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STEVIA CORP - 10-Q - Management's Discussion and Analysis of Financial Condition and Results of Operations.

August 19, 2014

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 $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.

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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 June 30, 2014 and June 30, 2013

For the three month period ended June 30, 2014 we incurred net income of $1,961,505, compared to a net loss of $1,278,244 for the three month period ended June 30, 2013. The increase was mainly attributed to an increase in revenue from $957,261 to $2,217,026.

General and administration expenses and professional fees for the three month period ended June 30, 2014 amounted to $74,138 and $126,641 respectively, compared to $137,079 and $208,846 during the three month period ended June 30, 2013. Research and development fees for the three month period ended June 30, 2014 were $96,000 compared to $116,531 during the three month period ended June 30, 2013. Directors fees, officer salary and compensation and other salary and compensation were $76,803, $0 and $0 respectively, compared to $93,750, $600,000 and $66,178 during the three month period ended June 30, 2013.

Liquidity and Capital Resources

As at June 30, 2014 we have $4,038,410 in current assets, and $913,898 in current liabilities. As at June 30, 2014 we have $501,205 in cash. As at June 30, 2014, our total assets were $5,498,693 and our total liabilities were $2,400,877. Our net working capital surplus as at June 30, 2014 was $3,124,512.

During the three month period ended June 30, 2014, we used cash of $1,422,643 in operating activities and used cash of $257,545 in investing activities, respectively. During the three month period ended June 30, 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 three month period ended June 30, 2014, we raised $735,000 through the issuance of convertible notes, $225,000 through the sale of common stock and $485,874 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 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.

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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 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 and to date we have received $929,408 from such warrant exercises. Any such proceeds we receive will be used for working capital and general corporate matters. Pursuant to the anti-dilution adjustment provision included in the Offering, the total share amount under the third Anson Warrant has been increased to 10,873,876, and the exercise price has been reduced to $0.039 as a result of certain other offerings of the Company.

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 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"). On March 31, 2014, the Debenture was converted in full into 1,119,299 shares of common stock. 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, subject to adjustment, 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.

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.

On February 20, 2014 we issued a convertible note in the principal amount of $55,556 with a 10% Original Issuance Discount ("OID") and 12% one time interest. The note is due February 20, 2015, one (1) year from the date of issuance, convertible at 65% of the lowest trade price for the 25 trade day period before the conversion date.

On March 3, 2014, we entered into a securities purchase agreement (the "Purchase Agreement") with Nomis Bay Ltd., a Bermuda company ("Nomis Bay"). The Purchase Agreement provides that, upon the terms and subject to the conditions set forth therein, (i) Nomis Bay shall purchase from us on the Closing Date a senior convertible note with an initial principal amount of $500,000 (the "Initial Convertible Note") for a purchase price of $340,000 (a 32% original issue discount) and (ii) we shall have the right to require Nomis Bay to purchase from us on or prior to the 10th trading day after the effective date of the registration statement registering the shares issuable upon conversion of the Initial Convertible Note an additional senior convertible note with an initial principal amount of $600,000 (the "Additional Convertible Note" and, together with the Initial Convertible Note, the "Convertible Notes") for a purchase price of $600,000. On May 16, 2014, we issued the Additional Convertible Note to Nomis Bay pursuant to the Purchase Agreement. The Initial Convertible Note matures on December 27, 2014 (subject to extension as provided in the Initial Convertible Note) and, in addition to the 32% original issue discount, accrues interest at the rate of 8% per

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annum. The Additional Convertible Note matures on March 16, 2015 (subject to extension as provided in the Initial Convertible Note) and accrues interest at the rate of 8% per annum. The Initial Convertible Note is convertible at any time, in whole or in part, at Nomis Bay's option into shares of our common stock, par value $0.001 per share (the "Common Stock"), at a conversion price equal to the lesser of (i) the product of (x) the arithmetic average of the lowest three (3) volume weighted average prices of the Common Stock during the 10 consecutive trading days ending and including the trading day immediately preceding the applicable conversion date and (y) 40% (the "Variable Conversion Price"), and (ii) $0.30 (as adjusted for stock splits, stock dividends, stock combinations or other similar transactions). The Additional Convertible Note is convertible at any time, in whole or in part, at Nomis Bay's option into shares of our Common Stock at a conversion price that will be equal to the lesser of (i) the Variable Conversion Price and (ii) $0.30 (as adjusted for stock splits, stock dividends, stock combinations or other similar transactions). We have the right at any time to redeem all, but not less than all, of the total outstanding amount then remaining under the Initial Convertible Note and/or the Additional Convertible Note in cash at a price equal to 140% of the total amount of such Convertible Note then outstanding.

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 June 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 June 30, 2014, we generated revenues of $2,217,026, we received an aggregate of $735,000 from the issuance of convertible promissory notes, we received $225,000 from the sale of common stock and we received an aggregate of $485,874 upon the exercise of warrants to purchase our common stock.

As of June 30, 2014, convertible promissory notes in the aggregate principal amount of $1,294,487 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. In addition, the terms of the Securities Purchase Agreement contain certain restrictions on our ability to engage in financing transactions. Specifically, for a period of two years after the effective date of the Securities Purchase Agreement, the Securities Purchase Agreement contains 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, (iv) up to $500,000 in stock and warrants on the same terms as set forth in the Securities Purchase Agreement, and (v) up to $3,000,000 of the Company's securities.

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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 June 30, 2014, there have been no material changes or updates to our critical accounting policies.


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