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, 2012
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
Commission File Number 000-53781
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 [X] 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 aggregate market value of the voting stock held by non-affiliates of the
Registrant as of September 30, 2011, was $46,800,000 (computed by reference to
the last sale price of a share of the registrant's common stock on that date as
reported by the Over the Counter Bulletin Board). For purposes of this
computation, it has been assumed that the shares beneficially held by directors
and officers of registrant were "held by affiliates"; this assumption is not to
be deemed to be an admission by such persons that they are affiliates of
registrant.
As of June 21, 2012, there were outstanding 61,354,775 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 11
ITEM 1B -- UNRESOLVED STAFF COMMENTS 18
ITEM 2 -- PROPERTIES 18
ITEM 3 -- LEGAL PROCEEDINGS 18
ITEM 4 -- MINE SAFETY DISCLOSURES 18
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 31
ITEM 8 -- FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 31
ITEM 9 -- CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE 31
ITEM 9A -- CONTROLS AND PROCEDURES 31
ITEM 9B -- OTHER INFORMATION 32
PART III
ITEM 10 -- DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE 32
ITEM 11 -- EXECUTIVE COMPENSATION 34
ITEM 12 -- SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS 35
ITEM 13 -- CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE 36
ITEM 14 -- PRINCIPAL ACCOUNTING FEES AND SERVICES 36
PART IV
ITEM 15 -- EXHIBITS, FINANCIAL STATEMENT SCHEDULES 37
SIGNATURES 39
INDEX TO FINANCIAL STATEMENTS F-1
2
PART I
ITEM 1 -- BUSINESS
BACKGROUND
We are a farm management company with a focus on stevia agronomics from plant
breeding to good agricultural practices to post-harvest techniques and
commercial applications. We provide farm management services to contract growers
and other industry growers integrating our stevia focused research and
development and intellectual property acquisitions.
We were incorporated on May 21, 2007 in the state of Nevada under the name
Interpro Management Corp. On March 4, 2011, we changed our name to Stevia Corp.
and effectuated a 35 for 1 forward stock split of all of our issued and
outstanding shares of common stock.. 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 (the "Share
Exchange Transaction") with Stevia Ventures International Ltd., a business
company incorporated in the British Virgin Islands, pursuant to which we
acquired certain rights relating to stevia production, including certain
exclusive purchase contracts and a supply agreement related to stevia. In
connection with the Share Exchange Transaction, on June 23, 2011, Mohanad
Shurrab, a shareholder of the Company, surrendered 33,000,000 shares of the
Company's common stock to the Company for cancellation.
On March 19, 2012, we formed a wholly-owned subsidiary, Stevia Asia Limited, a
company incorporated under the companies ordinance of Hong Kong ("Stevia Asia")
that will allow the Company to expand its China operations. Hero Tact Limited, a
wholly-owned subsidiary of Stevia Asia, was incorporated under the companies
ordinance of Hong Kong. On April 28, 2012, Hero Tact Limited changed its name to
Stevia Technew Limited ("Stevia Technew"). Stevia Technew is intended to
facilitate a joint venture relationship with the Company's technology partner,
Guangzhou Health China Technology Development Company Limited, operating under
the trade name Tech-New Bio-Technology ("TechNew") and TechNew's subsidiary
Technew Technology Limited. The following diagram illustrates our corporate
structure:
Stevia Corp.
(Nevada)
| |
| 100% | 100%
\/ \/
Stevia Asia Limited Stevia Ventures International Ltd.
(Hong Kong) (British Virgin Islands)
Directors: George Blankenbaker Sole Director: George Blankenbaker
Tan Meng Sheong
|
| 100%
\/
Stevia Technew Limited
(Hong Kong)
Directors: George Blankenbaker
Tan Meng Sheong
OVERVIEW
Our focus is on implementing quality agribusiness solutions to our partners,
contract growers and customers to maximize the efficient production and economic
development of stevia leaf. Our management team has expertise in farm management
and contract growing in Asia, and experience in international business
management.
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Our mission is to become a global leader of stevia leaf growers and to create a
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.
To achieve these goals we believe we need to develop a suite of intellectual
property relating to stevia production that will enhance the value of our farm
management operations as well as our own stevia production. Through our business
partnerships we are exploring the market for commercial applications of stevia
which may be vertically integrated into our services and production.
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.
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.
THE INDUSTRY AND OUR OPPORTUNITY
STEVIA AS A FOOD ADDITIVE
We believe that health issues created by the modern diet are causing consumers
to look for more natural products and simpler ingredient lines on the foods and
beverages they purchase and causing governments to put pressure on the food
industry to offer products with reduced calories.
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 U.S. 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 and has since been incorporated into many categories of food and
beverages.
The stevia industry is segmented into three main business processes: i)
extraction and purification, ii) product formulation, applications and
marketing, and iii) plant breeding and farming.
A significant portion of the cost of refined stevia is a result of the leaf cost
and 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 an
increased demand for agronomic and farm management expertise to establish new
plantations and rapidly scale leaf production.
The primary competitors within this market segment include: PureCircle, which
has extensive operations in China as well as subsidiaries in South America
(Paraguay) and Africa (Kenya); Stevia One, an independent grower established in
Peru, who is adopting the plantation model and is targeting approximately 1,000
Ha under cultivation; S&W Seed Company, who signed a supply agreement with
PureCircle in July of 2010 to grow stevia in North America under its subsidiary,
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Stevia California; and GLG Life Tech Corporation, a China-centric company which
has chosen to continue to focus on building and expanding its supply chain
within China.
STEVIA AS A COMMERCIAL PRODUCT
In March 2012, we announced that we had begun testing certain proprietary
formulations which incorporate stevia extracts for the purpose of fertilizer and
feed applications. These proprietary formulations include aquaculture feed for
shrimp, feed for livestock, granular fertilizers and foliar spray, each of which
holds the potential to open new revenue opportunities to us. Commercial trials
of these formulations are on-going and initial stevia harvests using the
formulations are anticipated for the second quarter of 2012.
Feed additives provide an important value add market to vertically integrate
downstream within our core competency. Consumer awareness has brought about a
rise in demand of healthy and safe animal derived food. A complete ban on
antibiotics usage as growth promoters was instituted in the European Union in
2006 and the United States in 2009. This has created a demand for safe natural
feed additives that improve the growth rate and health of animals.
This opens up an additional market for stevia extracts and also provides a
market for the complete plant including the leaf and stem. While the overall
feed additive market is dominated by large companies such as C.P. Group, no
major company has established a line of stevia feed additives to date.
We have begun testing our feed additives in China where such use has already
received governmental approval. We expect similar approval for Vietnam during
the current calendar year.
We have begun initial trials to confirm the economics and validate the
effectiveness of stevia fertilizers and foliar sprays.
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 plan to improve yield and plant
performance and exploit 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 - 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;
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* Provides protection against country-specific political, regulatory,
disease, and natural disaster risk; and
* Provides operations closer to end markets.
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
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 a
premium. 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
GROWERS SYNERGY
Effective November 1, 2011, we engaged Growers Synergy Pte Ltd, a regional farm
management services provider ("Growers Synergy"), to provide farm management
operations and back-office and regional logistical support for our Vietnam and
Indonesia operations for a period of two years. In addition, Growers Synergy
will enter into an agreement to purchase from us all the non-stevia crops
produced at the farms for which they are providing management services.
We believe that the relationship with Growers Synergy will 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. Growers Synergy will 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
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supporting the scale up to 1,000 Ha and farmers communities that are capable of
growing stevia. To help us achieve this Growers Synergy will provide the
necessary resources and assign staff to fill certain managerial and support
staff positions.
TECH-NEW BIO-TECHNOLOGY
In March 2012, we entered into both a Supply Agreement and Cooperative Agreement
with Guangzhou Health China Technology Development Company Limited, operating
under the trade name Tech-New Bio-Technology ("TechNew"). TechNew is a developer
and manufacturer of hi-tech biotechnology products which offers a series of
specialized ecological fertilizers, microbiological preparations and management
systems for the agriculture and aquaculture industry as well as technologies for
the extraction and refinement of high purity stevia. Under the terms of the
Supply Agreement, we are able to sell dry stevia plant product exclusively to
TechNew including all leaf and stem. Under the terms of the Cooperative
Agreement, we will explore potential technology partnerships with TechNew, with
the intent to formalize a joint venture to pursue promising technologies and
businesses. These include the inclusion of stevia extracts in its current
product formulations for use in agriculture and aquaculture applications
including fertilizers and feed.
Through our cooperative agreement with TechNew, we will also explore a potential
relationship to integrate extraction and refining technology to produce high
purity Reb-A and other steviol glycosides for the consumer market. We believe
that vertically integrating our technologies for both commercial and consumer
products may provide advantages of a diversified market, but we do not intend to
enter the consumer market with a finished product. We believe that our core
competency is farm management and developing technologies for production and
post harvest processes and that the consumer market is extremely competitive.
INDEPENDENT GROWER RELATIONSHIPS
We plan to develop a 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. To date we have entered
into initial purchase agreements with several companies.
OUR FARM MANAGEMENT SERVICES AND INTELLECTUAL PROPERTY
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 and intercrop production. To achieve this objective, our focus is on
intellectual property development including 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.
We are also developing local SOP (standard operating procedures) manuals
specific to each growing location and plant variety, which will document the
proper use of all inputs including a proprietary crop production system that we
believe is more efficient and cost effective than traditional methods. 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 are also developing 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:
TECHNEW SUITE OF PRODUCTS - through our technology partner, TechNew, we have
access to TechNew's portfolio of technologies for the extraction and refinement
of high purity stevia, as well as their formulas for using stevia extract in
feed and fertilizer applications. We are discussing with TechNew the possibility
of a joint venture to further explore potential stevia commercial applications,
which we would integrate into our farm management services and our own stevia
production.
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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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 fertilizers and other input products
used in our protocols, have the potential to create a dedicated customer base
because the protocols once implemented on a farm call for continual use of our
fertilizers and other 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 TechNew has the potential to make
us an attractive partner to growers who are looking for a guaranteed market for
their stevia and our supply relationship with TechNew will allow us to commit to
purchase the entire plant material harvested including the stem which increases
total crop yield, productivity and income.
MARKET TRENDS AND SEGMENTS COUNTRY TYPE OF APPROVAL
------- ----------------
Within the market of stevia as a NORTH AMERICA
food additive, the trend has been USA Food additive
towards the continued launch of new Canada Dietary supplement
stevia-sugar blended products. Two Mexico Food additive
industry leaders, PureCircle and LATIN AMERICA
GLG Life Tech, have partnered with Argentina Food additive
major sugar manufacturers in the Brazil Food additive
U.S. (Imperial Sugar), Denmark Chile Food additive
(NordZucker), France (Tereos), Colombia Food additive
Great Britain (British Sugar), and Ecuador Food additive
Australia (Sugar Australia) to Paraguay Food additive
market blended reduced calorie Peru Food additive
products. SteviaCane is a Uruguay Food additive
steviasucrose retail product being Venezuela Food additive
marketed by Natural Sweet Ventures, ASIA PACIFIC
a joint venture between PureCircle Australia Food additive
and Imperial Sugar. Brunei Food additive
China Food additive
With respect to the use of stevia Hong Kong Food additive
extracts in commercial applications Indonesia Dietary supplement
such as fertilizers and feed Japan Food additive
applications, the trend is towards Malaysia Food additive
the usage of more natural inputs New Zealand Food additive
because of consumer awareness of Singapore Food additive
farming practices and how that South Korea Food additive
impacts the quality of the end food Taiwan Food additive
products that they consume. Thailand Food additive
Vietnam Dietary supplement
OUR PROPERTIES EUROPE
Austria Food additive
Our primary focus is on providing Belgium Food additive
farm management services to our Bulgaria Food additive
contract growers. We have acquired Cyprus Food additive
two grower supply contracts and Czech Republic Food additive
three nursery fields in Vietnam. Denmark Food additive
More than twenty fields have been Estonia Food additive
established in five provinces in Finland Food additive
the northern half of Vietnam with a France Food additive
total propagation approaching 100 Germany Food additive
Ha. Hungary Food additive
Ireland Food additive
The provincial locations include Italy Food additive
Hanoi, Bac Giang, Hai Duong, Hoa Latvia Food additive
Binh and Nghe An. Lithuania Food additive
Luxembourg Food additive
On December 14, 2011 we entered Malta Food additive
into a land lease agreement with The Netherlands Food additive
Stevia Ventures Corporation, one of Poland Food additive
our Suppliers, and Vinh Phuc Portugal Food additive
Province People's Committee Tam Dao Romania Food additive
Agriculture & Industry Co., Ltd Slovakia Food additive
("Vinh Phuc") whereby Stevia Slovenia Food additive
Ventures Corporation leased 10 Ha Spain Food additive
of land over 5 years and we have Sweden Food additive
begun to develop a research Switzerland Food additive
facility that will also serve as a Russia Food additive
propagation center for farms United Kingdom Food additive
located in the surrounding
provinces and particularly those
serving the provincial and national
sponsored projects.
To better service multiple farms located across the many provinces stretching
from north central Vietnam to the Chinese border, we will utilize the greenhouse
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.
In addition to our Vietnam operations, in April 2012, we announced plans to
begin a 2 Ha initial field trial in Indonesia which will utilize our
intercropping model.
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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 applications to the United Stated Food and
Drug Administration (FDA) in 1998 for GRAS approval. On December 17, 2008 the
stevia extract, Rebaudioside A (Reb-A), received GRAS approval.
In December 2008, Australia and New Zealand approved highly purified forms of
stevia extracts as safe for use in food and beverages. Previously, such extracts
had only been permitted for use as a dietary supplement in these countries.
Stevia extracts have been sanctioned by the Ministry of Health of China to be
used as a food additive, and are listed in the Sanitation Standard of Food
Additives.
In July 2010 the FDA issued GRAS clearance for PureCircle's high purity SG95
stevia product which opened up opportunities for many more applications as well
as more cost effective solutions.
In November 2011, the European Union cleared stevia for use as a food additive
in its twenty seven member states.
Further regulatory clearances were secured for Reb-A in Switzerland confirming
the growing regulatory support for high purity stevia. Presently in Canada
stevia extracts are permitted for use only as a dietary supplement.
INTERNATIONAL 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. Similarly, as we expand into Indonesia and other markets,
we will be subject to the laws and regulations of such jurisdictions. 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. Similar to Vietnam, the modern
Indonesia legal system was formed relatively recently and is continuing to
evolve.
We cannot predict the effect of future developments in the legal systems of
developing countries, 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.
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, Mr.
George Blankenbaker, and our local partner have been conducting talks and
training sessions for more than three years in Vietnam and have fostered local
support at many levels. To support the farmer's transition to stevia farming and
provide an opportunity to showcase the stevia opportunity to farmers'
communities, the Vietnam government has provided financial support at both the
provincial and national level to plant 20 Ha and 50 Ha respectively, both of
which are expected to be completed in 2012. The fields are small plots located
in several villages and will serve as demonstration fields and stepping stones
to gain wide support from growers in several villages.
We have entered into formal cooperative agreements with several local
institutes, including the National Institute of Medicinal Materials in Hanoi and
the Agricultural Science Institute of Northern Central Vietnam. These agreements
provide local technical assistance for our grower partners and also provide
additional credibility when our grower partners present the stevia opportunity
to the local farmers' communities.
We are also in contact with non-governmental organizations (NGO) that are
seeking programs to bring to the communities that they serve which are generally
located in poor rural areas in need of economically sound projects. If the
stevia model proves to be viable for these locations, the NGOs have indicated
that they will be interested in introducing and funding stevia farming programs.
However, many of these poor rural areas are located in areas of poor soil
quality, that lack adequate access to water or that suffer from other
environmental constraints which limit the opportunities for this approach.
9
We also hope to generate many local testimonials from our field trials and the
farmers in Vietnam are very fluid and willing to adopt new crops if the new
crops are proven to be more economically viable than their current crops.
In connection with commercial opportunities for stevia derived products, we
intend to develop a mark that can be applied to a buyer's brand which would
signify premium quality stevia-derived products.
PRODUCT ALTERNATIVES
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.
FOOD ADDITIVE PRODUCT ALTERNATIVES - We believe stevia is the 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 all of 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.
Because stevia as a food additive is an emerging industry and few companies had
previously done extensive research on growing high Reb-A producing stevia prior
to its approval in December of 2008, there are few companies that posses a
comprehensive knowledge of stevia. As a result, and because the market is
growing so rapidly, we believe that an influx of competitors in the near term
will not affect the industry significantly
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 Santa Margarita, California.
There are four areas on which 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. We believe that 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 have a strong focus on
developing protectable intellectual property which we believe should
create barriers to entry and protect our methodologies. Additionally,
where applicable we will continue to consider the acquisition of
potentially synergistic intellectual property.
3. CROP DIVERSIFICATION. Our farm management infrastructure and the
majority of our intellectual property is applicable to other
high-value crops providing us with the flexibility to diversify our
crops and the customer base for our farm management solutions.
4. PRODUCT DIVERSIFICATION. We will explore additional markets and uses
for stevia and seek to acquire technology to diversify its
applications.
COMMERCIAL PRODUCT ALTERNATIVES
Small regional companies in Japan, China, and South Korea have been producing
commercial stevia products for several years, focusing on their local markets.
We believe with the awareness of stevia on a global scale, this will provide an
opportunity to develop a large commercial market. Once the market reaches
critical mass, large companies such as CP Group will likely enter the market.
We intend to protect our market by positioning ourselves as both the primary
provider of raw extract to companies such as CP Group, as well as establishing
our own vertical markets utilizing our farm management core competency to
contract farm using our commercial stevia products.
10
EMPLOYEES
George Blankenbaker, our President and a director, is our sole employee.
Our relationship with our farm management partner, Growers Synergy, currently
provides the staffing necessary to operate our farms and our technology partner,
TechNew, provides the staffing for our technical operations.
We chose to outsource the operations management during our development phase to
minimize expenses and provide a team of qualified experienced staff to lead us
through the development phase until we are ready to commercialize. As we begin
commercialization and revenue generation, we intend to begin to hire full time
staff.
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 we will be among the
first companies to commercially grow it in Vietnam and 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, 2012. Furthermore, since inception
we have not generated any revenues. As of March 31, 2012, we had an accumulated
deficit of approximately $2,323,551. 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
11
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.
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 is 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 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 a limited 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 rely
significantly on trade secrets to protect our proprietary technology and
processes. However, trade secrets are difficult to protect. We 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
12
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.
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 are spending 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.
Our business model is substantially dependent on our establishment of
relationships with manufacturers to purchase the stevia produced both at our own
farms and at those of our customers. We are in the process of establishing a
network of growers to produce stevia using our methods and protocols. Our
ability to secure contracts with manufacturers to purchase this stevia 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.
13
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
* 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.
GLOBAL ECONOMIC CONDITIONS MAY ADVERSELY AFFECT OUR INDUSTRY, BUSINESS AND
RESULT OF OPERATIONS.
Disruptions in the global credit and financial market could result in diminished
liquidity and credit availability, a decline in consumer confidence, a decline
in economic growth, an increased unemployment rate, and uncertainty about
14
economic stability. These economic uncertainties can affect businesses such as
ours in a number of ways, making it difficult to accurately forecast and plan
our future business activities. Such conditions can lead consumers to postpone
spending, which can cause manufacturers to cancel, decrease or delay orders with
us. We are unable to predict the likelihood of the occurrence, duration or
severity of such disruptions in the credit and financial markets and adverse
global economic conditions and such economic conditions could materially and
adversely affect our business and results of operations.
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 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, 2012, 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, 2012, 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 not achieved the optimal level of segregation of duties
relative to key financial reporting functions.
ii) 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.
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.
15
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.
In April 2012, we announced plans to begin field tests in Indonesia. Similar to
Vietnam, the modern Indonesia legal system was formed relatively recently and is
continuing to evolve. As we continue our expansion into Indonesia and other
developing countries, we will face similar risks and uncertainties regarding the
legal system as we currently face in Vietnam.
We cannot predict the effect of future developments in the legal systems of
developing countries, 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 are generally
denominated in local currencies, which subjects 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 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 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.
16
IT WILL BE EXTREMELY DIFFICULT TO ACQUIRE JURISDICTION AND ENFORCE LIABILITIES
AGAINST OUR OFFICERS, DIRECTORS AND ASSETS OUTSIDE THE UNITED STATES.
Substantially all of our assets are currently located outside of the United
States 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 in particular 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.
Although our common stock is quoted on the OTCBB under the symbol "STEV", there
is a limited public market for our common stock. No assurance can be given that
an active market will develop or that a stockholder will ever be able to
liquidate its shares of common stock without considerable delay, if at all. Many
brokerage firms may not be willing to effect transactions in the securities.
Even if a purchaser finds a broker willing to effect a transaction in these
securities, the combination of brokerage commissions, state transfer taxes, if
any, and any other selling costs may exceed the selling price. Furthermore, our
stock price may be impacted by factors that are unrelated or disproportionate to
our operating performance. These market fluctuations, as well as general
economic, political and market conditions, such as recessions, interest rates or
international currency fluctuations may adversely affect the market price and
liquidity of our common stock.
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.
17
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
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 Hong Kong, at
19/F Kam Chung Comm Bldg 19-21, Hennessy Rd, Hong Kong and in the United States,
at 7117 US 31 South, Indianapolis, IN 46227.
We have also begun development of a research facility on 10 Ha of land leased by
Stevia Ventures Corporation and have prepaid the first year lease payment of
$30,000 and the six month lease payment of $15,000 as security deposit.
ITEM 3 -- LEGAL PROCEEDINGS
None.
ITEM 4 -- MINE SAFETY DISCLOSURES
Not applicable.
18
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.
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.
Fiscal Year Ended March 31, 2012 High Low
-------------------------------- ---- ---
First Quarter (June 30, 2011) $ 1.60 $ .25
Second Quarter (September 30, 2011) $ 1.00 $ .85
Third Quarter (December 31, 2011) $ 1.05 $ .56
Fourth Quarter (March 31, 2012) $ 2.75 $ .667
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
STOCKHOLDERS
As of June 21, 2012, there were 61,354,775 shares of common stock issued and
outstanding held by 15 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.
UNREGISTERED SALES OF EQUITY SECURITIES
On January 16, 2012, March 7, 2012, and subsequent to the fiscal year ended
March 31, 2012, on May 30, 2012, we raised $250,000, $200,000 and $200,000
respectively, from the proceeds of convertible notes (collectively, the
"Notes"). The Notes were each based upon our standard form of promissory note,
accrue interest at the rate of ten percent per annum simple interest, and the
principal balance of each Note and any accrued interest thereon is convertible
into our common stock at the lower of (a) the price per share at which shares of
capital stock are sold in our next equity financing, or (b) the closing price of
our securities if traded on a securities exchange, or if actively traded
over-the-counter, the average closing bid price for the securities, in each case
over the thirty (30) day period prior to the date of conversion; provided
however, that if no active trading market for the securities exists at the time
of the conversion, such conversion price shall be the fair market value of a
share of our common stock as determined in good faith by our Board of Directors.
The issuances of the Notes were conducted in reliance upon Regulation S of the
Securities Act of 1933, as amended and the rules and regulations promulgated
thereunder (the "Securities Act"), to investors who are "accredited investors,"
as such term is defined in Rule 501(a) under the Securities Act, in offshore
transactions (as defined in Rule 902 under Regulation S of the Securities Act),
based upon representations made by such investors.
On January 26, 2012, we entered into an Equity Purchase Agreement (the "Purchase
Agreement") with Southridge Partners II, LP, a Delaware limited partnership
("Southridge"). Upon execution of such agreements, we issued 35,000 shares of
our common stock to Southridge as a commitment fee.
On March 19, 2012, we issued 27,500 shares of our common stock to Empire
Relations Group ("Empire") as consideration for consulting services rendered by
Empire to the Company.
19
The issuances of such shares were conducted in reliance upon Regulation D of the
Securities Act of 1933, as amended and the rules and regulations promulgated
thereunder (the "Securities Act"), to investors who are "accredited investors,"
as such term is defined in Rule 501(a) under the Securities Act, based upon
representations made by such investors.
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.
OVERVIEW
We were incorporated on May 21, 2007 in the state of Nevada under the name
Interpro Management Corp. On March 4, 2011, we changed our name to Stevia Corp.
and effectuated a 35 for 1 forward stock split of all of our issued and
outstanding shares of common stock.
We are a development stage company that has yet to generate significant revenue.
We plan to generate revenues by (i) providing farm management services, which
will provide plant breeding, agricultural protocols, post-harvest techniques and
other services to stevia growers, (ii) the sale of agriculture inputs such as
fertilizer to stevia growers, (iii) the sale of stevia and intercrops grown on
our own farmed property and (iv) the sale of products derived from the stevia
plant.
Our initial focus and capital expenditures have been directed toward
intellectual property development which will attempt to identify optimal
cultivar varieties for intended growing sites, development and testing of a
propagation protocol, development of cultivation technology including an
intercropping system and regional adaptability test, exploration of commercial
applications of stevia derived products, and development of a 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.
During the past fiscal year, we have begun our first commercial trials of stevia
production in Vietnam. In connection with such production we have entered into
supply agreements for the off-take of the stevia we produce and entered into an
agreement with Growers Synergy to assist in the management of our Vietnam
day-to-day operations. We have also developed and acquired certain proprietary
technology relating to stevia development which we can integrate into our own
stevia production and our farm management services. In connection with our
intellectual property development efforts we have engaged TechNew as our
technology partner in Vietnam. We have also continued to establish research and
production relationships with local institutions and companies in Vietnam. In
April, 2012 we announced plans to begin field trials in Indonesia.
RESULTS OF OPERATIONS
Our operations to-date 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, 2012
We reported total current assets of $184,572 at March 31, 2012 consisting of
cash of $15,698 and prepaid expenses of $168,874. Total current liabilities
reported of $997,567 included convertible notes payable of $700,000, accounts
20
payable of $237,288, accounts payable to our President of $20,220 and advances
from our President of $19,138. We had a working capital deficit of $812,995 at
March 31, 2012.
Stockholders' Deficiency increased from $50,470 at March 31, 2011 to $790,445 at
March 31, 2012. This increase is due primarily to an increase in our convertible
notes payable and accounts payable.
CASH AND CASH EQUIVALENTS
As of March 31, 2012, we had cash of $15,698. 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, 2012
For the fiscal year ended March 31, 2012, we incurred a net loss of $2,323,551.
General and administration expenses for the fiscal year ended March 31, 2012,
amounted to $113,742 compared to $7,458 in the fiscal year ended March 31, 2011.
Salary and compensation expenses amounted to $750,000 and Professional fees
amounted to $255,959 in the fiscal year ended March 31, 2012.
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 $9,368 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.
LIQUIDITY AND CAPITAL RESOURCES
As at March 31, 2012 we have $15,698 in cash and $997,567 in current
liabilities. As at March 31, 2012, our total assets were $207,122 and our total
liabilities were $997,567. Our net working capital deficiency as at March 31,
2012 was $812,995.
During the year ended March 31, 2012, we funded our operations from the proceeds
of private sales of equity and/or convertible notes. During the year ended March
31, 2012, we raised $100,000 through the sale of 400,000 shares of our common
stock at a price of $0.25 per share and we raised $950,000 through the issuance
of convertible promissory notes. We raised an additional $200,000 through the
issuance of convertible promissory notes subsequent to the fiscal year ended
March 31, 2012.
On October 4, 2011, outstanding convertible promissory notes in the principal
amount of $350,000 were converted into an aggregate of 1,474,849 shares of our
common stock. On January 18, 2012, outstanding convertible promissory notes in
the principal amount of $150,000 were converted into an aggregate of 617,425
shares of our common stock.
On January 26, 2012, we entered into the Purchase Agreement with Southridge.
Under the terms of the Purchase Agreement, Southridge will purchase, at our
election, up to $20,000,000 of our registered common stock (the "Shares").
During the term of the Purchase Agreement, we may at any time deliver a "put
notice" to Southridge thereby requiring Southridge to purchase a certain dollar
amount of the Shares. Simultaneous with the delivery of such Shares, Southridge
shall deliver payment for the Shares. Subject to certain restrictions, the
purchase price for the Shares shall be equal to ninety-three percent (93%) of
the lowest closing bid price for our common stock during the five-day trading
period immediately after the Shares specified in the Put Notice are delivered to
Southridge. The number of Shares sold to Southridge shall not exceed the number
of such shares that, when aggregated with all other shares of our common stock
then beneficially owned by Southridge, would result in Southridge owning more
than 9.99% of all of our common stock then outstanding. As a condition to the
purchase of the Shares by Southridge, we must register the Shares with the
Securities and Exchange Commission on a Form S-1 registration statement. We are
currently working on amending the registration statement we have filed with the
Securities Exchange Commission.
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.
21
For the year ended March 31, 2012, we received net cash of $1,300,200 from
financing activities. Net cash from financing activities reflected $1,200,000 in
proceeds from the issuance of convertible notes, $100,000 in proceeds from the
sale of common stock.
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.
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
Our current capital requirements are for intellectual property development,
initial field trials and planning and readiness development for
commercialization. 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, 2012, 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 United States
generally accepted accounting principles requires management of our Company to
make estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting periods.
The discussion and analysis of our financial condition and results of operations
are based upon our financial statements, which have been prepared in accordance
with accounting principles generally accepted in the United States of America.
We believe certain critical accounting policies affect our more significant
judgments and estimates used in the preparation of the financial statements. A
description of such critical accounting policies is set forth below.
BASIS OF PRESENTATION
The Company's consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of America
("U.S. GAAP").
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include all accounts of the Company as of
March 31, 2012 and for the period from June 23, 2011 (date of acquisition)
through March 31, 2012; Stevia Ventures International Ltd. as of March 31, 2012
and for the period from April 11, 2011 (inception) through March 31, 2012; and
Stevia Asia Limited as of March 31, 2012 and for the period from March 19, 2012
(inception) through March 31, 2012 as follows:
22
Jurisdiction or Attributable
Entity Place of Incorporation Interest
------ ---------------------- --------
Stevia Ventures International Ltd. BVI 100%
Stevia Asia Limited Hong Kong SAR 100%
All inter-company balances and transactions have been eliminated.
DEVELOPMENT STAGE COMPANY
The Company is a development stage company as defined by section 915-10-20 of
the Financial Accounting Standards Board ("FASB") Accounting Standards
Codification. Although the Company has recognized some nominal amount of
revenues since inception, the Company is still devoting substantially all of its
efforts on establishing the business and, therefore, still qualifies as a
development stage company. All losses accumulated since inception have been
considered as part of the Company's development stage activities.
USE OF ESTIMATES AND ASSUMPTIONS
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America 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.
The Company's significant estimates and assumptions include the fair value of
financial instruments; the carrying value, recoverability and impairment of
long-lived assets, including the values assigned to and the estimated useful
lives of website development costs; interest rate; revenue recognized or
recognizable; sales returns and allowances; foreign currency exchange rate;
income tax rate, income tax provision, deferred tax assets and valuation
allowance of deferred tax assets; and the assumption that the Company will
continue as a going concern. 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 bases its estimates on historical experience and on various
assumptions that are believed to be reasonable in relation to the financial
statements taken as a whole 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.
Management regularly evaluates the key factors and assumptions used to develop
the estimates utilizing currently available information, changes in facts and
circumstances, historical experience and reasonable assumptions. After such
evaluations, if deemed appropriate, those estimates are adjusted accordingly.
Actual results could differ from those estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company follows 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 and paragraph 825-10-50-10 of the FASB Accounting
Standards Codification for disclosures about 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 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.
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.
23
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 expenses, approximate their
fair values because of the short maturity of these instruments.
The Company's convertible notes 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, 2012.
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.
CARRYING VALUE, RECOVERABILITY AND IMPAIRMENT OF LONG-LIVED ASSETS
The Company has adopted paragraph 360-10-35-17 of the FASB Accounting Standards
Codification for its long-lived assets. The Company's long-lived assets, which
include website development costs, are reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amount of an asset may
not be recoverable.
The Company assesses the recoverability of its long-lived assets by comparing
the projected undiscounted net cash flows associated with the related long-lived
asset or group of long-lived assets over their remaining estimated useful lives
against their respective carrying amounts. Impairment, if any, is based on the
excess of the carrying amount over the fair value of those assets. Fair value is
generally determined using the asset's expected future discounted cash flows or
market value, if readily determinable. If long-lived assets are determined to be
recoverable, but the newly determined remaining estimated useful lives are
shorter than originally estimated, the net book values of the long-lived assets
are depreciated over the newly determined remaining estimated useful lives.
The Company considers the following to be some examples of important indicators
that may trigger an impairment review: (i) significant under-performance or
losses of assets relative to expected historical or projected future operating
results; (ii) significant changes in the manner or use of assets or in the
Company's overall strategy with respect to the manner or use of the acquired
assets or changes in the Company's overall business strategy; (iii) significant
negative industry or economic trends; (iv) increased competitive pressures; (v)
a significant decline in the Company's stock price for a sustained period of
time; and (vi) regulatory changes. The Company evaluates acquired assets for
potential impairment indicators at least annually and more frequently upon the
occurrence of such events.
The key assumptions used in management's estimates of projected cash flow deal
largely with forecasts of sales levels and gross margins. These forecasts are
typically based on historical trends and take into account recent developments
as well as management's plans and intentions. Other factors, such as increased
competition or a decrease in the desirability of the Company's products or
services, could lead to lower projected sales levels, which would adversely
impact cash flows. A significant change in cash flows in the future could result
in an impairment of long lived assets.
The impairment charges, if any, is included in operating expenses in the
accompanying consolidated statements of income and comprehensive income (loss).
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.
FURNITURE AND FIXTURE
Furniture and fixture is recorded at cost. Expenditures for major additions and
betterments are capitalized. Maintenance and repairs are charged to operations
24
as incurred. Depreciation of furniture and fixture is computed by the
straight-line method (after taking into account their respective estimated
residual values) over the assets estimated useful life of five (5) years. Upon
sale or retirement of furniture and fixture, the related cost and accumulated
depreciation are removed from the accounts and any gain or loss is reflected in
the statements of operations.
WEBSITE DEVELOPMENT COSTS
Website development costs are stated at cost less accumulated amortization. The
cost of the website development is amortized on a straight-line basis over its
estimated useful life of five (5) years. Upon becoming fully amortized, the
related cost and accumulated amortization are removed from the accounts.
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
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) involved; b. a 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.
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 potential 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.
25
REVENUE RECOGNITION
The Company follows paragraph 605-10-S99-1 of the FASB Accounting Standards
Codification for revenue recognition. The Company recognizes revenue when it is
realized or realizable and earned. The Company considers revenue realized or
realizable and earned when all of the following criteria are met: (i) persuasive
evidence of an arrangement exists, (ii) the product has been shipped or the
services have been rendered to the customer, (iii) the sales price is fixed or
determinable, and (iv) collectability is reasonably assured.
RESEARCH AND DEVELOPMENT
The Company follows paragraph 730-10-25-1 of the FASB Accounting Standards
Codification (formerly Statement of Financial Accounting Standards No. 2
"ACCOUNTING FOR RESEARCH AND DEVELOPMENT COSTS") and paragraph 730-20-25-11 of
the FASB Accounting Standards Codification (formerly Statement of Financial
Accounting Standards No. 68 "RESEARCH AND DEVELOPMENT ARRANGEMENTS") for
research and development costs. Research and development costs are charged to
expense as incurred. Research and development costs consist primarily of
remuneration for research and development staff, depreciation and maintenance
expenses of research and development equipment, material and testing costs for
research and development as well as research and development arrangements with
unrelated third party research and development institutions. The research and
development arrangements usually involve specific research and development
projects. Often times, the Company makes non-refundable advances upon signing of
these arrangements. The Company adopted paragraph 730-20-25-13 and 730-20-35-1
of the FASB Accounting Standards Codification (formerly Emerging Issues Task
Force Issue No. 07-3 "ACCOUNTING FOR NONREFUNDABLE ADVANCE PAYMENTS FOR GOODS OR
SERVICES TO BE USED IN FUTURE RESEARCH AND DEVELOPMENT ACTIVITIES") for those
non-refundable advances. Non-refundable advance payments for goods or services
that will be used or rendered for future research and development activities are
deferred and capitalized. Such amounts are recognized as an expense as the
related goods are delivered or the related services are performed. The
management continues to evaluate whether the Company expect the goods to be
delivered or services to be rendered. If the management does not expect the
goods to be delivered or services to be rendered, the capitalized advance
payment are charged to expense.
STOCK-BASED COMPENSATION FOR OBTAINING EMPLOYEE SERVICES
The Company accounts for its stock based compensation in which the Company
obtains employee services in share-based payment transactions under the
recognition and measurement principles of the fair value recognition provisions
of section 718-10-30 of the FASB Accounting Standards Codification. Pursuant to
paragraph 718-10-30-6 of the FASB Accounting Standards Codification, all
transactions in which goods or services are the consideration received for the
issuance of equity instruments are accounted for based on the fair value of the
consideration received or the fair value of the equity instrument issued,
whichever is more reliably measurable. The measurement date used to determine
the fair value of the equity instrument issued is the earlier of the date on
which the performance is complete or the date on which it is probable that
performance will occur. If shares of the Company are thinly traded the use of
share prices established in the Company's most recent private placement
memorandum ("PPM"), or weekly or monthly price observations would generally be
more appropriate than the use of daily price observations as such shares could
be artificially inflated due to a larger spread between the bid and asked quotes
and lack of consistent trading in the market.
The fair value of each option award is estimated on the date of grant using a
Black-Scholes option-pricing valuation model. The ranges of assumptions for
inputs are as follows:
* Expected term of share options and similar instruments: The expected
life of options and similar instruments represents the period of time
the option and/or warrant are expected to be outstanding. Pursuant to
Paragraph 718-10-50-2(f)(2)(i) of the FASB Accounting Standards
Codification the expected term of share options and similar
instruments represents the period of time the options and similar
instruments are expected to be outstanding taking into consideration
of the contractual term of the instruments and employees' expected
exercise and post-vesting employment termination behavior into the
fair value (or calculated value) of the instruments. Pursuant to
paragraph 718-50-S99-1, it may be appropriate to use the SIMPLIFIED
METHOD, if (i) A company does not have sufficient historical exercise
data to provide a reasonable basis upon which to estimate expected
term due to the limited period of time its equity shares have been
publicly traded; (ii) A company significantly changes the terms of its
share option grants or the types of employees that receive share
option grants such that its historical exercise data may no longer
provide a reasonable basis upon which to estimate expected term; or
(iii) A company has or expects to have significant structural changes
in its business such that its historical exercise data may no longer
provide a reasonable basis upon which to estimate expected term. The
Company uses the simplified method to calculate expected term of share
options and similar instruments as the company does not have
sufficient historical exercise data to provide a reasonable basis upon
which to estimate expected term.
26
* Expected volatility of the entity's shares and the method used to
estimate it. Pursuant to ASC Paragraph 718-10-50-2(f)(2)(ii) a
thinly-traded or nonpublic entity that uses the calculated value
method shall disclose the reasons why it is not practicable for the
Company to estimate the expected volatility of its share price, the
appropriate industry sector index that it has selected, the reasons
for selecting that particular index, and how it has calculated
historical volatility using that index. The Company uses the average
historical volatility of the comparable companies over the expected
contractual life of the share options or similar instruments as its
expected volatility. If shares of a company are thinly traded the use
of weekly or monthly price observations would generally be more
appropriate than the use of daily price observations as the volatility
calculation using daily observations for such shares could be
artificially inflated due to a larger spread between the bid and asked
quotes and lack of consistent trading in the market.
* Expected annual rate of quarterly dividends. An entity that uses a
method that employs different dividend rates during the contractual
term shall disclose the range of expected dividends used and the
weighted-average expected dividends. The expected dividend yield is
based on the Company's current dividend yield as the best estimate of
projected dividend yield for periods within the expected term of the
share options and similar instruments.
* Risk-free rate(s). An entity that uses a method that employs different
risk-free rates shall disclose the range of risk-free rates used. The
risk-free interest rate is based on the U.S. Treasury yield curve in
effect at the time of grant for periods within the expected term of
the share options and similar instruments.
The Company's policy is to recognize compensation cost for awards with only
service conditions and a graded vesting schedule on a straight-line basis over
the requisite service period for the entire award.
EQUITY INSTRUMENTS ISSUED TO PARTIES OTHER THAN EMPLOYEES FOR ACQUIRING GOODS OR
SERVICES
The Company accounts for equity instruments issued to parties other than
employees for acquiring goods or services under guidance of Subtopic 505-50 of
the FASB Accounting Standards Codification ("Subtopic 505-50").
Pursuant to ASC Section 505-50-30, all transactions in which goods or services
are the consideration received for the issuance of equity instruments are
accounted for based on the fair value of the consideration received or the fair
value of the equity instrument issued, whichever is more reliably measurable.
The measurement date used to determine the fair value of the equity instrument
issued is the earlier of the date on which the performance is complete or the
date on which it is probable that performance will occur. If shares of the
Company are thinly traded the use of share prices established in the Company's
most recent private placement memorandum ("PPM"), or weekly or monthly price
observations would generally be more appropriate than the use of daily price
observations as such shares could be artificially inflated due to a larger
spread between the bid and asked quotes and lack of consistent trading in the
market.
The fair value of option or warrant award is estimated on the date of grant
using a Black-Scholes option-pricing valuation model. The ranges of assumptions
for inputs are as follows:
* Expected term of share options and similar instruments: Pursuant to
Paragraph 718-10-50-2 of the FASB Accounting Standards Codification
the expected term of share options and similar instruments represents
the period of time the options and similar instruments are expected to
be outstanding taking into consideration of the contractual term of
the instruments and holder's expected exercise behavior into the fair
value (or calculated value) of the instruments. The Company uses
historical data to estimate holder's expected exercise behavior. If
the Company is a newly formed corporation or shares of the Company are
thinly traded the contractual term of the share options and similar
instruments is used as the expected term of share options and similar
instruments as the Company does not have sufficient historical
exercise data to provide a reasonable basis upon which to estimate
expected term.
* Expected volatility of the entity's shares and the method used to
estimate it. An entity that uses a method that employs different
volatilities during the contractual term shall disclose the range of
expected volatilities used and the weighted-average expected
volatility. A thinly-traded or nonpublic entity that uses the
calculated value method shall disclose the reasons why it is not
practicable for the Company to estimate the expected volatility of its
share price, the appropriate industry sector index that it has
selected, the reasons for selecting that particular index, and how it
has calculated historical volatility using that index. The Company
uses the average historical volatility of the comparable companies
over the expected contractual life of the share options or similar
instruments as its expected volatility. If shares of a company are
thinly traded the use of weekly or monthly price observations would
generally be more appropriate than the use of daily price observations
as the volatility calculation using daily observations for such shares
could be artificially inflated due to a larger spread between the bid
and asked quotes and lack of consistent trading in the market.
27
* Expected annual rate of quarterly dividends. An entity that uses a
method that employs different dividend rates during the contractual
term shall disclose the range of expected dividends used and the
weighted-average expected dividends. The expected dividend yield is
based on the Company's current dividend yield as the best estimate of
projected dividend yield for periods within the expected contractual
life of the option and similar instruments.
* Risk-free rate(s). An entity that uses a method that employs different
risk-free rates shall disclose the range of risk-free rates used. The
risk-free interest rate is based on the U.S. Treasury yield curve in
effect at the time of grant for periods within the contractual life of
the option and similar instruments.
Pursuant to Paragraphs 505-50-25-8, if fully vested, non-forfeitable equity
instruments are issued at the date the grantor and grantee enter into an
agreement for goods or services (no specific performance is required by the
grantee to retain those equity instruments), then, because of the elimination of
any obligation on the part of the counterparty to earn the equity instruments, a
measurement date has been reached. A grantor shall recognize the equity
instruments when they are issued (in most cases, when the agreement is entered
into). Whether the corresponding cost is an immediate expense or a prepaid asset
(or whether the debit should be characterized as contra-equity under the
requirements of paragraph 505-50-45-1) depends on the specific facts and
circumstances. Pursuant to ASC paragraph 505-50-45-1, a grantor may conclude
that an asset (other than a note or a receivable) has been received in return
for fully vested, non-forfeitable equity instruments that are issued at the date
the grantor and grantee enter into an agreement for goods or services (and no
specific performance is required by the grantee in order to retain those equity
instruments). Such an asset shall not be displayed as contra-equity by the
grantor of the equity instruments. The transferability (or lack thereof) of the
equity instruments shall not affect the balance sheet display of the asset. This
guidance is limited to transactions in which equity instruments are transferred
to other than employees in exchange for goods or services. Section 505-50-30
provides guidance on the determination of the measurement date for transactions
that are within the scope of this Subtopic.
Pursuant to Paragraphs 505-50-25-8 and 505-50-25-9,an entity may grant fully
vested, non-forfeitable equity instruments that are exercisable by the grantee
only after a specified period of time if the terms of the agreement provide for
earlier exercisability if the grantee achieves specified performance conditions.
Any measured cost of the transaction shall be recognized in the same period(s)
and in the same manner as if the entity had paid cash for the goods or services
or used cash rebates as a sales discount instead of paying with, or using, the
equity instruments. A recognized asset, expense, or sales discount shall not be
reversed if a stock option that the counterparty has the right to exercise
expires unexercised.
Pursuant to ASC paragraph 505-50-30-S99-1, if the Company receives a right to
receive future services in exchange for unvested, forfeitable equity
instruments, those equity instruments are treated as unissued for accounting
purposes until the future services are received (that is, the instruments are
not considered issued until they vest). Consequently, there would be no
recognition at the measurement date and no entry should be recorded.
INCOME TAX PROVISION
The Company accounts for income taxes under Section 740-10-30 of the FASB
Accounting Standards Codification, which requires recognition of deferred tax
assets and liabilities for the expected future tax consequences of events that
have been included in the financial statements or tax returns. Under this
method, deferred tax assets and liabilities are based on the differences between
the financial statement and tax bases of assets and liabilities using enacted
tax rates in effect for the year in which 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
consolidated statements of income and comprehensive income (loss) 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 (50) percent 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 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.
28
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.
UNCERTAIN TAX POSITIONS
The Company did not take any uncertain tax positions and had no adjustments to
its income tax liabilities or benefits pursuant to the provisions of Section
740-10-25 for the period from April 11, 2011 (Inception) through March 31, 2012.
LIMITATION ON UTILIZATION OF NOLS DUE TO CHANGE IN CONTROL
Pursuant to the Internal Revenue Code Section 382 ("Section 382"), certain
ownership changes may subject the NOL's to annual limitations which could reduce
or defer the NOL. Section 382 imposes limitations on a corporation's ability to
utilize NOLs if it experiences an "ownership change." In general terms, an
ownership change may result from transactions increasing the ownership of
certain stockholders in the stock of a corporation by more than 50 percentage
points over a three-year period. In the event of an ownership change,
utilization of the NOLs would be subject to an annual limitation under Section
382 determined by multiplying the value of its stock at the time of the
ownership change by the applicable long-term tax-exempt rate. Any unused annual
limitation may be carried over to later years. The imposition of this limitation
on its ability to use the NOLs to offset future taxable income could cause the
Company to pay U.S. federal income taxes earlier than if such limitation were
not in effect and could cause such NOLs to expire unused, reducing or
eliminating the benefit of such NOLs.
NET INCOME (LOSS) PER COMMON SHARE
Net income (loss) per common share is computed pursuant to section 260-10-45 of
the FASB Accounting Standards Codification. Basic net income (loss) per common
share is computed by dividing net income (loss) by the weighted average number
of shares of common stock outstanding during the period. Diluted net income
(loss) per common share is computed by dividing net income (loss) by the
weighted average number of shares of common stock and potentially outstanding
shares of common stock during the period to reflect the potential dilution that
could occur from common shares issuable through contingent shares issuance
arrangement, stock options or warrants.
The following table shows the potentially outstanding dilutive common shares
excluded from the diluted net income (loss) per common share calculation for the
period from April 11, 2011 (inception) through March 31, 2012 as they were
anti-dilutive:
Potentially
Outstanding Dilutive
Common Shares
-------------
For the
Period from
April 11, 2011
(inception)
through
March 31, 2012
--------------
The remainder of the Make Good Escrow Agreement shares issued
and held with the escrow agent in connection with the Share
Exchange Agreement consummated on June 23, 2011 pending the
achievement by the Company of certain post-Closing business
milestones (the "Milestones") 3,000,000
---------
Total potentially outstanding dilutive common shares 3,000,000
=========
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
29
operating cash receipts and payments and (b) all items that are included in net
income that do not affect operating cash receipts and payments. The Company
reports the reporting currency equivalent of foreign currency cash flows, using
the current exchange rate at the time of the cash flows and the effect of
exchange rate changes on cash held in foreign currencies is reported as a
separate item in the reconciliation of beginning and ending balances of cash and
cash equivalents and separately provides information about investing and
financing activities not resulting in cash receipts or payments in the period
pursuant to paragraph 830-230-45-1 of the FASB Accounting Standards
Codification.
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 will
evaluate subsequent events 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 on EDGAR.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
FASB ACCOUNTING STANDARDS UPDATE NO. 2011-05
In June 2011, the FASB issued the FASB Accounting Standards Update No. 2011-05
"COMPREHENSIVE INCOME" ("ASU 2011-05"), which was the result of a joint project
with the IASB and amends the guidance in ASC 220, COMPREHENSIVE INCOME, by
eliminating the option to present components of other comprehensive income (OCI)
in the statement of stockholders' equity. Instead, the new guidance now gives
entities the option to present all non-owner changes in stockholders' equity
either as a single continuous statement of comprehensive income or as two
separate but consecutive statements. Regardless of whether an entity chooses to
present comprehensive income in a single continuous statement or in two separate
but consecutive statements, the amendments require entities to present all
reclassification adjustments from OCI to net income on the face of the statement
of comprehensive income.
The amendments in this Update should be applied retrospectively and are
effective for public entity for fiscal years, and interim periods within those
years, beginning after December 15, 2011.
FASB ACCOUNTING STANDARDS UPDATE NO. 2011-08
In September 2011, the FASB issued the FASB Accounting Standards Update No.
2011-08 "INTANGIBLES--GOODWILL AND OTHER: TESTING GOODWILL FOR IMPAIRMENT" ("ASU
2011-08"). This Update is to simplify how public and nonpublic entities test
goodwill for impairment. The amendments permit an entity to first assess
qualitative factors to determine whether it is more likely than not that the
fair value of a reporting unit is less than its carrying amount as a basis for
determining whether it is necessary to perform the two-step goodwill impairment
test described in Topic 350. Under the amendments in this Update, an entity is
not required to calculate the fair value of a reporting unit unless the entity
determines that it is more likely than not that its fair value is less than its
carrying amount.
The guidance is effective for interim and annual periods beginning on or after
December 15, 2011. Early adoption is permitted.
FASB ACCOUNTING STANDARDS UPDATE NO. 2011-10
In December 2011, the FASB issued the FASB Accounting Standards Update No.
2011-10 "PROPERTY, PLANT AND EQUIPMENT: DERECOGNITION OF IN SUBSTANCE REAL
ESTATE-A SCOPE CLARIFICATION" ("ASU 2011-09"). This Update is to resolve the
diversity in practice as to how financial statements have been reflecting
circumstances when parent company reporting entities cease to have controlling
financial interests in subsidiaries that are in substance real estate, where the
situation arises as a result of default on nonrecourse debt of the subsidiaries.
The amended guidance is effective for annual reporting periods ending after June
15, 2012 for public entities. Early adoption is permitted.
FASB ACCOUNTING STANDARDS UPDATE NO. 2011-11
In December 2011, the FASB issued the FASB Accounting Standards Update No.
2011-11 "BALANCE SHEET: DISCLOSURES ABOUT OFFSETTING ASSETS AND LIABILITIES"
("ASU 2011-11"). This Update requires an entity to disclose information about
offsetting and related arrangements to enable users of its financial statements
to understand the effect of those arrangements on its financial position. The
objective of this disclosure is to facilitate comparison between those entities
that prepare their financial statements on the basis of U.S. GAAP and those
entities that prepare their financial statements on the basis of IFRS.
30
The amended guidance is effective for annual reporting periods beginning on or
after January 1, 2013, and interim periods within those annual periods.
FASB ACCOUNTING STANDARDS UPDATE NO. 2011-12
In December 2011, the FASB issued the FASB Accounting Standards Update No.
2011-12 "COMPREHENSIVE INCOME: DEFERRAL OF THE EFFECTIVE DATE FOR AMENDMENTS TO
THE PRESENTATION OF RECLASSIFICATIONS OF ITEMS OUT OF ACCUMULATED OTHER
COMPREHENSIVE INCOME IN ACCOUNTING STANDARDS UPDATE NO. 2011-05" ("ASU
2011-12"). This Update is a deferral of the effective date pertaining to
reclassification adjustments out of accumulated other comprehensive income in
ASU 2011-05. FASB is to going to reassess the costs and benefits of those
provisions in ASU 2011-05 related to reclassifications out of accumulated other
comprehensive income. Due to the time required to properly make such a
reassessment and to evaluate alternative presentation formats, the FASB decided
that it is necessary to reinstate the requirements for the presentation of
reclassifications out of accumulated other comprehensive income that were in
place before the issuance of Update 2011-05.
All other requirements in Update 2011-05 are not affected by this Update,
including the requirement to report comprehensive income either in a single
continuous financial statement or in two separate but consecutive financial
statements. Public entities should apply these requirements for fiscal years,
and interim periods within those years, beginning after December 15, 2011.
OTHER RECENTLY ISSUED, BUT NOT YET EFFECTIVE ACCOUNTING PRONOUNCEMENTS
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 financial statements.
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.
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, 2012 pursuant to Exchange Act Rule 13a-15. Our management is
responsible for establishing and maintaining adequate internal control over
financial reporting, as such term is defined in Exchange Act Rules 13a-15(f).
Our management conducted an evaluation of the effectiveness of our internal
control over financial reporting based on the framework in Internal Control -
Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission. 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, 2012 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.
31
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, 2012 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 47 Director, President, Secretary and Treasurer
Dr. Pablo Erat 41 Director
Rodney L. Cook 59 Director
The information below with respect to our directors includes such director's
experience, qualifications, attributes, and skills that led us to the conclusion
that they should serve as directors.
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. 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 are
invaluable to our Board of Directors.
32
DR. PABLO ERAT - DIRECTOR
Dr. Erat was elected to our board of directors on October 4, 2011. Since January
2009, Dr. Erat has served as CEO of Pal & Partners AG, a Swiss-based group
domiciled in Zug with offices in Zurich and Mumbai and with a focus on the
Indian agriculture industry. Prior to joining Pal & Partners AG, in 2008 Dr.
Erat served as a consultant to corporations and start-up companies in various
industries to assist in the development and implementation of innovative
strategies. In April 2001, he co-founded Executive Insight, a strategy
consulting firm and in January 2003, he co-founded DocsLogic, a company
specialized on the development of knowledge applications, where he remained
through 2007. Dr. Erat is also Assistant Professor at the ETH Zurich and
regularly delivers speeches and workshops on strategic management principles for
educational and business communities. Dr. Erat received a Doctorate from the
University of St. Gallen in Switzerland in June 2003. Dr. Erat's extensive
knowledge and experience working for and advising early stage companies as well
as his experience in the agriculture industry will be extremely relevant to the
board.
RODNEY L. COOK - DIRECTOR
Mr. Cook was elected to the board of directors on October 6, 2011. Mr. Cook has
an extensive background in agribusiness and is a practicing horticulturist with
twenty years experience in grower education, technology transfer from university
to field, research and project development. In 2009, he founded Ag-View
Consulting, a horticulture and market development consulting firm, where he
remained until 2011. From 2008 to 2009, Mr. Cook has served as Chief Executive
Officer and President of Naturipe Foods, LLC a multinational partnership of
fruit growers. Prior to joining Naturipe, Mr. Cook was with Producer Marketing
Company from 1995 to 2008, where he served as Chief Executive Officer and
President. Producer Maketing was a grower owned corporation marketing
blueberries for a group of growers. Mr. Cook received a Masters of Science, with
Honor, in Horticulture from Michigan State University and a Bachelors of
Science, with Honor, in Resource Development from Michigan State University. Mr.
Cook's experience in the agriculture industry will provide critical experience
and perspective to the Company's 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, 2012 or during the two months ended May 31, 2012. All proceedings of
the Board of Directors were conducted by resolutions consented to in writing by
the Board of Directors. 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
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, 2012, 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.
33
CODE OF ETHICS
On October 25, 2011, the Board of Directors of the Company adopted a Code of
Ethics for the Company, establishing a wide range of ethical standards for all
directors, officers and employees. A copy of the Code of Ethics will be
provided, without charge, to any person who so requests. A copy of the Code of
Ethics may be requested via the following address or phone number:
Stevia Corp.
7117 US 31 South
Indianapolis, IN 46227
(888) 250-2566
ITEM 11 -- EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION
The summary compensation table below shows certain compensation information for
services rendered in all capacities to us by our principal executive officer and
principal financial officer and by each other executive officer whose total
annual salary and bonus exceeded $100,000 during the fiscal periods ended March
31, 2011 and March 31, 2012. Other than as set forth below, no executive
officer's total annual compensation exceeded $100,000 during our last fiscal
period.
SUMMARY COMPENSATION TABLE
Non-Equity Nonqualified
Incentive Deferred All
Name and Plan Compen- Other
Principal Stock Option Compen- sation Compen-
Position Year Salary Bonus Awards Awards sation Earnings sation Totals
(a) (b) ($)(c) ($)(d) ($)(e) ($)(f) ($)(g) ($)(h) ($)(i) ($)(j)
------------ ---- ------ ----- ------ ------ ------ -------- ------ ------
George 2012 0 0 0 0 0 0 750,000 750,000
Blankenbaker 2011 0 0 0 0 0 0 0 0
President, Secretary,
Treasurer, Director
(Principal Executive
Officer and Principal
Financial Officer)
On June 23, 2011, as a result of the Share Exchange Agreement, the sole
shareholder of Stevia Ventures International Ltd. ("Stevia Ventures") received
12,000,000 shares of our common stock in exchange for 100% of the issued and
outstanding common stock of Stevia Ventures. Mr. Blankenbaker, our President and
director, was the sole shareholder and officer of Stevia Ventures. 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 were to be held in
escrow pending the achievement by the Company of certain business milestones
(the "Escrow Shares"). On December 23, 2011, 3,000,000 of the 6,000,000 Escrow
Shares were earned and released to Mr. Blankenbaker upon achievement of certain
business objectives by the Company. Those shares were valued at $0.25 per share
or $750,000 on the date of release and recorded as compensation.
Other than as set forth above, none of our executive officers 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.
DIRECTOR COMPENSATION
On October 14, 2011 we issued 1,500,000 shares to each of Rodney L. Cook and
Pablo Erat, as newly appointed members of our Board of Directors, as
compensation for future services. These shares shall vest with respect to
750,000 shares of restricted stock for each director on each of the first two
anniversaries of the date of grant, subject to the director's continuous service
to the Company. These shares were valued at $0.25 per share, or an aggregate of
$750,000, on the date of grant and are being amortized over the vesting period
of two (2) years or $93,750 per quarter.
We recorded $187,500 in directors' fees for the period from April 11, 2011
(inception) through March 31, 2012.
We have no standard arrangement to compensate directors for their services in
their capacity as directors. Except as set forth above, directors are not paid
for meetings attended. All travel and lodging expenses associated with corporate
matters are reimbursed by us, if and when incurred.
34
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 21, 2012 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 19.56%
President, Secretary,
Treasurer, and Director
6451 Buck Creek Pkwy
Indianapolis, IN 46227
Rodney L Cook 1,500,000 2.44%
Director
1720 Medallion Loop NW
Olympia, WA 98502
Pablo Erat 1,500,000 2.44%
Director
Ludretikonerstrasse 53
880 Thalwil
Switzerland
All Officers and Directors 15,000,000 24.45%
as a Group
----------
(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 61,354,775 shares of our common stock outstanding as of June 21,
2012.
EQUITY COMPENSATION PLAN INFORMATION
The company has no active equity compensation plans and there are currently no
outstanding options from prior plans.
35
ITEM 13 -- CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Effective November 1, 2011, the Company engaged Growers Synergy to provide farm
management consulting services on a month-to-month basis. Growers Synergy is
owned and controlled by George Blankenbaker, the president, director and
stockholder of the Company. During the fiscal year ended March 31, 2012, the
Growers Synergy received $180,000 for consulting services rendered to the
Company. Minimum payments due from the Company to Growers Synergy during the
fiscal years ending March 31, 2013 and March 31, 2014 are $240,000 and $140,000
respectively.
On June 23, 2011, as a result of the Share Exchange Agreement, the sole
shareholder of Stevia Ventures International Ltd. ("Stevia Ventures") received
12,000,000 shares of our common stock in exchange for 100% of the issued and
outstanding common stock of Stevia Ventures. Mr. Blankenbaker, our President and
director, was the sole shareholder and officer of Stevia Ventures. 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 were to be held in
escrow pending the achievement by the Company of certain business milestones
(the "Escrow Shares"). On December 23, 2011, 3,000,000 of the 6,000,000 Escrow
Shares were earned and released to Mr. Blankenbaker upon achievement of certain
business objectives by the Company. Those shares were valued at $0.25 per share
or $750,000 on the date of release and recorded as compensation.
REVIEW, APPROVAL OR RATIFICATION OF TRANSACTIONS WITH RELATED PERSONS
Although we have adopted a Code of Ethics, we still 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.
DIRECTOR INDEPENDENCE
During the year ended March 31, 2012, we had two independent directors on our
Board, Dr. Erat and Mr. Cook. 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
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, March 31,
2012 2011
-------- --------
Audit Fees $ 15,250 $ 7,500
Audit - Related Fees 0 0
Tax Fees 0 0
All Other Fees 0 0
-------- --------
Total $ 15,250 $ 7,500
======== ========
36
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 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)
10.2 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)
10.3 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)
10.4 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)
10.5 Form of Convertible Promissory Note (incorporated by reference to
the registrant's Form 10-Q filed on November 21, 2011)
10.6 Stock Purchase Agreement (incorporated by reference to the
registrant's Form 10-Q filed on November 21, 2011)
10.7 Management and Off-Take Agreement with Growers Synergy Pte Ltd.,
effective November 1, 2011 (incorporated by reference to the
registrant's Form 8-K filed on October 31, 2011)
37
10.8 Equity Purchase Agreement with Southridge Partners II, LP, dated
January 26, 2012 (incorporated by reference to the registrant's
Form 8-K filed on January 30, 2012)
10.9 Registration Rights Agreement with Southridge Partners II, LP,
dated January 26, 2012 (incorporated by reference to the
registrant's Form 8-K filed on January 30, 2012)
10.10 The Minutes for Land Transferring Agreement for New Crop Plants
Variety, dated December 14, 2011 (incorporated by reference to the
registrant's Form 10-Q filed on February 17, 2012)
10.11 Supply Agreement with Guangzhou Health China Technology
Development Company Limited, dated February 21, 2012 (incorporated
by reference to the registrant's Form 8-K filed on February 27,
2012)
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*
101 Interactive data files pursuant to Rule 405 of Regulation S-T.*
----------
* Filed herewith
38
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: June 29, 2012 /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 June 29, 2012
------------------------------------- (Principal Financial
George Blankenbaker Officer and Principal
Accounting Officer)
/s/ Pablo Erat Director June 29, 2012
-------------------------------------
Pablo Erat
/s/ Rodney L. Cook Director June 29, 2012
-------------------------------------
Rodney L. Cook
39
Stevia Corp.
(A Development Stage Company)
March 31, 2012
Index to the Consolidated Financial Statements
Contents Page(s)
-------- -------
Report of Independent Registered Public Accounting Firm .................. F-2
Consolidated Balance Sheet at March 31, 2012 ............................. F-3
Consolidated Statement of Operation for the Period from April 11, 2011
(Inception) through March 31, 2012 ....................................... F-4
Consolidated Statement of Stockholders' Equity (Deficit) for the Period
from April 11, 2011 (Inception) through March 31, 2012 ................... F-5
Consolidated Statement of Cash Flows for the Period from April 11, 2011
(Inception) through March 31, 2012 ....................................... F-6
Notes to the Consolidated Financial Statements ........................... F-7
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Stevia Corp.
(A Development Stage Company)
Indianapolis, Indiana
We have audited the accompanying consolidated balance sheet of Stevia
Corp., a development stage company, (the "Company") as of March 31, 2012, and
the related consolidated statements of operations, stockholders' equity
(deficit) and cash flows for the period from April 11, 2011 (inception) through
March 31, 2012. These consolidated financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audit.
We conducted our audit 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
consolidated 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 audit 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 purposes
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 amount and
disclosures in the consolidated 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 audit provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of the Company
as of March 31, 2012, and the related consolidated statements of operations,
stockholders' equity (deficit) and cash flows for the period from April 11, 2011
(inception) through March 31, 2012 in conformity with accounting principles
generally accepted in the United States of America.
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern, which contemplates
continuity of operations, realization of assets, and liquidation of liabilities
in the normal course of business. As discussed in Note 3 to the consolidated
financial statements, the Company had a deficit accumulated during the
development stage at March 31, 2012 and a net loss and net cash used in
operating activities for the period from April 11, 2011 (inception) through
March 31, 2012. 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 consolidated 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
June 29, 2012
F-2
Stevia Corp.
(A Development Stage Company)
Consolidated Balance Sheet
March 31, 2012
--------------
ASSETS
Current assets:
Cash $ 15,698
Prepaid expenses 168,874
-----------
Total current assets 184,572
-----------
Furniture and fixture
Furniture and fixture 3,036
Accumulated depreciation --
-----------
Furniture and fixture, net 3,036
Website development costs
Website development costs 5,315
Accumulated amortization (801)
-----------
Website development costs, net 4,514
-----------
Security Deposit
Security deposit 15,000
-----------
Security deposit 15,000
-----------
Total assets $ 207,122
===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 237,288
Accounts payable - President and CEO 20,220
Accrued expenses 5,400
Accrued interest 15,521
Advances from president and significant stockholder 19,138
Convertible notes payable 700,000
-----------
Total current liabilities 997,567
-----------
Stockholders' deficit:
Common stock at $0.001 par value: 100,000,000 shares authorized,
58,354,775 shares issued and outstanding 58,355
Additional paid-in capital 1,474,751
Deficit accumulated during the development stage (2,323,551)
-----------
Total stockholders' deficit (790,445)
-----------
Total liabilities and stockholders' deficit $ 207,122
===========
See accompanying notes to the consolidated financial statements.
F-3
Stevia Corp.
(A Development Stage Company)
Consolidated Statements of Operations
For the Period from
April 11, 2011
(inception)
through
March 31, 2012
--------------
Revenues eaarned during the development stage $ 1,300
Cost of services during the development stage
Farm expenses 531,246
Farm management services - related party 180,000
------------
Total cost of services during the development stage 711,246
------------
Gross profit (loss) (709,946)
Operating expenses:
Directors' fees 187,500
Professional fees 255,959
Research and development 206,191
Salary and compensation - officer 750,000
General and administrative expenses 113,742
------------
Total operating expenses 1,513,392
------------
Loss from operations (2,223,338)
Other (income) expense:
Financing cost 70,500
Interest expense 29,757
Interest income (44)
------------
Total other (income) expense 100,213
------------
Loss before income taxes (2,323,551)
Income tax provision --
------------
Net loss $ (2,323,551)
============
Net loss per common share
- Basic and diluted: $ (0.05)
============
Weighted average common shares
- basic and diluted 45,093,271
============
See accompanying notes to the consolidated financial statements.
F-4
Stevia Corp.
(A Development Stage Company)
Consolidated Statement of Stockholders' Equity (Deficit)
For the Period from April 11, 2011 (Inception) through March 31, 2012
Common Stock, Deficit
$0.001 Par Value Accumulated Total
----------------------- Additional during the Stockholders'
Number paid-in Development Equity
of Shares Amount Capital Stage (Deficit)
--------- ------ ------- ----- ---------
Balance, April 11, 2011 (inception) 6,000,000 $ 6,000 $ (5,900) $ -- $ 100
Common shares deemed issued in
reverse acquisition 79,800,000 79,800 (198,088) (118,288)
Common shares cancelled in
reverse acquisition (33,000,000) (33,000) 33,000 --
Common shares issued for cash at
$0.25 per share on October 4, 2011 400,000 400 99,600 100,000
Common shares issued for notes
conversion at $0.25 per share on
October 4, 2011 1,400,000 1,400 348,600 350,000
Common shares issued for conversion
of accrued interest at $0.25 per
share on October 4, 2011 74,850 75 18,638 18,713
Common shares cancelled by significant
stockholder on October 4, 2011 (3,000,000) (3,000) 3,000 --
Common shares issued for future director
services on October 4, 2011 3,000,000 3,000 747,000 750,000
Common shares issued for future director
services on October 4, 2011 (750,000) (750,000)
Amortization of director services
earned during the period 187,500 187,500
Make good shares released to officer for
achieving the first milestone on
December 23, 2011 3,000,000 3,000 747,000 750,000
Common shares issued for notes conversion
at $0.25 per share on January 18, 2012 600,000 600 149,400 150,000
Common shares issued for conversion of
accrued interest at $0.25 per share on
January 18, 2012 17,425 17 4,339 4,356
Common shares issued for financing services
upon agreement at $1.50 per share on
January 26, 2012 35,000 35 52,465 52,500
Common shares issued for consulting services
at $1.39 per share on March 31, 2012 27,500 28 38,197 38,225
Net loss (2,323,551) (2,323,551)
----------- ----------- ----------- ----------- -----------
Balance, March 31, 2012 58,354,775 $ 58,355 $ 1,474,751 $(2,323,551) $ (790,445)
=========== =========== =========== =========== ===========
See accompanying notes to the consolidated financial statements.
F-5
Stevia Corp.
(A Development Stage Company)
Consolidated Statement of Cash Flows
For the Period from
April 11, 2011
(inception)
through
March 31, 2012
--------------
Cash flows from operating activities:
Net loss $(2,323,551)
Adjustments to reconcile net loss to net cash
used in operating activities
Amortization expense 801
Common shares issued for compensation 750,000
Common shares issued for director services earned during the period 187,500
Common shares issued for outside services 90,725
Changes in operating assets and liabilities:
Prepaid expenses (168,874)
Security deposit (15,000)
Accounts payable 141,530
Accounts payable - related parties 20,220
Accrued expenses (1,290)
Accrued interest 38,589
-----------
Net cash used in operating activities (1,279,350)
-----------
Cash flows from investing activities:
Purchases of property, plant and equipment (3,036)
Website development costs (5,315)
Cash received from reverse acquisition 3,199
-----------
Net cash used in investing activities (5,152)
-----------
Cash flows from financing activities:
Advances from president and stockholder 200
Proceeds from issuance of convertible notes 1,200,000
Proceeds from sale of common stock 100,000
-----------
Net cash provided by financing activities 1,300,200
-----------
Net change in cash 15,698
Cash at beginning of period --
-----------
Cash at end of period $ 15,698
===========
Supplemental disclosure of cash flows information:
Interest paid $ --
===========
Income tax paid $ --
===========
Non-cash investing and financing activities:
Issuance of common stock for conversion of convertible notes $ 500,000
===========
Issuance of common stock for conversion of accrued note interest $ 23,068
===========
See accompanying notes to the consolidated financial statements.
F-6
Stevia Corp.
(A Development Stage Company)
March 31, 2012
Notes to the Consolidated Financial Statements
NOTE 1 - ORGANIZATION AND OPERATIONS
STEVIA CORP. (FORMERLY INTERPRO MANAGEMENT CORP.)
Interpro Management Corp ("Interpro") was incorporated under the laws of
the State of Nevada on May 21, 2007. Interpro focused on developing and offering
web based software that was 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. The Company discontinued its web-based software
business upon the acquisition of Stevia Ventures International Ltd. on June 23,
2011.
On March 4, 2011, Interpro amended its Articles of Incorporation, and
changed its name to Stevia Corp. ("Stevia" or the "Company") and effectuated a
35 for 1 (1:35) forward stock split of all of its issued and outstanding shares
of common stock (the "Stock Split").
All shares and per share amounts in the consolidated financial statements
have been adjusted to give retroactive effect to the Stock Split.
STEVIA VENTURES INTERNATIONAL LTD.
Stevia Ventures International Ltd. ("Ventures") was incorporated on April
11, 2011 under the laws of the Territory of the British Virgin Islands ("BVI").
Ventures owns certain rights relating to stevia production, including certain
assignable exclusive purchase contracts and an assignable supply agreement
related to stevia.
ACQUISITION OF STEVIA VENTURES INTERNATIONAL LTD. RECOGNIZED AS A REVERSE
ACQUISITION
On June 23, 2011 (the "Closing Date"), the Company closed a voluntary share
exchange transaction with Stevia Ventures International Ltd. ("Ventures")
pursuant to a Share Exchange Agreement (the "Share Exchange Agreement") by and
among the Company, Ventures and George Blankenbaker, the stockholder of Ventures
(the "Ventures Stockholder").
Immediately prior to the Share Exchange Transaction on June 23, 2011, the
Company had 79,800,000 common shares issued and outstanding. Simultaneously with
the Closing of the Share Exchange Agreement, on the Closing Date, Mohanad
Shurrab, a shareholder and, as of the Closing Date, the Company's former
Director, President, Treasurer and Secretary, surrendered 33,000,000 shares of
the Company's common stock to the Company for cancellation.
As a result of the Share Exchange Agreement, the Company issued 12,000,000
common shares for the acquisition of 100% of the issued and outstanding shares
of Ventures. Of the 12,000,000 common shares issued 6,000,000 shares are being
held in escrow pending the achievement by the Company of certain post-Closing
business milestones (the "Milestones"), pursuant to the terms of the Make Good
Escrow Agreement, between the Company, Greenberg Traurig, LLP, as escrow agent
and the Ventures' Stockholder (the "Escrow Agreement"). Even though the shares
issued only represented approximately 20.4% of the issued and outstanding common
stock immediately after the consummation of the Share Exchange Agreement the
stockholder of Ventures completely took over and controlled the board of
directors and management of the Company upon acquisition.
As a result of the change in control to the then Ventures Stockholder, for
financial statement reporting purposes, the merger between the Company and
Ventures has been treated as a reverse acquisition with Ventures deemed the
accounting acquirer and the Company deemed the accounting acquiree under the
purchase method of accounting in accordance with section 805-10-55 of the FASB
Accounting Standards Codification. The reverse merger is deemed a capital
transaction and the net assets of Ventures (the accounting acquirer) are carried
forward to the Company (the legal acquirer and the reporting entity) at their
carrying value before the combination. The acquisition process utilizes the
capital structure of the Company and the assets and liabilities of Ventures
which are recorded at historical cost. The equity of the Company is the
historical equity of Ventures retroactively restated to reflect the number of
shares issued by the Company in the transaction.
F-7
FORMATION OF STEVIA ASIA LIMITED
On March 19, 2012, the Company formed Stevia Asia Limited ("Stevia Asia")
under the laws of the Hong Kong Special Administrative Region ("HK SAR") of the
People's Republic of China ("PRC"), a wholly-owned subsidiary. Stevia Asia is
currently inactive.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The Company's consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United States of
America ("U.S. GAAP").
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include all accounts of the Company
as of March 31, 2012 and for the period from June 23, 2011 (date of acquisition)
through March 31, 2012; Stevia Ventures International Ltd. as of March 31, 2012
and for the period from April 11, 2011 (inception) through March 31, 2012; and
Stevia Asia Limited as of March 31, 2012 and for the period from March 19, 2012
(inception) through March 31, 2012 as follows:
Jurisdiction or Attributable
Entity Place of Incorporation Interest
------ ---------------------- --------
Stevia Ventures International Ltd. BVI 100%
Stevia Asia Limited Hong Kong SAR 100%
All inter-company balances and transactions have been eliminated.
DEVELOPMENT STAGE COMPANY
The Company is a development stage company as defined by section 915-10-20
of the Financial Accounting Standards Board ("FASB") Accounting Standards
Codification. Although the Company has recognized some nominal amount of
revenues since inception, the Company is still devoting substantially all of its
efforts on establishing the business and, therefore, still qualifies as a
development stage company. All losses accumulated since inception have been
considered as part of the Company's development stage activities.
USE OF ESTIMATES AND ASSUMPTIONS
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America 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.
The Company's significant estimates and assumptions include the fair value
of financial instruments; the carrying value, recoverability and impairment of
long-lived assets, including the values assigned to and the estimated useful
lives of website development costs; interest rate; revenue recognized or
recognizable; sales returns and allowances; foreign currency exchange rate;
income tax rate, income tax provision, deferred tax assets and valuation
allowance of deferred tax assets; and the assumption that the Company will
continue as a going concern. 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 bases its estimates on historical experience and on various
assumptions that are believed to be reasonable in relation to the financial
statements taken as a whole 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.
F-8
Management regularly evaluates the key factors and assumptions used to
develop the estimates utilizing currently available information, changes in
facts and circumstances, historical experience and reasonable assumptions. After
such evaluations, if deemed appropriate, those estimates are adjusted
accordingly. Actual results could differ from those estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company follows 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 and paragraph 825-10-50-10 of the FASB Accounting
Standards Codification for disclosures about 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 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.
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 expenses,
approximate their fair values because of the short maturity of these
instruments.
The Company's convertible notes 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, 2012.
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.
CARRYING VALUE, RECOVERABILITY AND IMPAIRMENT OF LONG-LIVED ASSETS
The Company has adopted paragraph 360-10-35-17 of the FASB Accounting
Standards Codification for its long-lived assets. The Company's long-lived
assets, which include website development costs, are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable.
The Company assesses the recoverability of its long-lived assets by
comparing the projected undiscounted net cash flows associated with the related
long-lived asset or group of long-lived assets over their remaining estimated
useful lives against their respective carrying amounts. Impairment, if any, is
based on the excess of the carrying amount over the fair value of those assets.
Fair value is generally determined using the asset's expected future discounted
cash flows or market value, if readily determinable. If long-lived assets are
determined to be recoverable, but the newly determined remaining estimated
useful lives are shorter than originally estimated, the net book values of the
long-lived assets are depreciated over the newly determined remaining estimated
useful lives.
F-9
The Company considers the following to be some examples of important
indicators that may trigger an impairment review: (i) significant
under-performance or losses of assets relative to expected historical or
projected future operating results; (ii) significant changes in the manner or
use of assets or in the Company's overall strategy with respect to the manner or
use of the acquired assets or changes in the Company's overall business
strategy; (iii) significant negative industry or economic trends; (iv) increased
competitive pressures; (v) a significant decline in the Company's stock price
for a sustained period of time; and (vi) regulatory changes. The Company
evaluates acquired assets for potential impairment indicators at least annually
and more frequently upon the occurrence of such events.
The key assumptions used in management's estimates of projected cash flow
deal largely with forecasts of sales levels and gross margins. These forecasts
are typically based on historical trends and take into account recent
developments as well as management's plans and intentions. Other factors, such
as increased competition or a decrease in the desirability of the Company's
products or services, could lead to lower projected sales levels, which would
adversely impact cash flows. A significant change in cash flows in the future
could result in an impairment of long lived assets.
The impairment charges, if any, is included in operating expenses in the
accompanying consolidated statements of income and comprehensive income (loss).
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.
FURNITURE AND FIXTURE
Furniture and fixture is recorded at cost. Expenditures for major additions
and betterments are capitalized. Maintenance and repairs are charged to
operations as incurred. Depreciation of furniture and fixture is computed by the
straight-line method (after taking into account their respective estimated
residual values) over the assets estimated useful life of five (5) years. Upon
sale or retirement of furniture and fixture, the related cost and accumulated
depreciation are removed from the accounts and any gain or loss is reflected in
the statements of operations.
WEBSITE DEVELOPMENT COSTS
Website development costs are stated at cost less accumulated amortization.
The cost of the website development is amortized on a straight-line basis over
its estimated useful life of five (5) years. Upon becoming fully amortized, the
related cost and accumulated amortization are removed from the accounts.
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
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.
F-10
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) involved; b. a
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.
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 potential
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.
REVENUE RECOGNITION
The Company follows paragraph 605-10-S99-1 of the FASB Accounting Standards
Codification for revenue recognition. The Company recognizes revenue when it is
realized or realizable and earned. The Company considers revenue realized or
realizable and earned when all of the following criteria are met: (i) persuasive
evidence of an arrangement exists, (ii) the product has been shipped or the
services have been rendered to the customer, (iii) the sales price is fixed or
determinable, and (iv) collectability is reasonably assured.
RESEARCH AND DEVELOPMENT
The Company follows paragraph 730-10-25-1 of the FASB Accounting Standards
Codification (formerly Statement of Financial Accounting Standards No. 2
"ACCOUNTING FOR RESEARCH AND DEVELOPMENT COSTS") and paragraph 730-20-25-11 of
the FASB Accounting Standards Codification (formerly Statement of Financial
Accounting Standards No. 68 "RESEARCH AND DEVELOPMENT ARRANGEMENTS") for
research and development costs. Research and development costs are charged to
expense as incurred. Research and development costs consist primarily of
remuneration for research and development staff, depreciation and maintenance
expenses of research and development equipment, material and testing costs for
research and development as well as research and development arrangements with
unrelated third party research and development institutions. The research and
development arrangements usually involve specific research and development
projects. Often times, the Company makes non-refundable advances upon signing of
these arrangements. The Company adopted paragraph 730-20-25-13 and 730-20-35-1
of the FASB Accounting Standards Codification (formerly Emerging Issues Task
Force Issue No. 07-3 "ACCOUNTING FOR NONREFUNDABLE ADVANCE PAYMENTS FOR GOODS OR
SERVICES TO BE USED IN FUTURE RESEARCH AND DEVELOPMENT ACTIVITIES") for those
non-refundable advances. Non-refundable advance payments for goods or services
that will be used or rendered for future research and development activities are
deferred and capitalized. Such amounts are recognized as an expense as the
related goods are delivered or the related services are performed. The
management continues to evaluate whether the Company expect the goods to be
delivered or services to be rendered. If the management does not expect the
goods to be delivered or services to be rendered, the capitalized advance
payment are charged to expense.
F-11
STOCK-BASED COMPENSATION FOR OBTAINING EMPLOYEE SERVICES
The Company accounts for its stock based compensation in which the Company
obtains employee services in share-based payment transactions under the
recognition and measurement principles of the fair value recognition provisions
of section 718-10-30 of the FASB Accounting Standards Codification. Pursuant to
paragraph 718-10-30-6 of the FASB Accounting Standards Codification, all
transactions in which goods or services are the consideration received for the
issuance of equity instruments are accounted for based on the fair value of the
consideration received or the fair value of the equity instrument issued,
whichever is more reliably measurable. The measurement date used to determine
the fair value of the equity instrument issued is the earlier of the date on
which the performance is complete or the date on which it is probable that
performance will occur. If shares of the Company are thinly traded the use of
share prices established in the Company's most recent private placement
memorandum (PPM"), or weekly or monthly price observations would generally be
more appropriate than the use of daily price observations as such shares could
be artificially inflated due to a larger spread between the bid and asked quotes
and lack of consistent trading in the market.
The fair value of each option award is estimated on the date of grant using
a Black-Scholes option-pricing valuation model. The ranges of assumptions for
inputs are as follows:
* Expected term of share options and similar instruments: The expected life
of options and similar instruments represents the period of time the option
and/or warrant are expected to be outstanding. Pursuant to Paragraph
718-10-50-2(f)(2)(i) of the FASB Accounting Standards Codification the
expected term of share options and similar instruments represents the
period of time the options and similar instruments are expected to be
outstanding taking into consideration of the contractual term of the
instruments and employees' expected exercise and post-vesting employment
termination behavior into the fair value (or calculated value) of the
instruments. Pursuant to paragraph 718-50-S99-1, it may be appropriate to
use the SIMPLIFIED METHOD, if (i) A company does not have sufficient
historical exercise data to provide a reasonable basis upon which to
estimate expected term due to the limited period of time its equity shares
have been publicly traded; (ii) A company significantly changes the terms
of its share option grants or the types of employees that receive share
option grants such that its historical exercise data may no longer provide
a reasonable basis upon which to estimate expected term; or (iii) A company
has or expects to have significant structural changes in its business such
that its historical exercise data may no longer provide a reasonable basis
upon which to estimate expected term. The Company uses the simplified
method to calculate expected term of share options and similar instruments
as the company does not have sufficient historical exercise data to provide
a reasonable basis upon which to estimate expected term.
* Expected volatility of the entity's shares and the method used to estimate
it. Pursuant to ASC Paragraph 718-10-50-2(f)(2)(ii) a thinly-traded or
nonpublic entity that uses the calculated value method shall disclose the
reasons why it is not practicable for the Company to estimate the expected
volatility of its share price, the appropriate industry sector index that
it has selected, the reasons for selecting that particular index, and how
it has calculated historical volatility using that index. The Company uses
the average historical volatility of the comparable companies over the
expected contractual life of the share options or similar instruments as
its expected volatility. If shares of a company are thinly traded the use
of weekly or monthly price observations would generally be more appropriate
than the use of daily price observations as the volatility calculation
using daily observations for such shares could be artificially inflated due
to a larger spread between the bid and asked quotes and lack of consistent
trading in the market.
* Expected annual rate of quarterly dividends. An entity that uses a method
that employs different dividend rates during the contractual term shall
disclose the range of expected dividends used and the weighted-average
expected dividends. The expected dividend yield is based on the Company's
current dividend yield as the best estimate of projected dividend yield for
periods within the expected term of the share options and similar
instruments.
* Risk-free rate(s). An entity that uses a method that employs different
risk-free rates shall disclose the range of risk-free rates used. The
risk-free interest rate is based on the U.S. Treasury yield curve in effect
at the time of grant for periods within the expected term of the share
options and similar instruments.
F-12
The Company's policy is to recognize compensation cost for awards with only
service conditions and a graded vesting schedule on a straight-line basis over
the requisite service period for the entire award.
EQUITY INSTRUMENTS ISSUED TO PARTIES OTHER THAN EMPLOYEES FOR ACQUIRING GOODS OR
SERVICES
The Company accounts for equity instruments issued to parties other than
employees for acquiring goods or services under guidance of Subtopic 505-50 of
the FASB Accounting Standards Codification ("Subtopic 505-50").
Pursuant to ASC Section 505-50-30, all transactions in which goods or
services are the consideration received for the issuance of equity instruments
are accounted for based on the fair value of the consideration received or the
fair value of the equity instrument issued, whichever is more reliably
measurable. The measurement date used to determine the fair value of the equity
instrument issued is the earlier of the date on which the performance is
complete or the date on which it is probable that performance will occur. If
shares of the Company are thinly traded the use of share prices established in
the Company's most recent private placement memorandum (PPM"), or weekly or
monthly price observations would generally be more appropriate than the use of
daily price observations as such shares could be artificially inflated due to a
larger spread between the bid and asked quotes and lack of consistent trading in
the market.
The fair value of option or warrant award is estimated on the date of grant
using a Black-Scholes option-pricing valuation model. The ranges of assumptions
for inputs are as follows:
* Expected term of share options and similar instruments: Pursuant to
Paragraph 718-10-50-2 of the FASB Accounting Standards Codification the
expected term of share options and similar instruments represents the
period of time the options and similar instruments are expected to be
outstanding taking into consideration of the contractual term of the
instruments and holder's expected exercise behavior into the fair value (or
calculated value) of the instruments. The Company uses historical data to
estimate holder's expected exercise behavior. If the Company is a newly
formed corporation or shares of the Company are thinly traded the
contractual term of the share options and similar instruments is used as
the expected term of share options and similar instruments as the Company
does not have sufficient historical exercise data to provide a reasonable
basis upon which to estimate expected term.
* Expected volatility of the entity's shares and the method used to estimate
it. An entity that uses a method that employs different volatilities during
the contractual term shall disclose the range of expected volatilities used
and the weighted-average expected volatility. A thinly-traded or nonpublic
entity that uses the calculated value method shall disclose the reasons why
it is not practicable for the Company to estimate the expected volatility
of its share price, the appropriate industry sector index that it has
selected, the reasons for selecting that particular index, and how it has
calculated historical volatility using that index. The Company uses the
average historical volatility of the comparable companies over the expected
contractual life of the share options or similar instruments as its
expected volatility. If shares of a company are thinly traded the use of
weekly or monthly price observations would generally be more appropriate
than the use of daily price observations as the volatility calculation
using daily observations for such shares could be artificially inflated due
to a larger spread between the bid and asked quotes and lack of consistent
trading in the market.
* Expected annual rate of quarterly dividends. An entity that uses a method
that employs different dividend rates during the contractual term shall
disclose the range of expected dividends used and the weighted-average
expected dividends. The expected dividend yield is based on the Company's
current dividend yield as the best estimate of projected dividend yield for
periods within the expected contractual life of the option and similar
instruments.
* Risk-free rate(s). An entity that uses a method that employs different
risk-free rates shall disclose the range of risk-free rates used. The
risk-free interest rate is based on the U.S. Treasury yield curve in effect
at the time of grant for periods within the contractual life of the option
and similar instruments.
F-13
Pursuant to Paragraphs 505-50-25-8, if fully vested, non-forfeitable equity
instruments are issued at the date the grantor and grantee enter into an
agreement for goods or services (no specific performance is required by the
grantee to retain those equity instruments), then, because of the elimination of
any obligation on the part of the counterparty to earn the equity instruments, a
measurement date has been reached. A grantor shall recognize the equity
instruments when they are issued (in most cases, when the agreement is entered
into). Whether the corresponding cost is an immediate expense or a prepaid asset
(or whether the debit should be characterized as contra-equity under the
requirements of paragraph 505-50-45-1) depends on the specific facts and
circumstances. Pursuant to ASC paragraph 505-50-45-1, a grantor may conclude
that an asset (other than a note or a receivable) has been received in return
for fully vested, non-forfeitable equity instruments that are issued at the date
the grantor and grantee enter into an agreement for goods or services (and no
specific performance is required by the grantee in order to retain those equity
instruments). Such an asset shall not be displayed as contra-equity by the
grantor of the equity instruments. The transferability (or lack thereof) of the
equity instruments shall not affect the balance sheet display of the asset. This
guidance is limited to transactions in which equity instruments are transferred
to other than employees in exchange for goods or services. Section 505-50-30
provides guidance on the determination of the measurement date for transactions
that are within the scope of this Subtopic.
Pursuant to Paragraphs 505-50-25-8 and 505-50-25-9,an entity may grant
fully vested, non-forfeitable equity instruments that are exercisable by the
grantee only after a specified period of time if the terms of the agreement
provide for earlier exercisability if the grantee achieves specified performance
conditions. Any measured cost of the transaction shall be recognized in the same
period(s) and in the same manner as if the entity had paid cash for the goods or
services or used cash rebates as a sales discount instead of paying with, or
using, the equity instruments. A recognized asset, expense, or sales discount
shall not be reversed if a stock option that the counterparty has the right to
exercise expires unexercised.
Pursuant to ASC paragraph 505-50-30-S99-1, if the Company receives a right
to receive future services in exchange for unvested, forfeitable equity
instruments, those equity instruments are treated as unissued for accounting
purposes until the future services are received (that is, the instruments are
not considered issued until they vest). Consequently, there would be no
recognition at the measurement date and no entry should be recorded.
INCOME TAX PROVISION
The Company accounts for income taxes under Section 740-10-30 of the FASB
Accounting Standards Codification, which requires recognition of deferred tax
assets and liabilities for the expected future tax consequences of events that
have been included in the financial statements or tax returns. Under this
method, deferred tax assets and liabilities are based on the differences between
the financial statement and tax bases of assets and liabilities using enacted
tax rates in effect for the year in which 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
consolidated statements of income and comprehensive income (loss) 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 (50) percent 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 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.
F-14
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.
UNCERTAIN TAX POSITIONS
The Company did not take any uncertain tax positions and had no adjustments
to its income tax liabilities or benefits pursuant to the provisions of Section
740-10-25 for the period from April 11, 2011 (Inception) through March 31, 2012.
LIMITATION ON UTILIZATION OF NOLS DUE TO CHANGE IN CONTROL
Pursuant to the Internal Revenue Code Section 382 ("Section 382"), certain
ownership changes may subject the NOL's to annual limitations which could reduce
or defer the NOL. Section 382 imposes limitations on a corporation's ability to
utilize NOLs if it experiences an "ownership change." In general terms, an
ownership change may result from transactions increasing the ownership of
certain stockholders in the stock of a corporation by more than 50 percentage
points over a three-year period. In the event of an ownership change,
utilization of the NOLs would be subject to an annual limitation under Section
382 determined by multiplying the value of its stock at the time of the
ownership change by the applicable long-term tax-exempt rate. Any unused annual
limitation may be carried over to later years. The imposition of this limitation
on its ability to use the NOLs to offset future taxable income could cause the
Company to pay U.S. federal income taxes earlier than if such limitation were
not in effect and could cause such NOLs to expire unused, reducing or
eliminating the benefit of such NOLs.
NET INCOME (LOSS) PER COMMON SHARE
Net income (loss) per common share is computed pursuant to section
260-10-45 of the FASB Accounting Standards Codification. Basic net income (loss)
per common share is computed by dividing net income (loss) by the weighted
average number of shares of common stock outstanding during the period. Diluted
net income (loss) per common share is computed by dividing net income (loss) by
the weighted average number of shares of common stock and potentially
outstanding shares of common stock during the period to reflect the potential
dilution that could occur from common shares issuable through contingent shares
issuance arrangement, stock options or warrants.
The following table shows the potentially outstanding dilutive common
shares excluded from the diluted net income (loss) per common share calculation
for the period from April 11, 2011 (inception) through March 31, 2012 as they
were anti-dilutive:
Potentially Outstanding
Dilutive Common Shares
-----------------------
For the
Period from
April 11, 2011
(inception)
through
March 31, 2012
--------------
The remainder of the Make Good Escrow Agreement
shares issued and held with the escrow agent in
connection with the Share Exchange Agreement
consummated on June 23, 2011 pending the
achievement by the Company of certain
post-Closing business milestones (the
"Milestones"). 3,000,000
----------
Total potentially outstanding dilutive common
shares 3,000,000
==========
F-15
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. The Company
reports the reporting currency equivalent of foreign currency cash flows, using
the current exchange rate at the time of the cash flows and the effect of
exchange rate changes on cash held in foreign currencies is reported as a
separate item in the reconciliation of beginning and ending balances of cash and
cash equivalents and separately provides information about investing and
financing activities not resulting in cash receipts or payments in the period
pursuant to paragraph 830-230-45-1 of the FASB Accounting Standards
Codification.
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 will evaluate subsequent events 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 on
EDGAR.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
FASB ACCOUNTING STANDARDS UPDATE NO. 2011-05
In June 2011, the FASB issued the FASB Accounting Standards Update No.
2011-05 "COMPREHENSIVE INCOME" ("ASU 2011-05"), which was the result of a joint
project with the IASB and amends the guidance in ASC 220, COMPREHENSIVE INCOME,
by eliminating the option to present components of other comprehensive income
(OCI) in the statement of stockholders' equity. Instead, the new guidance now
gives entities the option to present all non-owner changes in stockholders'
equity either as a single continuous statement of comprehensive income or as two
separate but consecutive statements. Regardless of whether an entity chooses to
present comprehensive income in a single continuous statement or in two separate
but consecutive statements, the amendments require entities to present all
reclassification adjustments from OCI to net income on the face of the statement
of comprehensive income.
The amendments in this Update should be applied retrospectively and are
effective for public entity for fiscal years, and interim periods within those
years, beginning after December 15, 2011.
FASB ACCOUNTING STANDARDS UPDATE NO. 2011-08
In September 2011, the FASB issued the FASB Accounting Standards Update No.
2011-08 "INTANGIBLES--GOODWILL AND OTHER: TESTING GOODWILL FOR IMPAIRMENT" ("ASU
2011-08"). This Update is to simplify how public and nonpublic entities test
goodwill for impairment. The amendments permit an entity to first assess
qualitative factors to determine whether it is more likely than not that the
fair value of a reporting unit is less than its carrying amount as a basis for
determining whether it is necessary to perform the two-step goodwill impairment
test described in Topic 350. Under the amendments in this Update, an entity is
not required to calculate the fair value of a reporting unit unless the entity
determines that it is more likely than not that its fair value is less than its
carrying amount.
The guidance is effective for interim and annual periods beginning on or
after December 15, 2011. Early adoption is permitted.
FASB ACCOUNTING STANDARDS UPDATE NO. 2011-10
In December 2011, the FASB issued the FASB Accounting Standards Update No.
2011-10 "PROPERTY, PLANT AND EQUIPMENT: DERECOGNITION OF IN SUBSTANCE REAL
ESTATE-A SCOPE CLARIFICATION" ("ASU 2011-09"). This Update is to resolve the
diversity in practice as to how financial statements have been reflecting
circumstances when parent company reporting entities cease to have controlling
financial interests in subsidiaries that are in substance real estate, where the
situation arises as a result of default on nonrecourse debt of the subsidiaries.
F-16
The amended guidance is effective for annual reporting periods ending after
June 15, 2012 for public entities. Early adoption is permitted.
FASB ACCOUNTING STANDARDS UPDATE NO. 2011-11
In December 2011, the FASB issued the FASB Accounting Standards Update No.
2011-11 "BALANCE SHEET: DISCLOSURES ABOUT OFFSETTING ASSETS AND LIABILITIES"
("ASU 2011-11"). This Update requires an entity to disclose information about
offsetting and related arrangements to enable users of its financial statements
to understand the effect of those arrangements on its financial position. The
objective of this disclosure is to facilitate comparison between those entities
that prepare their financial statements on the basis of U.S. GAAP and those
entities that prepare their financial statements on the basis of IFRS.
The amended guidance is effective for annual reporting periods beginning on
or after January 1, 2013, and interim periods within those annual periods.
FASB ACCOUNTING STANDARDS UPDATE NO. 2011-12
In December 2011, the FASB issued the FASB Accounting Standards Update No.
2011-12 "COMPREHENSIVE INCOME: DEFERRAL OF THE EFFECTIVE DATE FOR AMENDMENTS TO
THE PRESENTATION OF RECLASSIFICATIONS OF ITEMS OUT OF ACCUMULATED OTHER
COMPREHENSIVE INCOME IN ACCOUNTING STANDARDS UPDATE NO. 2011-05" ("ASU
2011-12"). This Update is a deferral of the effective date pertaining to
reclassification adjustments out of accumulated other comprehensive income in
ASU 2011-05. FASB is to going to reassess the costs and benefits of those
provisions in ASU 2011-05 related to reclassifications out of accumulated other
comprehensive income. Due to the time required to properly make such a
reassessment and to evaluate alternative presentation formats, the FASB decided
that it is necessary to reinstate the requirements for the presentation of
reclassifications out of accumulated other comprehensive income that were in
place before the issuance of Update 2011-05.
All other requirements in Update 2011-05 are not affected by this Update,
including the requirement to report comprehensive income either in a single
continuous financial statement or in two separate but consecutive financial
statements. Public entities should apply these requirements for fiscal years,
and interim periods within those years, beginning after December 15, 2011.
OTHER RECENTLY ISSUED, BUT NOT YET EFFECTIVE ACCOUNTING PRONOUNCEMENTS
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 financial statements.
NOTE 3 - GOING CONCERN
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern, which contemplates
continuity of operations, realization of assets, and liquidation of liabilities
in the normal course of business.
As reflected in the accompanying consolidated financial statements, the
Company had a deficit accumulated during the development stage at March 31,
2012, a net loss and net cash used in operating activities for the period from
April 11, 2011 (inception) through March 31, 2012. These factors raise
substantial doubt about the Company's ability to continue as a going concern.
While the Company is attempting to commence operations and generate
sufficient revenues, the Company's cash position may not be sufficient 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 commence operations and 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 consolidated financial statements do not include any adjustments
related to the recoverability and classification of recorded asset amounts or
the amounts and classification of liabilities that might be necessary should the
Company be unable to continue as a going concern.
F-17
NOTE 4 - PREPAID EXPENSES
Prepaid expenses at March 31, 2012, consisted of the following:
March 31, 2012
--------------
Prepaid research and development $128,445
Prepaid rent 21,250
Retainer 15,000
Other 4,179
--------
$168,874
========
NOTE 5 - FURNITURE AND FIXTURE
Furniture and fixture, stated at cost, less accumulated depreciation at
March 31, 2012 consisted of the following:
Estimated
Useful Life
(Years) March 31, 2012
------- --------------
Furniture and fixture 5 $ 3,036
--------
3,036
Less accumulated depreciation (-)
--------
$ 3,036
========
DEPRECIATION EXPENSE
The Company acquired furniture and fixture near the end of February 2012
and started to depreciate as of April 1, 2012.
NOTE 6 - WEBSITE DEVELOPMENT COSTS
Website development costs, stated at cost, less accumulated amortization at
March 31, 2012, consisted of the following:
March 31, 2012
--------------
Website development costs $ 5,315
Accumulated amortization (801)
--------
$ 4,514
========
AMORTIZATION EXPENSE
Amortization expense was $801 for the period from April 11, 2011
(inception) through March 31, 2012.
F-18
NOTE 7 - RELATED PARTY TRANSACTIONS
RELATED PARTIES
Related parties with whom the Company had transactions are:
Related Parties Relationship
--------------- ------------
George Blankenbaker President and significant stockholder of the Company
Leverage Investments LLC An entity owned and controlled by the president and
significant stockholder of the Company
Growers Synergy Pte Ltd. An entity owned and controlled by the president and
significant stockholder of the Company
ADVANCES FROM STOCKHOLDER
From time to time, stockholders of the Company advance funds to the Company
for working capital purpose. Those advances are unsecured, non-interest bearing
and due on demand.
LEASE OF CERTAIN OFFICE SPACE FROM LEVERAGE INVESTMENTS, LLC
The Company leases certain office space with Leverage Investments, LLC for
$500 per month on a month-to-month basis since July 1, 2011. For the period from
April 11, 2011 (inception) through March 31, 2012, the Company recorded $9,200
in rent expenses due Leverage Investment LLC.
CONSULTING SERVICES, MANAGEMENT AND OFF-TAKE AGREEMENT WITH GROWERS SYNERGY PTE
LTD.
Prior to November 1, 2011, the Company engaged Growers Synergy Pte Ltd. to
provide farm management consulting services on a month-to-month basis, at
$20,000 per month as of July 1, 2011.
On November 1, 2011, the Company entered into a Management and Off-Take
Agreement (the "Agreement") with Growers Synergy Pte Ltd. ("GSPL"), a Singapore
corporation owned and controlled by the president and major stockholder of the
Company. Under the terms of the Agreement, the Company will engage GSPL to
supervise the Company's farm management operations, recommend quality farm
management programs for stevia cultivation, assist in the hiring of employees
and provide training to help the Company meet its commercialization targets,
develop successful models to propagate future agribusiness services, and provide
back-office and regional logistical support for the development of proprietary
stevia farm systems in Vietnam, Indonesia and potentially other countries. GSPL
will provide services for a term of two (2) years from the date of signing, at
$20,000 per month. The Agreement may be terminated by the Company upon 30 day
notice. In connection with the Agreement, the parties agreed to enter into an
off-take agreement whereby GSPL agreed to purchase all of the non-stevia crops
produced at the Company's GSPL supervised farms.
Consulting services provided by Growers Synergy Pte Ltd. for the period
from April 11, 2011 (inception) through March 31, 2012 is as follows:
March 31, 2012
--------------
Consulting services received and consulting fees booked $180,000
--------
$180,000
========
F-19
Future minimum payments required under this agreement at March 31, 2012
were as follows:
Fiscal Year Ending March 31:
2013 $240,000
2014 140,000
--------
$380,000
========
NOTE 8 - CONVERTIBLE NOTES PAYABLE
On February 14, 2011, the Company issued a convertible note in the amount
of $250,000 with interest at 10% per annum due one (1) year from the date of
issuance. On October 4, 2011, the note holder converted the entire principal of
$250,000 and accrued interest through the date of conversion of $15,890.41 to
1,000,000 and 63,561 shares of the Company's common stock at $0.25 per share,
respectively.
On June 23, 2011, the Company issued a convertible note in the amount of
$100,000 with interest at 10% per annum due one (1) year from the date of
issuance. On October 4, 2011, the note holder converted the entire principal of
$100,000 and accrued interest through the date of conversion of $2,821.92 to
400,000 and 11,288 shares of the Company's common stock at $0.25 per share.
On October 4, 2011, the Company issued a convertible note in the amount of
$150,000 with interest at 10% per annum due one (1) year from the date of
issuance. On January 18, 2012, the note holder converted the entire principal of
$150,000 and accrued interest through the date of conversion of $4,356 to
617,425 shares of the Company's common stock at $0.25 per share.
On November 16, 2011, the Company issued a convertible note in the amount
of $250,000 with interest at 10% per annum due one (1) year from the date of
issuance. The note may be converted into common shares 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.
On January 16, 2012, the Company issued a convertible note in the amount of
$250,000 with interest at 10% per annum due one (1) year from the date of
issuance.
On March 7, 2012, the Company issued a convertible note in the amount of
$200,000 with interest at 10% per annum due one (1) year from the date of
issuance.
Convertible notes payable at March 31, 2012 consisted of the following:
March 31, 2012
--------------
On November 16, 2011, the Company issued a convertible note
in the amount of $250,000 with interest at 10% per annum
due one (1) year from the date of issuance. The note may
be converted into common shares 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 $250,000
On January 16, 2012, the Company issued a convertible note
in the amount of $250,000 with interest at 10% per annum
due one (1) year from the date of issuance 250,000
On March 7, 2012, the Company issued a convertible note in
the amount of $200,000 with interest at 10% per annum due
one (1) year from the date of issuance. 200,000
--------
$700,000
========
F-20
NOTE 9 - STOCKHOLDERS' DEFICIT
SHARES AUTHORIZED
Upon formation the total number of shares of common stock which the Company
is authorized to issue is One Hundred Million (100,000,000) shares, par value
$0.001 per share.
COMMON STOCK
REVERSE ACQUISITION TRANSACTION
Immediately prior to the Share Exchange Transaction on June 23, 2011, the
Company had 79,800,000 common shares issued and outstanding. Simultaneously with
the Closing of the Share Exchange Agreement, on the Closing Date, Mohanad
Shurrab, a shareholder and, as of the Closing Date, the Company's former
Director, President, Treasurer and Secretary, surrendered 33,000,000 shares of
the Company's common stock to the Company for cancellation.
As a result of the Share Exchange Agreement, the Company issued 12,000,000
common shares for the acquisition of 100% of the issued and outstanding shares
of Stevia Ventures International Ltd. Of the 12,000,000 common shares issued in
connection with the Share Exchange Agreement, 6,000,000 of such shares are being
held in escrow ("Escrow Shares") pending the achievement by the Company of
certain post-Closing business milestones (the "Milestones"), pursuant to the
terms of the Make Good Escrow Agreement, between the Company, Greenberg Traurig,
LLP, as escrow agent and the Ventures' Stockholder (the "Escrow Agreement").
MAKE GOOD AGREEMENT SHARES
(I) DURATION OF ESCROW AGREEMENT
The Make Good Escrow Agreement shall terminate on the sooner of (i) the
distribution of all the escrow shares, or (ii) December 31, 2013.
(II) DISBURSEMENT OF MAKE GOOD SHARES
Upon achievement of any Milestone on or before the date associated with
such Milestone on Exhibit A, the Company shall promptly provide written
notice to the Escrow Agent and the Selling Shareholder of such achievement
(each a "COMPLETION NOTICE"). Upon the passage of any Milestone date set
forth on Exhibit A for which the Company has not achieved the associated
Milestone, the Company shall promptly provide written notice to the Escrow
Agent and the Selling Shareholder of such failure to achieve the milestone
(each a "NONCOMPLETION NOTICE").
(III) EXHIBIT A - SCHEDULE OF MILESTONES
Completion Number of
Milestones Date Escrow Shares
---------- ---- -------------
I.
(1) Enter into exclusive international license agreement
for all Agro Genesis intellectual property and
products as it applies to stevia
(2) Enter into cooperative agreements to work with Vietnam
Institutes (a) Medical Plant Institute in Hanoi; (b)
Agricultural Science Institute of Northern Central 3,000,000
Vietnam shares only
(3) Enter into farm management agreements with local if and when
growers including the Provincial and National Within 180 ALL four (4)
projects; days of the milestones
(4) Take over management of three existing nurseries Closing Date reached
II. Achieve 100 Ha field trials and first test shipment of Within two (2)
dry leaf years of the
Closing Date 1,500,000 shares
F-21
III. Test shipment of dry leaf to achieve minimum specs for Within two (2)
contracted base price (currently $2.00 per kilogram) years of the
Closing Date 1,500,000 shares
On December 23, 2011, 3,000,000 out of the 6,000,000 Escrow Shares have
been earned and released to Ventures stockholder upon achievement of the First
Milestone within 180 days of June 23, 2011, the Closing Date associated with the
First Milestone. Those shares were valued at $0.25 per share or $750,000 on the
date of release and recorded as compensation.
COMMON SHARES SURRENDERED FOR CANCELLATION
On October 4, 2011, a significant stockholder of the Company, Mohanad
Shurrab, surrendered another 3,000,000 shares of the Company's common stock to
the Company for cancellation. The Company recorded this transaction by debiting
common stock at par of $3,000 and crediting additional paid-in capital of the
same.
COMMON SHARES ISSUED FOR CASH
On October 4, 2011 the Company sold 400,000 shares of its common stock to
one investor at $0.25 per share or $100,000.
COMMON SHARES ISSUED FOR OBTAINING EMPLOYEE AND DIRECTOR SERVICES
On October 14, 2011 the Company issued 1,500,000 shares each to two (2)
newly appointed members of the board of directors or 3,000,000 shares of its
common stock in aggregate as compensation for future services. These shares
shall vest with respect to 750,000 shares of restricted stock on each of the
first two anniversaries of the date of grant, subject to the director's
continuous service to the Company as directors. These shares were valued at
$0.25 per share or $750,000 on the date of grant and are being amortized over
the vesting period of two (2) years or $93,750 per quarter. The Company recorded
$187,500 in directors' fees for the period from April 11, 2011 (inception)
through March 31, 2012.
COMMON SHARES ISSUED TO PARTIES OTHER THAN EMPLOYEES FOR ACQUIRING GOODS OR
SERVICES
EQUITY PURCHASE AGREEMENT AND RELATED REGISTRATION RIGHTS AGREEMENT
(I) EQUITY PURCHASE AGREEMENT
On January 26, 2012, the Company entered into an equity purchase agreement
("Equity Purchase Agreement") with Southridge Partners II, LP, a Delaware
limited partnership (The "Investor"). Upon the terms and subject to the
conditions contained in the agreement, the Company shall issue and sell to the
Investor, and the Investor shall purchase, up to Twenty Million Dollars
($20,000,000) of its common stock, par value $0.001 per share.
At any time and from time to time during the Commitment Period, the period
commencing on the effective date, and ending on the earlier of (i) the date on
which investor shall have purchased put shares pursuant to this agreement for an
aggregate purchase price of the maximum commitment amount, or (ii) the date
occurring thirty six (36) months from the date of commencement of the commitment
period. the Company may exercise a put by the delivery of a put notice, the
number of put shares that investor shall purchase pursuant to such put shall be
determined by dividing the investment amount specified in the put notice by the
purchase price with respect to such put notice. However, that the investment
amount identified in the applicable put notice shall not be greater than the
maximum put amount and, when taken together with any prior put notices, shall
not exceed the maximum commitment The purchase price shall mean 93% of the
market price on such date on which the purchase price is calculated in
accordance with the terms and conditions of this Agreement.
(II) REGISTRATION RIGHTS AGREEMENT
In connection with the Equity Purchase Agreement, on January 26, 2012, the
Company entered into a registration rights agreement ("Registration Rights
Agreement") with Southridge Partners II, LP, a Delaware limited partnership (the
"Investor"). To induce the investor to execute and deliver the equity purchase
agreement which the Company has agreed to issue and sell to the investor shares
(the "put shares") of its common stock, par value $0.001 per share (the "common
stock") from time to time for an aggregate investment price of up to twenty
million dollars ($20,000,000) (the "registrable securities"), the company has
agreed to provide certain registration rights under the securities act of 1933,
as amended, and the rules and regulations thereunder, or any similar successor
statute (collectively, "securities act"), and applicable state securities laws
with respect to the registrable securities.
F-22
(III) COMMON SHARES ISSUED UPON SIGNING
As a condition for the execution of this agreement by the investor, the
company issued to the investor 35,000 shares of restricted common stock (the
"restricted shares") upon the signing of this agreement. The restricted shares
shall have no registration rights. These shares were valued at $1.50 per share
or $52,500 on the date of issuance and recorded as financing cost.
MARKETING SERVICE AGREEMENT - EMPIRE RELATIONS GROUP INC.
On March 14, 2012 the Company entered into a consulting agreement (the
"Consulting Agreement") with Empire Relations Group, Inc. ("Empire").
(I) SCOPE OF SERVICES
Under the terms of the Consulting Agreement, the Company engaged Empire to
introduce interested investors to the Company, advise the Company on available
financing options, provide periodic updates on the stevia sector and provide
insights and strategies for the Company to undertake.
(II) TERM
The term of this agreement shall be consummated from the date hereof, and
shall automatically terminate unless otherwise agreed upon in writing by both
parties on May 30, 20 12.
(III) COMPENSATION
For the term of this agreement, the consultant shall be paid an upfront,
non-refundable, non-cancellable retainer fee of 27,500 restricted shares. For
the purposes of this agreement, these shares shall be considered to be fully
earned by March 31, 2012. These shares were valued at $1.39 per share or $38,225
on March 31, 2012, the date when they were earned.
NOTE 10 - RESEARCH AND DEVELOPMENT
AGRIBUSINESS DEVELOPMENT AGREEMENT - AGRO GENESIS PTE LTD.
ENTRY INTO AGRIBUSINESS DEVELOPMENT AGREEMENT
On July 16, 2011, the Company entered into an Agribusiness Development
Agreement (the "Agribusiness Development Agreement") with Agro Genesis Pte Ltd.
("AGPL"), a corporation organized under the laws of the Republic of Singapore
expiring two (2) years from the date of signing.
Under the terms of the Agreement, the Company engaged AGPL to be the
Company's technology provider consultant for stevia propagation and cultivation
in Vietnam, and potentially other countries for a period of two (2) years. AGPL
will be tasked with developing stevia propagation and cultivation technology in
Vietnam, recommend quality agronomic programs for stevia cultivation, harvest
and post harvest, alert findings on stevia propagation and cultivation that may
impact profitability and develop a successful model in Vietnam that can be
replicated elsewhere (the "Project"). The Project will be on-site at stevia
fields in Vietnam and will have a term of at least two (2) years. For its
services, AGPL could receive a fee of up to 275,000 Singapore dollars, plus
related expenses estimated at $274,000 as specified in Appendix A to the
Agribusiness Development Agreement. Additionally, the Company will be AGPL's
exclusive distributor for AGPL's g'farm system (a novel crop production system)
for stevia growing resulting from the Project. AGPL will receive a commission of
no less than 2% of the price paid for crops other than stevia, from cropping
systems that utilize the g'farm system resulting from the Project. All
technology-related patents resulting from the Project will be jointly owned by
AGPL and the Company, with the Company holding a right of first offer for the
use and distribution rights to registered patents resulting from the Project.
F-23
ADDENDUM TO AGRIBUSINESS DEVELOPMENT AGREEMENT
On August 26, 2011, in accordance with Appendix A , 3(a), the Company and
AGPL have mutually agreed to add to the current Project budget $100,000 per
annum for one, on-site resident AGPL expert for 2 (two) years effective
September 1, 2011, or $200,000 in aggregate for the term of the contract as
specified in Appendix C. In-country accommodation for the resident expert will
be born separately by the Company and is excluded from the above amount. The
expert, Dr. Cho, Young-Cheol, Director, Life Sciences has been appointed and
commenced on September 1, 2011.
TERMINATION OF AGRIBUSINESS DEVELOPMENT AGREEMENT
On March 31, 2012, the Company and AGPL mutually agreed to terminate the
Agribusiness Development Agreement, effective immediately.
LEASE OF AGRICULTURAL LAND
On December 14, 2011, the Company and Stevia Ventures Corporation ("Stevia
Ventures") entered into a Land Lease Agreement with Vinh Phuc Province People's
Committee Tam Dao Agriculture & Industry Co., Ltd. pursuant to which Stevia
Ventures has leased l0 hectares of land (the "Leased Property") for a term
expiring five (5) years from the date of signing.
The Company has begun development of a research facility on the Leased
Property and has prepaid (i) the first year lease payment of $30,000 and (ii)
the six month lease payment of $15,000 as security deposit, or $45,000 in
aggregate upon signing of the agreement.
Future minimum payments required under this agreement at March 31, 2012
were as follows:
Fiscal Year Ending March 31:
2013 $ 30,000
2014 30,000
2015 30,000
2016 30,000
--------
$120,000
========
SUPPLY AND COOPERATIVE AGREEMENT - GUANGZHOU HEALTH TECHNOLOGY DEVELOPMENT
COMPANY LIMITED
ENTRY INTO SUPPLY AGREEMENT
On February 21, 2012, the Company entered into a Supply Agreement (the
"Supply Agreement") with Guangzhou Health China Technology Development Company
Limited, a foreign-invested limited liability company incorporated in the
People's Republic of China (the "Guangzhou Health").
Under the terms of the Supply Agreement, the Company will sell dry stevia
plant materials, including stems and leaves ("Product") exclusively to Guangzhou
Health. For the first two years of the agreement, Guangzhou Health will purchase
all Product produced by the Company. Starting with the third year of the
agreement, the Company and Guangzhou Health will review and agree on the
quantity of Product to be supplied in the forthcoming year, and Guangzhou Health
will be obliged to purchase up to 130 percent of that amount. The specifications
and price of Product will also be revised annually according to the mutual
agreement of the parties. The term of the Supply Agreement is five years with an
option to renew for an additional four years.
F-24
ENTRY INTO COOPERATIVE AGREEMENT
On February 21, 2012, the Company also entered into Cooperative Agreement
(the "Cooperative Agreement") with Guangzhou Health Technology Development
Company Limited.
Under the terms of the Cooperative Agreement, the parties agree to explore
potential technology partnerships with the intent of formalizing a joint venture
to pursue the most promising technologies and businesses. The parties also agree
to conduct trials to test the efficacy of certain technologies as applied
specifically to the Company's business model as well as the marketability of
harvests produced utilizing such technologies. Guangzhou Health will share all
available information of its business structure and technologies with the
Company, subject to the confidentiality provisions of the Cooperative Agreement.
Guangzhou Health will also permit the Company to enter its premises and grow-out
sites for purposes of inspection and will, as reasonably requested by the
Company, supply without cost, random samples of products and harvests for
testing.
NOTE 11 - INCOME TAX PROVISION
DEFERRED TAX ASSETS
At March 31, 2012, the Company has available for federal income tax
purposes net operating loss ("NOL") carry-forwards of $2,323,551 that may be
used to offset future taxable income through the fiscal year ending March 31,
2032. No tax benefit has been reported with respect to these net operating loss
carry-forwards in the accompanying financial statements since the Company
believes that the realization of its net deferred tax asset of approximately
$790,007 was not considered more likely than not and accordingly, the potential
tax benefits of the net loss carry-forwards are fully offset by the full
valuation allowance.
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 $790,007 for the period from April
11, 2011 (inception) through March 31, 2012.
Components of deferred tax assets as of March 31, 2012 are as follows:
March 31, 2012
--------------
Net deferred tax assets - Non-current:
Expected income tax benefit from NOL carry-forwards $ 790,007
Less valuation allowance (790,007)
---------
Deferred tax assets, net of valuation allowance $ --
=========
LIMITATION ON UTILIZATION OF NOLS DUE TO CHANGE IN CONTROL
The Company had ownership changes as defined by the Internal Revenue Code
Section 382 ("Section 382"), which may subject the NOL's to annual limitations
which could reduce or defer the NOL. Section 382 imposes limitations on a
corporation's ability to utilize NOLs if it experiences an "ownership change."
In general terms, an ownership change may result from transactions increasing
the ownership of certain stockholders in the stock of a corporation by more than
50 percentage points over a three-year period. In the event of an ownership
change, utilization of the NOLs would be subject to an annual limitation under
Section 382 determined by multiplying the value of its stock at the time of the
ownership change by the applicable long-term tax-exempt rate. Any unused annual
limitation may be carried over to later years. The imposition of this limitation
on its ability to use the NOLs to offset future taxable income could cause the
Company to pay U.S. federal income taxes earlier than if such limitation were
not in effect and could cause such NOLs to expire unused, reducing or
eliminating the benefit of such NOLs.
F-25
INCOME TAX PROVISION IN THE CONSOLIDATED STATEMENT 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
Period from
April 11, 2011
(inception)
through
March 31, 2012
--------------
Federal statutory income tax rate 34.0%
Change in valuation allowance on net operating
loss carry-forwards (34.0)
------
Effective income tax rate 0.0%
======
NOTE 12 - COMMITMENTS AND CONTINGENCIES
SUPPLY AGREEMENT - BETWEEN STEVIA VENTURES INTERNATIONAL LTD. AND ASIA STEVIA
INVESTMENT DEVELOPMENT COMPANY LTD.
On April 12, 2011, Stevia Ventures International Ltd, the subsidiary of the
Company entered into a Supply Agreement (the "Supply Agreement") with Asia
Stevia Investment Development Company Ltd ("ASID"), a foreign-invested limited
liability company incorporated in Vietnam.
(I) SCOPE OF SERVICES
Under the terms of the Agreement, the Company engaged ASID to plant the
Stevia Seedlings and supply the Products only to the Company to the exclusion of
other customers and the Company is desirous to purchase the same, on the terms
and conditions as set out in this Agreement produce Products and the Company
purchase the Products from ASID.
(II) TERM
This Agreement shall come into force on the Effective Date and, subject to
earlier termination pursuant to certain clauses specified in the Agreement,
shall continue in force for a period of three (3) years ("Term") and thereafter
automatically renew on its anniversary each year for an additional period of one
(1) year ("Extended Term").
(III) PURCHASE PRICE
ASID and the Company shall review and agree on or before 30th September of
each Year on the quantity of the Products to be supplied by the Supplier to the
Company in the forthcoming year and ASID shall provide the Company with prior
written notice at any time during the year following the revision if it has
reason to believe that it would be unable to fulfill its forecast volumes under
this clause.
SUPPLY AGREEMENT - BETWEEN STEVIA VENTURES INTERNATIONAL LTD. AND STEVIA
VENTURES CORPORATION
On April 12, 2011, Stevia Ventures International Ltd, the subsidiary of the
Company also entered into a Supply Agreement (the "Supply Agreement") with
Stevia Ventures Corporation ("SVC"), a foreign-invested limited liability
company incorporated in Vietnam.
(I) SCOPE OF SERVICES
Under the terms of the Agreement, the Company engaged SVC to plant the
Stevia Seedlings and supply the Products only to the Company to the exclusion of
other customers and the Company is desirous to purchase the same, on the terms
and conditions as set out in this Agreement produce Products and the Company
purchase the Products from SVC.
(II) TERM
This Agreement shall come into force on the Effective Date and, subject to
earlier termination pursuant to certain clauses specified in the Agreement,
shall continue in force for a period of three (3) years ("Term") and thereafter
automatically renew on its anniversary each year for an additional period of one
(1) year ("Extended Term").
F-26
(III) PURCHASE PRICE
SVC and the Company shall review and agree on or before 30th September of
each Year on the quantity of the Products to be supplied by the Supplier to the
Company in the forthcoming year and SVC shall provide the Company with prior
written notice at any time during the year following the revision if it has
reason to believe that it would be unable to fulfill its forecast volumes under
this clause.
CONSULTING AGREEMENT - DORIAN BANKS
ENTRY INTO CONSULTING AGREEMENT
On July 1, 2011 the Company entered into a consulting agreement (the
"Consulting Agreement") with Dorian Banks ("Banks").
(I) SCOPE OF SERVICES
Under the terms of the Consulting Agreement, the Company engaged the
Consultant to provide advice in general business development, strategy,
assistance with new business and land acquisition, introductions, and assistance
with Public Relations ("PR") and Investor Relations ("IR").
(II) TERM
The term of this Agreement shall be six (6) months, commencing on July 1,
2011 and continue until December 31, 2011. This Agreement may be terminated by
either the Company or the Consultant at any time prior to the end of the
Consulting Period by giving thirty (30) days written notice of termination. Such
notice may be given at any time for any reason, with or without cause. The
Company will pay Consultant for all Service performed by Consultant through the
date of termination.
(III) COMPENSATION
The Company shall pay the Consultant a fee of $3,000.00 per month.
EXTENSION OF THE CONSULTING AGREEMENT
On December 30, 2011, the Consulting Agreement was extended with the same
terms and conditions to December 31, 2012.
SUMMARY OF THE CONSULTING FEES
For the period from April 11, 2011 (inception) through March 31, 2012, The
Company recorded $27,000 in consulting fees under the Consulting Agreement.
FINANCING CONSULTING AGREEMENT - DAVID CLIFTON
ENTRY INTO FINANCIAL CONSULTING AGREEMENT
On July 1, 2011 the Company entered into a consulting agreement (the
"Consulting Agreement") with David Clifton ( "Clifton").
(I) SCOPE OF SERVICES
Under the terms of the Consulting Agreement, the Company engaged Clifton to
introduce interested investors to the Company, advise the Company on available
financing options and provide periodic updates on the stevia sector and provide
insights and strategies for the Company to undertake.
F-27
(II) TERM
The term of this Agreement shall be six (6) months, commencing on July 1,
2011 and continuing until December 31, 2011. This Agreement may be terminated by
either the Company or Clifton at any time prior to the end of the consulting
period by giving thirty (30) days written notice of termination. Such notice may
be given at any time for any reason, with or without cause. The Company will pay
Clifton for all service performed by him through the date of termination.
(III) COMPENSATION
The Company shall pay Clifton a fee of $3,000.00 per month.
SUMMARY OF THE CONSULTING FEES
For the period from April 11, 2011 (inception) through March 31, 2012, The
Company recorded $18,000 in financing cost under this Financing Consulting
Agreement.
NOTE 12 - CONCENTRATIONS AND CREDIT RISK
VENDORS AND ACCOUNTS PAYABLE CONCENTRATIONS
Vendor purchase concentrations for the period ended March 31, 2012 and
accounts payable concentration at March 31, 2012 are as follows:
Net Purchases
for the
Period from
April 11, 2011
(inception) Accounts
through Payable at
March 31, 2012 March 31, 2012
-------------- --------------
Asia Stevia Investment Development Limited 38.0% --%
Growers Synergy Pte. Ltd. - related party 13.5% 16.4%
Stevia Ventures Corporation 14.4% 54.1%
----- -----
65.9% 70.5%
===== =====
CREDIT RISK
Financial instruments that potentially subject the Company to significant
concentration of credit risk consist primarily of cash and cash equivalents.
As of March 31, 2012, substantially all of the Company's cash and cash
equivalents were held by major financial institutions, and the balance at
certain accounts exceeded the maximum amount insured by the Federal Deposits
Insurance Corporation ("FDIC"). However, the Company has not experienced losses
on these accounts and management believes that the Company is not exposed to
significant risks on such accounts.
F-28
NOTE 14 - SUBSEQUENT EVENTS
The Company has evaluated all events that occurred after the balance sheet
date 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:
FORMATION OF STEVIA TECHNEW LIMITED
On April 28, 2012, Hero Tact Limited, a wholly-owned subsidiary of Stevia
Asia which was incorporated under the laws of Hong Kong, changed its name to
Stevia Technew Limited ("Stevia Technew"). Stevia Technew is intended to
facilitate a joint venture relationship with the Company's technology partner,
Guangzhou Health China Technology Development Company Limited, operating under
the trade name Tech-New Bio-Technology ("TechNew") and its affiliates Technew
Technology Limited.
ISSUANCE OF CONVERTIBLE NOTE
On May 30, 2012, the Company issued a convertible note in the amount of
$200,000 with interest at 10% per annum due one (1) year from the date of
issuance.
ENTRY INTO ENGAGEMENT AGREEMENT - GARDEN STATE SECURITIES INC.
On June 18, 2012, the Company entered into an engagement agreement (the
"Agreement") with Garden State Securities Inc ("GSS") respect to the engagement
of GSS to act as a selling/placement agent for the Company.
(I) SCOPE OF SERVICES
Under the terms of the Agreement, the Company engaged GSS to review the
business and operation of the Company and its historical and projected financial
condition, advise Company of "best efforts" Private Placement offering of debt
or equity securities to fulfill the Company's business plan, and contact for the
Company possible financing sources.
(II) TERM
GSS shall act as the Company's exclusive placement agent the later of; (i)
60 days from the execution of the term sheet; or (ii) the final termination date
of the securities financing (the "Exclusive Period"). GSS shall act as the
Company's non-exclusive placement agent after the Exclusive Period until
terminated.
(III) COMPENSATION
The Company agrees to pay to GSS at each full or incremental closing of any
equity financing, convertible debt financing, debt conversion or any instrument
convertible into the Company's common stock (the "Securities Financing") during
the Exclusive Period; (i) a cash transaction fee in the amount of 8% of the
amount received by the Company under the Securities Financing; and (ii) warrants
(the "Warrants") with "piggy back" registration rights, equal to 8% of the stock
issued in the Securities Financing at an exercise price equal to the investor's
warrant exercise price of the Securities Financing or the price of the
Securities Financing if no warrants are issued to investors. The Company will
also pay, at closing, the expense of GSS's legal counsel pursuant to the
Securities Financing and/or Shelf equal to $25,000 for Securities Financing
and/or Shelf resulting in equal to or greater than $500,000 of gross proceeds to
the Company, and $18,000 for a Securities Financing and/or Shelf resulting in
less than $500,000 of gross proceeds to the Company. In addition, the Company
shall cause, at its cost and expense, the "Blue sky filing" and Form D in due
and proper form and substance and in a timely manner.
F-29
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 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)
10.2 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)
10.3 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)
10.4 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)
10.5 Form of Convertible Promissory Note (incorporated by reference to
the registrant's Form 10-Q filed on November 21, 2011)
10.6 Stock Purchase Agreement (incorporated by reference to the
registrant's Form 10-Q filed on November 21, 2011)
10.7 Management and Off-Take Agreement with Growers Synergy Pte Ltd.,
effective November 1, 2011 (incorporated by reference to the
registrant's Form 8-K filed on October 31, 2011)
10.8 Equity Purchase Agreement with Southridge Partners II, LP, dated
January 26, 2012 (incorporated by reference to the registrant's
Form 8-K filed on January 30, 2012)
10.9 Registration Rights Agreement with Southridge Partners II, LP,
dated January 26, 2012 (incorporated by reference to the
registrant's Form 8-K filed on January 30, 2012)
10.10 The Minutes for Land Transferring Agreement for New Crop Plants
Variety, dated December 14, 2011 (incorporated by reference to the
registrant's Form 10-Q filed on February 17, 2012)
10.11 Supply Agreement with Guangzhou Health China Technology
Development Company Limited, dated February 21, 2012 (incorporated
by reference to the registrant's Form 8-K filed on February 27,
2012)
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*
101 Interactive data files pursuant to Rule 405 of Regulation S-T.*
----------
* Filed herewit
