BTHC XV, Inc. - FORM 10-Q - January 20, 2012

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EX-99.5 - EXHIBIT 99.5 - BTHC XV, Inc.	v245533_ex99-5.htm
EX-99.6 - EXHIBIT 99.6 - BTHC XV, Inc.	v245533_ex99-6.htm
EX-99.3 - EXHIBIT 99.3 - BTHC XV, Inc.	v245533_ex99-3.htm
EX-99.4 - EXHIBIT 99.4 - BTHC XV, Inc.	v245533_ex99-4.htm
EX-99.9 - EXHIBIT 99.9 - BTHC XV, Inc.	v245533_ex99-9.htm
EX-32.1 - EXHIBIT 32.1 - BTHC XV, Inc.	v245533_ex32-1.htm
EX-31.2 - EXHIBIT 31.2 - BTHC XV, Inc.	v245533_ex31-2.htm
EX-31.1 - EXHIBIT 31.1 - BTHC XV, Inc.	v245533_ex31-1.htm
EX-32.2 - EXHIBIT 32.2 - BTHC XV, Inc.	v245533_ex32-2.htm
EX-99.1 - EXHIBIT 99.1 - BTHC XV, Inc.	v245533_ex99-1.htm
EX-99.8 - EXHIBIT 99.8 - BTHC XV, Inc.	v245533_ex99-8.htm
EX-99.2 - EXHIBIT 99.2 - BTHC XV, Inc.	v245533_ex99-2.htm
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EXCEL - IDEA: XBRL DOCUMENT - BTHC XV, Inc.	Financial_Report.xls

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark one)

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

For the quarterly period ended September 30, 2011

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

For the transition period from ________________________________ to ____________________________________

Commission File Number: 0-52808

BTHC XV, Inc.

(Exact name of registrant as specified in its charter)

Delaware		20-5456294
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

c/o Underground Grand Canyon Linyi City, Yishui County, Shandong Province, China		276400
(Address of principal executive offices)		(Zip Code)

+86 539-2553919

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).Yes x No ¨

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

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

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

Yes ¨ No x

APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.

Yes x No ¨

As of January 17, 2012, there were 18,089,660 shares of the registrant’s common stock outstanding.

BTHC XV, INC.

FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2011

TABLE OF CONTENTS

PART 1 - FINANCIAL INFORMATION	1
Item 1. Financial Statements.	1
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.	17
Item 3. Quantitative and Qualitative Disclosures About Market Risk.	37
Item 4. Controls and Procedures.	38
PART II – OTHER INFORMATION	39
Item 1. Legal Proceedings.	39
Item 1A. Risk Factors.	39
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.	42
Item 3. Defaults upon Senior Securities.	42
Item 4. (Removed and Reserved).	42
Item 5. Other Information.	42
Item 6. Exhibits.	42

PART 1 - FINANCIAL INFORMATION

Item 1. Financial Statements.

BTHC XV, Inc. and Subsidiaries

Consolidated Balance Sheets

	September 30, 2011		December 31, 2010
	(Unaudited)		(Restated)
ASSETS
Current assets:
Cash and cash equivalents	$	132,635	$	208,955
Accounts receivable, net of allowance of $- and $-		153,604		36,968
Other receivables and advance payments		1,717,267		960,588
Notes receivable from related parties		17,928,300		13,422,978
Inventories		48,295		-
Deferred tax assets		391,751		380,465
Other current assets		26,106		25,354
Total current assets		20,397,958		15,035,308

Property, plant and equipment, net		13,451,550		13,603,339
Intangible assets, net		259,641		259,218
Long term investment		315,238		306,156
Other assets		140,272		140,959
Total assets	$	34,564,659	$	29,344,980
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	328,718	$	399,472
Accrued liabilities		213,804		277,108
Taxes payable		4,639,620		3,917,347
Short term debt		10,621,600		10,315,600
Due to related parties		70,264		28,463
Total current liabilities		15,874,006		14,937,990
Long term deferred tax liabilities		33,945		32,967
Total liabilities	$	15,907,951	$	14,970,957
Shareholders’ equity:
Preferred stock, $0.001 par value, 10,000,000 shares authorized, none issued and outstanding		-		-
Common stock, $0.001 par value, 40,000,000 shares authorized, 18,089,660 shares issued and outstanding		18,090		18,090
Additional paid in capital		1,172,358		1,172,358
Statutory reserves		913,370		913,370
Retained earnings		15,015,704		11,282,284
Accumulated other comprehensive income		1,537,186		987,921
Total shareholders’ equity		18,656,708		14,374,023
Total liabilities and shareholders’ equity	$	34,564,659	$	29,344,980

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

BTHC XV, Inc. and Subsidiaries

Consolidated Statements of Operations and Other Comprehensive Income

	For the three months ended						For the nine months ended
	September30, 2011			September 30, 2010			September 30, 2011			September 30, 2010
	(unaudited)			(unaudited)			(unaudited)			(unaudited)


Revenue (including $276,607 and $284,253 related party commission for the three months ended September 30, 2011 and 2010, respectively; $550,407 and $486,053 for the nine months ended September 30, 2011 and 2010, respectively)	$	4,013,534		$	3,460,585		$	9,000,045		$	7,962,000

Operating Expenses		1,250,198			408,661			3,206,903			2,237,000

Income from Operations		2,763,336			3,051,924			5,793,142			5,725,000

Other Income (Expenses):

Other income (expenses), net		(270,760	)		(142,897	)		(815,243	)		(203,000	)

Total Other Income (Expenses)		(270,760	)		(142,897	)		(815,243	)		(203,000	)

Income before Income Taxes		2,492,576			2,909,027			4,977,899			5,522,000
Income taxes		623,143			724,609			1,244,479			1,380,000
Net Income	$	1,869,433		$	2,184,418		$	3,733,420		$	4,142,000

Other Comprehensive Income
Foreign currency translation adjustment		199,156			240,946			549,265			288,000
Comprehensive Income	$	2,068,589		$	2,425,364		$	4,282,685		$	4,430,000

Earnings per Share, Basic and Diluted	$	0.10		$	0.13		$	0.21		$	0.24

Weighted Average Shares Outstanding, Basic and Diluted		18,089,660			17,185,177			18,089,660			17,185,177

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

BTHC XV, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

	Nine months ended September 30,
	2011			2010
	(unaudited)			(unaudited)

Cash flows from operating activities:
Net income	$	3,733,420		$	4,142,000
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation expense		678,154			563,000
Amortization expense		7,150			5,000
Amortization of prepaid rent		18,654			-
Changes in operating assets and liabilities:
(Increase)/decrease in accounts receivable		(113,690	)		(19,000	)
(Increase)/decrease in other receivables and advance payments		(730,393	)		(1,572,000	)
(Increase)/decrease in inventories		(47,523	)		-
Increase/(decrease) in accounts payable		(80,647	)		(644,000	)
Increase/(decrease) in accrued liabilities		(70,380	)		144,000
Increase/(decrease) in amount due to related party		40,302			22,000
Increase/(decrease) in taxes payable		656,994			928,000
Net cash provided by operating activities		4,092,041			3,569,000

Cash flows from investing activities:
Cash paid for long-term investment		-			(301,000	)
Cash paid for notes receivable from related parties		(4,041,410	)		(9,208,000	)
Cash paid for purchase of property, plant and equipment and intangible assets		(131,726	)		(2,645,000	)
Net cash used in investing activities		(4,173,136	)		(12,154,000	)

Cash flows from financing activities:
Proceeds from short term debt		-			7,807,000
Net cash provided by financing activities		-			7,807,000

Effect of foreign exchange rate changes on cash		4,775			266,000

Net decrease in cash and cash equivalents		(76,320	)		(512,000	)
Cash and cash equivalents at beginning of period		208,955			1,076,000
Cash and cash equivalents at end of period	$	132,635		$	564,000

Supplemental information:
Income taxes paid	$	470,313		$	452,000
Interest paid	$	618,964		$	268,000

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

BTHC XV, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Unless the context requires otherwise, US$ amounts expressed in thousands)

1.	Basis of Presentation, Organization and Nature of Operations

Basis of Presentation

The accompanying unaudited interim consolidated financial statements of BTHC XV, Inc. and Subsidiaries (collectively, the “Company”) have been prepared based upon United States Securities and Exchange Commission (“SEC”) rules permitting reduced disclosure for interim periods, and include all adjustments necessary for a fair presentation of statements of operations, statements of cash flows, and financial condition for the interim periods shown, including normal recurring accruals and other items. While certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted pursuant to SEC rules and regulations, the Company believes the disclosures are adequate to make the information presented not misleading.

Organization

BTHC XV, Inc. (“BTHC”) was formed on March 31, 2006 and incorporated on August 16, 2006 in the State of Delaware. BTHC is the U.S. Bankruptcy Court mandated reincorporation of and successor to BTHC XV, LLC, a Texas limited liability company which was discharged from bankruptcy on November 29, 2004. The effective date of the merger of BTHC and BTHC XV, LLC was August 16, 2006. On October 18, 2010, BTHC (i) closed a share exchange transaction pursuant to which BTHC became the 100% parent of Long Fortune Valley Tourism International (Cayman) Limited (“LFVT Cayman”), (ii) assumed the operations of LFVT Cayman and its subsidiaries, including Rich Valley Capital Holding Limited (“Rich Valley”), Long Fortune Valley Tourism International (Hong Kong) Limited (“LFHK”), and Shandong Longkong Travel Management Co., Ltd. (“Longkong”).

LFVT Cayman was incorporated on December 9, 2009 as an exempted company limited by shares in the Cayman Islands. Prior to the closing of the share exchange transaction, LFVT Cayman was 45.7% owned by Grand Fountain Capital Holding Limited (a Cayman Islands company 99.8% owned by Chen Rongxia, Zhang Shanjiu’s wife), 28.9% owned by Zhang Qian, Zhang Shanjiu’s daughter, 22% owned by Zhang Shanjiu, 2.9% owned by Li Shikun and 0.5% owned by Yu Xinbo. LFVT Cayman has 50,000 common shares authorized with $1.00 par value each and 1,750 shares issued and outstanding. Since inception, LFVT Cayman has not conducted any substantive operations of its own, except to serve as a holding company that owns 100% of the equity of Rich Valley, a British Virgin Islands company that was established by LFVT Cayman on December 9, 2009 as a wholly-owned subsidiary.

Rich Valley has 50,000 common shares authorized with no par value and one share issued and outstanding. The share was issued for $1.00. Since inception, Rich Valley has not conducted any substantive operations of its own, except to serve as a holding company that owns 100% of the equity of LFHK, a Hong Kong company that was established by Rich Valley on December 22, 2009 as a wholly-owned subsidiary.

LFHK has 10,000 common shares authorized with HK$1.00 par value each and 10,000 shares issued and outstanding. Since inception, LFHK has not conducted any substantive operations of its own, except to serve as a holding company that owns 100% of the equity of Longkong, a limited liability company organized in the PRC on March 15, 2004. Longkong operates its business in Linyi City, Yishui County, Shandong Province, PRC.

Longkong was organized with an initial registered capital of approximately $2.4 million, which was 79.2% owned by Zhang Shanjiu and 20.8% owned by Zhang Qian, Zhang Shanjiu’s daughter. On August 25, 2004, the registered capital was increased to approximately $3.8 million, which resulted in an increase in the number of shareholders from two to fifteen. After the increase in registered capital, Zhang Shanjiu, Zhang Qian, Chen Rongxia and Yu Xinbo owned 56.60%, 15.72%, 6.92% and 5.66% of Longkong, respectively, while the remaining eleven shareholders owned 15.10% of Longkong.

BTHC XV, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Unless the context requires otherwise, US$ amounts expressed in thousands)

Until September 2004, Longkong invested in Yishui Underground Fluorescent Lake Travel Development Co., Ltd., Shandong Shanjiu Bronze Craft Co. Ltd. and Yishui Yimong Mountain Travel Service Co. Ltd., thereby becoming the parent entity of each company and forming a PRC enterprise group of tourism companies.

In September 2007, the shareholders of Longkong entered into several equity transfer transactions that resulted in the reduction in the number of shareholders from fifteen to six. After the equity transfers, Zhang Shanjiu, Zhang Qian, Chen Rongxia and Yu Xinbo owned 21.26%, 59.87%, 1.13% and 2.52% of Longkong, respectively, while the remaining two shareholders owned 15.22% of Longkong.

On October 10, 2007, the shareholders agreed to a decrease in Longkong’s registered capital to approximately $3.2 million, which ultimately resulted in Zhang Qian and another shareholder being cashed out as shareholders. After the decrease in registered capital, Zhang Shanjiu, Chen Rongxia and Yu Xinbo owned 84.5%, 4.5% and 10% of Longkong, respectively, while the remaining shareholder owned 1% of Longkong.

On December 17, 2007, largely in part due to the rarity of a group of companies such as the enterprise group in the PRC, Longkong’s management decided to sell its majority interest in its three subsidiaries to the minority shareholders in each company in order to focus on its core business. Longkong’s interest in Yishui Underground Fluorescent Lake Travel Development Co. Ltd. (“Fluorescent Lake”) was sold to Zhang Qian, Zhang Shanjiu’s daughter, for approximately $1.8 million. Longkong’s interest in Shandong Shanjiu Bronze Craft Co. Ltd. was sold to Li Hongwei, a former shareholder and employee of Longkong, for approximately $274,000. Longkong’s interest in Yishui Yimong Mountain Travel Service Co. Ltd. was sold to Zhang Shanshuang, Zhang Shanjiu’s brother, for approximately $27,000.

On March 10, 2008, the four remaining shareholders of Longkong sold their shares to Longong Travel Limited, a United Kingdom company (“Longong”), for approximately $2.0 million. Longong was a company that was established on behalf of Zhang Shanjiu by a third party trustee in the United Kingdom. The shares of Longong were held in trust for the benefit of Zhang Shanjiu, who beneficially owned the shares of Longong and had the ability to exercise control over Longong.

On November 12, 2008, Longong sold 100% of the equity interests in Longkong to Long Fortune Valley Limited, a company organized under the laws of Gibraltar (“Fortune Valley”), for $1. Both Longong and the trust were dissolved after the sale of Longkong to Fortune Valley. Fortune Valley was a company that was established on behalf of Zhang Shanjiu by a third party trustee in Gibraltar. The shares of Fortune Valley were held in trust for the benefit of Zhang Shanjiu, who beneficially owned the shares of Fortune Valley and had the ability to exercise control over Fortune Valley. On December 29, 2009, Fortune Valley sold 100% of the equity interests in Longkong to LFHK for $1. Both Fortune Valley and the trust were dissolved after the sale of Longkong to LFHK.

Pursuant to the acquisitions described above, LFVT Cayman acquired all the equity interests of the subsidiaries under common control as all of the entities are ultimately controlled by the same parties (Zhang Shanjiu and his immediate family). Accordingly, the financial statements have been prepared as if the existing corporate structure had been in existence throughout all periods and the acquisitions had occurred as of the beginning of the earliest period presented in the accompanying financial statements.

Nature of Operations

The business scope of Longkong is tourism management. The key business project is a cave named the “Underground Grand Canyon” that is located in Linyi City, Yishui County, Shandong Province, PRC. The Underground Grand Canyon tourist destination, at 6,100 meters (approximately 3.75 miles), is the longest cave system in northern China and contains several stalactite and stalagmite formations, as well as rivers and streams. To date, approximately 3,100 meters (approximately 2 miles) have been developed into five entertainment attractions, including: (i) the “Underground Water Drifting” attraction; (ii) the “Electric Slide Car” attraction; (iii) the “Battery Vehicle” attraction; (iv) the “Strop Ropeway” attraction; and (v) the “Treasure Hunting Cave” attraction. Revenue is generated from bundled passes, admission tickets, water drifting attraction fees, rail car fees and other fees and services, including battery vehicle fees, strop ropeway fees, treasure hunting cave fees and parking fees. A bundled pass is for general access to the Company’s “Underground Grand Canyon” tourist destination and general access to the “Fluorescent Lake” tourist destination operated by Fluorescent Lake. An admission ticket is for general access to the “Underground Grand Canyon” tourist destination. Visitors are charged additional fees for the entertainment attractions in and around the Underground Grand Canyon.

BTHC XV, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Unless the context requires otherwise, US$ amounts expressed in thousands)

2.	Summary of Significant Accounting Policies

Basis of Consolidation

The consolidated financial statements include the financial statements of the Company and its subsidiaries. All significant inter-company transactions and balances have been eliminated upon consolidation.

Reclassification

Certain amounts in the consolidated financial statements for the prior year have been reclassified to conform to the presentation of the current year for comparative purposes.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

Revenue Recognition

Revenue of the Company is generated from bundled passes, admission tickets, water drifting attraction fees, rail car fees and other fees and services, including battery vehicle fees, strop ropeway fees, treasure hunting cave fees (beginning February 2011) and parking fees. A bundled pass is for same-day general access to the Company’s “Underground Grand Canyon” tourist destination and same-day general access to the “Fluorescent Lake” tourist destination operated by Yishui Underground Fluorescent Lake Travel Development Co., Ltd. (“Fluorescent Lake”). Because the bundled pass entitles its holder to visit the Fluorescent Lake tourist destination, the price of the bundled pass, which is sold at both the Underground Grand Canyon and the Fluorescent Lake, is higher than the regular admission ticket price to the Underground Grand Canyon.

Pursuant to a 2010 revenue sharing agreement between Longkong and Fluorescent Lake, if a bundled pass (RMB118) is sold at the Underground Grand Canyon, approximately 92% (RMB108) of the cost of the pass is allocated as revenue to Longkong with the remaining 8% (RMB10) being allocated to Fluorescent Lake and recorded as a liability to a related party on the Company’s balance sheet. If a bundled pass is sold at the Fluorescent Lake, approximately 36% (RMB42) of the cost of the pass is allocated as revenue to Longkong and recorded as a receivable from a related party on the Company’s balance sheet with the remaining 64% (RMB76) being recorded as revenue by Fluorescent Lake. While negotiating the terms of the revenue sharing agreement, Fluorescent Lake’s management agreed to the premium percentages allocated to the Underground Grand Canyon due to several factors, including that the Underground Grand Canyon is relatively better known than the Fluorescent Lake based on the number of visitors to each tourist attraction annually, that the Underground Grand Canyon offers five entertainment attractions, in addition to the general walking tour, to Fluorescent Lake’s one entertainment attraction and that Longkong’s management did not expect to see a significant increase in the number of visitors to the Underground Grand Canyon solely as a result of the sales of bundled passes by Fluorescent Lake. The revenue sharing agreement only contains economic terms and is otherwise terminable at the will of either party and does not contain a term. During the fiscal year ended December 31, 2010 and the three months ended March 31, 2011, the allocation was as follows:

BTHC XV, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Unless the context requires otherwise, US$ amounts expressed in thousands)

		Fluorescent Lake	Bundled Pass
If bundled pass sold at:	Longkong Received	Received	Price
Underground Grand Canyon	RMB 108	RMB 10	RMB 118
Fluorescent Lake	RMB 42	RMB 76	RMB 118

In March 2011, the local government approved an increase in our admission ticket price for visitors effective April 1, 2011, which led to a RMB10 increase in the price of the bundled pass to RMB128 also effective that date. During April and May 2011, if a bundled pass (RMB128) was sold at the Underground Grand Canyon, approximately 91% (RMB116) of the cost of the pass was allocated as revenue to Longkong with the remaining 9% (RMB12) being allocated to Fluorescent Lake and recorded as a liability to a related party on the Company’s balance sheet. If a bundled pass was sold at the Fluorescent Lake, approximately 39% (RMB50) of the cost of the pass was allocated as revenue to Longkong and recorded as a receivable from a related party on the Company’s balance sheet with the remaining 61% (RMB78) being recorded as revenue by Fluorescent Lake. During April and May 2011, the allocation was as follows:

		Fluorescent Lake	Bundled
If bundled pass sold at:	Longkong Received	Received	Pass Price
Underground Grand Canyon	RMB 116	RMB 12	RMB 128
Fluorescent Lake	RMB 50	RMB 78	RMB 128

Beginning June 1, 2011, the price of the bundled pass increased again RMB10 to RMB138. From and after June 1, 2011, if a bundled pass (RMB138) is sold at the Underground Grand Canyon, approximately 88% (RMB121) of the cost of the pass is allocated as revenue to Longkong with the remaining 12% (RMB17) being allocated to Fluorescent Lake and recorded as a liability to a related party on the Company’s balance sheet. If a bundled pass is sold at the Fluorescent Lake, approximately 40% (RMB55) of the cost of the pass is allocated as revenue to Longkong and recorded as a receivable from a related party on the Company’s balance sheet with the remaining 60% (RMB83) being recorded as revenue by Fluorescent Lake. From and after June 1, 2011, the allocation is as follows:

		Fluorescent Lake	Bundled Pass
If bundled pass sold at:	Longkong Received	Received	Price
Underground Grand Canyon	RMB 121	RMB 17	RMB 138
Fluorescent Lake	RMB 55	RMB 83	RMB 138

Longkong’s and Fluorescent Lake’s management expects to review the terms of the revenue sharing agreement annually and decide whether to continue the relationship as is, modify the existing terms, which could be more or less beneficial to Longkong, or terminate the relationship.

Neither Longkong nor Fluorescent Lake sells bundled passes in advance. Because the bundled pass expires if not used the same day it is sold to a visitor, neither company has any unfilled obligations at the end of the day the bundled pass is sold. Accordingly, there are no unused, unexpired passes and therefore no deferred revenue at September 30, 2011.

Prior to April 1, 2011, a regular admission ticket to the Underground Grand Canyon was RMB76 and a regular admission ticket to the Fluorescent Lake was RMB68. Therefore, Longkong’s relative fair value of each bundled pass was RMB62, which is the proportion that its regular admission ticket price (RMB76) bore to the total of the regular admission ticket prices for both attractions (RMB144) to the former price of a bundled pass (RMB118). For each bundled pass sold by the Underground Grand Canyon, Longkong received a benefit of RMB46 above its relative fair value. Because the revenue sharing arrangement is with a related party company, the benefit for each bundled pass sold by the Underground Grand Canyon was characterized as a related party commission received. For each bundled pass sold by the Fluorescent Lake, Longkong received RMB20 less than its relative fair value. This difference was characterized as a related party commission paid and recorded net of the related party commission received by Longkong for bundled passes sold by the Underground Ground Canyon. During the fiscal year ended December 31, 2010 and the three months ended March 31, 2011, the allocation was as follows:

BTHC XV, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Unless the context requires otherwise, US$ amounts expressed in thousands)

		Longkong’s Relative	Commission
If bundled pass sold at:	Longkong Received	Fair Value	Received/(Paid)
Underground Grand Canyon	RMB 108	RMB 62	RMB 46
Fluorescent Lake	RMB 42	RMB 62	(RMB 20)

During April and May 2011, a regular admission ticket to the Underground Grand Canyon was RMB96 and a regular admission ticket to the Fluorescent Lake was RMB80. Therefore, Longkong’s relative fair value of each bundled pass was RMB70, which is the proportion that its regular admission ticket price (RMB96) bore to the total of the regular admission ticket prices for both attractions (RMB176) to the former price of a bundled pass (RMB128). For each bundled pass sold by the Underground Grand Canyon, Longkong received a benefit of RMB46 above its relative fair value. Because the revenue sharing arrangement is with a related party company, the benefit for each bundled pass sold by the Underground Grand Canyon was characterized as a related party commission received. For each bundled pass sold by the Fluorescent Lake, Longkong received RMB20 less than its relative fair value. This difference was characterized as a related party commission paid and recorded net of the related party commission received by Longkong for bundled passes sold by the Underground Grand Canyon. During April and May 2011, the allocation was as follows:

		Longkong’s Relative	Commission
If bundled pass sold at:	Longkong Received	Fair Value	Received/(Paid)
Underground Grand Canyon	RMB 116	RMB 70	RMB 46
Fluorescent Lake	RMB 50	RMB 70	(RMB 20)

From and after June 1, 2011, a regular admission ticket to the Underground Grand Canyon is RMB96 and a regular admission ticket to the Fluorescent Lake is RMB80. Therefore, Longkong’s relative fair value of each bundled pass is RMB75, which is the proportion that its regular admission ticket price (RMB96) bears to the total of the regular admission ticket prices for both attractions (RMB176) to the price of a bundled pass (RMB138). For each bundled pass sold by the Underground Grand Canyon, Longkong receives a benefit of RMB46 above its relative fair value. Because the revenue sharing arrangement is with a related party company, the benefit for each bundled pass sold by the Underground Grand Canyon is characterized as a related party commission received. For each bundled pass sold by the Fluorescent Lake, Longkong receives RMB20 less than its relative fair value. This difference is characterized as a related party commission paid and recorded net of the related party commission received by Longkong for bundled passes sold by the Underground Grand Canyon. From and after June 1, 2011, the allocation is as follows:

		Longkong’s Relative	Commission
If bundled pass sold at:	Longkong Received	Fair Value	Received/(Paid)
Underground Grand Canyon	RMB 121	RMB 75	RMB 46
Fluorescent Lake	RMB 55	RMB 75	(RMB 20)

The amount of the net related party commissions received during the nine months ended September 30, 2011 and 2010 was approximately $550,407 and approximately $486,053, respectively. The amount of the net related party commissions received during the three months ended September 30, 2011 and 2010 was approximately $276,607 and approximately $284,253, respectively.

BTHC XV, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Unless the context requires otherwise, US$ amounts expressed in thousands)

An admission ticket entitles the visitor to a one-time admission to the Underground Grand Canyon and entertainment attraction fees entitle the visitor to a one-time usage of the particular entertainment attraction. No weekly, monthly or other annual or season type passes are offered to the Underground Grand Canyon. Longkong does not sell admission tickets in advance. Admission ticket prices and entertainment attraction fees are generally collected when tickets are sold upon the visitors entering the facility. Revenue is recognized when the tickets are used. Occasionally, visitors are granted admission to the Underground Grand Canyon on credit. At such times, the Company recognizes revenue when the service has occurred and records accounts receivable. Revenue is recorded net of relevant business taxes. Business taxes are charged at 3% on sales of admission tickets and 5% of other fee and service revenues. Such taxes were $347,911 and $209,000 for the nine months ended September 30, 2011 and 2010, respectively. Refer to Note 6 – Related-Party Transactions.

The Company’s revenues are subject to seasonal variation and accordingly interim results may not be indicative of the estimated results for a full fiscal year.

Rebates

Commencing January 1, 2010, the Company started to offer a return, also referred to as a rebate, to the travel agencies with which Longkong has entered into cooperation agreements. The rebates are based on the total number of visitors the travel agency brings to the Underground Grand Canyon during a calendar year. The Company recognizes the rebate obligation as a reduction of revenue based on the estimated number of visitors brought to the Underground Grand Canyon by those travel agencies expected to claim rebates. The rebates for the nine months ended September 30, 2011 and 2010 were $42,294 and $177,000, respectively.

Foreign Currency Translation

The reporting currency of the Company is the U.S. dollar. The functional currencies of the Company’s subsidiaries are local currencies, primarily the PRC currency Yuan (Renminbi) and Hong Kong dollar. Transactions denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the date of the transaction. The financial statements are translated into U.S. dollars using period-end rates of exchange for assets and liabilities and average rates of exchange for the period for revenues and expenses. Exchange gains or losses on transactions are included in earnings.

Earnings per Share

Basic earnings per share is computed by dividing net income by the weighted average number of shares of common stock outstanding during each period. Diluted earnings per share is computed by dividing net income by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during each period. At September 30, 2011 and 2010, respectively, the Company had no common stock equivalents that could potentially dilute future earnings per share.

Related Parties

A party is considered to be related to the Company if the party directly or indirectly or through one or more intermediaries, controls, is controlled by, or is under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. A party which can significantly influence the management or operating policies of the transacting parties or has an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests is also a related party.

BTHC XV, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Unless the context requires otherwise, US$ amounts expressed in thousands)

3.	Property, Plant and Equipment, Net

Property, plant and equipment consisted of the following:

	September 30,			December 31,
	2011			2010
	(Unaudited)			(Audited)
Building	$	15,421,430		$	11,191,052
Machinery and equipment		748,863			727,288
Office equipment		258,716			188,701
Automobiles		888,258			852,338
Total at Cost		17,317,267			12,959,379
Less: accumulated depreciation		(3,920,444	)		(3,138,170	)
Construction in progress		54,727			3,782,130
Property, plant and equipment, net	$	13,451,550		$	13,603,339

During the nine months ended September 30, 2011, approximately $3.8 million of costs associated with the remaining construction of the Treasure Hunting Cave entertainment attraction, a parking lot and other infrastructure, including improvements to the welcome area, of the Underground Grand Canyon were transferred from construction in progress to property, plant and equipment.

Depreciation expense for the nine months ended September 30, 2011 and 2010 was $678,154 and $563,000, respectively.

4.	Short Term Debt

As of September 30, 2011 and December 31, 2010, the Company’s short term debt consisted of the following:

	Term			Interest			September 30,			December 31,
	(Months)		Maturity Date	Rate			2011			2010
							(Unaudited)
Yishui Rural Credit Cooperatives		12	04/20/2011		10.62	%	$	-		$	910,200	(a)
Yishui Rural Credit Cooperatives		12	04/26/2011		5.31	%		-			303,400	(b)
Yishui Rural Credit Cooperatives		12	04/26/2011		11.15	%		-			455,100	(c)
Yishui Rural Credit Cooperatives		12	05/20/2011		10.62	%		-			1,517,000	(a)
Yishui Rural Credit Cooperatives		12	01/10/2012		10.46	%		937,200	(e)		-
Yishui Rural Credit Cooperatives		12	06/15/2012		13.88	%		781,000	(e)		-
Yishui Rural Credit Cooperatives		12	08/15/2012		12.47	%		2,499,200	(i)
Industrial and Commercial Bank of China		12	09/15/2011		6.372	%		-	(e)		1,061,900	(e)
Industrial and Commercial Bank of China		12	10/14/2011		6.672	%		781,000	(e)		758,500	(e)
Bank of China		12	09/28/2011		5.841	%		-	(f)		455,100	(f)
Bank of China		12	10/20/2011		6.116	%		2,343,000	(f)		2,275,500	(f)
Bank of China		12	10/26/2011		6.116	%		-	(f)		303,400	(f)
Bank of China		12	09/13/2012		4.543	%		781,000	(f)		-
LinShang Bank		12	05/28/2011		7.965	%		-			758,500	(g)
LinShang Bank		12	08/22/2012		9.84	%		781,000	(g)		-
Construction Bank of China		12	07/25/2011		5.84	%		-	(d)		910,200	(d)
Construction Bank of China		12	08/01/2011		5.84	%		-	(g)		606,800	(g)
ShanDong YiSheng Guarantee Co., Ltd.	92 days		10/20/2011		12.6	%		937,200	(h)		-
JuNan Xin Yuan Investment Consulting Co., Ltd.	90 days		11/10/2011		12.6	%		781,000	(h)		-
							$	10,621,600		$	10,315,600

BTHC XV, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Unless the context requires otherwise, US$ amounts expressed in thousands)

(a) Guaranteed by Zhang Shanjiu; pledged by Longkong’s usufruct.

(b) Guaranteed by (i) two related party companies: Yishui Underground Fluorescent Lake Travel Development Co., Ltd. (“Fluorescent Lake”) and Junan Tianma Island Travel Development Co., Ltd. (“Tianma Island”) (see Note 6); (ii) Zhang Shanjiu, Zhang Hanwang, a current employee of Longkong unrelated to Zhang Shanjiu, and Xu Shuming, a former employee of Longkong; and (iii) Longkong’s equity investment in the bank.

(c) Guaranteed by (i) two related party companies: Fluorescent Lake and Tianma Island (see Note 6); and (ii) Zhang Shanjiu, Zhang Hanwang, a current employee of Longkong unrelated to Zhang Shanjiu, and Xu Shuming, a former employee of Longkong.

(d) Collateralized by Longkong’s land use rights.

(e) Guaranteed by Zhang Shanjiu and a third party guarantee company.

(f) Guaranteed by (i) three related party companies: Yishui Yinhe Travel Development Co., Ltd. (“Yinhe Travel”) using its land use rights, Tianma Island and Fluorescent Lake (see Note 6); and (ii) Zhang Shanjiu.

(g) Guaranteed by a third party guarantee company and counter guaranteed by Fluorescent Lake, a related party company (see Note 6).

(h) Guaranteed by Zhang Shanjiu and Chen Rongxia (Zhang Shanjiu’s wife).

(i) Guaranteed by Zhang Shanjiu and pledged by Tianma Island, a related party company (see Note 6).

For the nine months ended September 30, 2011, interest expense totaled $668,598.

5.	Income Taxes

Cayman Islands and British Virgin Islands

Under the current laws of the Cayman Islands and the British Virgin Islands, the subsidiaries of the Company that are incorporated in the Cayman Islands and the British Virgin Islands are not subject to income taxes.

Hong Kong

LFHK was incorporated in Hong Kong, China. Under the current Hong Kong Inland Revenue Ordinance, the Company is subject to 16.5% income tax on its taxable income generated from operations in Hong Kong. LFHK did not have any operations during the nine months ended September 30, 2011 and 2010 and therefore was not subject to Hong Kong Profits Tax.

BTHC XV, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Unless the context requires otherwise, US$ amounts expressed in thousands)

PRC

The Company’s PRC subsidiary, Longkong, is governed by the Income Tax Law of the PRC concerning private-run enterprises, which are generally subject to tax at a statutory rate of 25%. Beginning January 1, 2008, the new Enterprise Income Tax Law (the “New EIT Law”) replaced the old laws for Domestic Enterprises (“DES”) and Foreign Invested Enterprises (“FIEs”). The new standard EIT rate of 25% replaces the 33% rate applicable to both DES and FIEs, except for certain entities that still benefit from the tax holidays which were grandfathered by the New EIT Law or that are entitled to tax incentives under the New EIT Law.

The tax authority of the PRC Government conducts periodic and ad hoc tax filing reviews on business enterprises operating in the PRC after those enterprises complete their relevant tax filings, hence Longkong’s tax filings may not be finalized. It is uncertain as to whether the PRC tax authority may take different views about Longkong’s tax filings which may lead to additional tax liabilities.

The components of the income tax provision are:

	Nine months ended September 30,
	2011		2010
	(Unaudited)
Current tax provision – PRC	$	1,244,479	$	1,380,000
Deferred taxes		-		-
	$	1,244,479	$	1,380,000

A reconciliation of the effective income tax rate to the U.S. statutory rate is as follows:

	Nine months ended September 30,
	2011			2010
	(Unaudited)
U.S. statutory rate		34	%		34	%
Foreign income not recognized in the U.S.		(34	)%		(34	)%
PRC enterprise income tax rate		25	%		25	%
Permanent difference		-			-
Provision for income tax		25	%		25	%

Accounting for Uncertainties in Income Taxes

The Company accounts for uncertainties in income taxes in accordance with applicable accounting standards, which prescribe a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. These accounting standards also provide guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.

Based on the Company’s evaluation, the Company has concluded that there are no significant uncertain tax positions requiring recognition in its financial statements.

The Company may from time to time be assessed interest or penalties by major tax jurisdictions. In the event it receives an assessment for interest and/or penalties, it will be classified in the financial statements as tax expense.

BTHC XV, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Unless the context requires otherwise, US$ amounts expressed in thousands)

6.	Related Party Transactions

		Relationship with the
Related Parties		Company

Zhang Shanjiu		CEO and Chairman of the Board

Yishui Yinhe Travel Development Co., Ltd. (“Yinhe Travel”)		Controlled by Zhang Shanjiu’s immediate family

Yishui Underground Fluorescent Lake Travel Development Co., Ltd. (“Fluorescent Lake”)		Controlled by Zhang Shanjiu’s immediate family

Junan Tianma Island Travel Development Co., Ltd. (“Tianma Island”)		Controlled by Zhang Shanjiu’s immediate family

Zhang Shansan		Brother of Zhang Shanjiu

Chen Rongxia		Wife of Zhang Shanjiu

(1)	Outstanding balances with related parties as of September 30, 2011 and December 31, 2010 are as follows:

	Due from related parties (a)				Due to related parties (b)
	September 30, 2011		December 31, 2010		September 30, 2011		December 31, 2010
	(unaudited)		(audited)		(unaudited)		(audited)
Yinhe Travel	$	10,558,838	$	7,613,355	$	-	$	-
Fluorescent Lake		7,369,462		5,680,678		70,264		28,463
Zhang Shansan		-		128,945		-		-
	$	17,928,300	$	13,422,978	$	70,264	$	28,463

The following table sets forth details of the related party transactions that occurred during the nine months ended September 30, 2011 and 2010, respectively:

	Nine months ended September 30, 2011				Nine months ended September 30, 2010
	Borrowings		Payments		Borrowings		Payments
Yinhe Travel	$	9,363,968	$	6,644,326	$	10,336,521	$	2,076,210
Fluorescent Lake		3,063,217		1,566,374		704,462		78,100
Tianma Island		1,422,857		1,422,857		731,016		82,786
Zhang Shanjiu		1,405,800		1,405,800		-		-
Zhang Shansan		452,980		585,750		46,860		46,860
Chen Rongxia		-		-		74,976		74,976
Advance Payment for Fluorescent Lake		23,430		-		-		-

Notes:

Amounts due from related parties are unsecured related party loans, which are due upon request and interest free. Certain loans were initially issued with a one-year term. However, as of December 31, 2010 and thereafter, all loans are due upon request. Periodic payments of principal are not required with respect to these loans.

b.	Amounts due to Fluorescent Lake represent the net revenue proceeds payable to the related party as a result of the bundled pass revenue sharing arrangement. See “Note 2 – Summary of Significant Accounting Policies – Revenue Recognition.”

BTHC XV, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Unless the context requires otherwise, US$ amounts expressed in thousands)

(2) Guarantees

The Company and its three related party companies provide loan guarantees to each other. As of September 30, 2011 and December 31, 2010, loans guaranteed by related party companies were $7,341,400 and $5,157,800, respectively (see Note 4). The period of the guarantees is usually two years starting from the due date of the loan.

Details of related-party guarantees at September 30, 2011 pursuant to which the Company has executed a Guarantee Contract with the related parties and the creditor to guarantee loans to the related parties are as follows:

Pursuant to the Guarantee Contract, dated March 14, 2008, between Longkong and the Agricultural Development Bank of China, Junan Branch (“Agricultural Bank”), Longkong has guaranteed a six-year loan by Agricultural Bank to Tianma Island for the amount of approximately $6 million. The loan is due March 2014. The guarantee period is two years starting from the due date of the loan. Tianma Island has been making timely principal payments and the balance due of the loan at September 30, 2011 was $4.7 million, the maximum potential amount of future payments that Longkong could be required to make under the guarantee. The guarantee provided under the Guarantee Contract expires upon the payment in full of the loan. Longkong will be required to make payment under the guarantee if Tianma Island fails to make a payment when due. In such circumstance, Longkong will have recourse against Tianma Island for the full amount of the payment made on its behalf. This obligation, however, is secured by the usufruct of Tianma Island. Longkong’s guarantee to Agricultural Bank is secured by its usufruct. Longkong periodically requests information from Tianma Island regarding its financial condition, including the amount of its outstanding indebtedness and payment histories, to assess the payment/performance risk of the guarantee. As of September 30, 2011, Longkong believes the risk of paying or performing the guarantee on Tianma Island’s behalf is remote.

Pursuant to the Guarantee Contract, dated April 2010, between Longkong and Yishui Rural Credit Cooperative, Longkong has guaranteed a one-year loan by the bank to Fluorescent Lake for the amount of approximately $731,500. The loan matured and was paid off by Fluorescent Lake in April 2011.

7.	Commitment and Contingencies

Guarantees

In January and March 2011, respectively, Longkong agreed to guarantee two loans borrowed by Shandong Green Foodstuff Co., Ltd. (“Green Foodstuff”) from Industrial and Commercial Bank of China Yishui Branch (“ICBC”) totaling $1.5 million, which is the maximum potential amount of future payments that the Company could be required to make under the guarantee. The loans are due in January and March 2012, respectively. The guarantee period is two years starting from the due date of the loans. The guarantee provided under the Guarantee Contracts expires upon the payment in full of the loan. Longkong will be required to make payment under the guarantee if Green Foodstuff fails to make a payment when due. In such circumstance, Longkong will have recourse against Green Foodstuff for the full amount of the payment made on its behalf. This obligation, however, is unsecured. Longkong’s guarantee to ICBC is also unsecured. Longkong periodically requests information from Green Foodstuff regarding its financial condition, including the amount of its outstanding indebtedness and payment histories, to assess the payment/performance risk of the guarantee. As of September 30, 2011, Longkong believes the risk of paying or performing the guarantee on Green Foodstuff’s behalf is remote.

On April 14, 2011, Longkong agreed to guarantee a loan borrowed by Green Foodstuff from China Minsheng Bank Co., Ltd. (“CMB”) totaling $2.3 million, which is the maximum potential amount of future payments that the Company could be required to make under the guarantee. The loan is due in April 2012 and the guarantee period is two years from the due date of the loan. The guarantee expires upon the payment in full of the loan. Longkong will be required to make payment under the guarantee if Green Foodstuff fails to make a payment when due. In such circumstance, Longkong will have recourse against Green Foodstuff for the full amount of the payment made on its behalf. This obligation, however, is unsecured. Longkong’s guarantee to CMB also is unsecured. Longkong periodically requests information from Green Foodstuff regarding its financial condition, including the amount of its outstanding indebtedness and payment histories, to assess the payment/performance risk of the guarantee. As of September 30, 2011, Longkong believes the risk of paying or performing the guarantee on Green Foodstuff’s behalf is remote.

BTHC XV, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Unless the context requires otherwise, US$ amounts expressed in thousands)

Legal Contingencies

On or around January 7, 2011, Greentree Financial Group, Inc. (“Greentree”) filed a two-count complaint (the “Complaint”) against BTHC, LFVT Cayman, and BTHC’s former principal shareholder, in the Circuit Court of the 17th Judicial Circuit in and for Broward County, Florida, entitled Greentree Financial Group, Inc. v. Long Fortune Valley Tourism International, Ltd., BTHC XV, Inc. and Halter Financial Investments L.P. The Complaint asserted a claim for breach of contract against LFVT Cayman and a claim of tortious interference with a business relationship against BTHC and BTHC’s former principal shareholder. BTHC was served with the summons and complaint on or around January 21, 2011.

On April 12, 2011, Greentree filed its opposition to BTHC’s and LFVT Cayman’s motion to dismiss the Amended Complaint, which was filed by the parties on March 25, 2011. On April 22, 2011, BTHC and LFVT Cayman filed a reply in further support of their motion to dismiss. On May 10, 2011, prior to a decision being rendered on the motion to dismiss, Greentree advised the Court that Greentree, BTHC and LFVT Cayman had reached an agreement in principle to settle all claims involving BTHC and LFVT Cayman. That settlement has now been formalized and effectuated, and, on July 6, 2011, Greentree filed a Notice of Voluntary Dismissal with Prejudice of all claims brought against LFVT Cayman and BTHC. On July 8, 2011, the Court dismissed with prejudice all claims brought against defendants BTHC and LFVT Cayman.

8.	Subsequent Events

In October 2011, one loan from Industrial and Commercial Bank of China in the amount of approximately $781,000 matured and was paid off.

In October 2011, one loan from the Bank of China in the amount of approximately $2,343,000 matured and was paid off.

In October 2011, the Company obtained a loan of approximately $2,343,000 from the Bank of China. The term of the loan is 12 months and it bears interest at a rate of 8.07% per annum and is guaranteed by Fluorescent Lake, Tianma Island, Yinhe Travel and Zhang Shanjiu.

In October 2011, one loan from ShanDong YiSheng Guarantee Co., Ltd. in the amount of approximately $937,200 matured and was paid off.

In October 2011, one loan from JuNan Xin Yuan Investment Consulting Co., Ltd. in the amount of approximately $781,000 was paid off.

In October 2011, the Company obtained a loan from ShanDong YiSheng Guarantee Co., Ltd. in the amount of approximately $937,200. The loan is due on February 7, 2012, bears interest at a rate of 12.6% per annum and is guaranteed by Zhang Shanjiu and Chen Rongxia (Zhang Shanjiu’s wife).

In October 2011, the Company obtained a loan from JuNan Xin Yuan Investment Consulting Co., Ltd. in the amount of approximately $781,000. The loan was due on January 8, 2012, bore interest at a rate of 12.6% per annum and was guaranteed by Zhang Shanjiu and Chen Rongxia (Zhang Shanjiu’s wife). The loan was paid off in December 2011.

In December 2011, the Company obtained a loan from JuNan Xin Yuan Investment Consulting Co., Ltd. in the amount of approximately $937,200. The loan is due on February11, 2012, bears interest rate at 12.6% per annum and is guaranteed by Zhang Shanjiu and Chen Rongxia (Zhang Shanjiu’s wife).

BTHC XV, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Unless the context requires otherwise, US$ amounts expressed in thousands)

In January 2012, the Company paid off a loan from Yishui Rural Credit Cooperatives in the amount of approximately $937,200.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Forward-Looking Statements

The following discussion and analysis, as well as other sections in this Quarterly Report on Form 10-Q, should be read in conjunction with the unaudited interim consolidated financial statements and related notes to the unaudited interim consolidated financial statements included elsewhere herein.

The information contained in this Quarterly Report, including in the documents incorporated by reference into this Quarterly Report, includes some statements that are not purely historical and that are “forward-looking statements.” Such forward-looking statements include, but are not limited to, statements regarding our and our management’s expectations, hopes, beliefs, intentions or strategies regarding the future, including our financial condition and results of operations. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipates,” “believes,” “continues,” “could,” “estimates,” “expects,” “intends,” “may,” “might,” “plans,” “possible,” “potential,” “predicts,” “projects,” “seeks,” “should,” “will,” “would” and similar expressions, or the negatives of such terms, may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking.

The forward-looking statements contained in this Quarterly Report are based on current expectations and beliefs concerning future developments and the potential effects on our company. There can be no assurance that future developments actually affecting us will be those anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements, including the following: our ability to increase our revenues and expand our business operations; our ability to successfully implement our acquisition strategy; availability and cost of external financing; our ability to manage our growth; competition for discretionary spending; weather conditions; the length of our operating season; importance of our land use rights to the operation of our business; unanticipated construction delays in completing capital improvements; the effect of any extended shutdown period of our facilities; accidents occurring at our tourist destinations; lack of business interruption or third-party liability insurance; factors that affect tourist destination attendance, such as local conditions, events, natural disasters, disturbances and terrorist activities; dependence on key management personnel; obligations under guarantees; our significant debt load; control by a limited number of principal stockholders; potential conflicts of interest; transactions with related parties; our ability to increase revenues through price increases; our ability to obtain, maintain and renew necessary safety inspections on the special equipment we operate; failure to maintain an effective system of internal control over financial reporting; lack of experience with and knowledge of U.S. GAAP and SEC rules and regulations by those individuals in charge of and with responsibility over the preparation of our financial statements; our business’ susceptibility to the economic, political and legal policies, developments and conditions in China; uncertain legal environment in China; the degree to which the PRC government influences the conduct of our business; ambiguities in the implementation of the Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors issued on August 8, 2006; our ability to use equity compensation to attract and retain qualified personnel; rapid growth of the PRC economy and inflation as a result thereof; government control of currency conversion; fluctuations in exchange rates; outbreaks of widespread public health problems in the PRC, such as the Swine Flu, SARS or the Avian Flu; lack of deposit insurance for funds held in local banks; our ability to comply with the FCPA and Chinese anti-corruption laws; our ability to pay dividends to our stockholders; the implementation of the new PRC employment contract law; our classification as a “resident enterprise” under the Enterprise Income Tax Law; cultural, political and language differences between China and the United States; adverse changes in the securities markets; development of a public trading market for our securities; and the other factors referenced in this Quarterly Report, including, without limitation, under the section entitled “Item 1A. – Risk Factors” contained in our Annual Report on Form 10-K/A that was filed with the SEC on August 19, 2011.

Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

Use of Certain Defined Terms

As used in this Quarterly Report, unless the context requires or is otherwise indicated, the terms “we,” “us,” “our,” the “Registrant,” the “Company,” “our company” and similar expressions include the following entities, after giving effect to the Share Exchange (as defined below):

(i) BTHC XV, Inc., a Delaware corporation (“BTHC”), which is a publicly traded company;

(ii) Long Fortune Valley Tourism International Limited, a company organized under the laws of the Cayman Islands and a wholly-owned subsidiary of BTHC (“Long Fortune”);

(iii) Rich Valley Capital Holding Limited, a company organized under the laws of the British Virgin Islands and a wholly-owned subsidiary of Long Fortune (“Rich Valley”);

(iv) Long Fortune Valley Tourism International Limited, a company organized under the laws of Hong Kong and a wholly-owned subsidiary of Rich Valley (“LFHK”); and

(v) Shandong Longkong Travel Management Co., Ltd., a company organized under the laws of China and a wholly-owned subsidiary of LFHK (“Longkong”).

“China” or “PRC” refers to the People’s Republic of China, excluding Hong Kong, Macau and Taiwan. “RMB” or “Renminbi” refers to the legal currency of China and “$” or “U.S. Dollars” refers to the legal currency of the United States. The Company maintains its books and accounting records in Renminbi. Unless otherwise stated, the translations of RMB into U.S. Dollars have been made at the rate of exchange of $1.00 to RMB6.5062, the approximate average exchange rate for the nine months ended September 30, 2011. We make no representation that the RMB or U.S. Dollar amounts referred to in this Quarterly Report could have been or could be converted into U.S. Dollars or RMB, as the case may be, at any particular rate or at all. “U.S. GAAP” unless otherwise indicated refers to accounting principles generally accepted in the United States. All U.S. Dollar amounts referenced herein are in thousands, unless the context requires otherwise.

Background

On October 6, 2010, BTHC entered into a Share Exchange Agreement with Long Fortune, the former shareholders of Long Fortune (the “Long Fortune Shareholders”), and the former principal shareholder of BTHC, pursuant to which the Long Fortune Shareholders agreed to transfer all of the issued and outstanding securities of Long Fortune to BTHC in exchange for 17,185,177 shares of BTHC common stock (the “Share Exchange”). The Share Exchange closed on October 18, 2010, at which time Long Fortune became a wholly-owned subsidiary of BTHC. The acquisition of Long Fortune has been accounted for as a reverse merger. For accounting purposes, Long Fortune is the acquirer in the reverse acquisition transaction and, consequently, its financial results have been reported on a historical basis.

All of our business operations are carried out by Longkong, which is a cave tourism development and management company whose tourist destination and operations are based solely in the PRC, principally in Shandong Province.

The corporate structure of BTHC, after taking into account the Share Exchange, is as follows:

Overview

We are a tourism development and management company headquartered in Shandong Province, China. Our business specializes in the development and management of natural, cultural and historic scenic sites and ecotourism projects in China, with particular emphasis on the cave tourism sector of the tourism industry. We currently operate the “Underground Grand Canyon” tourist destination.

The Underground Grand Canyon

The Underground Grand Canyon, located in Linyi City, Yishui County, Shandong Province, at 6,100 meters (approximately 3.75 miles), is the longest cave system in northern China and contains several stalactite and stalagmite formations, as well as rivers and streams. To date, approximately 3,100 meters (approximately 2 miles) have been developed into five entertainment attractions, including: (i) the “Underground Water Drifting” attraction; (ii) the “Electric Slide Car” attraction; (iii) the “Battery Vehicle” attraction; (iv) the “Strop Ropeway” attraction; and (v) the “Treasure Hunting Cave” attraction.

In 2004, we entered into a development and management agreement with the Yaodianzi Town Government, Linyi City, Yishui County, Shandong Province to operate and manage the Underground Grand Canyon tourist destination from 2004 through 2062. Since 2004, we have invested approximately $16.3 million to improve the infrastructure and facilities at the Underground Grand Canyon, including the construction of new facilities, such as the construction of catering and restaurant facilities for our visitors, an office and accommodation and entertainment facilities for our staff, building the entertainment attractions, repairing roads leading to the Underground Grand Canyon, acquiring new boats or vehicles that are used in our entertainment attractions and repairing electrical lines and water pipes in the Underground Grand Canyon. In addition, the number of visitors has increased from approximately 150,000 in 2004 to approximately 749,000 in 2009, which is a compounded annual growth rate of 37.9%. In 2010, the number of visitors to the Underground Grand Canyon fell to approximately 672,000 visitors, which represents, from 2004 through 2010, a compounded annual growth rate of 28.5%.

Our visitors come to the Underground Grand Canyon both on their own, attracted either by advertisements or through word of mouth (“self-drivers”), and through touring with domestic PRC travel agencies. Visitors from travel agencies accounted for approximately 48.1% of the total number of visitors during the nine months ended September 30, 2011, while self-drivers accounted for the remaining 51.9% of our visitors.

Trends and Uncertainties Affecting our Business

Our Underground Grand Canyon tourist destination competes for discretionary spending with other national geological parks and with other types of recreational and tourist activities. Our business is also subject to factors that generally affect the recreation and leisure industries and are not within our control. Such factors include, but are not limited to, general economic conditions, including relative fuel prices, and changes in consumer preferences and spending habits. The current negative economic conditions have affected our guests’ levels of discretionary spending and, in turn, the number of visitors to our Underground Grand Canyon. The global economic crisis that began in late 2008 and carried through 2009 and most of 2010 generally was not felt by our company until the 2010 year.

The number of visitors to the Underground Grand Canyon increased from 536,000 in 2008 to 749,000 in 2009. However, the number of visitors decreased to 672,000 in 2010 primarily due to a colder than average spring in China and two large, non-recurring tourist events in China, the 16th Asian Games hosted in Guangzhou and the World Exposition hosted in Shanghai, both of which events created additional competition for discretionary spending in 2010. The Asian Games, dating back to 1951, are held every four years and only once prior to 2010 has China been the host country for the Asian Games. The World Exposition, dating back to 1851, is a worldwide exposition held every two to three years and only once prior to 2010 has China been the host country for the World Exposition. Management views these factors as short-term in nature, but there can be no assurance that, over the long-term, China will not be a host country for the Asian Games or the World Exposition or other events that could compete for consumers’ discretionary spending or that the climate will not affect the number of visitors to the Underground Grand Canyon.

Revenue increased approximately $1.0 million during the nine months ended September 30, 2011 as compared to the nine months ended September 30, 2010. The number of visitors to the Underground Grand Canyon decreased from approximately 571,000 during the nine months ended September 30, 2010 to approximately 567,600 during the nine months ended September 30, 2011. The decrease in visitors was due in part to the temporary cessation of operations in January 2011 discussed in further detail below. In addition, during January 2011 while renewing the cooperation agreements with travel agencies, we tried to renegotiate the discount offered to the visitors brought to the Underground Grand Canyon by travel agencies. Most travel agencies were not receptive to a price increase and ultimately removed the Underground Grand Canyon from their list of preferred tourist sites. This removal from the list of preferred tourist sites resulted in a 85% reduction in visitors from travel agencies during the three months ended March 31, 2011. In April 2011, at the beginning of our busy season, we agreed not to increase the ticket price to travel agency visitors, which resulted in the Underground Grand Canyon being added back to the list of preferred tourist sites. During the three months ended September 30, 2011, we saw a decrease in the number of visitors from approximately 245,400 during the three months ended September 30, 2010 to approximately 243,200, primarily due to the increase in our regular admission ticket price from period to period although the number of visitors brought to the Underground Grand Canyon by travel agencies increased from period to period and, therefore, the decrease was caused by a decrease in the number of self-drivers. Though we anticipated that the addition of the Treasure Hunting Cave would have led to an increase in the number of visitors, we have not found that to be the case during the third quarter of 2011. In fact, of the five entertainment attractions we have at the Underground Grand Canyon, revenue generated from the Treasure Hunting Cave was the lowest, which we attribute to limited marketing for it as a new entertainment attraction, and therefore we do not believe that, as of yet, visitors are coming to the Underground Grand Canyon solely because of this entertainment attraction. Looking forward to the final quarter of 2011, we anticipate an increase in the number of visitors as compared to the final quarter of 2010, but there can be no assurance that the number of visitors will increase over the comparable period of 2011.

In addition, sales of the bundled pass and the revenue sharing agreement with Fluorescent Lake accounted for approximately 20.0% of our total revenue for the nine months ended September 30, 2011 (approximately 107,500 total visitors accounting for approximately $1.8 million). Of the approximately 107,500 visitors who used a bundled pass, approximately 87,600 of the passes were sold by the Underground Ground Canyon and approximately 19,900 of the passes were sold by the Fluorescent Lake. Prior to April 1, 2011, the revenue sharing agreement effectively allowed us to obtain a premium price (approximately $4.75 (RMB32) higher than the regular admission ticket price) for visitors to the Underground Grand Canyon if the bundled pass was sold by Longkong. Alternatively, if a bundled pass was sold by Fluorescent Lake, we received approximately $5.00 (RMB34) less than the regular admission ticket price. During April and May 2011, the revenue sharing agreement effectively allowed us to obtain a premium price (approximately $3.00 (RMB20) higher than the regular admission ticket price) for visitors to the Underground Grand Canyon if the bundled pass was sold by Longkong. Alternatively, if a bundled pass was sold by Fluorescent Lake, we received approximately $7.00 (RMB46) less than the regular admission ticket price. From and after June 1, 2011, the revenue sharing agreement effectively allows us to obtain a premium price (approximately $3.75 (RMB25) higher than the regular admission ticket price) for visitors to the Underground Grand Canyon if the bundled pass is sold by Longkong. Alternatively, if a bundled pass is sold by Fluorescent Lake, we receive approximately $6.25 (RMB41) less than the regular admission ticket price. The revenue sharing agreement with Fluorescent Lake does not contain terms and conditions other than the economic terms described above. As a result, the agreement is terminable at the will of either party and does not contain a term. Zhang Shanjiu, as our Chairman, President and Chief Executive Officer and as an individual who controls Fluorescent Lake, could effectively require either our or Fluorescent Lake’s management to modify the terms of the agreement at his will. Any such modifications could be more or less beneficial to us, though no modifications are anticipated at this time other than those that occurred as a result of a price increase in our admission ticket price effective April 1, 2011, which led to an increase in the price of the bundled pass also effective as of that date, and a further increase in the price of the bundled pass effective June 1, 2011, which is described above. It is expected that Longkong’s and Fluorescent Lake’s management will review the terms of the revenue sharing arrangement annually. If the terms of the revenue sharing arrangement are modified to be less beneficial to us, or if the relationship is terminated, at a time when we are receiving material revenue from the arrangement, the modifications or termination could have a material adverse effect on our results of operations and financial condition.

Because prices for admission to the Underground Grand Canyon and the entertainment attractions within and around the Underground Grand Canyon are subject to government approval and may only be increased once every three years, we effectively need to increase the number of visitors year over year in order to increase our revenue. Unless we increase the number of visitors to the Underground Ground Canyon, we will likely see our revenue and net income in the coming years level off and then decline, until general economic conditions improve. On March 2, 2011, the local government agreed to an increase in our admission ticket price for visitors. In addition, the local government waived the six month advance notice requirement to the public so that the price increase could become effective on April 1, 2011.

We seek to increase the number of visitors to the Underground Grand Canyon by enhancing its existing entertainment attractions, as well as by further development of the Underground Grand Canyon to include additional entertainment attractions. Toward this goal, as previously disclosed on our Current Report on Form 8-K filed with the SEC on December 23, 2010, we temporarily halted operations on December 21, 2010 in order to reconstruct part of the Underground Grand Canyon during Longkong’s low season, which generally runs from November through March. The reconstruction included repairing roads leading to the Underground Grand Canyon, repairing and installing new electric cables and signs, and the completion of the construction of the Treasure Hunting Cave entertainment attraction. Reconstruction was completed in late January 2011 and we continued our operations at that time. The Treasure Hunting Cave attraction became operational in early February 2011. The Treasure Hunting Cave is our fifth entertainment attraction and consists of eight entertainment attractions suitable for teenagers and young adults encompassing more than 3,000 square meters (approximately 32,300 square feet), including a man-made rock hill for climbing, a maze and amusement park type rides. We believe the reconstruction and the opening of the Treasure Hunting Cave will, in time, increase the attraction points to the Underground Grand Canyon and ultimately the number of visitors we host and the amount of revenue we generate from our entertainment attractions, but there can be no assurance that the reconstruction or the Treasure Hunting Cave will lead to an increase in the number of visitors or an increase in the amount of revenue we generate from our entertainment attractions. Further, it is uncertain at this time whether the effect of ceasing operations at the beginning of 2011, which directly lead to a shift to a net loss during the three months ended March 31, 2011 from net income during the three months ended March 31, 2010, will be offset by the expected increase in the number of visitors or additional fees generated by the Treasure Hunting Cave. However, because the Treasure Hunting Cave generated the least revenue during the nine months ended September 30, 2011 of our five entertainment attractions, we do not believe that, as of yet, visitors are coming to the Underground Grand Canyon solely because of this entertainment attraction. In an effort to increase our visitors to the Underground Grand Canyon, we plan to increase our advertising, but there can be no assurance that increasing the advertising and making capital improvements will lead to an increase in the number of visitors.

In February 2011, we refocused our marketing strategy to focus primarily on Shandong Province and its surrounding areas though we continue to market nationally as well. Although the number of visitors during the nine months ended September 30, 2011 decreased as compared to the nine months ended September 30, 2010, we believe the number of visitors would have decreased even more without our focused marketing efforts. We believe our marketing strategy will lead to an increase in visitors and an increase in the number of travel agencies with which we enter into cooperation agreements, but there can be no assurance that our marketing efforts will continue to prove successful.

Approximately $6.0 million in aggregate principal amount of short-term loans were due during the three months ended September 30, 2011. Our cash on hand and cash flow from operations were insufficient, at times, during the three months ended September 30, 2011 to repay these loans due when. In lieu of calling our loans made to related party companies, we borrowed approximately $5.2 million from non-commercial bank, non-related party sources to repay the loans due. We did not obtain loans from commercial banks because the non-commercial bank sources offer to close loans in a shorter period of time than commercial banks have been closing loans in China as the market for commercial credit continues to tighten. In addition, because certain commercial banks are now requiring that third-party guarantee companies who guarantee third-party indebtedness be licensed and also have recently imposed minimum principal balances per loan and annual revenue or total assets tests or requirements for certain loans, we believe the number of commercial bank lending sources available to us have decreased and may continue to decrease, which may cause us to utilize non-commercial bank lending sources in the future. Although the non-commercial bank sources can provide us liquidity in a shorter period of time than a commercial bank, these sources generally charge a higher rate of interest per annum than a commercial bank and tend to offer loans for shorter periods of time, such as 30 to 90 days, whereas a commercial bank typically loans money for a one year term. Given the ongoing tightening of the credit markets in China, loans from commercial banks may not be available on terms acceptable to us, if at all, and we may have to continue to use the services of non-commercial bank sources for our liquidity needs, but similarly there can be no assurance that financing from these sources will be available on terms acceptable to us, if at all. Notwithstanding these borrowings, we believe that our cash on hand, cash flow from operations and anticipated additional cash resources will meet our expected capital expenditures and working capital requirements for the next 12 months.

Results of Operations

Three Months Ended September 30, 2011 Compared to the Three Months Ended September 30, 2010

The following table sets forth key components of our results of operations for the periods indicated, both in dollars and as a percentage of our revenues.

	For the three months ended September 30,
	2011				2010
	(in thousands of U.S. dollars)
Revenues (including $276,607 and $284,253 related party commission for the three months ended September 30, 2011 and 2010, respectively)	$	4,014	100	%	$	3,461	100	%
Operating expenses		1,250	31			409	12
Income from operations		2,763	69			3,052	88
Other expenses		271	7			143	4
Income before income taxes		2,493	62			2,909	84
Income tax expense		623	16			725	21
Net income		1,869	46			2,184	63

Our functional currency is RMB; however, our financial information is expressed in U.S. dollars. The results of operations reported in the table above are based on the exchange rate of RMB6.3549 to $1.00 for the three months ended September 30, 2011 and the exchange rate of RMB6.7011 to $1.00 for the three months ended September 30, 2010.

Revenues. Our sales revenue is generated from bundled passes, admission tickets, water drifting attraction fees, rail car fees and other fees and services, including battery vehicle fees, strop ropeway fees and parking fees. A bundled pass is for general access to our “Underground Grand Canyon” tourist destination and general access to the “Fluorescent Lake” tourist destination operated by Yishui Underground Fluorescent Lake Travel Development Co., Ltd. (“Fluorescent Lake”), a company controlled by the immediate family of Zhang Shanjiu, our Chairman, President and Chief Executive Officer. Because the bundled pass entitles its holder to visit the Fluorescent Lake tourist destination, the price of the bundled pass, which is sold at both the Underground Grand Canyon and the Fluorescent Lake, is higher than the regular admission ticket price to the Underground Grand Canyon. Through a 2010 revenue sharing agreement between Longkong and Fluorescent Lake, prior to April 1, 2011, if a bundled pass (RMB118) was sold at the Underground Grand Canyon, approximately 92% (RMB108) of the cost of the pass was allocated as revenue to Longkong with the remaining 8% (RMB10) being allocated to Fluorescent Lake and recorded as a liability to a related party on our balance sheet. If a bundled pass was sold at the Fluorescent Lake, approximately 36% (RMB42) of the cost of the pass was allocated as revenue to Longkong and recorded as a receivable from a related party on our balance sheet with the remaining 64% (RMB76) being recorded as revenue by Fluorescent Lake. During April and May 2011, if a bundled pass (RMB128) was sold at the Underground Grand Canyon, approximately 91% (RMB116) of the cost of the pass was allocated as revenue to Longkong with the remaining 9% (RMB12) being allocated to Fluorescent Lake and recorded as a liability to a related party on our balance sheet. If a bundled pass was sold at the Fluorescent Lake, approximately 39% (RMB50) of the cost of the pass was allocated as revenue to Longkong and recorded as a receivable from a related party on our balance sheet with the remaining 61% (RMB78) being recorded as revenue by Fluorescent Lake. From and after June 1, 2011, if a bundled pass (RMB138) is sold at the Underground Grand Canyon, approximately 88% (RMB121) of the cost of the pass is allocated as revenue to Longkong with the remaining 12% (RMB17) being allocated to Fluorescent Lake and recorded as a liability to a related party on our balance sheet. If a bundled pass is sold at the Fluorescent Lake, approximately 40% (RMB55) of the cost of the pass is allocated as revenue to Longkong and recorded as a receivable from a related party on our balance sheet with the remaining 60% (RMB83) being recorded as revenue by Fluorescent Lake. An admission ticket (RMB96) is for general access to our “Underground Grand Canyon” tourist destination. Our visitors are charged additional fees for the entertainment attractions in and around the Underground Grand Canyon. Our sales revenue increased approximately $0.5 million, or approximately 14.3%, to approximately $4.0 million in the three months ended September 30, 2011 from approximately $3.5 million in the three months ended September 30, 2010.

Revenue from sales of bundled passes was approximately $0.9 million (including approximately $0.28 million in related party commissions) in the three months ended September 30, 2011 and the number of visitors who used a bundled pass was approximately 54,100 during the three months ended September 30, 2011. Of the approximately 54,100 visitors who used a bundled pass, approximately 43,700 of the passes were sold by the Underground Ground Canyon, accounting for approximately $0.8 million in revenue (approximately $0.31 million in related party commission received) to Longkong and approximately $0.1 million in revenue to Fluorescent Lake, and approximately 10,400 of the passes were sold by the Fluorescent Lake, accounting for approximately $0.08 million in revenue (approximately $0.03 million in related party commissions paid) to Longkong and approximately $1.3 million in revenue to Fluorescent Lake. Revenue from sales of bundled passes was approximately $0.7 million (including approximately $0.28 million in related party commissions) in the three months ended September 30, 2010 and the number of visitors who used a bundled pass was approximately 52,400 during the three months ended September 30, 2010. Of the approximately 52,400 visitors who used a bundled pass, approximately 44,800 of the passes were sold by the Underground Ground Canyon, accounting for approximately $0.65 million in revenue (approximately $0.26 million in related party commissions received) to Longkong and approximately $0.05 million in revenue to Fluorescent Lake, and approximately 7,600 of the passes were sold by the Fluorescent Lake, accounting for approximately $0.05 million in revenue (approximately $0.02 million in related party commissions paid) to Longkong and approximately $0.15 million in revenue to Fluorescent Lake.

After June 1, 2011, a regular admission ticket to the Underground Grand Canyon is RMB96 and a regular admission ticket to the Fluorescent Lake is RMB80. Therefore, our relative fair value of each bundled pass is RMB75, which is the proportion that our regular admission ticket price (RMB96) bears to the total of the regular admission ticket prices for both attractions (RMB176) to the price of a bundled pass (RMB138). For each bundled pass sold by the Underground Grand Canyon, we receive a benefit of RMB46 above our relative fair value. Because the revenue sharing arrangement is with a related party company, the benefit for each bundled pass sold by the Underground Grand Canyon is characterized as a related party commission received. For each bundled pass sold by the Fluorescent Lake, we receive RMB20 less than our relative fair value. This difference is characterized as a related party commission paid and recorded net of the related party commission received by us for bundled passes sold by the Underground Grand Canyon.

Revenue from sales of admission tickets increased approximately $0.3 million, or approximately 23.1%, to approximately $1.6 million in the three months ended September 30, 2011 from approximately $1.3 million in the three months ended September 30, 2010 solely due to an increase in the regular admission ticket price from RMB76 to RMB96 on April 1, 2011 because the number of visitors who purchased an admission ticket decreased from approximately 193,000 during the three months ended September 30, 2010 to approximately 189,100 during the three months ended September 30, 2011. Total visitors, those who purchased either a bundled pass or an admission ticket, decreased from approximately 245,400 during the three months ended September 30, 2010 to approximately 243,200 during the three months ended September 30, 2011. The decrease in the total number of visitors from the three months ended September 30, 2010 to the three months ended September 30, 2011 was due to the increase in our regular admission ticket price from period to period although the number of visitors brought to the Underground Grand Canyon by travel agencies increased from period to period and, therefore, the decrease was caused by a decrease in the number of self-drivers.

Revenue from fees for our entertainment attractions increased approximately $0.1 million, or approximately 8.3%, to approximately $1.3 million in the three months ended September 30, 2011 from approximately $1.2 million in the three months ended September 30, 2010 primarily due to an increase in the number of visitors paying the additional fees for our entertainment attractions in the three months ended September 30, 2010 to the three months ended September 30, 2011. Having the Treasure Hunting Cave operational since February 2011 did not have a material effect on the revenue from fees for our entertainment attractions.

Operating Expenses. Our operating expenses are comprised of depreciation, amortization, advertising and promotion expenses, salaries and benefits, materials purchases for operating maintenance, service charges and administrative expenses. Our operating expenses increased approximately $0.9 million, or approximately 225%, to approximately $1.3 million in the three months ended September 30, 2011 from approximately $0.4 million in the three months ended September 30, 2010. The increase is due in part to increases in advertising expenses and maintenance expenses.

Income from Operations and Operating Margin. Our income from operations decreased approximately $0.3 million, or approximately 9.7%, from approximately $3.1 million in the three months ended September 30, 2010 to approximately $2.8 million in the three months ended September 30, 2011. Income from operations as a percentage of revenues was 69% and 88% for the three months ended September 30, 2011 and 2010, respectively. The decrease in our income from operations and operating margin was due in part to an increase in advertising expenses and maintenance expenses in the three months ended September 30, 2011 as compared to the three months ended September 30, 2010.

Other Expenses. Our other expenses increased approximately $128,000, or approximately 89.5%, from approximately $143,000 in the three months ended September 30, 2010 to approximately $271,000 in the three months ended September 30, 2011. The increase was primarily due to an increase in interest expense because of the increase in interest-bearing debt period to period.

Income Tax Expense. Our income tax expense decreased approximately $102,000, or approximately 14.1%, to approximately $623,000 in the three months ended September 30, 2011 from approximately $725,000 in the three months ended September 30, 2010.

Net Income. Our net income decreased approximately $0.3 million, or approximately 13.6%, from approximately $2.2 million in the three months ended September 30, 2010 to approximately $1.9 million in the three months ended September 30, 2011 primarily due to an increase in revenue being partially offset by increases in advertising and interest expenses.

Nine Months Ended September 30, 2011 Compared to the Nine Months Ended September 30, 2010

The following table sets forth key components of our results of operations for the periods indicated, both in dollars and as a percentage of our revenues.

	For the nine months ended September 30,
	2011				2010
	(in thousands of U.S. dollars)
Revenues (including $550,407 and $486,053 related party commission for the nine months ended September 30, 2011 and 2010, respectively)	$	9,000	100	%	$	7,962	100	%
Operating expenses		3,207	36			2,237	28
Income from operations		5,793	64			5,725	72
Other expenses		815	9			203	3
Income before income taxes		4,978	55			5,522	69
Income tax expense		1,245	14			1,380	17
Net income		3,733	41			4,142	52

Our functional currency is RMB; however, our financial information is expressed in U.S. dollars. The results of operations reported in the table above are based on the exchange rate of RMB6.5062 to $1.00 for the nine months ended September 30, 2011 and the exchange rate of RMB6.7647 to $1.00 for the nine months ended September 30, 2010.

Revenues. Our sales revenue is generated from bundled passes, admission tickets, water drifting attraction fees, rail car fees and other fees and services, including battery vehicle fees, strop ropeway fees and parking fees. A bundled pass is for general access to our “Underground Grand Canyon” tourist destination and general access to the “Fluorescent Lake” tourist destination operated by Yishui Underground Fluorescent Lake Travel Development Co., Ltd. (“Fluorescent Lake”), a company controlled by the immediate family of Zhang Shanjiu, our Chairman, President and Chief Executive Officer. Because the bundled pass entitles its holder to visit the Fluorescent Lake tourist destination, the price of the bundled pass, which is sold at both the Underground Grand Canyon and the Fluorescent Lake, is higher than the regular admission ticket price to the Underground Grand Canyon. Through a 2010 revenue sharing agreement between Longkong and Fluorescent Lake, prior to April 1, 2011, if a bundled pass (RMB118) was sold at the Underground Grand Canyon, approximately 92% (RMB108) of the cost of the pass was allocated as revenue to Longkong with the remaining 8% (RMB10) being allocated to Fluorescent Lake and recorded as a liability to a related party on our balance sheet. If a bundled pass was sold at the Fluorescent Lake, approximately 36% (RMB42) of the cost of the pass was allocated as revenue to Longkong and recorded as a receivable from a related party on our balance sheet with the remaining 64% (RMB76) being recorded as revenue by Fluorescent Lake. During April and May 2011, if a bundled pass (RMB128) was sold at the Underground Grand Canyon, approximately 91% (RMB116) of the cost of the pass was allocated as revenue to Longkong with the remaining 9% (RMB12) being allocated to Fluorescent Lake and recorded as a liability to a related party on our balance sheet. If a bundled pass was sold at the Fluorescent Lake, approximately 39% (RMB50) of the cost of the pass was allocated as revenue to Longkong and recorded as a receivable from a related party on our balance sheet with the remaining 61% (RMB78) being recorded as revenue by Fluorescent Lake. From and after June 1, 2011, if a bundled pass (RMB138) is sold at the Underground Grand Canyon, approximately 88% (RMB121) of the cost of the pass is allocated as revenue to Longkong with the remaining 12% (RMB17) being allocated to Fluorescent Lake and recorded as a liability to a related party on our balance sheet. If a bundled pass is sold at the Fluorescent Lake, approximately 40% (RMB55) of the cost of the pass is allocated as revenue to Longkong and recorded as a receivable from a related party on our balance sheet with the remaining 60% (RMB83) being recorded as revenue by Fluorescent Lake. An admission ticket (RMB96) is for general access to our “Underground Grand Canyon” tourist destination. Our visitors are charged additional fees for the entertainment attractions in and around the Underground Grand Canyon. Our sales revenue increased approximately $1.0 million, or approximately 13.0%, to approximately $9.0 million in the nine months ended September 30, 2011 from approximately $8.0 million in the nine months ended September 30, 2010.

Revenue from sales of bundled passes was approximately $1.8 million (including approximately $0.55 million in related party commissions) in the nine months ended September 30, 2011 and the number of visitors who used a bundled pass was approximately 107,500 during the nine months ended September 30, 2011. Of the approximately 107,500 visitors who used a bundled pass, approximately 87,600 of the passes were sold by the Underground Ground Canyon, accounting for approximately $1.6 million in revenue (approximately $0.61 million in related party commissions received) to Longkong and approximately $0.19 million in revenue to Fluorescent Lake, and approximately 19,900 of the passes were sold by the Fluorescent Lake, accounting for approximately $0.2 million in revenue (approximately $0.06 million in related party commissions paid) to Longkong and approximately $2.3 million in revenue to Fluorescent Lake. Revenue from sales of bundled passes was approximately $1.3 million (including approximately $0.49 million in related party commissions) in the nine months ended September 30, 2010 and the number of visitors who used a bundled pass was approximately 93,000 during the nine months ended September 30, 2010. Of the approximately 93,000 visitors who used a bundled pass, approximately 78,000 of the passes were sold by the Underground Ground Canyon, accounting for approximately $1.2 million in revenue (approximately $0.53 million in related party commission received) to Longkong and approximately $0.1 million in revenue to Fluorescent Lake, and approximately 15,000 of the passes were sold by the Fluorescent Lake, accounting for approximately $0.19 million in revenue (approximately $0.04 million in related party commissions paid) to Longkong and approximately $0.2 million in revenue to Fluorescent Lake.

Prior to April 1, 2011, a regular admission ticket to the Underground Grand Canyon was RMB76 and a regular admission ticket to the Fluorescent Lake was RMB68. Therefore, our relative fair value of each bundled pass was RMB62, which was the proportion that our regular admission ticket price (RMB76) bore to the total of the regular admission ticket prices for both attractions (RMB144) to the price of a bundled pass (RMB118). For each bundled pass sold by the Underground Grand Canyon, we received a benefit of RMB46 above our relative fair value. Because the revenue sharing arrangement is with a related party company, the benefit for each bundled pass sold by the Underground Grand Canyon was characterized as a related party commission received. For each bundled pass sold by the Fluorescent Lake, we received RMB20 less than our relative fair value. This difference was characterized as a related party commission paid and recorded net of the related party commission received by us for bundled passes sold by the Underground Ground Canyon. During April and May 2011, a regular admission ticket to the Underground Grand Canyon was RMB96 and a regular admission ticket to the Fluorescent Lake was RMB80. Therefore, Longkong’s relative fair value of each bundled pass was RMB70, which is the proportion that its regular admission ticket price (RMB96) bore to the total of the regular admission ticket prices for both attractions (RMB176) to the former price of a bundled pass (RMB128). For each bundled pass sold by the Underground Grand Canyon, Longkong received a benefit of RMB46 above its relative fair value. Because the revenue sharing arrangement is with a related party company, the benefit for each bundled pass sold by the Underground Grand Canyon was characterized as a related party commission received. For each bundled pass sold by the Fluorescent Lake, Longkong received RMB20 less than its relative fair value. This difference was characterized as a related party commission paid and recorded net of the related party commission received by Longkong for bundled passes sold by the Underground Grand Canyon. From and after June 1, 2011, a regular admission ticket to the Underground Grand Canyon is RMB96 and a regular admission ticket to the Fluorescent Lake is RMB80. Therefore, our relative fair value of each bundled pass is RMB75, which is the proportion that our regular admission ticket price (RMB96) bears to the total of the regular admission ticket prices for both attractions (RMB176) to the price of a bundled pass (RMB138). For each bundled pass sold by the Underground Grand Canyon, we receive a benefit of RMB46 above our relative fair value. Because the revenue sharing arrangement is with a related party company, the benefit for each bundled pass sold by the Underground Grand Canyon is characterized as a related party commission received. For each bundled pass sold by the Fluorescent Lake, we receive RMB20 less than our relative fair value. This difference is characterized as a related party commission paid and recorded net of the related party commission received by us for bundled passes sold by the Underground Grand Canyon.

Revenue from sales of admission tickets increased approximately $0.5 million, or approximately 13.2%, to approximately $4.3 million in the nine months ended September 30, 2011 from approximately $3.8 million in the nine months ended September 30, 2010 primarily due to an increase in the admission ticket price from RMB76 to RMB96 because the number of visitors who purchased an admission ticket decreased from approximately 478,000 during the nine months ended September 30, 2010 to approximately 460,100 during the nine months ended September 30, 2011. Total visitors, those who purchased either a bundled pass or an admission ticket, decreased from approximately 571,000 during the nine months ended September 30, 2010 to approximately 567,600 during the nine months ended September 30, 2011. The decrease in the total number of visitors from the nine months ended September 30, 2010 to the nine months ended September 30, 2011 was due in part to the temporary cessation of operations in January 2011.

Revenue from fees for our entertainment attractions increased approximately $0.2 million, or approximately 7.1%, to approximately $3.0 million in the nine months ended September 30, 2011 from approximately $2.8 million in the nine months ended September 30, 2010 primarily due to an increase in the number of visitors paying the additional fees for our entertainment attractions in the nine months ended September 30, 2010 to the nine months ended September 30, 2011. Having the Treasure Hunting Cave operational since February 2011 did not have a material effect on the revenue from fees for our entertainment attractions.

Operating Expenses. Our operating expenses are comprised of depreciation, amortization, advertising and promotion expenses, salaries and benefits, materials purchases for operating maintenance, service charges and administrative expenses. Our operating expenses increased approximately $1.0 million, or approximately 45.45%, to approximately $3.2 million in the nine months ended September 30, 2011 from approximately $2.2 million in the nine months ended September 30, 2010 due in part to increases in advertising and promotion expenses of approximately $0.6 million and legal and accounting fees of approximately $0.15 million.

Income from Operations and Operating Margin. Our income from operations increased approximately $0.1 million, or approximately 1.8%, to approximately $5.8 million in the nine months ended September 30, 2011 from approximately $5.7 million in the nine months ended September 30, 2010. The increase in our income from operations was primarily due to an increase in revenues, partially offset by an increase in advertising and promotion expenses and legal and accounting fees. Income from operations as a percentage of revenues was 64% and 72% for the nine months ended September 30, 2011 and 2010, respectively. The decrease in our operating margin was primarily due to an increase in advertising and promotion expenses as a percentage of our total revenue.

Other Expenses. Our other expenses increased approximately $0.6 million, or approximately 300%, from approximately $0.2 million in the nine months ended September 30, 2010 to approximately $0.8 million in the nine months ended September 30, 2011. The increase was primarily due to an increase in interest expense because of the increase in interest-bearing debt period to period.

Income Tax Expense. Our income tax expense decreased approximately $0.1 million, or approximately 7.1%, from approximately $1.4 million in the nine months ended September 30, 2010 to approximately $1.3 million in the nine months ended September 30, 2011.

Net Income. Our net income decreased approximately $0.4 million, or approximately 9.8%, from approximately $4.1 million in the nine months ended September 30, 2010 to approximately $3.7 million in the nine months ended September 30, 2011 primarily due to an increase in income from operations being offset by an increase in interest expense.

Liquidity and Capital Resources

Cash Flow

As of September 30, 2011, we had cash and cash equivalents of approximately $133,000. The following table sets forth key components of our net cash flow for the periods indicated.

	Nine Months Ended September 30
	2011			2010
	(All amounts in thousands of
	U.S. dollars)

Net cash provided by operating activities	$	4,092		$	3,569
Net cash used in investing activities		(4,173	)		(12,154	)
Net cash provided by financing activities		-			7,807
Effect of foreign exchange rate changes		5			266
Cash and cash equivalents at the beginning of the period		209			1,076
Cash and cash equivalents at the end of the period		133			564

Cash Flows from Operating Activities.

Net cash provided by operating activities was approximately $4.1 million in the nine months ended September 30, 2011, an increase of approximately $0.5 million from approximately $3.6 million in the nine months ended September 30, 2010. The increase was primarily attributable to a decrease in net income of approximately $0.4 million, an increase in depreciation expense of approximately $115,000, a net increase in changes in accounts receivable of approximately $114,000, a net increase in changes in other receivables and advance payments of approximately $730,000 due to increases in prepaid marketing expenses and advance payments for construction projects, an increase in changes in inventories of approximately $48,000, a net decrease in changes in accounts payable of approximately $81,000 due to payments made for construction projects, a net decrease in changes in accrued liabilities of approximately $70,400 due to the payment of accrued sales rebates to travel agencies and a net increase in changes in taxes payable of approximately $657,000 due to the accrual of income tax for the nine months ended September 30, 2011.

Cash Flows from Investing Activities.

Net cash used in investing activities for the nine months ended September 30, 2011 was approximately $4.2 million, an approximately $8.0 million decrease from approximately $12.2 million for the nine months ended September 30, 2010. The decrease was primarily due to an approximately $0.3 million decrease in cash paid for long-term investments, an approximately 5.2 million decrease in loans to related parties and an approximately $2.5 million decrease in investments in fixed and intangible assets in the nine months ended September 30, 2011 as compared to the nine months ended September 30, 2010.

Cash Flows from Financing Activities.

No cash was used in or provided by financing activities in the nine months ended September 30, 2011 because the total proceeds from short-term debt equaled total repayments of short-term debt during the period. During the nine months ended September 30, 2010, approximately $7.8 million in net cash was provided by financing activities because total proceeds from short-term debt were greater than total repayments of short-term debt during the period.

Capital Sources

Historically, our cash flow from operations has been sufficient to finance our operations. During the fiscal years ended December 31, 2009 and 2010, however, we increased our reliance on short-term borrowings to finance our operations during off-peak months during which our cash flow from operations was at its lowest and to finance the development of additional entertainment attractions and facilities at the Underground Grand Canyon. During those periods that our cash flow from operations is at its highest, we both seek to pay down the short-term borrowings that are outstanding, as well as make short-term loans to related parties controlled by Zhang Shanjiu, our Chairman, President and Chief Executive or by his immediate family. We plan to reduce the level of short-term loans we make to related parties, both in an effort to reduce our overall leverage and to focus on our core business.

At September 30, 2011, we did not have any unused credit facilities available to us as all of our borrowings are one-time loans received from commercial banks. As of September 30, 2011 and December 31, 2010, our outstanding borrowings consisted of the following:

	Term (Months)	Maturity Date	Interest Rate			September 30, 2011		December 31, 2010
	(in thousands of U.S. dollars, except percentage)

Yishui Rural Credit Cooperatives	12	04/20/2011		10.62	%	$	-	$	910,200

Yishui Rural Credit Cooperatives	12	04/26/2011		5.31	%		-		303,400

Yishui Rural Credit Cooperatives	12	04/26/2011		11.15	%		-		455,100

Yishui Rural Credit Cooperatives	12	05/20/2011		10.62	%		-		1,517,000

Yishui Rural Credit Cooperatives	12	01/10/2012		10.46	%		937,200		-

Yishui Rural Credit Cooperatives	12	06/15/2012		13.88	%		781,000		-

Yishui Rural Credit Cooperatives	12	08/15/2012		12.47	%		2,499,200		-

Industrial and Commercial Bank of China	12	09/15/2011		6.372	%		-		1,061,900

Industrial and Commercial Bank of China	12	10/14/2011		6.672	%		781,000		758,500

Bank of China	12	09/28/2011		5.841	%		-		455,100

	Term (Months)	Maturity Date	Interest Rate			September 30, 2011		December 31, 2010
	(in thousands of U.S. dollars, except percentage)

Bank of China	12	10/20/2011		6.116	%		2,343,000		2,275,500

Bank of China	12	10/26/2011		6.116	%		-		303,400

Bank of China	12	09/13/2012		4.543	%		781,000		-

LinShang Bank	12	05/28/2011		7.965	%		-		758,500

LinShang Bank	12	08/22/2012		9.84	%		781,000		-

Construction Bank of China	12	07/25/2011		5.84	%		-		910,200

Construction Bank of China	12	08/01/2011		5.84	%		-		606,800

ShanDong YiSheng Guarantee Co., Ltd.	92 days	10/20/2011		12.6	%		937,200		-

JuNan Xin Yuan Investment Consulting Co., Ltd.	90 days	11/10/2011		12.6	%		781,000		-

						$	10,621,600	$	10,315,600

The weighted average interest rate for short-term loans as of September 30, 2011 and December 31, 2010 was 9.3% and 6.69%, respectively. As of September 30, 2011, most of the short-term loans were secured by guarantees provided by related parties, including our director and executive officers and companies that are recipients of related party loans from us, as well as the pledge by Longkong of its operation fee charging rights and its interest in real property. Generally, the loans do not require the periodic payment of principal and interest, though we typically have the option to pay principal or interest prior to the maturity date of the loan. In some cases, the lender is entitled to charge us a prepayment fee if we choose to pay the loan off prior to the maturity date.

Notwithstanding that we had cash on hand of approximately $133,000 at September 30, 2011, had approximately $10.6 million of short-term loans due within the next 12 months, including approximately $4.8 million of short-term loans due within 90 days that were incurred because we were unable to obtain such financing from commercial banks in enough time to pay off maturing debts, had approximately $3.0 million of expected capital expenditures in the next 12 months and no unused credit facilities, we believe that our cash on hand, cash flow from operations and anticipated additional cash resources will meet our expected capital expenditures and working capital requirements for the next 12 months. Our cash flow from operations for the nine months ended September 30, 2011 was approximately $4.0 million. In addition, loans receivable from loans made to related parties were approximately $17.9 million at September 30, 2011, all of which is due within the next 12 months or payable on demand. Generally, the source of cash used to make loans to related parties is a combination of the use of short-term borrowings and cash on hand generated from cash flow from operations at a time when our cash on hand is relatively high, not all of which is required at that point in time to finance short-term operations. If cash on hand, cash flow from operations and anticipated cash payments received in respect of outstanding related party loans are not sufficient to meet our expected capital expenditures and working capital requirements for the next 12 months, we may be unable to repay our short-term indebtedness or we may be forced to cease or significantly reduce our operations, delay our capital expenditures, seek to collect on the related party loans we have made that are not yet due, and/or be forced to raise additional funds.

The related party loans are made to entities that are controlled by Zhang Shanjiu, our Chairman, President and Chief Executive Officer. If Zhang Shanjiu does not cause the related party companies to repay the loans we have made to such companies, we may be unable to repay our short-term indebtedness, which would have a material adverse effect on our financial condition. Further, if Zhang Shanjiu decides to focus more on the companies he owns or controls that compete directly or indirectly with our company and less on our company and we continue to make related party loans to these companies, our ability to expand our business and to continue to operate our business will be significantly reduced, which will have a material adverse effect on our financial condition and results of operations. Notwithstanding that many of our related party loans are subject to an agreement, we may not be able to compel repayment of these loans so long as Zhang Shanjiu controls both our company and the companies to which we have made loans.

To raise additional funds, we may seek to sell equity or debt securities or obtain additional credit facilities. The sale of equity securities could result in dilution to our stockholders. The incurrence of indebtedness would result in increased debt service obligations and could require us to agree to operating and financial covenants that would restrict our operations. Financing may not be available in amounts or on terms acceptable to us, if at all. The existence of the related party loans outstanding could impede our ability to obtain third party financing. Any failure by us to raise additional funds on terms favorable to us, or at all, could limit our ability to expand our business and could harm our overall business prospects.

Capital Uses

Capital Expenditures

Our capital expenditures were approximately $0.1 million and $2.6 million for the nine months ended September 30, 2011 and 2010, respectively. Our capital expenditures were mainly used to acquire fixed assets to build and expand our entertainment attractions.

In addition to expenditures to repair and improve our existing entertainment attractions, we plan to develop an additional 1,800 meters (approximately 1.1 miles) of the Underground Grand Canyon to include additional entertainment attractions. In late January 2011, we completed the development of the “Treasure Hunting Cave” entertainment attraction, which consists of eight entertainment attractions suitable for teenagers and young adults encompassing more than 3,000 square meters (approximately 32,300 square feet), including a man-made rock hill for climbing, a maze and amusement park type rides. The total cost to develop the Treasure Hunting Cave was approximately $3.1 million and it took approximately seven to eight months to complete. Of the $3.1 million incurred to develop the Treasure Hunting Cave, approximately $3.0 million had been incurred as of December 31, 2010 and the remaining $0.1 million was incurred in the first quarter of 2011. The source of the funds used to develop the Treasure Hunting Cave was cash flow from operations. The Treasure Hunting Cave entertainment attraction first opened to visitors in early February 2011. We believe the Treasure Hunting Cave will increase the attraction points to the Underground Grand Canyon and ultimately the number of visitors we host, but there can be no assurance that the Treasure Hunting Cave will lead to an increase in the number of visitors.

Any additional development of the additional 1,800 meters (approximately 1.1 miles) is expected to be financed by cash flow from operations, but there can be no assurance that cash flow from operations will be sufficient to fund this development, in which case we will have to raise additional funds. To do so, we may seek to sell equity or debt securities or obtain additional credit facilities. The sale of equity securities could result in dilution to our stockholders. The incurrence of indebtedness would result in increased debt service obligations and could require us to agree to operating and financial covenants that would restrict our operations. Financing may not be available in amounts or on terms acceptable to us, if at all. Any failure by us to raise additional funds on terms favorable to us, or at all, could limit our ability to expand our business and could harm our overall business prospects. We believe these new projects will increase the attraction points to the Underground Grand Canyon and ultimately the number of visitors we host, but there can be no assurance that we will be successful in completing these new projects or that, if completed, the new projects will lead to an increase in the number of visitors.

In addition to the Treasuring Hunting Cave, to enhance our visitors’ experience, we recently completed the development of catering facilities, which include restaurant facilities for our visitors, as well as the services to host and cater large-scale events, and gift shop facilities. Our catering and restaurant facilities are outsourced to third party food vendors who pay us a nominal fee to use our facilities, which totaled an aggregate of approximately $51,000 during the nine months ended September 30, 2011. The total cost to develop the catering and gift shop facilities was approximately $1.2 million, all of which had been incurred as of December 31, 2010, and it took approximately two years to complete. The source of the funds used to develop these facilities was cash flow from operations. Although we developed these facilities to enhance our visitors’ experience, there can be no assurance that we will be successful in doing so.

Acquisitions

In addition to expanding our current operations through the development of additional entertainment attractions at the Underground Grand Canyon, achieving our goal of becoming a leading tourism management and development company in China necessarily requires us to manage and develop additional tourist destinations. Although we are seeking to locate one or more sites as acquisition and/or management opportunities, no definitive agreements have been executed, nor have there been any preliminary agreements, discussions or negotiations, with respect to any of these opportunities and there can be no assurances that we will execute any such agreements or enter into discussions or negotiations with respect to any potential sites. If and when we acquire additional tourist destinations or obtain the rights to manage additional tourist destinations, we expect that we will have to raise funds to finance these acquisitions and related costs. To do so, we may seek to sell equity or debt securities or obtain additional credit facilities. The sale of equity securities could result in dilution to our stockholders. The incurrence of indebtedness would result in increased debt service obligations and could require us to agree to operating and financial covenants that would restrict our operations. Financing may not be available in amounts or on terms acceptable to us, if at all. Any failure by us to raise additional funds on terms favorable to us, or at all, could limit our ability to expand our business and could harm our overall business prospects.

Foreign Currency Translation Gains or Losses

During the nine months ended September 30, 2011, no foreign currency translation gains or losses were recorded in our consolidated statements of operations as a component of net income because we did not have any foreign currency revenues during such period.

Off-Balance Sheet Arrangements

We have entered into financial guarantees and similar commitments to guarantee the payment obligations of third parties. Conversely, our debt with lenders is also guaranteed by other parties which may be related or unrelated to us. As an industry practice, Chinese financial institutions require third party guarantees in order to provide both short term and long term bank loans to any corporate borrower. Because of this requirement, it is common practice that Chinese private enterprises enter into arrangements with other private enterprises to provide mutual guarantees in order to obtain bank loans from local Chinese financial institutions.

Typically, we enter into such mutual guarantees for companies that have good longstanding relationships with us and a mutual guarantee provided to us of approximately similar amounts. Such guarantees are typically for a period of two years after the maturity date of the loans underlying the guarantees.

Changes in the economic environment could leave us exposed to obligations that we have guaranteed which could have a materially negative impact on our ongoing business, and cause us to potentially be unable to meet our obligations under other bank financings. Additionally, should any of the companies for which we provide guarantees default, and the banks enforce our guarantees, our recourse may only be limited to default on the mutual guarantee and we may not be able to meet the liquidity and working capital requirements for our ongoing business, resulting in a material adverse impact on our business.

As of September 30, 2011, we had four guarantees of approximately $8.6 million in total principal outstanding. Our potential liability under guarantees could include interest, default interest and the obligation to pay costs of collection in addition to principal amounts to which the guarantees relate.

We have not entered into any derivative contracts that are indexed to our shares and classified as shareholders’ equity or that are not reflected in our consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk, or credit support to us or engages in leasing, hedging, or research and development services with us.

Inflation

In recent years, the Chinese economy has experienced periods of rapid expansion and high rates of inflation. During the past fifteen years, the official consumer price index in China has been as high as 24.1% and as low as -1.4%. While these inflation rates are an average national basis, the regional inflation in the major cities have arguably been higher. These factors have led to the adoption by the PRC government, from time to time, of various corrective measures designed to restrict the availability of credit or regulate growth and contain inflation including bank lending restrictions on property investment in China. While inflation has been more moderate since 1995, high inflation may in the future cause the PRC 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 services. Our operations have also experienced cost increases, including labor costs. We expect our operating costs to increase in tandem with the inflationary environment, particularly because of the economic growth in China. If the inflation rate increases in the near term, such increase will impact our operating costs.

Critical Accounting Policies

Basis of consolidation

The consolidated financial statements include the financial statements of BTHC and its subsidiaries. All significant inter-company transactions and balances have been eliminated upon consolidation.

Use of Estimates

Revenue Recognition

Revenue is generated from bundled passes, admission tickets, water drifting attraction fees, rail car fees and other fees and services, including battery vehicle fees, strop ropeway fees, treasure hunting cave fees (beginning February 2011) and parking fees. A bundled pass is for same-day general access to our “Underground Grand Canyon” tourist destination and same-day general access to the “Fluorescent Lake” tourist destination operated by Fluorescent Lake. Because the bundled pass entitles its holder to visit the Fluorescent Lake tourist destination, the price of the bundled pass, which is sold at both the Underground Grand Canyon and the Fluorescent Lake, is higher than the regular admission ticket price to the Underground Grand Canyon.

Pursuant to a 2010 revenue sharing agreement between Longkong and Fluorescent Lake, prior to April 1, 2011, if a bundled pass (RMB118) was sold at the Underground Grand Canyon, approximately 92% (RMB108) of the cost of the pass was allocated as revenue to Longkong with the remaining 8% (RMB10) being allocated to Fluorescent Lake and recorded as a liability to a related party on our balance sheet. If a bundled pass was sold at the Fluorescent Lake, approximately 36% (RMB42) of the cost of the pass was allocated as revenue to Longkong and recorded as a receivable from a related party on our balance sheet with the remaining 64% (RMB76) being recorded as revenue by Fluorescent Lake. While negotiating the terms of the revenue sharing agreement, Fluorescent Lake’s management agreed to the premium percentages allocated to the Underground Grand Canyon due to several factors, including that the Underground Grand Canyon is relatively better known than the Fluorescent Lake based on the number of visitors to each tourist attraction annually, that the Underground Grand Canyon offers five entertainment attractions, in addition to the general walking tour, to Fluorescent Lake’s one entertainment attraction and that Longkong’s management did not expect to see a significant increase in the number of visitors to the Underground Grand Canyon solely as a result of the sales of bundled passes by Fluorescent Lake. The revenue sharing agreement only contains economic terms and is otherwise terminable at the will of either party and does not contain a term. In March 2011, the local government approved an increase in our admission ticket price for visitors effective April 1, 2011, which led to a RMB10 increase in the price of the bundled pass to RMB128 also effective that date. During April and May 2011, if a bundled pass (RMB128) was sold at the Underground Grand Canyon, approximately 91% (RMB116) of the cost of the pass was allocated as revenue to Longkong with the remaining 9% (RMB12) being allocated to Fluorescent Lake and recorded as a liability to a related party on our balance sheet. If a bundled pass was sold at the Fluorescent Lake, approximately 39% (RMB50) of the cost of the pass was allocated as revenue to Longkong and recorded as a receivable from a related party on our balance sheet with the remaining 61% (RMB78) being recorded as revenue by Fluorescent Lake. Beginning June 1, 2011, the price of the bundled pass increased again RMB10 to RMB138. From and after June 1, 2011, if a bundled pass (RMB138) is sold at the Underground Grand Canyon, approximately 88% (RMB121) of the cost of the pass is allocated as revenue to Longkong with the remaining 12% (RMB17) being allocated to Fluorescent Lake and recorded as a liability to a related party on our balance sheet. If a bundled pass is sold at the Fluorescent Lake, approximately 40% (RMB55) of the cost of the pass is allocated as revenue to Longkong and recorded as a receivable from a related party on our balance sheet with the remaining 60% (RMB83) being recorded as revenue by Fluorescent Lake. Longkong’s and Fluorescent Lake’s management expects to review the terms of the revenue sharing agreement annually and decide whether to continue the relationship as is, modify the existing terms, which could be more or less beneficial to Longkong, or terminate the relationship.

Prior to April 1, 2011, a regular admission ticket to the Underground Grand Canyon was RMB76 and a regular admission ticket to the Fluorescent Lake was RMB68. Therefore, our relative fair value of each bundled pass was RMB62, which is the proportion that our regular admission ticket price (RMB76) bore to the total of the regular admission ticket prices for both attractions (RMB144) to the former price of a bundled pass (RMB118). For each bundled pass sold by the Underground Grand Canyon, we received a benefit of RMB46 above our relative fair value. Because the revenue sharing arrangement is with a related party company, the benefit for each bundled pass sold by the Underground Grand Canyon was characterized as a related party commission received. For each bundled pass sold by the Fluorescent Lake, we received RMB20 less than our relative fair value. This difference was characterized as a related party commission paid and recorded net of the related party commission received by us for bundled passes sold by the Underground Ground Canyon. During April and May 2011, a regular admission ticket to the Underground Grand Canyon was RMB96 and a regular admission ticket to the Fluorescent Lake was RMB80. Therefore, Longkong’s relative fair value of each bundled pass was RMB70, which is the proportion that its regular admission ticket price (RMB96) bore to the total of the regular admission ticket prices for both attractions (RMB176) to the former price of a bundled pass (RMB128). For each bundled pass sold by the Underground Grand Canyon, Longkong received a benefit of RMB46 above its relative fair value. Because the revenue sharing arrangement is with a related party company, the benefit for each bundled pass sold by the Underground Grand Canyon was characterized as a related party commission received. For each bundled pass sold by the Fluorescent Lake, Longkong received RMB20 less than its relative fair value. This difference was characterized as a related party commission paid and recorded net of the related party commission received by Longkong for bundled passes sold by the Underground Grand Canyon. From and after June 1, 2011, a regular admission ticket to the Underground Grand Canyon is RMB96 and a regular admission ticket to the Fluorescent Lake is RMB80. Therefore, our relative fair value of each bundled pass is RMB75, which is the proportion that our regular admission ticket price (RMB96) bears to the total of the regular admission ticket prices for both attractions (RMB176) to the price of a bundled pass (RMB138). For each bundled pass sold by the Underground Grand Canyon, we receive a benefit of RMB46 above our relative fair value. Because the revenue sharing arrangement is with a related party company, the benefit for each bundled pass sold by the Underground Grand Canyon is characterized as a related party commission received. For each bundled pass sold by the Fluorescent Lake, we receive RMB20 less than our relative fair value. This difference is characterized as a related party commission paid and recorded net of the related party commission received by us for bundled passes sold by the Underground Grand Canyon.

An admission ticket entitles the visitor to a one-time admission to the Underground Grand Canyon and entertainment attraction fees entitle the visitor to a one-time usage of the particular entertainment attraction. No weekly, monthly or other annual or season type passes are offered to the Underground Grand Canyon. Longkong does not sell admission tickets in advance. Admission ticket prices and entertainment attraction fees are generally collected when tickets are sold upon the visitors entering the facility. Revenue is recognized when the tickets are used. Occasionally, visitors are granted admission to the Underground Grand Canyon on credit. At such times, we recognize revenue when the service has occurred and record accounts receivable. Revenue is recorded net of relevant business taxes.

Rebates

Commencing January 1, 2010, we started to offer a return, also referred to as a rebate, to the travel agencies with which Longkong has entered into cooperation agreements. The rebates are based on the total number of visitors the travel agency brings to the Underground Grand Canyon during a calendar year. We recognize the rebate obligation as a reduction of revenue based on the estimated number of visitors brought to the Underground Grand Canyon by those travel agencies expected to claim rebates.

Foreign currency translation

Our reporting currency is the U.S. dollar. The functional currencies of our subsidiaries are local currencies, primarily the PRC currency Yuan (Renminbi) and Hong Kong dollar. Transactions denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the date of the transaction. The financial statements are translated into U.S. dollars using period-end rates of exchange for assets and liabilities and average rates of exchange for the period for revenues and expenses. Exchange gains or losses on transactions are included in earnings.

Earnings per share

Basic earnings per share is computed by dividing net income by the weighted average number of shares of common stock outstanding during each period. Diluted earnings per share is computed by dividing net income by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during each period. At September 30, 2011 and 2010, respectively, we had no common stock equivalents that could potentially dilute future earnings per share.

Related parties

A party is considered to be related to our company if the party directly or indirectly or through one or more intermediaries, controls, is controlled by, or is under common control with our company. Related parties also include our principal owners, our management, members of the immediate families of our principal owners and our management and other parties with which we may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. A party which can significantly influence the management or operating policies of the transacting parties or has an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests is also a related party.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

We do not use derivative financial instruments and we have no foreign exchange contracts. Our financial instruments consist of cash and cash equivalents, trade accounts receivable, accounts payable and long-term obligations. We generally consider investments in highly liquid instruments purchased with a remaining maturity of 90 days or less at the date of purchase to be cash equivalents.

Interest Rates. We generally do not invest in or hold debt securities. Accordingly, fluctuations in applicable interest rates would not have a material impact on our company. At September 30, 2011, we had short-term loans payable of approximately $10.6 million. These notes have interest rates ranging from 4.543% to 13.88%. Due to the short-term nature of the notes, a hypothetical 10% increase or decrease in applicable interest rates is not expected to have a material impact on Longkong’s earnings, loss or cash flows.

Foreign Exchange Rate. All of our transactions are transacted in RMB. As a result, changes in the relative values of U.S. Dollars and RMB affect our reported levels of revenues and profitability as the results are translated into U.S. Dollars for reporting purposes. However, because we conduct our sales and purchases in RMB, fluctuations in exchange rates are not expected to significantly affect financial stability, or gross and net profit margins. We do not currently expect to incur significant foreign exchange gains or losses, or gains or losses associated with any foreign operations.

Concentration of credit risk. Financial instruments that potentially subject us to significant concentrations of credit risk consist principally of cash. As of September 30, 2011 and December 31, 2010, substantially all of our cash was held by major financial institutions located in the PRC and Hong Kong, which management believes are of high credit quality.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our management maintains disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that are designed to provide reasonable assurance that the material information required to be disclosed by us in our periodic reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer (our principal financial and accounting officer), to allow timely decisions regarding required disclosure.

As of September 30, 2011, our management, under the supervision of and with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as required by Rules 13a-15(b) and 15d-15(b) under the Exchange Act. Based upon this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of September 30, 2011 as a result of the following material weaknesses identified in our internal control over financial reporting:

An absence of independence and financial expertise on our board of directors limiting its ability to provide effective oversight of our management;

Lack of sufficient accounting personnel at the Chinese operating company level with the experience and training to effectively address the U.S. GAAP accounting, financial reporting, internal control, and other regulatory compliance requirements of being a U.S. public company; and

Deficiency in the knowledge by our personnel responsible for our internal control over financial reporting and certain U.S. GAAP and SEC financial reporting principles.

In addition, management identified significant deficiencies with respect to the timely public reporting of events requiring such reporting. These deficiencies caused us to file late certain Current Reports on Form 8-K and our Quarterly Reports on Form 10-Q for 2011.

Our management will continue to monitor and evaluate the effectiveness of our disclosure controls and procedures, as well as our internal control over financial reporting, on an ongoing basis, and is committed to taking action and implementing improvements, as necessary and as funds allow. However, our management cannot guarantee that the measures to be taken will remediate the material weaknesses identified or that any additional material weaknesses or significant deficiencies will not arise in the future due to a failure to implement and maintain adequate internal control over financial reporting.

Notwithstanding the material weaknesses described above, our management believes that there are no material inaccuracies or omissions of material fact and, to the best of its knowledge, believes that the consolidated financial statements included in this Quarterly Report present fairly, in all material respects, our financial position, results of operations, and cash flows for the periods presented in conformity with U.S. GAAP.

Changes in Internal Control over Financial Reporting

No change in our system of internal control over financial reporting occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings.

We do not have any material proceedings pending nor are we aware of any pending investigation or threatened litigation by any third party other than the matter discussed below.

With respect to the previously reported matter entitled Greentree Financial Group, Inc. v. Long Fortune Valley Tourism International, Ltd., BTHC XV, Inc. and Halter Financial Investments L.P., on April 12, 2011, Greentree Financial Group, Inc. (“Greentree”) filed its opposition to BTHC’s and Long Fortune’s motion to dismiss the Amended Complaint, which was filed by the parties on March 25, 2011. On April 22, 2011, BTHC and Long Fortune filed a reply in further support of their motion to dismiss. On May 10, 2011, prior to a decision being rendered on the motion to dismiss, Greentree advised the Court that Greentree, BTHC and Long Fortune had reached an agreement in principle to settle all claims involving BTHC and Long Fortune. That settlement has now been formalized and effectuated, and, on July 6, 2011, Greentree filed a Notice of Voluntary Dismissal with Prejudice of all claims brought against Long Fortune and BTHC. On July 8, 2011, the Court dismissed with prejudice all claims brought against defendants BTHC and Long Fortune.

Item 1A. Risk Factors.

Smaller reporting companies are not required to provide information required by this item. Nonetheless, the following are risk factors that have been updated through September 30, 2011.

We may be required to repay obligations under guarantees we have executed in favor of other local entities.

From time to time, we provide guarantees of loans and other obligations for other local enterprises. As of September 30, 2011, we had four guarantees of approximately $10.2 million in total principal outstanding with a term up to three years. Our potential liability under such guarantees could include interest, default interest and the obligation to pay costs of collection in addition to principal amounts to which the guarantees relate. Because banks typically require security for loans, such as guarantees, mortgages or pledges, and these enterprises, including our company, have mortgaged and pledged all of our available assets, in order to obtain additional bank loans, the local enterprises often agree to provide guarantees for one another. All the guarantees provided by us are joint liability guarantees, which provide that when the debtor defaults, the bank can request us to pay the total debt outstanding without first enforcing its rights against the debtor. Although we may look to the debtor for repayment of any such amounts paid to the bank on behalf of the debtor, our evaluation of the potential liability may prove to be inaccurate and liabilities may exceed estimates. Changes in the economic environment could leave us exposed for obligations that we have guaranteed which could have a materially negative impact on our ongoing business.

Our current debt and other obligations, including amounts we may be liable for under guarantees, may harm our financial condition and results of operations.

Our short- and long-term debt as of September 30, 2011 was $10.6 million. Our level of indebtedness could result in the following:

it could affect our ability to satisfy our outstanding obligations;

a substantial portion of our cash flows from operations will have to be dedicated to interest and principal payments and may not be available for operations, working capital, capital expenditures, expansion, acquisitions or general corporate or other purposes;

it may impair our ability to obtain additional financing in the future;

it may limit our flexibility in planning for, or reacting to, changes in our business and industry and the markets in which we compete;

it may make us more vulnerable to downturns in our business, our industry or the economy in general; and

it may place us at a competitive disadvantage relative to our competitors with less indebtedness.

As of September 30, 2011, we had four guarantees of approximately $8.6 million in total principal outstanding with terms up to three years. Our operations may not generate sufficient cash to enable us to service all of our obligations, including any obligations for which we may become liable pursuant to guarantees we have executed in favor of third parties. In such case, we may be required to raise additional funds through the sale of equity or debt securities or obtain additional credit facilities. The sale of equity securities could result in dilution to our stockholders. The incurrence of indebtedness would result in increased debt service obligations and could require us to agree to operating and financial covenants that would restrict our operations. Financing may not be available in amounts or on terms acceptable to us, if at all. In fact, recently, the PRC government has been reported to be tightening its monetary policies, including increasing interest rates on bank loans and tightening the money supply to control growth in lending. If we fail to make a payment on certain of our obligations, this could cause us to be in default on such obligations and the security interests and mortgages on our assets to secure such obligations may be enforced to repay the underlying outstanding indebtedness, which would adversely affect the operations.

Our Chairman, President and Chief Executive Officer owns or controls companies that compete with our company.

Zhang Shanjiu, our Chairman, President and Chief Executive Officer, owns or controls companies that compete with our company. As the beneficial owner of 91.8% of our common stock and as our sole director, Zhang Shanjiu controls our board of directors and has the ability to exercise significant influence over matters submitted to a vote of our stockholders. In addition, our company is not presently subject to rules of any national securities exchange that require that we have a majority of independent directors or that we have a standing Audit Committee with responsibility over, among other things, the approval of related party transactions. As of September 30, 2011, we have $17.9 million in related party loans made to companies owned or controlled by Zhang Shanjiu. If Zhang Shanjiu does not cause the related party companies to repay the loans we have made to such companies, we may be unable to repay our short-term indebtedness (which was $10.6 million from unrelated third parties as of September 30, 2011), which would have a material adverse effect on our financial condition. Further, if Zhang Shanjiu decides to focus more on the companies he owns or controls that compete directly or indirectly with our company and less on our company and we continue to make related party loans to these companies, our ability to expand our business and to continue to operate our business will be significantly reduced, which will have a material adverse effect on our financial condition and results of operations. Notwithstanding that many of our related party loans are subject to an agreement, we may not be able to compel repayment of these loans so long as Zhang Shanjiu controls both our company and the companies to which we have made loans.

In addition, our revenue sharing arrangement with Fluorescent Lake for bundled passes sold at the Underground Grand Canyon and at the Fluorescent Lake was not negotiated on an arm’s length basis. As a result, if a bundled pass is sold by the Underground Grand Canyon, approximately 88% of the cost of the pass is allocated as revenue to Longkong with the remaining 12% being allocated to Fluorescent Lake and recorded as a liability to a related party on our balance sheet. If a bundled pass is sold at the Fluorescent Lake, approximately 40% of the cost of the pass is allocated as revenue to Longkong and recorded as a receivable from a related party on our balance sheet with the remaining 60% being recorded as revenue by Fluorescent Lake. As of September 30, 2011, there is a net payable to Fluorescent Lake in the amount of approximately $70,000. If Zhang Shanjiu decides to modify the terms of the revenue sharing arrangement to be more beneficial to Fluorescent Lake, our cash flow from operations, financial condition and results of operations may be materially adversely affected.

Our Chairman, President and Chief Executive Officer owns or controls many businesses in addition to our company, which may lead to conflicts of interest.

Zhang Shanjiu, our Chairman, President and Chief Executive Officer, owns or controls many businesses in addition to our company, some of which are in the travel industry, including the companies we have made loans to (Fluorescent Lake and Yinhe Travel) and other companies that operate hotels and travel agencies. Zhang Shanjiu’s employment agreement requires him to devote substantially all of his business time, attention and energy to performing his duties and responsibilities to us and also contains a non-compete provision prohibiting him from, among other things, owning, controlling or managing any business that competes directly or indirectly with us in any market in which we are operating or considering operating. Both of these provisions, however, are subject either to waiver by the board of directors or are enforceable by the board of directors. Zhang Shanjiu, as our sole director, has waived the non-compete provisions of his employment agreement with respect to the businesses he owned or controlled, directly or indirectly, as of the closing date of the Share Exchange. Because Zhang Shanjiu presently is our sole director and also presently owns or controls companies that compete with us, he may allocate his time to other businesses and activities, thereby causing possible conflicts of interest in his determination as to how much time to devote to the affairs of our company. If other business affairs require Zhang Shanjiu to devote more substantial amounts of time to such affairs, it could limit his ability to devote substantial time to our affairs and could have a negative impact on our ongoing business.

Because certain of Zhang Shanjiu’s other businesses compete or may compete with our business, certain opportunities, including acquisition opportunities, that may ultimately complement our business may also complement the business operated by Zhang Shanjiu’s other business interests, which may lead to those opportunities being presented to those businesses instead of our company. Moreover, in light of Zhang Shanjiu’s other business affiliations, he may have fiduciary obligations to present potential investment and business opportunities to those entities in addition to presenting them to our company, which could cause additional conflicts of interest. Although we are seeking to locate one or more sites as acquisition and/or management opportunities, no definitive agreements have been executed, nor have there been any preliminary agreements, discussions or negotiations, with respect to any of these opportunities and there can be no assurances that we will execute any such agreements or enter into discussions or negotiations with respect to any potential sites.

As of September 30, 2011, we have made approximately $17.9 million in loans to entities controlled by Zhang Shanjiu. Although most of the loans are payable on demand, Zhang Shanjiu’s influence over our company and the companies to which we have made loans may cause delays in repayment or modifications to repayment terms that might not otherwise occur in an arms’ length transaction. To the extent Zhang Shanjiu determines that he values the business operated by these other companies more than our company, he may cause us to make additional loans to these businesses, which could have a material adverse effect on our financial condition, particularly if we are unable to repay our short-term indebtedness as a result of Zhang Shanjiu not compelling repayment of the loans we have made to these other companies. Presently, we plan to reduce the level of short-term loans we make to related parties, both in an effort to reduce our overall leverage and to focus on our core business, although there can be no assurance that circumstances will not arise that will lead us to loan funds to related parties in the future. Furthermore, the process of reducing the amount of short-term loans may take a year or more to put in place.

There can be no assurances that any conflicts of interest will be resolved in our favor. Any such conflicts that are not resolved in our favor may have a material adverse effect on our business, financial condition and results of operations. In any event, it cannot be predicted with any degree of certainty as to whether or not Zhang Shanjiu will have a conflict of interest with respect to a particular transaction as such determination would be dependent upon the specific facts and circumstances surrounding such transaction at the time.

We are not currently subject to any law, rule or regulation requiring that all or any portion of our board of directors include “independent” directors. We intend to appoint such persons and form such committees as are required to meet the corporate governance requirements imposed by a U.S. national securities exchange. Therefore, we intend that a majority of our directors eventually will be independent directors and at least one of our new independent directors will qualify as an “audit committee financial expert.” At that time, we intend to have our Audit Committee or a majority of our independent directors approve all related party transactions, which, we believe, will minimize the number and potential impact of any future conflicts of interest.

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

None.

Item 3. Defaults upon Senior Securities.

None.

Item 4. (Removed and Reserved).

Item 5. Other Information.

None.

Item 6. Exhibits.

Exhibit No.		Description

31.1		Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*

31.2		Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*

32.1		Certifications of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*

32.2		Certifications of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*

99.1		Loan Contract, dated July 20, 2011, between Shandong Longkong Travel Management Co., Ltd. and ShanDong YiSheng Guarantee Co., Ltd.*+

99.2		Loan Contract, dated August 11, 2011, between Shandong Longkong Travel Management Co., Ltd. and JuNan Xin Yuan Investment Consulting Co., Ltd.*+

99.3		Loan Contract of Working Capital, dated August 23, 2011, between Shandong Longkong Travel Management Co., Ltd. and Linshang Bank Co., Ltd., Yishui Branch.*+

99.4		Working Capital Loan Contract, dated August 25, 2011, between Shandong Longkong Travel Management Co., Ltd. and Yishui Rural Credit Cooperative.*+

99.5		Renminbi Loan Contract, dated September 9, 2011, between Shandong Longkong Travel Management Co., Ltd. and Bank of China.*+

99.6		Loan Contract, dated October 9, 2011, between Shandong Longkong Travel Management Co., Ltd. and ShanDong YiSheng Guarantee Co., Ltd.*+

99.7		Loan Contract, dated October 9, 2011, between Shandong Longkong Travel Management Co., Ltd. and JuNan Xin Yuan Investment Consulting Co., Ltd.*+

99.8		Renminbi Loan Contract, dated October 21, 2011, between Shandong Longkong Travel Management Co., Ltd. and Bank of China.*+

99.9		Loan Contract, dated December 31, 2011, between Shandong Longkong Travel Management Co., Ltd. and JuNan Xin Yuan Investment Consulting Co., Ltd.*+

101		The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2011, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets as of September 30, 2011 and December 31, 2010; (ii) Consolidated Statements of Operations and Other Comprehensive Income for each of the three and nine months ended September 30, 2011 and 2010; (iii) Consolidated Statements of Cash Flows for each of the nine months ended September 30, 2011 and 2010; and (iv) Notes to Consolidated Financial Statements.**

*	Filed herewith

+	English translation of a Chinese language document.

** In accordance with Rule 406T of Regulation S-T, the information in this exhibit shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability under that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, except as expressly set forth by specific reference in such filing.

SIGNATURES

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

		BTHC XV, Inc.
		(Registrant)

Date:	January 20, 2012	By:	/s/ Zhang Shanjiu
			Zhang Shanjiu
			Chairman, President and
			Chief Executive Officer
			(Principal Executive Officer)

Date:	January 20, 2012	By:	/s/ Yu Xinbo
			Yu Xinbo
			Chief Financial Officer,
			Treasurer and Secretary
			(Principal Financial and
			Accounting Officer)

Exhibit Index

No.		Description

31.1		Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*

31.2		Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*

32.1		Certifications of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*

32.2		Certifications of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*

99.1		Loan Contract, dated July 20, 2011, between Shandong Longkong Travel Management Co., Ltd. and ShanDong YiSheng Guarantee Co., Ltd.*+

99.2		Loan Contract, dated August 11, 2011, between Shandong Longkong Travel Management Co., Ltd. and JuNan Xin Yuan Investment Consulting Co., Ltd.*+

99.3		Loan Contract of Working Capital, dated August 23, 2011, between Shandong Longkong Travel Management Co., Ltd. and Linshang Bank Co., Ltd., Yishui Branch.*+

99.4		Working Capital Loan Contract, dated August 25, 2011, between Shandong Longkong Travel Management Co., Ltd. and Yishui Rural Credit Cooperative.*+

99.5		Renminbi Loan Contract, dated September 9, 2011, between Shandong Longkong Travel Management Co., Ltd. and Bank of China.*+

99.6		Loan Contract, dated October 9, 2011, between Shandong Longkong Travel Management Co., Ltd. and ShanDong YiSheng Guarantee Co., Ltd.*+

99.7		Loan Contract, dated October 9, 2011, between Shandong Longkong Travel Management Co., Ltd. and JuNan Xin Yuan Investment Consulting Co., Ltd.*+

99.8		Renminbi Loan Contract, dated October 21, 2011, between Shandong Longkong Travel Management Co., Ltd. and Bank of China.*+

99.9		Loan Contract, dated December 31, 2011, between Shandong Longkong Travel Management Co., Ltd. and JuNan Xin Yuan Investment Consulting Co., Ltd.*+

101		The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2011, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets as of September 30, 2011 and December 31, 2010; (ii) Consolidated Statements of Operations and Other Comprehensive Income for each of the three and nine months ended September 30, 2011 and 2010; (iii) Consolidated Statements of Cash Flows for each of the nine months ended September 30, 2011 and 2010; and (iv) Notes to Consolidated Financial Statements.**

*	Filed herewith

+	English translation of a Chinese language document.

Attached files

BTHC XV, Inc. Reports

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