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SAN LOTUS HOLDING INC - 10-K - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS(Edgar Glimpses Via Acquire Media NewsEdge) The following discussion and analysis of the results of operations and financial condition of San Lotus Holding Inc. ("San Lotus" or the "Company") should be read in conjunction with our financial statements that are included elsewhere in this Annual Report on Form 10-K. References in this Management's Discussion and Analysis of Financial Condition and Results of Operations or Plan of Operations to "us," "we," "our" and similar terms refer to the Company. This discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements. Words such as "anticipate," "estimate," "plan," "continuing," "ongoing," "expect," "believe," "intend," "may," "will," "should," "could" and similar expressions are used to identify forward-looking statements. PLAN OF OPERATIONS San Lotus Holding Inc. was incorporated in the State of Nevada on June 21, 2011 to market travel products and services to the growing "baby boomer" market, with an initial focus on the Asian market. Our business plan for the next twelve months includes the following anticipated milestones: 1. Developing Travel Agency in Taiwan-September 1, 2013- throughout the life of Company Our plan of developing our travel agency in Taiwan includes: seeking to be (1) approved by Taiwan government to operate travel agency in Taiwan and (2) meeting the statutory requirements related to capital requirements, statutory reserves and employing fit, proper and qualified management. We anticipate that we may obtain the approval from Taiwan government by the end of 2014.The total cost we have incurred and/or anticipated to engage such development is listed as "set-up cost" and "operating expenses" in page2. Developing travel agency in Taiwan is an ongoing effort that will continue during the life of the Company. To facilitate our developing efforts, we are actively seeking additional funding on favorable terms to continue our development in Taiwan. If additional funding is not available on acceptable terms, we may not be able to implement our development in Taiwan and continue our operations. We plan to be funded by private placement of our equity securities and/or mortgage our land. But, there can be no assurance we will be funded as such. Thus, there can be no assurance we will successfully develop travel agency in Taiwan. 2. Acquisition of additional Travel Agencies -January 18, 2013-the end of Second quarter of 2014 We have entered into non-binding letters of intent to acquire the following travel agencies and expect to complete the acquisitions by the end of the second quarter of 2014: Company Location USA XO Tours Inc. Rosemead, CA XO Tours Canada Ltd. Vancouver, BC, Canada See World Holiday Ltd. Vancouver, BC, Canada Grandfair Travel Ltd. Vancouver, BC, Canada Lok Yee Holiday Limited Hong KongSian Lian Hua International Travel Inc. Taipei, Taiwan SmileViet, JSC Hanoi, Vietnam Tourmaster Travel Service Inc. Taipei, Taiwan Vietlink International Travel (HK) Ltd. Hong Kong 20 As a general note, we expect the travel agencies will be able to continue to operate as they have been, although we will integrate them into San Lotus by utilizing a comprehensive accounting system and assisting them in their further development. Although the non-binding letters of intent to acquire the travel agencies above were entered, we remain in the preliminary discussion with them about the specific considerations to acquire each of them. Thus, to date, we are not able to estimate any specific costs in completing such acquisitions. Acquiring travel agencies located both within and outside of Taiwan is an ongoing effort that will continue during the life of the Company. To facilitate our acquisition efforts, we will actively seeking additional funding on favorable terms to continue our acquisition. If additional funding is not available on acceptable terms, we may not be able to implement our acquisition plan and continue our operations. We plan to be funded by private placement of our equity securities and/or mortgage our land. But, there can be no assurance we will be funded as such. Thus, there can be no assurance we will successfully complete our acquisition of travel agencies. 3. Acquisition of additional land or land holding companies -Third quarter of 2013- throughout the life of Company San Lotus was designated a shell corporation until our wholly-owned subsidiary, Green Forest Management Consulting Inc. ("Green Forest") acquired Da Ren International Development Inc., a Taiwan (R.O.C.) land holding corporation ("Da Ren"), on September 17, 2013. Da Ren's sole asset is 32,273.68 square meters of land located in Taichung City, Beitun District, Taiwan (R.O.C.). We acquired Da Ren for $3,070,645. The transaction and all pertinent contracts in the transaction were disclosed in the current report on Form-8-K filed on September 20, 2013. With the acquisition of Da Ren, we are not only developing our travel agency in Taiwan, an ongoing process in our development, but also acquiring land and land holding companies, as well as acquiring travel agencies located both within and outside of Taiwan. After acquisition of Da Ren, we continue to acquire the lands in Xinpi Township, Pingtun County, Taiwan (R.O.C.), and the lands in Zaoqiao Township and Touwu Township, Miaoli County, Taiwan (R.O.C.). Such acquisitions are herein incorporated by reference to Item 2 of this annual report on Form 10-K. Additionally, we have filed current reports on Form 8-K announcing our acquisition plans concerning four additional land or land holding companies, along with the planned acquisition of nine travel agencies located in Asia and North America. In addition to our acquisition of Da Ren, we have entered into letters of intent to acquire the following land and land holding companies in Taiwan. We expect to complete these acquisitions by the end of the fourth quarter of 2014. Land or Land Holding Company Expected Acquisition Date Third Quarter 2013 (completed Da Ren International Development Inc. September 2013) Fourth Quarter 2013 (completed October Xinpi Land 2013) Den Wei Yuan Land Fourth Quarter 2014 Yao De International Recreation Inc. Fourth Quarter 2014 Mao Ren International Inc. Fourth Quarter 2014 we do not feel we are able to evaluate the land holdings accurately or make definitive plans for how to utilize the land and land holding companies until we can evaluate the properties as a whole. But, to date, we plan to use the land as follows : (1) dispose of the land for cash to develop other properties, (2) mortgage the land so that we may develop it ourselves, (3) enter into a joint venture with another developer or (4) use the land to capitalize other companies. We will evaluate this further once we complete the above listed acquisitions. Except for the completed acquisitions of Da Ren International Development Inc. and Xinpi Land, we remain in the preliminary discussion about the specific consideration in acquiring other land or land holding companies. Thus, to date, we are not able to estimate any specific costs in completing the acquisitions other than the completed acquisitions. Acquiring land and/or land Holding companies is an ongoing effort that will continue during the life of the Company. To facilitate our acquisition efforts, we will actively seeking additional funding on favorable terms to continue our acquisition. If additional funding is not available on acceptable terms, we may not be able to implement our acquisition plan and continue our operations. We plan to be funded by private placement of our equity securities and/or obtaining the loan by mortgage our land. But, there can be no assurance we will be funded as such. Thus, there can be no assurance we will successfully complete our acquisition of the land or land holding companies. 21 Results of Operations For the period ended December 31, 2013, we had no revenue. Operating Expenses for the period ended December 31, 2013, totaled $290,090. Capital Resources and Liquidity Excluding our planned acquisitions, we expect the running of San Lotus Holding, Green Forest and Da Ren to require approximately $578, 688 to carry out planned operations for the next 12 months. This includes as follows: From January 1, 2014 to March 31, 2014: $31,724 per month From April 1, 2014 to April 30, 2014: $165,724 ($39,724 plus a $100,000 capital injection into Green Forest, along with $20,000 in capital reserves and $6,000 in legal fees during this same time.) From May 1, 2014 to December 31, 2014: $39,724 per month The monthly expenses of $39,724 starting from April 1, 2014 are accounted for the added expenses of advertising for Green Forest's travel agency and adding employees. We expect our expenses to continue at the rate of $39,724 after April 1, 2014, not including the costs we will incur in running any of our planned acquisitions or embarking on any real estate development activities. To meet our needs for cash required for sustain our businesses and completing our planned acquisitions, we will need to generate sufficient revenues or require additional funding. To date, we do not have adequate funds to sustain our businesses. As of March 24, 2014, we had $9,458 cash in the bank, $391 cash held by our wholly-owned Taiwan (R.O.C.) subsidiary, Green Forest Management Consulting Inc., and $6,146 cash held by our wholly-owned Taiwan (R.O.C.) subsidiary Da Ren International Development Inc. Thus, San Lotus and Green Forest are already almost out of funds, and Da Ren has enough funds to support itself during the next three months. We will likely have to borrow funds from our President and Chairman, Chen Li-Hsing, to sustain our operations until we are able to complete a private placement of our equity securities and/or mortgage our land. As to our planned acquisitions, although the non-binding letters of intent to acquire the travel agencies were entered, we remain in the preliminary discussion with them about the specific considerations to acquire each of them. Thus, to date, we are not able to estimate any specific costs in completing such acquisitions. Additionally, except for the completed acquisitions of Da Ren International Development Inc.; Xinpi land; and certain lands in Miaoli County. We remain in the preliminary discussion about the specific consideration in acquiring other land or land holding companies. Thus, to date, we are not able to estimate any specific costs in completing the acquisitions other than the completed acquisitions. If we require additional funding to complete our planned acquisitions, we will actively seeking additional funding by completing a private placement of our equity securities and/or mortgage our land. But, there can be no assurance we will be funded as such. And, there can be no assurance that our existing shareholders will provide us with additional capital. Finally, if we are unable to generate sufficient revenue and/or obtain additional funding, we may have to cease operations entirely. We cannot guarantee that our operations and proceeds from any funding will be sufficient for us to continue as going concern. Revenue targets The Company anticipates no revenues be made in the early stages of completing our plan of operations. 22 Core services The Company is incorporated to market its travel products and services to the growing "baby boomer" market, with an initial focus on the Asian market, which is herein incorporated by reference to Item 1 of this annual report on Form 10K. We anticipate that depending on market conditions and our plan of operations, we may incur operating losses in the foreseeable future. Our liquidity may be negatively impacted by the significant costs associated with our public company reporting requirements, costs associated with newly applicable corporate governance requirements, including requirements under the Sarbanes-Oxley Act of 2002 and other rules implemented by the Securities and Exchange Commission. We expect all of these applicable rules and regulations to significantly increase our legal and financial compliance costs and to make some activities more time consuming and costly. Based upon the above, we believe that to continue our daily operation and implement our plan of operations, we will actively seeking additional funding on favorable terms. If additional funding is not available on acceptable terms, we may not be able to implement our operation plans and continue our operations. We plan to be funded by private placement of our equity securities and/or obtaining the loan by mortgage our land. But, there can be no assurance we will be funded as such. Thus, there can be no assurance we will successfully continue our operation and/or complete our plan of operations. Off-Balance Sheet Arrangements We have no off-balance sheet arrangements. Going Concern At present, we have no enough cash to pay for our selling, general and administrative expenses. As such, in order to continue developing our operations as planned, we may be reliant on obtaining additional funding by private placement of our equity securities and/or obtaining the loan by mortgage our land. But, there can be no assurance we will be funded as such. Thus, there can be no assurance we will successfully continue our operation and/or complete our plan of operations. Based on these assumptions, our auditor has expressed doubt about our ability to continue as a going concern. OUTLOOK By the end of 2014, in addition to the planned acquisitions listed in this Item, we intend to complete more acquisitions of lands; land holding companies; and/or travel agencies. We remain in the preliminary discussion with the acquired parties about the specific considerations in such acquisitions. Thus, to date, we are not able to estimate any specific costs in completing such acquisitions. Once we have completed such acquisitions, we will evaluate our land holdings as a group and develop an overall plan for how to proceed going forward. At that time, and once we determine more definitively how the land will be utilized, we will develop cost projections, milestones and plans for financing the land's development. At present, we anticipate that we will have the following four development objectives for the properties: (1) dispose of the land for cash, (2) mortgage the land to develop it ourselves, or (3) use the land to enter into a joint venture with another developer or (4) use the land to capitalize other companies. Critical Accounting Policies It is our goal to clearly present our financial information in a manner that enhances the understanding of our sources of earnings and cash flows, as well as our financial condition. We do this by including the information required by the SEC, as well as providing additional information that gives further insight into our financial operations. Our financial report includes a discussion of our accounting principles, as well as methods and estimates used in the preparation of our financial statements. 23 We believe these discussions and statements fairly represent the financial position and operating results of our company. The purpose of this portion of our discussion is to further emphasize some of the more critical areas where a significant change in facts and circumstances in our operating and financial environment could cause a change in future reported financial results. Impact of Accounting Pronouncements There were no recent accounting pronouncements that have had a material effect on our financial position or results of operations. Recently Issued Accounting Policies We have implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed and we do not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on our financial position or results of operations. |