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STVF > SEC Filings for STVF > Form 10-Q on 13-Aug-2013All Recent SEC Filings

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Form 10-Q for STEVIA FIRST CORP.


13-Aug-2013

Quarterly Report


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

Cautionary Statement

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our Unaudited Condensed Financial Statements and the related notes thereto contained in Part I, Item 1 of this Report. The information contained in this Quarterly Report on Form 10-Q is not a complete description of our business or the risks associated with an investment in our common stock. We urge you to carefully review and consider the various disclosures made by us in this Quarterly Report and in our other reports filed with the Securities and Exchange Commission (the "SEC"), including our Annual Report on Form 10-K for the fiscal year ended March 31, 2013 filed on May 20, 2013, and the related audited financial statements and notes included thereto.

Certain statements made in this Quarterly Report on Form 10-Q constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (the "Exchange Act"). Forward-looking statements are projections in respect of future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may," "should," "intend," "expect," "plan," "anticipate," "believe," "estimate," "predict," "potential," or "continue" or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, which may cause our or our industry's actual results, levels of activity or performance to be materially different from any future results, levels of activity or performance expressed or implied by these forward-looking statements. These risks and uncertainties include: general economic and financial market conditions; our ability to obtain additional financing as necessary; our ability to continue operating as a going concern; any adverse occurrence with respect to our intended business; our ability to bring our intended product to market; market demand for our intended product; shifts in industry capacity; product development or other initiatives by our competitors; fluctuations in the availability of raw materials and costs associated with growing raw materials for our intended product; poor growing conditions for the stevia plant; other factors beyond our control; and the other risks described under the heading "Risk Factors" in our Annual Report on Form 10-K filed with the SEC on May 20, 2013.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity or performance. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. These forward-looking statements speak only as of the date on which they are made. Except as required by law, we undertake no obligation to revise or update publicly any forward-looking statements for any reason.

Company Overview

We were incorporated in the State of Nevada on June 29, 2007 and commenced operations as a development stage exploration company. On October 10, 2011, we completed a merger with our wholly-owned subsidiary, Stevia First Corp., whereby we changed our name from "Legend Mining Inc." to "Stevia First Corp." As a result of our management change, the addition of key personnel, and the lease of property for laboratory and office space and agricultural land in California, we are pursuing our new business as an agricultural biotechnology company engaged in the cultivation and harvest of stevia leaf and the development of stevia products. We are in the early stages of establishing a vertically-integrated enterprise that controls the process of stevia extract production using biotechnological methods including fermentation, or using traditional farming, cultivation, and extraction from the stevia plant, and which also develops, markets, and sells stevia consumer products.

Our common stock is currently quoted on the OTC Markets Group's OTCQB tier under the symbol "STVF." No shares of our common stock traded until March 5, 2012 and there is only a limited trading market for our common stock.

Plan of Operations

We have not yet generated or realized any revenues from our business operations. In their report on the annual financial statements for the fiscal year ended March 31, 2013, our independent auditors included an explanatory paragraph regarding concerns about our ability to continue as a going concern. This means that there is substantial doubt that we can continue as an on-going business unless we obtain additional capital or generate sufficient cash from our operations. We do not expect to generate cash from our operations for the foreseeable future. The continuation of our business is dependent upon our ability to obtain loans or sell securities to new and existing investors.

Our current strategy is to build a vertically integrated stevia enterprise in North America through our internal research and development, cultivation of stevia in California's Central Valley, product development activities combined with acquiring rights to additional intellectual property and land suitable for stevia production, and forming alliances with leading California growers, current manufacturers and distributors of high-grade but low-cost stevia extracts with superior taste profiles. We are focused on the production of stevia extract through use of fermentation technologies, the production of stevia extract through California stevia leaf production, the development of consumer stevia products such as a tabletop sweetener, and more broadly at building a vertically-integrated stevia enterprise in the United States.

We have begun development of a stevia consumer product utilizing stevia extract purchased from other suppliers until we are able to produce our own stevia extract. Operations related to stevia product development include the formulation and testing of a stevia tabletop sweetener. We initiated consumer product testing in the first half of 2013. Assuming favorable results from our consumer product testing efforts, we would expect to release our planned tabletop sweetener product later in 2013 and generate revenues from this proposed product as soon as the second half of 2013. We expect additional expenses related to this development work to be approximately $30,000, costs for initial manufacturing runs and distribution of the product to be approximately $20,000, and that each of these activities would be funded internally.

Our present operations primarily consist of research and development related to stevia extract production through use of biotechnology or fermentation, including the directed conversion of steviol, undesirable steviol glycosides, or low-cost substrates to high-value and desirable steviol glycosides such as Rebaudioside A ("Reb A") that are sweet and normally present within the stevia leaf. Operations related to production of stevia extract through fermentation include microbial strain development and characterization work. Prior to the launch of California-produced stevia extract, we will need to achieve certain operational milestones, including but not limited to further microbial strain development, fermentation process development and optimization, work which we currently estimate to cost $250,000. Assuming our research and development efforts are successful, we would seek manufacturing capacity with contract manufacturers and regulatory approvals for products developed using these methods, which we currently estimate would cost $750,000. Assuming our research and development and regulatory approval efforts are successful, we expect the first revenues on sales of products resulting from use of our biotechnological or fermentation work could occur in 2014. However, we will require additional investment obtained through additional funding from our stockholders and other qualified investors in order to complete these milestones, and for initial commercialization as described will also require the availability of contract manufacturing capacity on desirable terms from outside companies. We may be unsuccessful in our development and commercialization of stevia extracts using biotechnology or fermentation methods, and may never commercialize any related product, generate revenue, or become profitable.

To a lesser extent, our present operations also consist of pursuing traditional industry means of stevia extract production, including stevia crop cultivation, harvest, and extraction of steviol glycosides from the stevia leaf., Operations related to production of stevia extract through traditional means include establishing stevia field trial production outputs, and development and scale-up of stevia leaf extraction and processing methods, work which we currently estimate will cost $250,000 and which we expect to complete in the second half of 2013. Provided research and development is successful, and we still plan to pursue traditional industry means of stevia extract production, we would seek to expand stevia leaf production through contract stevia growers, seek contract processing capacity with operators of extraction facilities, and obtain any necessary regulatory approvals for these stevia extracts and processing facilities, work which we currently estimate to cost $250,000. If these efforts prove successful, we expect the first revenues on sales of California stevia extract could occur in 2014. However, we will require additional investment obtained through additional funding from our stockholders and other qualified investors in order to complete these milestones, and for initial commercialization of California stevia extract as described will require the participation of local growers and the availability of contract extraction facilities on desirable terms. We may be unsuccessful in our development and commercialization of stevia extracts using traditional industry means, and may never commercialize any related product, generate revenue, or become profitable.

Over the 12 months following the date of this report, we expect to continue to review potential acquisitions and alliances, and to increase the scale of research and development operations. As of August 12, 2013, we had 4 full-time employees and 2 part-time employees. Total expenditures over the 12 months following June 30, 2013, are expected to be approximately $1,500,000. As of June 30, 2013, we expect to have sufficient funds to operate our business for at least nine months; however, we do not currently believe our existing cash resources are sufficient to meet our anticipated needs during the next twelve months. Further, our estimate of total expenditures could increase if we encounter unanticipated difficulties. In addition, our estimates of the amount of cash necessary to fund our business may prove to be wrong, and we could spend our available financial resources much faster than we currently expect. If we cannot raise the money that we need in order to continue to develop our business, we will be forced to delay, scale back or eliminate some or all of our proposed operations. If any of these were to occur, there is a substantial risk that our business would fail. We expect to continue to seek funding from our stockholders and other qualified investors in order to pursue our business plan. We do not have any arrangements in place for any future financing. Sources of additional funds may not be available on acceptable terms or at all.

Recent Events

On June 25, 2013, we entered into a Securities Purchase Agreement (the "Agreement") with three (3) investors for the sale of an aggregate of 3,676,472 shares of our common stock for total gross proceeds of $1,250,000 or a sales price of $0.34 per share. The offering closed on June 28, 2013. We incurred $112,500 of direct costs in connection with the financing, resulting in net cash proceeds to the Company of $ 1,137,500. The purchasers who entered into the Securities Purchase Agreement were also issued warrants to purchase up to 11,029,416 shares of our common stock. The warrants were issued in three groups of 3,676,472 each and have initial exercise prices of $0.40, $0.50 and $0.60 per share, respectively, are exercisable immediately upon issuance and have a term of exercise equal to five years, six months and nine months, respectively. We also issued warrants to purchase up to 294,185 shares of our common stock to the placement agent related to the financing. The placement agent warrants have an exercise price of $0.425 per share and a term of five years and are exercisable immediately.

As further discussed in "Liquidity and Capital Resources" below, we will need to raise additional funds in order to continue operating our business.

Results of Operations

Three Months Ended June 30, 2013 and June 30, 2012

Our net loss during the three months ended June 30, 2013 was $899,305 compared to a net loss of $426,508 for the three months ended June 30, 2012 (an increase in net loss of $472,797). During the three months ended June 30, 2013 and 2012, respectively, we did not generate any revenue.

During the three months ended June 30, 2013, we incurred general and administrative expenses in the aggregate amount of $726,196 compared to $374,737 incurred during the three months ended June 30, 2012 (an increase of $351,459). General and administrative expenses generally include corporate overhead, salaries and other compensation costs, financial and administrative contracted services, marketing, consulting costs and travel expenses. A significant portion of these costs are related to the development of our organizational capabilities as an agricultural biotechnology company engaged in the development of stevia products, including costs such as legal and advisory fees related to intellectual property development. The majority of the increase in general and administrative costs in the period relates to stock based compensation costs which increased to $422,099 in the period ending June 30, 2013, as compared to $168,650 in the period ending June 30, 2012.

In addition, during the three months ended June 30, 2013, we incurred research and development costs of $123,239 relating to the development of our stevia products. There were no comparable costs during the three months ended June 30, 2012.

During the three months ended June 30, 2013, we incurred related party rent and other costs totaling $41,150 compared to $26,933 incurred during the three months ended June 30, 2012 (an increase of $14,217).

This resulted in a loss from operations of $890,585 during the three months ended June 30, 2013 compared to a loss from operations of $401,670 during the three months ended June 30, 2012.

During the three months ended June 30, 2013, we recorded total other expenses in the amount of $8,720, compared to total other expenses recorded during the three months ended June 30, 2012 in the amount of $24,838. During the three months ended June 30, 2013, we incurred interest expense of $193,741 compared to $24,937 incurred during the three months ended June 30, 2012 (an increase of $168,804). The increase in interest expense was directly related to the amortization of valuation discount on our convertible notes. We also recorded a gain related to the change in fair value of derivatives of $185,021 during the three months ended June 30, 2013. No such items were recorded during the three months ended June 30, 2012. This resulted in a net loss of $899,305 during the three years ended June 30, 2013 compared to a net loss of $426,508 during the three months ended June 30, 2012.

The increase in net loss during the three years ended June 30, 2013 compared to the three months ended June 30, 2012 is attributable primarily to higher general and administrative expenses incurred in the development of our business as an agricultural biotechnology company engaged in the development of stevia products. The Company had no revenues during the three months ended June 30, 2013 or 2012.

Liquidity and Capital Resources

We have not yet received revenues from sales of products or services, and have recurring losses from operations. Our financial statements have been prepared on a going concern basis which assumes the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. The Company has incurred losses since inception resulting in an accumulated deficit of $5,073,342 as at June 30, 2013, and further losses are anticipated in the development of its business. The Company also had a stockholders' deficit of $949,838 at June 30, 2013. These factors raise substantial doubt about the Company's ability to continue as a going concern.

As of June 30, 2013, we had total current assets of $1,281,671 which was comprised of cash of $1,166,254, security deposits of $2,500, prepaid expenses in the amount of $19,166, and an advance payment on related party lease of $104,166. Our total current liabilities as of June 30, 2013 were $1,659,234 represented primarily by accounts payable and accrued liabilities of $182,516, accounts payable to related party of $14,111, and derivative liability of $1,462,607. The derivative liability is a non-cash item related to our outstanding warrants as described in Note 4 to our financial statements. As a result, on June 30, 2013, we had a working capital deficiency of $377,563.

As of June 30, 2013, our long term liabilities were $572,274, which consisted of convertible notes payable in the amount of $762,500, net of a discount of $190,226.

The continuation of our company as a going concern is dependent upon our company attaining and maintaining profitable operations and raising additional capital. The financial statements do not include any adjustment relating to the recovery and classification of recorded asset amounts or the amount and classification of liabilities that might be necessary should our company discontinue operations.

Due to the uncertainty of our ability to meet our current operating expenses and the capital expenses noted above, in their report on the annual financial statements for the year ended March 31, 2013, our independent auditors included an explanatory paragraph regarding substantial doubt about our ability to continue as a going concern. Our financial statements contain additional note disclosures describing the circumstances that lead to this disclosure by our independent auditors. After giving effect to the funds received in the recent equity and debt financings, we estimate as of June 30, 2013 we will have sufficient funds to operate the business for the next 9 months; however, based on our current operating expenses and working capital requirements, we do not currently believe our existing cash resources are sufficient to meet our anticipated needs during the next twelve months. We will require additional financing to fund our planned future operations, including the continuation of our ongoing research and development efforts, seeking to license or acquire new assets, and researching and developing any potential patents and any further intellectual property that we may acquire. Further, these estimates could differ if we encounter unanticipated difficulties, in which case our current funds may not be sufficient to operate our business for that period. In addition, our estimates of the amount of cash necessary to operate our business may prove to be wrong, and we could spend our available financial resources much faster than we currently expect.

We do not have any firm commitments for future capital. Significant additional financing will be required to fund our planned operations in the near term and in future periods, including research and development activities relating to our principal product candidate, seeking regulatory approval of that or any other product candidate we may choose to develop, commercializing any product candidate for which we are able to obtain regulatory approval or certification, seeking to license or acquire new assets or businesses, and maintaining our intellectual property rights and pursuing rights to new technologies. We do not presently have, nor do we expect in the near future to have, revenue to fund our business from our operations, and will need to obtain all of our necessary funding from external sources in the near term. We may not be able to obtain additional financing on commercially reasonable or acceptable terms when needed, or at all. If we cannot raise the money that we need in order to continue to develop our business, we will be forced to delay, scale back or eliminate some or all of our proposed operations. If any of these were to occur, there is a substantial risk that our business would fail and our stockholders could lose all of their investment.

Recent Financings

On February 7, 2012, we entered into a Subscription Agreement (the "Subscription Agreement") with one investor in a private placement, pursuant to which such investor purchased $1,250,000 in common stock and convertible debentures from the Company over a twelve month period beginning on March 1, 2012. Under the Subscription Agreement, the investor purchased an aggregate of (i) 625,000 shares of common stock and (ii) convertible debentures with an aggregate principal amount of $625,000 convertible into a total of 693,774 shares of our common stock at prices ranging from $0.65 to $1.25, in five tranches, for proceeds to us of $250,000 per tranche. The conversion price of the common stock underlying each of the convertible debentures is subject to adjustment upon a reclassification or other change in the Company's outstanding common stock and certain distributions to all holders of our common stock. The entire principal balance of each debenture is due and payable three years following its date of issuance unless earlier redeemed by us in accordance with its terms.). Each of these convertible debentures bears interest at the rate of 6.0% per annum, payable semi-annually in arrears on June 30 and December 31 of each year. During the three months ended June 30, 2013, the aggregate accrued interest due on these convertible debentures of $18,750 was converted into 20,816 shares of the Company's common stock based on the conversion rates of the five tranches of these convertible debentures ranging from $0.65 to $1.25 per share. As of June 30, 2013, all $625,000 of these convertible debentures were outstanding. If the outstanding principal on all of the convertible debentures issued pursuant to the Subscription Agreement were converted into common shares, as of June 30, 2013, the holders thereof would receive 693,773 shares of common stock.

On October 29, 2012, we entered into a Securities Purchase Agreement (the "Securities Purchase Agreement") with two investors providing for the issuance and sale of an aggregate of $500,000 in convertible debentures and warrants to purchase 1,000,000 shares of our common stock, for proceeds to us of $500,000. The financing closed on November 1, 2012. After deducting for fees and expenses, the aggregate net proceeds from the sale of the debentures and warrants was $445,000. The balance due on these debentures at March 31, 2013 was $330,000. During the three months ended June 30, 2013, $192,500 of the debentures were converted into 427,778 shares of common stock, and the remaining balance due on these debentures at June 30, 2013 was $137,500.

The debentures are non-interest bearing and mature on November 1, 2014. The debentures are convertible at the purchaser's option into shares of our common stock (the "Conversion Shares") at an initial conversion price of $0.50 per share, subject to adjustment for stock dividends and splits, subsequent rights offerings and pro rata distributions to our common stockholders. Upon the earlier of the effectiveness of a registration statement registering the Conversion Shares and Warrant Shares or the date the Conversion Shares and Warrant Shares may be sold pursuant to Rule 144 under the Securities Act of 1933 (the "Securities Act") without volume or manner-of-sale restrictions (such earlier date, the "Trigger Date"), the conversion price of the debentures shall be reduced to the lesser of (i) the then conversion price or (ii) 90% of the average of the volume weighted average price of the Company's common stock for the five trading days immediately prior to the Trigger Date, provided that the conversion price shall not be reduced to less than $0.35 per share (such adjusted conversion price, the "Reset Conversion Price"). Upon the effectiveness of the registration statement registering the shares issuable upon the conversion and exercise of the debentures and warrants on March 6, 2013, the conversion price of the debentures was reduced to $0.45. We may force conversion of the debentures into common stock if, at any time, the volume weighted average price of our common stock for each of any five consecutive trading days exceeds 120% of the Reset Conversion Price. We may force conversion of the debentures into Conversion Shares if, at any time following the Trigger Date, the volume weighted average price of our common stock for each of any five consecutive trading days exceeds 120% of the Reset Conversion Price. The debentures provide for certain restrictive covenants and events of default which, if any of them occurs, would permit or require the principal amount of the debentures to become or to be declared due and payable.

On June 25, 2013, we entered into a Securities Purchase Agreement (the "Agreement") with three (3) investors for the sale of an aggregate of 3,676,472 shares of our common stock for total gross proceeds of $1,250,000 or a sales price of $0.34 per share. The offering closed on June 28, 2013. We incurred $112,500 of direct costs in connection with the financing, resulting in net cash proceeds to the Company of $ 1,137,500. The purchasers who entered into the Securities Purchase Agreement were also issued warrants to purchase up to 11,029,416 shares of our common stock. The warrants were issued in three groups of 3,676,472 each and have initial exercise prices of $0.40, $0.50 and $0.60 per share, respectively, are exercisable immediately upon issuance and have a term of exercise equal to five years, six months and nine months, respectively. We also issued warrants to purchase up to 294,185 shares of our common stock to the placement agent related to the financing. The placement agent warrants have an exercise price of $0.425 per share and a term of five years and are exercisable immediately.

Net Cash Used in Operating Activities

We have not generated positive cash flows from operating activities. For the three months ended June 30, 2013, net cash used in operating activities was $359,479 compared to net cash used in operating activities of $532,052 for the three months ended June 30, 2012. This decrease was primarily attributable to an increase in stock-based compensation. Net cash used in operating activities during the three months ended June 30, 2013 consisted primarily of a net loss of $899,305 and change in fair value of derivative liability of $185,021, offset by $422,099 related to stock-based compensation. Net cash used in operating activities during the three months ended June 30, 2012 consisted of a net loss of $426,508 and increase of $228,267 on prepaid expense offset by $168,650 related to stock based compensation.

Net Cash Provided By Financing Activities

During the three months ended June 30, 2013, net cash provided by financing activities was $1,133,250 compared to net cash provided by financing activities of $891,992 for the three months ended June 30, 2012. Net cash provided from financing activities during the three months ended June 30, 2013 was attributable to the sale of common stock and warrants. Net cash provided from financing activities during the three months ended June 30, 2012 was attributable to the issuance of loans from third parties of $456,992 and the sale of common stock of $435,000 during the period.

Net Cash Used in Investing Activities

During the three months ended June 30, 2013 and 2012, no net cash was used in or provided by investing.

Off-Balance Sheet Arrangements

None.

Critical Accounting Policies

. . .

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