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GENUFOOD ENERGY ENZYMES CORP. - 10-Q - Management Discussion and Analysis of Financial Condition and Results of Operations.
[August 21, 2014]

GENUFOOD ENERGY ENZYMES CORP. - 10-Q - Management Discussion and Analysis of Financial Condition and Results of Operations.


(Edgar Glimpses Via Acquire Media NewsEdge) Safe Harbor Statement This report on Form 10-Q contains certain forward-looking statements. All statements other than statements of historical fact are "forward-looking statements" for purposes of these provisions, including any projections of earnings, revenues, or other financial items; any statements of the plans, strategies, and objectives of management for future operation; any statements concerning proposed new products, services, or developments; any statements regarding future economic conditions or performance; statements of belief; and any statement of assumptions underlying any of the foregoing. Such forward-looking statements are subject to inherent risks and uncertainties, and actual results could differ materially from those anticipated by the forward-looking statements.



These forward-looking statements involve significant risks and uncertainties, including, but not limited to, the following: competition, promotional costs, and risk of declining revenues. Our actual results could differ materially from those anticipated in such forward-looking statements as a result of a number of factors. These forward-looking statements are made as of the date of this filing, and we assume no obligation to update such forward-looking statements.

The following discusses our financial condition and results of operations based upon our consolidated financial statements which have been prepared in conformity with accounting principles generally accepted in the United States.


It should be read in conjunction with our financial statements and the notes thereto included elsewhere herein.

The following discussion should be read in conjunction with our consolidated financial statements, including the notes thereto, appearing elsewhere in this Form 10-Q. The discussions of results, causes and trends should not be construed to imply any conclusion that these results or trends will necessarily continue into the future.

Overview We are a start-up company and our main focus is to promote, market, distribute and export enzyme products to the Asian market, to begin with, Taiwan, and then followed by China, Hong Kong, Macau, Thailand, Malaysia, Singapore and Sri Lanka. These enzyme products are specifically formulated for our marketing and distribution under contract manufacturing arrangements. There are two contracted OEM manufacturers, one in Taiwan and the other in the United States.

We have contracted with Specialty Enzymes and Biochemicals Co. (Advanced Supplemental Therapies or AST Enzymes) to be our OEM Manufacturer in the United States. They are located in Chino, California.

Liquidity and Capital Resources As of June 30, 2014, we had cash and cash equivalents of $366,082 and a working capital surplus of $158,182. As of June 30, 2014 our accumulated deficit was $4,724,750. For the nine months ended June 30, 2014 our net loss was $2,070,410 compared to $828,765 during the same period in 2013. This increase was due mostly to our increased operations in 2014.

Our loss was funded by proceeds from the sale of our common stock. During the nine months ended June 30, 2014, we raised in net proceeds $825,000 through financing activities and our cash position decreased by $504,564.

We used net cash of $1,327,071 in operating activities for the nine months ended June 30, 2014 compared to net cash of $1,030,712 in operating activities for the same period in 2013. We used net cash of $4,802 in investing activities for the nine months ended June 30, 2014 compared to $10,378 during the same period in 2013. The effect of exchange rates on cash was an increase in cash of $2,309 for the nine months ended June 30, 2014 compared to a decrease of $16,231 during the nine months ended June 30, 2013.

During the nine months ended June 30, 2014 our monthly cash requirement was approximately $147,452, compared to approximately $114,524 for the same period in 2013.

We plan to implement the sole distributorship agreement we had signed and to enter into formal sole distributorship agreement with other country sole distributors. We plan to promote, market, distribute and export our range of enzyme products to the Asian market, to begin with Taiwan and then to China.

We expect to require a total of approximately $1,763,864 to fully carry out our business plan over the next twelve months beginning September 2014 as set out in this table: Description Estimated Expense Inventory $1,263,864 General Administration, Sales and Marketing Overhead $250,000 Sales, Advertising and Promotional Support Overhead $250,000 Total $1,763,864 We intend to meet our cash requirements for the next 12 months through external sources: a combination of debt financing and equity financing through private placements. We are currently not in good short-term financial standing. We anticipate that we may not generate any revenues in the near future and we will not have enough positive internal operating cash flow until we can generate substantial revenues, which may take the next few years to fully realize. There is no assurance we will achieve profitable operations. We have historically financed our operations primarily by cash flows generated from the sale of our equity securities and through cash infusions from officers and outside investors in exchange for debt and/or common stock.

These consolidated financial statements have been prepared on the assumption that we are a going concern, meaning we will continue in operation for the foreseeable future and will be able to realize assets and discharge liabilities in the ordinary course of operations. Different bases of measurement may be appropriate when a company is not expected to continue operations for the foreseeable future. Our continuation as a going concern is dependent upon our ability to attain profitable operations and generate funds there-from, and/or raise equity capital or borrowings sufficient to meet current and future obligations. Management plans to raise equity financings over the next twelve months to finance operations. There is no guarantee that we will be able to complete any of these objectives. We have incurred losses from operations since inception and at June 30, 2014, have an accumulated deficit that creates substantial doubt about our ability to continue as a going concern.

4 Results of Operations for the three months ended June 30, 2014 compared to the three months ended June 30, 2013 and from inception to June 30, 2014.

Limited Revenues Since our inception on June 21, 2010 to June 30, 2014, we have earned limited revenue of $363,314. As of June 30, 2014, we have an accumulated deficit of $4,724,750 and we did earned revenues of $25,647 during the three months ending on June 30, 2014. At this time, our ability to generate any significant revenues continues to be uncertain. Our financial statements contain an additional explanatory paragraph in Note 3, which identifies issues that raise substantial doubt about our ability to continue as a going concern. Our financial statements do not include any adjustment that might result from the outcome of this uncertainty.

Net Loss We incurred a net loss of $367,960 for the three months ended June 30, 2014, compared to a net loss of $172,716 for the same period in 2013. This increase in net loss is mostly due to increased operating expenses. From inception on June 21, 2010 to June 30, 2014, we have incurred a net loss of $4,724,750. Our basic and diluted loss per share was ($0.00) for the three months ended June 30, 2014, and ($0.00) for the same period in 2013.

Expenses Our total operating expenses increased from $225,556 to $413,394 for the three months ended June 30, 2014 compared to the same period in 2013. This increase in expenses is due to higher operating expenses. Since our inception on June 21, 2010 to June 30, 2014, we have incurred total operating expenses of $4,893,728.

Our professional fees, consisting primarily of legal, accounting and auditing fees, decreased by $98,354 to $46,698 for the three months ended June 30, 2014 from $145,052 for the same period in 2013, mainly due to decreased legal and auditing services provided in the three month period ended June 30, 2014. Since our inception on June 21, 2010 until June 30, 2014 we have spent $2,540,194 on professional fees.

Our rent expenses increased from $19,032 to $59,062 for three months ended June 30, 2014 compared to the same period in 2013. Since our inception on June 21, 2010 until June 30, 2014 we have spent $330,214 on rent expenses.

Results of Operations for the nine months ended June 30, 2014 compared to the nine months ended June 30, 2013 Revenues We earned revenues of $140,519 during the nine months ending on June 30, 2014, compared to revenues of $121,640 during the same period in 2013. At this time, our ability to generate any significant revenues continues to be uncertain.

Net Loss We incurred a net loss of $2,070,410 for the nine months ended June 30, 2014, compared to a net loss of $828,765 for the same period in 2013. This increase in net loss is due to our increased operations in 2014. Our basic and diluted loss per share was ($0. 01 ) for the nine months ended June 30, 2014, and ($0.00) for the same period in 2013.

Expenses Our total operating expenses increased from $892,898 to $2,150,994 for the nine months ended June 30, 2014 compared to the same period in 2013. This increase in expenses is due to higher operating expenses.

Our professional fees, consisting primarily of legal, accounting and auditing fees, increased by $752,402 to $1,151,691 for the nine months ended June 30, 2014 from $399,289 for the same period in 2013, mainly due to increased legal and auditing services provided in the nine month period ended June 30, 2014.

Our rent expenses increased from $42,021 to $167,314 for the nine months ended June 30, 2014 compared to the same period in 2013.

The amounts presented in the financial statements do not provide for the effect of inflation on our operations or financial position. The net operating losses shown would be greater than reported if the effects of inflation were reflected either by charging operations with amounts that represent replacement costs or by using other inflation adjustments.

Off-Balance Sheet Arrangements As of June 30, 2014, we had no off-balance sheet transactions that have or are reasonably likely to have a current or future effect on our financial condition, changes in our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

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