This annual report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements include, without limitation, statements concerning proposed commercial activities and collaboration relationships, property acquisitions, dispositions, design and construction, research and development activities, capital expenditures and capital raising activities. Words such as "expects," "anticipates," "intends," "plans," "likely," "will," "believes," "seeks," "estimates," and variations of such words and similar expressions are intended to identify such forward-looking statements. Such statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from the results of operations or plans expressed or implied by such forward-looking statements. Actual results may differ substantially from those referred to herein due to a number of factors, including but not limited to risks described under the heading "Risk Factors" and elsewhere in this annual report.
Although we believe that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate, and therefore such statements included in this annual report may not prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that the results or conditions described in such statements or our objectives and plans will be achieved.
Forward-looking statements and such risks, uncertainties and other factors speak only as of the date of this annual report, and we expressly disclaim any obligation or undertaking to update or revise any forward-looking statement contained herein, to reflect any change in our expectations with regard thereto, or any other change in events, conditions or circumstances on which any such statement is based, except to the extent otherwise required by law.
The following discussion should be read in conjunction with the financial statements and the accompanying notes for the years ended March 31, 2013 and 2014 appearing elsewhere in this annual report.
We were incorporated in the State of Nevada on June 29, 2007 and commenced operations as a mineral exploration company. On October 10, 2011, we completed a merger with our wholly-owned subsidiary, Stevia First Corp., whereby we changed our name from "Legend Mining Inc." to "Stevia First Corp." In February 2012, we substantially changed our management team, added other key personnel, and began leasing laboratory and office space and land in California and since then we have been pursuing our new business as an agricultural biotechnology company engaged primarily in developing novel methods and technologies for industrial production of stevia, using such methods and technologies to develop, obtain approval for and commercialize one or more stevia extract products, and exploring and commercializing additional research applications for such methods and technologies.
Our common stock is currently quoted on the OTC Markets Group's OTCQB tier under the symbol "STVF." There is only a limited trading market for our common stock.
Plan of Operations
As of the end of our March 31, 2014 fiscal year, we had not yet generated or realized any revenues from our business operations and we do not expect to generate significant amounts of cash from our operations for the foreseeable future. We had net losses for the year ended March 31, 2014 of $4,061,945, and we had an accumulated deficit as of March 31, 2014 of $8,326,861. As described further under the heading "Liquidity and Capital Resources" below, we will need significant additional funding to support our operations and business plans and we have no commitments for future capital. The continuation of our business is dependent upon our ability to obtain loans or sell securities to new and existing investors or obtain capital from other alternative sources. In their report on our annual financial statements for the fiscal year ended March 31, 2014, our independent auditors included an explanatory paragraph regarding concerns about our ability to continue as a going concern, which means there is substantial doubt that we can continue as an on-going business unless we obtain additional capital or generate sufficient cash from our operations.
Our long-term strategy is to develop the following proprietary technologies related to stevia and beyond: 1) fermentation technologies for stevia, through enzymatic enhancement and microbial fermentation, 2) extraction and purification methods for stevia, including process control systems that could be implemented at facilities in California, 3) artificial intelligence and machine learning algorithms, which could enable us to improve and optimize multiple process variables simultaneously that are critical to our stevia production methods, and 4) agricultural drones, particularly for a unique stevia application involving the interruption of its photoperiod by overnight illumination with LED lights, which has been shown in a laboratory setting to more than double the yield of stevia plants. In furtherance of these long-term goals, we expect to focus on the following activities during the remainder of calendar year 2014 and calendar year 2015:
· Conducting additional research and development activities to advance our
proprietary technologies for stevia production and explore related uses of
these technologies for product applications across diverse end markets;
· Initiating our stevia fermentation process at industrial scale and as a
commercial process, either through internal facilities, a contract manufacturer, or a strategic partner, and obtaining "generally recognized as safe" ("GRAS") status and any other necessary approvals from the U.S. Food and Drug Administration ("FDA") and other regulatory authorities in order to market and sell our first commercial product, a high purity stevia extract;
· Acquiring rights to and beginning to integrate and grow a stevia sales and
distribution business, including developing relationships with multinational customers and adding new marketing and sales support;
· Designing, building and operating a stevia extraction and purification facility
in California through SF Pure and forming a local stevia grower network to support stevia leaf production in California;
· Building new sales channels and marketing capabilities, either internally or
through partners, for stevia products and other commercial applications, such as research products, in order to help us fully leverage and capitalize upon our research and development efforts; and
· Evaluating new business development opportunities and strategic partnerships,
including opportunities to in-license new technologies and/or form strategic partnerships with third parties in order to fund our operations or increase our capabilities.
Our present operations consist of research and development efforts focused on harnessing breakthrough technologies for stevia production and additional applications, combined with business operations that seek to develop and commercialize stevia products and other commercial applications including research tools. The below descriptions of our planned operations include expected expenditures for various activities, some of which may depend on our ability to obtain additional funding, if available, and all of which are estimates based on current expectations and assumptions and could prove to be wrong. See "Liquidity and Capital Resources" in Item 7 of this annual report.
Research and Development Operations
We currently employ four full-time Ph.D.-level scientists who conduct and manage our internal research and development activities and staff, and have retained five additional scientists and engineers who act as consultants and perform research and development work independently through their own laboratory facilities. Internal research and development work is primarily conducted at our headquarters in Yuba City, California, which contains more than 3,000 square feet of research and development space. These facilities include a laboratory, greenhouse, and workshop, and a diverse array of equipment, including bioreactors, laboratory automation setups, pilot processing units, and other equipment related to agriculture, molecular biology, bioinformatics, analytical chemistry, process engineering, and food science.
During the 12 months following the date of this report, we intend to devote the majority of our operational focus to our stevia-related research and development efforts. We are planning for total research and development expenditures of $1,000,000 or more in this period, however these plans are dependent on additional funding being available on acceptable terms. These activities include scale-up of our stevia fermentation process, demonstration of agricultural drone technology for enhanced stevia leaf yields, demonstration of microbial fermentation for production of stevia without the stevia leaf, and discovery and process development related to next-generation stevia sweeteners. As we advance technologies for stevia production we have discovered that these technologies have applications beyond stevia. As a result, during the 12 months following the date of this report we intend to direct some research and development resources, as a secondary focus, to artificial intelligence, machine learning, and exploring additional technologies and tools, such as cell media development, that could be used for our fermentation processing and additional applications, including, for instance, tissue engineering and 3-D bioprinting. We expect to develop more specific technical milestones and product applications resulting from this work in late 2014.
We believe that our long-term commercial success and profit potential depends in large part on our ability to develop, advance and apply novel technologies to stevia production and other applications more quickly, efficiently and effectively than our competitors, and also on our ability to obtain and enforce patents, maintain protection of trade secrets, and operate our business without infringing the proprietary rights of third parties. As a result, we are dedicated to the continued development and protection of our intellectual property portfolio. See "-Intellectual Property" below for a further discussion.
Proposed Arrangements with Qualipride
Additionally, in 2014, we entered discussions regarding certain partnership and collaboration arrangements with Qualipride International ("Qualipride"), a significant stevia supplier based in China with reported access to annual stevia supply greater than 2,000 metric tons, and whose management has acted in an advisory capacity to Stevia First since 2012. In May 2014, we entered into a non-binding term sheet with Qualipride for definitive agreements that are intended to result in our Company substantially taking over Qualipride's stevia sales and distribution business, obtaining an exclusive license outside China to use their proprietary methods for stevia extraction and purification, and forming the SF Pure subsidiary to design and construct stevia processing facilities in California using Qualipride's proprietary disigns. Certain commercial operations pursuant to this arrangement including the construction of stevia processing facilities will be managed by SF Pure, an operating subsidiary of Stevia First that will be 30\% owned by Qualipride. Pursuant to the arrangement SF Pure must be financed with at least $2.55 million prior to July 2015. These funds would be used primarily to finance equipment for the facility's construction and we expect to obtain such fund primarily through debt financing. The definitive arrangements and structure for these operations have not been formalized yet, and as a result, there is not presently any binding relationship between us and Qualipride. Even upon entering into any necessary binding contracts, Qualipride and their affiliated suppliers and equipment providers are mostly private companies based in China, and so it may be difficult to enforce these contracts. In addition, there are other risk factors that apply to these proposed arrangements and commercial operations that may influence our ability to achieve expected milestones within the timeframes provided or at all. See "Risk Factors" below for a further discussion.
19 Commercial Operations
Our present business operations are primarily directed at industrial production of stevia and achieving sales of stevia products to multinational food, beverage, and ingredient companies. Although we previously planned to market our own stevia products directly to consumers, we have determined instead to focus our efforts and resources on commercialization through partnerships with multinational food and beverage and ingredient companies and other large commercial purchasers of stevia. We have also recently initiated a research products business, which we own and operate but which is branded as SF Biosciences, which will provide a sales channel for certain research products and tools that we have developed, as well as new commercialization opportunities related to new technologies and trends that are of strategic interest to us.
Our commercial operations include our pursuit of stevia extract production through our enzyme enhancement process that uses fermentation. We will need to achieve additional operational milestones in order to pursue this process at industrial scale, including, without limitation, additional process development and optimization, additional scale-up for commercial production, regulatory approvals for processing facilities, securing customer orders, securing adequate supply of low-grade stevia extract to use as starting material or feedstock, and regulatory approvals for our first stevia product, a high purity stevia extract. We currently estimate that completion of these milestones and initial commercialization of stevia extract using enzyme enhancement processes would require approximately $400,000 of additional investment if we commercialize the product through a contract manufacturer or strategic partner and more if we commercialize the product internally. We are currently targeting initial annual production capacity of 200 tons of high purity stevia extract using these processes, and we currently estimate these milestones could be achieved and required regulatory approvals could be obtained as early as late 2014.
We plan to launch a sales and distribution business pursuant to the proposed terms of our arrangements with Qualipride, where Qualipride would transfer to us its existing stevia customer relationships and we would integrate Qualipride's sales and distribution business with our current operations, including obtaining any necessary financing to adequately capitalize the business and to source inventory to fill customer orders. We intend to leverage this sales and distribution business with our current California operations to provide North American sales, marketing, quality control, and applications support and to provide a selling avenue for stevia products we make using our proprietary fermentation methods. We expect initial efforts to integrate the sales and distribution business and purchase inventory to fulfill initial customer orders may require initial capitalization by us of approximately $500,000, which will require additional debt or equity financing, and which may require the Company to manage and conduct certain operations in China, either directly or through a subsidiary.
We are planning to design and construct one or more stevia processing facilities in California that can produce at least 150 tons of stevia extract annually, and also have the flexibility to support additional production capacity that could be used to produce stevia using our proprietary fermentation methods, and to finance and build these facilities through our subsidiary, SF Pure. We plan to use the latest methods and equipment for stevia extraction and purification that have been developed by Qualipride. We expect to receive in an exclusive license to use these methods outside of China from Qualipride and to collaborate with their staff in order to procure necessary equipment. We intend to build upon these methods in order to construct a California facility that is technologically advanced and could lead the stevia industry in terms of energy efficiency, water conservation, and overall product quality. We have not yet finalized a site design for the facility, and we currently estimate design and construction will cost $4,000,000 or more and span 10-14 months. We do not plan to pursue construction plans unless we are able to obtain funding for these activities primarily or entirely through long-term debt financing or other similar means on favorable terms. Related to the construction of this facility, we also plan to pursue additional stevia field trials and field operations in California in fiscal 2015, in order to help build and coordinate a network of local growers who can provide adequate leaf supply to fill the capacity of the facility. We ultimately aim for this grower network to include 1,000 acres or more of local leaf production that will be managed and financed primarily by local growers in California's Central Valley.
Our commercial operations also include our research products business, which entails our commercialization of research products and tools that we develop and use in our stevia production activities. We initiated these operations in 2014 through the brand name SF Biosciences. In May 2014 we acquired certain assets and customer relationships and certain rights to molecular biology research products to facilitate the initiation of this research products business, and commenced operations with initial sales of research products. We expect to spend approximately $50,000 on additional sales and marketing efforts for these research products during the remainder of 2014.
We will need to raise additional funds in order to continue operating our business and pursue and execute our planned research and development and commercial operations. We expect that we will seek such funding through equity and debt financings with our existing stockholders and other qualified investors. We do not have any commitments for any future financing and sources of additional funds may not be available when needed, on acceptable terms, or at all. See "Liquidity and Capital Resources" below.
Over the 12 months following the date of this report, we aim to increase the scale of our research and development and commercial operations. As of June 27, 2014, we had seven full-time employees. Total expenditures over the 12 months following March 31, 2014, are expected to be approximately $2,000,000. We expect to have sufficient funds to operate our business for at least 6 months. However, our estimate of total expenditures could increase if we encounter unanticipated difficulties. In addition, our estimates of the amount of cash necessary to fund our business may prove to be wrong, and we could spend our available financial resources much faster than we currently expect. If we cannot raise the money that we need in order to continue operating and/or advance our business, we will be forced to delay, scale back or eliminate some or all of our proposed operations. If any of these were to occur, there is a substantial risk that our business would fail.
20 Critical Accounting Policies
Our financial statements and accompanying notes have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.
We regularly evaluate the accounting policies and estimates that we use to prepare our financial statements. In general, management's estimates are based on historical experience, on information from third party professionals, and on various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results could differ from those estimates made by management.
We believe the following critical accounting policies require us to make significant judgments and estimates in the preparation of our financial statements.
Use of Estimates and Assumptions
The preparation of financial statements in conformity with generally accepted accounting principles in the United States 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 period. Actual results could differ from those estimates. The more significant estimates and assumption by management include, among others, the fair value of shares issued for services, fair value of warrants issued in conjunction with convertible debentures, and assumptions used in the valuation of conversion features and derivative liabilities.
We periodically issue stock options and warrants to employees and non-employees in non-capital raising transactions, for services and for financing costs. The Company accounts for share-based payments under the guidance as set forth in the Share-Based Payment Topic of the FASB Accounting Standards Codification ("ASC"), which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees, officers, directors, and consultants, including employee stock options, based on estimated fair values. The Company estimates the fair value of share-based payment awards to employees and directors on the date of grant using a Black-Scholes-Merton option-pricing model, and the value of the portion of the award that is ultimately expected to vest is recognized as expense over the required service period in the Company's statements of operations. The Company accounts for stock option and warrant grants issued and vesting to non-employees in accordance with the authoritative guidance whereas the value of the stock compensation is based upon the measurement date as determined at either a) the date at which a performance commitment is reached, or b) the date at which the necessary performance to earn the equity instruments is complete. Stock-based compensation is based on awards ultimately expected to vest and is reduced for estimated forfeitures. Forfeitures are estimated at the time of grant and revised, as necessary, in subsequent periods if actual forfeitures differ from those estimates.
Derivative Financial Instruments
We evaluate our financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. For stock-based derivative financial instruments, we use the probability weighted average Black-Scholes-Merton models to value the derivative instruments at inception and on subsequent valuation dates through the March 31, 2014 reporting date. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date.
Recent Accounting Pronouncements
In April 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-08, "Presentation of Financial Statements (Topic 205) and Property, Plant and Equipment (Topic 360)." ASU 2014-08 amends the requirements for reporting discontinued operations and requires additional disclosures about discontinued operations. Under the new guidance, only disposals representing a strategic shift in operations or that have a major effect on the Company's operations and financial results should be presented as discontinued operations. This new accounting guidance is effective for annual periods beginning after December 15, 2014. The Company is currently evaluating the impact of adopting ASU 2014-08 on the Company's results of operations or financial condition.
On May 28, 2014, the FASB issued ASU No. 2014-09 (ASU 2014-09), Revenue from Contracts with Customers. ASU 2014-09 will eliminate transaction- and industry-specific revenue recognition guidance under current U.S. GAAP and replace it with a principle based approach for determining revenue recognition. ASU 2014-09 will require that companies recognize revenue based on the value of transferred goods or services as they occur in the contract. The ASU also will require additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. ASU 2014-09 is effective for reporting periods beginning after December 15, 2016, and early adoption is not permitted. Entities can transition to the standard either retrospectively or as a cumulative-effect adjustment as of the date of adoption. Management has not determined the effect of adopting ASU 2014-09 on the Company's ongoing financial reporting.
On June 10, 2014, the FASB issued ASU No. 2014-10 (ASU 2014-10), Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation. ASU 2014-10 eliminates the requirement to present inception-to-date information about income statement line items, cash flows, and equity transactions, and clarifies how entities should disclose the risks and uncertainties related to their activities. ASU 2014-10 also eliminates an exception provided to development stage entities in Consolidations (ASC Topic 810) for determining whether an entity is a variable interest entity on the basis of the amount of investment equity that is at risk. The presentation and disclosure requirements in Topic 915 are no longer required for interim and annual reporting periods beginning after December 15, 2014. The revised consolidation standards will take effect in annual periods beginning after December 15, 2015, however, early adoption is permitted. The Company adopted the provisions of ASU 2014-10 for this annual report on Form 10-K for the fiscal year ended March 31, 2014.
Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company's present or future financial statements.
Results of Operations
Fiscal Years Ended March 31, 2014 and March 31, 2013
The following table sets forth our results of operations for the years ended March 31, 2014 and 2013. Twelve Months Ended March 31, 2014 2013 Revenues $ - $ - Operating Expenses: General and Administrative 2,866,095 1,663,799 Rent and other related party costs 156,400 148,750 Research & development 575,092 736,420 Loss from operations (3,597,587 ) (2,548,969 ) Other expenses Foreign currency translation - (42 ) Interest expense (404,317 ) (346,912 ) Cost of warrant modification (344,835 ) - Change in fair value of derivative liability 193,915 124,855 Financing cost - (78,458 ) Gain on settlement of debt - 107,004 Net loss $ (4,152,824 ) $ (2,742,522 ) Loss per share - Basic and diluted $ (0.07 ) $ (0.05 )
Weighted average number of common shares outstanding 60,128,127 53,370,064
We did not generate any revenue during the fiscal years ended March 31, 2014 or 2013. Our net loss during the fiscal year ended March 31, 2014 was $4,152,824 compared to a net loss of $2,742,522 for the fiscal year ended March 31, 2013 (an increase in net loss of $1,410,302).
During the fiscal year ended March 31, 2014, we incurred general and administrative expenses in the aggregate amount of $2,866,095 compared to $1,663,799 incurred during the fiscal year ended March 31, 2013 (an increase of $1,202,296). General and administrative expenses generally include corporate overhead, salaries and other compensation costs, financial and administrative contracted services, marketing, consulting costs and travel expenses. A significant portion of these costs are related to the development of our organizational capabilities as an agricultural biotechnology company engaged in the development of stevia products, including costs such as legal and advisory fees related to intellectual property development. In addition, during the fiscal year ended March 31, 2014, we incurred research and development costs of $575,092 compared to $736,420 incurred during the fiscal year ended March 31, 2013 (a decrease of $161,328). During the fiscal year ended March 31, 2014, we incurred related party rent and other costs totaling $156,400 compared to $148,750 incurred during the fiscal year ended March 31, 2013 (an increase of $7,650). Also during the fiscal year ended March 31, 2014, we incurred stock-based compensation totaling $1,222,031 compared to $833,143 incurred during the fiscal year ended March 31, 2013.
This resulted in a loss from operations of $3,597,587 during the fiscal year ended March 31, 2014 compared to a loss from operations of $2,548,969 during the fiscal year ended March 31, 2013 (an increase of $1,048,618).
During the fiscal year ended March 31, 2014, we recorded total other expenses in the amount of $555,237, compared to total other expenses recorded during the fiscal year ended March 31, 2013 in the amount of $193,553 (an increase of $361,684). During the fiscal year ended March 31, 2014, we incurred interest expense of $404,317 compared to $346,912 incurred during the fiscal year ended March 31, 2013 (an increase of $57,405).We recorded a gain related to the change in fair value of derivatives of $193,915 during the fiscal year ended March 31, 2014, compared to a gain of $124,855 during the fiscal year ended March 31, 2013 (an increase of $69,060). We also recorded expenses related to the modification of warrant terms of $344,835 during the fiscal year ended March 31, 2014, and recorded no such costs during the fiscal year ended March 31, 2013. Additionally, we recorded a gain related to settlement of debt of $107,004 and expenses related to the cost of offering of $78,458 during the fiscal year ended March 31, 2013, and recorded no such costs during the fiscal year ended March 31, 2013. This resulted in a net loss of $4,152,824 during the fiscal year ended March 31, 2014 compared to a net loss of $2,742,522 during the fiscal year ended March 31, 2013 (an increase of $1,410,302).
The increase in net loss during the fiscal year ended March 31, 2014 compared to the fiscal year ended March 31, 2013 is attributable primarily to higher general and administrative expenses incurred in the development of our business as an agricultural biotechnology company engaged in stevia production using fermentation processes and methods.
Liquidity and Capital Resources
As of March 31, 2014 we had not yet received any revenues from sales of products or services. We have incurred losses since inception resulting in an accumulated deficit of $8,326,861 as of March 31, 2014, and further losses are anticipated in the development of its business. 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.
The continuation of our business is dependent upon us raising additional capital and eventually attaining and maintaining profitable operations. We do not have any firm commitments for future capital. We do not presently have, nor do we expect in the near future to have, material revenue to fund our business from our operations, and we will need to obtain all of our necessary funding from external sources in the near term. We may not be able to obtain additional financing on commercially reasonable or acceptable terms, when needed, or at all. If we cannot raise the money that we need in order to continue to develop our business, we will be forced to delay, scale back or eliminate some or all of our proposed operations. If any of these were to occur, there is a substantial risk that our business would fail and our stockholders could lose all of their investment.
As of March 31, 2014, we had total current assets of $1,424,453. Our total current assets as of March 31, 2014 were comprised of cash in the amount of $1,403,403, prepaid expenses and other current assets in the amount of $10,637, and the current portion of an advance payment on a related party lease of $10,413. Our total current liabilities as of March 31, 2014 were $1,534,829, represented primarily by accounts payable and accrued liabilities of $79,915, accounts payable to a related party of $16,100 and derivative liability of $1,438,814. The derivative liability is a non-cash item related to our outstanding warrants, as described in Note 8 to our financial statements. As a result, on March 31, 2014, we had a working capital of $(110,376). We had no long term liabilities as of March 31, 2014, and we had $580,408 of long term liabilities as of March 31, 2013, which consisted of convertible notes payable in the amount of $955,000, net of a discount of $374,592.
Sources of Capital
On June 25, 2013, we entered into a securities purchase agreement with three investors for our public offering, issuance and sale of an aggregate of 3,676,472 shares of our common stock and warrants to purchase an aggregate of 11,029,416 shares of our common stock, for total gross proceeds to us of $1,250,000, or a sales price of $0.34 per share. The offering closed on June 28, 2013. We incurred $116,750 of direct costs in connection with the offering, resulting in net cash proceeds to us of $1,133,250. The warrants issued to the purchasers in the offering were issued in three series of 3,676,472 each and have initial exercise prices of $0.40, $0.50 and $0.60 per share, respectively, are exercisable immediately upon issuance and have a term of exercise equal to five years, six months and nine months, respectively. We also issued warrants to purchase up to 294,185 shares of our common stock to our placement agent for the offering. The placement agent's warrants have an exercise price of $0.425 per share and a term of five years and are exercisable immediately.
In November and December 2013, certain purchasers in the offering exercised some of their six-month warrants and acquired an aggregate of 314,000 shares of our common stock at the then-effective exercise price of $0.50 per share, resulting in gross proceeds to us of $157,000. On December 6, 2013, we offered the purchasers holding the remaining six-month warrants the right to exercise all of those warrants, for an aggregate of 3,362,472 shares of our common stock, based on the terms of an early exercise offer wherein such warrants became exercisable at a reduced exercise price of $0.42 per share, so long as the exercise thereof occurred on or before December 9, 2013. All purchasers acted on the early exercise offer and we issued 3,362,472 shares of our common stock for gross proceeds to us of $1,327,504. We determined that the modification of the exercise price of the warrants from $0.50 per share to $0.42 per share should be recorded as a cost to induce the exercise of the warrants. As such, we recognized the difference of $173,824 between the fair value of the warrants before and after the modification as a cost in the accompanying statement of operations for the year ended March 31, 2014.
In addition to the warrant exercises described above, during the current fiscal year ended March 31, 2014, holders of an aggregate of 1,000,000 warrants were exercised to acquire a total of 1,000,000 shares of the Company's common stock based upon their exercise price of $0.34 or total proceeds to the Company of $340,000. Also, during the current fiscal year ended March 31, 2014, certain holders of options exercised their options and received 1,250,000 shares of the Company's common stock based upon the exercise price per option agreements or total proceeds to the Company of $325,998.
We have not generated any revenue from our activities as of March 31, 2014. We believe that revenue in the near term, if any, would be sparse and irregular and would be less than necessary to support our business and pursue our operational plans without obtaining additional financing. We currently have no commitments for any future funding. As of March 31, 2014, we had cash in the amount of $1,403,403. As discussed under the heading "Plan of Operations" above, our total expenditures over the 12 months following March 31, 2014, are expected to be approximately $2,000,000. As of the date of this annual report we expect to have sufficient funds to operate our business over the next 12 months. However, our estimate of total expenditures could increase if we encounter unanticipated difficulties. In addition, our estimates of the amount of cash necessary to fund our business may prove to be wrong, and we could spend our available financial resources much faster than we currently expect. If we cannot raise the capital we need in order to continue to develop our business, we will be forced to delay, scale back or eliminate some or all of our proposed operations. If any of these were to occur, there is a substantial risk that our business would fail.
Since inception, we have primarily funded our operations through equity and debt financings, such as our June 2013 public offering described above. We expect to continue to fund our operations primarily through equity and debt financings in the foreseeable future. However, sources of additional funds may not be available when needed, on acceptable terms, or at all. If we issue equity or convertible debt securities to raise additional funds, our existing stockholders may experience substantial dilution, and the new equity or debt securities may have rights, preferences and privileges senior to those of our existing stockholders. If we incur additional debt, it may increase our leverage relative to our earnings or to our equity capitalization, requiring us to pay additional interest expenses. Obtaining commercial loans, assuming those loans would be available, would increase our liabilities and future cash commitments. If we pursue capital through alternative sources, such as collaborations or other similar arrangements, we may be forced to relinquish rights to our proprietary technology or other intellectual property and could result in our receipt of only a portion of any revenue that may be generated from a partnered product or business. Moreover, regardless of the manner in which we seek to raise capital, we may incur substantial costs in those pursuits, including investment banking fees, legal fees, accounting fees, printing and distribution expenses and other related costs.
Net Cash Used in Operating Activities
We have not generated positive cash flows from operating activities. For the fiscal year ended March 31, 2014, net cash used in operating activities was $2,132,833 compared to net cash used in operating activities of $1,646,723 for the fiscal year ended March 31, 2013. This increase is due to increased costs of our operations as we continue to pursue our business as an agricultural biotechnology company. Net cash used in operating activities during the fiscal year ended March 31, 2014 consisted primarily of a net loss of $4,152,824 and $193,915 related to the change in fair value of derivative liability, offset by $125,004 related to advance payments on related party lease, $344,835 related to the cost of the warrant modification, , $107,652 for increases in accounts payable and accrued liabilities, and $1,222,031 related to stock-based compensation. Net cash used in operating activities during the fiscal year ended March 31, 2013 consisted primarily of a net loss of $2,742,522, advance payments of $135,417 on a related party lease, and a gain on settlement of debt of $107,004 offset by $297,884 related to the amortization of debt discount, $32,500 for increases in accounts payable and accrued liabilities, $196,000 related to the cancellation of fees applied to option exercise price, $36,953 for accrued interest, and $833,143 related to stock-based compensation.
Net Cash Used in Investing Activities
During the fiscal year ended March 31, 2014, net cash used in investing activities was $0 compared to net cash used in investing activities of $1,000 for the fiscal year ended March 31, 2013.
Net Cash Provided By Financing Activities
During the fiscal year ended March 31, 2014, net cash provided by financing activities was $3,143,753 compared to net cash provided by financing activities of $1,508,000 for the fiscal year ended March 31, 2013. Net cash provided by financing activities during the fiscal year ended March 31, 2014 consisted of $1,133,250 received from our public offering, issuance and sale of common stock and warrants to purchase common stock, $185,998 received from the exercise of options, and $1,824,505 received from the exercise of warrants to purchase common stock. Net cash provided by financing activities during the fiscal year ended March 31, 2013 consisted of $870,000 received from the issuance of convertible notes, $213,000 received from the exercise of stock options and $425,000 received from the issuance of common shares for cash.
Off-Balance Sheet Arrangements
We have no significant 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 would be material to stockholders.
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