Form 10-Q/A for STEVIA CORP
25-Feb-2015
Quarterly Report
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. Effective February 10, 2015, 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 two hundred fifty million (250,000,000) shares of Common Stock to seven hundred fifty million (750,000,000) 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 agriculture inputs such as fertilizer and feed additives, (iii) the sale of crops and seafood produced under contract farming, (iv) providing extraction, refining and synthesis technology services related to stevia and other medicinal herbs, (v) the sale of products derived from the stevia plant and other agriculture crops and their synthesized equivalents, (vi) the sale of branded consumer products, and (vii) the commercialization and/or licensing of intellectual property.
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 crops 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.
On March 19, 2012, we formed Stevia Asia Limited, a wholly-owned subsidiary incorporated under the companies ordinance of Hong Kong (“Stevia Asia”), to focus on expanding the Company’s operations in China. On April 28, 2012 we formed Hero Tact Limited, originally a wholly-owned subsidiary of Stevia Asia incorporated under the companies ordinance of Hong Kong, and renamed it Stevia Technew Limited (“Stevia Technew”). In connection with our intellectual property development efforts we engaged TechNew Technology Limited (“TechNew”) as our technology partner in China and Vietnam. Effective July 5, 2012, TechNew acquired 30% ownership of Stevia Technew.
On October 1, 2013, we formed SC Brands Pte. Ltd., originally a 70% owned subsidiary incorporated under the Singapore Companies Act (“SC Brands”), to develop brands. Effective July 16, 2014, we acquired 100% ownership of SC Brands. On August 7, 2014, we formed SC Royal Andaman Services Company Limited, a 70% owned subsidiary of SC Brands incorporated under the Myanmar Companies Act (“SC Royal”), to develop seafood brands.
On February 24, 2014, we formed Real Hemp LLC, a wholly owned Indiana limited liability company (“Real Hemp”), to focus on the industrial hemp industry. Real Hemp will focus on developing supply chain solutions with distribution channels in the United States to serve food, fiber, dietary supplement and health care buyers as well as develop online marketing channels such as Amazon.com to serve retail consumers.
On December 22, 2014, we filed a provisional patent with the United States Patent and Trademark Office (“USPTO”) as part of our intellectual property strategy focused on the health care industry. In January 2015 we filed three additional provisional patents. Each provisional patent application involves using Cannabidiol (“CBD”) in combination with a specific Over-The-Counter (“OTC”) drug for the treatment of pain. We believe there will be significant advantages of using these four OTC drugs in combination with CBD as opposed to using these drugs alone. We intend to file the respective non-provisional patent applications within 12 months of the provisional patent applications. There is no guarantee that filing a provisional or a non-provisional patent application will result in a successful registration with the USPTO.
We intend to file additional patent applications and we believe our portfolio of intellectual property will allow us to pursue a strategic and broad business strategy including licensing agreements, marketing and/or selling healthcare products and exploring possibilities of partnering with large pharmaceutical companies.
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 December 31, 2014 and December 31, 2013
For the three month period ended December 31, 2014 we incurred a net loss of $1,185,435, compared to net loss of $831,410 for the three month period ended December 31, 2013. The increase was mainly attributed to the change in fair value of derivative liability from income of $40,105 for the three month period ended December 31, 2013 to an expense of $775,770 for the three month period ended December 31, 2014, offset by a decrease in debt settlement loss from $561,077 for the three month period ended December 31, 2013, to $0 for the three month period ended December 31, 2014, as well as a decrease in revenue from $388,746 for the three month period ended December 31, 2013 to $255,445 for the three month period ended December 31, 2014.
General and administration expenses and professional fees for the three month period ended December 31, 2014 amounted to $109,476 and $234,290 respectively, compared to $133,641 and $178,135 during the three month period ended December 31, 2013. Research and development fees for the three month period ended December 31, 2014 were $39,872 compared to $71,930 during the three month period ended December 31, 2013. Directors fees, officer salary and compensation and other salary and compensation were $23,438, $53,365 and $0 respectively, compared to $7,813, $0 and $378 during the three month period ended December 31, 2013.
Comparison of the Nine Month Periods Ended December 31, 2014 and December 31, 2013
For the nine month period ended December 31, 2014 we incurred net income of $373,255, compared to a net loss of $2,017,484 for the nine month period ended December 31, 2013. The change was mainly attributed to an increase in revenue from $1,893,865 for the nine month period ended December 31, 2013 to $2,987,429 for the nine month period ended December 31, 2014, an increase in income from the change in fair value of derivative liability from income of $675,949 for the nine month period ended December 31, 2013 to $1,215,623 for the nine month period ended December 31, 2014 and a decrease in debt settlement loss expense from $561,077 for the nine month period ended December 31, 2013 to $0 for the nine month period ended December 31, 2014.
General and administration expenses and professional fees for the nine month period ended December 31, 2014 amounted to $399,265 and $513,175 respectively, compared to $387,040 and $487,867 during the nine month period ended December 31, 2013. Research and development fees for the nine month period ended December 31, 2014 were $221,872 compared to $262,810 during the nine month period ended December 31, 2013. Directors fees, officer salary and compensation and other salary and compensation were $70,313, $160,095 and $0 respectively, compared to $195,313, $600,000 and $66,556 during the nine month period ended December 31, 2013.
Liquidity and Capital Resources
As at December 31, 2014 we have $5,585,940 in current assets, and $1,680,412 in current liabilities. As at December 31, 2014 we have $1,420,252 in cash. As at December 31, 2014, our total assets were $6,986,772 and our total liabilities were $4,146,756. Our net working capital surplus as at December 31, 2014 was $3,905,528.
During the nine month period ended December 31, 2014, we used cash of $2,097,551 in operating activities and used cash of $269,925 in investing activities, respectively. During the nine month period ended December 31, 2014, we funded our operations from revenue from operations and the proceeds of private sales of convertible notes and common stock and the exercise proceeds of warrants. During the nine month period ended December 31, 2014, we raised $2,035,000 through the issuance of convertible notes, net of issuance costs, $225,000 through the sale of common stock, net of issuance costs and $791,039 through the proceeds of warrant exercises, net of issuance costs.
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.
On November 21, 2014, we entered into a secured convertible promissory note with an investor in the original principal amount of $110,000 with a ten percent (10%) original issue discount. The note matures on November 21, 2015, and is subject to a one-time interest charge of eight percent (8%) and is convertible into shares of our common stock at a conversion price equal to seventy percent (70%) of the lowest trade occurring during the twenty five consecutive trading days, or sixty percent (60%) of the lowest trading price if the conversion price is equal to or less than $0.05 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.
On December 17, 2014, we entered into a promissory note with an investor in the original principal amount of $300,000 with a ten percent (10%) original issued discount. The note matures two years following its issuance date. The note is subject to a one time interest charge of twelve percent (12%) three months after issuance. The note may be converted into common stock of the issuer at a conversion price equal to the lesser of $0.07 or sixty percent (60%) of the lowest trade price in the twenty five days prior to conversion. The note includes registration rights for all shares issuable upon conversion of the note.
On December 30, 2014, we entered into a Securities Purchase Agreement (the “Purchase Agreement”) with an accredited investor (the “Purchaser”) to raise $1,000,000 (the “December 2014 Offering”) through the sale of an Original Issue Discount Senior Convertible Debenture (the “Debenture”). In connection with the December 2014 Offering, we issued to the Purchaser: (i) the Debenture in the principle amount of $1,250,000 with an original issue discount of twenty percent
(20%) and a conversion price of $0.125 per share (the “Debenture”) and (ii)
warrants to purchase 10,000,000 shares of the Company’s common stock at an exercise price of $0.12 with a term of 7 years (the “Warrants”). The Debenture matures 18 months from December 31, 2014, with monthly payments beginning six months from December 31, 2014. The Debenture and Warrants each include certain anti-dilution protections and the Debenture includes protections against decreases in the trading price of the Company’s common stock. The Purchase Agreement includes certain restrictions on and a right of first refusal for future financings by the Company. Garden State Securities, Inc. (the “Placement Agent”) served as the placement agent of the Company for the December 2014 Offering. In consideration for services rendered as the Placement Agent, the Company: (i) paid to the Placement Agent cash commissions equal to $60,000, or 6.0% of the gross proceeds received in the December 2014 Offering, and (ii) issued to the Placement Agent, or its designee, a Warrant to purchase up to 600,000 shares of the Company’s common stock (representing 6% of the securities issued in the December 2014 Offering) on the same terms as the Warrants.
During the quarter ended December 31, 2014, we funded our operations from the proceeds of private sales of equity and convertible notes and debentures, proceeds from the exercise of warrants, and operating revenues. During the quarter ended December 31, 2014, we generated revenues of $255,445 and we received an aggregate of $1,299,999 from financing activities.
During the quarter ended December 31, 2014, an aggregate of $28,892.50 in outstanding convertible promissory notes were converted into shares of the Company and as of December 31, 2014, convertible promissory notes in the aggregate principal amount of $2,103,769 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 December 31, 2014, there have been no material changes or updates to our critical accounting policies.
