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STVF > SEC Filings for STVF > Form 10-Q on 14-Feb-2014All Recent SEC Filings

Show all filings for STEVIA FIRST CORP.

Form 10-Q for STEVIA FIRST CORP.


14-Feb-2014

Quarterly Report


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

As used in this discussion and analysis and elsewhere in this Quarterly Report on Form 10-Q, "we," "us," "our," and the "Company" refer to Stevia First Corp., a Nevada corporation.

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. 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," "will," "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 develop and bring our planned future products to market; market demand for our planned future products; 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 planned future products; 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 abandoned our mining and exploration business and are pursuing a 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 its report on our annual financial statements for the fiscal year ended March 31, 2013, our independent auditor 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, sell securities to new and existing investors or pursue alternative means of raising the capital we need to operate our business, which could include strategic or licensing transactions or other similar arrangements.

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 2013. Assuming favorable results from our consumer product testing efforts, we would expect to release our planned tabletop sweetener product and generate revenues from this proposed product as soon as the 2014 calendar year. 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 enzyme characterization work. Prior to the launch of these stevia products, we will need to achieve certain operational milestones, including but not limited to further microbial strain development and fermentation process development and optimization, work which we currently estimate to cost $100,000. 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 may require additional funding from our stockholders and/or other qualified investors, lenders or other third parties in order to complete these milestones, and 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 $175,000 and which we expect to be ongoing in 2014. 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 funding from our stockholders and/or other qualified investors, lenders or other third parties in order to complete these milestones, and 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 capital and other resources permit. As of February 13, 2014, we had 6 full-time employees. Total expenditures over the 12 months following December 31, 2013, are expected to be approximately $1,500,000. As of December 31, 2013, we expect to have sufficient funds to operate our business for at least one year. 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. We will need to raise additional capital to pursue our plan of operations as described. We expect to continue to seek funding from our stockholders and/or other qualified investors, lenders or other third parties in order to pursue our business plan, but we do not have any arrangements in place for any future financing and sources of additional funds may not be available when needed on acceptable terms 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.

Recent Events

On June 25, 2013, we entered into a Securities Purchase Agreement with three investors for the sale of an aggregate of 3,676,472 shares of our common stock and warrants to purchase up to an aggregate of 11,029,416 shares of our common stock, for gross proceeds as of the initial issuance of such securities of $1,250,000. The warrants were issued in three series 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, which have an exercise price of $0.425 per share and a term of five years and are exercisable immediately. During the three months ended December 31, 2013, certain purchasers exercised some of their six-month warrants and acquired an aggregate of 314,000 shares of our common stock at the then-effective exercise price of $0.50 per share, resulting in proceeds to us of $157,000. On December 6, 2013, we offered the purchasers holding the remaining six-month warrants the right to exercise all of those warrants, for an aggregate of 3,362,472 shares of our common stock, based on the terms of an early exercise offer wherein such warrants became exercisable at a reduced exercise price of $0.42 per share, so long as the exercise thereof occurred on or before December 9, 2013. All purchasers acted on the early exercise offer and we issued 3,362,472 shares of our common stock, resulting in proceeds to us of $1,327,504. As of December 31, 2013, all of the nine-month and five-year warrants issued to investors in the financing remained outstanding. See the more fulsome description of June 2013 financing in Notes 5 and 7 of the unaudited condensed financial statements included in this Quarterly Report.

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 December 31, 2013 and December 31, 2012

Our net loss during the three months ended December 31, 2013 was $1,045,037 compared to a net loss of $586,758 for the three months ended December 31, 2012 (an increase in net loss of $458,279). The increase in net loss during the three months ended December 31, 2013 compared to the three months ended December 31, 2012 is attributable primarily to higher consulting and professional fees incurred in the 2013 period. During the three months ended December 31, 2013 and 2012 we did not generate any revenue.

During the three months ended December 31, 2013, we incurred general and administrative expenses in the aggregate amount of $796,017 compared to $499,275 incurred during the three months ended December 31, 2012 (an increase of $296,742). 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 during the 2013 period relates to consulting and other professional fees , which increased to $372,246 in the period ending December 31, 2013, as compared to $65,700 in the period ending December 31, 2012, an increase of $306,546.

In addition, during the three months ended December 31, 2013, we incurred research and development costs of $219,436 relating to the development of our stevia products, compared to $132,888 during the three months ended December 31, 2012 (an increase of $86,548). This increase was primarily attributable to increased research efforts during the 2013 period.

During the three months ended December 31, 2013, we incurred related party rent and other costs totaling $42,150 compared to $41,150 incurred during the three months ended December 31, 2012 (an increase of $1,000).

This resulted in a loss from operations of $1,057,603 during the three months ended December 31, 2013 compared to a loss from operations of $673,313 during the three months ended December 31, 2012.

During the three months ended December 31, 2013, we recorded total net other income in the amount of $12,566, compared to total net other income recorded during the three months ended December 31, 2012 in the amount of $76,525 (a decrease of $63,959). During the three months ended December 31, 2013, we incurred interest expense of $88,842 compared to $69,468 incurred during the three months ended December 31, 2012 (an increase of $19,374). 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 $275,232 during the three months ended December 31, 2013 compared to a gain of $234,321 for the three months ended December 31, 2012, an increase of $40,911. We also recorded an expense in the amount of $173,824 related to the reduction in the exercise price of certain warrants that were exercised during the three months ended December 31, 2013. No such item was recorded during the three months ended December 31, 2012.

Nine Months Ended December 31, 2013 and December 31, 2012

Our net loss during the nine months ended December 31, 2013 was $2,726,022 compared to a net loss of $1,772,035 for the nine months ended December 31, 2012 (an increase in net loss of $953,987). The increase in net loss during the nine months ended December 31, 2013 compared to the nine months ended December 31, 2012 is attributable primarily to higher research and development expenses as well as higher consulting and professional fees incurred in the 2013 period. During the nine months ended December 31, 2013 and 2012 we did not generate any revenue.

During the nine months ended December 31, 2013, we incurred general and administrative expenses in the aggregate amount of $2,120,541 compared to $1,475,111 incurred during the nine months ended December 31, 2012 (an increase of $645,430). 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 increase in general and administrative expenses was mainly related to consulting and professional fees totaling $585,384 during the nine months ended December 31, 2013, compared to $206,335 during the three months ended December 31, 2012, an increase of $379,049. In addition, our stock based compensation expense increased to $718,448 during the 2013 period, from $575,915 during the 2012 period, an increase of $142,533. Our accounting and audit expenses also increased from $36,591 during the nine months ended December 31, 2012 to $169,114 during the nine months ended December 31, 2013, an increase of $132,523.

During the nine months ended December 31, 2013, we incurred research and development costs of $545,821 relating to the development of our stevia products compared to $329,728 during the nine months ended December 31, 2012, an increase of $216,093. These costs included stock based compensation of $178,078 during the 2013 period, compared to $127,461 during the 2012 period, an increase of $50,617.

During the nine months ended December 31, 2013, we incurred related party rent and other costs totaling $115,250 compared to $107,600 incurred during the nine months ended December 31, 2012 (an increase of $7,650).

This resulted in a loss from operations of $2,781,612 during the nine months ended December 31, 2013, compared to a loss from operations of $1,912,439 during the nine months ended December 31, 2012.

During the nine months ended December 31, 2013, we recorded total net other income in the amount of $55,590, compared to total net other income recorded during the nine months ended December 31, 2012 in the amount of $140,404 (a decrease of $84,874). During the nine months ended December 31, 2013, we incurred interest expense of $323,929 compared to $122,421 incurred during the nine months ended December 31, 2012 (an increase of $201,508). 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 $553,343 during the nine months ended December 31, 2013 compared to a gain of $234,321 for the nine months ended December 31, 2012, an increase of $319,022. We also recorded an expense in the amount of $173,824 related to the reduction in the exercise price of certain warrants that were exercised during the nine months ended December 31, 2013. No such item was recorded during the three months ended December 31, 2012. In the 2012 period we recorded a gain on settlement of debt in the amount of $107,004. No such item was recorded during the nine months ended December 31, 2013.

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 $6,900,059 as at December 31, 2013, and further losses are anticipated in the development of its business. These and other factors raise substantial doubt about the Company's ability to continue as a going concern.

As of December 31, 2013, we had total current assets of $1,884,659 which was comprised of cash of $1,831,189, security deposits of $2,500, prepaid expenses in the amount of $9,306, and an advance payment on related party lease of $41,664. Our total current liabilities as of December 31, 2013 were $1,084,088, represented primarily by accounts payable and accrued liabilities of $166,510, accounts payable to a related party of $9,200, and derivative liability of $908,378. The derivative liability is a non-cash item related to our outstanding warrants as described in Note 4 to our unaudited condensed financial statements included herein. As a result, on December 31, 2013, we had working capital of $800,571.

As of December 31, 2013, our long term liabilities were $546,212, which consisted of convertible notes payable in the amount of $625,000, net of a discount of $78,788.

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 December 31, 2013 we will have sufficient funds to operate the business for the next 12 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 stevia extract production, developing and seeking regulatory approval for any of our stevia product candidates, 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. Since inception, we have funded our operations primarily through equity and debt financings, and we expect to continue to rely on these sources of capital in the future. However, if we raise additional funds by issuing equity or convertible debt securities, our existing stockholders' ownership will be diluted, and obtaining commercial loans would increase our liabilities and future cash commitments. Further, these or other sources of capital may not be available 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 an aggregate of (i) 625,000 shares of common stock at a purchase price of $1.00 per share 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 over a 12 month period beginning on March 1, 2012, 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 nine months ended December 31, 2013, the aggregate accrued interest due on these convertible debentures of $37,500 was converted into 41,632 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 December 31, 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 December 31, 2013, the holders thereof would receive 693,773 shares of common stock.

On October 29, 2012, we entered into a 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 . . .

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