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STEV > SEC Filings for STEV > Form 10-Q on 19-Aug-2013All Recent SEC Filings

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Form 10-Q for STEVIA CORP


19-Aug-2013

Quarterly Report


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

The following discussion should be read in conjunction with our consolidated financial statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q. Forward looking statements are statements not based on historical information and which relate to future operations, strategies, financial results or other developments. Forward-looking statements are based upon estimates, forecasts, and assumptions that are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control and many of which, with respect to future business decisions, are subject to change. These uncertainties and contingencies can affect actual results and could cause actual results to differ materially from those expressed in any forward-looking statements made by us, or on our behalf. We disclaim any obligation to update forward-looking statements.

Overview

We were incorporated on May 21, 2007 in the State of Nevada under the name Interpro Management Corp. On March 4, 2011, we changed our name to Stevia Corp. and effectuated a 35 for 1 forward stock split of all of our issued and outstanding shares of common stock.

We are a development stage company. We expect our primary sources of revenue will be (i) providing farm management services, which will provide protocols and other services to agriculture, aquaculture, and livestock operators, (ii) the sale of inputs such as fertilizer and feed to agriculture, aquaculture and livestock operators, (iii) the sale of crops and seafood produced under contract farming and (iv) the sale of products derived from the stevia plant.

During the past fiscal year, we have completed our first commercial trials of stevia production in Vietnam. In connection with such production we have entered into supply agreements for the off-take of the stevia we produce and entered into an agreement with Growers Synergy Pte Ltd to assist in the management of our Vietnam day-to-day operations. We have also begun to explore commercial applications of stevia derived products and have developed and acquired certain proprietary technology relating to stevia development which we can integrate into our own stevia production and our farm management services. In connection with our intellectual property development efforts we have engaged TechNew Technology Limited ("TechNew), as our technology partner in Vietnam and on July 5, 2012 we entered into a Cooperative Agreement (the "Cooperative Agreement") through our subsidiary Stevia Asia Limited ("Stevia Asia"), with TechNew and Zhang Ji, a Chinese citizen (together with TechNew, the "Partners") pursuant to which Stevia Asia and Partners have agreed to engage in a joint venture to develop certain intellectual property related to stevia development, such joint venture to be owned 70% by Stevia Asia and 30% by TechNew (the "Joint Venture"). Pursuant to the Cooperative Agreement Stevia Asia has agreed to contribute $200,000 per month, up to a total of $2,000,000 in financing, subject to the performance of the Joint Venture and Stevia Asia's financial capabilities.

We have also continued to establish research and production relationships with local institutions and companies in Vietnam. In April, 2012 we announced plans to begin field trials in Indonesia.

Results of Operations

Our operations to-date have primarily consisted of securing purchase and supply contracts, office space and a research center, developing relationships with potential partners, and developing products derived from the stevia plant.

Our auditors have issued a going concern opinion. This means that there is substantial doubt that we can continue as an on-going business for the next twelve months unless we obtain additional capital.

The following discussion of the financial condition, results of operations, cash flows, and changes in our financial position should be read in conjunction with our audited consolidated financial statements and notes included herein. Such financial statements have been prepared in conformity with U.S. GAAP and are stated in United States dollars.

Comparison of three month periods ended June 30, 2013 and June 30, 2012

For the three month period ended June 30, 2013 we incurred a net loss of $1,278,244, compared to a net loss of $413,936 for the three month period ended June 30, 2012. The increase was mainly attributed to an increase in loss from operations from $401,394 to $1,366,972.


General and administration expenses and professional fees for the three month period ended June 30, 2013 amounted to $253,611 and $208.846 respectively, compared to $44,712 and $116,728, respectively, during the three month period ended June 30, 2012. Research and development fees for the three month period ended June 30, 2013 were $0 compared to $78,984 during the three month period ended June 30, 2012. Directors fees, officer salary and compensation and other salary and compensation were $93,750, $600,000 and $66,178 respectively, compared to $93,750, $0, $0 during the three month period ended June 30, 2012.

Liquidity and Capital Resources

As at June 30, 2013 we have $1,417,521 in current assets, including $266,479 in cash, and $2,398,883 in current liabilities. As at June 30, 2013, our total assets were $2,984,380 and our total liabilities were $3,303,507. Our net working capital deficit as at June 30, 2013 was $981,362.

During the three month period ended June 30, 2013, we used cash of $283,039 in operating activities and used cash of $16,475 in investing activities, respectively. During the three month period ended June 30, 2013, we funded our operations from operating revenues, the proceeds of private sales of equity and convertible notes. During the three month period ended June 30, 2013, we raised $152,013 through the proceeds of sales of common stock, net of costs.

As of June 30, 2013, convertible promissory notes in the aggregate principal amount of $770,438 remained outstanding. In connection with the issuance of such notes, we issued to the investors warrants to purchase an aggregate of 2,281,753 shares of common stock at a price per share of $0.25.

In July, 2012 outstanding convertible promissory notes in the principal amount of $500,000 were converted into an aggregate of 634,193 shares of our common stock.

On August 1, 2012, we entered into a Securities Purchase Agreement with certain accredited investors (the "Financing Stockholders") to raise $500,000 in a private placement financing (the "Offering"). On August 6, 2012, after the satisfaction of certain closing conditions, the Offering closed and the Company issued to the Financing Stockholders: (i) an aggregate of 1,066,667 shares of the Company's common stock at a price per share of $0.46875 and (ii) warrants to purchase an equal number of shares of the Company's common stock at an exercise price of $0.6405 with a term of five (5) years, for gross proceeds of $500,000. Garden State Securities, Inc. ("GSS") served as the placement agent for such equity financing. Per the engagement agreement signed between GSS and the Company on June 18, 2012, in consideration for services rendered as the placement agent, the Company agreed to: (i) pay GSS cash commissions equal to $40,000, or 8.0% of the gross proceeds received in the equity financing, and
(ii) issue to GSS or its designee, a warrant to purchase up to 85,333 shares of the Company's common stock representing 8% of the shares sold in the Offering) with an exercise price of $0.6405 per share and a term of five (5) years.

On December 7, 2012, a Registration Statement on Form S-1 was declared effective, registering a total of 17,018,545 of our shares of common stock (the "Registered Shares"). 14,885,211of the Registered Shares are shares that we may put to Southridge Partners II, LP ("Southridge") pursuant to an equity purchase agreement (the "Equity Purchase Agreement") between Southridge and the Company, effective January 26, 2012. 1,066,667 of the Registered Shares are the shares of common stock issued to the accredited investors pursuant to the Securities Purchase Agreement, and another 1,066,667 of the Registered Shares are shares of common stock underlying warrants issued to such accredited investors pursuant to the Securities Purchase Agreement. We have not put any shares to Southridge pursuant to the Equity Purchase Agreement.

On May 3, 2013, in consideration for the immediate cash exercise of outstanding warrants to purchase 853,333 shares of common stock of the Company at a price per share of $0.20, the Company issued to such investor three new warrants in the amounts of 1,877,333, 1,066,666 and 2,346,666 and with exercise prices of $0.20, $0.25 and $0.25 per share, respectively, and each with a five year term (collectively the "Warrants"). The Warrant to purchase 1,877,333 shares of common stock is subject to a right of repurchase by the Company upon the satisfaction of certain conditions, at a price of $0.001 per Warrant share. The Warrant to purchase 2,346,666 shares is only exercisable upon the investor's exercise in full of the warrant to purchase 1,877,333 shares. A registration statement was filed with respect to the shares of common stock underlying the Warrants on May 21, 2013. We will not receive any proceeds from the sale of those shares of common stock. We may, however, receive gross proceeds of up to $1,228,799.60 upon the cash exercise of the Warrants. Any such proceeds we receive will be used for working capital and general corporate matters.


We do not expect that our revenues from operations will be wholly sufficient to fund our operating plan, so we are currently seeking further financing and we believe that, along with our revenues, will provide sufficient working capital to fund our operations for at least the next six months. Changes in our operating plans, increased expenses, acquisitions, or other events, may cause us to seek additional equity or debt financing in the future.

Our current cash requirements are significant due to the planned development and expansion of our business. The successful implementation of our business plan is dependent upon our ability to develop valuable intellectual property relating to stevia through our research programs, as well as our ability to develop and manage our own crop and aquaculture production operations. These planned research and agricultural development activities require significant cash expenditures. We do not expect to generate the necessary cash from our operations during the next 6 to 12 months to expand our business as desired. As such, in order to fund our operations during the next 6 to 12 months, we anticipate that we will have to raise additional capital through debt and/or equity financings, which may result in substantial dilution to our existing stockholders. There are no assurances that we will be able to raise the required working capital on terms favorable, or that such working capital will be available on any terms when needed. In addition, the terms of the Securities Purchase Agreement contain certain restrictions on our ability to engage in financing transactions. Specifically, the Securities Purchase Agreement prohibits us from engaging in any issuance of Common Stock for a period of 90 days after the effective date of the Securities Purchase Agreement, and for a period of two years thereafter, contains additional restrictions on certain types of financing transactions. The Securities Purchase Agreement contains carveouts to such financing restrictions for certain exempted transactions including (i) issuances pursuant to a stock option plan, (ii) securities issued upon the conversion of outstanding securities, (iii) securities issued pursuant to acquisitions or other strategic transactions, (iv) up to $500,000 in stock and warrants on the same terms as set forth in the Securities Purchase Agreement, and (v) securities issued pursuant to the Southridge Equity Purchase Agreement. The terms of the Equity Purchase Agreement with Southridge also contain a prohibition on us entering into any equity line of credit with terms substantially comparable to the Equity Purchase Agreement for a period of 36 months following the date of such Equity Purchase Agreement, without Southridge's consent.

Off-Balance Sheet Arrangements

We have not entered into any other financial guarantees or other commitments to guarantee the payment obligations of any third parties. We have not entered into any derivative contracts that are indexed to our shares and classified as stockholder's equity or that are not reflected in our consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or research and development services with us.

Critical Accounting Estimates

The preparation of financial statements in conformity with generally accepted accounting principles of the United States (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the year. The more significant areas requiring the use of estimates include asset impairment, stock-based compensation, and future income tax amounts. Management bases its estimates on historical experience and on other assumptions considered to be reasonable under the circumstances. However, actual results may differ from the estimates.

The discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with GAAP. We believe certain critical accounting policies affect our more significant judgments and estimates used in the preparation of the financial statements. A description of our critical accounting policies is set forth in our Annual Report on Form 10-K for the fiscal year ended March 31, 2013, filed on July 16, 2013. As of, and for the three months ended June 30, 2013, there have been no material changes or updates to our critical accounting policies.

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