FORWARD-LOOKING STATEMENTS
This annual report contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may”, “should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled “Risk Factors”, that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.
Our financial statements are stated in United States Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles.
In this annual report, unless otherwise specified, all dollar amounts are expressed in United States dollars and all references to “common shares” refer to the common shares in our capital stock.
As used in this annual report, the terms “we”, “us”, “our” and “our company” refer to Stevia Nutra Corp., and, unless otherwise indicated, our wholly owned subsidiary, Health Power Trading Ltd., a British Virgin Islands company and our wholly owned subsidiary, Mighty Mekong Agro Industries Co. Ltd., a Cambodian company.
General Overview
We were incorporated in Nevada on April 30, 2010 under the name AAA Best Car Rental Inc.
We planned to offer discounted car rental services, by acquiring late model vehicles from used car auctions. On January 4, 2012 we underwent a change of control and a change in management through the purchase of 8,000,000 pre-split shares of our stock by Atlantic and Pacific Communications Inc., from our former director and officer, Suresh Gupta. On January 11, 2012 we received approval from our Board of Directors, and Atlantic and Pacific Communications Inc., our majority shareholder, to effect a change of name to Stevia Nutra Corp., increase our authorized capital to 200,000,000 shares of common stock and to effect a forward split of our issued and outstanding shares on a 1 old for 15 new basis. On January 25, 2012, we filed a certificate of amendment to change our name to Stevia Nutra Corp., with the Secretary of State of Nevada which became effective in the State of Nevada on March 5, 2012 upon approval from
the Financial Industry Regulatory Authority (“FINRA”)
.
We maintain our business offices at 37 Bannisters Road, Corner Brook, Newfoundland, Canada, A2H 1M5, and our telephone number is (709) 660-3056.
Effective March 5, 2012, in accordance with approval from FINRA, we changed our name from AAA Best Car Rental Inc. to Stevia Nutra Corp. In addition, our issued and outstanding shares of common stock increased from 10,400,000 shares of common stock to 156,000,000 shares of common stock, par value of $0.001, pursuant to a 1:15 forward split of our issued and outstanding shares of common stock.
Also effective March 5, 2012, our authorized capital increased from 75,000,000 shares of common stock to 200,000,000 shares of common stock, par value of $0.001.
Effective April 17, 2012, our common stock changed from “AAAB” to “STNT” to better reflect the new name of our company.
Our Current Business
As our company was unable to secure the financing required to continue with the car rental business, on January 4, 2012, in conjunction with a change in control, we changed our business focus to the business of the cultivation, development and post-harvest processing of Stevia plants for use as a sweetener. On March 9, 2012, our wholly owned subsidiary, Mighty Mekong Agro Industries Co., Ltd., entered into and closed a lease agreement with Sara Ramany, a resident of Cambodia, for the lease of 20 hectares of land in the Kampong Speu Province of the Kingdom of Cambodia. The land is intended to be used in agricultural production, and more specifically in the cultivation and propagation of Stevia plants.
Our initial plan of operation is to organize an operational team on the ground in Cambodia, open an administration office, construct a Stevia propagation center and construct greenhouses and a nursery. Following these developments, we anticipate propagating more than 1,000,000 seedlings ready for plantation and installing approximately ten hectares of Stevia plants.
Effective June 1, 2012, we entered into a consulting agreement with Atlantic and Pacific Communications Ltd., a company controlled by Brian W. Dicks, whereby Mr. Dicks has agreed to provide consulting services as our company’s president, for a period ending June 1, 2014. In consideration for Mr. Dicks agreeing to provide such consulting, we have agreed to pay Mr. Dicks a salary of $3,500 per month during the term of the consulting agreement.
Also effective June 1, 2012, Mighty Mekong Agro Industries Co. Ltd., our wholly-owned subsidiary, entered into an agreement with Ecologica Co. Ltd., whereby Ecologica has agreed to provide certain services, associated with the cultivation of stevia, to Mighty Mekong and our company for a period of twelve months. Pursuant to the terms of the agreement, Ecologica will receive a salary of $7,000 per month, in consideration for the services provided.
On August 20, 2012, we entered into an investment agreement with Fairhills Capital Offshore Ltd., a Cayman Islands exempted company. Pursuant to the terms of the investment agreement, Fairhills shall commit to purchase up to $3,000,000 of our common stock over a period of up to 36 months.
In connection with the Investment Agreement, we also entered into a registration rights agreement with Fairhills on August 20, 2012. Pursuant to the registration rights agreement, we are obligated to file a registration statement with the Securities and Exchange Commission (“SEC”) covering 11,000,000 shares of the common stock underlying the investment agreement within 21 days after the closing of the investment agreement. In addition, we are obligated to use all commercially reasonable efforts to have the registration statement declared effective by the SEC within 120 days after the closing of the investment agreement and maintain the effectiveness of such registration statement until termination in accordance with the investment agreement.
In connection with the financing agreement, we also entered into a securities purchase agreement with Fairhills. Pursuant to the securities purchase agreement, Fairhills has agreed to purchase 312,500 shares of our common stock at $0.24 per share for total proceeds of $75,000.
The securities purchase agreement also contains a price protection provision. According to the price protection provision, the shares to be purchased pursuant to the securities purchase agreement will be valued at 25% discount to the price of our common stock on the effectiveness date (the “Share Value”). In the event that the Share Value is less than $75,000, we will issue additional shares of registered common stock to Fairhills Capital, such that the value of the total shares being issued by us to Fairhills Capital will total $75,000.
Products
We are in the development stage and have not yet produced any commercially viable amounts of Stevia leaf. We have recently acquired rights to land in Cambodia which we anticipate using for Stevia cultivation and production. As laid out above, we will begin the process of building our company into a Stevia producer by organizing an operational team and constructing greenhouses, a nursery and a propagation center.
Stevia (Stevia rebaudiana B.) is a crop of the family asteraceae. Fresh Stevia leaves are approximately 15 times sweeter than raw cane sugar. In order for the Stevia leaves to be used as a sweetener in baking or cooking, it is necessary to dry the leaves. This process removes the moisture and concentrates sweetness in the leaves. This process also acts as a preservative so the leaves can be used in the future. Once the leaves have been dried, they are crushed and this increases the sweetness from 15 times sweeter than sugar to 30 – 40 times. Dried Stevia leaves can be used to brew tea or as an added sweetener in drinks or cooking. Stevia leaves are an excellent dietary supplement as they contain proteins, iron, calcium, potassium, sodium, magnesium, vitamin A and vitamin C. Stevia leaves can be purchased whole, crushed, in tea bags or as a fine green powder.
Stevia extracts are used to sweeten food and beverages globally; with no known side effects, Stevia extracts have become a major addition to the sweetener and natural food market. In order to extract Stevia, the leaves are harvested during a cold period so that more sugar is accumulated in the leaves. The harvested Stevia leaves are then sun-dried and left in conditions with good air circulation. The dried leaves are then crushed and put through a clarification and crystallization process where the sweetening elements, known as ‘glycosides’ are extracted (otherwise known as steviaglycocides). A second important component is also extracted at this point, Rebaudioside A (“Reb-A”) which is the sweetest element of the plant, approximately 400 times sweeter than sugar. Stevia has been actively used in the food industry in Asia since the 1970’s and were pioneered as a processed food additive in Japan. In 2008 steviol glycosides were recognized as safe for use as a sweetener in foods and beverages in the United States, Mexico, Australia, New Zealand and other countries. At the same time, Reb-A was granted Generally Recognized as Safe (“GRAS”) status by the US Food and Drug Administration (“FDA”).
Reb-A has the least bitterness of all the steviol glycosides in the Stevia plant. To produce Reb-A commercially, Stevia plants are dried and subjected to a water extraction process. This crude extract contains about 50% Reb-A; its various glycoside molecules are separated via crystallization techniques, typically using ethanol or methanol as solvent. This allows the manufacturer to isolate pure Reb-A
Management of Stevia cultivation is yet to mature in many regions and cultivators are still on a learning curve. While tolerant of most soil types, Stevia is normally grown on a sandy loam or loam. Stevia occurs naturally on soils of ph
+
4 to 5, but thrives with soil ph
+
as high as 7.5. However, Stevia does not tolerate saline soils. Normally there is no pest or disease incidence reported in this crop. Stevia does not appear as a crop that displaces to traditional crops as the coffee, maize, etc., but as a complementary item in agro-product diversification and an economic alternative for the small land holder allowing additional revenue to the farmers. The largest single factor of Reb A production is varietal specific. There are many commercially available varieties available today. Low quality leaf either has no buyers or is purchased for low value. Reb-A increases as the plant matures and grows and concentrates with sun light over time. Upon flowering, the sweetness content decreases. Accordingly, commercial harvesting is optimal at time of flowering and delaying flowering is the key to commercial farming success so Reb A is maximized. Virtually all of the commercial production of Stevia is today undertaken between 30 and 45 degrees latitude. With new varieties and using altitude, there are also commercial farms in latitude, equatorial regions of Colombia, Peru and Kenya. Increasingly, more trials are happening in tropical areas. Equatorial (and altitude) locations may compensate for shorter days with higher light intensity resulting in comparable sweetness and Reb-A content.
Chinese farms typically harvest once or twice a year (due to winter season above 30 degrees latitude). Equatorial Farms such as those in Peru, Colombia and Kenya, can achieve 4 to 6 commercial harvests per year. However, delaying flowering and hence less harvests, likely increases Reb A. Subsequent yield harvest increases over time as the plant has more branching and a better root system. Some varieties experience a decline in Reb A over time (but this is still not clear on new cultivars). Yields range from 2,000 kg to 16,000 kg per hectare per year and the average is likely on the lower end, from 4,000 to 5,000.
Stevia is commercialized in the shape of dry leaf, concentrated liquid, pulverized leaves or white concentrated powder. The liquid and the pulverized leave have a light herbal aftertaste. The concentrated liquid of green blackish color is approximately 70 times sweeter than the sugar. The pulverized leaf is some 30 times more sweet that it is a sugar. Stevia, in the shape of white concentrated powder is 150 times sweeter than sugar.
The cultivation and harvest of Stevia is labor intensive. The process we plan to undertake on our land, as described below, will be carried out by experienced agriculturists to ensure a healthy, fast growing and productive crop. The following is a summary of the steps involved in Stevia cultivation:
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Ground conditioning: the areas where the crop will be cultivated need to be cleared of debris, shrubs, and any remaining vegetation.
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Production of fertilizers: organic debris can be process and turned into organic fertilizer for the fields, improving soil nutrients and crop yield.
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Maintenance of lines and inter rows: This is important in order to promote rapid vegetative growth of Stevia, which takes place from the total cycle of production.
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Fertilization: This will be conducted to maximize plant growth and maintain nutrients lost at harvest. Natural fertilizers are employed as much as possible.
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Pruning: this will be done by hand and will begin six months after the first round of pollination. Pruning simply involves removing rotten or damaged branches to maintain the health of the plant. After the harvested cycle we use a pre emergent herbicide to control the herb.
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Harvesting: This will occur 4 to 6 times in the year as soon as the leaves ripen to contain maximum total glycoside content. The harvested must be processed quickly in order to minimize the destructive acids that will accumulate after harvested action and will be taken directly to a hopper located close to the fields.
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Once harvested, the raw material will be taken to the dry plant nearby where it will be processed. The processing is anticipated to take place as follows:
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Weighing: The fresh row material is weighed when it enters the plant then transferred into the horns to dry
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Dry: The Reb-A are concentrated by a series of hot air and rotations cylinders machines in the dry plant.
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Clarification: This is the process by which leafs is separated of the rest of the initial raw material ingress in the industrial section.
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Concentrate of Reb A: The glycosides are separated and recovered from the remaining mass with an inverse osmosis process.
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Crystal process: The crystals are obtained with a spry process.
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Market, Customers and Distribution Methods
In 2008, Reb-A, a steviol glycoside, was granted GRAS (Generally Recognized as Safe) status by the US Food and Drug Administration following applications by Cargill and Merisant. Since then, approval by legislators across the world has opened the door to new formulations and reformulations of foods and beverages with zero or reduced calorie content using Stevia. In 2009, Stevia was incorporated into leading soft drinks brands manufactured by Coca-Cola and PepsiCo.
Usage of Stevia has continued to increase in recent years and in 2010 Stevia products were launched across thirty-five countries and 38 categories. Within two years of the USA market opening, Nielsen based retail consumption data indicated almost $1 billion of retail sales. Market research group, Mintel, has said it expected sales of Stevia sweetened products to top $2 billion in 2011. U.K. based Zenith International estimates worldwide sales of Stevia extract reached 3,500 tons in 2010 with an overall market value of $285 million and is forecasting that the global market for Stevia will reach 11,000 tons by 2014 requiring the tripling of Stevia leaf production at the farm level to keep pace with consumer demand.
There were two key developments that have opened the Stevia sweetener market. First, there was proven consumer demand for all-natural reduced calorie products where Stevia was blended with sugar reducing caloric value by 30% to 40% without sacrificing the functionality and taste of sugar. Second, high purity total steviol glycosides with reduced Reb-A content were granted GRAS status by the FDA in July 2010. Costing less than sugar and less than 50% of Reb-A, this allowed Stevia products to be formulated across a wide range of sweetness and create an economic advantage while producing a premium all natural low calorie product desired by the consumer.
The two industry leaders, PureCircle and GLG Life Tech, have partnered with major sugar manufacturers in the US (Imperial Sugar), Denmark (NordZucker), France (Tereos), Great Britain (British Sugar), and Australia (Sugar Australia) to market blended reduced calorie products. SteviaCane is a Stevia sucrose retail product being marketed by Natural Sweet Ventures, a joint venture between PureCircle and Imperial Sugar.
The entire sweetener market is nearly $80 billion and split into three main categories: Sugar (82%), High Fructose Corn Syrup (HFCS) - (9%), and High Intensity Sweeteners (HIS) - (9%). Overall the sweetener market is growing, but HFCS and artificial HIS ingredients are being replaced with natural alternatives such as Stevia. In addition, Stevia is being blended with sugar to meet the low calorie consumer requirements while still maintaining functionality and taste.
Stevia’s advantage against artificially produced sweeteners is that it is derived naturally from the plant instead of the chemical processes and formulations that artificial sweeteners use. With growing consumer preference for all-natural products, combined with increasing rates of obesity and diabetes, the demand for an all-natural, zero-calorie sweetener alternative like Stevia is high. Usage of Stevia has continued to increase in recent years. PureCircle, a natural sweetener provider, has estimated that the global Stevia ingredient market could reach $10 billion in just a few years.
U.K. based food and drink consultants Zenith International estimated that worldwide sales of Stevia extract reached 3,500 tons in 2010 with an overall market value of $285 million. Zenith has also forecasted that the global market for Stevia will reach 11,000 tons by 2014 which require the tripling of Stevia leaf production to keep pace with consumer demand. U.K. based food and drink consultants Zenith International estimated that worldwide sales of Stevia extract reached 3,500 tons in 2010 with an overall market value of $285 million. Zenith has also forecasted that the global market for Stevia will reach 11,000 tons by 2014 which require the tripling of Stevia leaf production to keep pace with consumer demand.
Once we are able to cultivate and harvest a commercially viable quantity of Stevia leaf, we anticipate entering into off-take agreements with distributors or downstream processors directly for the sale of the leaf. These buyers will then process the leaf and produce a refined end product to sell to consumers. We anticipate that we will begin producing Stevia end products once we have fully developed our agronomy business. We anticipate that we will begin downstream processing of Stevia end products once we have fully developed our agronomy business and fully control our internal upstream dry leaf production requirements. This strategy will allow us to lock in, 1) dry leaf quality standards, 2) our cost of raw materials and 3) remove uncertainty of dependence on third party dry leaf commodity traders and distributors.
Competition
The Stevia industry is populated with large, multinational companies engaged in a fully integrated Stevia growth and processing business, as well as smaller startups which focus on agronomy or processing. The Stevia industry is segmented into three main categories:
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Plant Breeding and Farming
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Extraction and Purification
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Product Formulation and Marketing
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Stevia One S.A.C. ("Stevia One"), Wisdom Natural Brands ("Wisdom") and GLGLife Tech Corporation (“GLG”) are the major participants in this industry framework. A tabular summary of these companies is provided below:
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Company Name
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Operating Segment
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Public/Private
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Geographic Market
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Year of Incorporation
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PureCircle
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Plant Breeding & Farming, Extraction
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Public
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Americas, Europe, the Middle East, and the Asia Pacific
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2007
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Stevia One
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Plant Breeding and Farming
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Private
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North America
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2011
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Wisdom
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Product Formulation
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Private
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North America
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1982
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Stevia Nutra
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Plant Breeding and Farming
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Public
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Asia, EU and the Americas
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2012
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GLG
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Plant Breeding & Farming, Extraction
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Public
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Global
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1998
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PureCircle Limited
PureCircle (LSE: PURE) is the world’s leading producer of high purity Stevia ingredients for the global food and beverage industry. PureCircle is engaged in the production, marketing and distribution of natural sweeteners. The company is headquartered in Bandar Enstek, Malaysia. PureCircle has a license agreement giving it the right to sell high-purity Reb-A under the PureVia™ brand. With fully owned businesses in Paraguay and Kenya the pace of development is accelerating rapidly. Partners of PureCircle continue to grow in sixteen countries across four continents including the Americas, Europe, the Middle East, and the Asia Pacific.
PureCircle made its initial public offering on the Alternative Investment Market (“AIM”) of the London Stock Exchange in December 2007. In 2008 PureCircle announced contract extensions with Cargill (an international producer and marketer of food, agricultural, financial and industrial products and services) and entered into contracts with PepsiCo and Whole Earth Sweetener Company for the supply of high-purity Reb-A for the use in beverages, foods and tabletop sweeteners worldwide. In 2010 they received a US Notice of Allowance from the US Patent and Trademark Office for the production process of its Stevia derived sweeteners. In addition, on September 7
th
2011 PureCircle announced the opening of a new European headquarters in London and the signing of a UK distribution agreement with Prinova Europe, an ingredient and flavor solutions company.
Stevia One
Stevia One is a privately held company with over 250 employees. The company was founded in 2009. They are establishing their company as a leader in Stevia agricultural science and techniques. The company is based in Lima, Peru with farming operations in Northern Peru. Stevia One's primary focus is to be the largest, lowest cost, highest quality producer of Stevia leaf in the world. Stevia One is the largest single owned plantation globally and they intend to build and operate an extraction facility in the next few years.
Wisdom Natural Brands
™
Wisdom Natural Brands™ (formerly Wisdom Herbs) is a privately held company founded by James May in 1982. Wisdom’s objective has been to provide healthy lifestyle choices for consumers. Wisdom is the parent company of two large consumer brands: SweetLeaf™ Sweetener and Wisdom of the Ancients Tea®. Wisdom is now the largest U.S manufacturer of high-purity, water extracted Stevia and it offers a full line of SweetLeaf™ Stevia products in single serve packets, liquid, powder, tablets and concentrate. Wisdom of the Ancients® sells Stevia teas and a range of other health related products including soaps and strainer straws for straining tea.
GLG Life Tech Corporation
GLG Life Tech Corporation is a public company and a world leader in the production of high quality Stevia. Their operations include Stevia seed breeding, propagation, growth and harvest, extraction, refining and formulation.
GLG has been listed as a public company since 2005 and began trading on the Toronto Stock Exchange in December 2007. Their IPO on the NASDAQ was in November 2009. While the company’s headquarters are based in Vancouver, Canada, GLG’s operations are run out of China. One of GLG’s strongest competitive advantages is the relationship it has with local Chinese provincial and central government agencies which have allowed them to secure agreements in three of China’s largest Stevia growing areas: Dongtai – Jiangsu Province, Mingguang – Anhui Province and Qingdao – Shangdong Province. GLG has 10 year agreements with the governments in Dongtai and Mingguang and a non-binding 20 year agreement with the Juancheng government. These agreements provide GLG with a right of first refusal to purchase all Stevia grown in these cities and exclusivity to process Stevia in these particular cities.
In 2008, GLG signed a strategic alliance and long-term renewable supply agreement with Cargill for the supply of Reb-A extract. GLG has been a supplier to Cargill for three years previous to the new agreement. The conditions of the new alliance mean that GLG would provide a minimum of 80% of Cargill’s Reb-A global requirements for the first five years of the agreement and would be Cargill’s exclusive Chinese supplier. In December 2010, GLG entered into a joint venture agreement with China Agriculture and Healthy Foods Company Limited (“CAHFC”) to operate All Natural and Zero Calorie Beverage and Foods Company (“ANOC”) which is owned by Dr. Luke Zhang, GLG’s CEO. ANOC was incorporated for the sale and distribution of zero calorie food and beverages contained with GLG’s Stevia extracts in China.
As we are only in the development stages of our operations, we will not effectively compete with any of these established industry participants. Our main competition will be companies at a similar level of current development, focused on cultivation and production of Stevia leaf. Though our management believes that the industry is underserviced at this time, we may still compete with these companies, as well as the industry’s more established participants, for resources, financing, land and knowledgeable personnel.
In the face of competition, we may not be successful in cultivating, harvesting and selling our Stevia leaf. Despite this, we hope to compete successfully in the Stevia industry by:
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keeping our development and asset acquisition costs low;
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focusing on the competitive advantages of our geographical location and the experience of our staff and management; and
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using our size and experience to our advantage by adapting quickly to changing market conditions or responding swiftly to potential opportunities.
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Many of the Stevia companies with which we compete for financing and consumers have greater financial and technical resources than those available to us. Accordingly, these competitors may be able to spend greater amounts on developing their cultivation and harvesting systems. This advantage could enable our competitors to develop their Stevia plantations at a faster rate. Such competition could adversely impact our ability to attain the financing necessary for us to establish our Stevia plantation and their expansions as well as cultivate and harvest a commercially viable amount of Stevia plants.
Intellectual Property
We have not filed for any protection of our trademark, and we do not have any other intellectual property other than a copyright to the contents of our website: www.Stevianutra.com.
Research and Development
To date no amounts have been spent on direct research and development. However our company plans to enter into a research and development consulting agreement with a third party to assist in the development of a formulation for our consumer product. This amount will be approximately $5,000 and will likely take place in the month of October, 2012.
Government Regulations
Stevia extracts may be used in a wide variety of consumer products including soft drinks, vegetable products, tabletop sweeteners, confectioneries, fruit products and processed seafood products, in a wide range of countries, including almost all major markets, and as a dietary supplement in others. Clinical studies have supported the safety and stability of Stevia's various high purity compounds used in food and beverages. There is no known health threat and this is increasing consumer confidence in Stevia as a sugar substitute. Cargill and Merisant each submitted applications to the United States and Drug Administration (FDA) in 1998 for GRAS approval. On December 17, 2008 the Stevia extract, Reb-A, received GRAS approval. In December 2008, Australia and New Zealand approved highly purified forms of Stevia extracts as safe for use in food and beverages. Previously, such extracts had only been permitted for use as a dietary supplement in these countries.
Stevia extracts have been sanctioned by the Ministry of Health of China to be used as a food additive, and are listed in the Sanitation Standard of Food Additives.
In July 2010 the FDA issued GRAS clearance for PureCircle's high purity SG95 Stevia product which opened up opportunities for many more applications as well as more cost effective solutions. Further regulatory clearances were secured for Reb-A in Switzerland and France confirming the growing regulatory support for high purity Stevia. Presently in the wider European Union ("EU") and Canada, Stevia extracts are permitted for use only as a dietary supplement.
Efforts to eliminate the EU restrictions are ongoing. The European Stevia Research Center ("ESC") and the European Stevia Association ("EUSTAS") are EU-based organizations that focus on Stevia research and the elimination of the EU's ban on consumption. The ESC is housed at the Laboratory of Functional Biology at the Katholieke Universities Leuven ("KU Leuven") in Belgium and was founded by Professors Jan Geuns of the Laboratory for Functional Biology and Johan Buyse of the Laboratory of Physiology and Immunology of Domestic Animals at KU Leuven.
In June 2007, the Joint Expert Committee on Food Additives ("JECFA") concluded that steviol glycoside showed no adverse affects and was stable for use in food and acidic beverages under normal conditions, and in June 2008, extended its recommendation for acceptable daily intake of up to four mg per kg body weight per day.
In April 2010, at the request from the European Commission, the European Food Safety Authority's scientific panel on additives, the ANS Panel, assessed the safety of steviol glycosides, sweeteners extracted from plant leaves, and established an acceptable daily intake for their safe use. The assessment has been sent to the European Commission which will consider whether or not to authorize the substances in the European Union for their proposed use in particular in sugar free or reduced energy foods such as certain flavored drinks, confectionery with no added sugar or energy reduced soups.
The toxicological testing conducted by the ANS panel showed that the substances are not genotoxic, nor carcinogenic, nor are they linked to any adverse effects on the human reproductive system or for the developing child. The ADS panel set an acceptable daily intake of four mg per kg body weight per day for steviol glycosides, a level consistent with that already established by JECFA. EUSTAS believes that the current EU ban on Stevia is out of sync with the current global regulatory environment and the EU could grant approval for Stevia in the near future based on the FDA's decisions and JECFA's decision on the acceptable daily intake of Stevia.
Cambodian Regulations
A significant portion of our initial business operations will occur in Cambodia. We will be generally subject to laws and regulations applicable to foreign investment in Cambodia. The Cambodian legal system is based, at least in part, on written statutes. However, since these laws and regulations are relatively new and the Cambodian legal system continues to rapidly evolve, the interpretations of many laws, regulations and rules are not always uniform and enforcement of these laws, regulations and rules involves uncertainties. We cannot predict the effect of future developments in the Cambodian legal system, including the promulgation of new laws, changes to existing laws or the interpretation or enforcement thereof, the preemption of local regulations by national laws, or the overturn of local government's decisions by the superior government. These uncertainties may limit legal protections available to us.
Employees
As of October 29, 2012 we did not have any employees. Brian W. Dicks, our sole director and our president, chief financial officer, and treasurer, spends about 30 hours per week on our operations on a consulting basis. On January 23, 2012, we entered into a consulting agreement with Dr. Ahmed Attia El Sheikh, wherein Dr. El Sheikh has agreed to provide certain consulting services as our company’s chief agronomy officer for a period of five years, effective March 5, 2012, on a consulting basis. Dr. Sheikh spends about 40 hours per week on our operations on a consulting basis. On June 14, 2012, we appointed Dr. Hilary A. Rodrigues as our chief executive officer. Dr. Hilary Rodrigues will be coordinating our company’s consumer product development initiative. His skill set is of significant value to this project and his early departure would slow progress in this area. Dr. Rodrigues does not have a contract with our company but is a shareholder. Dr. Rodrigues spends about 2 hours per week on our operations on a consulting basis. On June 18, 2012, we appointed David Foo as vice president of Southeast Asia operation. David Foo spends about 5 hours per week on our operations on a consulting basis. Additionally, we plan to engage a number of consultants in the areas of legal and accounting, as well as agronomy and management services on location in Cambodia.
Reports to Security Holders
We are required to file annual, quarterly and current reports, proxy statements and other information with the SEC and our filings are available to the public over the internet at the SEC’s website at http://www.sec.gov. The public may read and copy any materials filed by us with the SEC at the SEC’s Public Reference Room at 100 F Street N.E. Washington D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-732-0330. The SEC also maintains an Internet site that contains reports, proxy and formation statements, and other information regarding issuers that file electronically with the SEC, at http://www.sec.gov.
Much of the information included in this annual report includes or is based upon estimates, projections or other “forward looking statements”. Such forward looking statements include any projections and estimates made by us and our management in connection with our business operations. While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested herein.
Such estimates, projections or other “forward looking statements” involve various risks and uncertainties as outlined below. We caution the reader that important factors in some cases have affected and, in the future, could materially affect actual results and cause actual results to differ materially from the results expressed in any such estimates, projections or other “forward looking statements”.
Risks Related to Our Business
Our limited operating history may not serve as an adequate basis to judge our future prospects and results of operations.
We are at the development stage of our business model and therefore our operating history to date is reflective of early planning and development. While growing operations in Cambodia are progressing as expected there could be unforeseen variables that could impact either positively or negatively on operations.
Our independent auditor has raised doubt about our ability to continue as a going concern.
Our independent auditor expressed substantial doubt as to our ability to continue as a going concern.
Newly developed products may not be compatible with market needs resulting in an adverse effect on our sales and earnings.
Our business is particularly subject to changing consumer trends and preferences. Our continued success depends in part on our ability to anticipate and respond to these changes, and we may not respond in a timely or commercially appropriate manner to such changes. If we fail to invest in extensive market research on consumer health needs in each market we target, we may face limited market acceptance of our products, which could have a material adverse effect on our sales and earnings.
We may encounter substantial competition in our business and failure to compete effectively may adversely affect our ability to generate revenue.
We believe that existing and new competitors will continue to improve their products and to introduce new products with competitive price and performance characteristics. We expect that we will be required to continue to invest in product development and productivity improvements to compete effectively in our markets. Our competitors could develop more efficient products or undertake more aggressive and costly marketing campaigns than ours, which may adversely affect our marketing strategies and could have a material adverse effect on our business, results of operations and financial condition.
Important factors affecting our ability to compete successfully include:
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the taste and flavor of products;
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trade and consumer promotions;
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rapid and effective development of new, unique cutting edge products;
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attractive and different packaging;
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branded product advertising; and
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In periods of reduced demand for our products, we can either choose to maintain market share by reducing our selling prices to meet competition or maintain selling prices, which would likely sacrifice market share. Sales and overall profitability would be reduced in either case. In addition, we cannot assure that additional competitors will not enter our existing markets, or that we will be able to compete successfully against existing or new competition.
We rely on the services of certain key personnel. If we fail to keep them employed it may have a material adverse effect on fulfilling our business plan.
Our business relies on the efforts and talents of our president, treasurer and chairman Brian W. Dicks and chief executive officer, Dr. Hilary Rodrigues. The loss of Mr. Dicks’ service could adversely affect the general operations of our business. Although we have entered into a consulting agreement, pursuant to which Mr. Dicks has agreed to provide consulting services as our company’s chief executive officer and president for a period ending June 1, 2014, and Mr. Dicks has not indicated any intention of leaving us, the loss of his service for any reason could have a very negative impact on our ability to fulfill on our business plan. Dr. Rodrigues will be coordinating our company’s consumer product development initiative. His skill set is of significant value to this project and his early departure would slow progress in this area. Dr. Rodrigues does not have a contract with our company but is a shareholder.
Our business also relies on the efforts of our chief agronomy officer, Dr. Ahmed Attia El Sheikh.
The loss of Dr. El Sheik would have significant negative impact on our Cambodia growing operations. However Dr. El Sheik has entered into a five year consulting contract and is unlikely to break the contract as it provides him with both income and share equity incentive and the opportunity to pursue his profession on a global scale.
We may not be able to hire and retain qualified personnel to support our growth and if we are unable to retain or hire such personnel in the future, our ability to improve our products and implement our business objectives could be adversely affected.
If one or more of our senior executives or other key personnel are unable or unwilling to continue in their present positions, we may not be able to replace them easily or at all, and our business may be disrupted and our financial condition and results of operations may be materially and adversely affected. Competition for senior management and senior technology personnel is intense, the pool of qualified candidates is very limited, and we may not be able to retain the services of our senior executives or senior technology personnel, or attract and retain high-quality senior executives or senior technology personnel in the future. Such failure could materially and adversely affect our future growth and financial condition.
Our management concludes that our disclosure controls and procedures were not effective, which may prevent us from filing reports required by the applicable laws and regulations within the time frame required by the applicable rules of the SEC.
Our management concludes that our disclosure controls and procedures are not effective to ensure that information required to be disclosed by us in the responses we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules due to that the fact that we have not completed the process of formally documenting internal controls. Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud. If we cannot provide reliable financial reports timely or prevent fraud, our business reputation and operating results could be harmed. Failure to achieve and maintain an effective internal control environment could also cause investors to lose confidence in our reported financial information, which could have a material adverse effect on the price of our common stock.
Product liability claims against us could result in adverse publicity and potentially significant monetary damages.
As with other food producers, we are also exposed to risks associated with product liability claims if the consumption of our products results in injury or illness. We cannot predict what impact such product liability claims or resulting negative publicity would have on our business or on our brand image. The successful assertion of product liability claims against us could result in potentially significant monetary damages, diversion of management resources and require us to make significant payments and incur substantial legal expenses, although we do carry product liability insurance for potential product liability claims. Even if a product liability claim is not successfully pursued to judgment by a claimant, we may still incur substantial legal expenses defending against such a claim. Finally, serious product quality concerns could result in governmental action against us, which, among other things, could result in the suspension of production or distribution of our products, loss of certain licenses, or other governmental penalties.
We compete in an industry that is brand-conscious, and unless we are able to establish and maintain brand name recognition our sales may be negatively impacted.
Our business is substantially dependent upon awareness and market acceptance of our products and brand by our targeted consumers. In addition, our business depends on acceptance by our independent distributors and consumers of our brand. Although we believe that we have made progress towards establishing market recognition for our brand in the industry, it is too early in the product life cycle of the brand to determine whether our products and brand will achieve and maintain satisfactory levels of acceptance by independent distributors, grocery stores, retailers and consumers.
We rely primarily on third-party distributors and independent retailers, and this could negatively affect our ability to efficiently and profitably distribute and market our products, maintain our existing markets and expand our business into other geographic markets.
Except for the sales through the internet, we do not sell our products directly to our end customers. We primarily rely on third-party distributors and retailers for the sale and distribution of our products. To the extent that our distributors are distracted from selling our products or do not expend sufficient efforts in managing and selling our products, our sales will be adversely affected. Our ability to maintain our distribution network and attract additional distributors will depend on a number of factors, many of which are outside our control. Some of these factors include: (i) the level of demand for our brand and products in a particular distribution area; (ii) our ability to price our products at levels competitive with those offered by competing products and (iii) our ability to deliver products in the quantity and at the time ordered by distributors.
There can be no assurance that we will be able to meet all or any of these factors in any of our current or prospective geographic areas of distribution. Furthermore, shortage of adequate working capital may make it impossible for us to do so. Our inability to achieve any of these factors in a geographic distribution area will have a material adverse effect on our relationships with our distributors in that particular geographic area, thus limiting our ability to maintain and expand our market, which will likely adversely affect our revenues and financial results.
We may never pay any dividends to shareholders.
We have never declared or paid any cash dividends or distributions on our capital stock. We currently intend to retain our future earnings, if any, to support operations and to finance expansion and therefore we do not anticipate paying any cash dividends on our Common Stock in the foreseeable future.
The declaration, payment and amount of any future dividends will be made at the discretion of the board of directors, and will depend upon, among other things, the results of our operations, cash flows and financial condition, operating and capital requirements, and other factors as the board of directors considers relevant. There is no assurance that future dividends will be paid, and, if dividends are paid, there is no assurance with respect to the amount of any such dividend.
Our future operations are reliant on additional capital
Additional bridge financing via debt or equity will be required in addition to the $75,000 received as part of the Fairhills agreement. We estimate that amount to be approximately $100,000. Additionally, should our company proceed with its plans to establish refining facilities it will have to source additional capital at that time. However this event is approximately twenty-four months away.
Risks Related to Our Common Stock
Our common stock is quoted on the OTC Bulletin Board which may have an unfavorable impact on our stock price and liquidity.
Our common stock is quoted on the OTC Bulletin Board (“OTCBB”). The OTCBB is a significantly more limited market than the New York Stock Exchange or NASDAQ system. The quotation of our shares on the OTCBB may result in a less liquid market available for existing and potential stockholders to trade shares of our common stock, could depress the trading price of our common stock and could have a long-term adverse impact on our ability to raise capital in the future.
There is limited liquidity on the OTCBB.
When fewer shares of a security are being traded on the OTCBB, volatility of prices may increase and price movement may outpace the ability to deliver accurate quote information. Due to lower trading volumes in shares of our common stock, there may be a lower likelihood of one's orders for shares of our common stock being executed, and current prices may differ significantly from the price one was quoted at the time of one's order entry.
Our common stock is thinly traded, so you may be unable to sell at or near asking prices or at all if you need to sell your shares to raise money or otherwise desire to liquidate your shares.
Currently our common stock is quoted in the OTCBB market and the trading volume we will develop may be limited by the fact that many major institutional investment funds, including mutual funds, as well as individual investors follow a policy of not investing in Bulletin Board stocks and certain major brokerage firms restrict their brokers from recommending Bulletin Board stocks because they are considered speculative, volatile and thinly traded. The OTCBB market is an inter-dealer market much less regulated than the major exchanges and our common stock is subject to abuses, volatility and shorting. Thus there is currently no broadly followed and established trading market for our common stock. An established trading market may never develop or be maintained. Active trading markets generally result in lower price volatility and more efficient execution of buy and sell orders. Absence of an active trading market reduces the liquidity of the shares traded there.
The trading volume of our common stock has been and may continue to be limited and sporadic. As a result of such trading activity, the quoted price for our common stock on the OTCBB may not necessarily be a reliable indicator of its fair market value. Further, if we cease to be quoted, holders would find it more difficult to dispose of or to obtain accurate quotations as to the market value of our common stock and as a result, the market value of our common stock likely would decline.
Our common stock is subject to price volatility unrelated to our operations.
The market price of our common stock could fluctuate substantially due to a variety of factors, including market perception of our ability to achieve our planned growth, quarterly operating results of other companies in the same industry, trading volume in our common stock, changes in general conditions in the economy and the financial markets or other developments affecting our competitors or us. In addition, the stock market is subject to extreme price and volume fluctuations. This volatility has had a significant effect on the market price of securities issued by many companies for reasons unrelated to their operating performance and could have the same effect on our common stock.
You may be unable to sell your common stock at or above your purchase price, which may result in substantial losses to you.
The following factors may add to the volatility in the price of our common stock: actual or anticipated variations in our quarterly or annual operating results; government regulations, announcements of significant acquisitions, strategic partnerships or joint ventures; our capital commitments; and additions or departures of our key personnel. Many of these factors are beyond our control and may decrease the market price of our common stock, regardless of our operating performance. We cannot make any predictions or projections as to what the prevailing market price for our common stock will be at any time, including as to whether our common stock will sustain its current market price, or as to what effect that the sale of shares or the availability of common stock for sale at any time will have on the prevailing market price.
If we fail to remain current on our reporting requirements, we could be removed from the OTCBB, which would limit the ability of broker-dealers to sell our securities and the ability of shareholders to sell their securities in the secondary market.
Companies trading on the OTCBB, such as Stevia Nutra, must be reporting issuers under Section 12 of the Exchange Act, and must be current in their reports under Section 13 of the Exchange Act, in order to maintain price quotation privileges on the OTCBB. If we fail to remain current on our reporting requirements, we could be removed from the OTCBB. As a result, the market liquidity for our securities could be adversely affected by limiting the ability of broker-dealers to sell our securities and the ability of shareholders to sell their securities in the secondary market.
Our common stock is classified as a “penny stock” as that term is generally defined in the Securities Exchange Act of 1934 to mean equity securities with a price of less than $5.00. Our common stock will be subject to rules that impose sales practice and disclosure requirements on broker-dealers who engage in certain transactions involving a penny stock.
The SEC has adopted regulations which generally define so-called "penny stocks" to be an equity security that has a market price less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exemptions. As of February 10, 2011, the closing sale price of our common stock was $0.52 per share and, therefore, it is designated a "penny stock." As a "penny stock," our common stock may become subject to Rule 15g-9 under the Exchange Act of 1934, or the "Penny Stock Rule." This rule imposes additional sales practice requirements on broker-dealers that sell such securities to persons other than established customers and "accredited investors" (generally, individuals with a net worth in excess of $1,000,000 or annual incomes exceeding $200,000, or $300,000 together with their spouses).
For any transaction involving a penny stock, unless exempt, the penny stock rules require that a broker or dealer approve a person's account for transactions in penny stocks and the broker or dealer receive from the investor a written agreement to the transaction setting forth the identity and quantity of the penny stock to be purchased. In order to approve a person's account for transactions in penny stocks, the broker or dealer must obtain financial information and investment experience and objectives of the person and make a reasonable determination that the transactions in penny stocks are suitable for that person and that that person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.
The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prepared by the SEC relating to the penny stock market, which, in highlight form, sets forth:
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The basis on which the broker or dealer made the suitability determination, and
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that the broker or dealer received a signed, written agreement from the investor prior to the transaction.
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Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.
Because of these regulations, broker-dealers may not wish to engage in the above-referenced necessary paperwork and disclosures and/or may encounter difficulties in their attempt to sell shares of our common stock, which may affect the ability of selling shareholders or other holders to sell their shares in any secondary market and have the effect of reducing the level of trading activity in any secondary market. These additional sales practice and disclosure requirements could impede the sale of our common stock, if and when our common stock becomes publicly traded. In addition, the liquidity for our common stock may decrease, with a corresponding decrease in the price of our common stock. Our common stock, in all probability, will be subject to such penny stock rules for the foreseeable future and our shareholders will, in all likelihood, find it difficult to sell their common stock.
There can be no assurance that our common stock will qualify for exemption from the Penny Stock Rule. In any event, even if our common stock were exempt from the Penny Stock Rule, we would remain subject to Section 15(b)(6) of the Exchange Act, which gives the SEC the authority to restrict any person from participating in a distribution of a penny stock if the SEC determines that such a restriction would be in the public interest.