FUSS BRANDS CORP. The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our unaudited condensed
consolidated financial statements and related notes appearing elsewhere in this
Quarterly Report. In addition to historical financial information, the
following discussion contains forward-looking statements that reflect our plans,
estimates and beliefs. Our actual results could differ materially from those
discussed in the forward-looking statements. Factors that could cause or
contribute to these differences include those discussed below and elsewhere in
this Quarterly Report. See also Risk Factors contained in our Form 10-K for the
year ended
Overview
We are a high-tech enterprise engaged in the research, development, manufacture,
and distribution of botanical products, bio-pharmaceutical products, and
traditional Chinese medicines, or TCM, in
Recent Developments
Siberian Ginseng Polysaccharide Extract Powder. On
Ah City Phase Two project. We have finished the architectural design of Ah City
Phase Two project and are in the process of obtaining approval from relevant
government authorities. We expect to finish all the procedures by
Tax Treatment of Subsidiary
As a recipient of the PRC's State High-Tech Enterprise certificate,
Critical Accounting Policies
The unaudited condensed consolidated financial statements include the financial statements of the Company and our subsidiaries. All transactions and balances among us and our subsidiaries have been eliminated upon consolidation.
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Accounting Judgments and Estimates
Certain amounts included in or affecting our unaudited condensed consolidated financial statements and related disclosures must be estimated, requiring us to make certain assumptions with respect to values or conditions that cannot be known with certainty at the time the condensed consolidated financial statements are prepared. These estimates and assumptions affect the amounts we report for assets and liabilities and our disclosure of contingent assets and liabilities at the date of our condensed consolidated financial statements. We routinely evaluate these estimates, utilizing historical experience, consulting with experts and other methods we consider reasonable in the particular circumstances. Nevertheless, actual results may differ significantly from our estimates. Any effects on our business, financial position or results of operations resulting from revisions to these estimates are recorded in the period in which the facts that give rise to the revision become known.
We believe that certain accounting policies are of more significance in our unaudited condensed consolidated financial statement preparation process than others, which policies are discussed below. See also Note 2 to the unaudited condensed consolidated financial statements for a summary of our significant accounting policies.
Estimates of allowances for bad debts - We must periodically review our trade and other receivables to determine if all are collectible or whether an allowance is required for possible uncollectible balances.
Estimate of the useful lives of property and equipment - We must estimate the useful lives and proper salvage values of our property and equipment. We must also review property and equipment for possible impairment.
Estimate of the useful lives of intangible assets - We must estimate the useful lives of our intangible assets. We must also review intangible assets for possible impairment.
Inventory - We must determine whether we have any obsolete or impaired inventory.
Revenue recognition - Revenue from the sale of goods is recognized on the transfer of risks and rewards of ownership, which generally coincides with the time when the goods are shipped to customers and the title has passed.
Please refer to the notes to the unaudited condensed consolidated financial statements included elsewhere in this filing for a more complete listing of all of our significant accounting policies.
Factors Affecting our Results of Operations
Our operating results are primarily affected by the following factors:
? Pharmaceutical Industry Growth. We believe the market for pharmaceutical
products in the PRC is growing rapidly driven by the PRC's economic
growth, increased pharmaceutical expenditure, an aging population,
increased lifestyle-related diseases, government support of the
pharmaceutical industry, as well as the increased availability of funding
for medical insurance in the PRC. In particular, in January 2009 , the
PRC's State Council passed a far-reaching medical reform plan ("Health
Reform") to help provide universal primary medical insurance coverage and
increased access to medical facilities to a greater majority of its
citizens. Both the central government of the PRC and provincial
governments has published Lists of Essential Medicines to regulate the
market. We expect these factors to continue to drive industry growth.
? Pricing of Our Products. Seven of our products, which accounted for 28.4%
of our total revenues before sales rebate in the three months ended
January 31, 2013 , are listed on the National or Provincial List of
Essential Medicines published by the Chinese government, and therefore
subject to government pricing limits. We do not believe pricing controls
will influence our sales significantly and expect that the health care
reform will help increase our sales.
? Production Capacity. We believe much of the pharmaceutical market in the
PRC is still underserved, particularly with respect to treatment of
depression, melancholy and nerve regulation. The demand for our products
that treat depression, melancholy and regulate nerves, continuously
increased and we were able to increase our production of such products to
capture much of this growth. We believe our current facilities with the
ability to manufacture 18 dosage forms and over 200 products could not
meet our future demand and we are building our Ah City Phase Two project,
Depth Development and Industrialization of Siberian Ginseng, to produce
more advanced Siberian Ginseng products and to allow us to capture future
market growth and increase our revenue and market share accordingly.
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? Perceptions of Product Quality. We believe that rising health concerns in
the PRC have contributed to a greater demand for health-care products with
perceived health benefits. We believe many consumers in the PRC tend to
prefer natural health care products with, we believe, limited side
effects. Accordingly, we believe our reputation for quality and leadership
position in a number of our products allow our products to command a
higher average selling price and generate higher gross margins than our
competitors.
? Raw Material Supply and Prices. The per unit costs of producing our
products are subject to the supply and price volatility of raw materials,
which are affected by various market factors such as market demands,
fluctuations in production and competition.
? Expenses Associated with Research and Development. In order to enhance our
existing products and develop new products for the market, we have devoted
significant resources to research and development.
? Expenses Associated with Sales and Marketing. In order to promote our
product brand and gain greater market awareness, we have devoted
significant resources to sales and marketing, in particular advertising
activities.
? Demand for Our Products. We expect the market demand for our botanic
anti-depression and nerve-regulation products will increase along with the
growth of the general market for such products.© Edgar Online, source
