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SAN LOTUS HOLDING INC - 10-Q/A - Management's Discussion and Analysis of Financial Condition and Results of Operation(Edgar Glimpses Via Acquire Media NewsEdge) This Quarterly Report on Form 10-Q/A contains "forward-looking" statements as such term is defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements consist of information relating to the Company that is based on the beliefs of the Company's management as well as assumptions made by and information currently available to the Company's management. When used in this report, the words "anticipate," "believe," "estimate," "expect" and "intend" and words or phrases of similar import, as they relate to the Company or Company management, are intended to identify forward-looking statements. Such statements reflect the current risks, uncertainties and assumptions related to certain factors including, without limitation, competitive factors, general economic conditions, customer relations, relationships with vendors, the interest rate environment, governmental regulation and supervision, seasonality, distribution networks, product introductions and acceptance, technological change, changes in industry practices, onetime events and other factors described herein and in other filings made by the Company with the Securities and Exchange Commission. Based upon changing conditions, should any one or more of these risks or uncertainties materialize, or should any underlying assumptions prove incorrect, actual results may vary materially from those described herein as anticipated, believed, estimated, expected or intended. The Company does not intend to update these forward-looking statements. BUSINESS OVERVIEW 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. We are a development stage company that plans to market global travel products to the retiring baby boomer generation in the Asian markets. We are in the initial stages of opening a travel agency in Taiwan, Republic of China. On May 21, 2012, we obtained a license from the Investment Commission, Ministry of Economic Affairs, Taiwan (R.O.C.) to invest into Taiwan through our wholly-owned subsidiary, Green Forest Management Consulting Inc., a Taiwan (R.O.C.) company. We anticipate that we will be able to obtain this approval by the fourth quarter of 2013. The challenges we anticipate in obtaining the necessary approvals to operate a travel agency in Taiwan (as well as in other countries) primarily involves meeting the statutory requirements related to capital requirements, statutory reserves and employing fit, proper and qualified management. These challenges have already been addressed by starting our business in Taiwan (as referenced in Risk Factors under government approval). We expect to begin generating revenue in Taiwan in April 2014, after we obtain the relevant licenses and approval from Taiwan's government. Our travel services entity in Taiwan will provide both outbound travel services for customers based in Taiwan and inbound travel services for customers based abroad and coming to Taiwan. Both the outbound and inbound services will be conducted in our Taiwan office, except the inbound services will rely in part on advertising conducted or directed outside of Taiwan. 8 -------------------------------------------------------------------------------- We will not only book airplane tickets, hotels and tours, but design specialized destination-related travel services for our customers based on their specific needs and desires while they are in Taiwan. In this way, our market will consist of both those potential travelers based in Taiwan, but also anyone from any other country who might be planning a trip to Taiwan or need assistance with designing a travel itinerary once they arrive in Taiwan. We will market our products and services to the travel population in Taiwan and abroad through our website, www.sanlotusholding.com, as well as through services such as Twitter and other media outlets. In addition, we have already taken steps to begin marketing our services to the Chinese market in California through a California television station, TBWTV Inc. ("TBWTV"). We plan to use this entity for purposes of gaining access to a means of advertising our services to the California market of potential Taiwan travelers. Our vice president and secretary, Yu Chien-Yang and Chen Kuan-Yu, own TBWTV and, as a result, have knowledge of when preferred advertising slots become available and may be able to assist us in gaining preferable advertising rates, although we have no contractual guarantees on either of these issues. In addition, we have purchased three vehicles to provide transportation to our customers while they are in California, a common destination for Taiwan business travelers and tourists. We intend to use the cars, with hired drivers, to provide car service for our customers from the airport to their hotels or other desired destinations upon their arrival in California. Providing car service is an experimental project at this point as we only have three vehicles available for use. We will charge our customers an amount that will cover our expenses in providing the car and driver. In the event the service is popular and appears to benefit our services, we may add to the service in the future, at which time we would reevaluate the amount we charge for the service. In addition to developing our business in Taiwan, in the first quarter of 2013, we entered into non-binding letters of intent to acquire existing travel services agencies in Taipei City, Taiwan, Hong Kong, Vietnam, Vancouver, British Columbia and California. We plan to proceed in negotiating terms for these acquisitions over the course of the next several months while we simultaneously gather operational data from our module operation in Taiwan. We expect to complete the acquisitions of such travel agencies by the end of the second quarter of 2014. At the same time, we also have entered into non-binding letters of intent to acquire land in Taiwan, which land we intend to use to develop destination-related travel services. We expect to complete the acquisitions of such land and/or land holding companies by the end of the first quarter of 2014. Despite of entering the non-binding letters of intent to acquire the travel agencies and land, we remain in the preliminary discussion with the travel agencies and the sellers of the land about the specific considerations to acquire them. Thus, to date, we are not able to estimate any specific costs in completing such acquisitions. Acquiring the travel agencies located both within and outside of Taiwan and land in 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 acquisitions 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 acquisitions of travel agencies and/or land. If we fail to complete our acquisitions of travel agencies and/or land, we may be forced to cease our operation entirely, and you may lose all your investment. Each of these non-binding letters of intent above was disclosed to the SEC in a Current Report on Form 8-K shortly after our entry into each such non-binding letter of intent. Regarding the development of our travel services entity in Taiwan, our plan is to build up a successful module operation in Taiwan and to gain meaningful operational data for one year before using it as a model to replicate throughout Asia. It is critically important for us to obtain credible data in terms of the following (per module main office, plus branch officers): 1. Start-up Cost A. Capital requirements - estimated $100,000 upon application license - end of 2014 B. Statutory reserve - estimated $20,000 upon approval of license - end of 2014 C. Fees - estimated $1,000 upon application for license - end of 2014 D. Rent deposit - estimated $2,000 upon rental of office - end of 2014 9 -------------------------------------------------------------------------------- E. Equipment, etc. - estimated $5,000 - end of 2014 F. Purchase of condominium and automobiles in California - $628,141 - June 2012 G. Purchase of interest in A Peace World Holding Inc. - $46,500 - January 2012 2. Operating Expenses A. Number of employees and salary per office - two employees at $1,500 each per month for a total of $3,000 - starting in April 2014 B. Office rent-Green Forest-$2,000 per month-starting in September 2013 C. Office rent-Da Ren-$1,333 per month -starting in September 2013 D. Telecommunications - $200 per month-starting in June 2012 and $700 starting in September 2012 E. Utilities, etc. - $500 per month- starting in September 2013 F. Advertising - estimated $5,000 for initial television advertising development - end of 2014 G. Condominium expenses - $900 per month-starting in September 2013 H. Automobile-related expenses - 1,500- September 2013 3. Projected Sales A. Dollar sales/commission per office B. Breakdown of sales by product 4. Projected Cash Flow 5. Breakeven point and Projected Earnings Making projections using real figures based on the module operations should lower our level of risk as we expand into other countries. While it is premature to set any definitive dates in applying for obtaining statutory approval to operate travel agencies beyond Taiwan (R.O.C.), we anticipate that after one full year of operation, we will have sufficient data to construct an expansion plan for establishing ventures beyond Taiwan. Products and Services Offered: - Transportation: airlines / buses / car rentals / railways / cruises; - Accommodation: hotels / resorts / cruises; and - Packaged holidays / local tours. Our business strategy is to generate revenue mainly through commissions or mark-ups for selling travel products. For example, for airplane tickets, for which we do not take inventory, we will receive commission revenue from the airlines as compensation for selling airplane tickets to our customers. In other words, our revenue will not come directly from the payments which the customers make to the airlines, but instead our commission revenue will be paid by the product provider (e.g. airlines) directly to our Company. The size of commission will vary from product to product, depending on how product providers (e.g. airlines) set their distribution strategy. Below is an estimate of the commission percentage we expect to be able to obtain for each type of product: Type of Product Estimated Commission % Transportation 3 ~ 10% Accommodation 3 ~ 10% Packaged Tours 3 ~ 10% Another type of revenue would come from mark-ups. Our mark-up revenue will be earned when we choose to take inventory on products such as hotel stays, cruise trips or tours. This type of revenue is different from commission-based revenue in that we will secure the product outright before customers purchase the product. After we purchase the product, we would then sell the product to the customer at a higher price, thereby earning the difference or mark-up as profit. The size of the mark-up will vary depending on our inventory level, market conditions and customer preference. Below is an estimate of the mark-up percentage and the initial cost of obtaining wholesale inventory for each type of product: Type of Product Estimated Mark-up % Initial Cost of Obtaining Wholesale Inventory Transportation 5 ~ 20% $10,000 Accommodation 10 ~ 30% $30,000 Packaged Tours 10 ~ 20% $10,000 10 -------------------------------------------------------------------------------- We expect to incur the cost of obtaining wholesale inventory starting in the first quarter of 2014 or as soon as our license to operate a travel agency has been granted. Consequently, we will recover the cost and make a profit when inventory is turned over or sold. The profitability of our mark-up business will depend on how frequent inventory is turned. We anticipate providing other ancillary travel services such as submitting visa applications on behalf of clients. It is our understanding that it is customary to charge a handling fee of US$5~10 for the submission of a visa application. These types of services, however, should only constitute a small part of our overall revenue. We plan to market our company to high-income individuals and affinity groups, such as private schools, alumni groups and wealth management organizations at banks and investment firms. Our plan to reach these target customers is through seeking lists from the affinity groups and marketing online. In terms of seeking lists from affinity groups, our strategy involves no upfront cost to our company. We will instead share the profits with the organizations that provided such lists when customers purchase travel products through our company. Our general rule of thumb is to share 50% of the profit with the affinity group. This estimate may be adjusted upward or downward depending on the size and quality of the customer list. Separately, we plan to market our company online through our company website. Currently under construction, our company website, www.sanlotusholding.com, will be a vehicle to promote our offerings to a wide audience. We plan on interacting with our retail customers primarily through our website. Our customers will be able to place their purchases via the telephone, through credit card or bank transfer payment. Business Development The Company seeks to develop mutually beneficial business relationships with travel product providers, such as airlines, hotels and tour operators, and will begin offering travel products to our customers. The Company will work on reaching a variety of affinity groups and reaching agreements to service their customers. The Company recently launched a website, www.sanlotusholding.com, to begin marketing our services online. Our costs as a reporting company in our first year are approximately $165,000 in legal fees and $45,000 in auditing fees, including the preparation of our 10-K filing and annual audit. And, our costs as a reporting company in our second year are approximately $16,193 in legal fees and $50,300 in auditing fees, including the preparation of our 10-K filing and annual audit. Marketing and Sales Our initial marketing efforts will be designed to drive prospective clients to our website, www.sanlotusholding.com. We plan to use social media vehicles such as Twitter and Facebook to generate awareness of our website. We expect to engage prospective clients through promoting our website and responding to requests for information. Eventually, we expect to use broader-based email marketing to generate a much larger number of sales leads that will be followed up with a personal exchange, via email or telephone, but there is no guarantee this will be successful. We will also market to potential customers based in California through TBWTV, a Chinese language television station based in California. We have taken the following steps in implementing our business plan: Vendor Discussion and Supplier Agreements We have contacted vendors to provide travel related products to our customers. Below is a summary of the number of vendors who have responded favorably to our request. We have not signed any formal supplier agreements with product vendors. Type of Vendor Number of Vendor Airline 2 Bus Company 1 Cruise Company 2 Hotel 7 Resort 2 Other Travel Agency 2 11 -------------------------------------------------------------------------------- Website Development We have completed the initial version of our website, www.sanlotusholding.com, and will use this site to market our services to the general public. Television Advertising in California We will begin advertising our services to potential Taiwan travelers in California through TBWTV Inc., a local California station geared toward Chinese speaking audiences, sometime during 2014. With California's large Asian population and strong business connections with Taiwan, we believe there is potential to develop a strong customer base in California by directing potential customers to our website. As part of this effort, we have purchased a condominium unit in California so that our management and employees will be able to easily be able to travel to California to work on our television advertising campaign, as well as enable them to work with our various U.S. service providers. In addition, we purchased three vehicles that will be used to transport our management, as well as our customers, when in California. Affinity Groups We have used the contacts of our directors and officers in initially contacting various affinity groups. Thus far, we have had conversations with no less than five groups that have expressed interest in sharing their group list with our company. However, at this time we have not executed any of agreements with these companies. Below is a summary of the statistics we wish to reach regarding various affinity groups: Type of Vendor Number of Vendor Airline 5 Bus Company 2 Cruise Company 2 Hotel 15 Resort 5 Other Travel Agency 5 We are in the process of applying for our license to operate a travel agency in Taiwan. We expect to receive approval for our business license by the end of 2014. Once proper licenses and approvals have been granted, we will need to take the following steps in generating revenue: - Formally launch online operations (in or after 2014) - Sign formal supplier agreements with product vendors that have expressed interest previously (in or after 2014) - Begin advertising with TBWTV (in or after 2014) - Sign on additional product vendors (in or after 2014) - Sign profit sharing agreements with affinity groups that have expressed interest previously (completed as of the year 2012) - Sign on additional affinity groups (in or after 2014) - Hire office staff (in or after 2014) These steps will ensure that we have sufficient product and service offerings to attract customers, both to launch our operations and on an ongoing basis going forward. In addition to the aforementioned steps, we are in the process of investing in and developing scenic/destination real estate sites through the acquisition of land and land holding companies. We acquired certain land in Taiwan (R.O.C.), which is specifically described in Item 2 of our annual report on Form 10-K which is filed on April 7, 2014. We also have entered into four additional non-binding letters of intent to acquire additional land in scenic and/or agricultural areas in Taiwan. We aim to complete four acquisitions by the end of 2014. After we have completed these acquisitions, we will evaluate all of our real estate holdings as a group and determine how we will utilize those properties to support our overall goal of developing a travel, tourism and destination real estate business. At that same time, we will evaluate and plan for the costs of developing the properties. 12 -------------------------------------------------------------------------------- We expect the destination real estate portion of our business to make up approximately half of our overall business in the future, with the other half consisting of travel agencies. By destination real estate, we mean to develop locations that will attract and support visitors for stays of one day or longer, providing outdoor activities and places of interest for visitors from both domestic locales and abroad. In addition to our destination real estate business, we are continuing to develop our travel agency in Taiwan and have entered into nine non-binding letters of intent to acquire travel agencies located outside of Taiwan in both Asia and North America. We aim to complete the acquisition of these nine travel agencies by the end of the second quarter 2014. We intend to fund all of these acquisitions through the sale of our common stock. While this will cause dilution to the existing shareholders, we do not believe this dilution will negatively affect the shareholders as the acquisitions will add significant value to the Company and will allow the Company to proceed in developing its business. We may also from time to time invest in travel-related service providers that we believe can help us better service our customers and help them meet their travel needs. Through investing in such entities, we may be able to recoup some of our costs through maintaining small ownership interests in the entities our clients use. Furthermore, by investing in these entities, we may be able to work with them to better improve their travel offerings or related services or bring the entities up to the standard of service our customers expect. We recently made one such investment in A Peace World Holding Inc. ("APW"), a company in the early stages of developing destination real estate products and services. We expect that APW, based on its expressed business plans, will develop destination real estate that our customers will be interested in traveling to, thus enhancing the products and services we can provide to our customers. Any costs involved in offering such products and services to our customers, if there are any such costs, will be incorporated into the fees we charge our customers for our service. At this time we have no further plans for making any additional such investments and therefore have no plans of making further capital expenditures in relation to such investments. Competition We will be operating in two sectors in the area of destination real estate development and travel agencies. These two sectors will complement each other as, over the long term, the travel agencies will be able to refer clients and visitors to our destination real estate sites. We will face competition from many individuals and companies that also market travel locations and products. As concerns travel destinations, we desire to utilize scenic properties that will allow for outdoor activities. Thus we must create locations that provide both activities of interest and provide convenience and amenities, while allowing visitors to enjoy the natural beauty of the area around them. Observation tells us that the current travel industry is generally driven by the lowest cost provider. However, different segments of the market, such as the affluent segment, consider factors beyond cost when they plan vacations and travel. Ahead of cost, an affluent consumer may value factors such as convenience, comprehensive service, and luxury and/or prestige, to name a few. We believe that a successful marketing effort to reach the affluent market segment (retiring baby boomers) with the right quality of products should increase our revenue opportunity. In Taiwan, market conditions for the travel industry are similar to those of the U.S. There is a mix of large travel agencies, online service providers and small-scale local operators. However, since Taiwan is geographically much smaller than the U.S., competition is fierce. In Taiwan, there are four types of travel agencies: 1. Mega Agencies A. Lion Travel B. Cola Tour C. EZ Travel 13 -------------------------------------------------------------------------------- 2. Intermediate-Small - locally or regionally owned agencies A. Star Travel B. SET Tour 3. Independent Agencies: Usually catering to a special or niche market A. Royal Jet Way B. Perfect Travel C. Life Tour 4. Airline & other types of travel consolidators A. China Airlines B. EVA Airlines C. American Express We feel at this time we would fall into the Independent Agency category and hope to create our own niche as a more customer-oriented agency or travel service provider with a reputation of going the "extra mile" wherever possible in connecting the right type of customers with the right type of products. Concerning destination real estate sites, there are many competitors who will be vying for the business of our potential clientele. The key will be to develop attractive properties that provide the amenities and activities that visitors would enjoy. In our development plans, we are defining destination real estate as locations that will draw tourist from both domestically and abroad to visit our sites for a period of one or two days or more. So in the long term we will be developing sites that include hotels, restaurants, as well as activity and entertainment centers, among other things. Some of our competitors in the destination real estate sector in Taiwan include the following companies: Elements Innovation Co. Ltd. E United Group Taiwan Land Development Inc. EMERGING GROWTH COMPANY STATUS We qualify as an "emerging growth company" under the Jumpstart Our Business Startups Act (the "JOBS Act"). As a result, we are permitted to rely on exemptions from certain disclosure requirements. For so long as we are an emerging growth company, we will not be required to: ? have an auditor report on our internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act; comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a ? supplement to the auditor's report providing additional information about the audit and the financial statements (i.e., an auditor discussion and analysis); ? submit certain executive compensation matters to shareholder advisory votes, such as "say-on-pay" and "say-on-frequency"; and 14 -------------------------------------------------------------------------------- disclose certain executive compensation related items such as the ? correlation between executive compensation and performance and comparisons of the CEO's compensation to median employee compensation. In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of the benefits of this extended transition period. Our financial statements may therefore not be comparable to those of companies that comply with such new or revised accounting standards. We will remain an "emerging growth company" for up to five years, or until the earliest of (i) the last day of the first fiscal year in which our total annual gross revenues exceed $1 billion, (ii) the date that we become a "large accelerated filer" as defined in Rule 12b-2 under the Securities Exchange Act of 1934, which would occur if the market value of our ordinary shares that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter or (iii) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three year period. 15 -------------------------------------------------------------------------------- RESULTS OF OPERATIONS The following table summarizes our historical condensed consolidated statements of operations data. SAN LOTUS HOLDING INC. AND SUBSIDIARIES (A DEVELOPMENT STAGE COMPANY) CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (UNAUDITED) Period From June Three Months Ended September 30, Nine Months EndedSeptember 30, 21, 2011 (Inception) to September 30, 2014 2013 2014 2013 2014 Revenue $ - $ - $ - $ - $ - General and administrative expenses 44,149 50,777 155,167 234,213 968,503 Loss from operations (44,149) (50,777) (155,167) (234,213) (968,503) Other income (expenses) Interest income - 62 5 62 243 Loss from long-term investments - - - - (20,837) Gain from disposal of long-term investments - - - - 20,837 Total other income, net - 62 5 62 243 Loss before provision for income taxes (44,149) (50,715) (155,162) (234,151) (968,260) Provision for income taxes - - - - - Net loss (44,149) (50,715) (155,162) (234,151) (968,260) Add: Net loss attributable to noncontrolling interest - 547 5,737 193 59,178 Net loss attributable to San Lotus Holding Inc. (44,149) (50,168) (149,425) (233,958) (909,082) Other comprehensive loss, net of tax Consolidated net loss (44,149) (50,715) (155,162) (234,151) (968,260) Foreign currency translation adjustment, net of tax (2,611,080) (547) (3,001,426) (4,130) (3,104,159) Comprehensive loss (2,655,229) (51,262) (3,156,588) (238,281) (4,072,419) Add: Comprehensive loss attributable to the noncontrolling interest - 547 5,737 193 59,178 Comprehensive loss attributable to San Lotus Holding Inc. $ (2,655,229) $ (50,715) $ (3,150,851) $ (238,088) $ (4,013,241) Net Loss Per Share: Basic and diluted $ (0.00) $ (0.00) $ (0.00) $ (0.01) $ (0.01) Weighted-average shares outstanding Basic and Diluted 562,635,195 19,244,851 312,178,407 16,146,820 82,527,100 16 --------------------------------------------------------------------------------Comparison of Three Months Ended September 30, 2014 and 2013 Revenues. We did not generate any revenue for the three months ended September 30, 2014 and 2013. We have not generated any revenue since our formation on June 21, 2011. General and Administrative Expenses. We incurred general and administrative expenses of $44,149 and $50,777 during the three months ended September 30, 2014 and 2013, respectively. The decrease was mainly attributable to fewer professional service fees for Securities and Exchange Commission filings incurred during the current period this year. The decrease was also attributable to lower office rent and salaries, partially offset by the increase in depreciation expense for the three months ended September 30, 2014. Income (loss) from operations. Loss from operations is ($44,149) for the three months ended September 30, 2014, and Loss from operations for the three months ended September 30, 2013 is ($50,777). This decrease was mainly for lower development costs expended in implementing our business plan for the three-month periods ended September 30, 2014 as compared to the same period in 2013. Other Income (expenses). Other income was $- for the three months ended September 30, 2014, and was $62 for the three-months ended September 30, 2013. Net Loss Before Income Taxes. Loss before income taxes is ($44,149) for the three months ended September 30, 2014, and Loss before income taxes for the same period in 2013 is ($50,715). This decrease was mainly for a decrease in operating expense during the development stage. Provision for Income Taxes. We have not generated income and thus have no income tax liabilities for the three months ended September 30, 2014and 2013. Net Loss. As a result of the above factors, we experienced a net loss of approximately ($44,149) for the three months ended September 30, 2014 as compared to the net loss of approximately ($50,715) for the three months ended September 30, 2013, representing a decrease of approximately $6,566. This decrease was primarily for less development costs; less office rental expenses; and lower payroll expenses, partially offset by the increase in depreciation expenses for the three months ended September 30, 2014 as compared with the same period in 2013. Net Loss Attributable to Non-controlling Interest. Net loss attributable to non-controlling interest ended September 30, 2014 and 2013 is ($-) and ($547). Liquidity and Capital Resources 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. 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 through the 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. As of September 30, 2014, we had $11,074 cash in the bank, $1,053 cash held by our wholly-owned Taiwan (R.O.C.) subsidiary, Green Forest Management Consulting Inc. and $1,723 cash held by our wholly-owned Taiwan (R.O.C.) subsidiary Da Ren International Development Inc. Thus, San Lotus and Da Ren will not have enough funds to support themselves for remaining months, and Green Forest are already almost out of funds, We will likely 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. 17 -------------------------------------------------------------------------------- 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. Tabular disclosure of contractual obligations Payments due by period Contractual obligations 3-5 years More than Total Less than 1-3 years 5 years 1 year [Long-Term Debt Obligations] - - - - - [Capital Lease Obligations] - - - - - [Operating Lease Obligations] $8,192 $8,192 - - - [Purchase Obligations] - - - - - [Other Long-Term Liabilities Reflected on the Registrant's - - - - - Balance Sheet under GAAP] Total $8,192 $8,192 - - - 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. Critical Accounting Polices We have made no material changes to our critical accounting policies in connection with the preparation of financial statements included in this Quarterly Report on Form 10-Q/A. Impact of Accounting Pronouncements There were no recent accounting pronouncements that have had a material effect on the Company's financial position or results of operations. Recently Issued Accounting Policies The Company has 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 the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations. 18 --------------------------------------------------------------------------------OFF-BALANCE SHEET ARRANGEMENTS We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition or results of operations. |