regions.
The
“Belt” and the “Road” run through the continents of Asia, Europe and Africa, connecting the vibrant East
Asian economic circle on one end and developed European economic circle on the other, and encompassing countries with huge potential
for economic development. The Silk Road Economic Belt focuses on bringing together China, Central Asia, Russia and Europe (the
Baltic), linking China with the Persian Gulf and the Mediterranean Sea through Central Asia and West Asia, and connecting China
with Southeast Asia, South Asia and the countries along the Indian Ocean. The 21st-Century Maritime Silk Road is designed to go
from China’s coast to Europe through the South China Sea and the Indian Ocean in one route, and from China’s coast through the
South China Sea to the South Pacific in the other.
On
land, the Initiative is expected to focus on jointly building a new Eurasian Land Bridge and developing China-Mongolia-Russia,
China-Central Asia-West Asia and China-Indochina Peninsula economic corridors by taking advantage of international transport routes,
relying on core cities along the Belt and Road and using key economic industrial parks as cooperation platforms. At sea, the Initiative
is expected to focus on jointly building smooth, secure and efficient transportation routes connecting major sea ports along the
Belt and the Road. The China-Pakistan Economic Corridor and the Bangladesh-China-India-Myanmar Economic Corridor are closely related
to the Belt and Road Initiative, and therefore require closer cooperation and greater progress. (Source:
http://en.ndrc.gov.cn/newsrelease/201503/t20150330_669367.html
;
National Development and Reform Commission, Ministry of Foreign Affairs, and Ministry of Commerce of the People’s Republic
of China, with State Council authorization
).
The
following map illustrates the location of the New Silk Road Economic Belt and the 21st Century Maritime Silk Road:
(Source:
Xinhua Finance Agency)
Corporate
History
On
December 23, 2009, the Company was incorporated under the laws of the State of Nevada under the name of “Ciglarette, Inc.”
Our operations at the time consisted of marketing and distributing a “smokeless” cigarette. During that time, we had
no revenue and our operations were limited to capital formation, organization, and development of our business plan and target
customer market.
On
March 1, 2011, the Company completed a reverse acquisition transaction through a share exchange with Kirin China Holding, a British
Virgin Islands company (“Kirin China”), whereby the Company acquired all of the issued and outstanding shares of Kirin
China in exchange for 18,547,297 shares of common stock, which represented approximately 98.4% of the total shares outstanding
immediately following the closing of this share exchange (the “First Share Exchange”). Upon consummation of the
First Share Exchange, the Company changed its name to “Kirin International Holding, Inc.” and traded under the symbol
“KIRI” on the OTC Markets. As a result of the First Share Exchange, Kirin China became a wholly-owned subsidiary.
The Company ceased the smokeless cigarette business and became a holding company, through various controlled entities in China
and engaged in the development and operation of real estate in China. Through Kirin China, the Company engaged in private real
estate development focusing on residential and commercial real estate development in “tier-three” cities in China.
Tier-three cities are provincial capital cities with ordinary economic development and prefecture cities with relatively strong
economic development.
On
December 19, 2015, we entered into certain share exchange agreements with Energetic Mind and all the shareholders of Energetic
Mind, whereby we acquired 100% of the issued and outstanding ordinary shares of Energetic Mind (the “Second Share Exchange”).
Pursuant to the terms of the agreements for the Second Share Exchange, in exchange for 100% of the issued and outstanding ordinary
shares of Energetic Mind, we agreed to issue to (i) the shareholders of Energetic Mind an aggregate of one hundred fifty-one million
(151,000,000) shares of the Company’s common stock and (2) a certain related party an additional 8% convertible promissory
note in the principal amount of one hundred fifty million dollars ($150,000,000), with a conversion price of $10.00 per share.
On
December 31, 2015, we disposed all of its interests in i) Brookhollow Lake, LLC, ii) Newport Property Holding, LLC, iii) Kirin
China, iv) Kirin Hopkins Real Estate Group LLC, v) Archway Development Group LLC, vi) Specturm International Enterprise, LLC and
vii) wholly-owned subsidiary HHC-6055 Centre Drive LLC. The sale of Kirin China also effectively terminated the Company’s
contractual relationship with Hebei Zhongding Real Estate Development Co. Ltd and XingtaiZhongdingJiye Real Estate Development
Co., Ltd, both of which are companies formed under the laws of the People’s Republic of China and were deemed the Company’s
variable interest entities prior to this sale (“Subsidiaries Sale”).
As
a result of the Second Share Exchange and the Subsidiaries Sale, we currently operates its business solely through its wholly-owned
subsidiary Energetic Mind, which is the sole shareholder of Ricofeliz, which engages its business through its wholly-owned subsidiary
Wuhan Newport.
On
January 13, 2016, we filed a Certificate of Amendment to its Articles of Incorporation with the Secretary of the State of the
State of Nevada, changing its name from “Kirin International Holding, Inc.” to “Yangtze River Development Limited”.
Effective January 22, 2016, Company changed its stock symbol from “KIRI” to “YERR”.
The
Company, by and among Armada Enterprises GP (“Armada”) and Wight International Construction, LLC (“Wight”),
e
ntered into (i) a Contribution, Conveyance and Assumption Agreement (“Contribution
Agreement”) dated October 3, 2016, first and second addendums, dated October 3, 2016 and November 30, 2016, respectively,
and (ii) an Amended and Restated Limited Liability Company Agreement dated November 16, 2016 (collectively with the Contribution
Agreement, the (“Agreement”, whereby the Company acquired 100 million preferred B membership units of Wight, which
would ultimately convert into 100 million LP units in Armada Enterprises LP. In exchange, the Company issued a $500 million convertible
promissory note (“Note”) and 50,000,000 shares of the Company’s common stock to Wight. As a result of the Agreement
and the conversion of the Note on November 17, 2016, Wight owned 100,000,000 shares of the Company’s common stock representing
36.73% of the Company’s voting power and the Company owned 100 million preferred B membership units in Wight representing
a 62.5% non-voting equity interest in Wight.
Under
the terms of the Agreement, at the first closing, Wight was required to provide an aggregate total of $200 million, including
$50 million in working capital and $150 million in construction funding (the “Funding”) to the Company, by January
18, 2017. Wight did not provide the Funding on January 18, 2017 and the Company provided to Wight a “Notice of Default and
Request for Cure”. Wight proposed to provide $50 million in working capital funding on or before February 15, 2017 and secure
$150 million in construction funding on or before March 15, 2017. Wight failed to provide the $50 million in working capital funding
as proposed by February 15, 2017. Therefore, the Company, on February 24, 2017 decided to terminate the Agreement for non-performance
by Wight. Pursuant to the Agreement, the termination thereof calls for the immediate return of the 100,000,000 shares of common
stock issued by the Company to Wight.
On
February 27, 2017, the Company issued a “Termination and Demand” letter to Wight which terminated the Agreement with
Wight and Armada and demanded the return of the 100,000,000 shares of common stock.
On
March 1, 2017, the 100,000,000 shares of the Company’s common stock were canceled and returned by Wight, and were subsequently
returned to the Company’s treasury.
The
Company reserves the right to pursue any further legal action with respect to Armada’s and Wight’s default under the
Agreement.
Organization
& Subsidiaries
Upon
completion of the Second Share Exchange described above in “Corporate History,” Yangtze River Development Limited
holds 100% of the ordinary shares of its wholly owned subsidiary, Energetic Mind, which holds all of the share capital of Ricofeliz
Capital. Ricofeliz Capital holds all of the share capital of Wuhan Newport, a wholly foreign-owned enterprise located in
Wuhan of Hubei Province in China.
The
following diagram illustrates our corporate structure as of the date of this prospectus:
Overview
of the Logistics Center
The
Logistics Center is expected to be an extensive complex located in Wuhan, the capital of the Hubei Province of China, a major
transportation hub with numerous railways, roads and expressways passing through the city and connecting to major cities in China,
as well as other international centers of commerce and business.
The
Logistics Center is expected to occupy approximately 1,918,000 square meters, for which the construction and development are expected
to be completed in three phases in three years and reach its target maximum annual profit by the end of 2021 assuming the entire
funding required for construction of the Logistics Center of $1.03 billion is in place by 2020 and the Logistics Center is in
operation according to our business plan. The following table illustrates the timeframe of our investment and construction progress.
Time
|
|
Phase of
Investment/Construction
|
|
Percentage of Total
Anticipated
Investment/Construction (1)
|
|
|
Production Capacity (2)
|
|
1
st
Year (2017)
|
|
1
st
Phase
|
|
|
40
|
%
|
|
|
30
|
%
|
2
nd
Year (2018)
|
|
2
nd
Phase
|
|
|
70
|
%
|
|
|
40
|
%
|
3
rd
Year (2019)
|
|
3
rd
Phase
|
|
|
100
|
%
|
|
|
60
|
%
|
4
th
Year (2020)
|
|
Completed
|
|
|
100
|
%
|
|
|
75
|
%
|
5
th
Year (2021)
|
|
Completed
|
|
|
100
|
%
|
|
|
100
|
%
|
(1)
|
The
percentage of construction in a certain phase reflects the anticipated contribution of the investment in such particular phase.
For example, contribution of 40% of the total investment in Phase 1 will lead to construction of 40% of total value of the
Logistics Center.
|
(2)
|
The
percentage of Production Capacity shows the fraction of the target maximum annual profit to be earned under the full operation
of the Logistics Center. We target to reach our maximum annual profit by the end of 2021 assuming the entire funding required
for construction of the Logistics Center of $1.03 billion is in place by 2020 and the Logistics Center is in operation according
to our business plan.
|
Office
Complex Development
With
the advantage of being in the anticipated Comprehensive Bonded Zone and Pilot Free Trade Zone, Wuhan Newport’s Logistics
Center has obtained the land use rights to develop approximately 500,000 square meters of commercial lands until August 30, 2048
with rights of renewal, on which Wuhan Newport plans to build an office complex of approximately 700,000 square meters. As of
the date of this prospectus, the complex, totaling approximately 100,000 square meters has been completed and there are 600,000
square meters outstanding to be constructed within the next five (5) years.
The
office complex will be supported by a light railway line from downtown Wuhan that is undergoing construction. The complex will
be accessible by two stations along the light railway line. In addition, a highway along the north shore of the Yangtze River
in Wuhan is currently under construction; the completion of the highway is also expected to provide direct ground access between
Wuhan city center and the Logistics Center and cut down the commute time to only 20 minutes.
Upon
completion of the construction of the office buildings, Wuhan Newport plans to sell half of the complex while leasing out the
remaining half for long-term rental income. It is the Company’s goal to recoup the initial capital investment costs for
the entire projected logistics center through the sale of a certain portion of the complex and generate a stable return based
on rent of the other half of the complex upon completion of the project.
Transportation
and Logistics Services
Taking
advantage of the regional highways, railways and waterways in the Yangluo area, we plan to develop a shipping hub with access
to all types of cargo transportation and offer complementary services to businesses within this logistics center. We intend to
create an efficient, reliable and comprehensive logistics service system by utilizing third-party service providers with offices
within the Logistics Center to provide professional logistics services.
We
are currently constructing the port terminal which will be the focal point of the Yangtze River Economic Belt. The Yangtze River
riverbank, within our properties, measures 1,039 meters and will host eight cargo berths handling ships ranging from 5,000 to
10,000 tons.
As
of January 1, 2016, a government sponsored cargo transportation railway has been completed and launched leading to the premise
of the Logistic Center, known as, the Wuhan-Xinjiang-Europe (“WXE”) Railway. The WXE is a part of the Silk Road Economic
Zone, as it is within the “One Belt, One Road” initiative. The WXE Freight Train sets out from Wuhan to Xinjiang and
finally ends in Hamburg, Germany. Wuhan Newport’s terminal will therefore be an important component of the “Silk Road
Economic Belt” under the “One Belt, One Road” framework. (Source:
http://www.wuhantime.com/detail.php?aid=1964
;
The Wuhan Time
).
The
custom facility at the Yangluo Comprehensive Bonded Area allows cargo vessels ranging from 5,000 to 10,000 tons to set out from
Shanghai downstream via the Yangtze River in order to transport “Made in China” commodities to the Pacific Ocean and
further to any other ports across the Indian Ocean. This same route will also return commodities from other countries directly
back to Wuhan and then distribute them throughout the rest of China. Aside from being situated within the Wuhan Yangluo Comprehensive
Bonded Zone, the Yangluo development area is amongst the third group of China’s Pilot Free Trade Zone applicants to submit
applications to the State Council. As of the date hereof, approvals have so far been granted to Shanghai, Tianjin, Guangdong and
Fujian. Enterprises within the approved pilot free-trade zones are typically entitled to a series of favorable regulations and
policies that could help businesses grow and succeed. We believe that the approval will be granted within the near future.
The
estimated cost of the Logistic Center is approximately $1.03 billion US dollars.
Cold
Chain Logistics Services
A
cold chain is a temperature-controlled supply chain for products that need to be kept under low temperatures. An unbroken cold
chain is an uninterrupted series of storage and distribution activities which maintain a given temperature range. It is used to
help extend and ensure the shelf life of products such as fresh agricultural produce, seafood and frozen food.
Within
the Logistics Center, we plan to provide extensive storage and processing services to its customers. Meanwhile, a cold chain logistics
service system will be established to better help the Company’s clients’ processing needs for their frozen foods,
meats and other products that need special processing and handling. In addition, we will offer professional services with temperature
controls, sorting, processing, packaging and delivery to ensure the reliability and safety of the logistics process.
Information
Platform
To
adapt to the needs of modern logistics service and meet the standards of the industry worldwide, we will establish comprehensive
automated management systems, as well as develop an operation system, enquiry system and decision-making systems for all types
of business information such as warehouse, storage, trade, distribution and transportation, movable assets supervision and freight
forwarding. We plan to launch an integrated and information-sharing platform geared towards the demand of its targeted markets
and potential clients.
We
will establish a uniform information platform including an internet-based logistics information portal and an e-commerce platform
to provide the Company’s clients with services such as logistics services tracking, service rating, online operation, electronic
transaction, and etc. We expect this information portal to be equally reliable for both service providers and their respective
clients.
We
will also establish an e-commerce system based on the logistics information portal and it will provide clients with many updated
services such as online transactions, online payments, online inquiries and business information communication. This will create
a comprehensive service system and a business model with high integration of information flow, capital flow, trade flow and goods
flow.
Portside
Service
We
also plan to provide incentives for companies that specialize in IT, production of new material and high-end equipment and manufacturing
companies to station nearby the Logistics Center so that these companies can grow with the Logistics Center, leveraging each other’s
specializations to serve each other’s business needs.
Logistics
Financing
Logistics
financing is mainly based on using supplies as collateral to obtain financing for supply chains to improve their overall economic
efficiency. Developing innovative logistics financing is significant because traditionally mortgages or loans are concentrated
in real estate and logistics financing provides a lower systematic risk for lenders.
Compared
to developed countries, logistics financing is a rather new field in China with a huge market potential of about $1 trillion.
The driving force for logistics financial services in western countries is mainly attributable to financial institutions, as opposed
to third-party private logistics companies in China who would occasionally provide financing options.
Logistics
financial services became a popular investment vehicle among these third-party lenders. However, the business of logistics financing
has become too complex for these private lenders to handle, as they will need professional services to guide them through the
process and thus safeguard their investments.
Even
though the history of logistics financing has been relatively short in China, the appetite for this is expected to grow as the
Pilot Free Trade Zones in Shanghai, Tianjin and the one expected to be granted in Wuhan, will likely attract more business and
international financial institutions to launch offices or branches within these Pilot Free Trade Zones to serve the businesses
in the areas. Logistics financing not only provides the businesses with a new alternative to meet their capital needs, but also
opens a new channel for commercial banks to reach small and midsize businesses. While interest income generated from logistics
financing transactions is often an important source of income for many multinational logistics companies, companies who are able
to provide financing are often the industry leaders. Because logistics financing can be an effective channel for the Company to
reach its targeted market, our Company plans to capture this first-mover advantage when logistics financing is still in its development
stage in China.
In
light of this market opportunity, we plan to establish and utilize e-commerce platforms to offer online booking, dealing and exhibiting
services for electronic products, commodities, foods and metals. We also plan to provide comprehensive support services to complement
logistics financing. Maritime insurance and training services will also be offered within the Logistic Center. We plan to help
its clients raise construction capital through Build-Transfer (BT), Build-Operate-Transfer (BOT), corporate debt and equity financing.
In addition, Company plans to collaborate and develop strategic alliances with other logistics or cargo shipping centers around
the world.
Sales
and Marketing
We
plan to sell its properties by forming strategic alliances with CMST Development (Hankou) Co. Ltd. (“CMST-Hankou”),
the Shanxi Chamber of Commerce in Hubei (“SCCH”) and the Wuhan Coal Business Association (“WCBA”).
Partnership
with CMST
CMST-Hankou
is a regional subsidiary of the CMST Development Co. Ltd, which is a state-owned enterprise that principally engages in the logistics
and import & export businesses. CMST-Hankou’s core business includes warehouse storage, sale and distribution of commodities,
and freight forwarding. Pursuant to the Memorandum of Understanding executed with CMST-Hankou on August 20, 2015, CMST-Hankou has
agreed to transfer all of its warehouse storage and processing division, distribution service division and other existing businesses
to the premises of the Logistics Center. In addition, CMST-Hankou has agreed to move its warehouse for steel trading business
with the Shanghai Future Exchange to the Logistics Center. In consideration, we have agreed to offer CMST-Hankou a 5% discount
for all services provided within the Logistics Center, including those within the warehouses, port terminal, and railway operating
zones. In addition, CMST-Hankou has agreed to assist the Company with the establishment of an online commodity exchange platform
to provide a comprehensive support system through the supply chain and provide necessary personnel to help with the management
of the warehouse operations within the Logistics Center. Though at a slight discount, the Company is expected to receive fees
based on CMST-Hankou’s large volume of commodities that need to be stored and use of complementary services at the warehouse
facilities and operating areas, as well as rental income and/or property sales generated from the office complex. However, the
partnership is subject to the terms and conditions of the definitive agreement between CMST-Hankou and the Company. No assurances
can be provided at this point that such a definitive agreement will be executed.
Partnership
with SCCH
SCCH
is a non-profit business coalition with 252 businesses across various industries as members. Pursuant to the Memorandum of Understanding
executed with SCCH on July 27, 2015, SCCH has agreed to move its headquarters to the office complex within the Logistics Center
by purchasing or leasing certain units. In consideration of a 7% discount to the purchase price of $2,729 per square meter of
our properties, approximately 50 businesses within the organization plan to open offices in the Logistics Center and purchase
at least 100,000 square meters of space within the office complex. SCCH, on behalf of 50 businesses, also executed a letter of
intent to purchase approximately 100,000 square meters of storefront. In addition, because we expect the 50 businesses to have
a total annual turnover of commodities of more than 5,000,000 tons, we have agreed to offer members of SCCH a 5% discount for
all services provided within the Logistics Center, including those within the warehouses, port terminal, and railway operating
zones. However, the partnership is subject to the terms and conditions of the definitive agreement between SCCH and the Company.
No assurances can be provided at this point that such a definitive agreement will be executed.
Partnership
with WCBA
WCBA
is a non-profit business coalition with more than 300 businesses within the coal mining industry as members. Pursuant to the Memorandum
of Understanding executed with WCBA on September 17, 2015, WCBA has agreed to move its headquarters to the office complex within
the Logistics Center by purchasing or leasing certain units. We have agreed to offer WCBA member businesses a 5% discount to the
purchase price of $2,729 per square meter of our properties. In addition, because we expect WCBA members to have a total annual
turnover of coal-related commodities of more than 20,000,000 tons and will use the Company’s warehouse storage for at least
3,000,000 tons, we have agreed to offer members of WCBA a 5% discount for all services provided within the Logistics Center, including
those within the warehouses, port terminal, and railway operating zones. However, the partnership is subject to the terms and
conditions of the definitive agreement between WCBA and the Company. No assurances can be provided at this point that such a definitive
agreement will be executed.
Market
Opportunity for Logistics Finance
According
to an industry review issued by the China Federation of Logistics and Purchasing, with the stabilization and recovery of the economy,
the logistics industry began to rise gradually from the steady state before. According to statistics, the total value of social
logistics goods in 2012 was 177.3 trillion yuan, with a year-on-year growth of 9.8%, dropping 2.5% compared with growth in 2011,
dropping 0.2 percentage points compared with the first half of the year, rebounded by 0.2 percentage points compared to the first
three quarters. National logistics added value is 3.5 trillion yuan, achieving a year-on-year growth of 9.1%. Although this figure
is somewhat lower than the same period last year, it’s still 1 percentage point higher than the tertiary industry. Logistics
value added has a share of 6.8% of GDP, accounting for 15.3% of the value added to the service sector. The total cost of national
social logistics is 9.4 trillion yuan, with a year-on-year growth of 11.4%, dropping 7.1 % compared to the growth of last year.
Total costs of social logistics account for 18% of GDP, with a year-on-year increase of 0.2 percentage points. The logistics cost
of economic operations is still high. (Source:
http://www.chinawuliu.com.cn/english/201406/16/290820.shtml
;
China Federation
of Logistics and Purchasing
).
Logistics
financing provides financial services such as financing, clearance and insurance to support the logistics industry. It evolves
as the logistics industry develops. Not only can logistics financing services improve the service capability and increase the
profitability of third party logistics companies; it can also expand financing channels, decrease financing cost and increase
the capital efficiency.
The
major target clients for logistics finance services are small and medium sized companies, which are an important sector of China’s
economy and have great weight in the market. One of the biggest hurdles in the life cycle of these small and medium sized companies
is lack of cash flow, which can become the “bottle neck” of their development and prevent progress. The need for logistics
financing results from the lack of available credit financing facilities and the difficulty of obtaining financing on the capital
markets. Therefore, logistics financing services protect against the financing problems by allowing these small and medium companies
to use their raw materials and commodities as collateral to borrow money. Logistics financing increases the liquidity of cash
flow, lowers the clearance risks and improves the efficiency of the economic operation. Upon completion of the Logistics Center,
we expect to house many small and mid-size logistics companies. The offering of logistics financing will therefore become an important
component of the business, as these businesses are expected to have financing needs as they grow their businesses.
Market
Overview of Wuhan
Located
in the middle reaches of the Yangtze River, Wuhan has been regarded as the gateway to nine provinces nearby. Beijing-Guangzhou
Railway and the Yangtze River converge in Wuhan and also the Beijing-Jiulong Railway and the Beijing-Guangzhou Railway intersect
in it, thus forming a railway network linking North China, Southwest China, Central South China and East China. Moreover, the
Beijing-Zhuhai Expressway and the Shanghai-Chengdu Expressway converge in Wuhan and a high-speed railway along the Yangtze River
will be completed in this area in the near future. A “flexible multimodal transportation system,” combining expressways,
high-speed railways and water transportation on the Yangtze River will give greater prominence to Wuhan’s position of strategic
importance as a junction of water and land transportation in China.
According
to the statistics published by the Wuhan government, Wuhan is the largest economic city in central China with an annual GDP of
more than $160 billion. In 2015, the China State Council introduced and implemented the Midstream Yangtze River City Group Development
Plan headed by Wuhan. In fact, the city was once called “The Oriental Chicago” by US Harper’s Magazine back
in 1918. Wuhan is also among the largest inland logistics and cargo distribution centers in China, with its ability to cover approximately
a 400 million person population in the five neighboring provinces including Hunan, Jiangxi, Anhui, Henan and Sichuan. At present,
there are over 10,000 commercial organizations, 105,000 commodity networks, 4 commercial listed enterprises, and 8 comprehensive
shopping centers on the list of China Top 100 Retail Shopping Centers. (Source:
http://www.whfao.gov.cn/html/guide/201602/t20160204_45988.shtml
;
Foreign Affairs Office of Wuhan City Government
).
China
is thoroughly implementing the strategy of coordinated regional development, expanding domestic demand, innovation-driven development
and new urbanization, and building a new economic support belt relying on the Yangtze River. As a central city in the central
region and the middle reach of the Yangtze River, as well as the country’s major transportation hub and science and technology
base, Wuhan faces multiple overlapping strategic opportunities. Location, transportation, science, education, market and other
advantages will be further enhanced and fully released and more quickly transformed into development and competitive advantage.
Wuhan
is also a major transportation hub in Central China, situated at the midstream of the Yangtze River. Going west alongside the
Yangtze upstream, includes cities or provinces such as Chongqing, Sichuan, Yunnan and Qinghai. Going east downstream, includes
provinces such as Hunan, Anhui and Jiangsu, as well as municipal cities such as Shanghai, until finally ending at the Pacific
Ocean. The railway runs north bound to Harbin, westbound to Urumqi, east bound to Shanghai and south bound to the Shenzhen Highway
and expressways that stretch in all directions ensuring easy and convenient transportation to all of China’s provinces.
With
the rapid development of inland waterway transportation in China, the logistics and port management industries have grown significantly.
Wuhan is one of the major inland water ports in China. In 2014, the Wuhan government released an
Opinion On Accelerating The
Establishment Of Shipping Center In The Middle Reach Of Yangtze River
, indicating that the government will help the Wuhan
shipping center to be a well-equipped, surrounding industry developed internationally with a scaled and intelligent inland water
shipping center with all port and shipping resources highly concentrated. In the
Development Plan On Wuhan Logistics Space
(2012-2020)
published by the Wuhan city government, * Wuhan is strategically positioned as the critical joint of the global
supply chain and the logistics transportation hub and information center of China. (Source:
http://www.wuhan.gov.cn/hbgovinfo/szfxxgkml/fggw/szfwj/201505/t20150515_30288.html
;
Wuhan City Government
).
However,
in Wuhan, logistics for domestic trade operate separately from those for international trade and all the resources are scattered
and not concentrated to form a well-organized and well-managed international supply chain. It becomes very difficult for Wuhan
to realize the synergy of business, logistics, money and information. In addition, a majority of the current logistics companies
in Wuhan focus on traditional cargo transportation and storage services. Therefore, there exists an opportunity for an efficient,
comprehensive and modern logistics service center like our Company’s Logistics Center to facilitate the channel of both
regional and global logistics.
Competitive
Advantages
The
following factors reflect the Company’s advantages over the company’s competitors:
|
●
|
Experienced
Logistics Management Team.
We have a professional team with significant experience in logistics
management. Members of the Company’s team have had work experience with well-known logistics management companies in
different cities. In addition, the management members are well educated with degrees from top universities such as Huazhong
University of Science and Technology, Wuhan University, University of British Columbia and the Chinese Academy of Social Sciences.
|
|
●
|
Encouraging
Policy Environment.
Under China’s latest “One Belt, One Road” initiative, the
Company is strategically positioned in the anticipated “Pilot Free Trade Zone” of the Wuhan Port, a crucial trading
window between China, the Middle East and Europe. In May 2015, the China State Council approved the nation’s economic
strategic plan, the Vigorous Development Plan of Yangtze River Economic Belt. The Yangtze River Economic Belt has sharpened
the focus on the Wuhan New Port Yangluo Terminal, the port project that the Company is developing.
|
|
●
|
Unique
Transportation Network.
Wuhan is located in the middle reaches of the Yangtze River, east facing
south-eastern coastal economic developed area and west linking north-western raw material base. The distance to
metropolitan cities, such as Beijing, Shanghai, Hong Kong and Chongqing are within 1,200 kilometers. As a
central city on mainland China, Wuhan is capable of reaching over 30 provinces like Yunnan Province, Henan Province, Sichuan
Province, Shanxi Province, Jiangxi Province and Hunan Province and 600 cities and counties in China.
|
|
●
|
Highway:
the Logistics Center is in close proximity to the Beijing-Zhuhai expressway, the Shanghai-Chengdu Expressway, and
the Jiangbei Expressway.
|
|
●
|
Waterway:
the project adjacent to the Yangluo deep-water port, has eight 5,000-ton berths, directly leading to Jianghai. Yangluo
Port is the largest national shipping port in Central China and the largest container port in the upper reaches of the Yangtze
River. We will be strategically located for international procurement, distribution and delivery.
|
|
●
|
Railway:
through Chinese commodity freight logistics Beijing-Guangzhou, Beijing-Kowloon Railway, close to Beijing-Guangzhou
railway extension line, special railway lines offer direct access to the center of the Wuhan Yangtze River Newport Logistics
Center, through Jiangbei railway- Xianglushan station connects all of the domestic railway freight stations, and through the
construction of the “Chinese new Europe” railway through the Continent.
|
|
●
|
Airport:
30 kilometers from the Wuhan Tianhe airport.
|
|
●
|
Light-rail
transit:
by the year 2018, two light rail stations are expected to be completed next to the Logistics Center, cutting
the commute to downtown Wuhan to only 20 minutes.
|
|
●
|
Jiangbei
Expressway:
after the completion of Jiangbei Expressway, commute by car from downtown Wuhan to the Logistics Centers
is expected to be only about 20 minutes.
|
The
following maps illustrate the location of the Wuhan Newport Logistics Center and surrounding transportation network:
Employees
As
of the date of this prospectus, we have a total of 87 employees, including our executive officers.
Our
employees are not represented by any collective bargaining agreement, and we have never experienced a work stoppage. We believe
we have good relations with our employees.
Intellectual
Property
Trademark
We
are currently applying for trademark protection in China for our Company’s logo and we anticipate that we will be able to
obtain the trademark within the next 12 months.
Domain
Names
We
have added the domain names i)
www.yerr.com.cn
; ii)
www.cjxgwl.com
; and iii)
www.cjxgwl.cn
to the Internet
Content Provider License that we currently hold and we have received the updated ICP License covering the foregoing domain name.
Legal
Proceedings
Currently
there are no legal proceedings pending or threatened against the Company. However, from time to time, we may become involved in
various lawsuits and legal proceedings which arise in the ordinary course of business. Litigation is subject to inherent
uncertainties, and an adverse result in these or other matters may arise.
DESCRIPTION
OF PROPERTY
Our corporate headquarters is located
at 183 Broadway, 5
th
Floor, New York, NY 10007, for which we currently pay a rent of 6,000.00 USD per month for our
lease.
The
following chart illustrates the properties we currently have the land use rights to in Wuhan, Hubei Province, China. We do not
have ownership over such properties.
Certification
Number
of
Land Use Right
|
|
Location
|
|
Purpose
of Use
|
|
|
|
Area
(㎡)
|
|
|
Termination
Date
|
Wu
Xin Guo Yong (2008)
Di Zhuan No. 029
|
|
South
of Han Shi Road, Wuhan Yangluo Economic Development Zone, Hubei Province, PRC
|
|
|
Commercial
|
|
|
|
9,802.67
|
|
|
August
30, 2048
|
Wu
Xin Guo Yong (2008)
Di Zhuan No. 030
|
|
South
of Han Shi Road, Wuhan Yangluo Economic Development Zone, Hubei Province, PRC
|
|
|
Commercial
|
|
|
|
59,308.09
|
|
|
August
30, 2048
|
Wu
Xin Guo Yong (2008)
Di Zhuan No. 031
|
|
South
of Han Shi Road, Wuhan Yangluo Economic Development Zone, Hubei Province, PRC
|
|
|
Commercial
|
|
|
|
79,178.94
|
|
|
August
30, 2048
|
Wu
Xin Guo Yong (2008)
Di Zhuan No. 032
|
|
South
of Han Shi Road, Wuhan Yangluo Economic Development Zone, Hubei Province, PRC
|
|
|
Commercial
|
|
|
|
87,108.30
|
|
|
August
30, 2048
|
Wu
Xin Guo Yong (2009)
Di Zhuan No. 005
|
|
South
of Han Shi Road, Wuhan Yangluo Economic Development Zone, Hubei Province, PRC
|
|
|
Commercial
|
|
|
|
176,853.70
|
|
|
August
30, 2048
|
Wu
Xin Guo Yong (2009)
Di Zhuan No. 006
|
|
South
of Han Shi Road, Wuhan Yangluo Economic Development Zone, Hubei Province, PRC
|
|
|
Commercial
|
|
|
|
103,304.49
|
|
|
August
30, 2048
|
As
of December 31, 2016, as disclosed in the notes to our financial statements, we have completed the construction of four buildings
covering area of approximately 35,350.4 square meters of construction area. We have also obtained pre-sale permits on other three
buildings.
The
following chart illustrates the properties we currently lease in Wuhan, Hubei Province, PRC and New York, United States. We do
not have ownership over such properties.
Name
of the Property
|
|
Location
|
|
Purpose
of Use
|
|
|
|
Area
(㎡)
|
|
|
Duration
Date
|
Land
Lease No. HZ20150427 (1)
|
|
Chunfeng
Village, Yangluo Neighborhood, Wuhan, Hubei Province, PRC
|
|
|
Commercial
|
|
|
|
1,214,654.52
|
|
|
April
26, 2035
|
New
York Office Premise
|
|
183
Broadway, New York, NY 10007
|
|
|
Commercial
|
|
|
|
Suite
5
|
|
|
April
15, 2017
|
(1)
|
On October 8, 2016, we entered an amendment to the Land
Lease No. HZ20150427 Agreement (“Amendment”) that was executed on April 27, 2015 between the Company and Chunfeng
Villagers Committee at the Yangluo Neighborhood Office in Xinzhou District, Wuhan (“CVC”). We agreed to make an advance
payment of the first year rent to CVC (“First Year Rent”), upon the earlier of the following date or event to occur:
(i) June 3rd, 2017; or (ii) within 5 days after the Company’s port terminal obtains approval from the government. The term
of such land lease is 20 years from the date of CVC’s receipt of the First Year Rent.
|
MANAGEMENT’S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITIONS
AND
RESULTS OF OPERATIONS
The
following discussion and analysis of the results of operations and financial conditions for the years ended December 31, 2016
and 2015 should be read in conjunction with our financial statements and the notes to those financial statements that are
included elsewhere in this Report. Our discussion includes forward-looking statements based upon current expectations that involve
risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could
differ materially from those anticipated in these forward-looking statements as a result of a number of factors. See
“Cautionary Note Regarding Forward-looking Statements” on page 23.
Overview
Yangtze
River Development Limited is a Nevada corporation that operates through its wholly-owned subsidiary Energetic Mind Limited, a
British Virgin Islands company, which holds 100% of the capital stock of Ricofeliz Capital (HK) Ltd., a Hong Kong company that
holds 100% of the capital stock of Wuhan Yangtze River Newport Logistics Co., Ltd., a wholly foreign-owned enterprise formed under
the laws of the People’s Republic of China that primarily engages in the business of real estate and infrastructural development
with a port Logistics Center located in Wuhan, Hubei Province of China. Situated in the middle reaches of the Yangtze River, Wuhan
Newport is a large infrastructure development project implemented under China’s latest “One Belt One Road” initiative
and is believed to be strategically positioned in the anticipated “Pilot Free Trade Zone” of the Wuhan Port, a crucial
trading window among China, the Middle East and Europe. To be fully developed upon completion, within the Logistics Center, there
will be six operating zones: including port operation area, warehouse and distribution area, cold chain logistics area, rail cargo
loading area, exhibition area and business related area. The logistics center is also expected to provide a number of shipping
berths for cargo ships of various sizes. Wuhan Newport is expected to provide domestic and foreign businesses a direct access
to the Pilot Free Trade Zone in Wuhan. The project will include commercial buildings, professional logistic supply chain centers,
direct access to the Yangtze River, Wuhan-Xinjiang-Europe Railway and ground transportation, storage and processing centers, and
IT supporting services, among others.
Our
Logistics Center is an extensive complex located in Wuhan, the capital of the Hubei Province of China, a major transportation
hub city with access to numerous railways, roads and expressways passing through the city and connecting to major cities in China,
as well as other international centers of commerce and business.
The
Logistics Center is expected to occupy approximately 1,918,000 square meters, for which the construction and development are expected
to be completed in three phases in three years and reach its target maximum annual profit by the end of 2021 assuming the entire
funding required for construction of the Logistics Center of $1.03 billion is in place by 2020 and the Logistics Center is in
operation according to our business plan. The following table illustrates the timeframe of our investment and construction progress.
Time
|
|
Phase of
Investment/Construction
|
|
Percentage of Total
Anticipated
Investment/Construction (1)
|
|
|
Production Capacity (2)
|
|
1
st
Year (2017)
|
|
1
st
Phase
|
|
|
40
|
%
|
|
|
30
|
%
|
2
nd
Year (2018)
|
|
2
nd
Phase
|
|
|
70
|
%
|
|
|
40
|
%
|
3
rd
Year (2019)
|
|
3
rd
Phase
|
|
|
100
|
%
|
|
|
60
|
%
|
4
th
Year (2020)
|
|
Completed
|
|
|
100
|
%
|
|
|
75
|
%
|
5
th
Year (2021)
|
|
Completed
|
|
|
100
|
%
|
|
|
100
|
%
|
(1)
|
The
percentage of construction in a certain phase reflects the anticipated contribution of the investment in such particular phase.
For example, contribution of 40% of the total investment in Phase 1 will lead to construction of 40% of total value of the
Wuhan Project.
|
(2)
|
The
percentage of Production Capacity shows the fraction of the target maximum annual profit to be earned under the full operation
of the Wuhan Project. We target to reach its maximum annual profit by the end of 2021 assuming the entire funding required
for construction of the Logistics Center of $1.03 billion is in place by 2020 and the Logistics Center is in operation according
to our business plan.
|
The
Logistics Center is located within the Wuhan Newport Yangluo Port, on the upper stream of the Yangtze River, and close to the
northern base of Wuhan Iron and Steel, China’s first mega-sized iron and steel production complex. The Logistics Center is expected
to include a port terminal that will be located approximately 26.5km from the Wuhan Guan and 5.5km from the Yangluo Yangtze River
Bridge. The operation area of the port is expected to consist of a riverbank of 1,039 meters with eight 5,000-to-10,000-ton berths,
two of which are multi-purpose berths and the other six are general cargo berths. It is designed to be able to handle up to 5,000,000
tons of cargo annually, including up to 100,000 TEU for annual container throughput (including 20,000 TEU in freezers areas),
1,000,000 tons of iron and steel and 3,000,000 tons of general cargo.
Within
the Logistics Center, functional areas will be divided into six operating zones: a port operation area, a warehouse and distribution
area, a cold chain supply logistics area, a rail cargo loading area, an exhibition area and a business related area. The Logistics
Center will also be complemented with container storage areas, multi-functional areas, general storage areas, multi-functional
warehouse and infrastructural development, including new roads, gas stations, parking areas, gas and water pipes, electricity
lines and all other facilities and equipment to operate the Logistics Center.
Aside
from being situated in the Wuhan Yangluo Comprehensive Bonded Zone, the Yangluo development area is amongst the third group of
China’s Pilot Free Trade Zone (FTZ) applicants to submit FTZ applications to the State Council. As of the date of this prospectus,
approvals have been granted to Shanghai, Tianjin, Guangdong and Fujian. Enterprises within the approved free-trade zones are typically
entitled to a series of favorable regulations and policies that could help the businesses grow and succeed. However, we can provide
no assurance at this point that the FTZ application will in fact be approved.
Wuhan
Newport has signed a twenty-year lease agreement, the maximum number of years permitted by the applicable PRC laws, and with rights
to renew at its sole discretion, effective April 27, 2015 to lease approximately 1,200,000 square meters of land for building
logistics warehouses in support of the Logistics Center. The warehouses are expected to comprise of port terminal zones, warehouse
logistics zones, cold chain supply zones and railroad loading and unloading zones. The warehouses will connect the port terminal
along the Yangtze River and the railway leading to Europe, satisfying the requirement of China’s latest “One Belt,
One Road” initiative. It will also be able to support large logistics companies in Wuhan and other nearby provinces, which
will rent the warehouses, terminals and offices within the Logistics Center.
Remediation
Effort Taken to Address the Material Weaknesses Identified for the Fiscal Year Ended December 31, 2015
We
have concluded that there are material weaknesses in our internal control over financial reporting for the fiscal year ended December
31, 2015, as we did not maintain effective controls over the selection and application of GAAP related to the classification of
capital transactions. Specifically, the members of our management team with the requisite level of accounting knowledge, experience
and training commensurate with our financial reporting requirements did not analyze certain accounting issues at the level of
detail required to ensure the proper application of GAAP in certain circumstances. These material weaknesses resulted in the restatement
of our financial statements for the year ended December 31, 2015.
In
addition to the implementation of effective internal control and oversight steps we have taken described in “
Committees
of the Board of Directors
” beginning on page 55, we also plan to implement other measures in addition to those already
in place to continue improving our internal control and oversight during 2016. We plan to achieve this primarily through ensuring
appropriate review of accounting policies and procedures related to the accounting measurements by the members of management with
the requisite level of knowledge, experience and training to appropriately apply GAAP.
We
also intend to take the following actions to further improve our internal control for financial reporting:
|
●
|
Provide
more U.S. GAAP knowledge and SEC reporting requirement training to our CFO, accounting and other finance personnel;
|
|
|
|
|
●
|
Hire
additional personnel with sufficient U.S. GAAP experience;
|
|
|
|
|
●
|
Establish
formal policies and procedures in internal accounting and audit function;
|
|
|
|
|
●
|
Implementation
of an ongoing initiative and training in the Company to ensure the importance of internal controls and compliance with established
policies and procedures are fully understood throughout the organization and plan to provide continuous U.S. GAAP knowledge
training to relevant employees involved to ensure the performance of and compliance with those procedures and policies.
|
Although
we believe that the steps we have taken sufficiently remediate the material weaknesses we had for the fiscal years ended December
31, 2015, any actions we have taken or may take to address those material weaknesses we had for the fiscal year ended December
31, 2015 are subject to continued management review supported by testing, as well as oversight by the Audit Committee of our Board
of Directors.
Factors
Affecting our Operating Results
Growth
of China’s Economy
.
We operate and derive all of our revenue from operations in China. Economic conditions in China,
therefore, affect our operations, including the demand for our properties and services and the availability and prices of land
maintenance, among other expenses. China has experienced significant economic growth with recorded Gross Domestic Product growth
rates at 7.7% in 2013, 7.4% in 2014 and 6.9% in 2015. China is expected to experience continued growth in all areas of investment
and consumption. However, if the Chinese economy were to become significantly affected by a negative stimulus, China’s
growth rate would likely to fall and our revenue could correspondingly decline.
Government
Regulations.
Our business and results of operations are subject to PRC government policies and regulations regarding
the following:
|
●
|
Land
Use Rights
- According to the Land Administration Law of the PRC and Interim Regulations of the People’s Republic
of China Concerning the Assignment and Transfer of the Right to the Use of the State-owned Land in the Urban Areas, individuals
and companies are permitted to acquire rights to use urban land or land use rights for specific purposes, including residential,
industrial and commercial purposes. We acquire land use rights from local governments and/or other entities for development
of residential and commercial real estate projects. We do not have ownership over these properties.
|
|
●
|
Land
Development
- According to the Urban Real Estate Development and Operation Administration Regulation, the Urban Real Estate
Development and Operation Administration Rules of Hebei Province promulgated by the government of the Hebei Province, and
the Real Estate Development Enterprise Qualification Administration Regulation, a real estate development enterprise shall
obtain a Real Estate Development Enterprise Qualification Certificate. We obtained the related certificates and seek to ensure
that each phase of our projects complies with our certificates.
|
|
●
|
Project
Financing
- According to the Land Administration Law and the Property Law of the PRC, the land use rights, residential
housing and other buildings still in the process of construction may be pledged and mortgaged. From time to time, we pledge
and mortgage our land use rights and real properties to lenders in order to obtain project financing.
|
Interest
Rate and Inflation Challenges.
We are subject to market risks due to fluctuations in interest rates and refinancing of
mid-term debt. Higher interest rates may also affect our revenues, gross profits and our ability to raise and service debt and
to finance our developments. Inflation could result in increases in the price of raw materials and labor costs. We
do not believe that inflation or deflation has affected our business materially.
Acquisitions
of Land Use Rights and Associated Costs
.
We acquire land use rights for development through the governmental auction process
and by obtaining land use rights permits from third parties through negotiation, acquisition of entities, co-development or other
joint venture arrangements. Our ability to secure sufficient financing for land use rights acquisitions and property development
depends on internal cash flows in addition to lenders’ perceptions of our credit reliability, market conditions in the capital
markets, investors’ perception of our securities, the PRC’s economy and the PRC’s government regulations that
affect the availability and cost of financing real estate companies or property purchasers.
Critical
Accounting Estimates
As discussed in Part II, Item 7,
Management’s Discussion and Analysis of Financial Condition and Results of Operations, of our Annual Report on Form 10-K
for the fiscal year ended December 31, 2016, we consider our estimates on revenue recognition, impairment of long-lived assets,
and real estate property refunds and compensation payables to be the most critical in understanding the judgments that are involved
in preparing our consolidated financial statements.
Results
of Operations
Comparison
of Years Ended December 31, 2016 and 2015
The
following table sets forth the results of our operations for the periods indicated in U.S. dollars
|
|
For the years ended
December 31
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
-
|
|
|
$
|
-
|
|
Costs of revenue
|
|
|
-
|
|
|
|
-
|
|
Gross profit
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
Selling expenses
|
|
$
|
2,348
|
|
|
$
|
11,577
|
|
General and administrative expenses
|
|
|
5,446,175
|
|
|
|
4,547,646
|
|
Total operating expenses
|
|
|
5,448,523
|
|
|
|
4,559,223
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(5,448,523
|
)
|
|
|
(4,559,223
|
)
|
|
|
|
|
|
|
|
|
|
Other expenses
|
|
|
|
|
|
|
|
|
Other income
|
|
|
3,587
|
|
|
|
868
|
|
Other expenses
|
|
|
(174
|
)
|
|
|
(3,231
|
)
|
Interest income
|
|
|
229
|
|
|
|
55
|
|
Interest expenses
|
|
|
(8,424,794
|
)
|
|
|
(3,199,031
|
)
|
Total other expenses
|
|
|
(8,421,152
|
)
|
|
|
(3,201,339
|
)
|
|
|
|
|
|
|
|
|
|
Loss before income taxes
|
|
|
(13,869,675
|
)
|
|
|
(7,760,562
|
)
|
Income taxes expense
|
|
|
1,143,595
|
|
|
|
1,378,700
|
|
Net loss
|
|
$
|
(12,726,080
|
)
|
|
$
|
(6,381,862
|
)
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments
|
|
|
(19,227,596
|
)
|
|
|
(6,649,917
|
)
|
Comprehensive loss
|
|
$
|
(31,953,676
|
)
|
|
$
|
(13,031,779
|
)
|
|
|
|
|
|
|
|
|
|
Loss per share - basic and diluted
|
|
$
|
(0.07
|
)
|
|
$
|
(0.04
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding - basic and diluted
|
|
|
177,459,678
|
|
|
|
151,682,554
|
|
Revenue.
We
did not generate any revenue from the sales of real estate property for the years ended December 31, 2016 and 2015. In addition,
since our Logistics Center is still in its development stage and therefore is not yet in operation, we have not started providing
any logistics service within our port terminal and have not generated any sales from providing such services.
Cost
of Revenue.
For
the years ended December 31, 2016 and 2015, our cost of goods sold was $0, respectively.
Gross
Profit.
Our
gross margin was $0 for the years ended December 31, 2016 and 2015, respectively.
Selling
expenses.
Selling
expenses were $2,348 for the year ended December 31, 2016, compared to $11,577 for the year ended December 31, 2015, a decrease
of $9,229. The decrease is primarily due to the decrease of marketing expenses.
General
and administrative expenses
.
Our
general and administrative expenses consist of salaries, office expenses, utilities, business travel, amortization expenses (including
legal expenses, accounting expenses and other professional service expenses) and stock compensation. General and administrative
expenses were $5,446,175 for the year ended December 31, 2016, compared to $4,547,646 for the year ended December 31, 2015,
an increase of $898,529. The significant increase is primarily due to the increase of expenses related to professional
services.
Loss
from operations.
Operating
loss was $5,448,523 for the year ended December 31, 2016, compared to operating loss of $4,559,223 for the year ended December
31, 2015, an increase of $889,300. The significant increase is primarily due to the increase of operations expenses relating to
general and administrative expenses.
Other
expenses.
Other
expenses were $8,421,152 for the year ended December 31, 2016, compared to $3,201,339 for the year ended December 31, 2015. The
significant increase in other expenses is mainly attributable to the interest of convertible bond issued on December 19, 2015.
Our interest income and expenses were $229 and $8,424,794, respectively, for the year ended December 31, 2016, compared to interest
income and expenses of $55 and $3,199,031, respectively, for year ended December 31, 2015. Our other income and expenses were
$3,587 and $174, respectively, for the year ended December 31, 2016, compared to other income and expenses of $868 and $3,231,
respectively, for the year ended December 31, 2015.
Income
tax.
We
received an income tax benefit of $1,143,595 for the year ended December 31, 2016, compared to $1,378,700 for the year ended December
31, 2015. The slight decrease is primarily due to the decrease of net loss incurred from Wuhan Newport.
Net
loss.
Our
net loss from operations for the year ended December 31, 2016 was $12,726,080, compared to net loss of $6,381,862 for the year
ended December 31, 2015, an increase in net loss of $6,344,218. This increase is primarily due to significant increase is primarily
due to the increase of expenses related to professional services, the increase of operations expenses relating to general and
administrative expenses, and the interest of convertible bond issued on December 19, 2015.
Foreign
currency translation.
Our
consolidated financial statements are expressed in U.S. dollars but the functional currency of our operating subsidiary is RMB.
Results of operations and cash flows are translated at average exchange rates during the period, assets and liabilities are translated
at the unified exchange rate at the end of the period and equity is translated at historical exchange rates. Translation adjustments
resulting from the process of translating the financial statements denominated in RMB into U.S. dollars are included in determining
comprehensive income. Our foreign currency translation loss for the year ended December 31, 2016 was $19,227,596, compared to
a foreign currency translation loss of $6,649,917 for the year ended December 31, 2015, an increase of $12,577,679. The significant
decrease of foreign currency translation is mainly attributable to the depreciation of RMB against U.S. dollars.
Net
loss available to common stockholders.
Net
loss available to our common stockholders was $0.07 per share, for the year ended December 31, 2016, compared to net loss of $0.04
per share for the year ended December 31, 2015.
Liquidity
and Capital Resources
The
following table sets forth a summary of our cash flows for the years indicated:
|
|
Years
Ended
December
31,
|
|
|
|
2016
|
|
|
2015
|
|
Net Cash Used in Operating Activities
|
|
$
|
(2,135,205
|
)
|
|
$
|
(4,735,142
|
)
|
Net Cash (Used in) Provided by Investing Activities
|
|
$
|
(1,851
|
)
|
|
$
|
494,179
|
|
Net Cash Provided by Financing Activities
|
|
$
|
1,688,769
|
|
|
$
|
4,698,162
|
|
We
had a balance of cash and cash equivalents of $63,092 as of December 31, 2016. We have historically funded our working capital
needs through advance payments from customers, bank borrowings, and capital from stockholders. Our working capital requirements
are influenced by the state and level of our operations, and the timing of capital needed for projects.
Operating
Activities
.
Net cash used in operating activities was $2,135,205 for the year ended December 31, 2016, compared to net
cash used in operating activities of $4,735,142 for the year ended December 31, 2015, a decrease of $2,599,937. The decrease in
net cash used in operating activities was primarily contributed by the following factors:
|
●
|
Share-based
compensation expense contributed $2,014,664 cash inflow for the year ended December 31, 2016. In the same period
of 2015, share-based compensation expense contributed $1,808,867 cash inflow, which led to a decrease of $205,797 in net cash
outflow.
|
|
|
|
|
●
|
Changes
in real estate properties and land lots under development provided $367,826 cash outflow for the year ended December 31, 2016,
compared to changes in real estate properties and land lots under development contributed $778,977 cash outflow in the same
period of 2015, which led to a decrease of $411,151 in net cash outflow.
|
|
|
|
|
●
|
Changes
in accounts payable provided $7,553 cash outflow for the year ended December 31, 2016, compared to $nil cash outflow for the
year ended December 31, 2015, which lead to an increase of $7,553 in net cash outflow from operating activities.
|
|
●
|
Changes
in other payables and accrued liabilities provided $8,559,773 cash inflow for the year ended December 31, 2016, compared other
payables and accrued liabilities contributed $2,257,051 cash inflow for the year ended December 31, 2015, which
led to a decrease of $6,302,722 in net cash outflow.
|
|
|
|
|
●
|
We
have net loss of $12,726,080 for the year ended December 31, 2016, compared to net loss of $6,381,862 for the year ended December
31, 2015, which led to an increase of $6,344,218 in net cash outflow.
|
Investing
Activities.
Net cash used in investing activities was $1,851 for the year ended December 31, 2016, compared to $494,179
provided by investing activities for the year ended December 31, 2015, representing an increase of $496,030 in cash outflow. This
increase is primarily due to the effect of share exchange.
Financing
Activities
.
Net cash provided by financing activities was $1,688,769 for the year ended December 31, 2016, compared to
net cash of $4,698,162 provided by financing activities for the year ended December 31, 2015, representing a decrease of $3,009,393
in cash inflow. The decrease was primarily due to advances of $2,201,144 from related parties in the year ended December
31, 2016, compared to $4,874,761 for the year ended December 31, 2015.
As
shown in our financial statements, we have negative cash flows from operations, sustained recurring losses for a number of years
and currently we are not generating revenues. Over the past years, the Company has been funded through a combination of bank loans
and advances from shareholders. On January 29, 2016, we received an undertaking commitment letter provided by our majority shareholder
who is willing to provide sufficient funding on an as-needed basis. In addition, the Company plans to dispose of the existing
developed real estate properties with market value of approximately $42 million when the Company needs cash flows. The Company
believes that, as a result of these, it currently has sufficient cash and financing commitments to meet its funding requirements
for a reasonable period of time.
Firm
Commitment Offering
The
Company has entered into an investment banking agreement with Boustead Securities, LLC., who is acting as representative of the
underwriters of a $40,000,000 firm commitment offering for the Company. The underwriters will be committed severally to purchase
all of the shares of common stock offered by us. The obligations of the underwriters may be terminated upon the occurrence of
certain events to be specified in the underwriting agreement. Furthermore, pursuant to the proposed underwriting agreement, the
underwriters’ several obligations will be subject to customary conditions, representations and warranties contained in the
underwriting agreement, such as receipt by the underwriters of officers’ certificates and legal opinions. We have agreed
to indemnify the underwriters against specified liabilities, including liabilities under the Securities Act, and to contribute
to payments the underwriters may be required to make in respect thereof. The underwriters propose to offer the shares of common
stock offered by us to the public at the registered direct offering price to be determined. There is no assurance that this offering
will close or that the Company will receive the $40,000,000.
Off-Balance
Sheet Arrangements
On
January 29, 2016, we received an undertaking commitment letter provided by the our majority shareholder who is willing to provide
sufficient funding on an as-needed basis. We believe that the financial commitment provided by our majority shareholder could
provide our company with sufficient capital resources to meet our capital needs for a reasonable period of time.
Critical
Accounting Policies
We
prepare our consolidated financial statements in accordance with accounting principles generally accepted in the United States
of America. The preparation of these financial statements require the use of estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements
and the reported amount of revenues and expenses during the reporting period. Our management periodically evaluates the estimates
and judgments made. Management bases its estimates and judgments on historical experience and on various factors that are believed
to be reasonable under the circumstances. Actual results may differ from these estimates as a result of different assumptions
or conditions.
The
methods, estimates, and judgment we use in applying our most critical accounting policies have a significant impact on the results
we report in our financial statements. The SEC has defined “critical accounting policies” as those accounting policies
that are most important to the portrayal of our financial condition and results, and require us to make our most difficult and
subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. Based upon this
definition, our most critical estimates relate to the fair value of warrant liabilities, impairment of long-lived assets, commitments
and contingencies, and revenue recognition. We also have other key accounting estimates and policies, but we believe that these
other policies either do not generally require us to make estimates and judgments that are as difficult or as subjective, or it
is less likely that they would have a material impact on our reported results of operations for a given period. For additional
information see Note 2, “Summary of Significant Accounting Policies” in the notes to our consolidated financial statements
appearing elsewhere in this report. Although we believe that our estimates and assumptions are reasonable, they are based upon
information presently available, and actual results may differ significantly from these estimates.
UNDERWRITING
Boustead
Securities, LLC., is acting as the representative of the underwriters of the offering (the “Representative”). We have
entered into an underwriting agreement dated [●], 2017 with the Representative. Subject to the terms and conditions of the
underwriting agreement, we have agreed to sell to each underwriters named below and each underwriters named below has severally
agreed to purchase, at the public offering price, less the underwriting discounts and commissions set forth on the cover page
of this prospectus, the number of shares of common stock listed next to its name in the following table:
Name
|
|
|
Total Number of
Shares
|
|
Boustead Securities, LLC
|
|
|
[●]
|
|
Network 1 Financial Securities, Inc.
|
|
|
|
|
Total:
|
|
|
[●]
|
|
The
underwriters are committed severally to purchase all of the shares of common stock offered by us. The obligations of the underwriters
may be terminated upon the occurrence of certain events specified in the underwriting agreement. Furthermore, pursuant to the
underwriting agreement, the underwriters’ several obligations are subject to customary conditions, representations and warranties
contained in the underwriting agreement, such as receipt by the underwriters of officers’ certificates and legal opinions.
We
have agreed to indemnify the underwriters against specified liabilities, including liabilities under the Securities Act, and to
contribute to payments the underwriters may be required to make in respect thereof.
The
underwriters propose to offer the shares of common stock offered by us to the public at the registered direct offering price set
forth on the cover of this prospectus.
Our
stock is currently listed on the OTC Markets under the symbol “YERR”. We intend to apply to list our common stock
on the NASDAQ Global Select, but we cannot assure you that our application will be approved at this point.
Discounts,
Commissions and Expense Reimbursement.
The following table shows the public offering price, underwriting discount
and proceeds, before expenses, to us.
|
|
Per
Share
|
|
|
Total
|
|
Public
offering price
|
|
$
|
[●]
|
|
|
$
|
40,000,000
|
|
Underwriting
discounts and commissions to be paid by us
(1)
|
|
$
|
[●]
|
|
|
$
|
2,000,000
|
|
Proceeds,
before expenses, to us
|
|
$
|
[●]
|
|
|
$
|
38,000,000
|
|
Non-accountable
expense allowance
|
|
$
|
[●]
|
|
|
$
|
150,000
|
|
Advisory
fees
|
|
$
|
[●]
|
|
|
$
|
100,000
|
|
(1)
|
The
underwriting discounts and commissions are not payable with respect to the warrants issued to our underwriters. See
“
Underwriter’ Warrants
” below.
|
We
will reimburse the Representative for up to $150,000 of its reasonable non-accountable expenses incurred promptly when invoiced,
its reasonable travel expenses incurred in connection with roadshows not to exceed $25,000, its costs associated with book building,
prospectus tracking and compliance software and its cost of preparing certificates representing the securities in this offering
not to exceed $5,000, the Representative’s legal expenses in an amount not to exceed $75,000 and costs of third-party due
diligence reports in an amount not to exceed $25,000. Additionally, upon the earlier of the termination of the Underwriting Agreement
or the completion of a Transaction, we agree to pay promptly in cash any unreimbursed expenses that have accrued as of such date.
We
estimate that the total expenses of the offering payable by us, excluding the total underwriting discount, will be approximately
$[●] million.
Lock-Up
Agreements.
We, our directors and executive officers and shareholders beneficially own in excess of 5% of the currently
issued and outstanding shares of common stock will enter into lock-up agreements with the underwriters pursuant to which each
of these persons or entities, for a period of time ranging from 90 days to 360 days from the effective date of the registration
statement of which this prospectus is a part without the prior written consent of the underwriters, agree not to, (1) offer, pledge,
sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right
or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any shares of our securities or any
securities convertible into or exercisable or exchangeable for our shares of common stock owned or acquired on or prior to the
closing date of this offering (including any shares of common stock acquired after the closing date of this offering upon the
conversion, exercise or exchange of such securities), or publicly disclose the intention to do any of the foregoing; (2) enter
into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership
of the shares of common stock, whether any such transaction described in clause (1) or (2) above is to be settled by delivery
of shares of common stock or such other securities, in cash or otherwise, except for certain exceptions and limitations; or (3)
file or caused to be filed any registration statement relating to the offering of any of our shares of common stock.
Underwriters’
Warrants
. We have agreed to issue to our underwriters warrants to purchase the number of our shares of common stock
in the aggregate equal to 5% of the gross proceeds received by the Company from the Closing. The warrants will be exercisable
at any time, and from time to time, in whole or in part, during the period commencing 180 days from the effective date
of the offering, which period shall not extend further than five years from the effective date of the offering in compliance with
FINRA Rule 5110(f)(2)(G)(i). The warrants are exercisable at a per share price equal to 100% of the public offering price per
share in the offering. The warrants are also exercisable on a cashless basis. The warrants have been deemed compensation by FINRA
and are therefore subject to a 180-day lock-up pursuant to Rule 5110(g)(1) of FINRA. Neither our underwriters, nor permitted assignees
under Rule 5110(g)(1), will sell, transfer, assign, pledge, or hypothecate these warrants or the securities underlying these warrants,
nor will they engage in any hedging, short sale, derivative, put, or call transaction that would result in the effective economic
disposition of the warrants or the underlying securities for a period of 180 days from the effective date of the offering. In
addition, the warrants provide for registration rights upon request, in certain cases. The demand registration right provided
will not be greater than five years from the effective date of the offering in compliance with FINRA Rule 5110(f)(2)(G)(iv). The
piggyback registration right provided will not be greater than seven years from the effective date of the offering in compliance
with FINRA Rule 5110(f)(2)(G)(v). We will bear all fees and expenses attendant to registering the securities issuable on exercise
of the warrants other than underwriting commissions incurred and payable by the holders. The exercise price and number of shares
issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a stock dividend, extraordinary
cash dividend or our recapitalization, reorganization, merger or consolidation. The warrant exercise price and/or underlying shares
may also be adjusted for issuances of shares of common stock at a price below the warrant exercise price.
Electronic
Offer, Sale and Distribution of Securities
. A prospectus in electronic format may be made available on the websites
maintained by one or more of the underwriters or selling group members, if any, participating in this offering and one or more
of the underwriters participating in this offering may distribute prospectuses electronically. The Representative may agree to
allocate a number of shares to underwriters and selling group members for sale to their online brokerage account holders. Internet
distributions will be allocated by the underwriters and selling group members that will make internet distributions on the same
basis as other allocations. Other than the prospectus in electronic format, the information on these websites is not part of,
nor incorporated by reference into, this prospectus or the registration statement of which this prospectus forms a part, has not
been approved or endorsed by us or any underwriter in its capacity as underwriter, and should not be relied upon by investors.
Stabilization
. In
connection with this offering, the underwriters may engage in stabilizing transactions, syndicate-covering transactions, penalty
bids and purchases to cover positions created by short sales.
Stabilizing
transactions permit bids to purchase securities so long as the stabilizing bids do not exceed a specified maximum, and are engaged
in for the purpose of preventing or retarding a decline in the market price of the securities while the offering is in progress.
Syndicate
covering transactions involve purchases of securities in the open market after the distribution has been completed in order to
cover syndicate short positions. A naked short position is more likely to be created if the underwriters are concerned that after
pricing there could be downward pressure on the price of the securities in the open market that could adversely affect investors
who purchase in the offering.
Penalty
bids permit the Representative to reclaim a selling concession from a syndicate member when the securities originally sold by
that syndicate member are purchased in stabilizing or syndicate covering transactions to cover syndicate short positions.
These
stabilizing transactions, syndicate covering transactions and penalty bids may have the effect of raising or maintaining the market
price of our securities or preventing or retarding a decline in the market price of our securities. As a result, the price of
our securities in the open market may be higher than it would otherwise be in the absence of these transactions. Neither we nor
the underwriters make any representation or prediction as to the effect that the transactions described above may have on the
price of our securities. These transactions may be effected on the NASDAQ Capital Market, in the over-the-counter market or otherwise
and, if commenced, may be discontinued at any time.
Passive
Market Making
. In connection with this offering, underwriters and selling group members may engage in passive market
making transactions in our shares of common stock on the NASDAQ Global Select or on the OTC Markets in accordance with Rule 103
of Regulation M under the Exchange Act, during a period before the commencement of offers or sales of the shares and extending
through the completion of the distribution. A passive market maker must display its bid at a price not in excess of the highest
independent bid of that security. However, if all independent bids are lowered below the passive market maker’s bid, then
that bid must then be lowered when specified purchase limits are exceeded.
Potential
Conflicts of Interest
. The underwriters and their affiliates may, from time to time, engage in transactions with
and perform services for us in the ordinary course of their business for which they may receive customary fees and reimbursement
of expenses. In the ordinary course of their various business activities, the underwriters and their affiliates may make or hold
a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments
(including bank loans) for their own accounts and for the accounts of their customers and such investment and securities activities
may involve securities and/or instruments of our Company. The underwriters and their affiliates may also make investment recommendations
and/or publish or express independent research views in respect of such securities or instruments and may at any time hold, or
recommend to clients that they acquire, long and/or short positions in such securities and instruments.
Selling
Restrictions Outside the United States
Other
than in the United States, no action has been taken by us or the underwriters that would permit a public offering of the securities
offered by this prospectus in any jurisdiction where action for that purpose is required. The securities offered by this prospectus
may not be offered or sold, directly or indirectly, nor may this prospectus or any other offering material or advertisements in
connection with the offer and sale of any such securities be distributed or published in any jurisdiction, except under circumstances
that will result in compliance with the applicable rules and regulations of that jurisdiction. Persons into whose possession this
prospectus comes are advised to inform themselves about and to observe any restrictions relating to the offering and the distribution
of this prospectus. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities offered
by this prospectus in any jurisdiction in which such an offer or a solicitation is unlawful.
European
Economic Area
In
relation to each Member State of the European Economic Area which has implemented the Prospectus Directive, with effect from and
including the date on which the Prospectus Directive is implemented in that Member State, an offer of securities may not be made
to the public in that Member State, other than:
(a)
to any legal entity that is a qualified investor as defined in the Prospectus Directive;
(b)
to fewer than 100 or, if that Member State has implemented the relevant provision of the 2010 PD Amending Directive, 150 natural
or legal persons (other than “qualified investors” as defined in the Prospectus Directive) subject to obtaining the
prior consent of the Representative; or
(c)
in any other circumstances that do not require the publication of a prospectus pursuant to Article 3 of the Prospectus Directive;
provided that no such offer of securities shall require us or any underwriter to publish a prospectus pursuant to Article 3
of the Prospectus Directive.
For
the purposes of the above, the expression an “offer of securities to the public” in relation to any securities in
any Member State means the communication in any form and by any means of sufficient information on the terms of the offer and
the securities to be offered so as to enable an investor to decide to purchase or subscribe for the securities, as the same may
be varied in that Member State by any measure implementing the Prospectus Directive in that Member State (and amendments thereto,
including the 2010 PD Amending Directive, to the extent implemented in that Member State), and the expression “Prospectus
Directive” means Directive 2003/71/EC and includes any relevant implementing measure in that Member State, and the expression
“2010 PD Amending Directive” means Directive 2010/73/EU.
United
Kingdom
This
prospectus and any other material in relation to the shares described herein is only being distributed to, and is only directed
at, persons in the United Kingdom that are qualified investors within the meaning of Article 2(1)(e) of the Prospective Directive
(“qualified investors”) that also (i) have professional experience in matters relating to investments falling
within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended, or the Order,
(ii) who fall within Article 49(2)(a) to (d) of the Order or (iii) to whom it may otherwise lawfully be communicated
(all such persons together being referred to as “relevant persons”). The shares are only available to, and any invitation,
offer or agreement to purchase or otherwise acquire such shares will be engaged in only with, relevant persons. This prospectus
and its contents are confidential and should not be distributed, published or reproduced (in whole or in part) or disclosed by
recipients to any other person in the United Kingdom. Any person in the United Kingdom that is not a relevant person should not
act or rely on this prospectus or any of its contents.
Hong
Kong
The
shares may not be offered or sold by means of any document other than (i) in circumstances which do not constitute an offer
to the public within the meaning of the Companies Ordinance (Cap.32, Laws of Hong Kong), or (ii) to “professional investors”
within the meaning of the Securities and Futures Ordinance (Cap.571, Laws of Hong Kong) and any rules made thereunder, or (iii) in
other circumstances which do not result in the document being a “prospectus” within the meaning of the Companies Ordinance
(Cap.32, Laws of Hong Kong), and no advertisement, invitation or document relating to the shares may be issued or may be in the
possession of any person for the purpose of issue (in each case whether in Hong Kong or elsewhere), which is directed at, or the
contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the laws of
Hong Kong) other than with respect to shares which are or are intended to be disposed of only to persons outside Hong Kong or
only to “professional investors” within the meaning of the Securities and Futures Ordinance (Cap.571 Laws of Hong
Kong) and any rules made thereunder.
People’s
Republic of China
This
prospectus has not been and will not be circulated or distributed in the PRC, and shares may not be offered or sold, and will
not be offered or sold to any person for re-offering or resale, directly or indirectly, to any resident of the PRC except pursuant
to applicable laws and regulations of the PRC. For the purpose of this paragraph, PRC does not include Taiwan, and
the special administrative regions of Hong Kong and Macau.
Singapore
This
prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this prospectus and
any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the shares
may not be circulated or distributed, nor may the shares be offered or sold, or be made the subject of an invitation for subscription
or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor under Section 274
of the Securities and Futures Act, Chapter 289 of Singapore (SFA), (ii) to a relevant person, or any person pursuant to Section 275(1A),
and in accordance with the conditions, specified in Section 275 of the SFA or (iii) otherwise pursuant to, and in accordance
with the conditions of, any other applicable provision of the SFA.
Where
the shares are subscribed or purchased under Section 275 by a relevant person which is: (a) a corporation (which is
not an accredited investor) the sole business of which is to hold investments and the entire share capital of which is owned by
one or more individuals, each of whom is an accredited investor; or (b) a trust (where the trustee is not an accredited investor)
whose sole purpose is to hold investments and each beneficiary is an accredited investor, shares, debentures and units of shares
and debentures of that corporation or the beneficiaries’ rights and interest in that trust shall not be transferable for
six months after that corporation or that trust has acquired the shares under Section 275 except: (1) to an institutional
investor under Section 274 of the SFA or to a relevant person, or any person pursuant to Section 275(1A), and in accordance
with the conditions, specified in Section 275 of the SFA; (2) where no consideration is given for the transfer; or (3) by
operation of law.
Japan
The
securities have not been and will not be registered under the Financial Instruments and Exchange Law of Japan (the Financial Instruments
and Exchange Law) and may not be offered or sold, directly or indirectly, in Japan or to, or for the benefit of, any resident
of Japan (which term as used herein means any person resident in Japan, including any corporation or other entity organized under
the laws of Japan), or to others for re-offering or resale, directly or indirectly, in Japan or to a resident of Japan, except
pursuant to an exemption from the registration requirements of, and otherwise in compliance with, the Financial Instruments and
Exchange Law and any other applicable laws, regulations and ministerial guidelines of Japan.
Notice
to Prospective Investors in Switzerland
The
shares may not be publicly offered in Switzerland and will not be listed on the SIX Swiss Exchange (SIX) or on any other stock
exchange or regulated trading facility in Switzerland. This document has been prepared without regard to the disclosure standards
for issuance prospectuses under art. 652a or art. 1156 of the Swiss Code of Obligations or the disclosure standards for listing
prospectuses under art. 27 ff. of the SIX Listing Rules or the listing rules of any other stock exchange or regulated trading
facility in Switzerland. Neither this document nor any other offering or marketing material relating to the shares or the offering
may be publicly distributed or otherwise made publicly available in Switzerland.
Neither
this document nor any other offering or marketing material relating to the offering, the Company, or the shares have been or will
be filed with or approved by any Swiss regulatory authority. In particular, this document will not be filed with, and the offer
of shares will not be supervised by, the Swiss Financial Market Supervisory Authority FINMA (FINMA), and the offer of shares has
not been and will not be authorized under the Swiss Federal Act on Collective Investment Schemes (CISA). The investor protection
afforded to acquirers of interests in collective investment schemes under the CISA does not extend to acquirers of the shares.
Notice
to Prospective Investors in the Dubai International Financial Centre
This
prospectus relates to an Exempt Offer in accordance with the Offered Securities Rules of the Dubai Financial Services Authority
(DFSA). This prospectus is intended for distribution only to persons of a type specified in the Offered Securities Rules of the
DFSA. It must not be delivered to, or relied on by, any other person. The DFSA has no responsibility for reviewing or verifying
any documents in connection with Exempt Offers. The DFSA has not approved this prospectus nor taken steps to verify the information
set forth herein and has no responsibility for the prospectus. The shares to which this prospectus relates may be illiquid and/or
subject to restrictions on their resale. Prospective purchasers of the shares offered should conduct their own due diligence on
the shares. If you do not understand the contents of this prospectus you should consult an authorized financial advisor.
DIRECTORS AND
EXECUTIVE OFFICERS
Our
directors, executive officers and key employees are listed below. The number of directors is determined by our Board
of Directors. All directors hold office until the next annual meeting of the Board or until their successors have been
duly elected and qualified. Officers are elected by the Board of Directors and their terms of office are, except to
the extent governed by employment contract, at the discretion of the Board of Directors.
Directors
and Executive Officers
Name
|
|
Age
|
|
Position
|
Xiangyao
Liu
|
|
45
|
|
Chief
Executive Officer, President, Secretary and Chairman of the Board
|
Xin
“Cindy” Zheng
|
|
38
|
|
Chief
Financial Officer
|
James
Stuart Coleman
|
|
60
|
|
Director
|
Zhanhuai
Cheng
|
|
69
|
|
Director
|
Yanliang
Wu
|
|
51
|
|
Director
|
Yu
Zong
|
|
46
|
|
Director
|
Harvey
Leibowitz (1) (2) (3) (4) (5) (6)
|
|
82
|
|
Independent
Director
|
Zhixue
Liu (2) (3) (5)
|
|
53
|
|
Independent
Director
|
Tongmin
Wang (1) (4) (6)
|
|
57
|
|
Independent
Director
|
Adam
Goldberg (1) (2) (3) (4) (5) (6)
|
|
46
|
|
Independent
Director
|
Daniel
W. Heffernan (1) (2) (3) (4) (5) (6)
|
|
67
|
|
Independent
Director
|
Zhihong
Su (1) (2) (3) (4) (5) (6)
|
|
56
|
|
Independent
Director
|
(1)
Member of the Audit Committee
(2)
Member of the Compensation Committee
(3)
Member of the Nomination Committee
(4)
Member of the Governance and Human Resources Committee
(5)
Member of the Board Oversight Committee
(6)
Member of the Social Media Committee
Xiangyao
Liu,
President, CEO, Secretary and Chairman of the Board (age 45)
Mr.
Xiangyao Liu served in the state-owned Materials Bureau of Hebei Province and was involved in steel and other logistics trading
between 1994 and 1996. From 1996 to 2003, he invested and established the Pacific Trade and Logistics in China, served as the
General Manager and engaged in the trading and logistics of steel, agricultural products and other commodities. In 2010, Mr. Liu
participated in the investment of Wuhan Renhe Group Limited, which held the Wuhan Huazhong Steel Trading Center Co., Ltd., at
that time, supervising the logistics and trading of steel. He also started to engage in financial and security investments in
Hong Kong. From November 2010 to December 2012, Mr. Liu was the deputy general manager of Wuhan Renhe Group Limited; From January
2012 to June 2015, Mr. Liu served as the Deputy General Manager of the Wuhan Huazhong Steel Trading Center Co., Ltd., which later
became the Wuhan Yangtze River Newport Logistics Co. Ltd. He supervised the transition of the steel trading renter to a residential
and commercial complex which supports the warehouses and docks, led projects to bring the Steel Trading Center into the Yangluo
Comprehensive Bonded Zone and Free Trade Area in Wuhan, supervised the feasibility study of the Wuhan Yangtze River Newport Logistics
Center and collaborated with the local government to develop the Yangluo Newport Project Plan, handling corporate structuring,
strategic planning and operations management of the company. Mr. Liu was appointed as the CEO and the Chairman of the Board of
the Company in July 2015 because of his managerial skills and expertise in the industry.
Mr.
Liu received his Bachelor’s degree in Business Management from the Hebei Institute of Finance in 1994.
Xin
“Cindy” Zheng,
Chief Financial Officer (age 38)
Ms.
Zheng joined the Company (formerly Kirin International Limited) in December 2009. From September 2010 to March 2011, she
has been employed by the Company’s finance department where she has had oversight of the Company’s accounting and
financing matters. Ms. Zheng was appointed as Chief Financial Officer in April 2011. Prior to joining the Company, Ms. Zheng
was employed as Marketing Director for both XingtaiZhongdingJiye Real Estate Development Co., Ltd., and Hebei Zhongding Real Estate
Development Co., Ltd., which through certain contractual arrangements, the Company controls. As Marketing Director, Ms. Zheng’s
responsibilities included oversight of the Company’s marketing efforts. From May 2006 to December 2009, Ms. Zheng was
employed in the Lighting Division of Philips, a Netherlands based fortune 500 company. Philips has generated approximately
$9 billion dollars in revenue in China, where she was responsible for budgeting and financial planning for the operations of Philip’s
lighting division in northern China. From April 2004 to May 2006, Ms. Zheng was employed by Mercer Consulting in China where
she engaged in management consulting and financial modeling for a variety of companies, including state and privately owned business. Ms.
Zheng graduated from the University of Bradford in the United Kingdom in February 2004 with a Master’s degree in Financial
Management. She has extensive experience in accounting and capital markets.
James
Stuart Coleman
,
Director (age 60)
Mr.
James Coleman has been the Chief Representative in the United States of Wuhan Yangtze River Newport Logistics Co., Limited since
April 2015. Mr. Coleman has also been the CEO and CFO of Dream Recovery International, Inc., a drug and alcohol rehabilitation
facility since January 2014. Mr. Coleman has also been a Partner of the Angel Capital Ltd, an angel capital investor in start-up
companies since September 2012. Since April 2006, Mr. Coleman has served as an Associate Broker at Bond New York Properties, LLC,
specializing in commercial real estate in New York. We have selected Mr. Coleman as a director because of his experience with
the capital markets in the United States.
Mr.
Coleman received his Bachelor’s degree in Arts from Allegheny College in 1978. He is also a licensed Associate Broker in
the State of New York.
Zhanhuai
Cheng,
Director (age 69)
Mr.
Zhanhuai Cheng has served as the Chief Technology Officer (“CTO”) of Wuhan Huazhong Steel Trading Center since December
2008 and is responsible for the planning and construction of the logistics warehouse, dock berths, and supporting residential
and commercial buildings. Since July 2015, after Wuhan Huangzhong Steel Trading Center restructured into Wuhan Newport, Mr. Cheng
continued serving as the CTO of Wuhan Newport. Mr. Cheng was appointed as a member of the Board in December 2015. From 2000 to
2007, Mr. Cheng was employed by the Wuhan City Port Authority Officers and was in charge of port construction planning. During
his term with the office, Mr. Cheng worked with the various ports along the Yangtze River and accumulated great experience in
port planning, wharf construction, operations and management. He helped various agencies of the Wuhan government to complete the
transformation of the water network, port construction, etc., and obtained the title of advanced workers of Wuhan City. During
his service, Mr. Cheng also directed the planning, development and construction of the Qingshan Port, Yangluo Port, Yangsi Port
and other terminals in Wuhan.
From
1993 to 2000, Mr. Cheng served as an officer of Wuhan Light Rail Construction and was in charge of resource development, project
design, tendering and construction work. During his term of office, Mr. Cheng has contributed greatly to metro line planning and
rail transit construction in Wuhan. These are recognized by the Wuhan Government with a number of honorary titles issued to him.
Mr.
Cheng has also previously worked in the Wuhan Iron and Steel Limited, focusing on the production of railway and other construction,
and port transportation projections. Mr. Cheng was also employed by the Ministry of Railways Bridge Engineering Bureau and served
as a staff analyst and later on a vice dean of an academic institute, contributing to many projects and achieving great success.
We have selected Mr. Cheng as a director because of his expertise in our industry.
Yanliang
Wu,
Director (age 51)
Mr.
Wu has served as the deputy general manager of Wuhan Huazhong Steel Trading Center since June 2010. Since July 2015, after Wuhan
Huangzhong Steel Trading Center re-structured into Wuhan Newport, Mr. Wu continued serving as the deputy general manager of Wuhan
Newport. Mr. Wu has been working for Wuhan Yangtze River Newport Logistics Co. Ltd. since 2012, and is in charge of the company’s
indoor storage, outdoor yards, approval, planning and construction of warehouses, and operations management. Mr. Wu worked for
Alpha Logistics Co, Ltd. in Montreal, Canada from 1997 to 2003, where he served as the Head of Logistics and coordinated the construction
of the logistics network of the company in North America and the Pacific Rim. From 2002 to 2012, he was in charge of the company’s
business development in the logistics industry in Mainland China, as well as leading the opening of its Shanghai branch. From
1986 to 1996, Mr. Wu worked in the head office of the state-owned Wuhan Metal Materials Corporation, serving as the Minister of
Management and General Manager of Commodity Trading. During his employment, he received two accolades for his personal achievement
in 1990 and 1992. He was also certified as a senior economist in China in September 1994. We have selected Mr. Wu as a director
because of his expertise in our industry.
Mr.
Wu received his Bachelor of Sciences degree in Logistics from Huazhong University of Science and Technology in 1986.
Yu
Zong,
Director (age 46)
Mr.
Zong has served as the Deputy General Manager of Wuhan Yangtze River Newport Logistics Co. Ltd. from February 2012 to September
2015, and was in charge of the development, construction and management of the real estate. Mr. Zong became its general manager
and legal representative in October 2015. In July 2015, after Wuhan Huangzhong Steel Trading Center re-structured into Wuhan Newport,
Mr. Zong was appointed as the deputy general manager of Wuhan Newport. Mr. Zong was appointed as General Manager and Chief Representative
of Wuhan Newport in October 2015. From September 2009 to January 2012, he worked in Wuhan Dingxin Real Estate Ltd. as the Deputy
General Manager and Chief Engineer, leading the construction and management of the “Mocha Town” Phase II Development
Project. From 2007 to 2009, Mr. Zong worked in the China Railway Group Wuhan Properties Limited, as the minister of
Engineering Planning Division, and participated in a large real estate project which had a total investment of six (6) billion
RMB. From 2003 to 2006, Mr. Zong worked in Hubei Jiuding Ltd., as the Deputy General Manager and Chief Engineer and
was responsible for the construction and management of a villa project which occupied an area of 80,000 square meters and a total
construction area of 70,000 square meters. During the construction period, his duties included preliminary design, construction
report, project quality control, and compliance. From 2000 to 2002, Mr. Zong worked as the Project Manager for Pace Home Development
Inc., in Canada, providing consulting services for various types of construction projects. Mr. Zong also previously worked
in the Wuhan Institute of Architecture Design Institute. We have selected Mr. Zong as a director because of his expertise in our
industry.
Mr.
Zong obtained his bachelor’s degree in Civil Engineering in 1993 from Wuhan University. He also obtained his master’
degree in Engineering from the University of British Columbia in 2004.
Harvey
Leibowitz,
Independent Director, Chair of the Audit and Compensation Committees (age 82)
Mr.
Leibowtiz has been a director and Chair of the Audit Committee of ASTA Funding, Inc., a company listed on the NASDAQ since 2000.
Mr. Leibowitz graduated from the City University of New York - Baruch College in 1955 with a bachelor’s degree in Accounting.
Between 1955 and 1962, he was employed as a staff accountant at various accounting firms working on matters relating to audits,
taxes and write-ups. From 1962 to 1979, Mr. Leibowtiz worked at Standard Financial Corporation, which acquired Sterling National
Bank in 1965, in capacities including internal auditor and Senior Vice President in charge of commercial financing and factoring.
From 1980 to 1994, Mr. Leibowitz worked for companies such as International Paper Company, Century Factors, Inc., and Foothill
Financial Advisors, Inc., and was in charge of commercial financing involving secured loan financing. From 1994 to 1999, Mr. Leibowitz
worked for Sterling National Bank as an internal auditor and was in charge of the Commercial Finance Department. Based on Mr.
Leibowitz’s education and employment background, we have selected Mr. Leibowitz as a director and chairman of the Audit
Committee because of his expertise in accounting and finance and the Board believes that Mr. Leibowitz qualifies as a “financial
expert” as defined by the SEC rules.
Zhixue
Liu,
Independent Director (age 53)
Mr.
Liu obtained his Ph.D. in Management and is currently a professor at the School of Management of Huazhong University of Science
and Technology. Mr. Liu has been teaching as a professor at the School of Management of the Huazhong University of Science &
Technology since January 2011. Mr. Liu was appointed as a member of the Board in December 2015. Also currently the Deputy Director
of the Product Operations and Logistics Management Department, Mr. Liu is one of the main drafters of
The People’s
Republic of China National Standard - Classification and Index of Logistics Enterprises
and
The People’s Republic
of China National Standard - Logistics Terminology
. He is also a member of the National Ministry of Education Logistics Specialty
Guidance Steering Committee, Board of Trustee of the National Natural Science Fund Committee Management Division, Committee of
the National Professional Commission for Certification of Logistics Specialist, Deputy Secretary General of the China Logistics
Technology Association, Executive Director of the China Society of Logistics, and Executive Director of the China Marketing Association.
Mr.
Liu obtained his bachelor’s in Logistics from Huazhong University of Science and Technology in 1986. After his graduation,
he served as an assistant, lecturer, associate professor, professor and doctoral tutor in the University, and focuses on researching
and teaching logistics management, supply chain management, international trade, international business operations and marketing.
Recently, he has published six (6) representative works, including the
Modern Logistics Handbook
, and more than forty
(40) papers in domestic and foreign mainstream journals. He also hosted and participated in academic forums on
Research on
Model of Supply Chain Logistics Management and Case Studies on China’s Auto Supply Chain
and other studies initiated by the
National Natural Science Foundation. Mr. Liu has led research on the
Shandong Weifang City Logistics Development Strategy
Plan, Planning of Jiangyin Yangtze Port Integrated Logistics Zone
and
Logistics Solutions for Dongfeng Vehicles,
Study on Transition of Wuhan Iron and Logistics Transportation Companies
and a number of other logistics management topics.
Mr. Liu and his research have been awarded the Outstanding Scientific Achievement Award under China’s “Ninth Five-Year”
key scientific and technological projects, and Second Place in the National Commerce Scientific Advancement Award. We have selected
Mr. Liu as a director because of his expertise and scholarship in the industry.
Tongmin
Wang,
Independent Director (age 57)
Mr.
Wang was a chief engineer of Logistical Equipment at Wuhan Iron and Steel Limited from January 2011. Mr. Wang has worked for Wuhan
Iron and Steel Limited and Wuhan Port Terminal Foreign Trade Co., Ltd. since 2007. He has served as the deputy general manager
of the Office of Corporate Integration, Chief Administrative Officer, Director of Cargo Unloading and Chief Engineer of Logistical
Equipment. Mr. Wang worked for Wuhan Port Group from 1992 to 2007. During this period, he held positions include Deputy Administrate
Officer, Deputy Director of the Wuhan Water Company, Director of the Wuhan Port Mechanical Company, Manager of the Office of the
Corporate Integration, Director of the Cargo Unloading Division and etc. From 1981 to 1992, Mr. Wang worked for the Wuhan Port
Machinery Plant of the Ministry of Transportation in China.
Mr.
Wang possesses professional knowledge and more than three decades of experience in the management of a port. He is familiar with
the logistics industry and takes a practical approach in the organization and management of cargo loading/unloading. He is able
to utilize his expertise to solve practical problems involving the day-to-day operations at a port terminal. We have selected
Mr. Wang as a director because of his expertise in the industry.
He
received his bachelor’s degree in Mechanical Engineering from Wuhan Institute of Maritime and master’s degree in Industrial
Management from the Chinese Academy of Social Sciences in 1998.
Adam
Goldberg,
Independent Director, Chair of the Social Media Committee (age 46)
Mr.
Goldberg is the President and founder of Telco Experts LLC since March 2008. He served as Chief Executive Officer of Gemini Communications
from March 1996 to March 2008. At Telco, Mr. Goldberg obtained regulatory approval as a licensed telephone company in 21 states
and manages staff of 30 telecommunication professionals and engineers. Mr. Goldberg has extensive experience in business development,
regulatory affairs, strategic planning, employee development and project management. We have selected Mr. Goldberg as a director
because of his expertise in project management and strategic planning.
Mr.
Goldberg obtained his bachelor’s degree in Marketing and Finance from University of Maryland, Robert H. Smith School of
Business in 1993.
Daniel
W. Heffernan,
Independent Director Chair of the Nomination and Board Oversight Committees (age 56)
Mr.
Heffernan has served as the Principal of HRK Associates, specializing in credit enhanced finance since 1998. Mr. Heffernan was
the Principal of HRK Associates since January 2011. Mr. Heffernan was appointed as a member of the Board in December 2015. Prior
to his position at HRK, from 1973 to 1986, Mr. Heffernan served as an officer at New York Life Insurance Company. From 1986 to
1998, Mr. Heffernan was employed as an officer at Jhminer, Co. Ltd., in New York. Mr. Heffernan has more than thirty years of
financial experience in the highly specialized niche market of mitigation of risk through the use of insurance and reinsurance
related financial products. He has provided services to clients operating throughout the U.S. and in the international marketplace,
leveraging his experience in providing credit enhanced, customized financial solutions that provide a distinctive bridge to the
capital markets.
Mr.
Heffernan is actuarially trained and has previously worked for New York Life Insurance Company, where he ran the Pension Department
and supervised its two hundred eighty employees, and MINET/MIPI Brokers. While at New York Life, he consulted with a client base
in excess of 5,000 corporations and unions, providing services ranging from structuring to administration. We have selected Mr.
Heffernan as a director because of his expertise in finance.
Mr.
Daniel W. Heffernan obtained his bachelor’s degree in Theology from New York Shadowbrook Jesuit Seminary in 1972.
Zhihong
Su
,
Independent Director, Chair of the Governance and Human Resources Committee (age 56)
Mr.
Su has served as the managing partner of the Beijing Hengjun Law Firm since December 2001, practicing in areas such as securities,
litigation, general corporate and banking. Mr. Su was appointed as member of the Board in January 2016. Mr. Su started his career
as in-house counsel for China International Trust and Investment Corporation (“CITIC”) in December 1984, and was responsible
for the legal affairs of overseas investments. In January 1990, Mr. Su was sent to station at the Washington DC-based law firm
Arnold and Porter LLP as a foreign lawyer to oversee a full spectrum of legal matters of CITIC’s subsidiaries in the United
States, namely, CITIC Steel Group, CITIC Buffalo Tungsten Company, CITIC Seattle Woodland and CITIC Florida Real Estate Co. Ltd.
During his stay in Washington from 1990 to June 1996, he worked on a number of matters involving corporate and securities law.
Upon returning to China in July 1996, Mr. Su worked for the Law Offices of Jiahe as one of the founding members and as an attorney
until November 2001. We have chosen Mr. Su to serve as a director because of the perspective he brings to legal matters in China.
Mr.
Su earned his bachelor’s degree in Laws (LLB) from China University of Political Science and Law where he had taught for
a year after graduation before becoming a qualified Chinese lawyer in the same year.
Term
of Office
Our
directors are appointed for a one-year term to hold office until the next annual general meeting of our shareholders or until
removed from office in accordance with our bylaws. Our officers are appointed by our Board of Directors and hold office until
removed by the Board.
Family
Relationships
There
are no family relationships between any of our directors or executive officers and any other directors or executive officers.
Involvement
in Certain Legal Proceedings
Except
as described below, to the best of our knowledge, none of our directors or executive officers has, during the past ten years:
|
●
|
been
convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other
minor offenses);
|
|
●
|
had
any bankruptcy petition filed by or against the business or property of the person, or of any partnership, corporation or
business association of which he was a general partner or executive officer, either at the time of the bankruptcy filing or
within two years prior to that time;
|
|
●
|
been
subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, by any court of competent jurisdiction
or federal or state authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting, his involvement
in any type of business, securities, futures, commodities, investment, banking, savings and loan, or insurance activities,
or to be associated with persons engaged in any such activity;
|
|
●
|
been
found by a court of competent jurisdiction in a civil action or by the Commission or the Commodity Futures Trading Commission
to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;
|
|
●
|
been
the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently
reversed, suspended or vacated (not including any settlement of a civil proceeding among private litigants), relating to an
alleged violation of any federal or state securities or commodities law or regulation, any law or regulation respecting financial
institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement
or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or
any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or
|
|
●
|
been
the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory
organization (as defined in Section 3(a)(26) of the Exchange Act), any registered entity (as defined in Section 1(a)(29) of
the Commodity Exchange Act), or any equivalent exchange, association, entity or organization that has disciplinary authority
over its members or persons associated with a member.
|
On
December 19, 2015, James Coleman joined us as Executive Director. Prior to joining us, Mr. Coleman was the managing member and
owner of Firebird International LLC, Dream International Holdings LLC and Dream Recovery International LLC, all of which are privately
held companies engaged primarily in drug rehabilitation businesses, from January 2014 to September 2016. On September 13, 2016,
all three entities mentioned above filed voluntary petitions in the United States Bankruptcy Court for the District of Southern
Florida seeking relief under the provisions of chapter 7 of title 11 of the United States Code in order to facilitate liquidations
in these three entities.
Except
as set forth in our discussion below in “Certain Relationships and Related Transactions,” none of our directors or
executive officers has been involved in any transactions with us or any of our directors, executive officers, affiliates or associates
which are required to be disclosed pursuant to the rules and regulations of the Commission.
Code
of Ethics
We
have adopted a code of ethics as of the date of this prospectus that applies to our principal executive officer, principal financial
officer, directors and principal accounting officer as well as our employees. Our standards are in writing and are to be posted
on our website at
www.yerr.com.cn
at a future time. The following is a summation of the key points of the Code of Ethics
we adopted:
|
●
|
Honest
and ethical conduct, including ethical handling of actual or apparent conflicts of interest between personal and professional
relationships;
|
|
●
|
Full,
fair, accurate, timely, and understandable disclosure reports and documents that a small business issuer files with, or submits
to, the Commission and in other public communications made by our Company;
|
|
●
|
Full
compliance with applicable government laws, rules and regulations;
|
|
●
|
The
prompt internal reporting of violations of the code to an appropriate person or persons identified in the code; and
|
|
●
|
Accountability
for adherence to the code.
|
Corporate
Governance
The
business and affairs of the company are managed under the direction of our Board. We have conducted Board meetings regularly since
inception. Each of our directors has attended all meetings either in person, via telephone conference, or through written consent
for special meetings. In addition to the contact information in this prospectus, the Board has adopted procedures for communication
with the officers and directors as of January 25, 2016. Each stockholder will be given specific information on how he/she can
direct communications to the officers and directors of the Company at our annual stockholders’ meetings. All communications
from stockholders are relayed to the members of the Board.
Board
Leadership Structure and Role in Risk Oversight
Our
Board is primarily responsible for overseeing our risk management processes. The Board receives and reviews periodic reports from
management, auditors, legal counsel, and others, as considered appropriate regarding our company’s assessment of risks.
The Board focuses on the most significant risks facing our company and our company’s general risk management strategy, and
also ensures that risks undertaken by our company are consistent with the Board’s appetite for risk. While the Board oversees
our company’s risk management, management is responsible for day-to-day risk management processes. We believe this division
of responsibilities is the most effective approach for addressing the risks facing our company and that our Board leadership structure
supports this approach.
The
audit committee, which was formed on January 25, 2016, assists our Board in its general oversight of, among other things, the
company’s policies, guidelines and related practices regarding risk assessment and risk management, including the risk of
fraud. As part of this endeavor, the audit committee reviews and assesses the company’s major financial, legal, regulatory,
environmental and similar risk exposures and the steps that management has taken to monitor and control such exposures. The audit
committee also reviews and assesses the quality and integrity of the company’s public reporting, the company’s compliance
with legal and regulatory requirements, the performance and independence of the company’s independent auditors, the performance
of the company’s internal audit department, the effectiveness of the company’s disclosure controls and procedures,
and the adequacy and effectiveness of the company’s risk management policies and related practices.
Committees
of the Board of Directors
On
January 25, 2016, the Board formed and adopted charters for six standing committees: Audit Committee, Compensation Committee,
Nomination Committee, Governance and Human Resources Committee, Board Oversight Committee, Social Media Committee (collectively
the “Committees”). Each Committee consists of only independent directors of the Company. The Board also adopted charter
for the Regulatory, Compliance and Government Affairs Committee, for which the charter will be implemented once the committee
is formed. The Company believes that the adoption of these charters and the formation of these Committees is necessary for the
implementation of effective internal control and oversight and a significant step towards remediating any material weakness the
Company had for the fiscal year ended December 31, 2015.
|
●
|
Audit
Committee:
Harvey Leibowitz (Chair), Zhihong Su, Daniel W. Heffernan, Adam Goldberg, Tongmin Wang
|
|
●
|
Compensation
Committee:
Harvey Leibowitz (Chair), Zhihong Su, Zhixue Liu, Adam Goldberg, Daniel W. Heffernan
|
|
●
|
Nomination
Committee:
Daniel W. Heffernan (Chair), Harvey Leibowitz, Zhixue Liu, Adam Goldberg, Zhihong Su
|
|
●
|
Governance
and Human Resources Committee:
Zhihong Su (Chair), Harvey Leibowitz, Adam Goldberg, Daniel W. Heffernan, Tongmin
Wang
|
|
●
|
Board
Oversight Committee:
Daniel W. Heffernan (Chair), Zhixue Liu, Harvey Leibowitz, Adam Goldberg, Zhihong Su
|
|
●
|
Social
Media Committee:
Adam Goldberg (Chair), Harvey Leibowitz, Zhihong Su, Daniel W. Heffernan, Tongmin Wang
|
The
Board also adopted an insider trading policy that allows insiders to sell securities of the Company pursuant to pre-arranged trading
plans.
This
insider trading policy was put into place because effective October 23, 2000, the Securities and Exchange Commission (the “SEC”)
adopted rules related to insider trading. One of these rules, Rule 10b5-1 of the Securities Exchange Act of 1934, as amended,
provides an exemption to the insider trading rules in the form of an affirmative defense. Rule 10b5-1 recognizes the creation
of formal programs under which executives and other insiders may sell the securities of publicly traded companies on a regular
basis pursuant to written plans that are entered into at a time when the plan participants are not aware of material non-public
information and that otherwise comply with the requirements of Rule 10b5-1.
The
Board also adopted a written disclosure policy, which applies to all directors, officers and employees of the Company and its
wholly owned subsidiaries, to ensure that communications to the investing public about the Company are timely, factual and accurate
and are broadly disseminated in accordance with all applicable legal and regulatory requirements.
In
addition, the Board adopted a whistleblower procedure that provides the Audit Committee the responsibility to ensure proper procedure
of the receipt, retention, and treatment of complaints about the Company’s accounting, internal accounting controls, or
auditing matters. The Audit Committee must also provide for confidential, anonymous submission by the Company’s employees
of concerns about questionable accounting or auditing matters.
Lastly,
the Board adopted a corporate governance policy for its website content, as well as procedures for shareholder’s communication
with Directors. With all of the above referenced charters and procedures in place, the Company is committed to corporate governance
practices that are compliance with applicable laws, regulations and exchange requirements.
The
functions of each committee the Company formed and adopted charters for as of the date of this prospectus are described below:
Audit
Committee
The
Audit Committee shall make such examinations as are necessary to monitor the corporate financial reporting and external audits
of the Company and its subsidiaries; to provide to the Board the results of its examinations and recommendations derived therefrom;
to outline to the Board improvements made, or to be made, in internal accounting controls; to nominate an independent auditor;
and to provide to the Board such additional information and materials as it may deem necessary to make the Board aware of significant
financial matters requiring Board attention.
Compensation
Committee
The
purpose of the Compensation Committee is to review and make recommendations to the Board regarding all forms of compensation to
be provided to the executive officers and directors of the Company, including stock compensation and loans, and all bonus and
stock compensation to all employees.
Nomination
Committee
The
purpose of the Nomination Committee shall be to review and make recommendations to the Board regarding matters concerning corporate
governance; review the composition of and evaluate the performance of the Board; recommend persons for election to the Board and
evaluate director compensation; review the composition of committees of the Board and recommend persons to be members of such
committees; review and maintain compliance of committee membership with applicable regulatory requirements; and review conflicts
of interest of members of the Board and corporate officers.
Governance
and Human Resources Committee
The
Governance and Human Resources Committee shall be is responsible for (1) developing Company’s approach to the Board and
corporate governance issues; (2) helping to maintain an effective working relationship between the Board and management; (3) exercising,
within the limits imposed by the by-laws of the Company, by applicable laws, and by the Board, the powers of the Board for the
management and direction of the affairs of the Company during the intervals between meetings of the Board; (4) reviewing and making
recommendations to the Board for the appointment of senior executives of the Company and for considering their terms of employment;
(5) reviewing succession planning, matters of compensation; (6) recommending awards under the Company’s long term and short
term incentive plans; (7) assuming the role of administrator, whether by delegation or by statute, for the corporate-sponsored
registered pension plans and the Supplementary Executive Retirement Plan of the Company and its wholly-owned subsidiaries and
any future, additional or replacement plans relating to the plans; and (8) monitoring the investment performance of the trust
funds for the plans and compliance with applicable legislation and investment policies.
Board
Oversight Committee
The
Board Oversight Committee shall assist the Board of Directors in the exercise of its responsibilities, particularly by defining
the scope of the Committee’s authority in respect of risk oversight matters delegated to it by the Board of Directors.
Social
Media Committee
The
Social Media Committee shall oversee the social media strategy initiatives for the Company pursuant to Regulation FD. The Committee
shall 1) provide compliant Regulation FD strategic leadership for social media through the alignment of social media strategies
and activities with enterprise strategic objectives and processes; 2) establish and maintain corporate policies with respect to
use of social media for both process-driven social engagements, as well as for use of social media by employees for participating
in social conversations (e.g. blogging and Tweeting by subject matter experts); 3) prioritize social media initiatives and deliver
final approvals and recommendations on proceeding with proposed social media projects, including process, technology, and organizational
project; 4) ensure open communication between the social media department and the other functional units of the Company so as
to promote collaborative strategies, planning, and implementation.
Section
16(a) Beneficial Ownership Reporting Compliance
Under
Section 16(a) of the Exchange Act, our directors and certain officers, and persons holding more than 10 percent of our common
stock are required to file forms reporting their beneficial ownership of our common stock and subsequent changes in that ownership
with the United States Securities and Exchange Commission.
Based
solely upon a review of copies of such forms filed on Forms 3, 4, and 5, and amendments thereto furnished to us, we believe that
as of the date hereof our executive officers, directors and greater than 10 percent beneficial owners have complied on a timely
basis with all Section 16(a) filing requirements.
EXECUTIVE
COMPENSATION
Summary
Compensation Table
The
Summary Compensation Table below sets forth information regarding the compensation awarded to or earned by the company’s
executive officers for our fiscal years ended December 31, 2016 and 2015.
Name
|
|
Year
|
|
Salary
($)
|
|
|
Bonus
($)
|
|
|
Securities-based
Compensation
($)
|
|
|
All
other compensation
($)
|
|
|
Total
($)
|
|
Xiangyao Liu
|
|
2016
|
|
|
0
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
0
|
|
Chief Executive Officer(1)
|
|
2015
|
|
|
0
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jianfeng
Guo
Former
Chief Executive Officer,
|
|
2016
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
0
|
|
Former Chairman of the Board (2)
|
|
2015
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Longlin Hu
|
|
2016
|
|
|
0
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
0
|
|
Former Chief Executive Officer(3)
|
|
2015
|
|
|
37,500
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
37,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Xin “Cindy” Zheng
|
|
2016
|
|
|
54,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
54,000
|
|
Chief Financial Officer
|
|
2015
|
|
|
54,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
54,000
|
|
(1)
|
On
December 19, 2015, Company acquired Energetic Mind and its wholly-owned subsidiaries and in connection with that transaction,
Mr. Liu was appointed as our President, Chief Executive Officer, Secretary and Chairman of the Board. The amounts in this
table reflect compensation awarded or paid by Energetic Mind and its subsidiaries to Mr. Liu in fiscal year 2014 and 2015.
As of the date of this Annual Report, President, Chief Executive Officer, Secretary and Chairman of the Board.
|
|
|
(2)
|
Mr.
Guo was appointed as our President and Chief Executive Officer on June 1, 2015 and resigned as an executive officer and director
on December 19, 2015 as a result of the transaction describe above in (1).
|
|
|
(3)
|
Mr.
Hu resigned from all his officer and director positions of the Company and as a member of the board of directors on June 1,
2015. Prior to his resignation, Mr. Hu served as the President and Chief Executive Officer and a member of the Board of Directors
from March 1, 2011.
|
Employment
Agreements
We
have employment agreements with all of our directors and officers except Xiangyao Liu.
Option
Grants
We
had no outstanding equity awards as of the end of fiscal year 2016.
Option
Exercises and Fiscal Year-End Option Value Table
There
were no stock options exercised during fiscal 2016 by the executive officers.
Long-Term
Incentive Plans and Awards
There
were no awards made to a named executive officer in fiscal 2016 under any long-term incentive plan.
Employment
Contracts, Termination of Employment, Change-in-Control Arrangements
We
have no other employment agreements with any of our executive officers.
Change-in-Control
Arrangements
None.
Director
Compensation Table
The
following table sets forth the compensation received by each of our Directors for the year ended December 31, 2016.
Name
|
|
Fees
Earned
or
Paid
in
Cash
($)
|
|
|
Stock
Awards
($)
|
|
|
Option
Awards
($)
|
|
|
Non-Equity
Incentive
Plan
Compensation
($)
|
|
|
Non-Qualified
Deferred
Compensation
($)
|
|
|
All
Other
Compensation
($)
|
|
|
Total
($)
|
|
Xiangyao
Liu
Chairman of the Board
|
|
-
|
|
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
James
Stuart Coleman
Executive Director(1)
|
|
|
70,000
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
70,000
|
|
Zhanhuai
Cheng
Executive Director (1)
|
|
|
24,000
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
24,000
|
|
Yanliang
Wu
Executive Director (1)
|
|
|
24,000
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
24,000
|
|
Yu
Zong
Executive Director(1)
|
|
|
24,000
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
24,000
|
|
Harvey
Leibowitz
Independent Director (2)
|
|
|
50,105
|
|
|
|
(7
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
50,105
|
|
Zhixue
Liu
Independent Director(3)
|
|
|
24,000
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
24,000
|
|
Tongmin
Wang
Independent Director(3)
|
|
|
24,000
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
24,000
|
|
Daniel
W. Heffernan
Independent Director (4)(5)
|
|
|
46,158
|
|
|
|
(8
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
46,158
|
|
Romano
Tio
Independent Director(4)(5)(6)
|
|
|
46,158
|
|
|
|
(8
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
46,158
|
|
Zhihong
Su
Independent Director(3)(5)
|
|
|
24,000
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
24,000
|
|
(1)
|
As
employee directors, James Coleman will be provided with cash compensation of $70,000 per year. Yanliang Wu, Yu Zong and Zhanhuai
Cheng will be provided with cash compensation of $24,000 per year, payable monthly.
|
(2)
|
As
an independent director and Chair of the Audit Committee, Harvey Leibowitz will be provided with the following compensation:
(a) subject to the Board’s approval, the Company will issue each a total of 20,000 shares of restricted common stock
for services rendered to the Company, with an annual compensation in cash of $48,000, payable quarterly; and (b) during the
directorship term, the Company will reimburse the independent directors for all reasonable out-of-pocket travel expenses incurred
by the director in attending any in-person meetings, provided that the director complies with the generally applicable policies,
practices and procedures of the Company for submission of expense reports, receipts or similar documentation of such expenses.
|
(3)
|
As
independent directors, Zhihong Su, Tongmin Wang and Zhixue Liu will be provided with the following compensation: (a) subject
to the Board’s approval, the Company will issue each a total of 10,000 shares of restricted common stock for services
rendered to the Company, with an annual compensation in cash of $24,000, payable monthly; and (b) during the directorship
term, the Company will reimburse the independent directors for all reasonable out-of-pocket travel expenses incurred by the
director in attending any in-person meetings, provided that the director complies with the generally applicable policies,
practices and procedures of the Company for submission of expense reports, receipts or similar documentation of such expenses.
|
(4)
|
As
independent directors, Daniel W. Heffernan and Romano Tio will be provided with the following compensation: (a) subject to
the Board’s approval, the Company will issue each a total of 15,000 shares of restricted common stock for services rendered
to the Company, with an annual compensation in cash of $48,000, payable quarterly; and (b) during the directorship term, the
Company will reimburse the independent directors for all reasonable out-of-pocket travel expenses incurred by the director
in attending any in-person meetings, provided that the director complies with the generally applicable policies, practices
and procedures of the Company for submission of expense reports, receipts or similar documentation of such expenses.
|
(5)
|
Individuals
were appointed as members of the Board in January, 2016.
|
(6)
|
Adam
Goldberg replaced Romano Tio as member of the Board in February 2017.
|
(7)
|
Harvey
Leibowitz began serving as an independent director of the Company since December 15, 2015. $2,105 was added to his $48,000
annual compensation in 2016.
|
(8)
|
Daniel
Heffernan and Romano Tio began serving as independent directors of the Company since January 14, 2016. $1,842 was deducted
from $48,000 annual compensation for each of them in 2016.
|
SECURITY OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table sets forth certain information regarding our shares of common stock beneficially owned as of March 17, 2017, for
(i) each stockholder known to be the beneficial owner of 5% or more of the Company’s outstanding shares of common stock,
(ii) each named executive officer and director, and (iii) all executive officers and directors as a group. A person is considered
to beneficially own any shares: (i) over which such person, directly or indirectly, exercises sole or shared voting or investment
power, or (ii) of which such person has the right to acquire beneficial ownership at any time within 60 days through an exercise
of stock options or warrants. Unless otherwise indicated, voting and investment power relating to the shares shown in the table
for our directors and executive officers is exercised solely by the beneficial owner or shared by the owner and the owner’s
spouse or children.
Unless
otherwise specified, the address of each of the persons set forth below is in care of the Company, at the address of: c/o 183
Broadway, Suite 5, New York, NY 10007.
Name of Beneficial Owner
|
|
Amount and Nature of Beneficial
Ownership
|
|
|
Percent of Common Stock
(1)
|
|
Xiangyao
Liu, CEO,
President, Chief Executive Officer, and Chairman of the Board (2)
|
|
|
91,240,000
|
|
|
|
52.96
|
%
|
James Stuart Coleman,
Executive Director(3)
|
|
|
4,060,000
|
|
|
|
2.36
|
%
|
Xin Zheng
, Chief
Financial Officer
|
|
|
0
|
|
|
|
0
|
%
|
Yanliang Wu,
Executive
Director
|
|
|
0
|
|
|
|
0
|
%
|
Yu Zong,
Executive
Director
|
|
|
0
|
|
|
|
0
|
%
|
Harvey Leibowitz,
Independent Director
|
|
|
0
|
|
|
|
0
|
%
|
Zhixue Liu,
Independent
Director
|
|
|
0
|
|
|
|
0
|
%
|
Tongmin Wang,
Independent
Director
|
|
|
0
|
|
|
|
0
|
%
|
Daniel W. Heffernan,
Independent Director
|
|
|
0
|
|
|
|
0
|
%
|
Romano Tio,
Independent
Director
(8)
|
|
|
0
|
|
|
|
0
|
%
|
Adam S. Goldberg,
Independent Director
(8)
|
|
|
0
|
|
|
|
0
|
%
|
Zhihong Su,
Independent
Director
|
|
|
0
|
|
|
|
0
|
%
|
Zhanhuai Cheng,
Executive Director
|
|
|
0
|
|
|
|
0
|
%
|
All directors and executive officers as a group (13 people)
|
|
|
95,300,000
|
|
|
|
55.32
|
%
|
5% Shareholders:
|
|
|
|
|
|
|
|
|
Jasper Lake Holdings Limited (2)
|
|
|
91,240,000
|
|
|
|
52.96
|
%
|
Crestlake Holdings Limited (4)
|
|
|
16,600,000
|
|
|
|
9.64
|
%
|
Fortunate Drift Limited (5)
|
|
|
16,600,000
|
|
|
|
9.64
|
%
|
Majestic Symbol Limited (6)
|
|
|
16,600,000
|
|
|
|
9.64
|
%
|
Prolific Lion Limited (7)
|
|
|
14,575,348
|
|
|
|
8.46
|
%
|
(1)
|
Based
on 172,269,446 shares of Common Stock outstanding as of March 17, 2017.
|
(2)
|
Mr.
Liu has investing and dispositive power of shares beneficially owned by Jasper Lake Holdings Limited.
|
|
|
(3)
|
Mr.
Coleman owns all of the membership interest of Best Future Investment LLC., which owns 4,060,000 shares of the Company’s
common stock. Mr. Coleman may be deemed to be the beneficial owner of the shares of our common stock held by Best Future Investment
LLC.
|
|
|
(4)
|
Yanlin
Hu has investing and dispositive power of shares beneficially owned by Crestlake Holdings Limited.
|
|
|
(5)
|
Linyu
Chen has investing and dispositive power of shares beneficially owned by Fortunate Drift Limited.
|
|
|
(6)
|
Long
Zhao has investing and dispositive power of shares beneficially owned by Majestic Symbol Limited.
|
|
|
(7)
|
Zhimin
Chen has sole voting and dispositive power of shares beneficially owned by Prolific Lion Limited. Additionally, Mr. Chen has
sole voting and dispositive power of 1,746,000 shares beneficially owned by Valiant Power Limited.
|
|
|
(8)
|
Adam
Goldberg replaced Romano Tio as member of the Board in February 2017.
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Transactions
with Related Persons
The
following includes a summary of certain transactions in the fiscal year ended December 31, 2016 and 2015, of which we were or
are to be a participant and the amount involved exceeded or exceeds $120,000 and in which any related person had or will have
a direct or indirect material interest (other than compensation described in Item 11 of this Report). We believe the terms
obtained or consideration that we paid or received, as applicable, in connection with the transactions described below were
comparable to terms available or the amounts that would be paid or received, as applicable, in arm’s-length
transactions.
Loans
from a Related Party
On
July 13, 2015, Wuhan Renhe Group Co., Ltd (“Wuhan Renhe”), where Xiangyao Liu, our CEO and President, was a majority
shareholder, transferred all of its interests in Wuhan Newport to Ricofeliz. As a former shareholder of Wuhan Newport, Wuhan Renhe
provided numerous loans to Wuhan Newport prior to the transfer. On June 30, 2015, Wuhan Renhe forgave a total amount of $285,413,074
with the Company. The Company has credited the amount of $285,413,074 to additional paid-in capital in equity. As of December
31, 2016 and December 31, 2015, the amounts due to Wuhan Renhe Real Estate Co., Ltd, an entity controlled by Geng Wang, who is
an affiliate of Wuhan Renhe, were $0 and $667,776, respectively.
As
of December 31, 2016, and December 31, 2015, the amounts due to Weibin Zhao, an officer of Wuhan Newport and a related party,
were $118,130 and $126,516, respectively. The amount is unsecured, interest free and does not have a fixed repayment date.
As
of December 31, 2016 and December 31, 2015, the amounts due to Mr. Liu Xiangyao, our President and CEO, were $31,751,959 and $2,428,731,
respectively. The amount is unsecured, interest free and does not have a fixed repayment date.
On
December 19, 2015, the Company entered into certain share exchange agreements with Energetic Mind and all the shareholders of
Energetic Mind whereby the Company acquired 100% of the issued and outstanding ordinary shares of Energetic Mind from these shareholders,
including Xiangyao Liu, who was appointed as Company’s executive officer and Chairman of the Board upon completion of the
transaction. As part of the transaction, the Company agreed to issue to Jasper Lake Holdings Limited, an entity Mr. Liu
has investing and dispositive power of, an 8% convertible promissory note in the principal amount of $150,000,000 (the “Note”).
Subsequently,
on December 31, 2015, the Company entered into certain stock purchase and business sale agreements with Kirin Global Enterprises,
Inc., a California corporation and an entity controlled by a former officer and director of the Company whereby the Company sold
its interest in certain subsidiaries for an aggregate of $75,000,002.00. Pursuant to the terms of the agreement for this transaction,
Jasper agreed to finance Kirin Global $75,000,000 for a partial payment of the transaction through reduction of the Note by $75,000,000.
As a result of this transaction, the outstanding balance due to Jasper under the Note is $75,000,000.00 plus any accrued interest.
The issuance of the Note at the closing of the transaction has been determined to be exempt from registration under the Securities
Act in reliance on Section 4(2) of the Securities Act.
Director
Independence
The
Board has adopted a formal set of Director Independence Guidelines (the “Guidelines”) with respect to the determination
of director independence, which either conform to or are more exacting than the independence requirements of the NASDAQ Global
Select listing standards, and the full text of which will soon to be available on our website at www.yerr.com.cn, under “Investor
Relations”.
NASDAQ
Listing Rule 5605(a)(2) provides that an “independent director” is a person other than an officer or employee of the
company or any other individual having a relationship which, in the opinion of the company’s board of directors, would interfere
with the exercise of independent judgment in carrying out the responsibilities of a director. The NASDAQ listing rules provide
that a director cannot be considered independent if:
|
(A)
|
a
director who is, or at any time during the past three years was, employed by the company;
|
|
(B)
|
a
director who accepted or who has a Family Member who accepted any compensation from the company in excess of $100,000 during
any period of twelve consecutive months within the three years preceding the determination of independence, other than the
following:
|
|
(i)
|
compensation
for board or board committee service;
|
|
|
|
|
(ii)
|
compensation
paid to a Family Member who is an employee (other than an executive officer) of the company; or
|
|
|
|
|
(iii)
|
benefits
under a tax-qualified retirement plan, or non-discretionary compensation. Provided, however, that in addition to the requirements
contained in this paragraph (B), audit committee members are also subject to additional, more stringent requirements under
Rule 4350(d).
|
|
(C)
|
a
director who is a Family Member of an individual who is, or at any time during the past three years was, employed by the company
as an executive officer;
|
|
(D)
|
a
director who is, or has a Family Member who is, a partner in, or a controlling shareholder or an executive officer of, any
organization to which the company made, or from which the company received, payments for property or services in the current
or any of the past three fiscal years that exceed 5% of the recipient’s consolidated gross revenues for that year, or $200,000,
whichever is more, other than the following:
|
|
(i)
|
payments
arising solely from investments in the company’s securities; or
|
|
|
|
|
(ii)
|
payments
under non-discretionary charitable contribution matching programs.
|
|
(E)
|
a
director of the issuer who is, or has a Family Member who is, employed as an executive officer of another entity where at
any time during the past three years any of the executive officers of the issuer serve on the compensation committee of such
other entity; or
|
|
(F)
|
a
director who is, or has a Family Member who is, a current partner of the company’s outside auditor, or was a partner or employee
of the company’s outside auditor who worked on the company’s audit at any time during any of the past three years.
|
|
(G)
|
in
the case of an investment company, in lieu of paragraphs (A)-(F), a director who is an “interested person” of the
company as defined in Section 2(a)(19) of the Investment Company Act of 1940, other than in his or her capacity as a member
of the board of directors or any board committee.
|
Based
on this review, Harvey Leibowitz, Zhixue Liu, Tongmin Wang, Adam Goldberg, Daniel Heffernan and Zhihong Su are “independent”
directors. In addition, and by definition, the Board has determined that all members of each of the audit and compensation committees
are independent.
The
Board has determined that Mr. Harvey Leibowitz qualifies as an “audit committee financial expert,” as that term is
defined in applicable regulations of the SEC.
As
of March 17, 2017, our Board is composed of eleven members, of which six directors are independent directors. The six
independent directors are Harvey Leibowitz, Zhixue Liu, Tongmin Wang, Adam Goldberg, Daniel Heffernan and Zhihong Su. In
addition, as indicated above, each of our audit and compensation committees is composed entirely of independent directors,
including the chairperson of the audit committee and compensation committees.
LEGAL PROCEEDINGS
From
time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. Litigation
is subject to inherent uncertainties and an adverse result in these or other matters may arise from time to time that may harm
our business. We are currently not aware of any such legal proceedings or claims that we believe will have a material adverse
effect on our business, financial condition or operating results.
DESCRIPTION
OF SECURITIES
Introduction
In
the discussion that follows, we have summarized selected provisions of our Articles of Incorporation relating to our capital stock.
This summary is not complete. This discussion is subject to the relevant provisions of Nevada law and is qualified in its entirety
by reference to our Articles of Incorporation and our Bylaws. You should read our articles of incorporation and our bylaws as
currently in effect for provisions that may be important to you.
Authorized
Capital Stock
Our
authorized share capital consists of 500,000,000 shares of common stock, par value $0.0001 per share, and 100,000,000 shares of
preferred stock, par value $0.0001 per share. As of March 17, 2017, 172,269,446 shares of our common stock and no shares
of our preferred stock were outstanding.
Common
Stock
Each
share of our common stock entitles its holder to one vote in the election of each director and on all other matters voted on generally
by our stockholders, other than any matter that (1) solely relates to the terms of any outstanding series of preferred stock or
the number of shares of that series and (2) does not affect the number of authorized shares of preferred stock or the powers,
privileges and rights pertaining to the common stock. No share of our common stock affords any cumulative voting rights. This
means that the holders of a majority of the voting power of the shares voting for the election of directors can elect all directors
to be elected if they choose to do so.
Holders
of our common stock will be entitled to dividends in such amounts and at such times as our Board of Directors in its discretion
may declare out of funds legally available for the payment of dividends. We currently intend to retain our entire available discretionary
cash flow to finance the growth, development and expansion of our business and do not anticipate paying any cash dividends on
the common stock in the foreseeable future. Any future dividends will be paid at the discretion of our Board of Directors after
taking into account various factors, including:
|
●
|
general
business conditions;
|
|
|
|
|
●
|
industry
practice;
|
|
|
|
|
●
|
our
financial condition and performance;
|
|
●
|
our
future prospects;
|
|
|
|
|
●
|
our
cash needs and capital investment plans;
|
|
|
|
|
●
|
our
obligations to holders of any preferred stock we may issue;
|
|
|
|
|
●
|
income
tax consequences; and
|
|
|
|
|
●
|
the
restrictions Nevada and other applicable laws and our credit arrangements then impose.
|
If
we liquidate or dissolve our business, the holders of our common stock will share ratably in all our assets that are available
for distribution to our stockholders after our creditors are paid in full and the holders of all series of our outstanding preferred
stock, if any, receive their liquidation preferences in full.
Our
common stock has no preemptive rights and is not convertible or redeemable or entitled to the benefits of any sinking or repurchase
fund.
Preferred
Stock
At
the direction of our Board of Directors, without any action by the holders of our common stock, we may issue one or more series
of preferred stock from time to time. Our Board of Directors can determine the number of shares of each series of preferred stock,
the designation, powers, preferences and relative, participating, optional or other special rights, and the qualifications, limitations
or restrictions applicable to any of those rights, including dividend rights, voting rights, conversion or exchange rights, terms
of redemption and liquidation preferences, of each series.
Undesignated
preferred stock may enable our Board of Directors to render more difficult or to discourage an attempt to obtain control of our
company by means of a tender offer, proxy contest, merger or otherwise, and thereby to protect the continuity of our management.
The issuance of shares of preferred stock may adversely affect the rights of our common stockholders. For example, any preferred
stock issued may rank prior to the common stock as to dividend rights, liquidation preference or both, may have full or limited
voting rights and may be convertible into shares of common stock. As a result, the issuance of shares of preferred stock, or the
issuance of rights to purchase shares of preferred stock, may discourage an unsolicited acquisition proposal or bids for our common
stock or may otherwise adversely affect the market price of our common stock or any existing preferred stock.
Warrants
There
are no outstanding warrants.
Transfer
Agent and Registrar
The
Transfer Agent for our common stock is VStock Transfer, LLC located at 18 Lafayette Pl, Woodmere, NY 11598. The telephone number
is: (212) 828-8436.
MARKET
PRICE OF AND DIVIDENDS ON OUR COMMON STOCK AND RELATED STOCKHOLDER MATTERS
Market
Information
Our
common stock trades on the OTC Markets under the symbol “YERR”. The OTC Markets is a quotation service
that displays real-time quotes, last-sale prices, and volume information in over-the-counter (“OTC”) equity securities.
An OTC Markets equity security generally is any equity that is not listed or traded on a national securities exchange. We have
applied to list our common stock on the NASDAQ Global Select, but we cannot assure you that our application will be approved.
Price
Range of Common Stock
The
following table shows, for the periods indicated, the high and low bid prices per share of our common stock as reported by the
OTC Markets’ quotation service. These bid prices represent prices quoted by broker-dealers on the OTC Markets
quotation service. The quotations reflect inter-dealer prices, without retail mark-up, mark-down or commissions, and may
not represent actual transactions.
|
|
Fiscal Year 2016
|
|
|
|
High
|
|
|
Low
|
|
|
|
|
|
|
|
|
First Quarter (January 1 - March 31)
|
|
$
|
6.15
|
|
|
$
|
3.70
|
|
Second Quarter (April 1 - June 30)
|
|
$
|
7.50
|
|
|
$
|
3.80
|
|
Third Quarter (July 1 - September 30)
|
|
$
|
5.50
|
|
|
$
|
3.50
|
|
Fourth Quarter (October 1 - December 31)
|
|
$
|
6.40
|
|
|
$
|
3.50
|
|
|
|
Fiscal Year 2015
|
|
|
|
High
|
|
|
Low
|
|
|
|
|
|
|
|
|
First Quarter (January 1 - March 31)
|
|
$
|
0.45
|
|
|
$
|
0.07
|
|
Second Quarter (April 1 - June 30)
|
|
$
|
1.90
|
|
|
$
|
0.25
|
|
Third Quarter (July 1 - September 30)
|
|
$
|
3.20
|
|
|
$
|
1.12
|
|
Fourth Quarter (October 1 - December 31)
|
|
$
|
8.40
|
|
|
$
|
1.84
|
|
|
|
Fiscal Year 2014
|
|
|
|
High
|
|
|
Low
|
|
|
|
|
|
|
|
|
First Quarter (January 1 - March 31)
|
|
$
|
0.11
|
|
|
$
|
0.10
|
|
Second Quarter (April 1 - June 30)
|
|
$
|
1.83
|
|
|
$
|
0.10
|
|
Third Quarter (July 1 - September 30)
|
|
$
|
0.52
|
|
|
$
|
0.16
|
|
Fourth Quarter (October 1 - December 31)
|
|
$
|
0.24
|
|
|
$
|
0.06
|
|
Holders
As
of March 17, 2017, there were 590 holders of record of our common stock. Because shares of the Company’s common
stock are held by depositaries, brokers and other nominees, the number of beneficial holders of the Company’s shares is
substantially larger than the number of stockholders of record.
Dividends
We
have never declared or paid a cash dividend. Any future decisions regarding dividends will be made by our Board of Directors.
We currently intend to retain and use any future earnings for the development and expansion of our business and do not anticipate
paying any cash dividends in the foreseeable future. Our Board of Directors has complete discretion on whether to pay dividends.
Even if our Board of Directors decides to pay dividends, the form, frequency and amount will depend upon our future operations
and earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors that the
Board of Directors may deem relevant.
Securities
Authorized for Issuance under Equity Compensation Plans
In
order to compensate our officers, directors, employees and/or consultants, on February 23, 2016, our Board of Directors approved
and stockholders ratified by consent the 2016 Stock Incentive Plan (the “Plan”). The Plan has a total of 10,000,000
shares reserved for issuance.
Under
the Plan, an eligible person in the Company’s service may acquire a proprietary interest in the Company in the form of shares
or an option to purchase shares of the Company’s common stock.
There
were no issuances under the Plan during the year ended December 31, 2016.
LEGAL
MATTERS
The
validity of the share of Common Stock offered hereby will be passed upon for us by Lucosky Brookman LLP. Hunter Taubman Fischer
& Li LLC is acting as counsel to the Underwriter.
The
current address of Lucosky Brookman LLP is 101 Wood Avenue South, Fifth Floor, Woodbridge, New Jersey 08830.
EXPERT
The
consolidated financial statements for each of the years ended December 31, 2016 and 2015, as set forth in this prospectus
and elsewhere in the registration statement have been so included in reliance on the report of Centurion ZD CPA Limited (previously
DCAW (CPA) Limited, as successor to Dominic K.F. Chan & Co), an independent registered public accounting firm, given on their
authority as experts in accounting and auditing. The current address of Centurion ZD CPA Limited is located in Rooms 2105-06,
21/F., Office Tower, Langham Place, 8 Argyle Street, Mongkok, Kowloon, Hong Kong.
On
December 14, 2015, Company dismissed its former independent registered public accounting firm, Marcum Bernstein & Pinchuk
LLP. The decision to change the independent registered public accounting firm was recommended and approved by the Board of Directors
of the Company. On December 15, 2015, the Board of Directors of the Company appointed DCAW (CPA) Limited (as successor to Dominic
K.F. Chan & Co) as its new independent registered public accounting firm to audit and review the Company’s financial
statements for the fiscal years ended December 31, 2014 and 2015.
On
November 15, 2016, the Company was informed by DCAW (CPA) Limited (now Centurion ZD CPA Limited) that on November 14, 2016, it
had changed its name from “DCAW (CPA) Limited” to “Centurion ZD CPA Limited”.
INTERESTS
OF NAMED EXPERTS AND COUNSEL
No
expert or counsel named in this prospectus as having prepared or certified any part of this prospectus or having given an opinion
upon the validity of the securities being registered or upon other legal matters in connection with the registration or offering
of the common stock was employed on a contingency basis, or had, or is to receive, in connection with the offering, a substantial
interest, direct or indirect, in the registrant. Nor was any such person connected with the registrant as a promoter, managing
or principal underwriter, voting trustee, director, officer, or employee.
WHERE YOU
CAN FIND MORE INFORMATION
We
filed with the SEC a registration statement under the Securities Act for the common stock in this offering. This prospectus does
not contain all of the information in the registration statement and the exhibits and schedule that were filed with the registration
statement. For further information with respect to us and our common stock, we refer you to the registration statement and the
exhibits that were filed with the registration statement. Statements contained in this prospectus about the contents of any contract
or any other document that is filed as an exhibit to the registration statement are not necessarily complete, and we refer you
to the full text of the contract or other document filed as an exhibit to the registration statement.
We
file annual, quarterly, and current reports and other information with the SEC. Our filings with the SEC are available to the
public on the SEC’s website at www.sec.gov. Those filings are also available to the public on our corporate website at www.yerr.com.cn.
The information we file with the SEC or contained on, or linked to through, our corporate website or any other website that we
may maintain is not part of this prospectus or the registration statement of which this prospectus is a part. You may also read
and copy, at the SEC’s prescribed rates, any document we file with the SEC, including the registration statement (and its
exhibits) of which this prospectus is a part, at the SEC’s Public Reference Room located at 100 F Street, N.E., Washington,
D.C. 20549. You can call the SEC at 1-800-SEC-0330 to obtain information on the operation of the Public Reference Room.
YANGTZE
RIVER DEVELOPMENT LIMITED
(FORMERLY
KIRIN INTERNATIONAL HOLDING, INC.)
CONSOLIDATED
FINANCIAL STATEMENTS
December
31, 2016 AND 2015
TABLE
OF CONTENTS
|
中正達會計師事務所有限公司
Centurion
ZD CPA Limited
Certified
Public Accountants (Practising)
|
|
|
HK
office: 7th Floor, Nan Dao Commercial Building, 359-361 Queen’s Road Central, Hong
Kong
香港皇后大道中三五九至三六一號南島商業大廈七樓
Tel
: (852) 2851 7954 Fax: (852) 2545 4086
Kowloon
office: Room 2105-06, 21/F., Office Tower, Langham Place, 8 Argyle Street, Mongkok, Kowloon, Hong Kong
九龍旺角亞皆老街八號朗豪坊辦公大樓2105-06室
Tel:
(852) 2780 0607 Fax: (852) 2780 0013
|
|
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board
of Directors and Stockholders of
Yangtze
River Development Limited
We
have audited the accompanying consolidated balance sheets of Yangtze River Development Limited (the “Company”) as
of December 31, 2016 and 2015, and the related consolidated statements of operations and comprehensive loss, changes in owners’
equity and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.
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 consolidated financial statements
are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of their internal
control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit
also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated 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 financial position
of Yangtze River Development Limited as of December 31, 2016 and 2015, and the results of its operations and its cash flows for
the years then ended in conformity with accounting principles generally accepted in the United States of America.
Centurion
ZD CPA Ltd. (fka DCAW (CPA) Ltd. as successor to Dominic K.F. Chan & Co.)
Certified
Public Accountants
Hong
Kong, March 9, 2017
Yangtze
River Development Limited
(FORMERLY
Kirin International Holding, Inc.)
Consolidated
Balance Sheets
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
63,092
|
|
|
$
|
512,569
|
|
Other assets and receivables
|
|
|
4,151,752
|
|
|
|
6,259,865
|
|
Real estate property completed
|
|
|
29,507,108
|
|
|
|
31,566,156
|
|
Real estate properties and land lots under development
|
|
|
341,427,234
|
|
|
|
364,876,105
|
|
Property and equipment, net
|
|
|
89,742
|
|
|
|
157,499
|
|
Deferred tax assets
|
|
|
4,472,581
|
|
|
|
3,614,419
|
|
Total Assets
|
|
$
|
379,711,509
|
|
|
$
|
406,986,613
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
5,159,212
|
|
|
$
|
5,526,610
|
|
Due to related parties
|
|
|
31,870,222
|
|
|
|
32,045,112
|
|
Other taxes payable
|
|
|
49,918
|
|
|
|
13,350
|
|
Other payables and accrued liabilities
|
|
|
8,985,719
|
|
|
|
560,830
|
|
Real estate property refund and compensation payable
|
|
|
24,997,563
|
|
|
|
25,274,753
|
|
Convertible note
|
|
|
75,000,000
|
|
|
|
75,000,000
|
|
Loans payable
|
|
|
41,456,074
|
|
|
|
44,502,981
|
|
Total Liabilities
|
|
$
|
187,518,708
|
|
|
$
|
182,923,636
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
Preferred stock at $0.0001 par value; 100,000,000
shares authorized; none issued or outstanding
|
|
$
|
-
|
|
|
$
|
-
|
|
Common stock at $0.0001 par value; 500,000,000 shares
authorized; 272,269,446 and 172,254,446 shares issued and outstanding at December 31, 2016 and 2015, respectively
|
|
|
27,227
|
|
|
|
17,225
|
|
Additional paid-in capital
|
|
|
242,696,445
|
|
|
|
242,622,947
|
|
Accumulated losses
|
|
|
(28,989,090
|
)
|
|
|
(16,263,010
|
)
|
Accumulated other comprehensive loss
|
|
|
(21,541,781
|
)
|
|
|
(2,314,185
|
)
|
Total Equity
|
|
$
|
192,192,801
|
|
|
$
|
224,062,977
|
|
Total Liabilities and Equity
|
|
$
|
379,711,509
|
|
|
$
|
406,986,613
|
|
See
notes to the consolidated financial statements
Yangtze
River Development Limited
(FORMERLY
Kirin International Holding, Inc.)
consolidated
Statements of OPERATIONS and Comprehensive LOSS
|
|
For the Years Ended
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
-
|
|
|
$
|
-
|
|
Cost of revenue
|
|
|
-
|
|
|
|
-
|
|
Gross profit (loss)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
Selling expenses
|
|
|
2,348
|
|
|
|
11,577
|
|
General and administrative expenses
|
|
|
5,446,175
|
|
|
|
4,547,646
|
|
Total operating expenses
|
|
|
5,448,523
|
|
|
|
4,559,223
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(5,448,523
|
)
|
|
|
(4,559,223
|
)
|
|
|
|
|
|
|
|
|
|
Other income (expenses)
|
|
|
|
|
|
|
|
|
Other income
|
|
|
3,587
|
|
|
|
868
|
|
Other expenses
|
|
|
(174
|
)
|
|
|
(3,231
|
)
|
Interest income
|
|
|
229
|
|
|
|
55
|
|
Interest expenses
|
|
|
(8,424,794
|
)
|
|
|
(3,199,031
|
)
|
Total other income (expenses)
|
|
|
(8,421,152
|
)
|
|
|
(3,201,339
|
)
|
|
|
|
|
|
|
|
|
|
Loss before income taxes
|
|
|
(13,869,675
|
)
|
|
|
(7,760,562
|
)
|
Income taxes benefit
|
|
|
1,143,595
|
|
|
|
1,378,700
|
|
Net loss
|
|
$
|
(12,726,080
|
)
|
|
$
|
(6,381,862
|
)
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments
|
|
|
(19,227,596
|
)
|
|
|
(6,649,917
|
)
|
Comprehensive loss
|
|
$
|
(31,953,676
|
)
|
|
$
|
(13,031,779
|
)
|
|
|
|
|
|
|
|
|
|
Loss per share - basic and diluted
|
|
$
|
(0.07
|
)
|
|
$
|
(0.04
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding - basic and diluted
|
|
|
177,459,678
|
|
|
|
151,682,554
|
|
See
notes to the consolidated financial statements
Yangtze
River Development Limited
(FORMERLY
Kirin International Holding, Inc.)
consolidated
Statements of CHANGES IN Equity
|
|
Common stock
|
|
|
Additional
|
|
|
|
|
|
Accumulated
other
|
|
|
|
|
|
|
Number of shares
|
|
|
Amount
|
|
|
paid-in
capital
|
|
|
Accumulated
losses
|
|
|
comprehensive
(loss)
income
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of January 1, 2015
|
|
|
151,000,000
|
|
|
$
|
15,100
|
|
|
$
|
27,955,331
|
|
|
$
|
(9,881,148
|
)
|
|
$
|
4,335,732
|
|
|
$
|
22,425,015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forgiveness of loan from Wuhan Renhe
|
|
|
-
|
|
|
|
-
|
|
|
|
285,413,074
|
|
|
|
-
|
|
|
|
-
|
|
|
|
285,413,074
|
|
Effect of share exchange
|
|
|
20,596,546
|
|
|
|
2,060
|
|
|
|
(86,182,521
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(86,180,461
|
)
|
Restricted shares issued for services
|
|
|
657,900
|
|
|
|
65
|
|
|
|
3,749,965
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,750,030
|
|
Extinguishment of debt with a former officer
|
|
|
-
|
|
|
|
-
|
|
|
|
11,687,098
|
|
|
|
-
|
|
|
|
-
|
|
|
|
11,687,098
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(6,381,862
|
)
|
|
|
-
|
|
|
|
(6,381,862
|
)
|
Foreign currency translation
adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(6,649,917
|
)
|
|
|
(6,649,917
|
)
|
Balance as of December 31,
2015
|
|
|
172,254,446
|
|
|
$
|
17,225
|
|
|
$
|
242,622,947
|
|
|
$
|
(16,263,010
|
)
|
|
$
|
(2,314,185
|
)
|
|
$
|
224,062,977
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted shares issued for services
|
|
|
15,000
|
|
|
|
2
|
|
|
|
73,498
|
|
|
|
-
|
|
|
|
-
|
|
|
|
73,500
|
|
Issuance of shares for the Armada transaction (See
Note 1.1)
|
|
|
100,000,000
|
|
|
|
10,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
10,000
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(12,726,080
|
)
|
|
|
-
|
|
|
|
(12,726,080
|
)
|
Foreign currency translation
adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(19,227,596
|
)
|
|
|
(19,227,596
|
)
|
Balance as of December 31,
2016
|
|
|
272,269,446
|
|
|
$
|
27,227
|
|
|
$
|
242,696,445
|
|
|
$
|
(28,989,090
|
)
|
|
$
|
(21,541,781
|
)
|
|
$
|
192,192,801
|
|
See
notes to the consolidated financial statements
Yangtze
River Development Limited
(FORMERLY
Kirin International Holding, Inc.)
Consolidated
Statements of Cash Flows
|
|
For the Years Ended
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
Cash Flows from Operating Activities:
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(12,726,080
|
)
|
|
$
|
(6,381,862
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Loss on disposal of property, and equipment
|
|
|
-
|
|
|
|
3,082
|
|
Depreciation of property, and equipment
|
|
|
62,536
|
|
|
|
79,064
|
|
Deferred tax benefit
|
|
|
(1,143,595
|
)
|
|
|
(1,378,700
|
)
|
Share-based compensation expense
|
|
|
2,014,664
|
|
|
|
1,808,867
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Other assets and receivables
|
|
|
-
|
|
|
|
(1,534,700
|
)
|
Real estate property completed
|
|
|
-
|
|
|
|
(312,163
|
)
|
Real estate properties and land lots under development
|
|
|
(367,826
|
)
|
|
|
(778,977
|
)
|
Accounts payable
|
|
|
(7,553
|
)
|
|
|
-
|
|
Other taxes payable
|
|
|
39,139
|
|
|
|
(13,914
|
)
|
Other payables and accrued liabilities
|
|
|
8,559,773
|
|
|
|
2,257,051
|
|
Real estate property refund and compensation payables
|
|
|
1,433,737
|
|
|
|
1,517,110
|
|
Net Cash Used In Operating Activities
|
|
|
(2,135,205
|
)
|
|
|
(4,735,142
|
)
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities:
|
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
|
(1,851
|
)
|
|
|
(11,733
|
)
|
Proceeds from disposal of property and equipment
|
|
|
-
|
|
|
|
130
|
|
Effect of share exchange
|
|
|
-
|
|
|
|
505,782
|
|
Net Cash (Used In) Provided By Investing Activities
|
|
|
(1,851
|
)
|
|
|
494,179
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities:
|
|
|
|
|
|
|
|
|
Advances from related parties
|
|
|
2,201,144
|
|
|
|
4,874,761
|
|
Repayment of financial institution loans
|
|
|
(150,532
|
)
|
|
|
(176,599
|
)
|
Repayment to related parties
|
|
|
(361,843
|
)
|
|
|
-
|
|
Net Cash Provided By Financing Activities
|
|
|
1,688,769
|
|
|
|
4,698,162
|
|
|
|
|
|
|
|
|
|
|
Effect of Exchange Rate Changes on Cash and Cash Equivalents
|
|
|
(1,190
|
)
|
|
|
(996
|
)
|
|
|
|
|
|
|
|
|
|
Net (Decrease) Increase In Cash and Cash Equivalents
|
|
|
(449,477
|
)
|
|
|
456,203
|
|
Cash and Cash Equivalents at Beginning of Year
|
|
|
512,569
|
|
|
|
56,366
|
|
Cash and Cash Equivalents at End of Year
|
|
$
|
63,092
|
|
|
$
|
512,569
|
|
|
|
|
|
|
|
|
|
|
Supplemental Cash Flow Information:
|
|
|
|
|
|
|
|
|
Cash paid for interest expenses
|
|
$
|
-
|
|
|
$
|
3,001,771
|
|
Cash paid for income tax
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosure of Non-Cash Transaction:
|
|
|
|
|
|
|
|
|
Issuance of shares for the Armada transaction
|
|
$
|
10,000
|
|
|
$
|
-
|
|
Restricted shares issued for services
|
|
$
|
73,500
|
|
|
$
|
3,750,030
|
|
Forgiveness of loans from an owner
|
|
$
|
-
|
|
|
$
|
285,413,074
|
|
Issuance of convertible note
|
|
$
|
-
|
|
|
$
|
150,000,000
|
|
Reduction of convertible note
|
|
$
|
-
|
|
|
$
|
75,000,000
|
|
See
notes to the consolidated financial statements
Yangtze
River Development Limited
(FORMERLY
Kirin International Holding, Inc.)
NOTES
TO the FINANCIAL STATEMENTS
1.
ORGANIZATION AND PRINCIPAL ACTIVITIES
The
consolidated financial statements include the financial statements of Yangtze River Development Limited (the “Company”
or “Yangtze River”) and its subsidiaries, Energetic Mind Limited (“Energetic Mind”), Ricofeliz Capital
(HK) Limited (“Ricofeliz Capital”), and Wuhan Yangtze River Newport Logistics Co., Ltd. (“Wuhan Newport”).
The
Company, formerly named as Kirin International Holding, Inc., and Ciglarette, Inc., was incorporated in the State of Nevada on
December 23, 2009. The Company was a development stage company and has not generated significant revenue since inception to March
1, 2011.
On
March 1, 2011, the Company entered into a share exchange agreement that Kirin China Holding Limited (“Kirin China”)
became the Company’s wholly-owned subsidiary. Kirin China engaged in the development and sales of residential and commercial
real estate properties, and development of land lots in People’s Republic of China (“China”, or the “PRC”).
On
December 19, 2015, the Company completed a share exchange (the “Share Exchange”) with Energetic Mind and all the shareholders
of Energetic Mind, whereby Yangtze River acquired 100% of the issued and outstanding capital stock of Energetic Mind, in exchange
for 151,000,000 shares of Yangtze River’s common stock, which constituted approximately 88% of its issued and outstanding
shares on a fully-diluted basis of Yangtze River immediately after the consummation of the Share Exchange, and an 8% convertible
note (the “Note”) in the principal amount of $150,000,000. As a result of the Share Exchange, Energetic Mind became
Yangtze River’s wholly-owned subsidiary and Jasper Lake Holdings Limited (“Jasper”), the former shareholder
of Energetic Mind, became Yangtze River’s controlling stockholder. The Share Exchange transaction with Energetic Mind was
treated as an acquisition, with Energetic Mind as the accounting acquirer and Yangtze River as the acquired party. The financial
statements before the date of the Share Exchange are those of Energetic Mind with the results of the Company being consolidated
from the date of the Share Exchange.
Energetic
Mind owns 100% of Ricofeliz Capital and operates its business through its subsidiary Wuhan Newport.
Wuhan
Newport was a wholly owned subsidiary of Wuhan Renhe Group Co., Ltd. (the “Wuhan Renhe”), a company incorporated in
the PRC as at September 23, 2002. On July 13, 2015, Wuhan Renhe transferred all of the equity interests of the Company to Ricofeliz
Capital, a company incorporated in Hong Kong on March 25, 2015. Ricofeliz Capital was incorporated by Energetic Mind, a company
incorporated in British Virgin Islands (“BVI”). Energetic Mind was incorporated by Mr. Liu Xiangyao on January 2,
2015, and was subsequently purchased by various companies incorporated in BVI or the United States of America (“USA”),
among whom Jasper became its 64% owner. Jasper was 100% owned by Mr. Liu Xiangyao, a Hong Kong citizen.
The
major assets of Wuhan Newport include land lots for developing commercial buildings that are in line with the principal activities
of Kirin China.
On
December 31, 2015, the Company entered into certain stock purchase and business sale agreements (the “Agreements”)
with Kirin Global Enterprises, Inc. (the “Purchaser”), a California corporation and an entity controlled by a former
officer and director of the Company whereby the Company sold its interest in certain subsidiaries (see Note 11) for an aggregate
of $75,000,002. (the “Sale”).
Pursuant
to the terms of the Agreements, Jasper agreed to finance the Sale by reducing Company’s financial obligations of the Note
by an aggregate of $75,000,000. In addition, the Purchaser agreed to pay the remaining two dollars in cash.
Upon
completion of the Sale, the Company operates its business solely through its subsidiary Wuhan Newport, primarily engaging in the
business as a port logistic center located in the middle reaches of the Yangtze River in the PRC.
1.1
Armada transaction
The
Company, by and among Armada Enterprises GP (“Armada”) and Wight International Construction, LLC (“Wight”),
e
ntered into (i) a Contribution, Conveyance and Assumption Agreement (“Contribution
Agreement”) dated October 3, 2016, first and second addendums, dated October 3, 2016 and November 30, 2016, respectively,
and (ii) an Amended and Restated Limited Liability Company Agreement dated November 16, 2016 (collectively with the Contribution
Agreement, the (“Agreement”, whereby the Company acquired 100 million preferred B membership units of Wight, which
would ultimately convert into 100 million LP units in Armada Enterprises LP. In exchange, the Company issued a $500 million convertible
promissory note (“Note”) and 50,000,000 shares of the Company’s common stock to Wight. As a result of the Agreement
and the conversion of the Note on November 17, 2016, Wight owned 100,000,000 shares of the Company’s common stock representing
36.73% of the Company’s voting power and the Company owned 100 million preferred B membership units in Wight representing
a 62.5% non-voting equity interest in Wight.
Yangtze
River Development Limited
(FORMERLY
Kirin International Holding, Inc.)
NOTES
TO the FINANCIAL STATEMENTS
Under
the terms of the Agreement, at the first closing, Wight was required to provide an aggregate total of $200 million, including
$50 million in working capital and $150 million in construction funding (the “Funding”) to the Company, by January
18, 2017. Wight did not provide the Funding on January 18, 2017 and the Company provided to Wight a “Notice of Default and
Request for Cure”. Wight proposed to provide $50 million in working capital funding on or before February 15, 2017 and secure
$150 million in construction funding on or before March 15, 2017. Wight failed to provide the $50 million in working capital funding
as proposed by February 15, 2017. Therefore, the Company, on February 24, 2017 decided to terminate the Agreement for non-performance
by Wight. Pursuant to the Agreement, the termination thereof calls for the immediate return of the 100,000,000 shares of common
stock issued by the Company to Wight.
On
February 27, 2017, the Company issued a “Termination and Demand” letter to Wight which terminated the Agreement with
Wight and Armada and demanded the return of the 100,000,000 shares of common stock.
On
March 1, 2017, the 100,000,000 shares of the Company’s common stock were canceled and returned by Wight, and were subsequently
returned to the Company’s treasury.
2.
Summary of Significant Accounting Policies
2.1
Basis of presentation
The
accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles
in the United States of America (“GAAP”).
The
consolidated financial statements include the financial statements of all the subsidiaries. All transactions and balances between
the Company and its subsidiaries have been eliminated upon consolidation.
The
consolidated balance sheets are presented unclassified because the time required to complete real estate projects and the Company’s
working capital considerations usually stretch for more than one-year period.
2.2
Use of estimates
The
preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the
consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results
could differ from those estimates. On an ongoing basis, management reviews these estimates using the currently available information.
Changes in facts and circumstances may cause the Company to revise its estimates. Significant accounting estimates reflected in
the consolidated financial statements include: (i) the allowance for doubtful debts; (ii) accrual of estimated liabilities; (iii)
contingencies; (iv) deferred tax assets; (v) impairment of long-lived assets; (vi) useful lives of property plant and equipment;
and (vii) real estate property refunds and compensation payables.
2.3
Cash and cash equivalents
Cash
and cash equivalents consist of cash and bank deposits with original maturities of three months or less, which are unrestricted
as to withdrawal and use the Company maintains accounts at banks and has not experienced any losses from such concentrations.
2.4
Property and equipment
The
property and equipment are stated at cost less accumulated depreciation. The depreciation is computed on a straight-line method
over the estimated useful lives of the assets with 5% salvage value. Estimated useful lives of property and equipment are stated
in Note 7.
The
Company eliminates the cost and related accumulated depreciation of assets sold or otherwise retired from the accounts and includes
any gain or loss in the statement of income. The Company charges maintenance, repairs and minor renewals directly to expenses
as incurred; major additions and betterment to equipment are capitalized.
Yangtze
River Development Limited
(FORMERLY
Kirin International Holding, Inc.)
NOTES
TO the FINANCIAL STATEMENTS
2.5
Impairment of long-lived assets
The
Company applies the provisions of ASC No. 360 Sub topic 10, “Impairment or Disposal of Long-Lived Assets”(ASC 360- 10)
issued by the Financial Accounting Standards Board (“FASB”). ASC 360-10 requires that long-lived assets be reviewed
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.
The
Company tests long-lived assets, including property and equipment and finite lived intangible assets, for impairment at least
annually or more frequently upon the occurrence of an event or when circumstances indicate that the net carrying amount is greater
than its 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 in making whatever estimates, judgments and projections
are considered necessary. There were no impairment losses in the years ended December 31, 2016 and 2015.
2.6
Fair values of financial instruments
ASC
Topic 825, Financial Instruments (“Topic 825”) requires disclosure of fair value information of financial instruments,
whether or not recognized in the balance sheets, for which it is practicable to estimate that value. In cases where quoted market
prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques
are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. In that regard,
the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be
realized in immediate settlement of the instruments. Topic 825 excludes certain financial instruments and all nonfinancial assets
and liabilities from its disclosure requirements. Accordingly, the aggregate fair value amounts do not represent the underlying
value of the Company.
Level
1
|
inputs
to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
|
Level
2
|
inputs
to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are
observable for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments.
|
Level
3
|
inputs
to the valuation methodology are unobservable and significant to the fair value.
|
As
of December 31, 2016 and 2015, financial instruments of the Company primarily comprise of cash, accrued interest receivables,
other receivables, short-term bank loans, deposits payables and accrued expenses, which were carried at cost on the balance sheets,
and carrying amounts approximated their fair values because of their generally short maturities.
2.7
Convertible notes
In
accordance with ASC subtopic 470-20, the convertible notes are initially carried at the principal amount of the convertible notes.
Debt premium or discounts, which are the differences between the carrying value and the principal amount of convertible notes
at the issuance date, together with related debts issuance cost, are subsequently amortized using effective interest method as
adjustments to interest expense from the debt issuance date to its first redemption date. Convertible notes are classified as
a current liability if they are or will be callable by the Company or puttable by the debt holders within one year from the balance
sheet date, even though liquidation may not be expected within that period.
Yangtze
River Development Limited
(FORMERLY
Kirin International Holding, Inc.)
NOTES
TO the FINANCIAL STATEMENTS
2.8
Foreign currency translation and transactions
The
Company’s consolidated financial statements are presented in the U.S. dollar (US$), which is the Company’s reporting
currency. Yangtze River, Energetic Mind, and Ricofeliz Capital uses US$ as its functional currency. Wuhan Newport uses Renminbi
Yuan (“RMB”) as its functional currency. Transactions in foreign currencies are initially recorded at the functional
currency rate ruling at the date of transaction. Any differences between the initially recorded amount and the settlement amount
are recorded as a gain or loss on foreign currency transaction in the statements of operations.
In
accordance with ASC 830, Foreign Currency Matters, the Company translated the assets and liabilities into US$ using the rate
of exchange prevailing at the applicable balance sheet date and the statements of operations and cash flows are translated at
an average rate during the reporting period. Adjustments resulting from the translation are recorded in owners’
equity as part of accumulated other comprehensive income.
|
|
December 31,
|
|
|
|
|
2016
|
|
|
|
2015
|
|
Balance sheet items, except for equity accounts
|
|
|
6.9447
|
|
|
|
6.4917
|
|
|
|
For the Years Ended
December 31,
|
|
|
|
|
2016
|
|
|
|
2015
|
|
Items in the statements of operations and comprehensive income, and statements
of cash flows
|
|
|
6.6431
|
|
|
|
6.2288
|
|
2.9
Revenue recognition
The
Company recognizes revenue from steel trading when persuasive evidence of an arrangement exists, delivery has occurred, the price
is fixed or determinable and collection is reasonably assured.
Real
estate sales are reported in accordance with the provisions of ASC 360-20, Property, Plant and Equipment, Real Estate Sales.
Revenue
from the sales of completed properties and properties where the construction period is twelve months or less is recognized by
the full accrual method when (a) sale is consummated; (b) the buyer’s initial and continuing involvements are adequate to
demonstrate a commitment to pay for the property; (c) the receivable is not subject to future subordination; (d) the Company has
transferred to the buyer the usual risks and rewards of ownership in a transaction that is in substance a sale and does not have
a substantial continuing involvement with the property. A sale is not considered consummated until (a) the parties are bound by
the terms of a contract or agreement, (b) all consideration has been exchanged, (c) any permanent financing for which the seller
is responsible has been arranged, (d) all conditions precedent to closing have been performed. Fair value of buyer’s payments
to be received in future periods pursuant to sales contract is classified under accounts receivable. Sales transactions not meeting
all the conditions of the full accrual method are accounted for using the deposit method of accounting. Under the deposit method,
all costs are capitalized as incurred, and payments received from the buyer are recorded as a deposit liability.
Revenue
and profit from the sale of development properties where the construction period is more than twelve months is recognized by the
percentage-of-completion method on the sale of individual units when the following conditions are met: (a) construction is beyond
a preliminary stage; (b) the buyer is committed to the extent of being unable to require a refund except for non-delivery of the
unit; (c) sufficient units have already been sold to assure that the entire property will not revert to rental property; (d) sales
prices are collectible and (e) aggregate sales proceeds and costs can be reasonably estimated. If any of these criteria are not
met, proceeds are accounted for as deposits until the criteria are met and/or the sale consummated.
The
Company has not generated any revenue from the sales of real estate property for the years ended December 31, 2016 and 2015.
Yangtze
River Development Limited
(FORMERLY
Kirin International Holding, Inc.)
NOTES
TO the FINANCIAL STATEMENTS
2.10
Real estate capitalization and cost allocation
Real
estate property completed and real estate properties and land lots under development consist of commercial units under construction
and units completed. Properties under development or completed are stated at cost or estimated net realizable value, whichever
is lower. Cost capitalization of development and redevelopment activities begins during the predevelopment period, which we define
as the activities that are necessary to begin the development of the property. We cease capitalization upon substantial completion
of the project, but no later than one year from cessation of major construction activity. We also cease capitalization when activities
necessary to prepare the property for its intended use have been suspended. Costs include costs of land use rights, direct development
costs, interest on indebtedness, construction overhead and indirect project costs. The Company acquires land use rights with lease
terms of 40 years through government sale transaction. Land use rights are divided and transferred to customers after the Company
delivers properties. The Company capitalizes payments for obtaining the land use rights, and allocates to specific units within
a project based on units’ gross floor area. Costs of land use rights for the purpose of property development are not amortized.
Other costs are allocated to units within a project based on the ratio of the sales value of units to the estimated total sales
value.
2.11
Capitalization of interest
In
accordance with ASC 360, Property, Plant and Equipment, interest incurred during construction is capitalized to properties under
development. For the years ended December 31, 2016 and 2015, $nil and $nil were capitalized as properties under development, respectively.
2.12
Advertising expenses
Advertising
costs are expensed as incurred, or the first time the advertising takes place, in accordance with ASC 720-35, Advertising Costs.
For the years ended December 31, 2016 and 2015, the Company recorded advertising expenses of $2,348 and $7,724, respectively.
2.13
Share-based compensation
The
Company grants restricted shares to its non-employee consultants. Awards granted to non-employees are measured at fair value at
the earlier of the commitment date or the date the services are completed, and are recognized using graded vesting method over
the period the service is provided.
2.14
Income taxes
Current
income taxes are provided for in accordance with the laws of the relevant taxing authorities. As part of the process of preparing
consolidated financial statements, the Company is required to estimate its income taxes in each of the jurisdictions in which
it operates. The Company accounts for income taxes using the liability method. Under this method, deferred income taxes are recognized
for tax consequences in future years of differences between the tax bases of assets and liabilities and their reported amounts
in the consolidated financial statements at each year-end and tax loss carry forwards. Deferred tax assets and liabilities are
measured using enacted tax rates applicable for the differences that are expected to affect taxable income.
The
Company adopts a more likely than not threshold and a two-step approach for the tax position measurement and financial statement
recognition. Under the two-step approach, the first step is to evaluate the tax position for recognition by determining if the
weight of available evidence indicates that it is more likely than not that the position will be sustained, including resolution
of related appeals or litigation process, if any. The second step is to measure the tax benefit as the largest amount that is
more than 50% likely of being realized upon settlement. As of December 31, 2016 and 2015, the Company did not have any uncertain
tax position.
2.15
Land Appreciation Tax (“LAT”)
In
accordance with the relevant taxation laws in the PRC, the Company is subject to LAT based on progressive rates ranging from 30%
to 60% on the appreciation of land value, which is calculated as the proceeds of sales of properties less deductible expenditures,
including borrowing costs and all property development expenditures. LAT is prepaid at 1% to 2% of the pre-sales proceeds each
year as required by the local tax authorities, and is settled generally after the construction of the real estate project is completed
and majority of the units are sold. The Company provides LAT as expensed when the related revenue is recognized based on estimate
of the full amount of applicable LAT for the real estate projects in accordance with the requirements set forth in the relevant
PRC laws and regulations. LAT would be included in income tax expense in the statements of operations and comprehensive income
(loss).
Yangtze
River Development Limited
(FORMERLY
Kirin International Holding, Inc.)
NOTES
TO the FINANCIAL STATEMENTS
2.16
Earnings (loss) per share
Basic
earnings (loss) per share is computed using the weighted average number of common shares outstanding during the year. Diluted
earnings per share is computed using the weighted average number of common shares and potential common shares outstanding during
the period for convertible notes under if-convertible method, if dilutive. Potential common shares are not included in the denominator
of the diluted earnings per share calculation when inclusion of such shares would be anti-dilutive, such as in a period in which
a net loss is recorded.
2.17
Comprehensive loss
Comprehensive
loss includes net income (loss) and foreign currency adjustments. Comprehensive loss is reported in the consolidated statements
of operations and comprehensive loss. Accumulated other comprehensive loss, as presented on the consolidated balance sheets are
the cumulative foreign currency translation adjustments.
2.18
Contingencies
In
the normal course of business, the Company is subject to loss contingencies, such as legal proceedings and claims arising out
of its business, that cover a wide range of matters, including, among others, government investigations and tax matters. In accordance
with ASC No. 450 Sub topic 20, “Loss Contingencies”, the Company records accruals for such loss contingencies when
it is probable that a liability has been incurred and the amount of loss can be reasonably estimated.
2.19
Recently issued accounting pronouncements
The
Company does not believe other recently issued but not yet effective accounting standards from ASU 2017-06, if currently adopted,
would have a material effect of the consolidated financial position, results of operation and cash flows.
3.
Risks
(a)
Liquidity risk
The
Company is exposed to liquidity risk which is risk that it is unable to provide sufficient capital resources and liquidity to
meet its commitments and business needs. Liquidity risk is controlled by the application of financial position analysis and monitoring
procedures.
(b)
Foreign currency risk
A
majority of the Company’s operating activities and a significant portion of the Company’s assets and liabilities are
denominated in RMB, which is not freely convertible into foreign currencies. All foreign exchange transactions take place either
through the Peoples’ Bank of China (“PBOC”) or other authorized financial institutions at exchange rates quoted
by PBOC. Approval of foreign currency payments by the PBOC or other regulatory institutions requires submitting a payment application
form together with suppliers’ invoices and signed contracts. The value of RMB is subject to changes in central government policies
and to international economic and political developments affecting supply and demand in the China Foreign Exchange Trading System
market.
(c)
For the years ended December 31, 2016 and 2015, there were no sales.
Yangtze
River Development Limited
(FORMERLY
Kirin International Holding, Inc.)
NOTES
TO the FINANCIAL STATEMENTS
4.
OTHER assets and receivables
Other
assets and receivables as of December 31, 2016 and 2015 consisted of:
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
$
|
792
|
|
|
$
|
847
|
|
Prepaid consulting and legal fees
|
|
|
-
|
|
|
|
1,941,163
|
|
Underwriting commission and rental deposit
|
|
|
1,606,000
|
|
|
|
1,606,000
|
|
Temporary investment deposit
|
|
|
10,000
|
|
|
|
-
|
|
Excessive business tax and related urban construction and education surcharge
|
|
|
1,578,178
|
|
|
|
1,726,408
|
|
Excessive land appreciation tax
|
|
|
956,782
|
|
|
|
985,447
|
|
|
|
$
|
4,151,752
|
|
|
$
|
6,259,865
|
|
Business
tax and LAT are payable each year at 5% and 1% - 2% respectively of customer deposits received. The Company recognizes sales related
business tax and LAT in the income statement to the extent that they are proportionate to the revenue recognized each period.
Any excessive amounts of business and LAT liabilities recognized at period-end pursuant to tax laws and regulations over the amounts
recognized in the income statement are capitalized in prepayments and will be expensed in subsequent periods.
5.
REAL ESTATE PROPERTY COMPLETED
The
account balance and components of the real estate property completed were as follow:
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
Properties completed
|
|
|
|
|
|
|
Wuhan Centre China Grand Steel Market
|
|
|
|
|
|
|
|
|
Costs of land use rights
|
|
$
|
7,213,617
|
|
|
$
|
7,716,994
|
|
Other development costs
|
|
|
22,293,491
|
|
|
|
23,849,162
|
|
|
|
$
|
29,507,108
|
|
|
$
|
31,566,156
|
|
As
of December 31, 2016, the sole and wholly owned developing project of the Company is called Wuhan Centre China Grand Steel Market
(Phase 1) Commercial Building in the south of Hans Road, Wuhan Yangluo Economic Development Zone with approximately 222,496.6
square meters of total construction area. Since June 2009, the Company commenced the construction of the project that funded through
a combination of bank loans and advances from shareholders. The Company has obtained certificates representing titles of the land
use rights used for the development of the project. As of December 31, 2016, the Company has completed the construction of four
buildings covering area of approximately 35,350.4square meters of construction area. The Company values the real estate assets
based on estimates using present value by quoted prices for comparable real estate projects.
Yangtze
River Development Limited
(FORMERLY
Kirin International Holding, Inc.)
NOTES
TO the FINANCIAL STATEMENTS
6.
REAL ESTATE PROPERTIES AND LAND LOTS UNDER DEVELOPMENT
The
components of real estate properties and land lots under development were as follows:
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
Properties under development
|
|
|
|
|
|
|
Wuhan Centre China Grand Steel Market
|
|
|
|
|
|
|
|
|
Costs of land use rights
|
|
$
|
8,699,859
|
|
|
$
|
9,306,948
|
|
Other development costs
|
|
|
36,791,759
|
|
|
|
38,982,735
|
|
|
|
|
|
|
|
|
|
|
Land lots under development Costs of land use rights
|
|
|
295,935,616
|
|
|
|
316,586,422
|
|
|
|
$
|
341,427,234
|
|
|
$
|
364,876,105
|
|
The
investments in undeveloped land were acquired in September, 2007. The Company leases the land under land use right leases with
various terms from the PRC government, and does not have ownership of the underlying land.
As
of December 31, 2016, the Company has three buildings under development of the project described in Note 5 covering area of approximately
57,450.4 square meters of construction area.
Land
use right with net book value of $169,461,795, including in real estate held for development and land lots undeveloped were pledged
as collateral for the
financial institution
loan as at December 31, 2016.
(See Note 10)
7.
Property and Equipment
The
Company’s property and equipment used to conduct day-to-day business are recorded at cost less accumulated depreciation.
Depreciation expenses are calculated using straight-line method over the estimated useful life with 5% of estimated salvage value
below:
|
|
Useful life
|
|
December 31,
|
|
|
|
Years
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixture, furniture and office equipment
|
|
5
|
|
$
|
60,017
|
|
|
$
|
63,474
|
|
Vehicles
|
|
5
|
|
|
493,955
|
|
|
|
528,424
|
|
Less: accumulated depreciation
|
|
|
|
|
(464,230
|
)
|
|
|
(434,399
|
)
|
Property and equipment, net
|
|
|
|
$
|
89,742
|
|
|
$
|
157,499
|
|
Depreciation
expense totaled $62,536 and $79,064 for the years ended December 31, 2016 and 2015, respectively.
8.
OTHER PAYABLES AND ACCRUED LIABILITIES
Other
payables and accrued liabilities as of December 31, 2016 and 2015 consisted of:
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
Salaries payable
|
|
$
|
301,590
|
|
|
$
|
182,716
|
|
Business tax and related urban construction and education surcharge
|
|
|
10,577
|
|
|
|
12,947
|
|
Deposits from contractors
|
|
|
156,954
|
|
|
|
167,907
|
|
Interest payable on convertible bond
|
|
|
6,197,260
|
|
|
|
197,260
|
|
Interest payable on loans
|
|
|
2,319,338
|
|
|
|
-
|
|
|
|
$
|
8,985,719
|
|
|
$
|
560,830
|
|
Yangtze
River Development Limited
(FORMERLY
Kirin International Holding, Inc.)
NOTES
TO the FINANCIAL STATEMENTS
9.
REAL ESTATE PROPERTY REFUND AND COMPENSATION PAYABLe
During
the years 2012 and 2011, the Company signed 443 binding agreements of sales of commercial offices of the project with floor area
of 22,790 square meters to unrelated purchasers (the transactions or the real estate sales transactions). The Company received
deposits and considerations from the purchasers as required by the agreements. The construction commenced in the 2010, which was
originally expected to be delivered to customers in late of 2012. No revenue was recognized from the sales of the commercial offices
due to the reason stated below.
Owing
to commercial reasons, the Company decided to terminate the agreements made for the sale of the real estate properties in relation
to the project of Wuhan Centre China Grand Market. According to the agreements of sales, the Company is obliged to compensate
the purchaser at a rate equal to 6% per annum or 0.05% per day on the deposits paid. In the years ended December 31, 2016 and
2015, the Company incurred $1,433,737 and $1,528,126 compensation expenses which were included in general and administrative expenses.
As
at December 31, 2016, 375 out of 443 agreements were cancelled, and no completed office (or real estate certificate) has been
delivered to the purchaser. The Company is still in the progress of negotiating with the purchasers for the cancellation of the
remaining agreements. The directors of the Company are of the opinion that almost all of the purchasers shall accept the cancellation.
If, finally the purchaser insisted on the execution of the agreement, the Company will accept.
Real
estate property refund and compensation payable represent the amount of customer deposits received and the compensation calculated
in accordance with the provisions in the sales agreements. The payable consists of the followings:
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
Property sales deposits
|
|
$
|
18,838,103
|
|
|
$
|
20,152,652
|
|
Compensation
|
|
|
6,159,460
|
|
|
|
5,122,101
|
|
|
|
$
|
24,997,563
|
|
|
$
|
25,274,753
|
|
10.
Loans payable
|
|
|
|
December 31,
|
|
Bank name
|
|
Term
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
China Construction Bank
|
|
From May 30, 2014 to May 29, 2020
|
|
$
|
41,456,074
|
|
|
$
|
44,502,981
|
|
Loans
are floating rate loans whose rates (2016: 5.58% per annum and 2015: 6.33% per annum) are set at 5% above the over 5 years base
borrowing rate stipulated by the People’s Bank of China. Interest expenses incurred on loans payable for the years ended December
31, 2016 and 2015 was $2,424,794 and $3,001,771, respectively.
Land
use right with net book value of $169,461,795, including in real estate held for development and land lots under development were
pledged as collateral for the loan as at December 31, 2016.
The
aggregate maturities of loans payable of each of years subsequent to December 31, 2016 are as follows:
2017
|
|
$
|
10,079,629
|
|
2018
|
|
|
10,079,629
|
|
2019
|
|
|
11,519,576
|
|
2020
|
|
|
9,777,240
|
|
|
|
$
|
41,456,074
|
|
Yangtze
River Development Limited
(FORMERLY
Kirin International Holding, Inc.)
NOTES
TO thE FINANCIAL STATEMENTS
11.
DISPOSAL OF SUBSIDIARIES
On
December 31, 2015, the Company sold all of its interests in i) Brookhollow Lake, LLC, ii) Newport Property Holding, LLC, iii)
wholly-owned subsidiary Kirin China, iv) wholly-owned subsidiary Kirin Hopkins Real Estate Group, v) wholly-owned subsidiary Archway
Development Group LLC, vi) wholly-owned subsidiary Specturm International Enterprise, LLC and vii) wholly-owned subsidiary HHC-6055
Centre Drive LLC (collectively referred to as the “Kirin Subsidiaries”). The sale of Kirin China also effectively
terminated Company’s contractual relationship with Hebei Zhongding Real Estate Development Co. Ltd and Xingtai Zhongding
Jiye Real Estate Development Co., Ltd, both of which are companies formed under the laws of the People’s Republic of China
and were deemed Company’s variable interest entities prior to the Sale.
The
Company sold its interests in Kirin Subsidiaries for an aggregate of $75,000,002 for the Sale. The carrying amount of the net
assets of Kirin Subsidiaries was $63,312,904 as of disposal date and the Company recognized the differences of $11,687,098 to
shareholders’ equity as a capital transaction.
12.
CONVERTIBLE NOTE
On
December 19, 2015, the Company issued an 8% convertible note in the principal amount of $150,000,000 to Jasper, a related party,
in the Share Exchange (see Note 1). The holder of the Note may convert all or any portion of the then aggregate outstanding principal
amount, together with any accrued and unpaid interest, into shares of Company’s common stock at $10.00 per share. The maturity
date of the Note is December 18, 2018.
On
December 31, 2015, pursuant to the terms and conditions of the Agreements, Jasper, financed the Purchaser for the Sale by reducing
Company’s financial obligations under the Note by an aggregate of $75,000,000 (see Note 1). As a result of the Sale, the
outstanding balance due to Jasper under the Note was $75,000,000 plus any accrued interest.
There
was no beneficial conversion feature attributable to the Note as the set conversion price of the Note was greater than the fair
value of the common share price at the date of issuance. The Company has accounted for the Note in accordance with ASC 470-20,
as a single instrument as a non-current liability. The Note is initially carried at the gross cash received at the issuance date.
The
interest expense for the convertible note included in the consolidated statements of operations was $6,197,260 and $197,260, respectively,
for the years ended December 31, 2016 and 2015. Note issuance costs are immaterial.
The
interest payable for the convertible note included in the consolidated balance sheets was $6,197,260 and $197,260, respectively
as at December 31, 2016 and 2015.
13.
Employee Retirement Benefit
The
Company has made employee benefit contribution in accordance with Chinese relevant regulations, including retirement insurance,
unemployment insurance, medical insurance, work injury insurance and birth insurance. The Company recorded the contribution in
the salary and employee charges when incurred. The contributions made by the Company were $125,027 and $64,005, respectively for
the years ended December 31, 2016 and 2015.
Yangtze
River Development Limited
(FORMERLY
Kirin International Holding, Inc.)
NOTES
TO the FINANCIAL STATEMENTS
14.
INCOME TAXES
The
Company was incorporated in the state of Nevada. Under the current law of Nevada, the Company is not subject to state corporate
income tax. No provision for federal corporate income tax has been made in the financial statements as there are no assessable
profits.
Energetic
Mind was incorporated in the British Virgin Islands (“BVI”). Under the current law of the BVI, Energetic Mind is not
subject to tax on income.
Ricofeliz
Capital was incorporated in Hong Kong. No provision for Hong Kong profits tax has been made in the financial statements as there
are no assessable profits.
Wuhan
Newport was incorporated in the PRC, was governed by the income tax law of the PRC and is subject to PRC enterprise income tax
(“EIT”). The EIT rate of PRC is 25%.
Income
tax expenses for the years ended December 31, 2016 and 2015 are summarized as follows:
|
|
Years Ended December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
$
|
-
|
|
|
$
|
-
|
|
Deferred tax benefit
|
|
$
|
1,143,595
|
|
|
$
|
1,378,700
|
|
A
reconciliation of the income tax benefit determined at the PRC EIT income tax rate to the Company’s effective income tax
benefit is as follows:
|
|
Years Ended December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
EIT at the PRC statutory rate of 25%
|
|
$
|
3,467,419
|
|
|
$
|
1,940,140
|
|
Valuation allowance
|
|
|
(2,323,824
|
)
|
|
|
(561,440
|
)
|
|
|
$
|
1,143,595
|
|
|
$
|
1,378,700
|
|
The
Company evaluates the level of authority for each uncertain tax position (including the potential application of interest and
penalties) based on the technical merits, and measures the unrecognized benefits associated with the tax positions. For the years
ended December 31, 2016 and 2015, the Company had no unrecognized tax benefits.
The
Company does not anticipate any significant increase to its liability for unrecognized tax benefit within the next 12 months.
The Company will classify interest and penalties related to income tax matters, if any, in income tax expense.
Deferred
income taxes are recognized for tax consequences in future years of differences between the tax bases of assets and liabilities
and their reported amounts in the consolidated financial statements at each year-end and tax loss carry forwards. The tax effects
of temporary differences that give rise to the following approximate deferred tax assets and liabilities as of December 31, 2016
and 2015 are presented below.
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
Deferred tax assets
|
|
|
|
|
|
|
|
|
Operating loss carry forward
|
|
$
|
372,075
|
|
|
$
|
303,237
|
|
Excess of interest expenses
|
|
|
1,887,225
|
|
|
|
1,398,582
|
|
Accrued expenses
|
|
|
2,213,281
|
|
|
|
1,912,600
|
|
|
|
$
|
4,472,581
|
|
|
$
|
3,614,419
|
|
The
Company had net operating losses carry forward of $1,423,666 as of December 31, 2016 which will expire on various dates between
December 31, 2018 and 2020.
Yangtze
River Development Limited
(FORMERLY
Kirin International Holding, Inc.)
NOTES
TO the FINANCIAL STATEMENTS
15.
loss per share
|
|
Years Ended December 31,
|
|
|
|
2016
|
|
|
2015
|
|
Numerator:
|
|
|
|
|
|
|
Net loss
|
|
$
|
(12,726,080
|
)
|
|
$
|
(6,381,862
|
)
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding-basic and diluted
|
|
|
177,459,678
|
|
|
|
151,682,554
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted loss per share
|
|
$
|
(0.07
|
)
|
|
$
|
(0.04
|
)
|
Common
shares of 7,950,411 resulting from the assumed conversion of 8% Convertible Note (Note 12) were excluded from the calculation
of diluted loss per share for the years ended December 31, 2016 as their effect is anti-dilutive.
16.
Related Party Transactions
16.1
Nature of relationships with related parties
Name
|
|
Relationships
with the Company
|
Mr
Zhao Weibin
|
|
Officer
|
Mr
Liu Xiangyao
|
|
Director
|
Wuhan
Renhe Group Co., Ltd (“Wuhan Renhe”)
|
|
Former
shareholder (Mr Wang Geng) of Wuhan Newport
|
Wuhan
Renhe Real Estate Co., Ltd (“Renhe RE”)
|
|
Mr.
Wang Geng, the director of the Company, holds 100% of Renhe RE
|
16.2
Related party balances and transactions
Amount
due to Mr Zhao Weibin were $118,263 and $126,516 as at December 31, 2016 and 2015, respectively. The amount is unsecured, interest
free and does not have a fixed repayment date.
A
summary of changes in the amount due to Mr Zhao Weibin is as follows:
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
At beginning of year
|
|
$
|
126,516
|
|
|
$
|
126,516
|
|
Exchange difference adjustment
|
|
|
(8,253
|
)
|
|
|
-
|
|
At end of year
|
|
$
|
118,263
|
|
|
$
|
126,516
|
|
Amount
due to Mr Liu Xiangyao were $31,751,959 and $2,428,731 as at December 31, 2016 and 2015, respectively. The amount is unsecured,
interest free and does not have a fixed repayment date.
Yangtze
River Development Limited
(FORMERLY
Kirin International Holding, Inc.)
NOTES
TO the FINANCIAL STATEMENTS
A
summary of changes in the amount due to Mr Liu Xiangyao is as follows:
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
At beginning of year
|
|
$
|
2,428,731
|
|
|
$
|
-
|
|
Advances from the director
|
|
|
29,720,658
|
|
|
|
2,428,731
|
|
Repayment to the director
|
|
|
(359,881
|
)
|
|
|
-
|
|
Exchange difference adjustment
|
|
|
(37,549
|
)
|
|
|
-
|
|
At end of year
|
|
$
|
31,751,959
|
|
|
$
|
2,428,731
|
|
Amount
due to Wuhan Renhe were $nil and $28,822,089 as at December 31, 2016 and December 31, 2015, respectively. The amount is unsecured,
interest free and does not have a fixed repayment date.
On
June 30, 2015, Wuhan Renhe forgave a total amount of $285,413,074 with the Company. The Company has credited the amount of $285,413,074
to additional paid-in capital in equity.
A
summary of changes in the amount due to Wuhan Renhe is as follows:
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
At beginning of year
|
|
$
|
28,822,089
|
|
|
$
|
322,388,060
|
|
Advances from the related party
|
|
|
-
|
|
|
|
28,463,394
|
|
Forgiveness of loan
|
|
|
-
|
|
|
|
(285,413,074
|
)
|
Exchange difference adjustment
|
|
|
-
|
|
|
|
(36,616,291
|
)
|
Repayment to the related company
|
|
|
28,822,089
|
|
|
|
-
|
|
At end of year
|
|
$
|
-
|
|
|
$
|
28,822,089
|
|
Amount
due to Renhe RE were $nil and $667,776 as at December 31, 2016 and December 31, 2015, respectively. The amount is unsecured, interest
free and does not have a fixed repayment date.
A
summary of changes in the amount due to Renhe RE is as follows:
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
At the beginning of year
|
|
$
|
667,776
|
|
|
$
|
-
|
|
Advances from the related party
|
|
|
-
|
|
|
|
667,776
|
|
Repayment to the related company
|
|
|
667,776
|
|
|
|
-
|
|
At end of year
|
|
$
|
-
|
|
|
$
|
667,776
|
|
Yangtze
River Development Limited
(FORMERLY
Kirin International Holding, Inc.)
NOTES
TO THE FINANCIAL STATEMENTS
17.
SHARE-BASED COMPENSATION EXPENSES
On
December 27, 2015, the Company granted 317,345 and 340,555 shares of the Company’s restricted common stock to a number of
consultants, in exchange for its legal and professional services to the Company for the years ended December 31, 2015 and 2016,
respectively. These shares were valued at $5.7 per share, the closing bid price of the Company’s common stock on the date
of grant. Total compensation expense recognized in the general and administrative expenses of the consolidated statement of operations
for the year ended December 31, 2015 was $1,808,867. Total compensation expense of approximately $1,941,163 was recognized in
2016. The shares attributable to fiscal 2015 and 2016 were issued on December 30, 2015.
On
January 25, 2016, the Company granted 15,000 shares of the Company’s restricted common stock to a consultant, in exchange
for its legal and professional services to the Company for the year 2016. These shares were valued at $4.9 per share, the closing
bid price of the Company’s common stock on the date of grant. This compensation expense of approximately $73,500 was recognized
in 2016.
Total
compensation expenses recognized in the general and administrative expenses of the consolidated statements of operations for the
years ended December 31, 2016 and 2015 was $2,014,663 and $1,808,867 respectively.
18.
Concentration of Credit Risks
As
of December 31, 2016 and 2015, substantially all of the Company’s cash and cash equivalents were held by major financial
institutions located in China and the US, which management believes are of high credit quality.
The
Company’s operations are carried out in the PRC. Accordingly, the Company’s business, financial condition and results
of operations may be influenced by the political, economic and legal environments in the PRC as well as by the general state of
the PRC’s economy. The business may be influenced by changes in governmental policies with respect to laws and regulations,
anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things.
No
customer accounted for more than 10% of total accounts receivable as of December 31, 2016 and 2015.
19.
Commitments and Contingencies
Operating
lease commitments
For
the years ended December 31, 2016 and 2015, rental expenses under operating leases were $72,000 and $6,000, respectively.
The
future obligations for operating leases of each of years subsequent to December 31, 2016 are as follows:
2017
|
|
$
|
21,000
|
|
2018
|
|
|
-
|
|
Total minimum payment required
|
|
$
|
21,000
|
|
Legal
proceeding
The
Company is not currently a party to any legal proceeding, investigation or claim which, in the opinion of the management, is likely
to have a material adverse effect on the business, financial condition or results of operations.
The
Company did not identify any contingency as of December 31, 2016.
Yangtze
River Development Limited
(FORMERLY
Kirin International Holding, Inc.)
NOTES
TO THE FINANCIAL STATEMENTS
20.
RESTRICTED NET ASSETS
PRC
laws and regulations permit payments of dividends by the Company’s subsidiary incorporated in the PRC only out of their
retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. In addition, the Company’s
subsidiary incorporated in the PRC are required to annually appropriate 10% of their net income to the statutory reserve prior
to payment of any dividends, unless such reserve have reached 50% of their respective registered capital. In addition, registered
share capital and capital reserve accounts are also restricted from withdrawal in the PRC, up to the amount of net assets held
in each subsidiary. As a result of the restrictions described above and elsewhere under PRC laws and regulations, the Company’s
subsidiary incorporated in the PRC are restricted in their ability to transfer a portion of their net assets to the Company in
the form of dividends or advances from PRC subsidiary. Such restriction amounted to $287,214,468 as of December 31, 2016. Except
for the above, there is no other restriction on the use of proceeds generated by the Company’s subsidiary to satisfy any
obligations of the Company.
21.
GOING CONCERN
As
shown in the accompanying financial statements, the Company has sustained recurring losses and negative cash flows from operations.
Over the past years, the Company has been funded through a combination of bank loans and advances from shareholders. On January
29, 2016, the Company received an undertaking commitment letter provided by the Company’s majority shareholder who is willing
to provide sufficient funding on an as-needed basis. In addition, the Company plans to dispose of the existing developed real
estate properties with market value of approximately $42 million when the Company needs cash flows. The Company believes that,
as a result of these, it currently has sufficient cash and financing commitments to meet its funding requirements for a reasonable
period of time.
22.
SUBSEQUENT EVENTS
Under
the terms of the Armada Agreement (See Note 1.1), at the first closing, Wight was required to provide an aggregate total of $200
million, $50 million in Working Capital and $150 million in Construction Funding, to us by January 18, 2017. Wight did not provide
the funding on January 18, 2017 and we gave Notice of Default and Request for Cure. Wight proposed to provide $50 million in Working
Capital on or before February 15, 2017 and secure $150 million in Construction Funding on or before March 15, 2017. Wight failed
to provide the $50 million in Working Capital as proposed by February 15, 2017.
On
February 24, 2017, due to Wight’s nonperformance and nonpayment of $50 million for the First Financing, the Company decided
to unwind Armada Financing. Pursuant to Armada Agreement, the termination of the Armada Agreement calls for the immediate return
of the 100,000,000 shares of common stock issued by the Company to Wight. On February 27, 2017, the Company issued a notice of
termination of contract to Wight.
On
February 27, 2017, the Company issued a “Termination and Demand” letter to Wight which terminated the Agreement with
Wight and Armada and demanded the return of the 100,000,000 shares of common stock.
On
March 1, 2017, the 100,000,000 shares of the Company’s common stock were canceled and returned by Wight, and were subsequently
returned to the Company’s treasury.
The
Company reserves the right to pursue any further legal action with respect to Armada’s and Wight’s default under the
Agreement.
Shares
of Common Stock
Warrants
to Purchase Shares of Common Stock
Yangtze
River Development Limited
PROSPECTUS
,
2017
Through
and including , 2017 (the 25
th
day after the date of this offering), all dealers effecting transactions in these securities, whether or not participating
in this offering, may be required to deliver a prospectus. This is in addition to a dealer’s obligation to deliver a prospectus
when acting as an underwriter and with respect to an unsold allotment or subscription
PART
II- INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item
13. Other Expenses Of Issuance And Distribution.
Set
forth below is an itemization of the total expenses, excluding placement discounts and commissions, that we expect to incur in
connection with this offering. With the exception of the SEC registration fee, the FINRA filing fee and the NASDAQ Global Select
Market listing fee, all amounts are estimates.
Securities and Exchange Commission Registration Fee
|
|
$
|
4,229.40
|
|
NASDAQ Global Select Market Listing Fee*
|
|
|
225,000
|
|
FINRA*
|
|
|
[●]
|
|
Legal Fees and Expenses*
|
|
|
[●]
|
|
Accounting Fees and Expenses*
|
|
|
[●]
|
|
Printing and Engraving Expenses*
|
|
|
[●]
|
|
Miscellaneous Expenses*
|
|
|
[●]
|
|
Total Expenses
|
|
$
|
[●]
|
|
*
To be filed by amendment
All
amounts are estimates other than the SEC’s registration fee. We are paying all expenses of the offering listed above.
Item
14. Indemnification of Directors and Officers.
Subsection
7 of Section 78.138 of the Nevada Revised Statutes (the “Nevada Law”) provides that, subject to certain very limited
statutory exceptions, a director or officer is not individually liable to the corporation or its stockholders or creditors for
any damages as a result of any act or failure to act in his or her capacity as a director or officer, unless it is proven that
the act or failure to act constituted a breach of his or her fiduciary duties as a director or officer and such breach of those
duties involved intentional misconduct, fraud or a knowing violation of law. The statutory standard of liability established by
Section 78.138 controls even if there is a provision in the corporation’s articles of incorporation unless a provision in
the Company’s Articles of Incorporation provides for greater individual liability.
Subsection
1 of Section 78.7502 of the Nevada Law empowers a corporation to indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by reason of the fact that he or she is or was a director,
officer, employee or agent of the corporation or is or was serving at the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other enterprise (any such person, a “Covered Person”),
against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred
by the Covered Person in connection with such action, suit or proceeding if the Covered Person is not liable pursuant to Section
78.138 of the Nevada Law or the Covered Person acted in good faith and in a manner the Covered Person reasonably believed to be
in or not opposed to the best interests of the corporation and, with respect to any criminal action or proceedings, had no reasonable
cause to believe the Covered Person’s conduct was unlawful.
Subsection
2 of Section 78.7502 of the Nevada Law empowers a corporation to indemnify any Covered Person who was or is a party or is threatened
to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment
in its favor by reason of the fact that such person acted in the capacity of a Covered Person against expenses, including amounts
paid in settlement and attorneys’ fees actually and reasonably incurred by the Covered Person in connection with the defense
or settlement of such action or suit, if the Covered Person is not liable pursuant to Section 78.138 of the Nevada Law or the
Covered Person acted in good faith and in a manner the Covered Person reasonably believed to be in or not opposed to the best
interests of the Corporation. However, no indemnification may be made in respect of any claim, issue or matter as to which the
Covered Person shall have been adjudged by a court of competent jurisdiction (after exhaustion of all appeals) to be liable to
the corporation or for amounts paid in settlement to the corporation unless and only to the extent that the court in which such
action or suit was brought or other court of competent jurisdiction determines upon application that in view of all the circumstances
the Covered Person is fairly and reasonably entitled to indemnity for such expenses as the court deems proper.
Section
78.7502 of the Nevada Law further provides that to the extent a Covered Person has been successful on the merits or otherwise
in the defense of any action, suit or proceeding referred to in Subsection 1 or 2, as described above, or in the defense of any
claim, issue or matter therein, the corporation shall indemnify the Covered Person against expenses (including attorneys’
fees) actually and reasonably incurred by the Covered Person in connection with the defense.
Subsection
1 of Section 78.751 of the Nevada Law provides that any discretionary indemnification pursuant to Section 78.7502 of the Nevada
Law, unless ordered by a court or advanced pursuant to Subsection 2 of Section 78.751, may be made by a corporation only as authorized
in the specific case upon a determination that indemnification of the Covered Person is proper in the circumstances. Such determination
must be made (a) by the stockholders, (b) by the board of directors of the corporation by majority vote of a quorum consisting
of directors who were not parties to the action, suit or proceeding, (c) if a majority vote of a quorum of such non-party directors
so orders, by independent legal counsel in a written opinion, or (d) by independent legal counsel in a written opinion if a quorum
of such non-party directors cannot be obtained.
Subsection
2 of Section 78.751 of the Nevada Law provides that a corporation’s articles of incorporation or bylaws or an agreement
made by the corporation may require the corporation to pay as incurred and in advance of the final disposition of a criminal or
civil action, suit or proceeding, the expenses of officers and directors in defending such action, suit or proceeding upon receipt
by the corporation of an undertaking by or on behalf of the officer or director to repay the amount if it is ultimately determined
by a court of competent jurisdiction that he or she is not entitled to be indemnified by the corporation. Subsection 2 of Section
78.751 further provides that its provisions do not affect any rights to advancement of expenses to which corporate personnel other
than officers and directors may be entitled under contract or otherwise by law.
Subsection
3 of Section 78.751 of the Nevada Law provides that indemnification pursuant to Section 78.7502 of the Nevada Law and advancement
of expenses authorized in or ordered by a court pursuant to Section 78.751 does not exclude any other rights to which the Covered
Person may be entitled under the articles of incorporation or any bylaw, agreement, vote of stockholders or disinterested directors
or otherwise, for either an action in his or her official capacity or in another capacity while holding his or her office. However,
indemnification, unless ordered by a court pursuant to Section 78.7502 or for the advancement of expenses under Subsection 2 of
Section 78.751 of the Nevada Law, may not be made to or on behalf of any director or officer of the corporation if a final adjudication
establishes that his or her acts or omissions involved intentional misconduct, fraud or a knowing violation of the law and were
material to the cause of action. Additionally, the scope of such indemnification and advancement of expenses shall continue for
a Covered Person who has ceased to be a director, officer, employee or agent of the corporation, and shall inure to the benefit
of his or her heirs, executors and administrators.
Section
78.752 of the Nevada Law empowers a corporation to purchase and maintain insurance or make other financial arrangements on behalf
of a Covered Person for any liability asserted against such person and liabilities and expenses incurred by such person in his
or her capacity as a Covered Person or arising out of such person’s status as a Covered Person whether or not the corporation
has the authority to indemnify such person against such liability and expenses.
The
Bylaws of the Company provide for indemnification of Covered Persons substantially identical in scope to that permitted under
the Nevada Law. Such Bylaws provide that the expenses of directors and officers of the Company incurred in defending any action,
suit or proceeding, whether civil, criminal, administrative or investigative, must be paid by the Company as they are incurred
and in advance of the final disposition of the action, suit or proceeding, upon receipt of an undertaking by or on behalf of such
director or officer to repay all amounts so advanced if it is ultimately determined by a court of competent jurisdiction that
the director or officer is not entitled to be indemnified by the Company.
Item
15. Recent Sales of Unregistered Securities.
On
December 19, 2015, upon completion of the Second Share Exchange describe above in “Description of Business”, the Company
issued to (i) the acquiree shareholders an aggregate of one hundred fifty-one million (151,000,000) shares of Company’s
common stock, and a certain acquiree shareholder an additional 8% convertible promissory note (the “Note”) in the
principal amount of one hundred fifty million dollars ($150,000,000). The Note may be converted all or any portion of the then
aggregate outstanding principal amount, together with any accrued and unpaid interest, into shares of Company’s common stock
at $10.00 per share. The principal amount of the Note was subsequently reduced to $75,000,000 as a result of the Subsidiaries
Sale consummated on December 31, 2015, as described above in “Description of Business”.
The issuance of the shares
and the Note at the closing of the underlying transactions has been determined to be exempt from registration under the Securities
Act in reliance on Section 4(2) of the Securities Act.
On
December 28, 2015, Company issued an aggregate of 657,900 shares of common stock to nine individuals and three entities for services
rendered.
The issuance of the shares has been determined to be exempt from registration under the Securities Act in reliance
on Section 4(2) of the Securities Act.
On
January 25, 2016, Company issued an aggregate of 15,000 shares of common stock to one individual for services rendered.
The
issuance of the shares has been determined to be exempt from registration under the Securities Act in reliance on Section 4(2)
of the Securities Act.
On
November 17, 2016, upon share exchange and conversion described above in “Description of Business” with Wight International
Construction, LLC, we issued an aggregate of 100,000,000 shares of common stock of the Company to Wight International Construction,
LLC. As a result, Wight holds 36.73% of Common Stock of the Company and is now the largest shareholder of the Company.
The
issuance of the shares has been determined to be exempt from registration under the Securities Act in reliance on Section 4(2)
of the Securities Act.
On
February 27, 2017, the Company issued a “Termination and Demand” letter to Wight which terminated the Armada Agreement
and demanded the return of the 100,000,000 shares of common stock of the Company. The Company is now in the process of effecting
the return and cancellation of the 100,000,000 shares of the Company’s common stock.
On
March 1, 2017, the 100,000,000 shares of the Company’s common stock have been canceled and returned by Wight. The 100,000,000
shares were subsequently returned to the Company’s treasury.
Item
16. Exhibits.
Exhibit
Number
|
|
Description
|
|
|
|
1.1
|
|
Form of Underwriting Agreement (incorporated by reference to Exhibit 1.1 of the Company’s registration statement on Form S-1 filed with the SEC on December 20, 2016)
|
2.1
|
|
Share Exchange Agreement, dated December 19, 2015, by and between the Company and Crestlake Holdings Limited (incorporated by reference to Exhibit 2.1 filed on Current Report to Form 8-K with the SEC on December 21, 2015)
|
2.2
|
|
Share Exchange Agreement, dated December 19, 2015, by and between the Company and Start Well International Limited (incorporated by reference to Exhibit 2.2 filed on Current Report to Form 8-K with the SEC on December 21, 2015)
|
2.3
|
|
Share Exchange Agreement, dated December 19, 2015, by and between the Company and Majestic Symbol Limited (incorporated by reference to the Exhibit 2.3 filed on Current Report to Form 8-K with the SEC on December 21, 2015)
|
2.4
|
|
Share Exchange Agreement, dated December 19, 2015, by and between the Company and Best Future Investment LLC (incorporated by reference to the Exhibit 2.4 filed on Current Report to Form 8-K with the SEC on December 21, 2015)
|
2.5
|
|
Share Exchange Agreement, dated December 19, 2015, by and between the Company and Fortunate Drift Limited (incorporated by reference to the Exhibit 2.5 filed on Current Report to Form 8-K with the SEC on December 21, 2015)
|
2.6
|
|
Share Exchange Agreement, dated December 19, 2015, by and between the Company and Jasper Lake Holdings Limited (incorporated by reference to Exhibit 2.6 filed on Current Report to Form 8-K with the SEC on December 21, 2015)
|
3.1
|
|
(a) Original Articles of Incorporation dated December 23, 2009
|
|
|
(b) Certificate of Correction dated April 21, 2010
|
|
|
(c) Certificate of Amendment dated March 10, 2011
|
|
|
(d) Certificate of Correction dated March 14, 2011
|
|
|
(e) Certificate of Amendment dated January 13, 2016
|
3.2
|
|
Bylaws (Incorporated by reference to Exhibit 3.2 filed on Company’s Registration Statement on Form S-1 filed with the SEC on April 28, 2010)
|
4.1
|
|
8% Convertible Promissory Note issued to Jasper Lake Holdings Limited (incorporated by reference to Exhibit 4.1 filed on Current Report to Form 8-K with the SEC on December 21, 2015)
|
4.2
|
|
Amended 8% Convertible Promissory Note issued to Jasper Lake Holdings Limited in the amount of $75,000,000 upon completion of the Subsidiaries Sale (Incorporated by reference to Exhibit 4.2 filed on Annual Report on Form 10-K filed with the SEC on February 2, 2016)
|
4.3
|
|
Specimen Common Stock Certificate
|
Exhibit
Number
|
|
Description
|
|
|
|
5.1*
|
|
Opinion of Lucosky Brookman LLP, counsel of Yangtze River Development Limited, as to the validity of the common stock
|
10.1
|
|
Stock Purchase and Business Sale Agreement, dated December 31, 2015, by and between the Company and Kirin Global Enterprises, Inc. for the sale of Brookhollow Lake, LLC (incorporated by reference to Exhibit 10.1 filed on Current Report to Form 8-K with the SEC on January 7, 2016)
|
10.2
|
|
Stock Purchase and Business Sale Agreement, dated December 31, 2015, by and between the Company and Kirin Global Enterprises, Inc. for the sale of New Port Property Holding, LLC (incorporated by reference to Exhibit 10.2 filed on Current Report to Form 8-K with the SEC on January 7, 2016)
|
10.3
|
|
Stock Purchase and Business Sale Agreement, dated December 31, 2015, by and between the Company and Kirin Global Enterprises, Inc. for the sale of Kirin China Holding Ltd. (incorporated by reference to Exhibit 10.3 filed on Current Report to Form 8-K with the SEC on January 7, 2016)
|
10.4
|
|
Stock Purchase and Business Sale Agreement, dated December 31, 2015, by and between the Company and Kirin Global Enterprises, Inc. for the sale of Kirin Hopkins Real Estate Group (incorporated by reference to Exhibit 10.4 filed on Current Report to Form 8-K with the SEC on January 7, 2016)
|
10.5
|
|
Stock Purchase and Business Sale Agreement, dated December 31, 2015, by and between the Company and Kirin Global Enterprises, Inc. for the sale of Archway Development Group LLC (incorporated by reference to Exhibit 10.5 filed on Current Report to Form 8-K with the SEC on January 7, 2016)
|
10.6
|
|
Stock Purchase and Business Sale Agreement, dated December 31, 2015, by and between the Company and Kirin Global Enterprises, Inc. for the sale of Spectrum International Enterprise, LLC (incorporated by reference to Exhibit 10.6 filed on Current Report to Form 8-K with the SEC on January 7, 2016)
|
10.7
|
|
Stock Purchase and Business Sale Agreement, dated December 31, 2015, by and between the Company and Kirin Global Enterprises, Inc. for the sale of HHC-6055 Centre Drive LLC (incorporated by reference to Exhibit 10.7 filed on Current Report to Form 8-K with the SEC on January 7, 2016)
|
10.8
|
|
Offer and Acceptance Letter between the Company and Daniel W. Heffernan (incorporated by reference to Exhibit 10.8 of the Company’s registration statement on Form S-1 filed with the SEC on March 31, 2016)
|
10.9
|
|
Offer and Acceptance Letter between the Company and Harvey Leibowitz (incorporated by reference to Exhibit 10.9 of the Company’s registration statement on Form S-1 filed with the SEC on March 31, 2016)
|
10.10
|
|
Offer and Acceptance Letter between the Company and James Coleman (incorporated by reference to Exhibit 10.10 of the Company’s registration statement on Form S-1 filed with the SEC on March 31, 2016)
|
10.11
|
|
Offer and Acceptance Letter between the Company and Zhixue Liu (incorporated by reference to Exhibit 10.11 of the Company’s registration statement on Form S-1 filed with the SEC on March 31, 2016)
|
10.12
|
|
Offer and Acceptance Letter between the Company and Adam S. Goldberg (incorporated by reference
to Exhibit 10.1 filed on Current Report 8-K with the SEC on March 9, 2017)
|
10.13
|
|
Offer and Acceptance Letter between the Company and Tongmin Wang (incorporated by reference to Exhibit 10.13 of the Company’s registration statement on Form S-1 filed with the SEC on March 31, 2016)
|
10.14
|
|
Offer and Acceptance Letter between the Company and Yanliang Wu (incorporated by reference to Exhibit 10.14 of the Company’s registration statement on Form S-1 filed with the SEC on March 31, 2016)
|
10.15
|
|
Offer and Acceptance Letter between the Company and Yu Zong (incorporated by reference to Exhibit 10.15 of the Company’s registration statement on Form S-1 filed with the SEC on March 31, 2016)
|
10.16
|
|
Offer and Acceptance Letter between the Company and Zhanhuai Cheng (incorporated by reference to Exhibit 10.16 of the Company’s registration statement on Form S-1 filed with the SEC on March 31, 2016)
|
Exhibit
Number
|
|
Description
|
|
|
|
10.17
|
|
Offer and Acceptance Letter between the Company and Zhihong Su (incorporated by reference to Exhibit 10.17 of the Company’s registration statement on Form S-1 filed with the SEC on March 31, 2016)
|
10.18
|
|
English translation of Memorandum of Understanding between the Company and CMST Development (Hankou) Co. Ltd. (incorporated by reference to Exhibit 10.17 of the Company’s registration statement on Form S-1 filed with the SEC on May 17, 2016)
|
10.19
|
|
English translation of Memorandum of Understanding between the Company and Shanxi Chamber of Commerce in Hubei (incorporated by reference to Exhibit 10.17 of the Company’s registration statement on Form S-1 filed with the SEC on May 17, 2016)
|
10.20
|
|
English translation of Memorandum of Understanding between the Company and Wuhan Coal Business Association (incorporated by reference to Exhibit 10.17 of the Company’s registration statement on Form S-1 filed with the SEC on May 17, 2016)
|
10.21
|
|
Undertaking Letter Provided by the Majority Shareholder dated January 29, 2016 (incorporated by reference to Exhibit 10.17 of the Company’s registration statement on Form S-1 filed with the SEC on June 17, 2016)
|
14.1
|
|
Code of Business Conduct and Ethics of the Company (incorporated by reference to Exhibit 10.7 filed on Current Report to Form 8-K with the SEC on January 28, 2016)
|
21.1
|
|
List of Subsidiaries (incorporated by reference to Exhibit 4.2 filed on Annual Report on Form 10-K filed with the SEC on February 2, 2016)
|
23.1†
|
|
Consent of Centurion ZD CPA Limited (as successor to Dominic K.F. Chan & Co)
|
23.2*
|
|
Consent of Lucosky Brookman LLP, counsel of Yangtze River Development Limited (included in Exhibit 5.1).
|
99.1
|
|
Termination and Demand letter from Company to Armada Enterprises GP and Wight International Construction, LLC, dated February 27, 2017 (incorporated by reference to Exhibit 99.1 filed on Current Report to Form 8-K with the SEC on February 27, 2017)
|
101.INS†
|
|
XBRL Instance Document
|
101.SCH†
|
|
XBRL Taxonomy Schema
|
101.CAL†
|
|
XBRL Taxonomy Calculation Linkbase
|
101.DEF†
|
|
XBRL Taxonomy Definition Linkbase
|
101.LAB†
|
|
XBRL Taxonomy Label Linkbase
|
101.PRE†
|
|
XBRL Presentation Linkbase
|
*
|
To
be filed by amendment.
|
†
|
Filed
herewith.
|
Item
17. Undertakings.
The
undersigned Registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreement,
certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each
purchaser.
Insofar
as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the
SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant
will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will
be governed by the final adjudication of such issue.
The
undersigned Registrant hereby undertakes that:
The
undersigned registrant hereby undertakes:
|
(1)
|
To
file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
|
|
(i)
|
To
include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;
|
|
(ii)
|
To
reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information
set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered
(if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low
or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant
to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum
aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration
statement;
|
|
(iii)
|
To
include any material information with respect to the plan of distribution not previously disclosed in the registration statement
or any material change to such information in the registration statement;
|
|
(2)
|
That
for the purpose of determining any liability under the Securities Act of 1933 each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
|
|
(3)
|
To
remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold
at the termination of the offering.
|
|
(4)
|
That,
for the purpose of determining liability under the Securities Act of 1933 to any purchaser, each prospectus filed pursuant
to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on
Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration
statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration
statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated
by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser
with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration
statement or prospectus that was part of the registration statement or made in any such document immediately prior to such
date of first use.
|
|
(5)
|
That,
for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial
distribution of the securities:
|
The
undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration
statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or
sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser
and will be considered to offer or sell such securities to such purchaser:
|
(i)
|
Any
preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant
to Rule 424;
|
|
(ii)
|
Any
free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred
to by the undersigned registrant;
|
|
(iii)
|
The
portion of any other free writing prospectus relating to the offering containing material information about the undersigned
registrant or its securities provided by or on behalf of the undersigned registrant; and
|
|
(iv)
|
Any
other communication that is an offer in the offering made by the undersigned registrant to the purchaser.
|
|
(6)
|
The
undersigned Registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreement
certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery
to each purchaser.
|
|
(7)
|
Insofar
as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the provisions described in Item 14 above, or otherwise, the Registrant has been advised
that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant
of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication of such issue.
|
|
(8)
|
The
undersigned Registrant hereby undertakes:
|
|
(1)
|
That
for purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed
as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant
pursuant to Rule 424(b)(1) or (4), or 497(h) under the Securities Act shall be deemed to be part of this registration statement
as of the time it was declared effective.
|
|
(2)
|
That
for the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form
of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and this offering
of such securities at that time shall be deemed to be the initial bona fide offering thereof.
|
SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, the registrant certifies has duly caused this registration statement to
be signed on its behalf by the undersigned, thereunto duly authorized in the City of New York, New York on March 17,
2017.
|
YANGTZE
RIVER DEVELOPMENT LIMITED
|
|
|
|
|
By:
|
/s/
Xiangyao Liu
|
|
|
Xiangyao
Liu
|
|
|
President
and Chief Executive Officer
(Principal
Executive Officer)
|
|
|
|
|
Date:
|
March
17, 2017
|
|
|
|
|
By:
|
/s/
Xin Zheng
|
|
|
Xin
Zheng
|
|
|
Chief
Financial Officer
(Principal
Financial and Accounting Officer)
|
|
|
|
|
Date:
|
March
17, 2017
|
Pursuant
to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the
capacities and on the dates indicated.
Name
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/
Xiangyao Liu
|
|
President,
Chief Executive Officer and Director
|
|
March
17, 2017
|
Xiangyao
Liu
|
|
(Principal
Executive Officer)
|
|
|
|
|
Chief
Financial Officer
|
|
|
|
|
|
|
|
/s/
Xin Zheng
|
|
(Principal
Financial and Accounting Officer)
|
|
March
17, 2017
|
Xin
Zheng
|
|
|
|
|
|
|
|
|
|
/s/
James Stuart Coleman
|
|
Director
|
|
March
17, 2017
|
James
Stuart Coleman
|
|
|
|
|
|
|
|
|
|
/s/
Zhanhuai Cheng
|
|
Director
|
|
March
17, 2017
|
Zhanhuai
Cheng
|
|
|
|
|
|
|
|
|
|
/s/
Yanliang Wu
|
|
Director
|
|
March
17, 2017
|
Yanliang
Wu
|
|
|
|
|
|
|
|
|
|
/s/
Yu Zong
|
|
Director
|
|
March
17, 2017
|
Yu
Zong
|
|
|
|
|
|
|
|
|
|
/s/
Harvey Leibowitz
|
|
Independent
Director
|
|
March
17, 2017
|
Harvey
Leibowitz
|
|
|
|
|
|
|
|
|
|
/s/
Zhixue Liu
|
|
Independent
Director
|
|
March
17, 2017
|
Zhixue
Liu
|
|
|
|
|
|
|
|
|
|
/s/Tongmin
Wang
|
|
Independent
Director
|
|
March
17, 2017
|
Tongmin
Wang
|
|
|
|
|
|
|
|
|
|
/s/
Adam Goldberg
|
|
Independent
Director
|
|
March
17, 2017
|
Adam
Goldberg
|
|
|
|
|
|
|
|
|
|
/s/
Daniel W. Heffernan
|
|
Independent
Director
|
|
March
17, 2017
|
Daniel
W. Heffernan
|
|
|
|
|
|
|
|
|
|
/s/
Zhihong Su
|
|
Independent
Director
|
|
March
17, 2017
|
Zhihong
Su
|
|
|
|
|
II-8
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