Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
FORWARD LOOKING STATEMENTS
This quarterly report contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may", "should", "expects", "plans", "anticipates", "believes", "estimates", "predicts", "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 that may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.
Our unaudited financial statements are stated in United States Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles. The following discussion should be read in conjunction with our financial statements and the related notes that appear elsewhere in this quarterly report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below and elsewhere in this quarterly report.
In this quarterly report, unless otherwise specified, all dollar amounts are expressed in United States dollars. All references to "US$" refer to United States dollars and all references to "common stock" refer to the common shares in our capital stock.
As used in this quarterly report, the terms “we”, “us”, “our” and “our company” mean Stevia Nutra Corp., and, unless otherwise indicated, our wholly owned subsidiary, Health Power Trading Ltd., a British Virgin Islands company and our wholly owned subsidiary, Mighty Mekong Agro Industries Co. Ltd., a Cambodian company.
General Overview
We were incorporated in Nevada on April 30, 2010 under the name AAA Best Car Rental Inc.
We planned to offer discounted car rental services, by acquiring late model vehicles from used car auctions. On January 4, 2012, we underwent a change of control and a change in management through the purchase of 8,000,000 pre-split shares of our stock by Atlantic and Pacific Communications Inc., from our former director and officer, Suresh Gupta. On January 11, 2012, we received approval from our board of directors, and Atlantic and Pacific Communications Inc., our majority shareholder, to effect a change of name to Stevia Nutra Corp., increase our authorized capital to 200,000,000 shares of common stock and to effect a forward split of our issued and outstanding shares on a 1 old for 15 new basis. On January 25, 2012, we filed a certificate of amendment to change our name to Stevia Nutra Corp., with the Secretary of State of Nevada which became effective in the State of Nevada on March 5, 2012 upon approval from
the Financial Industry Regulatory Authority (“FINRA”)
.
We maintain our business offices at 37 Bannisters Road, Corner Brook, Newfoundland, Canada, A2H 1M5, and our telephone number is (709) 660-3056.
Effective March 5, 2012, in accordance with approval from FINRA, we changed our name from AAA Best Car Rental Inc. to Stevia Nutra Corp. In addition, our issued and outstanding shares of common stock increased from 10,400,000 shares of common stock to 156,000,000 shares of common stock, par value of $0.001, pursuant to a 1:15 forward split of our issued and outstanding shares of common stock.
Also effective March 5, 2012, our authorized capital increased from 75,000,000 shares of common stock to 200,000,000 shares of common stock, par value of $0.001.
Effective April 17, 2012, our common stock changed from “AAAB” to “STNT” to better reflect the new name of our company.
Our Current Business
As our company was unable to secure the financing required to continue with the car rental business, on January 4, 2012, in conjunction with a change in control, we changed our business focus to the business of the cultivation, development and post-harvest processing of stevia plants for use as a sweetener. On March 9, 2012, our wholly owned subsidiary, Mighty Mekong Agro Industries Co., Ltd., entered into and closed a lease agreement with Sara Ramany, a resident of Cambodia, for the lease of 20 hectares of land in the Kampong Speu Province of the Kingdom of Cambodia. The land is intended to be used in agricultural production, and more specifically in the cultivation and propagation of Stevia plants.
Our initial plan of operation is to organize an operational team on the ground in Cambodia, open an administration office, construct a Stevia propagation center and construct greenhouses and a nursery. Following these developments, we anticipate propagating more than 1,000,000 seedlings ready for plantation and installing approximately ten hectares of Stevia plants.
Effective June 1, 2012, we entered into a consulting agreement with Atlantic and Pacific Communications Ltd., a company controlled by director and officer Brian W. Dicks, whereby Mr. Dicks has agreed to provide consulting services as our company’s president, for a period ending June 1, 2014. In consideration for Mr. Dicks agreeing to provide such consulting, we have agreed to pay Mr. Dicks a salary of $3,500 per month during the term of the consulting agreement.
Also effective June 1, 2012, Mighty Mekong Agro Industries Co. Ltd., our wholly-owned subsidiary, entered into an agreement with Ecologica Co. Ltd., whereby Ecologica has agreed to provide certain services, associated with the cultivation of stevia, to Mighty Mekong and our company for a period of twelve months. Pursuant to the terms of the agreement, Ecologica will receive payments of $7,000 per month, in consideration for the services provided.
On August 20, 2012, we entered into an investment agreement with Fairhills Capital Offshore Ltd., a Cayman Islands exempted company. Pursuant to the terms of the investment agreement, Fairhills shall commit to purchase up to $3,000,000 of our common stock over a period of up to 36 months.
In connection with the investment agreement, we also entered into a registration rights agreement with Fairhills on August 20, 2012. Pursuant to the registration rights agreement, we are obligated to file a registration statement with the Securities and Exchange Commission (“SEC”) covering 11,000,000 shares of the common stock underlying the investment agreement within 21 days after the closing of the investment agreement. In addition, we are obligated to use all commercially reasonable efforts to have the registration statement declared effective by the SEC within 120 days after the closing of the investment agreement and maintain the effectiveness of such registration statement until termination in accordance with the investment agreement.
In connection with the financing agreement, we also entered into a securities purchase agreement with Fairhills. Pursuant to the securities purchase agreement, Fairhills has agreed to purchase 312,500 shares of our common stock at $0.24 per share for total proceeds of $75,000.
The securities purchase agreement also contains a price protection provision. According to the price protection provision, the shares to be purchased pursuant to the securities purchase agreement will be valued at 25% discount to the price of our common stock on the effectiveness date (the “Share Value”). In the event that the Share Value is less than $75,000, we will issue additional shares of registered common stock to Fairhills Capital, such that the value of the total shares being issued by us to Fairhills Capital will total $75,000.
On December 20, 2012, we amended the share purchase agreement with Fairhills limiting the price protection provision to a floor of $0.05 per share and to include the option for us to repay any difference resulting from the stock price protection provision in cash or with the issuance of additional shares.
Results of Operations
We have incurred recurring losses to date. Our financial statements have been prepared assuming that we will continue as a going concern and, accordingly, do not include adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should we be unable to continue in operation.
We expect we will require additional capital to meet our long term operating requirements. We expect to raise additional capital through, among other things, the sale of equity or debt securities.
Three and Six Months Ended January 31, 2013 Compared to the Three and Six Months Ended January 31, 2012.
Our net loss for the three months ended January 31, 2013 was $122,375 compared to a net loss of $17,984 during the three months ended January 31, 2012. Our net loss for the six months ended January 31, 2013 was $330,445 compared to a net loss of $36,232 during the six months ended January 31, 2012. During the six months ended January 31, 2013, our company has not generated any revenue.
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Six Months Ended
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January 31,
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2013
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|
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2012
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|
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Depreciation
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$
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5,764
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|
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$
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Nil
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|
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General and administrative
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$
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317,522
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$
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28,315
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Transfer agent and filing fees
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$
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7,159
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|
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$
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7,917
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|
During the three months ended January 31, 2013, we incurred depreciation expense of $2,892, general and administrative expenses of $114,845 and transfer agent and filing fees of $4,638 compared to $Nil in depreciation expense, $12,840 in general and administrative expenses and $5,144 in transfer agent and filing fees incurred during three months ended January 31, 2012. General and administrative expenses incurred during the three months ended January 31, 2013 consisted of bank charges and interest of $922 (2012: $340), consulting fees of $54,350 (2012: $Nil), professional fees of $12,980 (2012: $Nil), and office and operational expenses of $46,593 (2012: $12,500).
During the six months ended January 31, 2013, we incurred depreciation expense of $5,764, general and administrative expenses of $317,522 and transfer agent and filing fees of $7,159 compared to $Nil in depreciation expense, $28,315 in general and administrative expenses and $7,917 in transfer agent and filing fees incurred during six months ended January 31, 2012. General and administrative expenses incurred during the six months ended January 31, 2013 consisted of bank charges and interest of $1,771 (2012: $678), consulting fees of $108,400 (2012: $Nil), professional fees of $24,594 (2012: $15,137), office and operational expenses of $104,065 (2012: $12,500), travel of $3,692 (2012: $Nil) and loss on stock price protection of $75,000 (2012: $Nil).
Expenses incurred during six month period ended January 31, 2013 compared to six month period ended January 31, 2012 increased primarily due to the increased scale and scope of business operations. General and administrative expenses generally include corporate overhead, financial and administrative contracted services, marketing, consulting costs and loss on stock price protection.
The weighted average number of shares outstanding was 77,406,731 for the six month period ended January 31, 2013 compared to 156,000,000 for the six month period ended January 31, 2012.
Liquidity and Capital Resources
Six Months Ended January 31, 2013
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At
January 31,
2013
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At a
July 31,
2012
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Current Assets
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$
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13,044
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|
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$
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30,798
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Current Liabilities
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$
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191,273
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$
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63,316
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Working Capital
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$
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(178,229
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)
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$
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(32,518
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)
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Six Months
Ended
January 31,
2013
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Six Months
Ended
January 31,
2012
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Net Cash Used in Operating Activities
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$
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(193,886
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)
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$
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(19,854
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)
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Net Cash Provided by Financing Activities
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$
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179,542
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$
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11,500
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Net Cash Used in Investing Activities
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$
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(1,030
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)
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$
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Nil
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Net increase (decrease) in cash and equivalents
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$
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(15,374
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)
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$
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(8,354
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)
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As at January 31, 2013, our company had a cash balance of $6,513 and total assets of $64,808 compared with a cash balance of $21,887 and total assets of $87,296 as at July 31, 2012. As of January 31, 2013, current assets were comprised of $6,513 in cash, $5,367 in amounts receivable and $1,164 in prepaid expenses; current liabilities were comprised of $2,550 in advances from a director, $113,723 in accounts payable and $75,000 as stock price protection liability.
As at January 31, 2013, our company had total liabilities of $211,273 compared with total liabilities of $83,316 as at July 31, 2012. The increase in total liabilities was attributed to an increase in accounts payable due to limited cash held as well as amount of $75,000 recorded for stock price protection liability related to the share purchase agreement with Fairhills Capital Offshore Ltd.
As at January 31, 2013, our company had a working capital deficit of $178,229 compared with a working capital deficit of $32,518 as at July 31, 2012. The increase in working capital deficit was due to an increase in current liabilities and a decrease in cash related to current period operations.
Cash Flows from Operating Activities
During the six month period ended January 31, 2013, our company used cash of $193,886 for operating activities as compared to use of $19,854 during the six month period ended January 31, 2012. The increase in cash used for operating activities during the period was due to payment of outstanding day-to-day obligations incurred by our company during the period.
Cashflow from Investing Activities
During the six month period ended January 31, 2013, our company used cash of $1,030 for investing activities as compared to use of $Nil during the six month period ended January 31, 2012. The increase in cash used for investing activities during the period was due to the acquisition of fixed assets.
Cashflow from Financing Activities
During the six month period ended January 31, 2013, our company received proceeds of $179,542 compared with $11,500 for the six month period ended January 31, 2012. The proceeds received included proceeds received from a director and proceeds received for the issuance of common shares.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.
Critical Accounting Policies
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 the accounting principles generally accepted in the United States of America. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions are affected by management’s application of accounting policies. We believe that understanding the basis and nature of the estimates and assumptions involved with the following aspects of our financial statements is critical to an understanding of our financial statements.
Basis of Presentation
The consolidated financial statements of our company have been prepared in accordance with accounting principles generally accepted in the United States (“US GAAP”) and are expressed in U.S. dollars. Our company’s fiscal year end is July 31.
Use of Estimates
The preparation of financial statements in conformity with US 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 reporting period. Our company regularly evaluates estimates and assumptions related to the deferred income tax asset valuation allowances. Our company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by our company may differ materially and adversely from our company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.
Interim Consolidated Financial Statements
These interim unaudited consolidated financial statements have been prepared on the same basis as the annual financial statements and in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly our company’s financial position, results of operations and cash flows for the periods shown. The results of operations for such periods are not necessarily indicative of the results expected for a full year or for any future period.
Cash and Cash Equivalents
Our company considers all highly liquid instruments with a maturity of three months or less at the time of issuance to be cash equivalents. As at January 31, 2013 and July 31, 2012, the Company had no cash equivalents.
Prepaid Expenses and Deposits
Our company has classified prepaid expenses and deposits held for less than one year as current assets and security deposits held for periods longer than one year as long-term assets.
Basic and Diluted Net Loss Per Share
Our company computes net loss per share in accordance with ASC 260,
Earnings per Share
. ASC 260 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing net loss available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive.
Financial Instruments
Pursuant to ASC 820,
Fair Value Measurements and Disclosures
, an entity is required to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value:
Level 1 -
Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
Level 2 -
Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.
Level 3 -
Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities. Our company’s financial instruments consist principally of cash, bank indebtedness, accounts payable and accrued liabilities, and amounts due to related parties. Pursuant to ASC 820, the fair value of our cash is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets. We believe that the recorded values of all of our other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.
Comprehensive Loss
ASC 220,
Comprehensive Income
, establishes standards for the reporting and display of comprehensive loss and its components in the financial statements. As of October 31, 2012 and July 31, 2012, our company has no items that represent a comprehensive loss and, therefore, has not included a schedule of comprehensive loss in the financial statements.
Foreign Currency Translation
Our company’s functional and reporting currency is the United States dollar. Monetary assets and liabilities denominated in foreign currencies are translated in accordance with ASC 830
Foreign Currency Translation Matters,
using the exchange rate prevailing at the balance sheet date. Gains and losses arising on translation or settlement of foreign currency denominated transactions or balances are included in the determination of income. Foreign currency transactions are primarily undertaken in Canadian dollars and Cambodian riels. Our company has not, to the date of these financial statements, entered into derivative instruments to offset the impact of foreign currency fluctuations.