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STEV > SEC Filings for STEV > Form 10-Q on 19-Feb-2014All Recent SEC Filings

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Form 10-Q for STEVIA CORP


19-Feb-2014

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. Effective November 15, 2013,we filed a Certificate of Amendment to the Company's Articles of Incorporation to increase the total number of authorized shares of Common Stock from one hundred million
(100,000,000) shares of Common Stock to two hundred fifty million (250,000,000)
shares of Common Stock, each with a par value of $0.001.

We generated revenues during the 2013 fiscal year. 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 additives to agriculture, aquaculture and livestock operators, (iii) the sale of crops and seafood produced under contract farming, (iv) the sale of products derived from the stevia plant and other agriculture crops, (v) providing extraction and refining technology services related to stevia and other medicinal herbs and (v) the sale of branded consumer products made from natural ingredients.

During the past fiscal year, we 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 developed 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 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.

On March 19, 2012, we formed a wholly-owned subsidiary, Stevia Asia Limited, a company incorporated under the companies ordinance of Hong Kong ("Stevia Asia") that will allow the Company to expand its China operations. Hero Tact Limited, a wholly-owned subsidiary of Stevia Asia, was incorporated under the companies ordinance of Hong Kong and renamed Stevia Technew Limited on April 28, 2012.

On October 1, 2013, we formed SC Brands Pte. Ltd., a Singapore corporation and a subsidiary in which we own a 70% equity interest. SC Brands will allow us to develop branded consumer products.

Results of Operations

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 in our Annual Report on Form 10-K for the fiscal year ended March 31, 2013, filed July 15, 2013. 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 December 31, 2013 and December 31, 2012

For the three month period ended December 31, 2013 we incurred a net loss of $831,410, compared to a net loss of $364,601 for the three month period ended December 31, 2012. The increase was mainly attributed to a $561,077 loss attributed to debt settlement during the three month period ended December 31, 2013.

General and administration expenses and professional fees for the three month period ended December 31, 2013 amounted to $133,641 and $178,135 respectively, compared to $69,302 and $123,356 during the three month period ended December 31, 2012. Research and development fees for the three month period ended December 31, 2013 were $71,930 compared to $0 during the three month period ended December 31, 2012. Directors fees, officer salary and compensation and other salary and compensation were $7,813, $0 and $378 respectively, compared to $93,750, $0 and $59,105 during the three month period ended December 31, 2012.

Comparison of Nine Month Periods Ended December 31, 2013 and December 31, 2012

For the nine month period ended December 31, 2013 we incurred a net loss of $2,017,484, compared to a net loss of $1,342,473 for the nine month period ended December 31, 2012. The increase was mainly attributed to an increase in officer salary and compensation expense from $0 to $600,000, an increase in other income/expenses from a gain of $247,341 to a loss of $786,508, and offset by a an increase in revenues from $0 to $758,809.

General and administration expenses and professional fees for the nine month period ended December 31, 2013 amounted to $387,040 and $487,867 respectively, compared to $204,616 and $281,250 during the nine month period ended December 31, 2012. Research and development fees for the nine month period ended December 31, 2013 were $262,810 compared to $118,669 during the nine month period ended December 31, 2012. Directors fees, officer salary and compensation and other salary and compensation were $195,313, $600,000 and $66,556 respectively, compared to $281,250, $0 and $110,982 during the nine month period ended December 31, 2012.

Liquidity and Capital Resources

As at December 31, 2013 we have $2,132,300 in current assets, and $2,591,869 in current liabilities. As at December 31, 2013 we have $85,366 in cash. As at December 31, 2013, our total assets were $3,641,781 and our total liabilities were $3,189,388. Our net working capital deficit as at December 31, 2013 was $459,569.

During the nine month period ended December 31, 2013, we used cash of $895,651 in operating activities and used cash of $16,475 in investing activities, respectively. During the nine month period ended December 31, 2013, we funded our operations from revenue from operations and the proceeds of private sales of convertible notes and the exercise proceeds of warrants. During the nine month period ended December 31, 2013, we raised $431,500 through the issuance of convertible notes and $152,012 through the proceeds of warrant exercises.

As of December 31, 2013, convertible promissory notes, net of discount, in the aggregate amount of $1,071,569 remained outstanding.

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. Pursuant to the anti-dilution adjustment provision included in the Offering, the total share amount under the Cranshire Warrant has been increased to 2,036,381 and the exercise price has been reduced to $0.0671 as a result of certain other offerings of the Company. We may receive gross proceeds of up to $136,640.40 upon the cash exercise of the Cranshire Warrants. Any such proceeds we receive will be used for working capital and general corporate matters.


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 the Anson Warrants which are included in this registration statement. 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. 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 Anson Warrants. Any such proceeds we receive will be used for working capital and general corporate matters.

On July 16, 2013, the Company entered into a $400,000 Promissory Note (the "June 2013 Note") with an accredited investor (the "Investor") whereby the Investor agreed to loan to the Company up to $400,000 pursuant to the terms of the June 2013 Note. The June 2013 Note provides for the first $100,000 to be advanced upon closing and additional amounts will be advanced at the Investor's sole discretion. Each advance is subject to a 10% original issue discount, such that the total amount which may actually be received by the Company pursuant to the June 2013 Note is only $360,000. The maturity date for each advance made under the June 2013 Note is one year from the date of such advance. If the Company repays the June 2013 Note on or before 90 days from the effective date, the interest rate shall be 0%, otherwise a one-time interest charge of l2% shall be applied to the principal sum. The June 2013 Notes are convertible into common stock of the Company on a cashless basis at any time, at a conversion price equal to the lesser of $0.26 or 65% of the lowest trade price in the 25 trading days prior to the conversion. If the conversion shares are not deliverable by DWAC an additional 10% discount will apply, and if the shares are ineligible for deposit into the DTC system and only eligible for Xclearing deposit an additional 5% discount will apply. So long as the June 2013 Note is outstanding, upon any issuance by the Company or any of its subsidiaries of any security with any term more favorable to the holder of such security or with a term in favor of the holder of such security that was not similarly provided to the Investor in the June 2013 Note, then the Company shall notify the Investor of such additional or more favorable term and such term, at the Investor's option, shall become a part of the transaction documents with the Company.

On August 22, 2013, we issued a convertible promissory note to Asher Enterprises, Inc. in the principal amount of $153,500 (the "Asher Note"), pursuant to the terms of a Securities Purchase Agreement. The Note matures on May 26, 2014, incurs interest at the rate of 8% per annum, and is convertible into shares of our common stock at a 35% discount to the average of the lowest three trading prices for our common stock during the 30 day trading period prior to the conversion date.

On September 26, 2013, we issued a convertible note in the principal amount of $27,778 with a 10% original issuance discount and a one-time interest charge of 12%. The note is due one (1) year from the date of issuance with the conversion price at 65% of the lowest trade price for the 25 trade day period before the conversion date.

On October 15, 2013, we issued a Convertible Debenture in the principal amount of $58,000 (the "Debenture"), to Black Mountain Equities, Inc. ("Black Mountain"). The Debenture matures on May 1, 2014, incurs a one-time interest charge of 10%, and is convertible into shares of our common stock at a conversion price of $0.20 per share. The Debenture is secured by 1,250,000 shares of our common stock. The Debenture provides that on the next registration statement the Company files, the Company will include the shares issuable upon conversion of the Debenture. Black Mountain also received a warrant to purchase 1,000,000 shares of our common stock, with an exercise price of $0.25 per share and a term of five years.

On November 21, 2013, we issued a convertible note in the principal amount of $53,000, convertible at 65% of the three lowest bids for 30 trading days before the conversion date with interest at 8% per annum, due on August 25, 2014.

On December 9, 2013, we issued a convertible note in the principal amount of $55,556 with a 10% original issuance discount and 12% one time interest. The note is due one (1) year from the date of issuance with the conversion price at 65% of the lowest trade price for the 25 trade day period before the conversion date.

Subsequent to the three months ended December 31, 2013, on February 7, 2014,we issued a Convertible Debenture to an investor in the principal amount of $80,000. The Convertible Debenture matures on February 6, 2015, incurs interest at the rate of 8% per annum, and is convertible into shares of our common stock at a conversion price of $0.10 per share.

Subsequent to the three months ended December 31, 2013, on February 13, 2014, an investor exercised warrants to purchase 1,877,333 shares of the Company's common stock with an exercise price of $0.0585 per share, yielding aggregate gross proceeds to the Company of $109,824 in cash.

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, and (iv) up to $500,000 in stock and warrants on the same terms as set forth in the Securities Purchase Agreement.

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 December 31, 2013, there have been no material changes or updates to our critical accounting policies.

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