Attached files
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended March 31, 2011
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
Commission File Number 333-152365
STEVIA CORP.
(Name of registrant as specified in its charter)
Nevada 98-0537233
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
7117 US 31 S, Indianapolis, IN 46227
(Address of Principal Executive Offices) (Zip Code)
(888) 250-2566
(Registrant's telephone number)
Securities registered pursuant to Section 12(b) of the Act:
None None
(Title of each class) (Name of each exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.001 par value
(Title of class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act. YES [ ] NO [X]
Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act. YES [ ] NO [X]
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES [X] NO [ ]
Indicate by check mark whether the registrant has submitted electronically and
posted on its corporate Web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T (ss. 232.405
of this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files). YES [ ] NO [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer, or a small reporting company. See
definition of "large accelerated filer", "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] Smaller reporting company [X]
(do not check if smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Act). YES [ ] NO [X]
The Company's common stock has not been actively traded during the past fiscal
year.
As of June 27, 2011, there were outstanding 58,800,000 shares of registrant's
common stock, par value $0.001 per share.
DOCUMENTS INCORPORATED BY REFERENCE
Exhibits incorporated by reference are referred under Part IV.
TABLE OF CONTENTS
Page
----
PART I
ITEM 1 -- BUSINESS 3
ITEM 1A -- RISK FACTORS 12
ITEM 1B -- UNRESOLVED STAFF COMMENTS 19
ITEM 2 -- PROPERTIES 19
ITEM 3 -- LEGAL PROCEEDINGS 19
ITEM 4 -- RESERVED 19
PART II
ITEM 5 -- MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES 19
ITEM 6 -- SELECTED FINANCIAL DATA 20
ITEM 7 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS 20
ITEM 7A -- QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 24
ITEM 8 -- FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 24
ITEM 9 -- CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE 24
ITEM 9A -- CONTROLS AND PROCEDURES 25
ITEM 9B -- OTHER INFORMATION 25
PART III
ITEM 10 -- DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE 25
ITEM 11 -- EXECUTIVE COMPENSATION 27
ITEM 12 -- SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS 27
ITEM 13 -- CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE 28
ITEM 14 -- PRINCIPAL ACCOUNTING FEES AND SERVICES 29
PART IV
ITEM 15 -- EXHIBITS, FINANCIAL STATEMENT SCHEDULES 29
SIGNATURES 31
INDEX TO FINANCIAL STATEMENTS F-1
2
PART I
ITEM 1 -- BUSINESS
BACKGROUND
We are a farm management company with a strong focus on stevia agronomics from
plant breeding to good agricultural practices to post-harvest techniques. We
plan to invest heavily in research and development and intellectual property
acquisition and provide farm management services to contract growers and other
industry growers.
We were incorporated on May 21, 2007 in the state of Nevada. Our initial
business focus was on development of a software product for tracking employee
productivity and projects. On June 23, 2011, we closed a voluntary share
exchange transaction ("Share Exchange Transaction") with Stevia Ventures
International Ltd., a business company incorporated in the British Virgin
Islands ("BVI"), pursuant to which we acquired certain rights relating to stevia
production, including certain assignable exclusive purchase contracts and an
assignable supply agreement related to stevia.
Prior to the Share Exchange Transaction, we were a public reporting "Shell
Company", as defined in Rule 12b-2 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). Following the consummation of the Exchange
Agreement we believe that we are not a shell corporation as that term is defined
in Rule 405 of the Securities Act of 1933, as amended (the "Securities Act") and
Rule 12b-2 of the Exchange Act.
OVERVIEW
Our focus is on implementing quality agribusiness solutions to our partners,
contract growers and customers to maximize the efficient production of stevia
leaf. Our management team has extensive expertise in farm management and
contract growing in Asia, and extensive experience in international business
management.
Our mission is to become the global leader of stevia leaf growers and to create
a durable competitive advantage by focusing on the full spectrum of agronomic
and business inputs and to develop, secure, or acquire the latest intellectual
property that will enable us to consistently produce high per unit volumes of
high quality leaf utilizing environmentally sustainable methods that create a
positive social impact.
We believe we can accomplish our mission by becoming the stevia agribusiness
partner of choice for our contract growers and customers, thereby creating
global synergies and producing a sustainable supply of stevia leaf sufficient to
support vertical integration of extraction facilities in each country that we
operate.
THE INDUSTRY AND OUR OPPORTUNITY
The World Health Organization estimates that there are more than one billion
people globally who are overweight, 400 million who are obese. With these
numbers expected to nearly double by 2015, governments are putting pressure on
the food industry to offer products with reduced calories and we believe that
consumers are looking for more natural products and simpler ingredient lines on
the foods and beverages they purchase.
In evaluating potential sweetener alternatives, manufacturers focus on taste,
pricing, and a sustainable and scalable supply. Stevia fulfills these four
criteria and has the added advantage of contributing no calories to food and
beverage with a near zero glycemic index, making it safe for diabetics.
Additionally, stevia has the benefit of having excellent application synergies
with sugar and corn as well as cost advantages that can offset sugar and corn
sweetener input costs. In addition the new blending approaches being used to
combine stevia with sugar and corn sweetener to produce reduced calorie products
completely overcomes any negative taste profiles.
Originating from Paraguay, stevia leaf has been valued for centuries because of
its sweetening properties and has been used as an approved sweetener in Japan
and Korea for decades. Extracts from stevia contain a mixture of different
molecules that vary depending upon climate and growing conditions and it was
historically impossible to come up with clear and consistent specifications of
the product needed to make it a reliable ingredient. This issue was only
overcome in recent years by identifying the steviol glycoside molecules with the
best taste profiles and by developing innovative and unique process technologies
to separate and purify stevia extract to pharmaceutical levels of purity on a
reliable and consistent basis: and, importantly, to do so in commercially viable
volumes.
In 2008, Rebaudioside A, a steviol glycoside, was granted GRAS (Generally
Recognized as Safe) status by the US Food and Drug Administration following
applications by Cargill and Merisant. Since then, approval by legislators across
the world has opened the door to new formulations and reformulations of foods
and beverages with zero or reduced calorie content. In 2009, stevia was
incorporated into leading soft drinks brands manufactured by Coca-Cola and
PepsiCo.
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Usage of stevia has continued to increase in recent years and in 2010 stevia
products were launched across thirty-five countries and 38 categories. Within
two years of the USA market opening, Nielsen based retail consumption data
indicated almost $1 billion of retail sales. Market research group, Mintel, has
said it expects sales of stevia sweetened products to top $2 billion in 2011.
U.K. based Zenith International estimates worldwide sales of stevia extract
reached 3,500 tons in 2010 with an overall market value of $285 million and is
forecasting that the global market for stevia will reach 11,000 tons by 2014
requiring the tripling of stevia leaf production at the farm level to keep pace
with consumer demand.
The stevia industry is segmented into three main business processes: i)
extraction and purification, ii) product formulation and marketing, and iii)
plant breeding and farming.
Within the extraction and purification sector there are two clear industry
leaders, PureCircle Ltd ("PureCircle") and GLG Life Tech, which together control
a majority of the stevia market and supply Coca Cola and Pepsico. PureCircle
alone supplies more than 90% of the US stevia market, excluding the table top
sweetener category.
There is also active development in product formulation and marketing and
considerable advances are being made in new formulations and flavoring
enhancements.
However, the third industry segment, production of leaf (farming) has been
highly overlooked to date and with nearly 80% of the cost of refined stevia
being composed of the leaf cost, we believe there remains considerable
opportunity to build value in the supply chain by focusing on stevia agronomics.
The stevia genus includes more than 100 species and each species contains unique
sweet compounds. However, only two of these species contain steviol glycosides
and of these two the variety with the sweetest compounds is stevia rebaudiana
bertoni. There is relatively little technical knowledge of this species and
almost all commercial growing of stevia has occurred in China because of the
traditional Japanese and Korean markets. Now with the global market demand for
high TSG (total steviol glycoside) and high Reb-A (Rebaudioside A) producing
plants, there is a huge demand for agronomic and farm management expertise to
establish new plantations and rapidly scale leaf production.
PRODUCTS AND SERVICES
GROWTH CYCLE - The stevia plant is a perennial but the growing cycle varies
greatly depending on the particular strain and location. Stevia is sensitive to
frost and in China where most stevia is grown today, it is common to only have
one or two harvests. Closer to the equator it is possible to harvest year round
with some dormancy during the winter months. It is also possible to manipulate
the harvest cycle and in developing countries where manual labor is the
preferred method, a short cycle of as little as 45 to 60 days between harvests
is preferred. However, in more developed countries where mechanization is the
focus, a longer growing cycle is preferred and cycles of more than 120 days have
been achieved.
YIELD - Expected annual dry leaf yields of plant varieties commonly sourced from
China is three to six tons per Ha. Field trial data indicates that six tons or
more per hectare (Ha) can be achieved working with elite strains. We are focused
on securing such strains and adapting them to local growing environments. By
continuing to build our inventory of elite strains and refine our farm
management practices and technologies, we can continue to improve yield and
plant performance and secure the economic value of our intellectual property.
HARVEST - Stevia is a very labor intensive plant and traditionally has been
harvested by hand. As larger commercial operations have begun to focus on
stevia, a considerable amount of research is being put into the mechanization of
planting, harvesting and leaf removal. While we will need to maximize
mechanization in the United States to be economical, in many Asian locations
there is both an abundance of low cost labor and an expectation that stevia will
provide an economic stimulus and employ many of the farmers in poor rural areas.
So the adoption of mechanization will need to consider both economic and social
factors.
LOCATION - Infrastructure is a major criteria for field site selection and can
be especially challenging in developing countries. A viable site must have the
proper weather and soil that is suitable for plant growth as well as being in a
location that satisfies logistical business considerations, such as being easily
accessible and in close proximity to a capable labor pool.
Access to water can often be a challenge and greatly limits the areas where an
irrigation model can be applied. Vietnam has excellent road infrastructure and
our fields are easily accessible by passenger car or lorry and most potential
growing areas are located within hours of a major port city. Indonesia has an
abundance of low cost labor and land available for acquisition that is suitable
for new varieties of stevia that we are breeding and/or acquiring to grow in the
equatorial zone.
LAND USE - Based on current land ownership in Vietnam, we will need to rely on
both contract farming and plantation models. In Indonesia, we will be able to
acquire vast tracts of land and will prioritize farming models based purely on
the economics and preferred levels of capital risk exposure. We are conducting
field trials under both methods to determine the preferred model.
LABOR AND RESEARCH AND DEVELOPMENT - Stevia is a labor intensive plant and it is
also a very technical plant requiring a high degree of knowledge and/or
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expertise to manage it properly. This is especially true of the newer high Reb-A
varieties. Although the stevia plant naturally produces Reb-A, it does not
require a high concentration to survive in its natural environment. The high
Reb-A varieties are newly developed and there is very limited experience and
knowledge in the world about the proper techniques to care for these plants.
Therefore, our initial funding will be largely used to secure elite plant
varieties, culling the current planted varieties, developing state of the art
propagation techniques, conducting field trials, documenting local operating
procedures and developing post-harvest techniques.
FINANCIAL - The value of the stevia leaf fluctuates based on supply and demand
and the quality of the leaf. Wide seasonal variances on the open market are
common and make long-term planning difficult. By entering into long-term supply
contracts with leaf buyers we will be able to plan our growth and commit to
large plantations and contract growers. In addition, buyers of leaf pay a
substantial premium for high quality leaf. This places strong economic value on
our intellectual property, including our elite stevia strains, and our farm
management solutions.
Current contracted selling price for leaf that meets the minimum standards is
set at a fixed price. Leaf exceeding the minimum standards will receive a
premium for which the benchmarks and price tiers will be reviewed each year
based on comparative market leaf quality and supply and demand.
Historically, leaf that produced 13% TSG and 70% Reb-A was purchased at an
average premium of 20%. Elite strains can potentially deliver TSG well above 12%
and Reb-A above 80% providing significant economic advantage. Minimum standards
require a TSG of 12% or more, Reb-A to be at least 60% of TSG, maximum of 5%
impurities and a maximum moisture content of 10%.
OUR KEY CONTRACTS AND RELATIONSHIPS
PURECIRCLE
PureCircle is one of the largest stevia extraction and refinery companies in the
world, and as such is also one of the largest buyers of stevia leaf. We have
entered into a Supply Agreement with PureCircle, dated February 20, 2009, as
amended (the "Supply Contract"), whereby PureCircle has agreed to purchase leaf
we produce at a fixed price during the term of the Supply Contract. We believe
this relationship with PureCircle will make us more attractive to potential
grower partners and will also provide us with the price stability needed to
expand our own stevia production.
We hope to expand our relationship with PureCircle and are currently negotiating
a letter of intent to extend our agreement and relationship at the end of the
current supply contract. As our operations expand, we also would like to partner
with PureCircle or another refiner to build and operate a primary extraction
facility near the leaf source which could directly feed the refiner's downstream
supply chain. PureCircle has established the largest downstream stevia supply
chain and could be an ideal partner for such a venture.
INDEPENDENT GROWER RELATIONSHIPS
We plan to develop a significant network of partner growers who we can market
our production methods and technologies to and who will also help supply us with
the stevia product necessary to fulfill our supply obligations. We have entered
into initial purchase agreements with each of Asia Stevia Investment Development
Company Ltd. and Stevia Ventures Corporation (each a "Supplier"), whereby the
Suppliers will provide us with stevia on the terms and conditions set forth
therein.
AGRO GENESIS
We are currently in discussions with Agro Genesis Pte Ltd, a science-based
agribusiness company ("Agro Genesis"), to engage Agro Genesis as our primary
technology partner. As part of this strategic partnership, we would co-own any
technology related patents (e.g. new varieties, propagation technology,
cultivation program, harvest and post-harvest process) resulting from the
engagement. We would also have the right of first offer for the use and
distribution rights of yielded patents resulting from the engagement. As part of
our discussions with Agro Genesis, we are also negotiating for the right to be
the exclusive distributor of their g'farm system (powered by MS Technology) for
stevia growing and for Agro Genesis to be our exclusive technology partner to
support the distribution.
GROWERS SYNERGY
We are currently in discussions with Growers Synergy Pte Ltd, a regional farm
management services provider ("Growers Synergy"), to manage in-country
operations in both Vietnam and Indonesia. We believe that a relationship with
Growers Synergy or a similar regional farm management company would provide us
with a strategic advantage and potential synergistic partnership by providing us
with guaranteed off-take agreements for agriculture crops other than stevia,
which will be produced as part of inter-cropping practices to maintain optimal
soil conditions for stevia farming.
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Growers Synergy would work with us and our technology partners to combine the
agronomy protocol with the farming models. Models and their related protocols
will be commercially field tested during the first two years working with the
provincial and national programs and establishing 100 Ha of field trials.
A local farm management service, such as Growers Synergy is critical to assist
us in training local teams with the documented protocol sufficient to scale to
1,000 Ha to create a turnkey project. Our goal, after two years, is to be vested
with fully documented protocols, local teams of trained staff capable of
supporting the scale up to 1,000 Ha and farmers communities that are capable of
growing stevia. To help us achieve this, a farm management service, such as
Growers Synergy, would provide the necessary resources and assign staff to fill
the following positions:
* Development Manager
* Operations Manager
* Logistics Manager
* Field Manager
* Technical Supervisor
* Training Manager
In addition they would provide the following support staff and infrastructure to
support our commercial presence:
* Accountant
* Secretary
* Office
* Utilities
* Phones for assigned personnel
* All related regional (Asia) travel for all assigned personnel
OUR FARM MANAGEMENT SERVICES
Our objective is to provide a full spectrum of farm management services to
manage our contract farms, service industry growers and provide for optimal
stevia production.
To achieve this objective we plan to develop a local SOP (standard operating
procedures) manual specific to each growing location and plant variety, which
documents the proper use of all inputs including a proprietary crop production
system utilizing licensed formulation technologies and a Micro Suspension
technology which delivers fertilizers that we believe are more efficient and
cost effective than current chemical fertilizers. We believe this customized
operating manual will result in advanced propagation and growing techniques that
can improve the quality and efficiency of the stevia plants.
We have also licensed a wide portfolio of highly efficient and environmentally
friendly crop nutrition products. These products are performance minerals, plant
phyto-chemicals, functional nutrients and microbial formulations. All products
are derived from natural sources and can be used as sustainable agriculture
solutions and/or for organic farming.
Currently, we believe we may be the only company that delivers the full spectrum
of agricultural consulting and solutions for stevia growers, including:
ELITE GERMPLASM - high performance mother stock suitable for varied regions and
environment.
ADVANCED PROPAGATION TECHNIQUES - methods that are efficient, more cost
effective, and produce a higher quality plant.
MICRO SUSPENSION PRODUCTS - a range of fertilizers produced using a licensed
proprietary Micro Suspension technology.
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GF SYSTEM (G'FARM CROP PRODUCTION TECHNOLOGY SYSTEM) - a crop production system
that leverages consulting expertise and Micro Suspension products to provide
location and strain specific, sustainable farming practices.
INTELLECTUAL PROPERTY DEVELOPMENT
During the coming 24 months, our primary focus in intellectual property
development will be on identifying optimal cultivar varieties for intended
growing sites, developing and testing a propagation protocol, developing
cultivation technology including an intercropping system and regional
adaptability test, and developing post-harvest and refinery processes.
As further described above in the section titled "Our Key Contracts and
Relationships", we are in the process of negotiating a contract with Agro
Genesis to serve as our primary technology partner and to grant us an exclusive
license to their g'farm system (powered by MS Technology) for stevia growing. If
we are able to reach an agreement with them, we anticipate Agro Genesis being a
key part of our intellectual property development.
OUR COMPETITIVE ADVANTAGE
We believe our intellectual property suite and our ability to serve as a
one-stop agribusiness solution will provide us with a competitive advantage
against our competitors.
Our intellectual property, particularly our Micro Suspension products used in
our GF System, has the potential to create a dedicated customer base because the
GF System once implemented on a farm calls for continual use of our Micro
Suspension products as a mandatory crop input. This long-term customer
relationship can enable us to create a substantial barrier to entry to potential
new competitors, while at the same time providing networking benefits that could
further propagate our business.
Additionally, our developing relationship with PureCircle has the potential to
make us an attractive partner to growers who are looking for a guaranteed market
for their product. Our supply relationship with PureCircle will allow us to
commit to growers that leaf grown using our Micro Suspension products will have
a ready market with refiners.
OUR PROPERTIES
Although our primary focus will be on providing farm management services to our
contract growers, we also plan to implement our technology and protocols to
develop and expand our own stevia production. This will allow us to fully
capitalize on the value of the intellectual property we create, while also
providing us an environment in which to continue to develop and refine our farm
management techniques and strategies.
We have acquired two grower supply contracts and three nursery fields in
Vietnam. Seventeen fields have been established in five provinces in the
northern half of Vietnam with a total propagation of 20 Ha of which eight Ha is
growing high Reb-A Morita 2 and Morita 3 varieties and 12 Ha is local variety
that is being converted to high Reb-A.
The provincial locations include Hanoi, Bac Giang, Hai Duong, Hoa Binh and Nghe
An.
As further described above in the section titled "Our Key Contracts and
Relationships", we plan to engage a regional farm management services provider,
such as Growers Synergy, to manage in-country operations in both Vietnam and
Indonesia.
Our third fiscal year is expected to be the first year of commercial cultivation
and we plan to target 1,000 Ha. The exact months to be targeted for planting
will be determined by the protocol confirmed during the first two years.
Logistically, the process of going from propagation center to greenhouse to
seedling to field is a very labor intensive effort that requires a large number
of trained workers. In addition, the field preparations are critical and need to
be inspected and supervised. Therefore a balance will be made between the
quality of the available biological windows and the logistical cost against the
backdrop of our targeted Ha. Another significant factor is the nursery and
greenhouse requirements. The more confined the window, the more capacity is
required.
We will utilize the green house facilities of our local grower partners in a
decentralized model that more efficiently addresses the logistical challenges
presented by the contract farming model. It is assumed that the commercial
fields will be scaled by stem cutting and we will receive reimbursement for the
cost of seedlings one month after delivery.
To ensure quality control, we will provide the equipment, intellectual property,
and protocol processes derived from our research and development program for
post-harvest processing of leaf. Under a decentralized model suitable to
contract farming in Vietnam, the grower partners will be responsible for
processing the leaf under our protocols which will be monitored by our quality
control staff. However, depending on the results of our research and
development, a centralized processing facility may be recommended.
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REGULATION
Stevia extracts may be used in a wide variety of consumer products including
soft drinks, vegetable products, tabletop sweeteners, confectioneries, fruit
products and processed seafood products, in a wide range of countries, including
almost all major markets, and as a dietary supplement in others. Clinical
studies have supported the safety and stability of stevia's various high purity
compounds used in food and beverages. There is no known health threat and this
is increasing consumer confidence in stevia as a sugar substitute.
Cargill and Merisant each submitted COUNTRY TYPE OF APPROVAL
applications to the United Stated Food ------- ----------------
and Drug Administration (FDA) in 1998 NORTH AMERICA
for GRAS approval. On December 17, 2008 USA Food additive
the stevia extract, Rebaudioside A Canada Dietary supplement
(Reb-A), received GRAS approval. Mexico Food additive
LATIN AMERICA
In December 2008, Australia and New Argentina Food additive
Zealand approved highly purified forms Brazil Dietary supplement
of stevia extracts as safe for use in Chile Food additive
food and beverages. Previously, such Colombia Food additive
extracts had only been permitted for Ecuador Food additive
use as a dietary supplement in these Paraguay Food additive
countries. Peru Food additive
Uruguay Food additive
Stevia extracts have been sanctioned by Venezuela Food additive
the Ministry of Health of China to be ASIA PACIFIC
used as a food additive, and are listed Australia Food additive
in the Sanitation Standard of Food Brunei Food additive
Additives. China Food additive
Hong Kong Food additive
In July 2010 the FDA issued GRAS Indonesia Dietary supplement
clearance for PureCircle's high purity Japan Food additive
SG95 stevia product which opened up Malaysia Food additive
opportunities for many more New Zealand Food additive
applications as well as more cost Singapore Food additive
effective solutions. Further regulatory South Korea Food additive
clearances were secured for Reb-A in Taiwan Food additive
Switzerland and France confirming the Thailand Dietary supplement
growing regulatory support for high Vietnam Dietary supplement
purity stevia. Presently in the wider EUROPE
European Union ("EU") and Canada, France Food additive
stevia extracts are permitted for use Switzerland Food additive
only as a dietary supplement. Russia Food additive
Efforts to eliminate the EU restrictions are ongoing. The European Stevia
Research Center ("ESC") and the European Stevia Association ("EUSTAS") are
EU-based organizations that focus on stevia research and the elimination of the
EU's ban on consumption. The ESC is housed at the Laboratory of Functional
Biology at the Katholieke Universities Leuven ("KU Leuven") in Belgium and was
founded by Professors Jan Geuns of the Laboratory for Functional Biology and
Johan Buyse of the Laboratory of Physiology and Immunology of Domestic Animals
at KU Leuven.
In June 2007, the Joint Expert Committee on Food Additives ("JECFA") concluded
that steviol glycoside showed no adverse affects and was stable for use in food
and acidic beverages under normal conditions, and in June 2008, extended its
recommendation for acceptable daily intake of up to four mg per kg body weight
per day.
In April 2010, at the request from the European Commission, the European Food
Safety Authority's scientific panel on additives, the ANS Panel, assessed the
safety of steviol glycosides, sweeteners extracted from plant leaves, and
established an acceptable daily intake for their safe use. The assessment has
been sent to the European Commission which will consider whether or not to
authorize the substances in the European Union for their proposed use in
particular in sugar free or reduced energy foods such as certain flavored
drinks, confectionery with no added sugar or energy reduced soups.
The toxicological testing conducted by the ANS panel showed that the substances
are not genotoxic, nor carcinogenic, nor are they linked to any adverse effects
on the human reproductive system or for the developing child. The ADS panel set
an acceptable daily intake of four mg per kg body weight per day for steviol
glycosides, a level consistent with that already established by JECFA.
EUSTAS believes that the current EU ban on stevia is out of sync with the
current global regulatory environment and the EU could grant approval for stevia
in the near future based on the FDA's decisions and JECFA's decision on the
acceptable daily intake of stevia.
TAXATION
The primary stevia extraction sites in the Vietnam region are currently located
in China, and for this reason we expect that all the stevia leaf we produce in
Vietnam will initially be imported into China for processing. Therefore, China's
import taxation regulations will be of critical importance to us.
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In China, stevia is currently classified as a medicinal plant and is assessed a
30% tax on imports. In other countries the importation of the finished product
is high. As stevia leaf production becomes more diversified globally, the
location of the extraction facilities will also begin to decentralize and there
will be opportunities for vertical integration within leaf growing countries to
more competitively serve the domestic markets.
Trade regulations with China and neighboring countries are very positive.
Standard taxation in Vietnam includes 5% on domestic sales, 10% on exports and
25% income tax on net profit. We may be able to obtain a waiver of sales tax for
stevia exports.
VIETNAM LAWS
A significant portion of our initial business operations will occur in Vietnam.
We will be generally subject to laws and regulations applicable to foreign
investment in Vietnam. The Vietnam legal system is based, at least in part, on
written statutes. However, since these laws and regulations are relatively new
and the Vietnamese legal system continues to rapidly evolve, the interpretations
of many laws, regulations and rules are not always uniform and enforcement of
these laws, regulations and rules involves uncertainties. We cannot predict the
effect of future developments in the Vietnamese legal system, including the
promulgation of new laws, changes to existing laws or the interpretation or
enforcement thereof, the preemption of local regulations by national laws, or
the overturn of local government's decisions by the superior government. These
uncertainties may limit legal protections available to us.
MARKET TRENDS AND CONSUMER SENTIMENT
Mintel New Product Database confirmed that the number of new stevia product
launches in 2010 increased by 200% over the previous year with product launches
across thirty-five countries. Nielsen data indicates that US stevia-based sales
totaled $809 million, an increase of 126% on the $357 million recorded in
full-year 2009 and crossed 38 categories of food and beverages. Euromonitor
reported launches of products with stevia increased 87% in 2010, while launches
of saccharine declined 41% and launches with aspartame declined 13%, and because
stevia has yet to win full regulatory approval across Europe, the market still
remains relatively untapped.
After only 12 months on the market in the United States, Nielsen retail data
estimates stevia sweeteners surpassed aspartame sales and now comprise 14% of
the USA tabletop sugar substitute market. Stevia is also taking market share
away from sucralose and high fructose corn syrup.
This market data suggests that consumers are willing to consider stevia as a
viable low calorie "natural" ingredient.
MARKET SEGMENTS
Originally it was thought that stevia's market would be restricted to zero
calorie beverage applications and would primarily be a premium priced natural
ingredient replacement for artificial High Intensity Sweeteners (HIS). While
stevia did make a large impact within the $8 billion HIS sector, overtaking
aspartame within its first year of launch, the potential market has expanded to
the entire sweetener market and across all food and beverage categories.
There were two key developments that have opened the market. First, there was
proven consumer demand for all-natural REDUCED calorie products where stevia was
blended with sugar reducing caloric value by 30% to 40% without sacrificing the
functionality and taste of sugar. Second, high purity total steviol glycosides
with reduced Reb-A content were granted GRAS status by the FDA in July 2010.
Costing less than sugar and less than 50% of Reb-A, this allowed stevia products
to be formulated across a wide range of sweetness and create an economic
advantage while producing a premium all natural low calorie product desired by
the consumer.
The two industry leaders, PureCircle and GLG Life Tech, have partnered with
major sugar manufacturers in the US (Imperial Sugar), Denmark (NordZucker),
France (Tereos), Great Britain (British Sugar), and Australia (Sugar Australia)
to market blended reduced calorie products. SteviaCane is a steviasucrose retail
product being marketed by Natural Sweet Ventures, a joint venture between
PureCircle and Imperial Sugar.
The entire sweetener market is nearly $80 billion and split into three main
categories: Sugar (82%), High Fructose Corn Syrup (HFCS) - (9%), and High
Intensity Sweeteners (HIS) - (9%). Overall the sweetener market is growing, but
HFCS and artificial HIS ingredients are being replaced with natural alternatives
such as stevia. In addition, stevia is being blended with sugar to meet the low
calorie consumer requirements while still maintaining functionality and taste.
Given that the standard product development and launch cycle is eighteen months
to three or more years, it is expected that the true market size potential and
consumer acceptance will only be confirmed in late 2011 and beyond.
Additionally, regulatory clearances expected in 2011 (EU, Argentina, Canada,
Indonesia, Thailand, Vietnam and others) will facilitate accelerating the
roll-out of sizeable brands internationally.
9
SALES STRATEGY AND IMPLEMENTATION
We have entered into a supply contract with PureCircle, whereby PureCircle has
agreed to purchase the leaf we produce during the term of the supply contract.
We are currently negotiating a letter of intent to extend our agreement and
relationship with PureCircle at the end of the current supply contract.
In the future, we may consider a joint venture with PureCircle or another
refiner, to build and operate a primary extraction facility near the leaf source
which could directly feed the refiner's downstream supply chain. PureCircle has
established the largest downstream stevia supply chain and could be an ideal
partner for such a venture.
We will also have the option to private label our own stevia products and build
our own brand value and supply chain which could be leveraged when a primary
extraction facility is operating.
However, our core focus will be on leveraging our germplasm inventory,
propagation systems, Micro Suspension intellectual property and farm systems to
provide competitive farm management services to stevia growers.
GEOGRAPHIC MARKETS
Our target markets are initially Vietnam and Indonesia where we have contracted
with growers and have established our own nurseries and test fields. Although
our priority is Asia, our services are not limited to specific countries and we
plan to pursue viable opportunities in other markets.
Crop nutrition forms a core component of our farm management system and is a
highly specialized field which requires extensive knowledge and experience which
is both crop-specific and country-specific. However, there are fundamental crop
characteristics that are similar for a specific crop sector across countries. We
believe this will allow a successful model in one country to be replicated in
another country.
MARKETING
We believe it is important to educate the local governments and farmer
communities on the merits of stevia becoming a new commercial crop and its
potential as a new economic stimulus for rural farmers. Our President and our
local partner have been conducting talks and training sessions for more than two
years in Vietnam and have fostered local support at many levels. To support the
farmers transition to stevia farming and provide an opportunity to showcase the
stevia opportunity to farmer communities, the Vietnam government has approved
financial support at both the provincial and national level to plant 20 Ha and
50 Ha respectively. The fields will be small plots located in several villages
and will serve as demonstration fields and stepping stone to gain wide support
from growers in several villages.
We will enter into formal cooperative agreements with the Medical Plant
Institute in Hanoi and the Agricultural Science Institute of Northern Central
Vietnam located in Nghe An province. Each will provide research assistance,
access to equipment for testing and land for field trials to help create
economic stimulus for the farmers. We will maintain full ownership of all
intellectual property that is developed while working in cooperation.
In Hoa Binh province, we will take over a nursery that will serve as a test
pilot for NGO's (non-governmental organizations). If the stevia model proves to
be viable, the NGO's will begin to introduce and fund stevia farming programs
for the communities that they serve which are located in poor rural areas in
need of economically sound projects.
In addition, by working with our current contract growers and field trials, we
hope to generate many local testimonials for our farm management services, and
our executive managers are well networked with the major international stevia
growers to arrange international field trials.
COMPETITION
As a full service stevia farm management service provider we will face
competition from both non-stevia sweetener products and from other service
providers within the stevia industry.
PRODUCT ALTERNATIVES - Stevia is the clear leader among natural zero calorie
sweeteners at this time and it takes years to develop and bring to market new
sweeteners of which few end up possessing all the qualities needed to be adopted
mainstream. At this time we are not aware of any proven and viable alternative
which possesses the positive qualities of stevia. As discussed above, the other
sweeteners currently on the market lack many of the qualities that make stevia
attractive to consumers and manufacturers, including the zero calorie/near zero
glycemic index combination.
10
Additionally, estimates by industry analysts have put the expected requirements
of stevia cultivation to surpass 100,000 Ha in the near future, which would
require a several fold increase in leaf production to keep pace. As such, we do
not perceive near or medium term competitor risk for leaf production.
Therefore, we believe that the most likely threat to stevia growers will come
from alternative "natural" methods to produce stevia extracts that obviate the
need to farm stevia, such as fermentation-derived stevia.
A fermentation-derived stevia ingredient would still meet the requirements to be
classified as a "natural" ingredient and when done at volume could potentially
be produced more economically than the farming method without impurities.
Major known companies that are progressing down this track include Evolva
Holding SA of Switzerland who has acquired San Francisco based Abunda Nutrition,
Inc., and Blue California of Rancho Stanta Margarita, California.
There are three areas that we will focus to reduce the risk and/or impact of
alternative methods of stevia ingredient production.
1. INCREASE FARMING EFFICIENCIES. The more efficient and scaled farming becomes,
the higher the economic hurdle will be for other methods of production. Our
intellectual property and continued research and development activities will
allow our farms and those of our customers to increase efficiencies, decrease
cost of production and produce better quality leaf.
2. INTELLECTUAL PROPERTY PROTECTIONS. We plan to have a strong focus on
developing protectable intellectual property which can create barriers to entry
and protect our methodologies. Additionally, where applicable we will consider
the acquisition of potentially synergistic intellectual property.
3. CROP DIVERSIFICATION. Our farm management infrastructure and the majority of
our intellectual property will be applicable to other high-value crops providing
us with the flexibility to diversify our crops and the customer base for our
farm management solutions.
GEOGRAPHIC DIVERSIFICATION AND COMPETITORS - Currently over 80% of stevia is
grown in China and almost all of the high Reb-A variety stevia leaf is being
produced in China. China is the center of commercial stevia growing for
historical reasons due to its proximity to Japan and Korea, which have
historically been the major markets for stevia. There is an effort to diversify
away from China for high Reb-A production now that high Reb-A leaf production is
in global demand. Due to its climate, China is likely not the most
geographically optimal location to grow stevia, as stevia is sensitive to frost
and China typically produces only one or two crops per year, requiring leaf
processors to purchase and store sufficient leaf for an entire year of
production.
Diversifying the supply chain of stevia leaf would provide several advantages:
* Incorporating Southern Hemisphere production provides two major
growing seasons;
* Incorporation Equatorial production provides for year round
production;
* Enables better control of leaf quality where major propagation of
stevia varieties is controlled;
* Provides protection against country-specific political, regulatory,
disease, and natural disaster risk; and
* Provides operations closer to end markets.
PureCircle has taken the lead to diversify away from China by establishing
subsidiaries in South America (Paraguay) and Africa (Kenya). Both operations
produced successful field trial results in 2010 and are now preparing for
commercial cultivation under contract farming models.
Stevia One, an independent grower established in Peru, is adopting the
plantation model and is targeting approximately 1,000 Ha under cultivation by
the end of 2012.
S&W Seed Company signed a supply agreement with PureCircle in July of 2010 to
grow stevia in North America under its subsidiary, Stevia California. S&W,
founded in 1980, is headquartered in the Central Valley of California and
specializes in producing alfalfa seed varieties.
In addition, GLG Life Tech Corporation is a China-centric company and has chosen
to continue to focus on building and expanding its supply chain within China.
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We are positioned to be the first major operation in Asia, outside of China, to
produce high Reb-A Stevia leaf.
EMPLOYEES
George Blankenbaker, our President and sole director, is our sole employee. We
have no immediate plans to hire any other employees.
We plan to negotiate an agreement with Growers Synergy, or another farm
management company, whereby the farm management company will provide the
staffing necessary to operate our farms. Similarly, we expect Agro Genesis, our
anticipated technical partner, will provide staffing for our technical
operations.
ITEM 1A -- RISK FACTORS
WITH THE EXCEPTION OF HISTORICAL FACTS STATED HEREIN, THE MATTERS DISCUSSED IN
THIS REPORT ON FORM 10-K ARE "FORWARD LOOKING" STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM
PROJECTED RESULTS. SUCH "FORWARD LOOKING" STATEMENTS INCLUDE, BUT ARE NOT
NECESSARILY LIMITED TO STATEMENTS REGARDING ANTICIPATED LEVELS OF FUTURE
REVENUES AND EARNINGS FROM THE OPERATIONS OF STEVIA CORP. AND ITS SUBSIDIARIES,
(THE "COMPANY," "WE," "US" OR "OUR"), PROJECTED COSTS AND EXPENSES RELATED TO
OUR OPERATIONS, LIQUIDITY, CAPITAL RESOURCES, AND AVAILABILITY OF FUTURE EQUITY
CAPITAL ON COMMERCIALLY REASONABLE TERMS. FACTORS THAT COULD CAUSE ACTUAL
RESULTS TO DIFFER MATERIALLY ARE DISCUSSED BELOW. WE DISCLAIM ANY INTENT OR
OBLIGATION TO PUBLICLY UPDATE THESE "FORWARD LOOKING" STATEMENTS, WHETHER AS A
RESULT OF NEW INFORMATION, FUTURE EVENTS OR OTHERWISE.
RISKS RELATING TO OUR BUSINESS AND INDUSTRY
WE ARE A DEVELOPMENT STAGE COMPANY WITH A LIMITED OPERATING HISTORY ON WHICH TO
EVALUATE OUR BUSINESS OR BASE AN INVESTMENT DECISION.
Our business prospects are difficult to predict because of our limited operating
history, early stage of development and unproven business strategy. We are a
development stage company that has yet to generate any revenue. Stevia is still
a relatively new product in the sweetener marketplace and it has never been
commercially grown in Vietnam or many of our other target locations. Both the
continued growth of the stevia market in general, and our ability to introduce
commercial development of stevia to new regions, face numerous risks and
uncertainties. In particular, we have not proven that we can produce stevia in a
manner that enables us to be profitable and meet manufacturer requirements,
develop intellectual property to enhance stevia production, develop and maintain
relationships with key growers and strategic partners to extract value from our
intellectual property, raise sufficient capital in the public and/or private
markets, or respond effectively to competitive pressures. If we are unable to
accomplish these goals, our business is unlikely to succeed and you should
consider our prospects in light of these risks, challenges and uncertainties.
WE HAVE NO REVENUES AND HAVE INCURRED LOSSES.
Our auditors have expressed uncertainty as to our ability to continue as a going
concern as of our fiscal year ended March 31, 2011. Furthermore, since inception
we have not generated any revenues. As of March 31, 2011, we had an accumulated
deficit of approximately $104,470. We anticipate that our existing cash and cash
equivalents will not be sufficient to fund our longer term business needs and we
will need to generate revenue or receive additional investment in the Company to
continue operations. Such financing may not be available in sufficient amounts,
or on terms acceptable to us and may dilute existing shareholders.
IF WE FAIL TO RAISE ADDITIONAL CAPITAL, OUR ABILITY TO IMPLEMENT OUR BUSINESS
MODEL AND STRATEGY COULD BE COMPROMISED.
We have limited capital resources and operations. To date, our operations have
been funded entirely from the proceeds from debt and equity financings. We
expect to require substantial additional capital in the near future to develop
our intellectual property base and to establish the targeted levels of
commercial production of stevia. We may not be able to obtain additional
financing on terms acceptable to us, or at all. Even if we obtain financing for
our near term operations, we expect that we will require additional capital
beyond the near term. If we are unable to raise capital when needed, our
business, financial condition and results of operations would be materially
adversely affected, and we could be forced to reduce or discontinue our
operations.
WE FACE INTENSE COMPETITION WHICH COULD PROHIBIT US FROM DEVELOPING A CUSTOMER
BASE AND GENERATING REVENUE.
The sweetener industry is highly competitive with companies that have greater
capital resources, facilities and diversity of product lines. Additionally, if
demand for stevia continues to grow, we expect many new competitors to enter the
market as there are no significant barriers to entry in the industry. More
established agricultural companies with much greater financial resources who do
not currently compete with us may be able to easily adapt their existing
operations to production of stevia. Due to this competition, there is no
assurance that we will not encounter difficulties in obtaining revenues and
market share or in the positioning of our services or that competition in the
industry will not lead to reduced prices for the stevia leaf.
12
Our competitors may also introduce new non-stevia based low-calorie sweeteners
or be successful in developing a fermentation-derived stevia ingredient or other
alternative production method which could also increase competition and decrease
demand for stevia-based products.
INABILITY TO PROTECT OUR TRADEMARKS AND OTHER PROPRIETARY RIGHTS COULD DAMAGE
OUR COMPETITIVE POSITION.
Our farm management services business will be heavily dependent upon the
intellectual property we develop or acquire. Any infringement or
misappropriation of our intellectual property could damage its value and limit
our ability to compete. We will rely on patents, copyrights, trademarks, trade
secrets, confidentiality provisions and licensing arrangements to establish and
protect our intellectual property. We may have to engage in litigation to
protect the rights to our intellectual property, which could result in
significant litigation costs and require a significant amount of our time. In
addition, our ability to enforce and protect our intellectual property rights
may be limited in certain countries outside the United States, which could make
it easier for competitors to capture market position in such countries by
utilizing technologies that are similar to those developed or licensed by us.
Competitors may also harm our sales by designing products that mirror the
capabilities of our products or technology without infringing our intellectual
property rights. If we do not obtain sufficient protection for our intellectual
property, or if we are unable to effectively enforce our intellectual property
rights, our competitiveness could be impaired, which would limit our growth and
future revenue.
A successful claim of infringement against us could result in a substantial
damage award and materially harm our financial condition. Even if a claim
against us is unsuccessful, we would likely have to devote significant time and
resources to defending against it.
We may also find it necessary to bring infringement or other actions against
third parties to seek to protect our intellectual property rights. Litigation of
this nature, even if successful, is often expensive and disruptive of a
company's management's attention, and in any event may not lead to a successful
result relative to the resources dedicated to any such litigation.
WE MAY BE UNABLE TO EFFECTIVELY DEVELOP AN INTELLECTUAL PROPERTY PORTFOLIO OR
MAY FAIL TO KEEP PACE WITH ADVANCES IN TECHNOLOGY.
We have no operating history in the agriculture industry and there is no
certainty that we will be able to effectively develop a viable portfolio of
intellectual property. The success of our farm management services, which are
the core of our business, depends upon our ability to create such intellectual
property.
Even if we are able to develop, manufacture and obtain any regulatory approvals
and clearances necessary for our technologies and methods, the success of such
services will depend upon market acceptance. Levels of market acceptance for our
services could be affected by several factors, including:
* the availability of alternative services from our competitors;
* the price and reliability of the our services relative to that of our
competitors; and
* the timing of our market entry.
Additionally, our intellectual property must keep pace with advances by our
competitors. Failure to do so could cause our position in the industry to erode
rapidly.
CONFIDENTIALITY AGREEMENTS WITH EMPLOYEES AND OTHERS MAY NOT ADEQUATELY PREVENT
DISCLOSURE OF OUR TRADE SECRETS AND OTHER PROPRIETARY INFORMATION.
Our success depends upon the skills, knowledge and experience of our technical
personnel, our consultants and advisors as well as our licensors and
contractors. Because we operate in a highly competitive field, we will rely
significantly on trade secrets to protect our proprietary technology and
processes. However, trade secrets are difficult to protect. We will enter into
confidentiality and intellectual property assignment agreements with our
corporate partners, employees, consultants, outside scientific collaborators,
developers and other advisors. These agreements generally require that the
receiving party keep confidential and not disclose to third parties confidential
information developed by us during the course of the receiving party's
relationship with us. These agreements also generally provide that inventions
conceived by the receiving party in the course of rendering services to us will
be our exclusive property. However, these agreements may be breached and may not
effectively assign intellectual property rights to us. Our trade secrets also
could be independently discovered by competitors, in which case we would not be
able to prevent use of such trade secrets by our competitors. The enforcement of
a claim alleging that a party illegally obtained and was using our trade secrets
could be difficult, expensive and time consuming and the outcome would be
unpredictable. In addition, courts outside the United States may be less willing
to protect trade secrets. The failure to obtain or maintain meaningful trade
secret protection could adversely affect our competitive position.
13
WE WILL PRODUCE PRODUCTS FOR CONSUMPTION BY CONSUMERS THAT MAY EXPOSE US TO
LITIGATION BASED ON CONSUMER CLAIMS AND PRODUCT LIABILITY.
The stevia produced at our farms will be integrated into stevia-based products
which will be consumed by the general public. Additionally, we may manufacture
and sell private label stevia-based food products. Even though we intend to grow
and sell products that are safe, we have potential product risk from the
consuming public. We could be party to litigation based on consumer claims,
product liability or otherwise that could result in significant liability for us
and adversely affect our financial condition and operations.
IF OUR SERVICES DO NOT GAIN ACCEPTANCE AMONG STEVIA GROWERS, WE MAY NOT BE ABLE
TO RECOVER THE COST OF OUR INTELLECTUAL PROPERTY DEVELOPMENT.
Our business model relies on the assumption that we will be able to develop
methods and protocols, secure valuable plant strains and develop other
intellectual property for stevia farming that will be attractive to both stevia
growers and manufacturers. We plan to spend significant amounts of capital to
develop this intellectual property portfolio. If we are unable to secure such
intellectual property or if our methods and protocols do not gain acceptance
among growers or manufacturers, our intellectual property will have limited
value. A number of factors may affect the market acceptance of our products and
services, including, among others, the perception by growers of the
effectiveness of our intellectual property, the perception among manufacturers
of the quality of stevia produced using our intellectual property, our ability
to fund marketing efforts, and the effectiveness of such marketing efforts. If
such products and services do not gain acceptance by growers and/or
manufacturers, we may not be able to fund future operations, including the
expansion of our own farming projects and development and/or acquisition of
additional intellectual property, which inability would have a material adverse
effect on our business, financial condition and operating results.
ANY FAILURE TO ADEQUATELY ESTABLISH A NETWORK OF GROWERS AND MANUFACTURERS WILL
IMPEDE OUR GROWTH.
We expect to be substantially dependent on manufacturers to purchase the stevia
produced both at our own farms and at those of our customers. We have entered
into a supply agreement with a manufacturer and two purchase agreements with
growers and are in the process of establishing a network of growers to produce
stevia using our methods and protocols. The relationship with this manufacturer
and its perception of the stevia produced using our farm management services
will determine its willingness to enter into purchase contracts with us and our
customers on attractive terms. Our ability to secure such contracts will
influence our attractiveness to growers who are potentially interested in
partnering with us. Achieving significant growth in revenue will depend, in
large part, on our success in establishing this production network. If we are
unable to develop an efficient production network, it will make our growth more
difficult and our business could suffer.
IF WE ARE UNABLE TO DELIVER A CONSISTENT, HIGH QUALITY STEVIA LEAF AT SUFFICIENT
VOLUMES, OUR RELATIONSHIP WITH OUR MANUFACTURERS MAY SUFFER AND OUR OPERATING
RESULTS WILL BE ADVERSELY AFFECTED.
Manufacturers will expect us to be able to consistently deliver stevia at
sufficient volumes, while meeting their established quality standards. If we are
unable to consistently deliver such volumes either from our own farms, or those
of our grower partners, our relationship with these manufacturers could be
adversely affected which could have a negative impact on our operating results.
CHANGES IN CONSUMER PREFERENCES OR NEGATIVE PUBLICITY OR RUMORS MAY REDUCE
DEMAND FOR OUR PRODUCTS.
Recent data suggests consumers are adopting stevia as a sweetener in many
products. However, stevia is a relatively new ingredient in consumer products
and many consumers are not familiar with it. Therefore, any negative reports or
rumors regarding either the taste or perceived health effects of stevia, whether
true or not, could have a severe impact on the demand for stevia-based products.
Manufacturers may decide to rely on alternative sweeteners which have a more
established history with consumers. Primarily operating at the grower level, we
will have little opportunity to influence these perceptions and there can be no
assurance that the increased adoption of stevia in consumer food and beverage
products will continue. Additionally, new sweeteners with similar
characteristics to stevia may emerge which could be cheaper to produce or be
perceived to have other qualities superior to stevia. Any of these factors could
adversely affect our ability to produce revenues and our business, financial
condition and results of operations would suffer.
FAILURE TO EFFECTIVELY MANAGE GROWTH OF INTERNAL OPERATIONS AND BUSINESS MAY
STRAIN OUR FINANCIAL RESOURCES.
We intend to significantly expand the scope of our farming operations and our
research and development activities in the near term. Our growth rate may place
a significant strain on our financial resources for a number of reasons,
including, but not limited to, the following:
* The need for continued development of our financial and information
management systems;
* The need to manage strategic relationships and agreements with
manufacturers, growers and partners; and
14
* Difficulties in hiring and retaining skilled management, technical and
other personnel necessary to support and manage our business.
Additionally, our strategy envisions a period of rapid growth that may impose a
significant burden on our administrative and operational resources. Our ability
to effectively manage growth will require us to substantially expand the
capabilities of our administrative and operational resources and to attract,
train, manage and retain qualified management and other personnel. Our failure
to successfully manage growth could result in our sales not increasing
commensurately with capital investments. Our inability to successfully manage
growth could materially adversely affect our business.
ADVERSE WEATHER CONDITIONS, NATURAL DISASTERS, CROP DISEASE, PESTS AND OTHER
NATURAL CONDITIONS CAN IMPOSE SIGNIFICANT COSTS AND LOSSES ON OUR BUSINESS.
Weather-related events could significantly affect our results of operations. We
do not currently maintain insurance to cover weather-related losses and if we do
obtain such insurance it likely will not cover all weather-related events and,
even when an event is covered, our retention or deductible may be significant.
Cooler temperatures in the regions where we operate could negatively affect us,
while not affecting our competitors in other regions.
Our crops, and those of our grower partners, could also be affected by drought,
temperature extremes, hurricanes, windstorms and floods. In addition, such crops
could be vulnerable to crop disease and to pests, which may vary in severity and
effect, depending on the stage of agricultural production at the time of
infection or infestation, the type of treatment applied and climatic conditions.
Unfavorable growing conditions caused by these factors can reduce both crop size
and crop quality. In extreme cases, entire harvests may be lost. These factors
may result in lower production and, in the case of farms we own or manage,
increased costs due to expenditures for additional agricultural techniques or
agrichemicals, the repair of infrastructure, and the replanting of damaged or
destroyed crops. We may also experience shipping interruptions, port damage and
changes in shipping routes as a result of weather-related disruptions.
Competitors and industry participants may be affected differently by
weather-related events based on the location of their production and supply. If
adverse conditions are widespread in the industry, it may restrict supplies and
lead to an increase in prices for stevia leaf, but our typical fixed-price
supply contracts may prevent us from recovering these higher costs.
OUR OPERATIONS AND PRODUCTS ARE REGULATED IN THE AREAS OF FOOD SAFETY AND
PROTECTION OF HUMAN HEALTH AND THE ENVIRONMENT.
Our operations and products are subject to inspections by environmental, food
safety, health and customs authorities and to numerous governmental regulations,
including those relating to the use and disposal of agrichemicals, the
documentation of food shipments, the traceability of food products, and labeling
of our products for consumers, all of which involve compliance costs. Changes in
regulations or laws may require, operational modifications or capital
improvements at various locations. If violations occur, regulators can impose
fines, penalties and other sanctions. The costs of these modifications and
improvements and of any fines or penalties could be substantial. We can be
adversely affected by actions of regulators or if consumers lose confidence in
the safety and quality of stevia, even if our products are not implicated.
IF WE ARE UNABLE TO CONTINUALLY INNOVATE AND INCREASE EFFICIENCIES, OUR ABILITY
TO ATTRACT NEW CUSTOMERS MAY BE ADVERSELY AFFECTED.
In the area of innovation, we must be able to develop new processes, plant
strains, and other technologies that appeal to stevia growers. This depends, in
part, on the technological and creative skills of our personnel and on our
ability to protect our intellectual property rights. We may not be successful in
the development, introduction, marketing and sourcing of new technologies or
innovations, that satisfy customer needs, achieve market acceptance or generate
satisfactory financial returns.
CURRENT GLOBAL ECONOMIC CONDITIONS MAY ADVERSELY AFFECT OUR INDUSTRY, BUSINESS
AND RESULT OF OPERATIONS.
The recent disruptions in the current global credit and financial markets has
included diminished liquidity and credit availability, a decline in consumer
confidence, a decline in economic growth, an increased unemployment rate, and
uncertainty about economic stability. There can be no assurance that there will
not be further deterioration in credit and financial markets and confidence in
economic conditions. These economic uncertainties affect businesses such as ours
in a number of ways, making it difficult to accurately forecast and plan our
future business activities. The current adverse global economic conditions and
tightening of credit in financial markets may lead consumers to postpone
spending, which may cause manufacturers to cancel, decrease or delay their
existing and future orders with us. We are unable to predict the likely duration
and severity of the current disruptions in the credit and financial markets and
adverse global economic conditions. If the current uncertain economic conditions
continue or further deteriorate, our business and results of operations could be
materially and adversely affected.
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OUR BUSINESS DEPENDS SUBSTANTIALLY ON THE CONTINUING EFFORTS OF OUR EXECUTIVE
OFFICERS AND OUR BUSINESS MAY BE SEVERELY DISRUPTED IF WE LOSE THEIR SERVICES.
Our future success depends substantially on the continued services of our
executive officers, especially our President and sole director, George
Blankenbaker. We do not maintain key man life insurance on any of our executive
officers and directors. If one or more of our executive officers are unable or
unwilling to continue in their present positions, we may not be able to replace
them readily, if at all. Therefore, our business may be severely disrupted, and
we may incur additional expenses to recruit and retain new officers. In
addition, if any of our executives joins a competitor or forms a competing
company, we may lose some of our customers.
LITIGATION MAY ADVERSELY AFFECT OUR BUSINESS, FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
From time to time in the normal course of our business operations, we may become
subject to litigation that may result in liability material to our financial
statements as a whole or may negatively affect our operating results if changes
to our business operation are required. The cost to defend such litigation may
be significant and may require a diversion of our resources. There also may be
adverse publicity associated with litigation that could negatively affect
customer perception of our business, regardless of whether the allegations are
valid or whether we are ultimately found liable. As a result, litigation may
adversely affect our business, financial condition and results of operations.
WE MAY BE REQUIRED TO INCUR SIGNIFICANT COSTS AND REQUIRE SIGNIFICANT MANAGEMENT
RESOURCES TO EVALUATE OUR INTERNAL CONTROL OVER FINANCIAL REPORTING AS REQUIRED
UNDER SECTION 404 OF THE SARBANES-OXLEY ACT, AND ANY FAILURE TO COMPLY OR ANY
ADVERSE RESULT FROM SUCH EVALUATION MAY HAVE AN ADVERSE EFFECT ON OUR STOCK
PRICE.
As a smaller reporting company as defined in Rule 12b-2 under the Securities
Exchange Act of 1934, as amended, we are required to evaluate our internal
control over financial reporting under Section 404 of the Sarbanes-Oxley Act of
2002 ("Section 404"). Section 404 requires us to include an internal control
report with this Annual Report on Form 10-K. This report must include
management's assessment of the effectiveness of our internal control over
financial reporting as of the end of the fiscal year. This report must also
include disclosure of any material weaknesses in internal control over financial
reporting that we have identified. Failure to comply, or any adverse results
from such evaluation could result in a loss of investor confidence in our
financial reports and have an adverse effect on the trading price of our equity
securities. As of March 31, 2011, the management of the Company assessed the
effectiveness of the Company's internal control over financial reporting based
on the criteria for effective internal control over financial reporting
established in INTERNAL CONTROL--INTEGRATED FRAMEWORK issued by the Committee of
Sponsoring Organizations of the Treadway Commission ("COSO") and SEC guidance on
conducting such assessments. Management concluded, as of the year ended March
31, 2011, that its internal controls and procedures were not effective to detect
the inappropriate application of U.S. GAAP rules. Management realized there were
deficiencies in the design or operation of our internal control that adversely
affected our internal controls which management considers to be material
weaknesses including those described below:
i) We have insufficient quantity of dedicated resources and experienced
personnel involved in reviewing and designing internal controls. As a
result, a material misstatement of the interim and annual financial
statements could occur and not be prevented or detected on a timely
basis.
ii) We have not achieved the optimal level of segregation of duties
relative to key financial reporting functions.
iii) We do not have an audit committee or an independent audit committee
financial expert. While not being legally obligated to have an audit
committee or independent audit committee financial expert, it is the
management's view that to have an audit committee, comprised of
independent board members, and an independent audit committee
financial expert is an important entity-level control over our
financial statements.
iv) We did not perform an entity level risk assessment to evaluate the
implication of relevant risks on financial reporting, including the
impact of potential fraud related risks and the risks related to
non-routine transactions, if any, on our internal control over
financial reporting. Lack of an entity-level risk assessment
constituted an internal control design deficiency which resulted in
more than a remote likelihood that a material error would not have
been prevented or detected, and constituted a material weakness.
Achieving continued compliance with Section 404 may require us to incur
significant costs and expend significant time and management resources. We
cannot assure you that we will be able to fully comply with Section 404 or that,
we and our independent registered public accounting firm would be able to
conclude that our internal control over financial reporting is effective at
fiscal year end. As a result, investors could lose confidence in our reported
financial information, which could have an adverse effect on the trading price
of our securities, as well as subject us to civil or criminal investigations and
penalties. In addition, our independent registered public accounting firm may
not agree with our management's assessment or conclude that our internal control
over financial reporting is operating effectively.
16
RISKS RELATED TO DOING BUSINESS IN DEVELOPING COUNTRIES
OUR INTERNATIONAL OPERATIONS WILL BE SUBJECT TO THE LAWS OF THE JURISDICTIONS IN
WHICH WE OPERATE.
A significant portion of our initial business operations will occur in Vietnam.
We will be generally subject to laws and regulations applicable to foreign
investment in Vietnam. The Vietnamese legal system is based, at least in part,
on written statutes. However, since these laws and regulations are relatively
new and the Vietnamese legal system continues to rapidly evolve, the
interpretations of many laws, regulations and rules are not always uniform and
enforcement of these laws, regulations and rules involves uncertainties. We
cannot predict the effect of future developments in the Vietnamese legal system,
including the promulgation of new laws, changes to existing laws or the
interpretation or enforcement thereof, the preemption of local regulations by
national laws, or the overturn of local government's decisions by the superior
government. These uncertainties may limit legal protections available to us.
OUR INTERNATIONAL OPERATIONS INVOLVE THE USE OF FOREIGN CURRENCIES, WHICH
SUBJECTS US TO EXCHANGE RATE FLUCTUATIONS AND OTHER CURRENCY RISKS.
The revenues and expenses of our international operations will generally be
denominated in local currencies, which will subject us to exchange rate
fluctuations between such local currencies and the U.S. dollar. These exchange
rate fluctuations will subject us to currency translation risk with respect to
the reported results of our international operations, as well as to other risks
sometimes associated with international operations. In the future, we could
experience fluctuations in financial results from our operations outside of the
United States, and there can be no assurance we will be able, contractually or
otherwise, to reduce the currency risks associated with our international
operations.
WE MAY BE ADVERSELY AFFECTED BY ECONOMIC AND POLITICAL CONDITIONS IN THE
COUNTRIES WHERE WE OPERATE.
We will operate in Vietnam and other countries throughout the world. Economic
and political changes in these countries, such as inflation rates, recession,
foreign ownership restrictions, restrictions on transfer of funds into or out of
a country and similar factors may adversely affect results of operations.
While it is our understanding that the economy in Vietnam has grown
significantly in the past 20 years, the growth has been uneven, both
geographically and among various economic sectors. The government of Vietnam has
implemented various measures to encourage or control economic growth and guide
the allocation of resources. Some of these measures benefit the overall
Vietnamese economy, but may also have a negative effect on us. For example, our
financial condition and results of operations may be adversely affected by
government control over capital investments or changes in tax regulations that
are applicable to us.
The Vietnamese economy has been transitioning from a planned economy to a more
market-oriented economy. Although in recent years the Vietnamese government has
implemented measures emphasizing the utilization of market forces for economic
reform, the reduction of state ownership of productive assets and the
establishment of sound corporate governance in business enterprises, a
substantial portion of the productive assets in Vietnam are still owned by the
Vietnamese government. The continued control of these assets and other aspects
of the national economy by Vietnam government could materially and adversely
affect our business. The Vietnamese government also exercises significant
control over Vietnamese economic growth through the allocation of resources,
controlling payment of foreign currency-denominated obligations, setting
monetary policy and providing preferential treatment to particular industries or
companies. Efforts by the Vietnamese government to slow the pace of growth of
the Vietnamese economy could negatively affect our business.
OUR INSURANCE COVERAGE MAY BE INADEQUATE TO COVER ALL SIGNIFICANT RISK
EXPOSURES.
We will be exposed to liabilities that are unique to the products we will
provide. While we intend to maintain insurance for certain risks, the amount of
our insurance coverage may not be adequate to cover all claims or liabilities,
and we may be forced to bear substantial costs resulting from risks and
uncertainties of our business. It is also not possible to obtain insurance to
protect against all operational risks and liabilities. The failure to obtain
adequate insurance coverage on terms favorable to us, or at all, could have a
material adverse effect on our business, financial condition and results of
operations. In addition, because the insurance industry in Vietnam and other
developing countries are still in their early stages of development, business
interruption insurance available in such countries relating to our intended
services and products offers limited coverage compared to that offered in many
other developed countries. We do not have any business interruption insurance.
Any business disruption or natural disaster could result in substantial costs
and diversion of resources.
17
IT WILL BE EXTREMELY DIFFICULT TO ACQUIRE JURISDICTION AND ENFORCE LIABILITIES
AGAINST OUR OFFICERS, DIRECTORS AND ASSETS BASED IN VIETNAM.
Substantially all of our assets will be located in Vietnam and a significant
number of our officers and directors may reside outside of the United States as
well. As a result, it may not be possible for United States investors to enforce
their legal rights, to effect service of process upon our directors or officers
or to enforce judgments of United States courts predicated upon civil
liabilities and criminal penalties of our directors and officers under Federal
securities laws. Moreover, we have been advised that Vietnam does not have
treaties providing for the reciprocal recognition and enforcement of judgments
of courts with the United States. Further, it is unclear if extradition treaties
now in effect between the United States and Vietnam would permit effective
enforcement of criminal penalties of the Federal securities laws.
RISKS RELATED TO AN INVESTMENT IN OUR SECURITIES
OUR STOCK IS CATEGORIZED AS A PENNY STOCK. TRADING OF OUR STOCK MAY BE
RESTRICTED BY THE SEC'S PENNY STOCK REGULATIONS WHICH MAY LIMIT A SHAREHOLDER'S
ABILITY TO BUY AND SELL OUR STOCK.
Our stock is categorized as a "penny stock". The SEC has adopted Rule 15g-9
which generally defines "penny stock" to be any equity security that has a
market price (as defined) less than $4.00 per share or an exercise price of less
than $5.00 per share, subject to certain exceptions. Our securities are covered
by the penny stock rules, which impose additional sales practice requirements on
broker-dealers who sell to persons other than established customers and
accredited investors. The penny stock rules require a broker-dealer, prior to a
transaction in a penny stock not otherwise exempt from the rules, to deliver a
standardized risk disclosure document in a form prepared by the SEC which
provides information about penny stocks and the nature and level of risks in the
penny stock market. The broker-dealer also must provide the customer with
current bid and offer quotations for the penny stock, the compensation of the
broker-dealer and its salesperson in the transaction and monthly account
statements showing the market value of each penny stock held in the customer's
account. The bid and offer quotations, and the broker-dealer and salesperson
compensation information, must be given to the customer orally or in writing
prior to effecting the transaction and must be given to the customer in writing
before or with the customer's confirmation. In addition, the penny stock rules
require that prior to a transaction in a penny stock not otherwise exempt from
these rules, the broker-dealer must make a special written determination that
the penny stock is a suitable investment for the purchaser and receive the
purchaser's written agreement to the transaction. These disclosure requirements
may have the effect of reducing the level of trading activity in the secondary
market for the stock that is subject to these penny stock rules. Consequently,
these penny stock rules may affect the ability of broker-dealers to trade our
securities. We believe that the penny stock rules discourage investor interest
in and limit the marketability of our common stock.
FINRA SALES PRACTICE REQUIREMENTS MAY ALSO LIMIT A SHAREHOLDER'S ABILITY TO BUY
AND SELL OUR STOCK.
In addition to the "penny stock" rules described above, the Financial Industry
Regulatory Authority ("FINRA") has adopted rules that require that in
recommending an investment to a customer, a broker-dealer must have reasonable
grounds for believing that the investment is suitable for that customer. Prior
to recommending speculative low priced securities to their non-institutional
customers, broker-dealers must make reasonable efforts to obtain information
about the customer's financial status, tax status, investment objectives and
other information. Under interpretations of these rules, FINRA believes that
there is a high probability that speculative low priced securities will not be
suitable for at least some customers. The FINRA requirements make it more
difficult for broker-dealers to recommend that their customers buy our common
stock, which may limit your ability to buy and sell our stock and have an
adverse effect on the market for our shares.
WE EXPECT TO EXPERIENCE VOLATILITY IN OUR STOCK PRICE, WHICH COULD NEGATIVELY
AFFECT SHAREHOLDERS' INVESTMENTS.
While our common stock is not currently traded, if and when there is an active
trading market, the market price for shares of our common stock may be volatile
and may fluctuate based upon a number of factors, including, without limitation,
business performance, news announcements or changes in general market
conditions.
In the past, securities class action litigation has often been brought against a
company following periods of volatility in the market price of its securities.
Due to the volatility of our common stock price, we may be the target of
securities litigation in the future. Securities litigation could result in
substantial costs and divert management's attention and resources.
Shareholders should also be aware that, according to SEC Release No. 34-29093,
the market for "penny stock", such as our common stock, has suffered in recent
years from patterns of fraud and abuse. Such patterns include (1) control of the
market for the security by one or a few broker-dealers that are often related to
the promoter or issuer; (2) manipulation of prices through prearranged matching
of purchases and sales and false and misleading press releases; (3) boiler room
practices involving high-pressure sales tactics and unrealistic price
projections by inexperienced sales persons; (4) excessive and undisclosed
bid-ask differential and markups by selling broker-dealers; and (5) the
wholesale dumping of the same securities by promoters and broker-dealers after
prices have been manipulated to a desired level, along with the resulting
inevitable collapse of those prices and with consequent investor losses. Our
18
management is aware of the abuses that have occurred historically in the penny
stock market. Although we do not expect to be in a position to dictate the
behavior of the market or of broker-dealers who participate in the market,
management will strive within the confines of practical limitations to prevent
the described patterns from being established with respect to our securities.
The occurrence of these patterns or practices could increase the future
volatility of our share price.
TO DATE, WE HAVE NOT PAID ANY CASH DIVIDENDS AND NO CASH DIVIDENDS WILL BE PAID
IN THE FORESEEABLE FUTURE.
We do not anticipate paying cash dividends on our common stock in the
foreseeable future and we may not have sufficient funds legally available to pay
dividends. Even if the funds are legally available for distribution, we may
nevertheless decide not to pay any dividends. We presently intend to retain all
earnings for our operations.
THE ELIMINATION OF MONETARY LIABILITY AGAINST OUR DIRECTORS, OFFICERS AND
EMPLOYEES UNDER NEVADA LAW AND THE EXISTENCE OF INDEMNIFICATION RIGHTS TO OUR
DIRECTORS, OFFICERS AND EMPLOYEES MAY RESULT IN SUBSTANTIAL EXPENDITURES BY OUR
COMPANY AND MAY DISCOURAGE LAWSUITS AGAINST OUR DIRECTORS, OFFICERS AND
EMPLOYEES.
Our Articles of Incorporation contain a provision permitting us to eliminate the
personal liability of our directors to our company and shareholders for damages
for breach of fiduciary duty as a director or officer to the extent provided by
Nevada law. We may also have contractual indemnification obligations under our
employment agreements with our officers. The foregoing indemnification
obligations could result in the Company incurring substantial expenditures to
cover the cost of settlement or damage awards against directors and officers,
which we may be unable to recoup. These provisions and resultant costs may also
discourage our company from bringing a lawsuit against directors and officers
for breaches of their fiduciary duties, and may similarly discourage the filing
of derivative litigation by our shareholders against our directors and officers
even though such actions, if successful, might otherwise benefit our company and
shareholders.
ITEM 1B -- UNRESOLVED STAFF COMMENTS
None.
ITEM 2 -- PROPERTIES
Our international corporate office is located at 14 Chin Bee Road, Singapore
619824. We also maintain an office in Vietnam at No. 602, CC2A, Thanh Ha `s
building, Bac Linh Dam, Hoang Mai district, Hanoi, Vietnam and in the United
States, at 7117 US 31 South, Indianapolis, IN 46227.
We have established three nursery fields in Vietnam on property which we manage
for our growers. The properties are approximately 3 Ha in size, and are capable
of supporting a total propagation of approximately 30 Ha of field trials.
ITEM 3 -- LEGAL PROCEEDINGS
None.
ITEM 4 -- RESERVED
Not applicable.
PART II
ITEM 5 -- MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
MARKET INFORMATION
Our common stock is quoted on the Over the Counter Bulletin Board under the
symbol STEV.
There has not been an active trading market for our common stock during the two
most recent fiscal years. The following is the range of high and low bid prices
for our common stock for the periods indicated. The quotations reflect
inter-dealer prices, without retail mark-up, mark-down or commissions and may
not represent actual transactions.
19
Fiscal Year Ended March 31, 2011 High Low
-------------------------------- ---- ---
First Quarter (June 30, 2010) $ .005714 $ .005714
Second Quarter (September 30, 2010) $ .009143 $ .009143
Third Quarter (December 31, 2010) $ .010286 $ .010286
Fourth Quarter (March 31, 2011) $ .012571 $ .012571
Fiscal Year Ended March 31, 2010 High Low
-------------------------------- ---- ---
First Quarter (June 30, 2009) $ N/A $ N/A
Second Quarter (September 30, 2009) $ N/A $ N/A
Third Quarter (December 31, 2009) $ N/A $ N/A
Fourth Quarter (March 31, 2010) $ N/A $ N/A
STOCKHOLDERS
As of June 27, 2011, there were 58,800,000 shares of common stock issued and
outstanding held by seven stockholders of record (not including street name
holders).
DIVIDENDS
We have not paid dividends to date and do not anticipate paying any dividends in
the foreseeable future. Our Board of Directors intends to follow a policy of
retaining earnings, if any, to finance our growth. The declaration and payment
of dividends in the future will be determined by our Board of Directors in light
of conditions then existing, including our earnings, financial condition,
capital requirements and other factors.
ITEM 6 -- SELECTED FINANCIAL DATA
Not applicable.
ITEM 7 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with our consolidated
financial statements and notes thereto included elsewhere in this Annual Report
on Form 10-K. 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.
BACKGROUND AND PLAN OF OPERATIONS
We are a development stage company that has recently acquired certain rights
relating to stevia production, including certain assignable exclusive purchase
contracts and an assignable supply agreement related to stevia.
We plan to generate revenue through two primary sources: (i) the sale of stevia
grown on our own farmed property and (ii) our farm management services, which
will provide plant breeding, agricultural protocols, post-harvest techniques and
other services to stevia growers.
Our initial farming efforts and farm management service are focused in Vietnam.
We plan to partner with leading refiners to create a reliable purchasing source
for both the stevia we grow as well as that produced by our contract partners
using our methods and technologies.
Our initial focus and capital expenditures will be directed toward intellectual
property development which will attempt to identify optimal cultivar varieties
for intended growing sites, develop and test a propagation protocol, develop
cultivation technology including an intercropping system and regional
adaptability test, and develop post-harvest and refinery processes. Once such
protocols and technologies are established, we plan to expand our commercial
farming of stevia using such intellectual property, with the goal of 5,000 Ha of
production by the end of our sixth fiscal year, while also marketing such
farming methods and technologies to other stevia farmers.
20
RESULTS OF OPERATIONS
We have had limited operations to-date, which have primarily consisted of
securing purchase and supply contracts and office space and developing
relationships with potential partners.
Our auditors have issued a going concern opinion. This means that there is
substantial doubt that we can continue as an on-going business for the next
twelve months unless we obtain additional capital.
FINANCIAL CONDITION AS OF MARCH 31, 2011
We reported total current assets of $255,598 at March 31, 2011 consisting of
cash. Total current liabilities reported of $306,068 consisted of accounts
payable and accrued liabilities of $37,130, due to related party of $18,938 and
convertible note payable of $250,000. We had a working capital deficit of
$50,470 at March 31, 2011.
Stockholders' Deficiency increased from $11,580 at March 31, 2010 to $50,470 at
March 31, 2011. This increase is due primarily to an increase in our losses.
CASH AND CASH EQUIVALENTS
As of March 31, 2011, we had cash of $255,598. We anticipate that a substantial
amount of cash will be used as working capital and to execute our strategy and
business plan. As such, we further anticipate that we will have to raise
additional capital through debt or equity financings to fund our operations
during the next 6 to 12 months.
RESULTS OF OPERATIONS FOR THE FISCAL YEAR ENDED MARCH 31, 2011
For the fiscal year ended March 31, 2011, we incurred a net loss of $38,890.
General and administration expenses for the fiscal year end March 31, 2011,
amounted to $7,458 compared to $9,773 in the fiscal year ended March 31, 2010.
Legal and accounting expenses for the fiscal year end March 31, 2011, amounted
to $28,350 compared to $19,813 in the fiscal year ended March 31, 2010.
RESULTS OF OPERATIONS FOR THE FISCAL YEAR ENDED MARCH 31, 2010
For the fiscal year ended March 31, 2010, we incurred a net loss of $29,586.
Administration expenses for the fiscal year ended March 31, 2010 amounted to
$9,773 compared to $9,368 in the fiscal year ended March 31, 2009. Legal and
accounting expenses for the fiscal year end March 31, 2010, amounted to $19,813
compared to $3,000 in the fiscal year ended March 31, 2009.
LIQUIDITY AND CAPITAL RESOURCES
During the year ended March 31, 2011, we funded our operations from the proceeds
of private sales of equity and/or convertible notes. We are currently seeking
further financing and we believe that 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.
For the year ended March 31, 2011, we raised net cash of $265,000 from financing
activities. Net cash from financing activities reflected an increase in notes
payable of $250,000 and increase in due to stock holder of $15,000.
We raised $250,000 during the year ended March 31, 2011 from the issuance of
convertible notes. Subsequent to the fiscal year end, we raised an additional
$100,000 from the issuance of convertible notes.
Our current cash requirements are significant due to the planned development and
expansion of our business. Accordingly, we expect to continue to use debt and
equity financing to fund operations for the next twelve months.
21
Our management believes that we will be able to generate sufficient revenue or
raise sufficient amounts of working capital through debt or equity offerings, as
may be required to meet our short-term and long-term obligations. In order to
execute on our business strategy, we will require additional working capital,
commensurate with our operational needs. Such working capital will most likely
be obtained through equity or debt financings until such time as our operations
are producing revenue in excess of operating expenses. 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.
CAPITAL REQUIREMENTS
There is no historical financial information about us upon which to base an
evaluation of our performance. We are a development stage corporation and have
not generated any revenues from operations. We cannot guarantee we will be
successful in our business operations. Our business is subject to risks inherent
in the establishment of a new business enterprise, including limited capital
resources.
We expect our initial capital requirements will be for intellectual property
development, initial field trials and planning and readiness development for the
commercialization that we hope to begin in year three. We plan to fund such
activities through various forms of financing including equity, convertible
debt, bank loans, lines of credit and other options that may be available to us.
Subsequently, we will require additional capitalization to expand our commercial
production to reach our target of 5,000 Ha in Vietnam.
We have no assurance that financing will be available to us, or if available, on
terms acceptable to us. If financing is not available to us, or on satisfactory
terms, we may be unable to continue, develop or expand our operations.
Additional equity financing could also result in additional dilution to our
existing shareholders.
CONTRACTUAL OBLIGATIONS AND OFF-BALANCE SHEET ARRANGEMENTS
As of March 31, 2011, the end of our latest fiscal year, we did not have any
long-term debt or purchase obligations.
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
shareholder'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 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.
FAIR VALUE OF FINANCIAL INSTRUMENTS
We follow paragraph 825-10-50-10 of the FASB Accounting Standards Codification
for disclosures about fair value of its financial instruments and paragraph
820-10-35-37 of the FASB Accounting Standards Codification ("Paragraph
820-10-35-37") to measure the fair value of its financial instruments. Paragraph
820-10-35-37 establishes a framework for measuring fair value in accounting
principles generally accepted in the United States of America (U.S. GAAP), and
expands disclosures about fair value measurements. To increase consistency and
comparability in fair value measurements and related disclosures, Paragraph
820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to
valuation techniques used to measure fair value into three (3) broad levels. The
fair value hierarchy gives the highest priority to quoted prices (unadjusted) in
active markets for identical assets or liabilities and the lowest priority to
unobservable inputs. The three (3) levels of fair value hierarchy defined by
Paragraph 820-10-35-37 are described below:
Level 1 Quoted market prices available in active markets for identical assets or
liabilities as of the reporting date.
Level 2 Pricing inputs other than quoted prices in active markets included in
Level 1, which are either directly or indirectly observable as of the reporting
date.
Level 3 Pricing inputs that are generally observable inputs and not corroborated
by market data.
22
The carrying amounts of our financial assets and liabilities, such as accrued
expenses, approximate their fair values because of the short maturity of these
instruments.
We do not have any assets or liabilities measured at fair value on a recurring
or a non-recurring basis, consequently, we did not have any fair value
adjustments for assets and liabilities measured at fair value at March 30, 2011;
no gains or losses are reported in the statement of operations that are
attributable to the change in unrealized gains or losses relating to those
assets and liabilities still held at the reporting date for the period ended
March 30, 2011.
REVENUE RECOGNITION
We follow paragraph 605-10-S99-1 of the FASB Accounting Standards Codification
for revenue recognition. We will recognize revenue when it is realized or
realizable and earned. We consider revenue realized or realizable and earned
when it has persuasive evidence of an arrangement that the services have been
rendered to the customer, the sales price is fixed or determinable, and
collectability is reasonably assured.
INCOME TAXES
We account for income taxes under Section 740-10-30 of the FASB Accounting
Standards Codification. Deferred income tax assets and liabilities are
determined based upon differences between the financial reporting and tax bases
of assets and liabilities and are measured using the enacted tax rates and laws
that will be in effect when the differences are expected to reverse. Deferred
tax assets are reduced by a valuation allowance to the extent management
concludes it is more likely than not that the assets will not be realized.
Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in the statements
of operations in the period that includes the enactment date.
We adopted section 740-10-25 of the FASB Accounting Standards Codification
("Section 740-10-25"). Section 740-10-25 addresses the determination of whether
tax benefits claimed or expected to be claimed on a tax return should be
recorded in the financial statements. Under Section 740-10-25, we may recognize
the tax benefit from an uncertain tax position only if it is more likely than
not that the tax position will be sustained on examination by the taxing
authorities, based on the technical merits of the position. The tax benefits
recognized in the financial statements from such a position should be measured
based on the largest benefit that has a greater than fifty percent (50%)
likelihood of being realized upon ultimate settlement. Section 740-10-25 also
provides guidance on de-recognition, classification, interest and penalties on
income taxes, accounting in interim periods and requires increased disclosures.
We had no material adjustments to our liabilities for unrecognized income tax
benefits according to the provisions of Section 740-10-25.
COMMITMENTS AND CONTINGENCIES
We follow subtopic 450-20 of the FASB Accounting Standards Codification to
report accounting for contingencies. Liabilities for loss contingencies arising
from claims, assessments, litigation, fines and penalties and other sources are
recorded when it is probable that a liability has been incurred and the amount
of the assessment can be reasonably estimated.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In January 2010, the FASB issued the FASB Accounting Standards Update No.
2010-06 "FAIR VALUE MEASUREMENTS AND DISCLOSURES (TOPIC 820) IMPROVING
DISCLOSURES ABOUT FAIR VALUE MEASUREMENTS", which provides amendments to
Subtopic 820-10 that require new disclosures as follows:
1. Transfers in and out of Levels 1 and 2. A reporting entity should disclose
separately the amounts of significant transfers in and out of Level 1 and Level
2 fair value measurements and describe the reasons for the transfers.
2. Activity in Level 3 fair value measurements. In the reconciliation for fair
value measurements using significant unobservable inputs (Level 3), a reporting
entity should present separately information about purchases, sales, issuances,
and settlements (that is, on a gross basis rather than as one net number).
This Update provides amendments to Subtopic 820-10 that clarify existing
disclosures as follows:
1. Level of disaggregation. A reporting entity should provide fair value
measurement disclosures for each class of assets and liabilities. A class is
often a subset of assets or liabilities within a line item in the statement of
financial position. A reporting entity needs to use judgment in determining the
appropriate classes of assets and liabilities.
23
2. Disclosures about inputs and valuation techniques. A reporting entity should
provide disclosures about the valuation techniques and inputs used to measure
fair value for both recurring and nonrecurring fair value measurements. Those
disclosures are required for fair value measurements that fall in either Level 2
or Level 3.
This Update also includes conforming amendments to the guidance on employers'
disclosures about postretirement benefit plan assets (Subtopic 715-20). The
conforming amendments to Subtopic 715-20 change the terminology from MAJOR
CATEGORIES of assets to CLASSES of assets and provide a cross reference to the
guidance in Subtopic 820-10 on how to determine appropriate classes to present
fair value disclosures. The new disclosures and clarifications of existing
disclosures are effective for interim and annual reporting periods beginning
after December 15, 2009, except for the disclosures about purchases, sales,
issuances, and settlements in the roll forward of activity in Level 3 fair value
measurements. Those disclosures are effective for fiscal years beginning after
December 15, 2010, and for interim periods within those fiscal years.
In August 2010, the FASB issued ASU 2010-21, "ACCOUNTING FOR TECHNICAL
AMENDMENTS TO VARIOUS SEC RULES AND SCHEDULES: AMENDMENTS TO SEC PARAGRAPHS
PURSUANT TO RELEASE NO. 33-9026: TECHNICAL AMENDMENTS TO RULES, FORMS, SCHEDULES
AND CODIFICATION OF FINANCIAL REPORTING POLICIES" ("ASU 2010-21"), was issued to
conform the SEC's reporting requirements to the terminology and provisions in
ASC 805, BUSINESS COMBINATIONS, and in ASC 810-10, CONSOLIDATION. ASU No.
2010-21 was issued to reflect SEC Release No. 33-9026, "Technical Amendments to
Rules, Forms, Schedules and Codification of Financial Reporting Policies," which
was effective April 23, 2009. The ASU also proposes additions or modifications
to the XBRL taxonomy as a result of the amendments in the update.
In August 2010, the FASB issued ASU 2010-22, "ACCOUNTING FOR VARIOUS TOPICS:
TECHNICAL CORRECTIONS TO SEC PARAGRAPHS" ("ASU 2010-22"), which amends various
SEC paragraphs based on external comments received and the issuance of SEC Staff
Accounting Bulletin (SAB) No. 112, which amends or rescinds portions of certain
SAB topics. The topics affected include reporting of inventories in condensed
financial statements for Form 10-Q, debt issue costs in conjunction with a
business combination, sales of stock by subsidiary, gain recognition on sales of
business, business combinations prior to an initial public offering, loss
contingent and liability assumed in business combination, divestitures, and oil
and gas exchange offers.
In December 2010, the FASB issued the FASB Accounting Standards Update No.
2010-28 "INTANGIBLES--GOODWILL AND OTHER (TOPIC 350): WHEN TO PERFORM STEP 2 OF
THE GOODWILL IMPAIRMENT TEST FOR REPORTING UNITS WITH ZERO OR NEGATIVE CARRYING
AMOUNTS" ("ASU 2010-28").Under ASU 2010-28, if the carrying amount of a
reporting unit is zero or negative, an entity must assess whether it is more
likely than not that goodwill impairment exists. To make that determination, an
entity should consider whether there are adverse qualitative factors that could
impact the amount of goodwill, including those listed in ASC 350-20-35-30. As a
result of the new guidance, an entity can no longer assert that a reporting unit
is not required to perform the second step of the goodwill impairment test
because the carrying amount of the reporting unit is zero or negative, despite
the existence of qualitative factors that indicate goodwill is more likely than
not impaired. ASU 2010-28 is effective for public entities for fiscal years, and
for interim periods within those years, beginning after December 15, 2010, with
early adoption prohibited.
In December 2010, the FASB issued the FASB Accounting Standards Update No.
2010-29 "BUSINESS COMBINATIONS (TOPIC 805): DISCLOSURE OF SUPPLEMENTARY PRO
FORMA INFORMATION FOR BUSINESS COMBINATIONS" ("ASU 2010-29"). ASU 2010-29
specifies that if a public entity presents comparative financial statements, the
entity should disclose revenue and earnings of the combined entity as though the
business combination(s) that occurred during the current year had occurred as of
the beginning of the comparable prior annual reporting period only. The
amendments in this Update also expand the supplemental pro forma disclosures
under Topic 805 to include a description of the nature and amount of material,
nonrecurring pro forma adjustments directly attributable to the business
combination included in the reported pro forma revenue and earnings. The amended
guidance is effective prospectively for business combinations for which the
acquisition date is on or after the beginning of the first annual reporting
period beginning on or after December 15, 2010. Early adoption is permitted.
ITEM 7A -- QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 8 -- FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Reference is made to the financial statements, the reports of our independent
registered public accounting firm, and the notes thereto of this report, which
financial statements, reports, and notes are incorporated herein by reference.
ITEM 9 -- CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
24
ITEM 9A -- CONTROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
We carried out an evaluation, under the supervision and with the participation
of our management, including our principal executive officer and principal
financial officer, of the effectiveness of the design of our disclosure controls
and procedures (as defined by Exchange Act Rules 13a-15(e) or 15d-15(e)) as of
March 31, 2011 pursuant to Exchange Act Rule 13a-15. Based upon that evaluation,
our Principal Executive Officer and Principal Financial Officer concluded that
our disclosure controls and procedures are not effective as of March 31, 2011 in
ensuring that information required to be disclosed by us in reports that we file
or submit under the Exchange Act is recorded, processed, summarized, and
reported within the time periods specified in the Securities and Exchange
Commission's rules and forms. This conclusion is based on findings that
constituted material weaknesses. A material weakness is a deficiency, or a
combination of control deficiencies, in internal control over financial
reporting such that there is a reasonable possibility that a material
misstatement of the Company's interim financial statements will not be prevented
or detected on a timely basis.
MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
In performing the above-referenced assessment, our management identified the
following material weaknesses:
i) We have not achieved the optimal level of segregation of duties
relative to key financial reporting functions.
ii) We did not have an audit committee or an independent audit committee
financial expert. While not being legally obligated to have an audit
committee or independent audit committee financial expert, it is the
management's view that to have an audit committee, comprised of
independent board members, and an independent audit committee
financial expert is an important entity-level control over our
financial statements.
We are currently reviewing our disclosure controls and procedures related to
these material weaknesses and expect to implement changes in the near term,
including identifying specific areas within our governance, accounting and
financial reporting processes to add adequate resources and personnel to
potentially mitigate these material weaknesses.
Our present management will continue to monitor and evaluate the effectiveness
of our internal controls and procedures and our internal controls over financial
reporting on an ongoing basis and are committed to taking further action and
implementing additional enhancements or improvements, as necessary and as funds
allow.
Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate. All internal control systems,
no matter how well designed, have inherent limitations. Therefore, even those
systems determined to be effective can provide only reasonable assurance with
respect to financial statement preparation and presentation.
CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING
There were no changes in our internal control over financial reporting that
occurred during the fourth quarter of the fiscal year ending March 31, 2011 that
have materially affected or are reasonably likely to materially affect our
internal control over financial reporting.
ITEM 9B -- OTHER INFORMATION
None.
PART III
ITEM 10 -- DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the names and ages of our current directors and
executive officers, the principal offices and positions held by each person:
Person Age Position
------ --- --------
George Blankenbaker 46 Director, President, Secretary and Treasurer
25
The information below with respect to our sole director includes such director's
experience, qualifications, attributes, and skills that led us to the conclusion
that he should serve as a director.
GEORGE BLANKENBAKER - PRESIDENT, SECRETARY, TREASURER AND DIRECTOR
Mr. Blankenbaker became our President, Secretary, Treasurer and Director in
June, 2011. Since November 2008, Mr. Blankenbaker has been leading the
development of high Reb-A stevia farming in Vietnam, where he imported the
Morita variety to trial in 2008 and signed a contract to supply stevia leaf to
PureCircle, the industry's leading refiner, in 2009. Mr. Blankenbaker was raised
on a farm and became involved in large scale commercial agriculture in 2002 when
he began working with the Agri-Food Veterinary Authority of Singapore (AVA) to
provide strategically important food supplies to Singapore and has extensive
experience managing agriculture projects in South East Asia. Mr. Blankenbaker
received a Bachelors of Science in Business Finance from Indiana University in
1988, where he also studied Asian Political Science. Mr. Blankenbaker's recent
activities and experience in Vietnam have laid the groundwork for the Company's
current business strategy, and his in-depth knowledge of such matters will be
invaluable to our Board of Directors.
INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
Other than as set forth above, no director, executive officer, significant
employee or control person of the Company has been involved in any legal
proceeding listed in Item 401(f) of Regulation S-K in the past 10 years.
TERM OF OFFICE
Our directors are appointed for a one-year term to hold office until the next
annual general meeting of our shareholders or until removed from office in
accordance with our bylaws. Our officers are appointed by our Board of Directors
and hold office until removed by the Board, absent an employment agreement.
COMMITTEES OF THE BOARD
Our Board of Directors held no formal meetings during the fiscal year ended
March 31, 2011 or during the two months ended May 31, 2011. All proceedings of
the Board of Directors were conducted by resolutions consented to in writing by
the sole director. Such resolutions consented to in writing by the director
entitled to vote on that resolution at a meeting of the directors are, according
to the Nevada Revised Statutes and the bylaws of the Company, as valid and
effective as if they had been passed at a meeting of the directors duly called
and held. We do not presently have a policy regarding director attendance at
meetings.
We do not currently have standing audit, nominating or compensation committees,
or committees performing similar functions. Due to the size of our board, our
Board of Directors believes that it is not necessary to have standing audit,
nominating or compensation committees at this time because the functions of such
committees are adequately performed by our Board of Directors. We do not have an
audit, nominating or compensation committee charter as we do not currently have
such committees. We do not have a policy for electing members to the Board.
AUDIT COMMITTEE
Our Board of Directors has not established a separate audit committee within the
meaning of Section 3(a)(58)(A) of the Exchange Act. Instead, the entire Board of
Directors acts as the audit committee within the meaning of Section 3(a)(58)(B)
of the Exchange Act and will continue to do so until such time as a separate
audit committee has been established. Mr. Blankenbaker does not meet the
definition of an "audit committee financial expert" within the meaning of Item
407(d)(5) of Regulation S-K.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
In connection with his acquisition of 1,600,000 (pre-split) shares of our common
stock on August 2, 2008 and his appointment as an officer and director of the
Company, Mohanad Shurrab was required to file a Form 3 no later than August 12,
2008. Mr. Shurrab filed the Form 3 on September 2, 2008.
Except as set forth above, and based solely upon a review of Forms 3, 4 and 5
delivered to us as filed with the Securities Exchange Commission, as of March
31, 2011, all of our executive officers and directors, and persons who own more
than 10% of our Common Stock timely filed all required reports pursuant to
Section 16(a) of the Securities Exchange Act.
CODE OF ETHICS
Given the current size of the Company and the fact that Mr. Blankenbaker is
currently our sole officer, director and employee, we have not found it
26
necessary to adopt a Code of Ethics at this time. We will continue to review the
advisability of adopting a Code of Ethics as our Company grows.
ITEM 11 -- EXECUTIVE COMPENSATION
DIRECTOR COMPENSATION
We have no standard arrangement to compensate directors for their services in
their capacity as directors. Directors are not paid for meetings attended.
However, we intend to review and consider future proposals regarding Board
compensation. All travel and lodging expenses associated with corporate matters
are reimbursed by us, if and when incurred.
EXECUTIVE COMPENSATION - FORMER EXECUTIVE OFFICERS
No director, officer or employee of the Company received compensation during the
fiscal year ended March 31, 2011.
EXECUTIVE COMPENSATION - CURRENT EXECUTIVE OFFICERS
Pursuant to the Letter of Intent entered into on February 14, 2011, between the
Company and Mr. Blankenbaker, included in on our periodic report on Form 8-K, as
filed with the SEC on February 18, 2011, which is hereby incorporated by
reference, we plan to establish either a stock or cash bonus plan for Mr.
Blankenbaker which would compensate him upon the achievement of certain project
milestones.
Other than as set forth above, none of our executive officers or directors
received, nor do we have any arrangements to pay out, any bonus, stock awards,
option awards, non-equity incentive plan compensation, or non-qualified deferred
compensation.
EMPLOYMENT AGREEMENTS
None of our executive officers currently have employment agreements with us and
the manner and amount of compensation for the above-referenced new officer and
director has not yet been determined.
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE-IN-CONTROL
We currently have no employment agreements with any of our executive officers,
nor any compensatory plans or arrangements resulting from the resignation,
retirement or any other termination of any of our executive officers, from a
change-in-control, or from a change in any executive officer's responsibilities
following a change-in-control. As a result, we have omitted this table.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No interlocking relationship exists between our Board of Directors and the Board
of Directors or compensation committee of any other company, nor has any
interlocking relationship existed in the past.
ITEM 12 -- SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
The following table sets forth certain information as of June 27, 2011 with
respect to the beneficial ownership of our common stock for (i) each director
and officer, (ii) all of our directors and officers as a group, and (iii) each
person known to us to own beneficially 5% or more of the outstanding shares of
our common stock. To our knowledge, except as indicated in any footnotes to this
table or pursuant to applicable community property laws, the persons named in
the table have sole voting and investment power with respect to the shares of
common stock indicated.
Name and Address Amount and Nature Percentage
of Beneficial Owner (1) of Beneficial Ownership of Class(2)
----------------------- ----------------------- -----------
George Blankenbaker 12,000,000 20.41%
President, Secretary, Treasurer,
and Director
6451 Buck Creek Pkwy
Indianapolis, IN 46227
Mohanad Shurrab 23,000,000 39.12%
P.O. Box 3571
Dubai, UAE
All Officers and Directors as a Group 12,000,000 20.41%
27
----------
(1) Beneficial ownership has been determined in accordance with Rule 13d-3
under the Exchange Act. Pursuant to the rules of the SEC, shares of common
stock which an individual or group has a right to acquire within 60 days
pursuant to the exercise of options or warrants are deemed to be
outstanding for the purpose of computing the percentage ownership of such
individual or group, but are not deemed to be beneficially owned and
outstanding for the purpose of computing the percentage ownership of any
other person shown in the table.
(2) Based on 58,800,000 shares of our common stock outstanding as of June 23,
2011.
EQUITY COMPENSATION PLAN INFORMATION
The company has no active equity compensation plans and there are currently no
outstanding options from prior plans.
ITEM 13 -- CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
On June 23, 2011, we entered into the Exchange Agreement. As a result of the
Share Exchange Transaction, the sole shareholder of BVI received 12,000,000
shares of our common stock in exchange for 100% of the issued and outstanding
common stock of BVI. Mr. Blankenbaker, our newly appointed officer and director,
was the sole shareholder and officer of BVI. Accordingly, he was a recipient of
12,000,000 shares of our common stock issued in connection with the Share
Exchange Transaction, 6,000,000 of which are being held in escrow pending the
achievement by the Company of certain business milestones. Effective at the
closing of the Share Exchange Transaction, Mr. Blankenbaker was appointed as an
officer of the Company and as a member of the Company's Board of Directors. In
connection with the Share Exchange Transaction, Mohanad Shurrab, our former sole
officer and director, surrendered 33,000,000 shares of the Company's common
stock to the Company for cancellation.
The Supply Contract with PureCircle was originally executed by and between
PureCircle and Waterland Holdings PTE Ltd. ("Waterland Holdings"). Mr.
Blankenbaker is the Managing Director of Waterland Holdings. Waterland Holdings
assigned the Supply Contract to Growers Synergy PTE Ltd ("Growers Synergy"). Mr.
Blankenbaker is the Managing Director of Growers Synergy. Growers Synergy
assigned the Supply Contract to BVI.
Other than as set forth above, no officer or director of the Company held any
position with BVI or the Company prior to the Closing of the Share Exchange
Transaction nor has he been involved in any material proceeding adverse to the
Company or any transactions with the Company or any of its directors, executive
officers, affiliates or associates that are required to be disclosed pursuant to
the rules and regulations of the SEC.
There are no family relationships between any of our former or current officers
and directors.
REVIEW, APPROVAL OR RATIFICATION OF TRANSACTIONS WITH RELATED PERSONS
We rely on our Board to review related party transactions on an ongoing basis to
prevent conflicts of interest. Our Board reviews a transaction in light of the
affiliations of the director, officer or employee and the affiliation's of such
person's immediate family. Transactions are presented to our Board for approval
before they are entered into or, if this is not possible, for ratification after
the transaction has occurred. If our Board finds that a conflict of interest
exists, then it will determine the appropriate remedial action, if any. Our
Board approves or ratifies a transaction if it determines that the transaction
is consistent with the best interests of the Company. These policies and
procedures are not evident in writing.
DIRECTOR INDEPENDENCE
During the year ended March 31, 2011, we did not have any independent directors
on our Board. Mr. Blankenbaker is not independent. We evaluate independence by
the standards for director independence established by applicable laws, rules,
and listing standards including, without limitation, the standards for
independent directors established by The New York Stock Exchange, Inc., the
NASDAQ National Market, and the SEC.
Subject to some exceptions, these standards generally provide that a director
will not be independent if (a) the director is, or in the past three years has
been, an employee of ours; (b) a member of the director's immediate family is,
or in the past three years has been, an executive officer of ours; (c) the
director or a member of the director's immediate family has received more than
$120,000 per year in direct compensation from us other than for service as a
director (or for a family member, as a non-executive employee); (d) the director
28
or a member of the director's immediate family is, or in the past three years
has been, employed in a professional capacity by our independent public
accountants, or has worked for such firm in any capacity on our audit; (e) the
director or a member of the director's immediate family is, or in the past three
years has been, employed as an executive officer of a company where one of our
executive officers serves on the compensation committee; or (f) the director or
a member of the director's immediate family is an executive officer of a company
that makes payments to, or receives payments from, us in an amount which, in any
twelve-month period during the past three years, exceeds the greater of
$1,000,000 or 2% of that other company's consolidated gross revenues.
ITEM 14 -- PRINCIPAL ACCOUNTING FEES AND SERVICES
The following table shows the fees paid or accrued by us for the audit and other
services provided by Li & Company for the fiscal periods shown.
March 31, 2011 March 31, 2010
-------------- --------------
Audit Fees $7,500 $ 0
Audit-- Related Fees 0 1,500
Tax Fees 0 0
All Other Fees 0 0
------ ------
Total $7,500 $1,500
====== ======
Audit fees consist of fees billed for professional services rendered for the
audit of our financial statements and review of the interim financial statements
included in quarterly reports and services that are normally provided by the
above auditors in connection with statutory and regulatory fillings or
engagements.
In the absence of a formal audit committee, the full Board of Directors
pre-approves all audit and non-audit services to be performed by the independent
registered public accounting firm in accordance with the rules and regulations
promulgated under the Securities Exchange Act of 1934, as amended. The Board of
Directors pre-approved 100% of the audit and audit-related services performed by
the independent registered public accounting firm in the past fiscal year. The
percentage of hours expended on the principal accountant's engagement to audit
the Company's financial statements for the most recent fiscal year that were
attributed to work performed by persons other than the principal accountant's
full-time, permanent employees was 0%.
PART IV
ITEM 15 -- EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(A) FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
(1) Financial Statements are listed in the Index to Financial Statements
of this report.
(B) EXHIBITS
EXHIBIT NO. DESCRIPTION
----------- -----------
2.1 Share Exchange Agreement dated June 23, 2011 (incorporated by
reference to the registrant's Form 8-K filed on June 29, 2011)
2.2 Make Good Escrow Agreement dated June 23, 2011 (incorporated by
reference to the registrant's Form 8-K filed on June 29, 2011)
3.1 Articles of Incorporation of the Registrant, including all
amendments to date (incorporated by reference to the registrant's
Registration Statement on Form S-1 filed on July 16, 2008 and the
Registrant's Current Report on Form 8-K filed March 9, 2011)
3.2 Amended and Restated Bylaws of the Registrant (incorporated by
reference to the registrant's Current Report on Form 8-K filed on
March 22, 2011)
10.1 Supply Agreement with PureCircle Sdn Bhd, dated February 20, 2009
(incorporated by reference to the registrant's Form 8-K filed on
June 29, 2011)
10.2 Supply Agreement with Asia Stevia Investment Development Company
Ltd, dated April 12, 2011 (incorporated by reference to the
registrant's Form 8-K filed on June 29, 2011)
10.3 Supply Agreement with Stevia Ventures Corporation, dated April 12,
2011 (incorporated by reference to the registrant's Form 8-K filed
on June 29, 2011)
29
10.4 Convertible Promissory Note, with Vantage Associates SA, dated
February 14, 2011 (incorporated by reference to the registrant's
Form 8-K filed on June 29, 2011)
10.5 Convertible Promissory Note, with Vantage Associates SA, dated
June 23, 2011 (incorporated by reference to the registrant's Form
8-K filed on June 29, 2011)
21 List of Subsidiaries*
31 Rule 13(a)-- 14(a)/15(d)-- 14(a) Certification (Principal
Executive Officer and Principal Financial Officer)*
32 Section 1350 Certifications*
----------
* Filed herewith
30
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
STEVIA CORP.
Dated: July 14, 2011 /s/ George Blankenbaker
----------------------------------------
By: George Blankenbaker
Its: President
(Principal Executive Officer)
Pursuant to requirements of the Securities Exchange Act of 1934, this report has
been signed below by the following persons on behalf of the registrant and in
the capacities and on the dates indicated:
SIGNATURE CAPACITY DATE
--------- -------- ----
/s/ George Blankenbaker President and Director July 14, 2011
----------------------------------------- (Principal Financial Officer and
George Blankenbaker Principal Accounting Officer)
31
STEVIA CORP.
(A Development Stage Company)
FINANCIAL STATEMENTS
March 31, 2011 AND 2010
(Stated in U.S. Dollars)
Stevia Corp.
Index to Financial Statements
March 31, 2011
INDEX
Page
----
Independent Registered Public Accounting Firms' Reports F-2
Financial Statements
Balance Sheets as of March 31, 2011 and 2009 F-3
Statements of Operations for the years ended March 31, 2011 and 2010 and
for the period from May 21, 2007 (inception) to March 31, 2011 F-4
Statements of Cash Flows for the years ended March 31, 2011 and 2010 and
for the period from May 21, 2007 (inception) to March 31, 2011 F-5
Statements of Changes in Stockholders' Deficit for the period from
May 21, 2007 (inception) through March 31, 2011 F-6
Notes to Financial Statements F-8
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
Stevia Corp.
(Formerly Interpro Management Corp.)
(A Development Stage Company)
Indianapolis, Indiana
We have audited the accompanying balance sheets of Stevia Corp. (formerly
Interpro Management Corp.), a development stage company, (the "Company") as of
March 31, 2011 and 2010 and the related statements of operations, stockholders'
deficit and cash flows for the fiscal years then ended and for the period from
May 21, 2007 (inception) through March 31, 2011. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audits included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Stevia Corp. (formerly Interpro
Management Corp.) as of March 31, 2011 and 2010, and the results of its
operations and its cash flows for the fiscal years then ended and for the period
from May 21, 2007 (inception) through March 31, 2011 in conformity with
accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 3 to the
consolidated financial statements, the Company has a deficit accumulated during
the development stage at March 31, 2011 and has incurred losses since inception
with no revenues earned since inception. These factors raise substantial doubt
about the Company's ability to continue as a going concern. Management's plans
in regards to these matters are also described in Note 3. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
/s/ Li & Company, PC
----------------------------------
Li & Company, PC
Skillman, New Jersey
July 14, 2011
F-2
Stevia Corp.
(Formerly Interpro Management Corp.)
(A Development Stage Company)
Balance Sheets
March 31, March 31,
2011 2010
---------- ----------
Assets
Cash $ 255,598 $ 4,111
---------- ----------
Total Current Assets 255,598 4,111
---------- ----------
Total Assets $ 255,598 $ 4,111
========== ==========
Liabilities
Accounts payable and accrued liabilities $ 37,130 $ 11,753
Due to related party 18,938 3,938
Convertible note payable 250,000 --
---------- ----------
Total Current Liabilities 306,068 15,691
---------- ----------
Total Liabilities 306,068 15,691
---------- ----------
Stockholders' Deficit
Common stock at $0.001 par value: 100,000,000 shares authorized;
79,800,000 shares issued and outstanding 79,800 79,800
Additional paid in capital (25,800) (25,800)
Deficit accumulated during the development stage (104,470) (65,580)
---------- ----------
Total Stockholders' Deficit (50,470) (11,580)
---------- ----------
Total Liabilities and Stockholders' Deficit $ 255,598 $ 4,111
========== ==========
See accompanying notes to the financial statements
F-3
Stevia Corp.
(Formerly Interpro Management Corp.)
(A Development Stage Company)
Statements of Operations
Period from
May 21, 2007
Fiscal Year Fiscal Year (Inception)
Ended Ended through
March 31, March 31, March 31,
2011 2010 2011
------------ ------------ ------------
Revenue $ -- $ -- $ --
------------ ------------ ------------
Operating expenses
Legal and accounting 28,350 19,813 68,164
Software and web design -- -- 3,500
General and administrative 7,458 9,773 29,724
------------ ------------ ------------
Total operating expenses 35,808 29,586 101,388
Other (income) expense
Interest expense 3,082 -- 3,082
------------ ------------ ------------
Total other (income) expense 3,082 -- 3,082
------------ ------------ ------------
Loss before income taxes 38,890 29,586 104,470
Provision for income taxes -- -- --
------------ ------------ ------------
Net loss $ (38,890) $ (29,586) $ (104,470)
============ ============ ============
Net loss per common share -
basic and diluted $ (0.00) $ (0.00)
============ ============
Weighted common shares outstanding -
basic and diluted 79,800,000 79,800,000
============ ============
See accompanying notes to the financial statements
F-4
Stevia Corp.
(Formerly Interpro Management Corp.)
(A Development Stage Company)
Statements of Stockholders' Equity (Deficit)
For the period from May 21, 2007 (Inception) through March 31, 2011
Deficit
Accumulated Total
Common Stock Additional During the Stockholders'
-------------------- Paid in Development Equity
Shares Amount Capital Stage (Deficit)
------ ------ ------- ----- ---------
Balance, May 21, 2007 (date of inception) -- $ -- $ -- $ -- $ --
Shares issued to founder on May 21, 2007
at $0.0125 per share 56,000,000 56,000 (36,000) -- 20,000
Net loss (9,626) (9,626)
----------- -------- --------- --------- ---------
Balance, March 31, 2008 56,000,000 56,000 (36,000) (9,626) 10,374
Private placement on February 10, 2009
at $0.05 per share 23,800,000 23,800 10,200 -- 34,000
Net loss (26,368) (26,368)
----------- -------- --------- --------- ---------
Balance, March 31, 2009 79,800,000 79,800 (25,800) (35,994) 18,006
Net loss (29,586) (29,586)
----------- -------- --------- --------- ---------
Balance, March 31, 2010 79,800,000 79,800 (25,800) (65,580) (11,580)
Net loss (38,890) (38,890)
----------- -------- --------- --------- ---------
Balance, March 31, 2011 79,800,000 $ 79,800 $ (25,800) $(104,470) $ (50,470)
=========== ======== ========= ========= =========
See accompanying notes to the financial statements
F-5
Stevia Corp.
(Formerly Interpro Management Corp.)
(A Development Stage Company)
Statements of Cash Flows
Period from
May 21, 2007
Fiscal Year Fiscal Year (Inception)
Ended Ended through
March 31, March 31, March 31,
2011 2010 2011
---------- ---------- ----------
Cash Flows from Operating Activities:
Net loss $ (38,890) $ (29,586) $ (104,470)
Adjustments to reconcile net loss to net
cash used in operating activities:
Changes in operating assets and liabilities
Prepaid expenses -- 230 --
Accounts payable and accrued liabilities 25,377 2,503 37,130
---------- ---------- ----------
Net Cash Used in Operating Activities (13,513) (23,848) (67,340)
---------- ---------- ----------
Cash Flows from Financing Activities:
Increase in due to stockholder 15,000 100 18,938
Proceeds from convertible note payable 250,000 -- 250,000
Proceeds from sale of common stock -- -- 54,000
---------- ---------- ----------
Net Cash Provided By Financing Activities 265,000 100 322,938
---------- ---------- ----------
NET CHANGE IN CASH 251,487 (26,753) 255,598
CASH AT BEGINNING OF PERIOD 4,111 30,864 --
---------- ---------- ----------
CASH AT END OF PERIOD $ 255,598 $ 4,111 $ 255,598
========== ========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for
Interest $ -- $ -- $ --
========== ========== ==========
Income taxes $ -- $ -- $ --
========== ========== ==========
See accompanying notes to the financial statements
F-6
Stevia Corp.
(Formerly Interpro Management Corp.)
(A Development Stage Company)
March 31, 2011 and 2010
Notes to Financial Statements
NOTE 1 - ORGANIZATION AND OPERATIONS
Stevia Corp. (formerly Interpro Management Corp) ("the Company"), incorporated
in the State of Nevada on May 21, 2007, is a company with business activities
focused on developing and offering web based software that will be designed to
be an online project management tool used to enhance an organization's
efficiency through planning and monitoring the daily operations of a business.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The Company's financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of America ("U.S.
GAAP").
DEVELOPMENT STAGE COMPANY
The Company is a development stage company as defined by section 810-10-20 of
the FASB Accounting Standards Codification. The Company is still devoting
substantially all of its efforts on establishing the business and its planned
principal operations have not commenced. All losses accumulated since inception
have been considered as part of the Company's exploration stage activities.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles 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.
Management bases its estimates on historical experience and on various
assumptions that are believed to be reasonable under the circumstances, the
results of which form the basis for making judgments about the carrying values
of assets and liabilities that are not readily apparent from other sources.
The Company's significant estimates include income taxes provision and valuation
allowance of deferred tax assets, the fair value of financial instruments; the
carrying value and recoverability of long-lived assets, including the values
assigned to and estimated useful lives of office equipment, and underlying
assumptions to estimate the fair value of warrants and options. Those
significant accounting estimates or assumptions bear the risk of change due to
the fact that there are uncertainties attached to those estimates or
assumptions, and certain estimates or assumptions are difficult to measure or
value.
Management regularly reviews its estimates utilizing currently available
information, changes in facts and circumstances, historical experience and
reasonable assumptions. After such reviews, and if deemed appropriate, those
estimates are adjusted accordingly. Actual results could differ from those
estimates. Actual results could differ from those estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS MEASURED ON A RECURRING BASIS
The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards
Codification for disclosures about fair value of its financial instruments and
paragraph 820-10-35-37 of the FASB Accounting Standards Codification ("Paragraph
820-10-35-37") to measure the fair value of its financial instruments. Paragraph
820-10-35-37 establishes a framework for measuring fair value in accounting
principles generally accepted in the United States of America (U.S. GAAP), and
expands disclosures about fair value measurements. To increase consistency and
comparability in fair value measurements and related disclosures, Paragraph
820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to
valuation techniques used to measure fair value into three (3) broad levels. The
fair value hierarchy gives the highest priority to quoted prices (unadjusted) in
active markets for identical assets or liabilities and the lowest priority to
unobservable inputs. The three (3) levels of fair value hierarchy defined by
Paragraph 820-10-35-37 are described below:
F-7
Level 1 Quoted market prices available in active markets for identical assets
or liabilities as of the reporting date.
Level 2 Pricing inputs other than quoted prices in active markets included in
Level 1, which are either directly or indirectly observable as of the
reporting date.
Level 3 Pricing inputs that are generally observable inputs and not
corroborated by market data.
Financial assets are considered Level 3 when their fair values are determined
using pricing models, discounted cash flow methodologies or similar techniques
and at least one significant model assumption or input is unobservable.
The fair value hierarchy gives the highest priority to quoted prices
(unadjusted) in active markets for identical assets or liabilities and the
lowest priority to unobservable inputs. If the inputs used to measure the
financial assets and liabilities fall within more than one level described
above, the categorization is based on the lowest level input that is significant
to the fair value measurement of the instrument.
The carrying amounts of the Company's financial assets and liabilities, such as
cash, prepaid expenses, accounts payable and accrued liabilities, approximate
their fair values because of the short maturity of these instruments. The
Company's convertible note payable approximates the fair value of such
instrument based upon management's best estimate of interest rates that would be
available to the Company for similar financial arrangements at March 31, 2011.
Transactions involving related parties cannot be presumed to be carried out on
an arm's-length basis, as the requisite conditions of competitive, free-market
dealings may not exist. Representations about transactions with related parties,
if made, shall not imply that the related party transactions were consummated on
terms equivalent to those that prevail in arm's-length transactions unless such
representations can be substantiated.
It is not however, practical to determine the fair value of advances from
stockholders due to their related party nature.
FISCAL YEAR END
The Company elected March 31 as its fiscal year ending date.
CASH EQUIVALENTS
The Company considers all highly liquid investments with maturities of three
months or less at the time of purchase to be cash equivalents.
RELATED PARTIES
The Company follows subtopic 850-10 of the FASB Accounting Standards
Codification for the identification of related parties and disclosure of related
party transactions.
Pursuant to Section 850-10-20 the Related parties include a. affiliates of the
Company; b. Entities for which investments in their equity securities would be
required, absent the election of the fair value option under the Fair Value
Option Subsection of Section 825-10-15, to be accounted for by the equity method
by the investing entity; c. trusts for the benefit of employees, such as pension
and profit-sharing trusts that are managed by or under the trusteeship of
management; d.principal owners of the Company; e. management of the Company; f.
other parties with which the Company may deal if one party controls or can
significantly influence the management or operating policies of the other to an
F-8
extent that one of the transacting parties might be prevented from fully
pursuing its own separate interests; and g. Other parties that can significantly
influence the management or operating policies of the transacting parties or
that have an ownership interest in one of the transacting parties and can
significantly influence the other to an extent that one or more of the
transacting parties might be prevented from fully pursuing its own separate
interests.
The financial statements shall include disclosures of material related party
transactions, other than compensation arrangements, expense allowances, and
other similar items in the ordinary course of business. However, disclosure of
transactions that are eliminated in the preparation of consolidated or combined
financial statements is not required in those statements. The disclosures shall
include: a. the nature of the relationship(s) involvedb. description of the
transactions, including transactions to which no amounts or nominal amounts were
ascribed, for each of the periods for which income statements are presented, and
such other information deemed necessary to an understanding of the effects of
the transactions on the financial statements; c. the dollar amounts of
transactions for each of the periods for which income statements are presented
and the effects of any change in the method of establishing the terms from that
used in the preceding period; and d. mounts due from or to related parties as of
the date of each balance sheet presented and, if not otherwise apparent, the
terms and manner of settlement.
REVENUE RECOGNITION
The Company follows paragraph 605-10-S99-1 of the FASB Accounting Standards
Codification for revenue recognition. The Company will recognize revenue when it
is realized or realizable and earned. The Company considers revenue realized or
realizable and earned when it has persuasive evidence of an arrangement that the
services have been rendered to the customer, the sales price is fixed or
determinable, and collectability is reasonably assured.
COMMITMENT AND CONTINGENCIES
The Company follows subtopic 450-20 of the FASB Accounting Standards
Codification to report accounting for contingencies. Certain conditions may
exist as of the date the consolidated financial statements are issued, which may
result in a loss to the Company but which will only be resolved when one or more
future events occur or fail to occur. The Company assesses such contingent
liabilities, and such assessment inherently involves an exercise of judgment. In
assessing loss contingencies related to legal proceedings that are pending
against the Company or unasserted claims that may result in such proceedings,
the Company evaluates the perceived merits of any legal proceedings or
unasserted claims as well as the perceived merits of the amount of relief sought
or expected to be sought therein.
If the assessment of a contingency indicates that it is probable that a material
loss has been incurred and the amount of the liability can be estimated, then
the estimated liability would be accrued in the Company's consolidated financial
statements. If the assessment indicates that a potentially material loss
contingency is not probable but is reasonably possible, or is probable but
cannot be estimated, then the nature of the contingent liability, and an
estimate of the range of possible losses, if determinable and material, would be
disclosed.
Loss contingencies considered remote are generally not disclosed unless they
involve guarantees, in which case the guarantees would be disclosed. Management
does not believe, based upon information available at this time, that these
matters will have a material adverse effect on the Company's consolidated
financial position, results of operations or cash flows. However, there is no
assurance that such matters will not materially and adversely affect the
Company's business, financial position, and results of operations or cash flows.
INCOME TAXES
The Company accounts for income taxes under Section 740-10-30 of the FASB
Accounting Standards Codification. Deferred income tax assets and liabilities
are determined based upon differences between the financial reporting and tax
bases of assets and liabilities and are measured using the enacted tax rates and
F-9
laws that will be in effect when the differences are expected to reverse.
Deferred tax assets are reduced by a valuation allowance to the extent
management concludes it is more likely than not that the assets will not be
realized. Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in the statements
of operations in the period that includes the enactment date.
The Company adopted section 740-10-25 of the FASB Accounting Standards
Codification ("Section 740-10-25"). Section 740-10-25 addresses the
determination of whether tax benefits claimed or expected to be claimed on a tax
return should be recorded in the financial statements. Under Section 740-10-25,
the Company may recognize the tax benefit from an uncertain tax position only if
it is more likely than not that the tax position will be sustained on
examination by the taxing authorities, based on the technical merits of the
position. The tax benefits recognized in the financial statements from such a
position should be measured based on the largest benefit that has a greater than
fifty percent (50%) likelihood of being realized upon ultimate settlement.
Section 740-10-25 also provides guidance on de-recognition, classification,
interest and penalties on income taxes, accounting in interim periods and
requires increased disclosures. The Company had no material adjustments to its
liabilities for unrecognized income tax benefits according to the provisions of
Section 740-10-25.
The estimated future tax effects of temporary differences between the tax basis
of assets and liabilities are reported in the accompanying consolidated balance
sheets, as well as tax credit carry-backs and carry-forwards. The Company
periodically reviews the recoverability of deferred tax assets recorded on its
consolidated balance sheets and provides valuation allowances as management
deems necessary.
Management makes judgments as to the interpretation of the tax laws that might
be challenged upon an audit and cause changes to previous estimates of tax
liability. In addition, the Company operates within multiple taxing
jurisdictions and is subject to audit in these jurisdictions. In management's
opinion, adequate provisions for income taxes have been made for all years. If
actual taxable income by tax jurisdiction varies from estimates, additional
allowances or reversals of reserves may be necessary.
NET LOSS PER COMMON SHARE
Net loss per common share is computed pursuant to section 260-10-45 of the FASB
Accounting Standards Codification. Basic net loss per common share is computed
by dividing net loss by the weighted average number of shares of common stock
outstanding during the period. Diluted net loss per common share is computed by
dividing net loss by the weighted average number of shares of common stock and
potentially outstanding shares of common stock during each period.
There were no potentially dilutive shares outstanding as of March 31, 2011 or
2010.
CASH FLOWS REPORTING
The Company adopted paragraph 230-10-45-24 of the FASB Accounting Standards
Codification for cash flows reporting, classifies cash receipts and payments
according to whether they stem from operating, investing, or financing
activities and provides definitions of each category, and uses the indirect or
reconciliation method ("Indirect method") as defined by paragraph 230-10-45-25
of the FASB Accounting Standards Codification to report net cash flow from
operating activities by adjusting net income to reconcile it to net cash flow
from operating activities by removing the effects of (a) all deferrals of past
operating cash receipts and payments and all accruals of expected future
operating cash receipts and payments and (b) all items that are included in net
income that do not affect operating cash receipts and payments.
SUBSEQUENT EVENTS
The Company follows the guidance in Section 855-10-50 of the FASB Accounting
Standards Codification for the disclosure of subsequent events. The Company
evaluates subsequent events from the date of the balance sheet through the date
when the financial statements are issued. Pursuant to ASU 2010-09 of the FASB
Accounting Standards Codification, the Company as an SEC filer considers its
financial statements issued when they are widely distributed to users, such as
through filing them with the SEC on the EDGAR system.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In January 2010, the FASB issued the FASB Accounting Standards Update No.
2010-06 "FAIR VALUE MEASUREMENTS AND DISCLOSURES (TOPIC 820) IMPROVING
DISCLOSURES ABOUT FAIR VALUE MEASUREMENTS", which provides amendments to
Subtopic 820-10 that require new disclosures as follows:
F-10
1. Transfers in and out of Levels 1 and 2. A reporting entity should
disclose separately the amounts of significant transfers in and out of
Level 1 and Level
2. fair value measurements and describe the reasons for the transfers. 2.
Activity in Level 3 fair value measurements. In the reconciliation for
fair value measurements using significant unobservable inputs (Level
3), a reporting entity should present separately information about
purchases, sales, issuances, and settlements (that is, on a gross
basis rather than as one net number).
This Update provides amendments to Subtopic 820-10 that clarify existing
disclosures as follows:
1. Level of disaggregation. A reporting entity should provide fair value
measurement disclosures for each class of assets and liabilities. A
class is often a subset of assets or liabilities within a line item in
the statement of financial position. A reporting entity needs to use
judgment in determining the appropriate classes of assets and
liabilities.
2. Disclosures about inputs and valuation techniques. A reporting entity
should provide disclosures about the valuation techniques and inputs
used to measure fair value for both recurring and nonrecurring fair
value measurements. Those disclosures are required for fair value
measurements that fall in either Level 2 or Level 3.
This Update also includes conforming amendments to the guidance on employers'
disclosures about postretirement benefit plan assets (Subtopic 715-20). The
conforming amendments to Subtopic 715-20 change the terminology from MAJOR
CATEGORIES of assets to CLASSES of assets and provide a cross reference to the
guidance in Subtopic 820-10 on how to determine appropriate classes to present
fair value disclosures. The new disclosures and clarifications of existing
disclosures are effective for interim and annual reporting periods beginning
after December 15, 2009, except for the disclosures about purchases, sales,
issuances, and settlements in the roll forward of activity in Level 3 fair value
measurements. Those disclosures are effective for fiscal years beginning after
December 15, 2010, and for interim periods within those fiscal years.
In December 2010, the FASB issued the FASB Accounting Standards Update No.
2010-28, INTANGIBLES--GOODWILL AND OTHER (TOPIC 350): WHEN TO PERFORM STEP 2 OF
THE GOODWILL IMPAIRMENT TEST FOR REPORTING UNITS WITH ZERO OR NEGATIVE CARRYING
AMOUNTS ("ASU 2010-28"). Under ASU 2010-28, if the carrying amount of a
reporting unit is zero or negative, an entity must assess whether it is more
likely than not that goodwill impairment exists. To make that determination, an
entity should consider whether there are adverse qualitative factors that could
impact the amount of goodwill, including those listed in ASC 350-20-35-30. As a
result of the new guidance, an entity can no longer assert that a reporting unit
is not required to perform the second step of the goodwill impairment test
because the carrying amount of the reporting unit is zero or negative, despite
the existence of qualitative factors that indicate goodwill is more likely than
not impaired. ASU 2010-28 is effective for public entities for fiscal years, and
for interim periods within those years, beginning after December 15, 2010, with
early adoption prohibited.
In December 2010, the FASB issued the FASB Accounting Standards Update No.
2010-29, BUSINESS COMBINATIONS (TOPIC 805): DISCLOSURE OF SUPPLEMENTARY PRO
FORMA INFORMATION FOR BUSINESS COMBINATIONS ("ASU 2010-29"). ASU 2010-29
specifies that if a public entity presents comparative financial statements, the
entity should disclose revenue and earnings of the combined entity as though the
business combination(s) that occurred during the current year had occurred as of
the beginning of the comparable prior annual reporting period only. The
amendments in this Update also expand the supplemental pro forma disclosures
under Topic 805 to include a description of the nature and amount of material,
nonrecurring pro forma adjustments directly attributable to the business
combination included in the reported pro forma revenue and earnings. The amended
guidance is effective prospectively for business combinations for which the
acquisition date is on or after the beginning of the first annual reporting
period beginning on or after December 15, 2010. Early adoption is permitted.
F-11
Management does not believe that any other recently issued, but not yet
effective accounting pronouncements, if adopted, would have a material effect on
the accompanying consolidated financial statements.
NOTE 3 - GOING CONCERN
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As reflected in the accompanying
financial statements, the Company had a deficit accumulated during the
development stage of $104,470 at March 31, 2011, a net loss of $38,890 and net
cash used in operating activities of $13,513 for the fiscal year then ended,
respectively, with no revenues earned since inception.
While the Company is attempting to generate sufficient revenues, the Company's
cash position may not be enough to support the Company's daily operations.
Management intends to raise additional funds by way of a public or private
offering. Management believes that the actions presently being taken to further
implement its business plan and generate sufficient revenues provide the
opportunity for the Company to continue as a going concern. While the Company
believes in the viability of its strategy to generate sufficient revenues and in
its ability to raise additional funds, there can be no assurances to that
effect. The ability of the Company to continue as a going concern is dependent
upon the Company's ability to further implement its business plan and generate
sufficient revenues.
The financial statements do not include any adjustments that might be necessary
if the Company is unable to continue as a going concern.
NOTE 4 - DUE TO RELATED PARTY
The amount owing to stockholder is unsecured, non-interest bearing and due on
demand.
NOTE 5 - CONVERTIBLE NOTE PAYABLE
On February 14, 2011, the Company issued a convertible note for $250,000. The
note bears interest at 10% per annum and is due on February 14, 2012.
The note may be converted into common stock of the Company should the Company
complete a private placement with gross proceeds of at least $100,000. The
conversion price shall be the same as the private placement price on a per share
basis.
At March 31, 2011, $3,082 of interest has been accrued on the loan payable which
is included in accounts payable and accrued liabilities.
NOTE 6 - INCOME TAXES
DEFERRED TAX ASSETS
At March 31, 2011, the Company had net operating loss ("NOL") carry-forwards for
Federal income tax purposes of $104,470 that may be offset against future
taxable income through 2031. No tax benefit has been reported with respect to
these net operating loss carry-forwards in the accompanying financial statements
because the Company believes that the realization of the Company's net deferred
tax assets of approximately $35,520 was not considered more likely than not and
F-12
accordingly, the potential tax benefits of the net loss carry-forwards are fully
offset by a full valuation allowance of $35,520.
Deferred tax assets consist primarily of the tax effect of NOL carry-forwards.
The Company has provided a full valuation allowance on the deferred tax assets
because of the uncertainty regarding its realizability. The valuation allowance
increased approximately $13,223 and $10,059 for the fiscal years ended March 31,
2011 and 2010.
Components of deferred tax assets as of March 31, 2011 and 2010 are as follows:
March 31, March 31,
2011 2010
-------- --------
Net deferred tax assets - Non-current:
Expected income tax benefit from NOL
carry-forwards $ 35,520 $ 22,297
Less valuation allowance (35,520) (22,297)
-------- --------
Deferred tax assets, net of valuation allowance $ -- $ --
======== ========
INCOME TAXES IN THE STATEMENTS OF OPERATIONS
A reconciliation of the federal statutory income tax rate and the
effective income tax rate as a percentage of income before income taxes is as
follows:
For the Fiscal For the Fiscal
Year Ended Year Ended
March 31, March 31,
2011 2010
-------- --------
Federal statutory income tax rate 34.0% 34.0%
Change in valuation allowance on net operating
loss carry-forwards (34.0)% (34.0)%
-------- --------
Effective income tax rate 0.0% 0.0%
======== =========
F-13
NOTE 7 - SUBSEQUENT EVENTS
The Company has evaluated all events that occurred after the balance sheet date
of March 31, 2011 through the date when the financial statements were issued to
determine if they must be reported. The Management of the Company determined
that there were certain reportable subsequent events to be disclosed., as
follows:
On June 23, 2011 (the "Closing Date"), the Company closed a voluntary share
exchange transaction with Stevia Ventures International Ltd., a business company
incorporated in the British Virgin Islands ("BVI") pursuant to a Share Exchange
Agreement (the "Exchange Agreement") by and among the Company, BVI and George
Blankenbaker, the stockholder of BVI (the "BVI Stockholder"). BVI owns certain
rights relating to stevia production, including certain assignable exclusive
purchase contracts and an assignable supply agreement related to stevia.
For accounting purposes, the Share Exchange Transaction has been accounted for
as an acquisition of BVI by the Registrant under the reverse acquisition method
for business combinations, with BVI being the accounting acquirer, as set forth
in paragraph 805-40-45-1 of the FASB Accounting Standards Codification.
F-14
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
----------- -----------
2.1 Share Exchange Agreement dated June 23, 2011 (incorporated by
reference to the registrant's Form 8-K filed on June 29, 2011)
2.2 Make Good Escrow Agreement dated June 23, 2011 (incorporated by
reference to the registrant's Form 8-K filed on June 29, 2011)
3.1 Articles of Incorporation of the Registrant, including all
amendments to date (incorporated by reference to the registrant's
Registration Statement on Form S-1 filed on July 16, 2008 and the
Registrant's Current Report on Form 8-K filed March 9, 2011)
3.2 Amended and Restated Bylaws of the Registrant (incorporated by
reference to the registrant's Current Report on Form 8-K filed on
March 22, 2011)
10.1 Supply Agreement with PureCircle Sdn Bhd, dated February 20, 2009
(incorporated by reference to the registrant's Form 8-K filed on
June 29, 2011)
10.2 Supply Agreement with Asia Stevia Investment Development Company
Ltd, dated April 12, 2011 (incorporated by reference to the
registrant's Form 8-K filed on June 29, 2011)
10.3 Supply Agreement with Stevia Ventures Corporation, dated April 12,
2011 (incorporated by reference to the registrant's Form 8-K filed
on June 29, 2011)
10.4 Convertible Promissory Note, with Vantage Associates SA, dated
February 14, 2011 (incorporated by reference to the registrant's
Form 8-K filed on June 29, 2011)
10.5 Convertible Promissory Note, with Vantage Associates SA, dated
June 23, 2011 (incorporated by reference to the registrant's Form
8-K filed on June 29, 2011)
21 List of Subsidiaries*
31 Rule 13(a)-- 14(a)/15(d)-- 14(a) Certification (Principal
Executive Officer and Principal Financial Officer)*
32 Section 1350 Certifications*
----------
* Filed herewit
