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: June 30, 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 August 13, 2012
----- ------------------------------
Common stock, $.001 par value 66,555,635
STEVIA CORP.
FORM 10-Q
JUNE 30, 2012
INDEX
PAGE
----
PART I--FINANCIAL INFORMATION
Item 1. Financial Statements.............................................. 4
Consolidated Balance Sheets as of June 30, 2012 (Unaudited)............ 5
Consolidated Statements of Operations for the three month period
ended June 30, 2012 and 2011 (Unaudited)............................... 6
Consolidated Statements of Stockholders' Equity (Deficit) for the
three month period ended June 30, 2012 (Unaudited)..................... 7
Consolidated Statements of Cash Flows for the three month periods
ended June 30, 2012 and 2011 (Unaudited)............................... 8
Notes to Financial Statements.......................................... 9
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................. 33
Item 3. Quantitative and Qualitative Disclosures About Market Risk........ 35
Item 4. Controls and Procedures........................................... 35
PART II--OTHER INFORMATION
Item 1. Legal Proceedings................................................. 36
Item 1A. Risk Factors...................................................... 36
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds....... 36
Item 3. Defaults Upon Senior Securities................................... 36
Item 4. Mine Safety Disclosures........................................... 36
Item 5. Other Information................................................. 36
Item 6. Exhibits.......................................................... 36
Signatures.................................................................. 38
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.
(A Development Stage Company)
June 30, 2012 and 2011
Index to the Consolidated Financial Statements
Contents Page(s)
-------- -------
Consolidated Balance Sheets at June 30, 2012 (Unaudited) and
March 31, 2012 ......................................................... 5
Consolidated Statements of Operations for the Three Months Ended
June 30, 2012, for the Period from April 11, 2011 (Inception) through
June 30, 2011 and for the Period from April 11, 2011 (Inception)
through June 30, 2012 (Unaudited) ...................................... 6
Consolidated Statement of Stockholders' Equity (Deficit) for the Period
from April 11, 2011 (Inception) through June 30, 2012 (Unaudited) ...... 7
Consolidated Statements of Cash Flows for the Three Months Ended
June 30, 2012, for the Period from April 11, 2011 (Inception) through
June 30, 2011 and for the Period from April 11, 2011 (Inception)
through June 30, 2012 (Unaudited) ...................................... 8
Notes to the Consolidated Financial Statements (Unaudited) ............. 9
4
Stevia Corp.
(A Development Stage Company)
Consolidated Balance Sheets
June 30, 2012 March 31, 2012
------------- --------------
(Unaudited)
ASSETS
Current assets:
Cash $ 17,062 $ 15,698
Accounts receivable 280 --
Prepaid expenses 16,608 168,874
----------- -----------
Total current assets 33,950 184,572
----------- -----------
Property and equipment 4,359 3,036
Accumulated depreciation (218) --
----------- -----------
Property and equipment, net 4,141 3,036
Website development costs
Website development costs 5,315 5,315
Accumulated amortization (1,068) (801)
----------- -----------
Website development costs, net 4,247 4,514
----------- -----------
Security Deposit
Security deposit 15,000 15,000
----------- -----------
Security deposit 15,000 15,000
----------- -----------
Total assets $ 57,338 $ 207,122
=========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 190,713 $ 237,288
Accounts payable - President and CEO 20,220 20,220
Accrued expenses 8,840 5,400
Accrued interest 26,959 15,521
Advances from president and significant stockholder 21,238 19,138
Convertible notes payable 900,000 700,000
----------- -----------
Total current liabilities 1,167,970 997,567
----------- -----------
Stockholders' deficit:
Common stock at $0.001 par value: 100,000,000 shares authorized,
58,354,775 shares issued and outstanding 58,355 58,355
Additional paid-in capital 1,568,501 1,474,751
Deficit accumulated during the development stage (2,737,488) (2,323,551)
----------- -----------
Total stockholders' deficit (1,110,632) (790,445)
----------- -----------
Total liabilities and stockholders' deficit $ 57,338 $ 207,122
=========== ===========
See accompanying notes to the consolidated financial statements.
5
Stevia Corp.
(A Development Stage Company)
Consolidated Statements of Operations
For the Period from For the Period from
For the April 11, 2011 April 11, 2011
Three Months (inception) (inception)
Ended through through
June 30, 2012 June 30, 2011 June 30, 2012
------------- ------------- -------------
(Unaudited) (Unaudited) (Unaudited)
Revenues earned during the development stage $ 280 $ -- $ 1,580
Cost of services during the development stage
Farm expenses 7,500 -- 538,746
Farm management services - related party 60,000 -- 240,000
------------ ------------ ------------
Total cost of services during the
development stage 67,500 -- 780,326
------------ ------------ ------------
Gross profit (loss) (67,220) -- (777,166)
Operating expenses:
Directors' fees 93,750 -- 281,250
Professional fees 116,728 13,071 372,687
Research and development 78,984 -- 285,175
Salary and compensation - officer -- -- 750,000
General and administrative expenses 44,713 100 158,455
------------ ------------ ------------
Total operating expenses 334,175 13,171 1,847,567
------------ ------------ ------------
Loss from operations (401,395) (13,171) (2,624,733)
Other (income) expense:
Financing cost -- -- 70,500
Foreign currency transaction gain (loss) 1,101 -- 1,101
Interest expense 11,441 671 41,198
Interest income -- -- (44)
------------ ------------ ------------
Total other (income) expense 12,542 671 112,755
------------ ------------ ------------
Loss before income tax provision (413,937) (13,842) (2,737,488)
Income tax provision -- -- --
------------ ------------ ------------
Net loss $ (413,937) $ (13,842) $ (2,737,488)
============ ============ ============
Net loss per common share
- Basic and diluted: $ (0.01) $ (0.00)
============ ============
Weighted average common shares
- basic and diluted 58,354,775 55,800,000
============ ============
See accompanying notes to the consolidated financial statements.
6
Stevia Corp.
(A Development Stage Company)
Consolidated Statement of Stockholders' Equity (Deficit)
For the Period from April 11, 2011 (Inception) through June 30, 2012
Common Stock, Deficit
$0.001 Par Value Accumulated Total
----------------------- Additional during the Stockholders'
Number paid-in Development Equity
of Shares Amount Capital Stage (Deficit)
--------- ------ ------- ----- ---------
Balance, April 11, 2011 (inception) 6,000,000 $ 6,000 $ (5,900) $ -- $ 100
Common shares deemed issued in
reverse acquisition 79,800,000 79,800 (198,088) (118,288)
Common shares cancelled in
reverse acquisition (33,000,000) (33,000) 33,000 --
Common shares issued for cash at
$0.25 per share on October 4, 2011 400,000 400 99,600 100,000
Common shares issued for notes
conversion at $0.25 per share on
October 4, 2011 1,400,000 1,400 348,600 350,000
Common shares issued for conversion
of accrued interest at $0.25 per
share on October 4, 2011 74,850 75 18,638 18,713
Common shares cancelled by significant
stockholder on October 4, 2011 (3,000,000) (3,000) 3,000 --
Common shares issued for future director
services on October 4, 2011 3,000,000 3,000 747,000 750,000
Common shares issued for future director
services on October 4, 2011 (750,000) (750,000)
Common shares issued for future director
services on October 4, 2011 earned
during the period 187,500 187,500
Make good shares released to officer for
achieving the first milestone on
December 23, 2011 3,000,000 3,000 747,000 750,000
Common shares issued for notes conversion
at $0.25 per share on January 18, 2012 600,000 600 149,400 150,000
Common shares issued for conversion of
accrued interest at $0.25 per share on
January 18, 2012 17,425 17 4,339 4,356
Common shares issued for financing services
upon agreement at $1.50 per share on
January 26, 2012 35,000 35 52,465 52,500
Common shares issued for consulting services
at $1.39 per share on March 31, 2012 27,500 28 38,197 38,225
Net loss (2,323,551) (2,323,551)
----------- ----------- ----------- ----------- -----------
Balance, March 31, 2012 58,354,775 58,355 1,474,751 (2,323,551) (790,445)
Common shares issued for future director
services on October 4, 2011 earned
during the period 93,750 93,750
Net loss (413,937) (413,937)
----------- ----------- ----------- ----------- -----------
Balance, June 30, 2012 58,354,775 $ 58,355 $ 1,568,501 $(2,737,488) $(1,110,632)
=========== =========== =========== =========== ===========
See accompanying notes to the consolidated financial statements.
7
Stevia Corp.
(A Development Stage Company)
Consolidated Statements of Cash Flows
For the Period from For the Period from
For the April 11, 2011 April 11, 2011
Three Months (inception) (inception)
Ended through through
June 30, 2012 June 30, 2011 June 30, 2012
------------- ------------- -------------
(Unaudited) (Unaudited) (Unaudited)
Cash flows from operating activities:
Net loss $ (413,937) $ (13,842) $(2,737,488)
Adjustments to reconcile net loss to net
cash used in operating activities
Depreciation expense 218 -- 218
Amortization expense 267 -- 1,068
Common shares issued for compensation -- -- 750,000
Common shares issued for director services
earned during the period 93,750 -- 281,250
Common shares issued for outside services -- -- 90,725
Changes in operating assets and liabilities:
Accounts receivable (280) -- (280)
Prepaid expenses 152,266 -- (16,608)
Security deposit -- -- (15,000)
Accounts payable (46,575) 9,926 94,955
Accounts payable - related parties -- -- 20,220
Accrued expenses 3,440 (5,690) 2,150
Accrued interest 11,438 9,506 50,027
----------- ----------- -----------
Net cash used in operating activities (199,413) (100) (1,478,763)
----------- ----------- -----------
Cash flows from investing activities:
Purchases of property, plant and equipment (1,323) -- (4,359)
Website development costs -- -- (5,315)
Cash received from reverse acquisition -- 3,198 3,199
----------- ----------- -----------
Net cash provided by (used in) investing activities (1,323) 3,198 (6,475)
----------- ----------- -----------
Cash flows from financing activities:
Advances from president and stockholder 2,100 -- 2,300
Proceeds from issuance of convertible notes 200,000 350,000 1,400,000
Proceeds from sale of common stock -- -- 100,000
----------- ----------- -----------
Net cash provided by financing activities 202,100 350,000 1,502,300
----------- ----------- -----------
Net change in cash 1,364 353,098 17,062
Cash at beginning of period 15,698 -- --
----------- ----------- -----------
Cash at end of period $ 17,062 $ 353,098 $ 17,062
=========== =========== ===========
Supplemental disclosure of cash flows information:
Interest paid $ -- $ -- $ --
=========== =========== ===========
Income tax paid $ -- $ -- $ --
=========== =========== ===========
Non-cash investing and financing activities:
Issuance of common stock for conversion of
convertible notes $ -- $ -- $ 500,000
=========== =========== ===========
Issuance of common stock for conversion of
accrued note interest $ -- $ -- $ 23,068
=========== =========== ===========
See accompanying notes to the consolidated financial statements.
8
Stevia Corp.
(A Development Stage Company)
June 30, 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 Stevia Ventures International Ltd. ("Ventures")
pursuant to a Share Exchange Agreement (the "Share Exchange Agreement") by and
among the Company, Ventures and George Blankenbaker, the stockholder of Ventures
(the "Ventures Stockholder").
Immediately prior to the Share Exchange Transaction on June 23, 2011, the
Company had 79,800,000 common shares issued and outstanding. Simultaneously with
the Closing of the Share Exchange Agreement, on the Closing Date, Mohanad
Shurrab, a shareholder and, as of the Closing Date, the Company's former
Director, President, Treasurer and Secretary, surrendered 33,000,000 shares of
the Company's common stock to the Company for cancellation.
As a result of the Share Exchange Agreement, the Company issued 12,000,000
common shares for the acquisition of 100% of the issued and outstanding shares
of Ventures. Of the 12,000,000 common shares issued 6,000,000 shares are being
held in escrow pending the achievement by the Company of certain post-Closing
business milestones (the "Milestones"), pursuant to the terms of the Make Good
Escrow Agreement, between the Company, Greenberg Traurig, LLP, as escrow agent
and the Ventures' Stockholder (the "Escrow Agreement"). Even though the shares
issued only represented approximately 20.4% of the issued and outstanding common
stock immediately after the consummation of the Share Exchange Agreement the
stockholder of Ventures completely took over and controlled the board of
directors and management of the Company upon acquisition.
As a result of the change in control to the then Ventures Stockholder, for
financial statement reporting purposes, the merger between the Company and
Ventures has been treated as a reverse acquisition with Ventures deemed the
accounting acquirer and the Company deemed the accounting acquiree under the
purchase method of accounting in accordance with section 805-10-55 of the FASB
Accounting Standards Codification. The reverse merger is deemed a capital
transaction and the net assets of Ventures (the accounting acquirer) are carried
forward to the Company (the legal acquirer and the reporting entity) at their
carrying value before the combination. The acquisition process utilizes the
9
capital structure of the Company and the assets and liabilities of Ventures
which are recorded at historical cost. The equity of the Company is the
historical equity of Ventures retroactively restated to reflect the number of
shares issued by the Company in the transaction.
FORMATION OF STEVIA ASIA LIMITED
On March 19, 2012, the Company formed Stevia Asia Limited ("Stevia Asia")
under the laws of the Hong Kong Special Administrative Region ("HK SAR") of the
People's Republic of China ("PRC"), a wholly-owned subsidiary. Stevia Asia is
currently inactive.
FORMATION OF STEVIA TECHNEW LIMITED (FORMERLY HERO TACT LIMITED)
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 is intended to
facilitate a joint venture relationship with the Company's technology partner,
Guangzhou Health China Technology Development Company Limited, operating under
the trade name Tech-New Bio-Technology ("TechNew") and its affiliates Technew
Technology Limited.
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 Current Report on Form 10-K as filed with the
SEC on June 29, 2012.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include all accounts of the Company
as of June 30, 2012 and for the period from June 23, 2011 (date of acquisition)
through June 30, 2012; Stevia Ventures International Ltd. as of June 30, 2012
and for the period from April 11, 2011 (inception) through June 30, 2012; Stevia
Asia Limited as of June 30, 2012 and for the period from March 19, 2012
(inception) through June 30, 2012; and Stevia Technew Limited as of June 30,
2012 and for the period from May 9, 2012 (inception) through June 30, 2012 as
follows:
Jurisdiction or Attributable
Entity Place of Incorporation Interest
------ ---------------------- --------
Stevia Ventures International Ltd. BVI 100%
Stevia Asia Limited Hong Kong SAR 100%
Stevia Technew Limited Hong Kong SAR 100%
All inter-company balances and transactions have been eliminated.
DEVELOPMENT STAGE COMPANY
The Company is a development stage company as defined by section 915-10-20
of the Financial Accounting Standards Board ("FASB") Accounting Standards
Codification. Although the Company has recognized some nominal amount of
revenues since inception, the Company is still devoting substantially all of its
10
efforts on establishing the business and, therefore, still qualifies as a
development stage company. All losses accumulated since inception have been
considered as part of the Company's development stage activities.
USE OF ESTIMATES AND ASSUMPTIONS
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period.
The Company's significant estimates and assumptions include the fair value
of financial instruments; the carrying value, recoverability and impairment of
long-lived assets, including the values assigned to and the estimated useful
lives of website development costs; interest rate; revenue recognized or
recognizable; sales returns and allowances; foreign currency exchange rate;
income tax rate, income tax provision, deferred tax assets and valuation
allowance of deferred tax assets; and the assumption that the Company will
continue as a going concern. Those significant accounting estimates or
assumptions bear the risk of change due to the fact that there are uncertainties
attached to those estimates or assumptions, and certain estimates or assumptions
are difficult to measure or value.
Management bases its estimates on historical experience and on various
assumptions that are believed to be reasonable in relation to the financial
statements taken as a whole under the circumstances, the results of which form
the basis for making judgments about the carrying values of assets and
liabilities that are not readily apparent from other sources.
Management regularly evaluates the key factors and assumptions used to
develop the estimates utilizing currently available information, changes in
facts and circumstances, historical experience and reasonable assumptions. After
such evaluations, if deemed appropriate, those estimates are adjusted
accordingly.
Actual results could differ from those estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company follows paragraph 820-10-35-37 of the FASB Accounting Standards
Codification ("Paragraph 820-10-35-37") to measure the fair value of its
financial instruments and paragraph 825-10-50-10 of the FASB Accounting
Standards Codification for disclosures about fair value of its financial
instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair
value in accounting principles generally accepted in the United States of
America (U.S. GAAP), and expands disclosures about fair value measurements. To
increase consistency and comparability in fair value measurements and related
disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which
prioritizes the inputs to valuation techniques used to measure fair value into
three (3) broad levels. The three (3) levels of fair value hierarchy defined by
Paragraph 820-10-35-37 are described below:
Level 1 Quoted market prices available in active markets for identical assets
or liabilities as of the reporting date.
Level 2 Pricing inputs other than quoted prices in active markets included in
Level 1, which are either directly or indirectly observable as of the
reporting date.
Level 3 Pricing inputs that are generally observable inputs and not
corroborated by market data.
Financial assets are considered Level 3 when their fair values are
determined using pricing models, discounted cash flow methodologies or similar
techniques and at least one significant model assumption or input is
unobservable.
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.
11
The carrying amounts of the Company's financial assets and liabilities,
such as cash, accounts receivable, prepaid expenses, accounts payable and
accrued expenses, approximate their fair values because of the short maturity of
these instruments.
The Company's convertible notes payable approximates the fair value of such
instrument based upon management's best estimate of interest rates that would be
available to the Company for similar financial arrangements at June 30, 2012 and
March 31, 2012.
Transactions involving related parties cannot be presumed to be carried out
on an arm's-length basis, as the requisite conditions of competitive,
free-market dealings may not exist. Representations about transactions with
related parties, if made, shall not imply that the related party transactions
were consummated on terms equivalent to those that prevail in arm's-length
transactions unless such representations can be substantiated.
It is not, however, practical to determine the fair value of advances from
president and significant stockholder, if any, due to their related party
nature.
CARRYING VALUE, RECOVERABILITY AND IMPAIRMENT OF LONG-LIVED ASSETS
The Company has adopted paragraph 360-10-35-17 of the FASB Accounting
Standards Codification for its long-lived assets. The Company's long-lived
assets, which include property and equipment, website development costs, and
security deposit are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable.
The Company assesses the recoverability of its long-lived assets by
comparing the projected undiscounted net cash flows associated with the related
long-lived asset or group of long-lived assets over their remaining estimated
useful lives against their respective carrying amounts. Impairment, if any, is
based on the excess of the carrying amount over the fair value of those assets.
Fair value is generally determined using the asset's expected future discounted
cash flows or market value, if readily determinable. If long-lived assets are
determined to be recoverable, but the newly determined remaining estimated
useful lives are shorter than originally estimated, the net book values of the
long-lived assets are depreciated over the newly determined remaining estimated
useful lives.
The Company considers the following to be some examples of important
indicators that may trigger an impairment review: (i) significant
under-performance or losses of assets relative to expected historical or
projected future operating results; (ii) significant changes in the manner or
use of assets or in the Company's overall strategy with respect to the manner or
use of the acquired assets or changes in the Company's overall business
strategy; (iii) significant negative industry or economic trends; (iv) increased
competitive pressures; (v) a significant decline in the Company's stock price
for a sustained period of time; and (vi) regulatory changes. The Company
evaluates acquired assets for potential impairment indicators at least annually
and more frequently upon the occurrence of such events.
The key assumptions used in management's estimates of projected cash flow
deal largely with forecasts of sales levels and gross margins. These forecasts
are typically based on historical trends and take into account recent
developments as well as management's plans and intentions. Other factors, such
as increased competition or a decrease in the desirability of the Company's
products or services, could lead to lower projected sales levels, which would
adversely impact cash flows. A significant change in cash flows in the future
could result in an impairment of long lived assets.
The impairment charges, if any, is included in operating expenses in the
accompanying consolidated statements of income and comprehensive income (loss).
FISCAL YEAR END
The Company elected March 31 as its fiscal year ending date.
CASH EQUIVALENTS
The Company considers all highly liquid investments with maturities of
three months or less at the time of purchase to be cash equivalents.
12
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.
WEBSITE DEVELOPMENT COSTS
Website development costs are stated at cost less accumulated amortization.
The cost of the website development is amortized on a straight-line basis over
its estimated useful life of five (5) years. Upon becoming fully amortized, the
related cost and accumulated amortization are removed from the accounts.
RELATED PARTIES
The Company follows subtopic 850-10 of the FASB Accounting Standards
Codification for the identification of related parties and disclosure of related
party transactions.
Pursuant to Section 850-10-20 the related parties include a. affiliates of
the Company; b. entities for which investments in their equity securities would
be required, absent the election of the fair value option under the Fair Value
Option Subsection of Section 825-10-15, to be accounted for by the equity method
by the investing entity; c. trusts for the benefit of employees, such as pension
and profit-sharing trusts that are managed by or under the trusteeship of
management; d. principal owners of the Company; e. management of the Company; f.
other parties with which the Company may deal if one party controls or can
significantly influence the management or operating policies of the other to an
extent that one of the transacting parties might be prevented from fully
pursuing its own separate interests; and g. other parties that can significantly
influence the management or operating policies of the transacting parties or
that have an ownership interest in one of the transacting parties and can
significantly influence the other to an extent that one or more of the
transacting parties might be prevented from fully pursuing its own separate
interests.
The financial statements shall include disclosures of material related
party transactions, other than compensation arrangements, expense allowances,
and other similar items in the ordinary course of business. However, disclosure
of transactions that are eliminated in the preparation of consolidated or
combined financial statements is not required in those statements. The
disclosures shall include: a. the nature of the relationship(s) involved; b. a
description of the transactions, including transactions to which no amounts or
nominal amounts were ascribed, for each of the periods for which income
statements are presented, and such other information deemed necessary to an
understanding of the effects of the transactions on the financial statements; c.
the dollar amounts of transactions for each of the periods for which income
statements are presented and the effects of any change in the method of
establishing the terms from that used in the preceding period; and d. mounts due
from or to related parties as of the date of each balance sheet presented and,
if not otherwise apparent, the terms and manner of settlement.
COMMITMENT AND CONTINGENCIES
The Company follows subtopic 450-20 of the FASB Accounting Standards
Codification to report accounting for contingencies. Certain conditions may
exist as of the date the consolidated financial statements are issued, which may
result in a loss to the Company but which will only be resolved when one or more
future events occur or fail to occur. The Company assesses such contingent
liabilities, and such assessment inherently involves an exercise of judgment. In
assessing loss contingencies related to legal proceedings that are pending
against the Company or unasserted claims that may result in such proceedings,
the Company evaluates the perceived merits of any legal proceedings or
unasserted claims as well as the perceived merits of the amount of relief sought
or expected to be sought therein.
If the assessment of a contingency indicates that it is probable that a
material loss has been incurred and the amount of the liability can be
estimated, then the estimated liability would be accrued in the Company's
consolidated financial statements. If the assessment indicates that a potential
material loss contingency is not probable but is reasonably possible, or is
probable but cannot be estimated, then the nature of the contingent liability,
and an estimate of the range of possible losses, if determinable and material,
would be disclosed.
13
Loss contingencies considered remote are generally not disclosed unless
they involve guarantees, in which case the guarantees would be disclosed.
Management does not believe, based upon information available at this time, that
these matters will have a material adverse effect on the Company's consolidated
financial position, results of operations or cash flows. However, there is no
assurance that such matters will not materially and adversely affect the
Company's business, financial position, and results of operations or cash flows.
REVENUE RECOGNITION
The Company follows paragraph 605-10-S99-1 of the FASB Accounting Standards
Codification for revenue recognition. The Company recognizes revenue when it is
realized or realizable and earned. The Company considers revenue realized or
realizable and earned when all of the following criteria are met: (i) persuasive
evidence of an arrangement exists, (ii) the product has been shipped or the
services have been rendered to the customer, (iii) the sales price is fixed or
determinable, and (iv) collectability is reasonably assured.
RESEARCH AND DEVELOPMENT
The Company follows paragraph 730-10-25-1 of the FASB Accounting Standards
Codification (formerly Statement of Financial Accounting Standards No. 2
"ACCOUNTING FOR RESEARCH AND DEVELOPMENT COSTS") and paragraph 730-20-25-11 of
the FASB Accounting Standards Codification (formerly Statement of Financial
Accounting Standards No. 68 "RESEARCH AND DEVELOPMENT ARRANGEMENTS") for
research and development costs. Research and development costs are charged to
expense as incurred. Research and development costs consist primarily of
remuneration for research and development staff, depreciation and maintenance
expenses of research and development equipment, material and testing costs for
research and development as well as research and development arrangements with
unrelated third party research and development institutions. The research and
development arrangements usually involve specific research and development
projects. Often times, the Company makes non-refundable advances upon signing of
these arrangements. The Company adopted paragraph 730-20-25-13 and 730-20-35-1
of the FASB Accounting Standards Codification (formerly Emerging Issues Task
Force Issue No. 07-3 "ACCOUNTING FOR NONREFUNDABLE ADVANCE PAYMENTS FOR GOODS OR
SERVICES TO BE USED IN FUTURE RESEARCH AND DEVELOPMENT ACTIVITIES") for those
non-refundable advances. Non-refundable advance payments for goods or services
that will be used or rendered for future research and development activities are
deferred and capitalized. Such amounts are recognized as an expense as the
related goods are delivered or the related services are performed. The
management continues to evaluate whether the Company expect the goods to be
delivered or services to be rendered. If the management does not expect the
goods to be delivered or services to be rendered, the capitalized advance
payment are charged to expense.
STOCK-BASED COMPENSATION FOR OBTAINING EMPLOYEE SERVICES
The Company accounts for its stock based compensation in which the Company
obtains employee services in share-based payment transactions under the
recognition and measurement principles of the fair value recognition provisions
of section 718-10-30 of the FASB Accounting Standards Codification. Pursuant to
paragraph 718-10-30-6 of the FASB Accounting Standards Codification, all
transactions in which goods or services are the consideration received for the
issuance of equity instruments are accounted for based on the fair value of the
consideration received or the fair value of the equity instrument issued,
whichever is more reliably measurable. The measurement date used to determine
the fair value of the equity instrument issued is the earlier of the date on
which the performance is complete or the date on which it is probable that
performance will occur. If shares of the Company are thinly traded the use of
share prices established in the Company's most recent private placement
memorandum (PPM"), or weekly or monthly price observations would generally be
more appropriate than the use of daily price observations as such shares could
be artificially inflated due to a larger spread between the bid and asked quotes
and lack of consistent trading in the market.
The fair value of each option award is estimated on the date of grant using
a Black-Scholes option-pricing valuation model. The ranges of assumptions for
inputs are as follows:
14
* Expected term of share options and similar instruments: The expected life
of options and similar instruments represents the period of time the option
and/or warrant are expected to be outstanding. Pursuant to Paragraph
718-10-50-2(f)(2)(i) of the FASB Accounting Standards Codification the
expected term of share options and similar instruments represents the
period of time the options and similar instruments are expected to be
outstanding taking into consideration of the contractual term of the
instruments and employees' expected exercise and post-vesting employment
termination behavior into the fair value (or calculated value) of the
instruments. Pursuant to paragraph 718-50-S99-1, it may be appropriate to
use the SIMPLIFIED METHOD, if (i) A company does not have sufficient
historical exercise data to provide a reasonable basis upon which to
estimate expected term due to the limited period of time its equity shares
have been publicly traded; (ii) A company significantly changes the terms
of its share option grants or the types of employees that receive share
option grants such that its historical exercise data may no longer provide
a reasonable basis upon which to estimate expected term; or (iii) A company
has or expects to have significant structural changes in its business such
that its historical exercise data may no longer provide a reasonable basis
upon which to estimate expected term. The Company uses the simplified
method to calculate expected term of share options and similar instruments
as the company does not have sufficient historical exercise data to provide
a reasonable basis upon which to estimate expected term.
* Expected volatility of the entity's shares and the method used to estimate
it. Pursuant to ASC Paragraph 718-10-50-2(f)(2)(ii) a thinly-traded or
nonpublic entity that uses the calculated value method shall disclose the
reasons why it is not practicable for the Company to estimate the expected
volatility of its share price, the appropriate industry sector index that
it has selected, the reasons for selecting that particular index, and how
it has calculated historical volatility using that index. The Company uses
the average historical volatility of the comparable companies over the
expected contractual life of the share options or similar instruments as
its expected volatility. If shares of a company are thinly traded the use
of weekly or monthly price observations would generally be more appropriate
than the use of daily price observations as the volatility calculation
using daily observations for such shares could be artificially inflated due
to a larger spread between the bid and asked quotes and lack of consistent
trading in the market.
* Expected annual rate of quarterly dividends. An entity that uses a method
that employs different dividend rates during the contractual term shall
disclose the range of expected dividends used and the weighted-average
expected dividends. The expected dividend yield is based on the Company's
current dividend yield as the best estimate of projected dividend yield for
periods within the expected term of the share options and similar
instruments.
* Risk-free rate(s). An entity that uses a method that employs different
risk-free rates shall disclose the range of risk-free rates used. The
risk-free interest rate is based on the U.S. Treasury yield curve in effect
at the time of grant for periods within the expected term of the share
options and similar instruments.
The Company's policy is to recognize compensation cost for awards with only
service conditions and a graded vesting schedule on a straight-line basis over
the requisite service period for the entire award.
EQUITY INSTRUMENTS ISSUED TO PARTIES OTHER THAN EMPLOYEES FOR ACQUIRING GOODS OR
SERVICES
The Company accounts for equity instruments issued to parties other than
employees for acquiring goods or services under guidance of Subtopic 505-50 of
the FASB Accounting Standards Codification ("Subtopic 505-50").
Pursuant to ASC Section 505-50-30, all transactions in which goods or
services are the consideration received for the issuance of equity instruments
are accounted for based on the fair value of the consideration received or the
fair value of the equity instrument issued, whichever is more reliably
measurable. The measurement date used to determine the fair value of the equity
instrument issued is the earlier of the date on which the performance is
complete or the date on which it is probable that performance will occur. If
shares of the Company are thinly traded the use of share prices established in
the Company's most recent private placement memorandum (PPM"), or weekly or
monthly price observations would generally be more appropriate than the use of
daily price observations as such shares could be artificially inflated due to a
larger spread between the bid and asked quotes and lack of consistent trading in
the market.
The fair value of option or warrant award is estimated on the date of grant
using a Black-Scholes option-pricing valuation model. The ranges of assumptions
for inputs are as follows:
15
* Expected term of share options and similar instruments: Pursuant to
Paragraph 718-10-50-2 of the FASB Accounting Standards Codification the
expected term of share options and similar instruments represents the
period of time the options and similar instruments are expected to be
outstanding taking into consideration of the contractual term of the
instruments and holder's expected exercise behavior into the fair value (or
calculated value) of the instruments. The Company uses historical data to
estimate holder's expected exercise behavior. If the Company is a newly
formed corporation or shares of the Company are thinly traded the
contractual term of the share options and similar instruments is used as
the expected term of share options and similar instruments as the Company
does not have sufficient historical exercise data to provide a reasonable
basis upon which to estimate expected term.
* Expected volatility of the entity's shares and the method used to estimate
it. An entity that uses a method that employs different volatilities during
the contractual term shall disclose the range of expected volatilities used
and the weighted-average expected volatility. A thinly-traded or nonpublic
entity that uses the calculated value method shall disclose the reasons why
it is not practicable for the Company to estimate the expected volatility
of its share price, the appropriate industry sector index that it has
selected, the reasons for selecting that particular index, and how it has
calculated historical volatility using that index. The Company uses the
average historical volatility of the comparable companies over the expected
contractual life of the share options or similar instruments as its
expected volatility. If shares of a company are thinly traded the use of
weekly or monthly price observations would generally be more appropriate
than the use of daily price observations as the volatility calculation
using daily observations for such shares could be artificially inflated due
to a larger spread between the bid and asked quotes and lack of consistent
trading in the market.
* Expected annual rate of quarterly dividends. An entity that uses a method
that employs different dividend rates during the contractual term shall
disclose the range of expected dividends used and the weighted-average
expected dividends. The expected dividend yield is based on the Company's
current dividend yield as the best estimate of projected dividend yield for
periods within the expected contractual life of the option and similar
instruments.
* Risk-free rate(s). An entity that uses a method that employs different
risk-free rates shall disclose the range of risk-free rates used. The
risk-free interest rate is based on the U.S. Treasury yield curve in effect
at the time of grant for periods within the contractual life of the option
and similar instruments.
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.
16
INCOME TAX PROVISION
The Company accounts for income taxes under Section 740-10-30 of the FASB
Accounting Standards Codification, which requires recognition of deferred tax
assets and liabilities for the expected future tax consequences of events that
have been included in the financial statements or tax returns. Under this
method, deferred tax assets and liabilities are based on the differences between
the financial statement and tax bases of assets and liabilities using enacted
tax rates in effect for the year in which the differences are expected to
reverse. Deferred tax assets are reduced by a valuation allowance to the extent
management concludes it is more likely than not that the assets will not be
realized. Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in the
consolidated statements of income and comprehensive income (loss) in the period
that includes the enactment date.
The Company adopted section 740-10-25 of the FASB Accounting Standards
Codification ("Section 740-10-25"). Section 740-10-25 addresses the
determination of whether tax benefits claimed or expected to be claimed on a tax
return should be recorded in the financial statements. Under Section 740-10-25,
the Company may recognize the tax benefit from an uncertain tax position only if
it is more likely than not that the tax position will be sustained on
examination by the taxing authorities, based on the technical merits of the
position. The tax benefits recognized in the financial statements from such a
position should be measured based on the largest benefit that has a greater than
fifty (50) percent likelihood of being realized upon ultimate settlement.
Section 740-10-25 also provides guidance on de-recognition, classification,
interest and penalties on income taxes, accounting in interim periods and
requires increased disclosures.
The estimated future tax effects of temporary differences between the tax
basis of assets and liabilities are reported in the accompanying consolidated
balance sheets, as well as tax credit carry-backs and carry-forwards. The
Company periodically reviews the recoverability of deferred tax assets recorded
on its consolidated balance sheets and provides valuation allowances as
management deems necessary.
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 June 30, 2012 or for the period from
April 11, 2011 (Inception) through June 30, 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
17
average number of shares of common stock outstanding during the period. Diluted
net income (loss) per common share is computed by dividing net income (loss) by
the weighted average number of shares of common stock and potentially
outstanding shares of common stock during the period to reflect the potential
dilution that could occur from common shares issuable through contingent shares
issuance arrangement, stock options or warrants.
The following table shows the potentially outstanding dilutive common
shares excluded from the diluted net income (loss) per common share calculation
for the interim period ended June 30, 2012 and for the period from April 11,
2011 (inception) through June 30, 2011 as they were anti-dilutive:
Potentially Outstanding Dilutive
Common Shares
----------------------------------------
For the Period
For the Interim from April 11, 2011
Period Ended (inception) through
June 30, 2012 June 30, 2011
------------- -------------
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
--------- ---------
Total potentially outstanding dilutive common shares 3,000,000 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.
SUBSEQUENT EVENTS
The Company follows the guidance in Section 855-10-50 of the FASB
Accounting Standards Codification for the disclosure of subsequent events. The
Company will evaluate subsequent events through the date when the financial
statements are issued. Pursuant to ASU 2010-09 of the FASB Accounting Standards
Codification, the Company as an SEC filer considers its financial statements
issued when they are widely distributed to users, such as through filing them on
EDGAR.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
FASB ACCOUNTING STANDARDS UPDATE NO. 2011-05
In June 2011, the FASB issued the FASB Accounting Standards Update No.
2011-05 "COMPREHENSIVE INCOME" ("ASU 2011-05"), which was the result of a joint
project with the IASB and amends the guidance in ASC 220, COMPREHENSIVE INCOME,
by eliminating the option to present components of other comprehensive income
(OCI) in the statement of stockholders' equity. Instead, the new guidance now
gives entities the option to present all non-owner changes in stockholders'
equity either as a single continuous statement of comprehensive income or as two
18
separate but consecutive statements. Regardless of whether an entity chooses to
present comprehensive income in a single continuous statement or in two separate
but consecutive statements, the amendments require entities to present all
reclassification adjustments from OCI to net income on the face of the statement
of comprehensive income.
The amendments in this Update should be applied retrospectively and are
effective for public entity for fiscal years, and interim periods within those
years, beginning after December 15, 2011.
FASB ACCOUNTING STANDARDS UPDATE NO. 2011-08
In September 2011, the FASB issued the FASB Accounting Standards Update No.
2011-08 "INTANGIBLES--GOODWILL AND OTHER: TESTING GOODWILL FOR IMPAIRMENT" ("ASU
2011-08"). This Update is to simplify how public and nonpublic entities test
goodwill for impairment. The amendments permit an entity to first assess
qualitative factors to determine whether it is more likely than not that the
fair value of a reporting unit is less than its carrying amount as a basis for
determining whether it is necessary to perform the two-step goodwill impairment
test described in Topic 350. Under the amendments in this Update, an entity is
not required to calculate the fair value of a reporting unit unless the entity
determines that it is more likely than not that its fair value is less than its
carrying amount.
The guidance is effective for interim and annual periods beginning on or
after December 15, 2011. Early adoption is permitted.
FASB ACCOUNTING STANDARDS UPDATE NO. 2011-10
In December 2011, the FASB issued the FASB Accounting Standards Update No.
2011-10 "PROPERTY, PLANT AND EQUIPMENT: DERECOGNITION OF IN SUBSTANCE REAL
ESTATE-A SCOPE CLARIFICATION" ("ASU 2011-09"). This Update is to resolve the
diversity in practice as to how financial statements have been reflecting
circumstances when parent company reporting entities cease to have controlling
financial interests in subsidiaries that are in substance real estate, where the
situation arises as a result of default on nonrecourse debt of the subsidiaries.
The amended guidance is effective for annual reporting periods ending after
June 15, 2012 for public entities. Early adoption is permitted.
FASB ACCOUNTING STANDARDS UPDATE NO. 2011-11
In December 2011, the FASB issued the FASB Accounting Standards Update No.
2011-11 "BALANCE SHEET: DISCLOSURES ABOUT OFFSETTING ASSETS AND LIABILITIES"
("ASU 2011-11"). This Update requires an entity to disclose information about
offsetting and related arrangements to enable users of its financial statements
to understand the effect of those arrangements on its financial position. The
objective of this disclosure is to facilitate comparison between those entities
that prepare their financial statements on the basis of U.S. GAAP and those
entities that prepare their financial statements on the basis of IFRS.
The amended guidance is effective for annual reporting periods beginning on
or after January 1, 2013, and interim periods within those annual periods.
FASB ACCOUNTING STANDARDS UPDATE NO. 2011-12
In December 2011, the FASB issued the FASB Accounting Standards Update No.
2011-12 "COMPREHENSIVE INCOME: DEFERRAL OF THE EFFECTIVE DATE FOR AMENDMENTS TO
THE PRESENTATION OF RECLASSIFICATIONS OF ITEMS OUT OF ACCUMULATED OTHER
COMPREHENSIVE INCOME IN ACCOUNTING STANDARDS UPDATE NO. 2011-05" ("ASU
2011-12"). This Update is a deferral of the effective date pertaining to
reclassification adjustments out of accumulated other comprehensive income in
ASU 2011-05. FASB is to going to reassess the costs and benefits of those
provisions in ASU 2011-05 related to reclassifications out of accumulated other
comprehensive income. Due to the time required to properly make such a
reassessment and to evaluate alternative presentation formats, the FASB decided
that it is necessary to reinstate the requirements for the presentation of
reclassifications out of accumulated other comprehensive income that were in
place before the issuance of Update 2011-05.
All other requirements in Update 2011-05 are not affected by this Update,
including the requirement to report comprehensive income either in a single
continuous financial statement or in two separate but consecutive financial
19
statements. Public entities should apply these requirements for fiscal years,
and interim periods within those years, beginning after December 15, 2011.
OTHER RECENTLY ISSUED, BUT NOT YET EFFECTIVE ACCOUNTING PRONOUNCEMENTS
Management does not believe that any other recently issued, but not yet
effective accounting pronouncements, if adopted, would have a material effect on
the accompanying financial statements.
NOTE 3 - GOING CONCERN
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern, which contemplates
continuity of operations, realization of assets, and liquidation of liabilities
in the normal course of business.
As reflected in the accompanying consolidated financial statements, the
Company had a deficit accumulated during the development stage at June 30, 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 commence operations and generate
sufficient revenues, the Company's cash position may not be sufficient enough to
support the Company's daily operations. Management intends to raise additional
funds by way of a public or private offering. Management believes that the
actions presently being taken to further implement its business plan and
generate sufficient revenues provide the opportunity for the Company to continue
as a going concern. While the Company believes in the viability of its strategy
to commence operations and generate sufficient revenues and in its ability to
raise additional funds, there can be no assurances to that effect. The ability
of the Company to continue as a going concern is dependent upon the Company's
ability to further implement its business plan and generate sufficient revenues.
The consolidated financial statements do not include any adjustments
related to the recoverability and classification of recorded asset amounts or
the amounts and classification of liabilities that might be necessary should the
Company be unable to continue as a going concern.
NOTE 4 - PREPAID EXPENSES
Prepaid expenses at June 30, 2012 and March 31, 2012, consisted of the
following:
June 30, 2012 March 31, 2012
------------- --------------
Prepaid research and development $ 1,615 $128,445
Prepaid rent 14,384 21,250
Retainer -- 15,000
Other 609 4,179
-------- --------
$ 16,608 $168,874
======== ========
NOTE 5 - PROPERTY AND EQUIPMENT
Property and equipment, stated at cost, less accumulated depreciation at
June 30, 2012 and March 31, 2012 consisted of the following:
20
Estimated
Useful
Life (Years) June 30, 2012 March 31, 2012
------------ ------------- --------------
Property and equipment 5 $ 4,359 $ 3,036
-------- --------
4,359 3,036
Less accumulated depreciation (218) --
-------- --------
$ 4,141 $ 3,036
======== ========
DEPRECIATION EXPENSE
The Company acquired furniture and fixture near the end of February 2012
and started to depreciate as of April 1, 2012. Additional equipment was
purchased and depreciated during the interim period ended June 30, 2012.
Depreciation expense for the interim period ended June 30, 2012 was $218.
NOTE 6 - WEBSITE DEVELOPMENT COSTS
Website development costs, stated at cost, less accumulated amortization at
June 30, 2012 and March 31, 2012, consisted of the following:
June 30, 2012 March 31, 2012
------------- --------------
Website development costs $ 5,315 $ 5,315
Accumulated amortization (1,068) (801)
-------- --------
$ 4,247 $ 4,514
======== ========
AMORTIZATION EXPENSE
Amortization expense was $267 and $0 for the interim period ended June 30,
2012 and for the period from April 11, 2011 (inception) through June 30, 2011.
NOTE 7 - RELATED PARTY TRANSACTIONS
RELATED PARTIES
Related parties with whom the Company had transactions are:
Related Parties Relationship
--------------- ------------
George Blankenbaker President and significant stockholder of the Company
Leverage Investments LLC An entity owned and controlled by the president and
significant stockholder of the Company
Growers Synergy Pte Ltd. An entity owned and controlled by the president and
significant stockholder of the Company
ADVANCES FROM STOCKHOLDER
From time to time, stockholders of the Company advance funds to the Company
for working capital purpose. Those advances are unsecured, non-interest bearing
and due on demand.
21
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 June 30, 2012, the Company recorded $1,500 in rent expenses due
Leverage Investment LLC.
CONSULTING SERVICES, MANAGEMENT AND OFF-TAKE AGREEMENT WITH GROWERS SYNERGY PTE
LTD.
Prior to November 1, 2011, the Company engaged Growers Synergy Pte Ltd. to
provide farm management consulting services on a month-to-month basis, at
$20,000 per month as of July 1, 2011.
On November 1, 2011, the Company entered into a Management and Off-Take
Agreement (the "Agreement") with Growers Synergy Pte Ltd. ("GSPL"), a Singapore
corporation owned and controlled by the president and major stockholder of the
Company. Under the terms of the Agreement, the Company will engage GSPL to
supervise the Company's farm management operations, recommend quality farm
management programs for stevia cultivation, assist in the hiring of employees
and provide training to help the Company meet its commercialization targets,
develop successful models to propagate future agribusiness services, and provide
back-office and regional logistical support for the development of proprietary
stevia farm systems in Vietnam, Indonesia and potentially other countries. GSPL
will provide services for a term of two (2) years from the date of signing, at
$20,000 per month. The Agreement may be terminated by the Company upon 30 day
notice. In connection with the Agreement, the parties agreed to enter into an
off-take agreement whereby GSPL agreed to purchase all of the non-stevia crops
produced at the Company's GSPL supervised farms.
Consulting services provided by Growers Synergy Pte Ltd. is as follows:
For the Period
For the Interim from April 11, 2011
Period Ended (inception) through
June 30, 2012 June 30, 2011
------------- -------------
Consulting services received and
consulting fees booked $ 60,000 $ --
-------- --------
$ 60,000 $ --
======== ========
Future minimum payments required under this agreement at June 30, 2012 were
as follows:
Fiscal Year Ending March 31:
2013 (remainder of the fiscal year) $180,000
2014 140,000
--------
$320,000
========
NOTE 8 - CONVERTIBLE NOTES PAYABLE
On February 14, 2011, the Company issued a convertible note in the amount
of $250,000 with interest at 10% per annum due one (1) year from the date of
issuance. On October 4, 2011, the note holder converted the entire principal of
$250,000 and accrued interest through the date of conversion of $15,890.41 to
1,000,000 and 63,561 shares of the Company's common stock at $0.25 per share,
respectively.
On June 23, 2011, the Company issued a convertible note in the amount of
$100,000 with interest at 10% per annum due one (1) year from the date of
issuance. On October 4, 2011, the note holder converted the entire principal of
$100,000 and accrued interest through the date of conversion of $2,821.92 to
400,000 and 11,288 shares of the Company's common stock at $0.25 per share.
22
On October 4, 2011, the Company issued a convertible note in the amount of
$150,000 with interest at 10% per annum due one (1) year from the date of
issuance. On January 18, 2012, the note holder converted the entire principal of
$150,000 and accrued interest through the date of conversion of $4,356 to
617,425 shares of the Company's common stock at $0.25 per share.
On November 16, 2011, the Company issued a convertible note in the amount
of $250,000 with interest at 10% per annum due one (1) year from the date of
issuance. The note may be converted into common shares of the Company should the
Company complete a private placement with gross proceeds of at least $100,000.
The conversion price shall be the same as the private placement price on a per
share basis.
On January 16, 2012, the Company issued a convertible note in the amount of
$250,000 with interest at 10% per annum due one (1) year from the date of
issuance.
On March 7, 2012, the Company issued a convertible note in the amount of
$200,000 with interest at 10% per annum due one (1) year from the date of
issuance.
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.
Convertible notes payable at June 30, 2012 and March 31, 2012 consisted of
the following:
June 30, 2012 March 31, 2012
------------- --------------
On November 16, 2011, the Company issued a
convertible note in the amount of $250,000 with
interest at 10% per annum due one (1) year from
the date of issuance. The note may be converted
into common shares of the Company should the
Company complete a private placement with gross
proceeds of at least $100,000. The conversion
price shall be the same as the private placement
price on a per share basis $250,000 $250,000
On January 16, 2012, the Company issued a
convertible note in the amount of $250,000 with
interest at 10% per annum due one (1) year from
the date of issuance 250,000 250,000
On March 7, 2012, the Company issued a convertible
note in the amount of $200,000 with interest at
10% per annum due one (1) year from the date of
issuance. 200,000 200,000
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. 200,000 --
-------- --------
$900,000 $700,000
======== ========
NOTE 9 - STOCKHOLDERS' DEFICIT
SHARES AUTHORIZED
Upon formation the total number of shares of common stock which the Company
is authorized to issue is One Hundred Million (100,000,000) shares, par value
$0.001 per share.
COMMON STOCK
REVERSE ACQUISITION TRANSACTION
Immediately prior to the Share Exchange Transaction on June 23, 2011, the
Company had 79,800,000 common shares issued and outstanding. Simultaneously with
the Closing of the Share Exchange Agreement, on the Closing Date, Mohanad
Shurrab, a shareholder and, as of the Closing Date, the Company's former
Director, President, Treasurer and Secretary, surrendered 33,000,000 shares of
the Company's common stock to the Company for cancellation.
23
As a result of the Share Exchange Agreement, the Company issued 12,000,000
common shares for the acquisition of 100% of the issued and outstanding shares
of Stevia Ventures International Ltd. Of the 12,000,000 common shares issued in
connection with the Share Exchange Agreement, 6,000,000 of such shares are being
held in escrow ("Escrow Shares") pending the achievement by the Company of
certain post-Closing business milestones (the "Milestones"), pursuant to the
terms of the Make Good Escrow Agreement, between the Company, Greenberg Traurig,
LLP, as escrow agent and the Ventures' Stockholder (the "Escrow Agreement").
MAKE GOOD AGREEMENT SHARES
(I) DURATION OF ESCROW AGREEMENT
The Make Good Escrow Agreement shall terminate on the sooner of (i) the
distribution of all the escrow shares, or (ii) December 31, 2013.
(II) DISBURSEMENT OF MAKE GOOD SHARES
Upon achievement of any Milestone on or before the date associated with
such Milestone on Exhibit A, the Company shall promptly provide written
notice to the Escrow Agent and the Selling Shareholder of such achievement
(each a "COMPLETION NOTICE"). Upon the passage of any Milestone date set
forth on Exhibit A for which the Company has not achieved the associated
Milestone, the Company shall promptly provide written notice to the Escrow
Agent and the Selling Shareholder of such failure to achieve the milestone
(each a "NONCOMPLETION NOTICE").
(III) EXHIBIT A - SCHEDULE OF MILESTONES
Completion Number of
Milestones Date Escrow Shares
---------- ---- -------------
I.
(1) Enter into exclusive international license agreement
for all Agro Genesis intellectual property and
products as it applies to stevia
(2) Enter into cooperative agreements to work with Vietnam
Institutes (a) Medical Plant Institute in Hanoi; (b)
Agricultural Science Institute of Northern Central 3,000,000
Vietnam shares only
(3) Enter into farm management agreements with local if and when
growers including the Provincial and National Within 180 ALL four (4)
projects; days of the milestones
(4) Take over management of three existing nurseries Closing Date reached
II. Achieve 100 Ha field trials and first test shipment of Within two (2)
dry leaf years of the 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. Those shares were valued at $0.25 per share or $750,000 on the
date of release and recorded as compensation.
24
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 $93,750 in directors' fees for the
interim period ended June 30, 2012.
COMMON SHARES ISSUED TO PARTIES OTHER THAN EMPLOYEES FOR ACQUIRING GOODS OR
SERVICES
EQUITY PURCHASE AGREEMENT AND RELATED REGISTRATION RIGHTS AGREEMENT
(I) EQUITY PURCHASE AGREEMENT
On January 26, 2012, the Company entered into an equity purchase agreement
("Equity Purchase Agreement") with Southridge Partners II, LP, a Delaware
limited partnership (The "Investor"). Upon the terms and subject to the
conditions contained in the agreement, the Company shall issue and sell to the
Investor, and the Investor shall purchase, up to Twenty Million Dollars
($20,000,000) of its common stock, par value $0.001 per share.
At any time and from time to time during the Commitment Period, the period
commencing on the effective date, and ending on the earlier of (i) the date on
which investor shall have purchased put shares pursuant to this agreement for an
aggregate purchase price of the maximum commitment amount, or (ii) the date
occurring thirty six (36) months from the date of commencement of the commitment
period. the Company may exercise a put by the delivery of a put notice, the
number of put shares that investor shall purchase pursuant to such put shall be
determined by dividing the investment amount specified in the put notice by the
purchase price with respect to such put notice. However, that the investment
amount identified in the applicable put notice shall not be greater than the
maximum put amount and, when taken together with any prior put notices, shall
not exceed the maximum commitment The purchase price shall mean 93% of the
market price on such date on which the purchase price is calculated in
accordance with the terms and conditions of this Agreement.
(II) REGISTRATION RIGHTS AGREEMENT
In connection with the Equity Purchase Agreement, on January 26, 2012, the
Company entered into a registration rights agreement ("Registration Rights
Agreement") with Southridge Partners II, LP, a Delaware limited partnership (the
"Investor"). To induce the investor to execute and deliver the equity purchase
agreement which the Company has agreed to issue and sell to the investor shares
(the "put shares") of its common stock, par value $0.001 per share (the "common
stock") from time to time for an aggregate investment price of up to twenty
million dollars ($20,000,000) (the "registrable securities"), the company has
agreed to provide certain registration rights under the securities act of 1933,
as amended, and the rules and regulations thereunder, or any similar successor
statute (collectively, "securities act"), and applicable state securities laws
with respect to the registrable securities.
(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.
25
MARKETING SERVICE AGREEMENT - EMPIRE RELATIONS GROUP, INC.
On March 14, 2012 the Company entered into a consulting agreement (the
"Consulting Agreement") with Empire Relations Group, Inc. ("Empire").
(I) SCOPE OF SERVICES
Under the terms of the Consulting Agreement, the Company engaged Empire to
introduce interested investors to the Company, advise the Company on available
financing options, provide periodic updates on the stevia sector and provide
insights and strategies for the Company to undertake.
(II) TERM
The term of this agreement 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.
NOTE 10 - RESEARCH AND DEVELOPMENT
AGRIBUSINESS DEVELOPMENT AGREEMENT - AGRO GENESIS PTE LTD.
ENTRY INTO AGRIBUSINESS DEVELOPMENT AGREEMENT
On July 16, 2011, the Company entered into an Agribusiness Development
Agreement (the "Agribusiness Development Agreement") with Agro Genesis Pte Ltd.
("AGPL"), a corporation organized under the laws of the Republic of Singapore
expiring two (2) years from the date of signing.
Under the terms of the Agreement, the Company engaged AGPL to be the
Company's technology provider consultant for stevia propagation and cultivation
in Vietnam, and potentially other countries for a period of two (2) years. AGPL
will be tasked with developing stevia propagation and cultivation technology in
Vietnam, recommend quality agronomic programs for stevia cultivation, harvest
and post harvest, alert findings on stevia propagation and cultivation that may
impact profitability and develop a successful model in Vietnam that can be
replicated elsewhere (the "Project"). The Project will be on-site at stevia
fields in Vietnam and will have a term of at least two (2) years. For its
services, AGPL could receive a fee of up to 275,000 Singapore dollars, plus
related expenses estimated at $274,000 as specified in Appendix A to the
Agribusiness Development Agreement. Additionally, the Company will be AGPL's
exclusive distributor for AGPL's g'farm system (a novel crop production system)
for stevia growing resulting from the Project. AGPL will receive a commission of
no less than 2% of the price paid for crops other than stevia, from cropping
systems that utilize the g'farm system resulting from the Project. All
technology-related patents resulting from the Project will be jointly owned by
AGPL and the Company, with the Company holding a right of first offer for the
use and distribution rights to registered patents resulting from the Project.
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.
26
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 June 30, 2012 were
as follows:
Fiscal Year Ending March 31:
2013 $ 30,000
2014 30,000
2015 30,000
2016 30,000
--------
$120,000
========
SUPPLY AND COOPERATIVE AGREEMENT - GUANGZHOU HEALTH TECHNOLOGY DEVELOPMENT
COMPANY LIMITED
ENTRY INTO SUPPLY AGREEMENT
On February 21, 2012, the Company entered into a Supply Agreement (the
"Supply Agreement") with Guangzhou Health China Technology Development Company
Limited, a foreign-invested limited liability company incorporated in the
People's Republic of China (the "Guangzhou Health").
Under the terms of the Supply Agreement, the Company will sell dry stevia
plant materials, including stems and leaves ("Product") exclusively to Guangzhou
Health. For the first two years of the agreement, Guangzhou Health will purchase
all Product produced by the Company. Starting with the third year of the
agreement, the Company and Guangzhou Health will review and agree on the
quantity of Product to be supplied in the forthcoming year, and Guangzhou Health
will be obliged to purchase up to 130 percent of that amount. The specifications
and price of Product will also be revised annually according to the mutual
agreement of the parties. The term of the Supply Agreement is five years with an
option to renew for an additional four years.
ENTRY INTO COOPERATIVE AGREEMENT
On February 21, 2012, the Company also entered into Cooperative Agreement
(the "Cooperative Agreement") with Guangzhou Health Technology Development
Company Limited.
Under the terms of the Cooperative Agreement, the parties agree to explore
potential technology partnerships with the intent of formalizing a joint venture
to pursue the most promising technologies and businesses. The parties also agree
to conduct trials to test the efficacy of certain technologies as applied
specifically to the Company's business model as well as the marketability of
harvests produced utilizing such technologies. Guangzhou Health will share all
available information of its business structure and technologies with the
Company, subject to the confidentiality provisions of the Cooperative Agreement.
27
Guangzhou Health will also permit the Company to enter its premises and grow-out
sites for purposes of inspection and will, as reasonably requested by the
Company, supply without cost, random samples of products and harvests for
testing.
NOTE 11 - 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.
28
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 June 30, 2012 and for the period from April
11, 2011 (inception) through June 30, 2011, The Company recorded $9,000 and $0
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.
29
(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 June 30, 2011, The Company
recorded no 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 12 - CONCENTRATIONS AND CREDIT RISK
VENDORS AND ACCOUNTS PAYABLE CONCENTRATIONS
Vendor purchase concentrations for the interim period ended June 30, 2012
and for the period from April 11, 2011 (inception) through June 30, 2011 and
accounts payable concentration at June 30, 2012 and March 31, 2012 are as
follows:
30
Net Purchases Accounts Payable at
------------------------------------ --------------------------------
For the Period from
April 11, 2011
For the Interim (inception)
Period Ended through
June 30, 2012 June 30, 2011 June 30, 2012 March 31, 2012
------------- ------------- ------------- --------------
Asia Stevia Investment Development Limited 0.9% --% 0.5% --%
Growers Synergy Pte. Ltd. - related party 50.4% --% 43.3% 16.4%
Stevia Ventures Corporation 8.6% --% --% 54.1%
------ ------ ------ ------
58.9% --% 43.3% 70.5%
====== ====== ====== ======
CREDIT RISK
Financial instruments that potentially subject the Company to significant
concentration of credit risk consist primarily of cash and cash equivalents.
As of June 30, 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.
NOTE 13 - SUBSEQUENT EVENTS
The Company has evaluated all events that occurred after the balance sheet
date through the date when the financial statements were issued to determine if
they must be reported. The Management of the Company determined that there were
certain reportable subsequent events to be disclosed as follows:
ENTRY INTO COOPERATIVE AGREEMENT
On July 5, 2012, Stevia Asia Limited ("Stevia Asia"), a wholly-owned
subsidiary of the Company entered into a Cooperative Agreement (the "Cooperative
Agreement") with Technew Technology Limited ("Technew"), a company incorporated
under the companies ordinance of Hong Kong, and Zhang Jia, a Chinese citizen
(together with Technew, the "Partners") pursuant to which Stevia Asia and
Partners have agreed to engage in a joint venture to be owned 70% by Stevia Asia
and 30% by Technew (the "Joint Venture"). The Partners will be responsible for
managing the Joint Venture 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
the Joint Venture and Stevia Asia's financial capabilities.
The Cooperative Agreement shall automatically terminate upon either Stevia
Asia or Technew ceasing to be a shareholder in the Joint Venture, 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.
ISSUANCE OF COMMON SHARES IN CONNECTION WITH ENTRY INTO TECHNOLOGY AGREEMENT
On July 5, 2012, the Company entered into a Technology Acquisition
Agreement (the "Technology 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 shares of the Company's common
stock.
31
ISSUANCE OF COMMON SHARES TO A RELATED PARTY
On July 5, 2012, the Company issued 500,000 shares of its common shares to
Growers Synergy Pte Ltd., a corporation organized under the laws of Singapore
and owned and controlled by George Blankenbaker, the president, director and a
stockholder of the Company ("Growers Synergy"), as consideration for services
rendered by Growers Synergy to the Company.
ISSUANCE OF COMMON SHARES IN CONNECTION WITH CONVERTIBLE NOTES CONVERSION
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. 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
On January 16, 2012, the Company issued a convertible note in the amount of
$250,000 with interest at 10% per annum due one (1) year from the date of
issuance. On 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.
ISSUANCE OF COMMON SHARES IN CONNECTION WITH ENTRY INTO SECURITIES PURCHASE
AGREEMENT
On August 1, 2012, the Company entered into a Securities Purchase Agreement
(the "SPA") with certain accredited 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 a price per share of $0.46875 (the "Shares") 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 (the "Warrants"), for
gross proceeds of $500,000. The Company intends to use the net proceeds from
this 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 (the
"effectiveness date") 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.
ISSUANCE OF WARRANTS TO THE PLACEMENT AGENT AS COMPENSATION PER THE ENGAGEMENT
AGREEMENT ON JUNE 18, 2012
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 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 (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.
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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 plant breeding, agricultural protocols, post-harvest techniques and
other services to stevia growers, (ii) the sale of agriculture inputs such as
fertilizer to stevia growers, (iii) the sale of stevia and intercrops grown on
our own farmed property and (iv) the sale of products derived from the stevia
plant.
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 and office space and developing relationships with potential partners.
Our auditors have issued a going concern opinion. This means that there is
substantial doubt that we can continue as an on-going business for the next
twelve months unless we obtain additional capital.
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.
33
COMPARISON OF THREE MONTH PERIODS ENDED JUNE 30, 2012 WITH THE PERIOD FROM
INCEPTION (APRIL 11, 2011) TO JUNE 30, 2011
For the three month periods ended June 30, 2012 we incurred a comprehensive loss
of $413,937, compared to a comprehensive loss of $13,842 for the period from
inception (April 11, 2011) to June 30, 2011. The increase was largely attributed
to increases in management fees, director and professional fees and research and
development expenses.
General and administration expenses and professional fees for the three month
period ended June 30, 2012 amounted to $44,713 and $116,728 respectively,
compared to $100 and $13,071 during the period from inception (April 11, 2011)
to June 30, 2011. Directors' fees for the three month period ended June 30, 2012
were $93,750 compared to $0 during the period from inception (April 11, 2011) to
June 30, 2011.
LIQUIDITY AND CAPITAL RESOURCES
As at June 30, 2012 we have $33,950 in current assets, and $1,167,970 in current
liabilities. As at June 30, 2012 we have $17,062 in cash. As at June 30, 2012,
our total assets were $57,338 and our total liabilities were $1,167,970. Our net
working capital deficiency as at June 30, 2012 was $1,134,020.
During the three month period ended June 30, 2012, we funded our operations from
the proceeds of private sales of equity and/or convertible notes. During the
three month period ended June 30, 2012, we raised $200,000 through the issuance
of convertible promissory notes and $2,100 through advances from our President.
For the three month period ended June 30, 2012, we received net cash of $202,100
from financing activities. During such period we used cash of $199,413 in
operating activities and $1,323 in investing activities.
Subsequent to the three month period ended June 30, 2012, on August 1, 2012, we
entered into a Securities Purchase Agreement with certain accredited 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 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.
In July, 2012 outstanding convertible promissory notes in the principal amount
of $500,000 were converted into an aggregate of 634,193 shares of our common
stock.
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 cultivation through our research programs, as well as our ability to
develop and manage our own stevia 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.
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
34
shareholder's equity or that are not reflected in our consolidated financial
statements. Furthermore, we do not have any retained or contingent interest in
assets transferred to an unconsolidated entity that serves as credit, liquidity
or market risk support to such entity. We do not have any variable interest in
any unconsolidated entity that provides financing, liquidity, market risk or
credit support to us or engages in leasing, hedging or research and development
services with us.
CRITICAL ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles of the United States (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 June 30, 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.
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
June 30, 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 June 30, 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.
35
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 June 30, 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.
None.
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
10.1 (3) Cooperative Agreement
10.2 (3) Technology Acquisition Agreement
36
10.3 (4) Securities Purchase Agreement
10.4 (4) Registration Rights Agreement
10.5 (4) Form of Warrant
31 Rule 13a-14(a)/15d-14(a) Certification (Principal Executive
Officer and Principal Financial Officer)
32 Section 1350 Certification
101 (5)* 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.
(3) Incorporated by reference to the Current Report on Form 8-K filed on July
11, 2012.
(4) Incorporated by reference to the Current Report on Form 8-K filed on August
7, 2012.
(5) To be provided by amendment.
* 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.
37
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: August 20, 2012 /s/ George Blankenbaker
--------------------------------------------
By: George Blankenbaker
Its: President, Secretary, Treasurer and Director
(Principal Executive Officer, Principal
Financial Officer and Principal Accounting
Officer)
38