UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended: December 31, 2012
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from __________ to __________
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:
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
None None
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. [X] Yes [ ] 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). [X] Yes [ ] No
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company. See
the definitions of "large accelerated filer," "accelerated filer," and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.
Non-accelerated filer [ ] Accelerated filer [ ]
Large 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 Exchange Act). [ ] Yes [X] No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at January 18, 2013
----- -------------------------------
Common stock, $.001 par value 66,555,635
STEVIA CORP.
FORM 10-Q
DECEMBER 31, 2012
INDEX
PAGE
----
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements................................................. 4
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................39
Item 3. Quantitative and Qualitative Disclosures About Market Risk...........41
Item 4. Controls and Procedures..............................................42
PART II - OTHER INFORMATION
Item 1. Legal Proceedings....................................................42
Item 1A. Risk Factors.........................................................42
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds..........43
Item 3. Defaults Upon Senior Securities......................................43
Item 4. Mine Safety Disclosures..............................................43
Item 5. Other Information....................................................43
Item 6. Exhibits.............................................................43
Signatures....................................................................44
2
FORWARD-LOOKING STATEMENTS
This Report on Form 10-Q contains forward-looking statements within the meaning
of the "safe harbor" provisions of the Private Securities Litigation Reform Act
of 1995. Reference is made in particular to the description of our plans and
objectives for future operations, assumptions underlying such plans and
objectives, and other forward-looking statements included in this report. Such
statements may be identified by the use of forward-looking terminology such as
"may," "will," "expect," "believe," "estimate," "anticipate," "intend,"
"continue," or similar terms, variations of such terms, or the negative of such
terms. Such statements are based on management's current expectations and are
subject to a number of factors and uncertainties, which could cause actual
results to differ materially from those described in the forward-looking
statements. Such statements address future events and conditions concerning,
among others, capital expenditures, earnings, litigation, regulatory matters,
liquidity and capital resources, and accounting matters. Actual results in each
case could differ materially from those anticipated in such statements by reason
of factors such as future economic conditions, changes in consumer demand,
legislative, regulatory and competitive developments in markets in which we
operate, results of litigation, and other circumstances affecting anticipated
revenues and costs, and the risk factors set forth under the heading "Risk
Factors" in our Annual Report on Form 10-K for the fiscal year ended March 31,
2012, filed on June 29, 2012.
As used in this Form 10-Q, "we," "us" and "our" refer to Stevia Corp., which is
also sometimes referred to as the "Company."
YOU SHOULD NOT PLACE UNDUE RELIANCE ON THESE FORWARD LOOKING STATEMENTS
The forward-looking statements made in this report on Form 10-Q relate only to
events or information as of the date on which the statements are made in this
report on Form 10-Q. Except as required by law, we undertake no obligation to
update or revise publicly any forward-looking statements, whether as a result of
new information, future events, or otherwise, after the date on which the
statements are made or to reflect the occurrence of unanticipated events. You
should read this report and the documents that we reference in this report,
including documents referenced by incorporation, completely and with the
understanding that our actual future results may be materially different from
what we expect or hope.
3
PART I--FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Stevia Corp.
December 31, 2012 and 2011
Index to the Consolidated Financial Statements
Contents Page(s)
-------- -------
Consolidated Balance Sheets at December 31, 2012 (Unaudited) and
March 31, 2012................................................................5
Consolidated Statements of Operations for the Nine and Three Months Ended
December 31, 2012, for the Period from April 11, 2011 (Inception) through
December 31, 2011 and for the Three Months Ended December 31, 2011
(Unaudited)...................................................................6
Consolidated Statement of Equity (Deficit) for the Period from April 11, 2011
(Inception) through December 31, 2012 (Unaudited).............................7
Consolidated Statements of Cash Flows for the Nine Months Ended December 31,
2012 and for the Period from April 11, 2011 (Inception) through
December 31, 2011 (Unaudited) ................................................8
Notes to the Consolidated Financial Statements (Unaudited).....................9
4
Stevia Corp.
Consolidated Balance Sheets
December 31, March 31,
2012 2012
------------ ------------
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash $ 5,978 $ 15,698
Accounts receivable 120,659 --
Prepayments and other current assets 26,016 168,874
------------ ------------
TOTAL CURRENT ASSETS 152,653 184,572
------------ ------------
NON-CURRENT ASSETS:
Property and equipment 7,925 3,036
Accumulated depreciation (762) --
------------ ------------
Property and equipment, net 7,163 3,036
Acquired technology 1,635,300 --
Accumulatd amortization (54,510) --
------------ ------------
Acquired technology, net 1,580,790 --
Website development costs 5,315 5,315
Accumulated amortization (1,602) (801)
------------ ------------
Website development costs, net 3,713 4,514
------------ ------------
Security deposit 15,000 15,000
------------ ------------
TOTAL ASSETS $ 1,759,319 $ 207,122
============ ============
LIABILITIES AND EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable $ 627,929 $ 237,288
Accounts payable - President and CEO 41,689 20,220
Accrued expenses 11,445 5,400
Accrued interest 28,178 15,521
Advances from president and significant stockholder 21,238 19,138
Convertible notes payable 400,000 700,000
------------ ------------
TOTAL CURRENT LIABILITIES 1,130,479 997,567
------------ ------------
NON-CURRENT LIABILITIES:
Derivative liability 106,561 --
------------ ------------
TOTAL NON-CURRENT LIABILITIES 106,561 --
------------ ------------
TOTAL LIABILITIES 1,237,040 997,567
------------ ------------
EQUITY (DEFICIT)
Stevia Corp stockholders' equity (deficit):
Preferred stock at $0.001 par value: 1,000,000 shares authorized;
none issued or outstanding -- --
Common stock at $0.001 par value: 100,000,000 shares authorized,
63,555,635 and 58,354,775 shares issued and outstanding, respectively 63,556 58,355
Additional paid-in capital 4,222,085 1,474,751
Accumulated deficit (3,666,024) (2,323,551)
------------ ------------
TOTAL STEVIA CORP STOCKHOLDERS' EQUITY (DEFICIT) 619,617 (790,445)
------------ ------------
Non-controlling interest in subsidiary (97,338) --
------------ ------------
TOTAL EQUITY (DEFICIT) 522,279 (790,445)
------------ ------------
TOTAL LIABILITIES AND EQUITY (DEFICIT) $ 1,759,319 $ 207,122
============ ============
See accompanying notes to the consolidated financial statements.
5
Stevia Corp.
Consolidated Statements of Operations
For the Period from
For the For the April 11, 2011 For the
Nine Months Three Months (inception) Three Months
Ended Ended through Ended
December 31, December 31, December 31, December 31,
2012 2012 2011 2011
------------ ------------ ------------ ------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
REVENUES $ 120,939 $ 8,142 $ 1,300 $ --
COST OF REVENUES
Farm expenses 66,743 66,743 -- --
Farm field lease 21,250 6,250 -- --
Farm management services - related party 652,550 60,000 120,000 60,000
------------ ------------ ------------ ------------
TOTAL COST OF REVENUES 740,543 132,993 120,000 60,000
------------ ------------ ------------ ------------
Gross margin (619,604) (124,851) (118,700) (60,000)
OPERATING EXPENSES:
Directors' fees 281,250 93,750 93,750 93,750
Professional fees 352,031 123,356 117,183 73,454
Research and development 118,669 -- 144,369 39,172
Salary and compensation - officer -- -- 750,000 750,000
Salary and compensation - others 110,982 59,105 -- --
General and administrative expenses 204,616 69,302 36,160 14,868
------------ ------------ ------------ ------------
TOTAL OPERATING EXPENSES 1,067,548 345,513 1,141,462 971,244
------------ ------------ ------------ ------------
Loss from operations (1,687,152) (470,364) (1,260,162) (1,031,244)
OTHER (INCOME) EXPENSE:
Change in fair value of derivative liability (305,244) (73,723) -- --
Financing cost 16,125 2,807 18,000 9,000
Foreign currency transaction gain (loss) 1,316 1 -- --
Interest expense 40,462 10,130 25,123 15,630
Interest income -- -- (44) --
------------ ------------ ------------ ------------
TOTAL OTHER (INCOME) EXPENSE (247,341) (60,785) 43,079 24,630
------------ ------------ ------------ ------------
Loss before income taxes and noncontrolling interest (1,439,811) (409,579) (1,303,241) (1,055,874)
------------ ------------ ------------ ------------
Income tax provision -- -- -- --
------------ ------------ ------------ ------------
Net loss before non-controlling interest (1,439,811) (409,579) (1,303,241) (1,055,874)
Net loss attributable to the non-controlling interest (97,338) (44,978) -- --
------------ ------------ ------------ ------------
NET LOSS ATTRIBUTABLE TO STEVIA CORP $ (1,342,473) $ (364,601) $ (1,303,241) $ (1,055,874)
============ ============ ============ ============
Net loss per common share
- Basic and diluted: $ (0.02) $ (0.01) $ (0.03) $ (0.02)
============ ============ ============ ============
Weighted average common shares outstanding
- basic and diluted 61,613,572 63,225,253 40,575,587 54,854,293
============ ============ ============ ============
See accompanying notes to the consolidated financial statements.
6
Stevia Corp.
Consolidated Statement of Equity (Deficit)
For the Period from April 11, 2011 (Inception) through December 31, 2012
(Unaudited)
Common Stock,
$0.001 Par Value Total STEV
-------------------- Additional Stockholders' Non- Total
Number of paid-in Accumulated Equity controlling Equity
Shares Amount Capital Deficit (Deficit) Interest (Deficit)
------ ------ ------- ------- --------- -------- ---------
Balance, April 11, 2011
(inception) 6,000,000 $ 6,000 $ (5,900) $ -- $ 100 $ -- $ 100
Common shares deemed
issued in reverse
acquisition 79,800,000 79,800 (198,088) (118,288) (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 99,600 100,000 100,000
Common shares issued
for notes conversion
at $0.25 per share
on October 4, 2011 1,400,000 1,400 348,600 350,000 350,000
Common shares issued
for conversion of
accrued interest
at $0.25 per share
on October 4, 2011 74,850 75 18,638 18,713 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 3,000 747,000 750,000 750,000
Common shares issued
for future director
services on
October 4, 2011 (750,000) (750,000) (750,000)
Common shares issued
for future director
services on
October 4, 2011
earned during the period 187,500 187,500 187,500
Make good shares
released to officer
for achieving the
first milestone on
December 23, 2011 3,000,000 3,000 747,000 750,000 750,000
Common shares issued
for notes conversion
at $0.25 per share
on January 18, 2012 600,000 600 149,400 150,000 150,000
Common shares issued
for conversion of
accrued interest
at $0.25 per share
on January 18, 2012 17,425 17 4,339 4,356 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 52,500
Common shares issued
for consulting services
at $1.39 per share
on March 31, 2012 27,500 28 38,197 38,225 38,225
Net loss (2,323,551) (2,323,551) (2,323,551)
----------- --------- ----------- ----------- ----------- -------- -----------
Balance, March 31, 2012 58,354,775 58,355 1,474,751 (2,323,551) (790,445) -- (790,445)
Restricted common shares
issued for farm management
services to a related
party valued at $0.79
per share discounted
at 69% on July 5, 2012 500,000 500 272,050 272,550 272,550
Restriced common shares
issued for technology
rights valued at $0.79
per share discounted 69%
on July 5, 2012 3,000,000 3,000 1,632,300 1,635,300 1,635,300
Common shares issued
for notes conversion
at $0.832143 per share
on July 6, 2012 600,858 601 499,399 500,000 500,000
Common shares issued
for conversion of accrued
interest at $0.832143 per
share on July 6, 2012 33,335 33 27,706 27,739 27,739
Common shares and warrants
issued for cash to two
investors at $0.46875 per
unit on August 6, 2012 1,066,667 1,067 498,933 500,000 500,000
Warrants issued to investors
in connection with the
sale of equity units on
August 6, 2012 (381,301) (381,301) (381,301)
Commissions and legal fees
in connection with the
stock sales on
August 6, 2012 (52,500) (52,500) (52,500)
Warrants issued to placement
agent in connection with
the sale of equity units
on August 6, 2012 (30,504) (30,504) (30,504)
Common shares issued for
future director services
on October 4, 2011 earned
during the period 281,250 281,250 281,250
Net loss (1,342,473) (1,342,473) (97,338) (1,439,811)
----------- --------- ----------- ----------- ----------- -------- -----------
Balance, December 31, 2012 63,555,635 $ 63,556 $ 4,222,085 $(3,666,024) $ 619,617 $(97,338) $ 522,279
=========== ========= =========== =========== =========== ======== ===========
See accompanying notes to the consolidated financial statements.
7
Stevia Corp.
Consolidated Statements of Cash Flows
For the Period from
For the April 11, 2011
Nine Months (inception)
Ended through
December 31, December 31,
2012 2011
------------ ------------
(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (1,439,811) $ (1,303,241)
Adjustments to reconcile net loss to net cash used
in operating activities
Depreciation expense 762 --
Amortization expense 55,311 534
Change in fair value of derivative liability (305,244) --
Common shares issued for compensation -- 750,000
Common shares issued for director services earned during the period 281,250 93,750
Common shares issued for services-related party 272,550 --
Common shares issued for outside services -- --
Changes in operating assets and liabilities:
Accounts receivable (120,659) --
Prepaid expenses 142,858 (49,219)
Accounts payable 390,641 (36,067)
Accounts payable - related parties 21,469 15,150
Accrued expenses 6,045 310
Accrued interest 40,397 33,958
------------ ------------
NET CASH USED IN OPERATING ACTIVITIES (654,431) (509,825)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (4,889) --
Proceeds from disposal of property and equipment -- --
Website development costs -- (5,315)
Cash received from reverse acquisition -- 3,198
------------ ------------
NET CASH USED IN INVESTING ACTIVITIES (4,889) (2,117)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Advances from president and stockholder 2,100 200
Proceeds from issuance of convertible notes 200,000 750,000
Proceeds from sale of common stock, net of costs 447,500 100,000
------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 649,600 850,200
------------ ------------
Net change in cash (9,720) 338,258
Cash at beginning of period 15,698 --
------------ ------------
CASH AT END OF PERIOD $ 5,978 $ 338,258
============ ============
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 $ 350,000
============ ============
Issuance of common stock for conversion of accrued interest $ 27,739 $ 18,712
============ ============
See accompanying notes to the consolidated financial statements.
8
Stevia Corp.
December 31, 2012 and 2011
Notes to the Consolidated Financial Statements
(Unaudited)
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 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
acquisition method of accounting in accordance with section 805-10-55 of the
FASB Accounting Standards Codification. The reverse acquisition 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 acquisition. The acquisition process utilizes
the capital structure of the Company and the assets and liabilities of Ventures
which are recorded at their 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.
9
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.
FORMATION OF STEVIA TECHNEW LIMITED (FORMERLY HERO TACT LIMITED)/COOPERATIVE
AGREEMENT
On April 28, 2012, Stevia Asia formed Hero Tact Limited, a wholly-owned
subsidiary, under the laws of HK SAR, which subsequently changed its name to
Stevia Technew Limited ("Stevia Technew"). Stevia Technew intends 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 and Guangzhou's affiliates Technew Technology
Limited. Prior to July 5, 2012, the date of entry into Cooperative Agreement,
Stevia Technew was inactive and had no assets or liabilities.
On July 5, 2012, Stevia Asia entered into a Cooperative Agreement (the
"Cooperative Agreement") with Technew Technology Limited ("Technew"), a company
incorporated under the companies ordinance of Hong Kong and an associate of
Guangzhou Health China Technology Development Company Limited, and Zhang Jia, a
Chinese citizen (together with Technew, the "Partners") pursuant to which Stevia
Asia and Partners have agreed to make Stevia Technew, a joint venture, of which
Stevia Asia legally and beneficially owns 70% of the shares (representing 70% of
the issued shares) and Technew legally and beneficially owns 30% of the shares
(representing 30% of the issued shares). The Partners will be responsible for
managing Stevia Technew and Stevia Asia has agreed to contribute $200,000 per
month, up to a total of $2,000,000 in financing, subject to the performance of
Stevia Technew and Stevia Asia's financial capabilities.
The Cooperative Agreement shall automatically terminate upon either Stevia Asia
or Technew ceasing to be a shareholder in Stevia Technew, or may be terminated
by either Stevia Asia or Technew upon a material breach by the other party which
is not cured within 30 days of notice of such breach.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION - UNAUDITED INTERIM FINANCIAL INFORMATION
The accompanying unaudited interim financial statements and related notes have
been prepared in accordance with accounting principles generally accepted in the
United States of America ("U.S. GAAP") for interim financial information, and
with the rules and regulations of the United States Securities and Exchange
Commission ("SEC") to Form 10-Q and Article 8 of Regulation S-X. Accordingly,
they do not include all of the information and footnotes required by U.S. GAAP
for complete financial statements. The unaudited interim financial statements
furnished reflect all adjustments (consisting of normal recurring accruals)
which are, in the opinion of management, necessary to a fair statement of the
results for the interim periods presented. Interim results are not necessarily
indicative of the results for the full fiscal year. These financial statements
should be read in conjunction with the financial statements of the Company for
the period from April 11, 2011 (inception) through March 31, 2012 and notes
thereto contained in the Company's Annual Report on Form 10-K as filed with the
SEC on June 29, 2012.
PRINCIPLES OF CONSOLIDATION
The Company applies the guidance of Topic 810 "CONSOLIDATION" of the FASB
Accounting Standards Codification to determine whether and how to consolidate
another entity. Pursuant to ASC Paragraph 810-10-15-10 all majority-owned
subsidiaries--all entities in which a parent has a controlling financial
interest--shall be consolidated except (1) when control does not rest with the
parent, the majority owner; (2) if the parent is a broker-dealer within the
scope of Topic 940 and control is likely to be temporary; (3) consolidation by
an investment company within the scope of Topic 946 of a non-investment-company
investee. Pursuant to ASC Paragraph 810-10-15-8 the usual condition for a
controlling financial interest is ownership of a majority voting interest, and,
therefore, as a general rule ownership by one reporting entity, directly or
indirectly, of more than 50 percent of the outstanding voting shares of another
entity is a condition pointing toward consolidation. The power to control may
also exist with a lesser percentage of ownership, for example, by contract,
lease, agreement with other stockholders, or by court decree. The Company
consolidates all less-than-majority-owned subsidiaries, in which the parent's
power to control exists.
10
The Company's consolidated subsidiaries and/or entities are as follows:
Date of incorporation
or formation
Name of consolidated State or other jurisdiction of (date of acquisition,
subsidiary or entity incorporation or organization if applicable) Attributable interest
-------------------- ----------------------------- -------------- ---------------------
Stevia Ventures The Territory of the April 11, 2011 100%
International Ltd. British Virgin Islands
Stevia Asia Limited Hong Kong SAR March 19, 2012 100%
Stevia Technew Limited Hong Kong SAR April 28, 2012 70%
The consolidated financial statements include all accounts of the Company as of
December 31, 2012, for the interim period then ended and for the period from
June 23, 2011 (date of acquisition) through December 31, 2011; Stevia Ventures
International Ltd. as of December 31, 2012, for the interim period then ended
and for the period from April 11, 2011 (inception) through December 31, 2011;
Stevia Asia Limited as of December 31, 2012 and for the period from March 19,
2012 (inception) through December 31, 2012; and Stevia Technew Limited as of
December 31, 2012 and for the period from April 28, 2012 (inception) through
December 31, 2012.
All inter-company balances and transactions have been eliminated.
RECLASSIFICATION
Certain amounts in the prior period financial statements have been reclassified
to conform to the current period presentation. These reclassifications had no
effect on reported losses.
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; expected term of share options and similar
instruments, expected volatility of the entity's shares and the method used to
estimate it, expected annual rate of quarterly dividends, and risk free rate(s);
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.
11
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, accounts receivable, prepayments and other current assets, accounts
payable, accrued expenses, and accrued interest, 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 December 31, 2012
and March 31, 2012.
The Company's Level 3 financial liabilities consist of the derivative warrant
issued in August 2012 for which there is no current market for these securities
such that the determination of fair value requires significant judgment or
estimation. The Company valued the automatic conditional conversion,
re-pricing/down-round, change of control; default and follow-on offering
provisions using a lattice model, with the assistance of a third party valuation
specialist, for which management understands the methodologies. These models
incorporate transaction details such as Company stock price, contractual terms,
maturity, risk free rates, as well as assumptions about future financings,
volatility, and holder behavior as of the date of issuance and each balance
sheet date.
It is not, however, practical to determine the fair value of advances from
president and significant stockholder, if any, due to their related party
nature.
FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES MEASURED ON A RECURRING BASIS
LEVEL 3 FINANCIAL LIABILITIES - DERIVATIVE WARRANT LIABILITIES
The Company uses Level 3 of the fair value hierarchy to measure the fair value
of the derivative liabilities and revalues its derivative warrant liability at
every reporting period and recognizes gains or losses in the consolidated
statements of operations and comprehensive income (loss) that are attributable
to the change in the fair value of the derivative warrant liability.
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 property and equipment, acquired technology, and 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.
12
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 operations.
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.
PROPERTY AND EQUIPMENT
Property and equipment 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 property and equipment, the related cost and accumulated
depreciation are removed from the accounts and any gain or loss is reflected in
the statements of operations.
INTANGIBLE ASSETS OTHER THAN GOODWILL
The Company has adopted paragraph 350-30-25-3 of the FASB Accounting Standards
Codification for intangible assets other than goodwill. Under the requirements,
the Company amortizes the acquisition costs of intangible assets other than
goodwill inclusive of acquired technology and website development costs on a
straight-line basis over their relevant estimated useful lives of fifteen (15)
and five (5) years, respectively. 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
13
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. amounts 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.
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
The Company accounts for derivative instruments and hedging activities in
accordance with paragraph 810-10-05-4 of the FASB Accounting Standards
Codification ("Paragraph 810-10-05-4"). Paragraph 810-10-05-4 requires companies
to recognize all derivative instruments as either assets or liabilities in the
balance sheet at fair value. The accounting for changes in the fair value of a
derivative instrument depends upon: (i) whether the derivative has been
designated and qualifies as part of a hedging relationship, and (ii) the type of
hedging relationship. For those derivative instruments that are designated and
qualify as hedging instruments, a company must designate the hedging instrument
based upon the exposure being hedged as either a fair value hedge, cash flow
hedge or hedge of a net investment in a foreign operation.
From time to time, the Company may employ foreign currency forward contracts to
convert unforeseeable foreign currency exchange rates to fixed foreign currency
exchange rates. The Company does not use derivatives for speculation or trading
purposes. Changes in the fair value of derivatives are recorded each period in
current earnings or through other comprehensive income, depending on whether a
derivative is designated as part of a hedge transaction and the type of hedge
transaction. The ineffective portion of all hedges is recognized in current
earnings. The Company has sales and purchase commitments denominated in foreign
currencies. Foreign currency forward contracts are used to hedge against the
risk of change in the fair value of these commitments attributable to
fluctuations in exchange rates ("Fair Value Hedges"). Changes in the fair value
of the derivative instrument are generally offset in the income statement by
changes in the fair value of the item being hedged.
The Company did not employ foreign currency forward contracts to convert
unforeseeable foreign currency exchange rates to fixed foreign currency exchange
rates for the interim period ended December 31, 2012 or 2011.
DERIVATIVE LIABILITY
The Company evaluates its convertible debt, options, warrants or other
contracts, if any, to determine if those contracts or embedded components of
those contracts qualify as derivatives to be separately accounted for in
accordance with paragraph 810-10-05-4 and Section 815-40-25 of the FASB
Accounting Standards Codification. The result of this accounting treatment is
that the fair value of the embedded derivative is marked-to-market each balance
sheet date and recorded as either an asset or a liability. In the event that the
fair value is recorded as a liability, the change in fair value is recorded in
the consolidated statement of operations and comprehensive income (loss) as
other income or expense. Upon conversion, exercise or cancellation of a
derivative instrument, the instrument is marked to fair value at the date of
conversion, exercise or cancellation and then that the related fair value is
reclassified to equity.
In circumstances where the embedded conversion option in a convertible
instrument is required to be bifurcated and there are also other embedded
derivative instruments in the convertible instrument that are required to be
bifurcated, the bifurcated derivative instruments are accounted for as a single,
compound derivative instrument.
The classification of derivative instruments, including whether such instruments
should be recorded as liabilities or as equity, is re-assessed at the end of
each reporting period. Equity instruments that are initially classified as
equity that become subject to reclassification are reclassified to liability at
the fair value of the instrument on the reclassification date. Derivative
instrument liabilities will be classified in the balance sheet as current or
non-current based on whether or not net-cash settlement of the derivative
instrument is expected within 12 months of the balance sheet date.
14
The Company adopted Section 815-40-15 of the FASB Accounting Standards
Codification ("Section 815-40-15") to determine whether an instrument (or an
embedded feature) is indexed to the Company's own stock. Section 815-40-15
provides that an entity should use a two-step approach to evaluate whether an
equity-linked financial instrument (or embedded feature) is indexed to its own
stock, including evaluating the instrument's contingent exercise and settlement
provisions. The adoption of Section 815-40-15 has affected the accounting for
(i) certain freestanding warrants that contain exercise price adjustment
features and (ii) convertible bonds issued by foreign subsidiaries with a strike
price denominated in a foreign currency.
The Company marks to market the fair value of the embedded derivative warrants
at each balance sheet date and records the change in the fair value of the
embedded derivative warrants as other income or expense in the consolidated
statements of operations and comprehensive income (loss).
The Company utilizes the Lattice model that values the liability of the
derivative warrants based on a probability weighted discounted cash flow model
with the assistance of the third party valuation firm. The reason the Company
picks the Lattice model is that in many cases there may be multiple embedded
features or the features of the bifurcated derivatives may be so complex that a
Black-Scholes valuation does not consider all of the terms of the instrument.
Therefore, the fair value may not be appropriately captured by simple models. In
other words, simple models such as Black-Scholes may not be appropriate in many
situations given complex features and terms of conversion option (e.g., combined
embedded derivatives). The Lattice model is based on future projections of the
various potential outcomes. The features that were analyzed and incorporated
into the model included the exercise and full reset features. Based on these
features, there are two primary events that can occur; the Holder exercises the
Warrants or the Warrants are held to expiration. The Lattice model analyzed the
underlying economic factors that influenced which of these events would occur,
when they were likely to occur, and the specific terms that would be in effect
at the time (i.e. stock price, exercise price, volatility, etc.). Projections
were then made on the underlying factors which led to potential scenarios.
Probabilities were assigned to each scenario based on management projections.
This led to a cash flow projection and a probability associated with that cash
flow. A discounted weighted average cash flow over the various scenarios was
completed to determine the value of the derivative warrants.
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.
NON-CONTROLLING INTEREST
The Company follows paragraph 810-10-65-1 of the FASB Accounting Standards
Codification to report the non-controlling interest in Stevia Technew Limited,
its majority owned subsidiary in the consolidated statements of balance sheets
within the equity section, separately from the Company's stockholders' equity.
Non-controlling interest represents the non-controlling interest holder's
proportionate share of the equity of the Company's majority-owned subsidiary,
Stevia Technew Limited. Non-controlling interest is adjusted for the
non-controlling interest holder's proportionate share of the earnings or losses
and other comprehensive income (loss) and the non-controlling interest continues
to be attributed its share of losses even if that attribution results in a
deficit non-controlling interest balance.
15
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.
NON-REFUNDABLE ADVANCE PAYMENTS FOR GOODS OR SERVICES TO BE USED IN FUTURE
RESEARCH AND DEVELOPMENT ACTIVITIES
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 non-derivative 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
16
fair value (or calculated value) of the instruments. Pursuant to
paragraph 718-10-S99-1, it may be appropriate to use the SIMPLIFIED
METHOD, I.E., EXPECTED TERM = ((VESTING TERM + ORIGINAL CONTRACTUAL
TERM) / 2), 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.
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 non-derivative 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
17
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.
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
18
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.
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 interim period ended December 31, 2012 or for the period from
April 11, 2011 (Inception) through December 31, 2011.
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 as they
were anti-dilutive:
19
Potentially
Outstanding Dilutive
Common Shares
---------------------------
For the
Period from
For the April 11, 2011
Interim Period (inception)
Ended through
December 31, December 31,
2012 2011
---------- ---------
MAKE GOOD ESCROW SHARES
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 6,000,000
CONVERTIBLE NOTE SHARES
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 with the
conversion price to be at $0.46875 per share,
at which the Company completed a private
placement with gross proceeds of at least
$100,000 on August 6, 2012, the same as the
next private placement price on a per share
basis provided the Company complete a private
placement with gross proceeds of at least
$100,000. 426,667 --
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 with the
conversion price to be at $0.46875 per share,
at which the Company completed a private
placement with gross proceeds of at least
$100,000 on August 6, 2012, the same as the
next private placement price on a per share
basis provided the Company complete a private
placement with gross proceeds of at least
$100,000. 426,667 --
WARRANT SHARES
On August 6, 2012, the Company issued (i)
warrants to purchase 1,066,667 shares, in the
aggregate, of the Company's common stock to
the investors (the "investors warrants") and
(ii) warrants to purchase 85,333 shares of
the Company's common stock to the placement
agent (the "agent warrants") with an exercise
price of $0.6405 per share subject to certain
adjustments pursuant to Section 3(b)
Subsequent Equity Sales of the SPA expiring
five (5) years from the date of issuance. 1,152,000 --
---------- ----------
TOTAL POTENTIALLY OUTSTANDING DILUTIVE
COMMON SHARES 5,005,334 6,000,000
========== ==========
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
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.
20
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. 2011-08
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. 2011-11
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. 2012-02
In July 2012, the FASB issued the FASB Accounting Standards Update No. 2012-02
"INTANGIBLES--GOODWILL AND OTHER (TOPIC 350) TESTING INDEFINITE-LIVED INTANGIBLE
ASSETS FOR IMPAIRMENT" ("ASU 2012-02").
This Update is intended to reduce the cost and complexity of testing
indefinite-lived intangible assets other than goodwill for impairment. This
guidance builds upon the guidance in ASU 2011-08, entitled TESTING GOODWILL FOR
IMPAIRMENT. ASU 2011-08 was issued on September 15, 2011, and feedback from
stakeholders during the exposure period related to the goodwill impairment
testing guidance was that the guidance also would be helpful in impairment
testing for intangible assets other than goodwill.
The revised standard allows an entity the option to first assess qualitatively
whether it is more likely than not (that is, a likelihood of more than 50
percent) that an indefinite-lived intangible asset is impaired, thus
necessitating that it perform the quantitative impairment test. An entity is not
required to calculate the fair value of an indefinite-lived intangible asset and
perform the quantitative impairment test unless the entity determines that it is
more likely than not that the asset is impaired.
This Update is effective for annual and interim impairment tests performed in
fiscal years beginning after September 15, 2012. Earlier implementation is
permitted.
21
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 consolidated 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 an accumulated deficit at December 31, 2012, a net loss and net cash used in
operating activities for the interim period then ended. These factors raise
substantial doubt about the Company's ability to continue as a going concern.
While the Company is attempting to 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 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.
NOTE 4 - PREPAID EXPENSES
Prepaid expenses consisted of the following:
December 31, March 31,
2012 2012
-------- --------
Prepaid research and development $ 23,336 $128,445
Prepaid rent -- 21,250
Retainer -- 15,000
Other 2,680 4,179
-------- --------
$ 26,016 $168,874
======== ========
NOTE 5 - PROPERTY AND EQUIPMENT
Property and equipment, stated at cost, less accumulated depreciation consisted
of the following:
Estimated
Useful Life December 31, March 31,
(Years) 2012 2012
------- -------- --------
Property and equipment 5 $ 7,925 $ 3,036
Less accumulated depreciation (762) --
-------- --------
$ 7,163 $ 3,036
======== ========
22
DEPRECIATION EXPENSE
The Company acquired furniture and fixture near the end of February 2012 and
started to depreciate as of April 1, 2012. Depreciation expense for the interim
period ended December 31, 2012 was $762.
NOTE 6 - ACQUIRED TECHNOLOGY
On July 5, 2012, the Company acquired the rights to certain technology from
Technew Technology Limited in exchange for 3,000,000 restricted shares of the
Company's common stock. These restricted shares were valued at $0.79 per share
discounted at 69% taking into consideration its restricted nature and lack of
liquidity and consistent trading in the market for a total value of $1,635,300,
which was recorded as acquired technology and amortized on a straight-line basis
over the acquired technology's estimated useful life of fifteen (15) years.
Estimated
Useful Life December 31, March 31,
(Years) 2012 2012
------- ---------- ----------
Technology right 15 $1,635,300 $ --
Less accumulated amortization (54,510) --
---------- ----------
$1,580,790 $ --
========== ==========
AMORTIZATION EXPENSE
Amortization expense for the interim period ended December 31, 2012 was $54,510.
NOTE 7 - WEBSITE DEVELOPMENT COSTS
Website development costs, stated at cost, less accumulated amortization
consisted of the following:
Estimated
Useful Life December 31, March 31,
(Years) 2012 2012
------- ---------- ----------
Website development costs 5 $ 5,315 $ 5,315
Accumulated amortization (1,602) (801)
----------- ----------
$ 3,713 $ 4,514
========== ==========
AMORTIZATION EXPENSE
Amortization expense was $801 and $534 for the interim period ended December 31,
2012 and for the period from April 11, 2011 (inception) through December 31,
2011, respectively.
NOTE 8 - 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
Technew Technology Limited Non-controlling interest holder
Growers Synergy Pte Ltd. An entity owned and controlled by the president
and significant stockholder of the Company
Guangzhou Health Technology An entity owned and controlled by
Development Company Limited Non-controlling interest holder
23
ADVANCES FROM STOCKHOLDER
From time to time, stockholder of the Company advances 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 interim period
ended December 31, 2012, the Company recorded $4,500 in rent expenses due
Leverage Investment LLC.
FARM MANAGEMENT AND OFF-TAKE AGREEMENT WITH GROWERS SYNERGY PTE LTD.
For the Period from July 1, 2011 through October 31, 2011, the Company engaged
Growers Synergy Pte Ltd. to provide farm management services on a month-to-month
basis, at $20,000 per month.
On November 1, 2011, the Company entered into a Management and Off-Take
Agreement (the "Management 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 Management 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 Management Agreement
may be terminated by the Company upon 30 day notice. In connection with the
Management 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.
Farm management services provided by Growers Synergy Pte Ltd. is as follows:
For the
Period from
For the April 11, 2011
Interim Period (inception)
Ended through
December 31, December 31,
2012 2011
-------- --------
Farm management services received and
farm management services booked $180,000 $ --
-------- --------
$180,000 $ --
======== ========
Future minimum payments required under this agreement at December 31, 2012 were
as follows:
Fiscal Year Ending March 31:
2013 (remainder of the fiscal year) $ 60,000
2014 140,000
--------
$200,000
========
CASH COMMITMENT IN CONNECTION WITH THE OPERATIONS OF STEVIA TECHNEW
On July 5, 2012, Stevia Asia, entered into a Cooperative Agreement (the
"Cooperative Agreement") with Technew Technology Limited ("Technew"), a company
incorporated under the companies ordinance of Hong Kong and an associate of
Guangzhou Health China Technology Development Company Limited, and Zhang Jia, a
Chinese citizen (together with Technew, the "Partners") pursuant to which Stevia
Asia and Partners have agreed to make Stevia Technew, a joint venture, of which
Stevia Asia legally and beneficially owns 70% shares (representing 70% of the
issued shares) and Technew legally and beneficially owns 30% shares
(representing 30% of the of the issued shares). The Partners will be responsible
for managing Stevia Technew and Stevia Asia has agreed to provide $200,000 per
month, up to a total of $2,000,000 in financing, subject to the performance of
Stevia Technew and Stevia Asia's financial capabilities.
24
For the interim period ended December 31, 2012, Stevia Asia provided Stevia
Technew $230,000, all of which has been paid to Guangzhou Health and expended
and recorded as farm management services - related party.
NOTE 9 - 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.
Convertible notes payable consisted of the following:
December 31, March 31,
2012 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 with the
conversion price to be the same as the
private placement price on a per share basis
provided the Company complete a private
placement with gross proceeds of at least
$100,000. On July 6, 2012, the note holder
converted the entire principal of $250,000
and accrued interest through the date of
conversion of $15,959 to 319,607 shares of
the Company's common stock at $0.83 per
share. -- 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 with the
conversion price to be the same as the
private placement price on a per share basis
provided the Company complete a private
placement with gross proceeds of at least
$100,000. On July 6, 2012, the note holder
converted the entire principal of $250,000
and accrued interest through the date of
conversion of $11,781 to 314,586 shares of
the Company's common stock at $0.83 per
share. -- 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 with the
conversion price to be at $0.46875 per share,
at which the Company completed a private
placement with gross proceeds of at least
$100,000 on August 6, 2012, the same as the
next private placement price on a per share
basis provided the Company complete a private
placement with gross proceeds of at least
$100,000. 200,000 200,000
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 with the
conversion price to be at $0.46875 per share,
at which the Company completed a private
placement with gross proceeds of at least
$100,000 on August 6, 2012, the same as the
next private placement price on a per share
basis provided the Company complete a private
placement with gross proceeds of at least
$100,000. 200,000 --
-------- --------
$400,000 $700,000
======== ========
25
NOTE 10 - DERIVATIVE INSTRUMENTS AND THE FAIR VALUE OF FINANCIAL INSTRUMENTS
(I) WARRANTS ISSUED ON AUGUST 6, 2012
DESCRIPTION OF WARRANTS AND FAIR VALUE ON DATE OF GRANT
On August 6, 2012, the Company issued (i) warrants to purchase 1,066,667 shares,
in the aggregate, of the Company's common stock to the investors (the "investors
warrants") and (ii) warrants to purchase 85,333 shares of the Company's common
stock to the placement agent (the "agent warrants") with an exercise price of
$0.6405 per share subject to certain adjustments pursuant to Section 3(b)
Subsequent Equity Sales of the SPA expiring five (5) years from the date of
issuance.
DERIVATIVE ANALYSIS
The exercise price of August 6, 2012 warrants and the number of shares issuable
upon exercise is subject to reset adjustment in the event of stock splits, stock
dividends, recapitalization, most favored nation clause and similar corporate
events. Pursuant to the Section 3(b) Subsequent Equity Sales of the SPA, if the
Company issues any common stock or securities other than the excepted issuances,
to any person or entity at a purchase or exercise price per share less than the
share purchase price of the August 6, 2012 Unit Offering without the consent of
the subscriber holding purchased shares, warrants or warrant shares of the
August 6, 2012 Unit Offering, then the subscriber shall have the right to apply
the lowest such purchase price or exercise price of the offering or sale of such
new securities to the purchase price of the purchased shares then held by the
subscriber (and, if necessary, the Company will issue additional shares), the
reset adjustments are also referred to as full reset adjustments.
Because these warrants have full reset adjustments tied to future issuances of
equity securities by the Company, they are subject to derivative liability
treatment under Section 815-40-15 of the FASB Accounting Standard Codification
("Section 815-40-15") (FORMERLY FASB EMERGING ISSUES TASK FORCE ("EITF") ISSUE
NO. 07-5: DETERMINING WHETHER AN INSTRUMENT (OR EMBEDDED FEATURE) IS INDEXED TO
AN ENTITY'S OWN STOCK ("EITF 07-5"))). Section 815-40-15 became effective on
January 1, 2009 and the Warrants issued in the August 6, 2012 Unit Offering have
been measured at fair value using a Lattice model at each reporting period with
gains and losses from the change in fair value of derivative liabilities
recognized on the consolidated statement of income and comprehensive income.
VALUATION OF DERIVATIVE LIABILITY
(A) VALUATION METHODOLOGY
The Company's August 6, 2012 warrants do not trade in an active securities
market, as such, the Company developed a Lattice model that values the
derivative liability of the warrants based on a probability weighted discounted
cash flow model. This model is based on future projections of the various
potential outcomes. The features that were analyzed and incorporated into the
model included the exercise feature and the full ratchet reset.
Based on these features, there are two primary events that can occur; the Holder
exercises the Warrants or the Warrants are held to expiration. The model
analyzed the underlying economic factors that influenced which of these events
would occur, when they were likely to occur, and the specific terms that would
be in effect at the time (i.e. stock price, exercise price, volatility, etc.).
Projections were then made on these underlying factors which led to a set of
potential scenarios. As the result of the large Warrant overhang we accounted
for the dilution affects, volatility and market cap to adjust the projections.
Probabilities were assigned to each of these scenarios based on management
projections. This led to a cash flow projection and a probability associated
with that cash flow. A discounted weighted average cash flow over the various
scenarios was completed to determine the value of the derivative warrant
liability.
(B) VALUATION ASSUMPTIONS
The Company's 2012 derivative warrants were valued at each period ending date
with the following assumptions:
26
* The stock price would fluctuate with the Company projected volatility.
* The stock price would fluctuate with an annual volatility. The
projected volatility curve was based on historical volatilities of the
Company for the valuation periods.
* The Holder would exercise the warrant as they become exercisable
(effective registration is projected 4 months from issuance and the
earliest exercise is projected 180 days from issuance) at target
prices of 2 times the higher of the projected reset price or stock
price.
* The Holder would exercise the warrant at maturity if the stock price
was above the project reset prices.
* A 100% probability of a reset event and a projected financing each
quarter for 3 years at prices approximating 93% of market
* The 1,066,667 Investor Warrants $0.6405 exercise price is projected to
reset from $0.87 to $0.192 at maturity; and the 85,333 Placement Agent
Warrants $0.6405 exercise price is projected to reset from $0.87 to
$0.192 at maturity;
* No warrants have been exercised or expired.
* The projected volatility curve for the valuation dates was:
1 Year 2 Year 3 Year 4 Year 5 Year
------ ------ ------ ------ ------
August 6, 2012 129% 178% 218% 252% 281%
September 30, 2012 127% 173% 211% 244% 272%
December 31, 2012 126% 167% 204% 235% 263%
(C) FAIR VALUE OF DERIVATIVE WARRANTS
The table below provides a summary of the fair value of the derivative warrant
liability and the changes in the fair value of the derivative warrants to
purchase 1,152,000 shares of the Company's common stock, including net transfers
in and/or out, of derivative warrants measured at fair value on a recurring
basis using significant unobservable inputs (Level 3).
Fair Value Measurement
Using Level 3 Inputs
----------------------------
Derivative
warrants Assets
(Liability) Total
----------- -----
Balance, August 6, 2012 $(411,805) $(411,805)
Total gains or losses
(realized/unrealized) included in:
Net income (loss) 231,521 231,521
Other comprehensive income (loss) -- --
Purchases, issuances and settlements -- --
Transfers in and/or out of Level 3 -- --
--------- ---------
Balance, August 6, 2012 (180,284) (180,284)
Total gains or losses
(realized/unrealized) included in:
Net income (loss) 73,723 73,723
Other comprehensive income (loss) -- --
Purchases, issuances and settlements -- --
Transfers in and/or out of Level 3 -- --
--------- ---------
Balance, December 31, 2012 $(106,561) $(106,561)
========= =========
27
(D) WARRANTS OUTSTANDING
As of December 31, 2012 no warrants have been exercised and warrants to purchase
1,152,000 shares of Company common stock remain outstanding.
The table below summarizes the Company's derivative warrant activity
2012 Warrant Activities Apic (Gain) Loss
---------------------------------------------------------- --------- ----------
Reclassification
Total Fair Value of Change in of Fair Value of
Derivative Non-derivative Warrant Derivative Derivative Derivative
Shares Shares Shares Warrants Liability Liability
------ ------ ------ -------- --------- ---------
Derivative warrant at
August 6, 2012 1,152,000 -- 1,152,000 (411,805) -- --
Mark to market 231,521 (231,521)
Derivative warrant at
September 30, 2012 1,152,000 -- 1,152,000 (180,284) (231,521)
Mark to market 73,723 (73,723)
Derivative warrant at
December 31, 2012 1,152,000 -- 1,152,000 (106,561) (305,244)
(II) WARRANT ACTIVITIES
The table below summarizes the Company's warrant activities through December 31,
2012:
SUMMARY OF THE COMPANY'S WARRANT ACTIVITIES
The table below summarizes the Company's warrant activities:
Number of Exercise Weighted Average Fair Value at Aggregate
Warrant Price Range Exercise Rate of Intrinsic
Shares Per Share Price Issuance Value
------ --------- ----- -------- -----
Balance, March 31, 2012 -- $ -- $ -- $ -- $ --
Granted 1,152,000 0.6405 0.6405 411,805 --
Canceled -- -- -- -- --
Exercised -- -- -- -- --
Expired -- -- -- -- --
--------- ------- ------- --------- ----
Balance, December 31, 2012 1,152,000 0.6405 0.6405 411,805 --
Earned and exercisable,
December 31, 2012 1,152,000 0.6405 0.6405 411,805 --
--------- ------- ------- --------- ----
Unvested, December 31, 2012 -- $ -- $ -- $ -- $ --
--------- ------- ------- --------- ----
28
The following table summarizes information concerning outstanding and
exercisable warrants as of December 31, 2012:
Warrants Outstanding Warrants Exercisable
---------------------------------- -----------------------------------
Average Average
Remaining Weighted Remaining Weighted
Contractual Average Contractual Average
Range of Number Life Exercise Number Life Exercise
Exercise Prices Outstanding (in years) Price Exercisable (in years) Price
--------------- ----------- ---------- ----- ----------- ---------- -----
$0.6405 1,152,000 4.60 $ 0.6405 1,152,000 4.60 $0.6405
------- --------- ---- -------- --------- ---- -------
$0.6405 1,152,000 4.60 $ 0.6405 1,152,000 4.60 $0.6405
======= ========= ==== ======== ========= ==== =======
NOTE 11 - EQUITY
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 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 "NON-COMPLETION NOTICE").
29
(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 1,500,000
Closing Date shares
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 1,500,000
Closing Date 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. These 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. The Company recorded $281,250 in directors' fees for the interim period
ended December 31, 2012.
30
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.
(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.
31
(II) TERM
The term of this agreement were consummated from the date hereof, and
automatically terminated 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.
COMMON SHARES ISSUED IN CONNECTION WITH ENTRY INTO TECHNOLOGY ACQUISITION
AGREEMENT
On July 5, 2012, the Company entered into a Technology Acquisition Agreement
(the "Technology Acquisition Agreement") with Technew Technology Limited
("Technew"), pursuant to which the Company acquired the rights to certain
technology from Technew in exchange for 3,000,000 restricted shares of the
Company's common stock. These restricted shares were valued at $0.79 per share
discounted at 69% taking into consideration of its restricted nature and lack of
liquidity and consistent trading in the market or $1,635,300, which was recorded
as acquired technology and amortized on a straight-line basis over the acquired
technology's estimated useful life of fifteen (15) years.
COMMON SHARES ISSUED TO A RELATED PARTY
On July 5, 2012, the Company issued 500,000 restricted shares of its common
shares to Growers Synergy Pte Ltd., a corporation organized under the laws of
the Republic of Singapore ("Singapore"), owned and controlled by George
Blankenbaker, the president, director and a significant stockholder of the
Company ("Growers Synergy"), as consideration for services rendered by Growers
Synergy to the Company. These restricted shares were valued at $0.79 per share
discounted at 69% taking into consideration of its restricted nature and lack of
liquidity and consistent trading in the market or $272,550 and included in the
farm management services - related party in the consolidated statements of
operations.
SALE OF EQUITY UNIT INCLUSIVE OF COMMON STOCK AND WARRANTS
ENTRY INTO SECURITIES PURCHASE AGREEMENT
On August 1, 2012, the Company entered into a Securities Purchase Agreement (the
"SPA") with two (2) accredited institutional investors (the "Purchasers") to
raise $500,000 in a private placement financing. On August 6, 2012, after the
satisfaction of certain closing conditions, the Offering closed and the Company
issued to the Purchasers: (i) an aggregate of 1,066,667 shares of the Company's
common stock at $0.46875 per share and (ii) warrants to purchase 1,066,667
shares of the Company's common stock at an exercise price of $0.6405 expiring
five (5) years from the date of issuance for a gross proceeds of $500,000.
At closing, the Company reimbursed the investor for legal fees of $12,500 and
paid Garden State Securities, Inc,("GSS") that served as placement agent for the
Company in the offering (i) cash commissions equal to 8.0% of the gross proceeds
received in the equity financing or $40,000, and (ii) a warrant to purchase
85,333 shares of the Company's common stock representing 8% of the Shares sold
in the Offering with an exercise price of $0.6405 per share expiring five (5)
years from the date of issuance (the "agent warrants") to GSS or its designee.
The units were sold at $0.46875 per unit consisting one common share and the
warrant to purchase one (1) common share for a gross proceeds of $500,000. In
connection with the August 6, 2012 equity unit offering the Company paid (i) GSS
cash commissions equal to 8.0% of the gross proceeds received in the equity
financing, or $40,000 and (ii) $12,500 in legal fees and resulted in a net
proceeds of $447,500.
The Company intended to use the net proceeds from the Offering to advance the
Company's ability to execute its growth strategy and to aid in the commercial
development of the recently announced launch of the Company's majority-owned
subsidiary, Stevia Technew Limited.
ENTRY INTO REGISTRATION RIGHTS AGREEMENT
In connection with the equity financing on August 1, 2012, the Company also
entered into a registration rights agreement with the Purchasers (the "rights
agreement"). The Rights Agreement requires the Company to file a registration
statement (the "Registration Statement") with the Securities and Exchange
Commission (the "SEC") within thirty (30) days of the Company's entrance into
the rights agreement (the "filing date") for the resale by the Purchasers of all
of the Shares and all of the shares of common stock issuable upon exercise of
the Warrants (the "registrable securities").
The registration statement must be declared effective by the SEC within one
hundred and twenty (120) days of the closing date of the Offering subject to
certain adjustments. If the registration statement is not filed prior to the
filing date, the Company will be required to pay certain liquidated damages, not
to exceed in the aggregate 6% of the purchase price paid by the Purchasers
pursuant to the SPA.
32
WARRANTS
ISSUANCES OF WARRANTS IN CONNECTION WITH ENTRY INTO SECURITIES PURCHASE
AGREEMENT
On August 6, 2012, the Company issued (i) warrants to purchase 1,066,667 shares,
in the aggregate, of the Company's common stock to the investors with an
exercise price of $0.6405 per share subject to certain adjustments per Section
3(b) Subsequent Equity Sales of the SPA expiring five (5) years from the date of
issuance in connection with the sale of common shares.
ISSUANCE OF WARRANTS TO THE PLACEMENT AGENT AS COMPENSATION
Garden State Securities, Inc. (the "GSS") served as the placement agent of the
Company for the equity financing on August 1, 2012. Per the engagement agreement
signed between GSS and the Company, in consideration for services rendered as
the placement agent, the Company agreed to: (i) pay GSS cash commissions equal
to 8.0% of the gross proceeds received in the equity financing, or $40,000, and
(ii) issue to GSS or its designee, a warrant to purchase 85,333 shares of the
Company's common stock representing 8% of the warrants sold in the Offering)
with an exercise price of $0.6405 per share subject to certain adjustments per
Section 3(b) Subsequent Equity Sales of the SPA expiring five (5) years from the
date of issuance (the "agent warrants"). The agent warrants also provide for the
same registration rights and obligations as set forth in the Rights Agreement
with respect to the Warrants and Warrant Shares.
NOTE 12 - NON-CONTROLLING INTEREST
Non-controlling interest consisted of the following:
Contributed and
additional Other Total
paid-in Earnings and Comprehensive non-controlling
capital losses Income interest
------- ------ ------ --------
Balance at March 31, 2012 $ -- $ -- $ -- $ --
Current period earnings and losses -- (97,338) -- (97,338)
------- -------- ------- --------
Balance at December 31, 2012 $ -- $(97,338) $ -- $(97,338)
======= ======== ======= ========
NOTE 13 - 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.
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.
33
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 December 31, 2012 were
as follows:
FISCAL YEAR ENDING MARCH 31:
2013 (remainder of the fiscal year) $ 15,000
2014 30,000
2015 30,000
2016 30,000
--------
$105,000
========
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.
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
34
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 14 - 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 September 30th 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").
(III) PURCHASE PRICE
SVC and the Company shall review and agree on or before September 30th 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.
35
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 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 interim period ended December 31, 2012 and for the period from April 11,
2011 (inception) through December 31, 2011, the Company recorded $27,000 and
$18,000 in consulting fees under the Consulting Agreement, respectively.
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.
(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.
On December 31, 2011, the financial consulting agreement expired.
36
(III) COMPENSATION
The Company shall pay Clifton a fee of $3,000 per month.
SUMMARY OF THE CONSULTING FEES
The financial consulting agreement expired on December 31, 2011. For the period
from April 11, 2011 (inception) through December 31, 2011, the Company recorded
$18,000 in financing cost under this Financing Consulting Agreement.
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") with 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 operations of the Company and its historical and projected financial
condition, advise the Company of "best efforts" Private Placement offering of
debt or equity securities to fulfill the Company's business plan, and contacts
for the Company possible financing sources.
(II) TERM
GSS shall act as the Company's exclusive placement agent for the period of 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.
NOTE 15 - CONCENTRATIONS AND CREDIT RISK
CREDIT RISK
Financial instruments that potentially subject the Company to significant
concentration of credit risk consist primarily of cash and cash equivalents.
As of December 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.
CUSTOMERS AND CREDIT CONCENTRATIONS
One (1) customer accounted for all of the sales for the interim period ended
December 31, 2012 and accounts receivable balances at December 31, 2012. A
reduction in sales from or loss of such customer would have a material adverse
effect on the Company's results of operations and financial condition.
37
VENDORS AND ACCOUNTS PAYABLE CONCENTRATIONS
Vendor purchase concentrations and accounts payable concentration are as
follows:
Accounts Payable at Net Purchases
--------------------- ----------------------
For the
Period from
For the April 11, 2011
Interim Period (inception)
Ended through
December 31, March 31, December 31, December 31,
2012 2012 2012 2011
------ ------ ------ ------
Growers Synergy Pte. Ltd. - related party 42.5% 16.4% 49.8% --%
tevia Ventures Corporation 3.7% 54.1% 10.3% --%
------ ------ ------ ------
46.2% 70.5% 60.1% --%
====== ====== ====== ======
NOTE 16 - 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 no
reportable subsequent events to be disclosed.
38
ITEM 2. 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 Quarterly
Report on Form 10-Q. Forward looking statements are statements not based on
historical information and which relate to future operations, strategies,
financial results or other developments. Forward-looking statements are based
upon estimates, forecasts, and assumptions that are inherently subject to
significant business, economic and competitive uncertainties and contingencies,
many of which are beyond our control and many of which, with respect to future
business decisions, are subject to change. These uncertainties and contingencies
can affect actual results and could cause actual results to differ materially
from those expressed in any forward-looking statements made by us, or on our
behalf. We disclaim any obligation to update forward-looking statements.
OVERVIEW
We were incorporated on May 21, 2007 in the State of Nevada under the name
Interpro Management Corp. On March 4, 2011, we changed our name to Stevia Corp.
and effectuated a 35 for 1 forward stock split of all of our issued and
outstanding shares of common stock.
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 protocols and other services to agriculture, aquaculture, and
livestock operators, (ii) the sale of inputs such as fertilizer and feed to
agriculture, aquaculture and livestock operators, (iii) the sale of crops and
seafood produced under contract farming and (iv) the sale of products derived
from the stevia plant.
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 Pte Ltd to assist in the management of our
Vietnam day-to-day operations. We have also begun to explore commercial
applications of stevia derived products and have developed and acquired certain
proprietary technology relating to stevia development which we can integrate
into our own stevia production and our farm management services. In connection
with our intellectual property development efforts we have engaged TechNew
Technology Limited ("TechNew), as our technology partner in Vietnam and on July
5, 2012 we entered into a Cooperative Agreement (the "Cooperative Agreement")
through our subsidiary Stevia Asia Limited ("Stevia Asia"), with Technew and
Zhang Ji, a Chinese citizen (together with Technew, the "Partners") pursuant to
which Stevia Asia and Partners have agreed to engage in a joint venture to
develop certain intellectual property related to stevia development, such joint
venture to be owned 70% by Stevia Asia and 30% by Technew (the "Joint Venture").
Pursuant to the Cooperative Agreement Stevia Asia has agreed to contribute
$200,000 per month, up to a total of $2,000,000 in financing, subject to the
performance of the Joint Venture and Stevia Asia's financial capabilities.
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, office space and a research center, developing relationships with
potential partners, and developing products derived from the stevia plant. We
have earned nominal revenues since inception.
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.
The following discussion of the financial condition, results of operations, cash
flows, and changes in our financial position should be read in conjunction with
our audited consolidated financial statements and notes included in our Annual
Report on Form 10-K for the fiscal year ended March 31, 2012, filed June 29,
2012. Such financial statements have been prepared in conformity with U.S. GAAP
and are stated in United States dollars.
COMPARISON OF THREE MONTH PERIODS ENDED DECEMBER 31, 2012 AND DECEMBER 31, 2011
For the three month period ended December 31, 2012 we incurred a net loss of
$364,601, compared to a net loss of $1,055,874 for the three month period ended
December 31, 2011. The decrease was mainly attributed to a decrease in research
39
and development expenses from $39,172 to 0, a decrease in salary and
compensation expense from $750,000 to $59,105, and a decrease in income from
change in fair value of derivative liability from $0 to $72,723.
General and administration expenses and professional fees for the three month
period ended December 31, 2012 amounted to $69,302 and $123,356 respectively,
compared to $14,868 and $73,454 during the three month period ended December 31,
2011. Research and development fees for the three month period ended December
31, 2012 were $0 compared to $39,172 during the three month period ended
December 31, 2011. Directors fees, officer salary and compensation and other
salary and compensation were $93,750, $0 and $110,982 respectively, compared to
$93,750, $750,000, $0 during the three month period ended December 31, 2011.
COMPARISON OF THE NINE MONTH PERIOD ENDED DECEMBER 31, 2012 WITH THE PERIOD FROM
INCEPTION (APRIL 11, 2011) TO DECEMBER 31, 2011
For the nine month period ended December 31, 2012 we incurred a net loss of
$1,342,473, compared to a net loss of $1,303,241 for the period from April 11,
2011 (inception) through December 31, 2011. The increase was largely attributed
to a decrease in gross margin from $(118,700) to $(619,604), offset by an
increase in other income from $(43,079) to $247,341.
General and administration expenses and professional fees for the nine month
period ended December 31, 2012 amounted to $204,616 and $352,031 respectively,
compared to $36,160 and $117,183 during the period from April 11, 2011
(inception) through December 31, 2011. Research and development fees for the
nine month period ended December 31, 2012 were $118,669 compared to $144,369
during the period from April 11, 2011 (inception) through December 31, 2011.
Directors' fees, officer salary and compensation and other salary and
compensation for the nine month period ended December 31, 2012 amounted to
$281,250, $0 and $110,982 respectively, compared to $93,750, $750,000 and $0
during the period from April 11, 2011 (inception) through December 31, 2011.
LIQUIDITY AND CAPITAL RESOURCES
As at December 31, 2012 we have $152,653 in current assets, and $1,130,479 in
current liabilities. As at December 31, 2012 we have $5,978 in cash. As at
December 31, 2012, our total assets were $1,759,319 and our total liabilities
were $1,237,040. Our net working capital deficit as at December 31, 2012 was
$977,826.
During the nine month period ended December 31, 2012, we used cash of $654,431
in operating activities and used cash of $4,889 in investing activities,
respectively. During the nine month period ended December 31, 2012, we funded
our operations from the proceeds of private sales of equity and convertible
notes. During the nine month period ended December 31, 2012, we raised $200,000
through the issuance of convertible notes and $447,500 through the proceeds of
sales of common stock, net of costs.
On August 1, 2012, we entered into a Securities Purchase Agreement (the
"Securities Purchase Agreement") with certain accredited investors (the
"Financing Stockholders") to raise $500,000 in a private placement financing
(the "Offering"). On August 6, 2012, after the satisfaction of certain closing
conditions, the Offering closed and the Company issued to the Financing
Stockholders: (i) an aggregate of 1,066,667 shares of the Company's common stock
at a price per share of $0.46875 and (ii) warrants to purchase an equal number
of shares of the Company's common stock at an exercise price of $0.6405 with a
term of five (5) years, for gross proceeds of $500,000. Garden State Securities,
Inc. ("GSS") served as the placement agent for such equity financing. Per the
engagement agreement signed between GSS and the Company on June 18, 2012, in
consideration for services rendered as the placement agent, the Company agreed
to: (i) pay GSS cash commissions equal to $40,000, or 8.0% of the gross proceeds
received in the equity financing, and (ii) issue to GSS or its designee, a
warrant to purchase up to 85,333 shares of the Company's common stock
representing 8% of the Shares sold in the Offering) with an exercise price of
$0.6405 per share and a term of five (5) years.
On December 7, 2012, a Registration Statement on Form S-1 was declared
effective, registering a total of 17,018,545 of our shares of common stock (the
"Registered Shares"). 14,885,211of the Registered Shares are shares that we may
put to Southridge Partners II, LP ("Southridge") pursuant to an equity purchase
agreement (the "Equity Purchase Agreement") between Southridge and the Company,
effective January 26, 2012. 1,066,667 of the Registered Shares are the shares of
common stock issued to the accredited investors pursuant to the Securities
Purchase Agreement, and another 1,066,667 of the Registered Shares are shares of
common stock underlying warrants issued to such accredited investors pursuant to
the Securities Purchase Agreement.
40
We have not put any shares to Southridge pursuant to the Equity Purchase
Agreement.
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.
Our current cash requirements are significant due to the planned development and
expansion of our business. The successful implementation of our business plan is
dependent upon our ability to develop valuable intellectual property relating to
stevia through our research programs, as well as our ability to develop and
manage our own crop and aquaculture production operations. These planned
research and agricultural development activities require significant cash
expenditures. We do not expect to generate the necessary cash from our
operations during the next 6 to 12 months to carry out these business
objectives. As such, in order to fund our operations during the next 6 to 12
months, we anticipate that we will have to raise additional capital through debt
and/or equity financings, which may result in substantial dilution to our
existing stockholders. There are no assurances that we will be able to raise the
required working capital on terms favorable, or that such working capital will
be available on any terms when needed. In addition, the terms of the Securities
Purchase Agreement contain certain restrictions on our ability to engage in
financing transactions for a period of two years from the effective date of the
Securities Purchase Agreement. The Securities Purchase Agreement contains
carveouts to such financing restrictions for certain exempted transactions
including (i) issuances pursuant to a stock option plan, (ii) securities issued
upon the conversion of outstanding securities, (iii) securities issued pursuant
to acquisitions or other strategic transactions, (iv) up to $500,000 in stock
and warrants on the same terms as set forth in the Securities Purchase
Agreement, and (v) securities issued pursuant to the Southridge Equity Purchase
Agreement. The terms of the Equity Purchase Agreement with Southridge also
contain a prohibition on us entering into any equity line of credit with terms
substantially comparable to the Equity Purchase Agreement for a period of 36
months following the date of such Equity Purchase Agreement, without
Southridge's consent.
OFF-BALANCE SHEET ARRANGEMENTS
We have not entered into any other financial guarantees or other commitments to
guarantee the payment obligations of any third parties. We have not entered into
any derivative contracts that are indexed to our shares and classified as
stockholder's equity or that are not reflected in our consolidated financial
statements. Furthermore, we do not have any retained or contingent interest in
assets transferred to an unconsolidated entity that serves as credit, liquidity
or market risk support to such entity. We do not have any variable interest in
any unconsolidated entity that provides financing, liquidity, market risk or
credit support to us or engages in leasing, hedging or research and development
services with us.
CRITICAL ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles of the United States (GAAP) requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the year. The more significant areas requiring the use of estimates
include asset impairment, stock-based compensation, and future income tax
amounts. Management bases its estimates on historical experience and on other
assumptions considered to be reasonable under the circumstances. However, actual
results may differ from the estimates.
The discussion and analysis of our financial condition and results of operations
are based upon our financial statements, which have been prepared in accordance
with GAAP. We believe certain critical accounting policies affect our more
significant judgments and estimates used in the preparation of the financial
statements. A description of our critical accounting policies is set forth in
our Annual Report on Form 10-K for the fiscal year ended March 31, 2012, filed
on June 29, 2012. As of, and for the three months ended December 31, 2012, there
have been no material changes or updates to our critical accounting policies.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
41
ITEM 4. 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
December 31, 2012 pursuant to Exchange Act Rule 13a-15. Based upon that
evaluation, our Principal Executive Officer and Principal Financial Officer
concluded that our disclosure controls and procedures are not effective as of
December 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.
In performing the above-referenced assessment, our management identified the
following material weaknesses:
i) We have not achieved the optimal level of segregation of duties
relative to key financial reporting functions.
ii) We did not have an audit committee or an independent audit committee
financial expert. While not being legally obligated to have an audit
committee or independent audit committee financial expert, it is the
management's view that to have an audit committee, comprised of
independent board members, and an independent audit committee
financial expert is an important entity-level control over our
financial statements.
We are currently reviewing our disclosure controls and procedures related to
these material weaknesses and expect to implement changes in the near term,
including identifying specific areas within our governance, accounting and
financial reporting processes to add adequate resources and personnel to
potentially mitigate these material weaknesses.
Our present management will continue to monitor and evaluate the effectiveness
of our internal controls and procedures and our internal controls over financial
reporting on an ongoing basis and are committed to taking further action and
implementing additional enhancements or improvements, as necessary and as funds
allow.
Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate. All internal control systems,
no matter how well designed, have inherent limitations. Therefore, even those
systems determined to be effective can provide only reasonable assurance with
respect to financial statement preparation and presentation.
CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING
There were no changes in our internal control over financial reporting that
occurred during the quarter ending December 31, 2012 that have materially
affected or are reasonably likely to materially affect our internal control over
financial reporting.
PART II--OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 1A. RISK FACTORS
Not applicable.
42
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
Exhibit
Number Name
------ ----
3.1(1) Articles of Incorporation, including all amendments to date
3.2(2) Amended and Restated Bylaws
31 Rule 13a-14(a)/15d-14(a) Certification (Principal Executive
Officer and Principal Financial Officer)
32 Section 1350 Certification
101* Interactive data files pursuant to Rule 405 of Regulation S-T
Footnotes to Exhibits Index
---------------------------
(1) Incorporated by reference to the Form S-1 filed on July 16, 2008 and the
Current Report on Form 8-K filed March 9, 2011.
(2) Incorporated by reference to the Current Report on Form 8-K filed on March
22, 2011.
* Pursuant to Rule 406T of Regulation S-T, these interactive data files are
deemed not filed or part of a registration statement or prospectus for
purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18
of the Securities Exchange Act of 1934 and otherwise are not subject to
liability.
43
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
STEVIA CORP.
Dated: February 14, 2013 /s/ George Blankenbaker
---------------------------------------
By: George Blankenbaker
Its: President, Secretary, Treasurer
and Director (Principal Executive
Officer, Principal Financial
Officer and Principal Accounting
Officer)