Form 10-Q/A for STEVIA CORP
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 $6,373,199 in revenues during our fiscal year ended March 31, 2014. 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 2012, we completed our first commercial trials of stevia production in Vietnam. In connection with such production we 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 Asia 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.
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 (“SC Brands”) and a subsidiary in which we originally owned a 70% equity interest. Effective July 16, 2014, we acquired 100% ownership of SC Brands. We are in the process of forming a majority-owned subsidiary of SC Brands in Myanmer, which is expected to begin active operations in September of 2014 developing branded seafood products.
On February 24, 2014, we formed Real Hemp LLC, a wholly owned Indiana limited liability company that will focus on developing hemp products to be sold in the U.S. Real Hemp will work with our China partner to source hemp products from China and will focus on developing distribution channels in the U.S. to serve commercial food and fiber buyers as well as develop online marketing channels such as Amazon.com to serve retail consumers.
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, 2014, filed July 15, 2014. 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 September 30, 2014 and September 30, 2013
For the three month period ended September 30, 2014 we incurred net loss of $430,811, compared to net income of $16,822 for the three month period ended September 30, 2013. This net loss was mainly attributed to an expense of $162,645 attributable to a change in the fair value of derivative liability compared to a gain of $318,693 in the three month period ended September 30, 2013 and a loss from operations of $86,530 compared to a gain from operations of $72,283 for the three month period ended September 30, 2013.
General and administration expenses and professional fees for the three month period ended September 30, 2014 amounted to $215,651 and $152,244 respectively, compared to $116,320 and $100,886 during the three month period ended September 30, 2013. Research and development fees for the three month period ended September 30, 2014 were $86,000 compared to $74,349 during the three month period ended September 30, 2013. Directors fees, officer salary and compensation and other salary and compensation were $23,437, $53,365 and $0 respectively, compared to $93,750, $0 and $0 during the three month period ended September 30, 2013.
Comparison of the Six Month Periods Ended September 30, 2014 and September 30, 2013
For the six month period ended September 30, 2014 we incurred net income of $1,558,690, compared to a net loss of $1,186,074 for the six month period ended September 30, 2013. This net income was mainly attributed to income from operations of $19,779 compared to a loss from operations of $1,294,688 for the sixth month period ended September 30, 2013 and income attributable to a change in the fair value of derivative liability of $1,991,393 compared to income of $318,693 for the sixth month period ended September 30, 2013.
General and administration expenses and professional fees for the six month period ended September 30, 2014 amounted to $289,789 and $278,885 respectively, compared to $253,399 and $309,732 during the six month period ended September 30, 2013. Research and development fees for the six month period ended September 30, 2014 were $182,000 compared to $190,880 during the six month period ended September 30, 2013. Directors fees and officer salary and compensation and other salary and compensation were $46,875, $106,730 and $0 respectively, compared to $187,500, $600,000 and $66,178 during the six month period ended September 30, 2013.
Liquidity and Capital Resources
As at September 30, 2014 we have $4,521,254 in current assets, and $1,036,333 in current liabilities. As at September 30, 2014 we have $310,076 in cash. As at September 30, 2014, our total assets were $5,946,371 and our total liabilities were $1,752,683. Our net working capital surplus as at September 30, 2014 was $3,484,921.
During the six month period ended September 30, 2014, we used cash of $1,911,858 in operating activities and used cash of $265,795 in investing activities, respectively. During the six month period ended September 30, 2014, we funded our operations primarily from revenue from operations and the proceeds of private sales of convertible notes and common stock and the exercise proceeds of warrants. During the six month period ended September 30, 2014, we raised $735,00 through the issuance of convertible notes, $225,000 through the sale of common stock and $791,040 through the proceeds of warrant exercises.
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. Pursuant to the anti-dilution adjustment provision included in the Offering, the total share amount under the Cranshire Warrant has been increased to 2,568,752, all of which are outstanding, and the exercise price has been reduced to $0.039 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.
On February 26, 2013, we issued a convertible note in the principal amount of $100,000, convertible at $0.25 per share, with interest at 12% per annum due on September 30, 2013. The convertible note is currently past due with no penalty and we continue to accrue the interest at 12% per annum.
On March 7, 2012, we issued a convertible note in the principal amount of $200,000 with interest at 10% per annum due one (1) year from the date of issuance with the conversion price to be the same as the next private placement price on a per share basis, provided that we complete a private placement with gross proceeds of at least $100,000. On March 15, 2013, the above note was cancelled and reissued with a new convertible note consisting of the prior principal amount and the entire accrued unpaid interest for the total amount of $220,438 with interest at 12% per annum convertible at $0.25 per share due on September 30, 2013. The note is currently past due with no penalty and we continue to accrue the interest at 10% per annum.
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, we issued three warrants in the amounts of 1,877,333, 1,066,666 and 2,346,666, with exercise prices of $0.20, $0.25 and $0.25 per share (the “Anson Warrants”). The warrant for 1,877,333 shares and 1,066,666 shares have been exercised in full. Pursuant to the anti-dilution adjustment provision included in the Offering, the total share amount under the third Anson Warrant was increased to 10,873,876, and the exercise price was reduced to $0.039 as a result of certain other offerings of the Company. An aggregate of 3,156,315 shares remain available for issuance pursuant to that warrant and we may receive gross proceeds of up to $123,096.28 upon the cash exercise of such Warrant.
On July 16, 2013, we entered into a $400,000 Promissory Note (the “June 2013 Note”) with an accredited investor (the “Investor”) whereby the Investor agreed to loan us 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 us 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. 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. 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 such term, at the Investor’s option, shall become a part of the transaction documents with the Company.
On February 7, 2014, we issued a Convertible Debenture to an accredited 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. The accredited investor also received a warrant to purchase 1,000,000 shares of our common stock with an exercise price of $0.10 per share, subject to adjustment, and a term of five years. Pursuant to the anti-dilution adjustment provision included with the warrant, the total share amount under the warrant was increased to 2,564,104, all of which are outstanding, and the exercise price was reduced to $0.039 as a result of certain other offerings of the Company. We may receive gross proceeds of up to $100,000.01 upon the cash exercise of such Warrant.
On April 8, 2014, we entered into a Securities Purchase Agreement (the “SPA”) with an investor to raise $225,000 in a private placement financing. Pursuant to the SPA, we issued to the investor: (i) an aggregate of 1,500,000 shares of our common stock at $0.15 per share and (ii) warrants to purchase 4,000,000 shares of our common stock at an exercise price of $0.45 expiring five (5) years from the date of issuance for a gross proceeds of $225,000.
During the quarter ended September 30, 2014, we funded our operations from the proceeds of private sales of equity and convertible notes, proceeds from the exercise of warrants, and operating revenues. During the quarter ended September 30, 2014, we generated revenues of $132,958 and we received an aggregate of $305,166 upon the exercise of warrants to purchase our common stock, net of costs.
As of September 30, 2014, convertible promissory notes in the aggregate principal amount of $444,340 remained outstanding.
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.
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, 2014, filed on July 15, 2014. As of, and for the three months ended September 30, 2014, there have been no material changes or updates to our critical accounting policies.