Company Quick10K Filing
Sunwin Stevia
Price0.05 EPS-0
Shares200 P/E-4
MCap10 P/FCF14
Net Debt-0 EBIT-3
TEV10 TEV/EBIT-3
TTM 2019-10-31, in MM, except price, ratios
10-Q 2020-10-31 Filed 2020-12-11
10-Q 2020-07-31 Filed 2020-09-11
10-K 2020-04-30 Filed 2020-08-03
10-Q 2020-01-31 Filed 2020-03-16
10-Q 2019-10-31 Filed 2019-12-16
10-Q 2019-07-31 Filed 2019-09-16
10-K 2019-04-30 Filed 2019-08-13
10-Q 2019-01-31 Filed 2019-03-18
10-Q 2018-10-31 Filed 2018-12-17
10-Q 2018-07-31 Filed 2018-09-14
10-K 2018-04-30 Filed 2018-07-30
10-Q 2018-01-31 Filed 2018-03-16
10-Q 2017-10-31 Filed 2017-12-15
10-Q 2017-07-31 Filed 2017-09-14
10-K 2017-04-30 Filed 2017-07-31
10-Q 2017-01-31 Filed 2017-03-17
10-Q 2016-10-31 Filed 2017-01-20
10-Q 2016-07-31 Filed 2016-09-13
10-K 2016-04-30 Filed 2016-07-29
10-Q 2016-01-31 Filed 2016-03-15
10-Q 2015-10-31 Filed 2015-12-29
10-Q 2015-07-31 Filed 2015-09-14
10-K 2015-04-30 Filed 2015-08-06
10-Q 2015-01-31 Filed 2015-03-17
10-Q 2014-10-31 Filed 2014-12-22
10-Q 2014-07-31 Filed 2014-09-15
10-K 2014-04-30 Filed 2014-07-29
10-Q 2014-01-31 Filed 2014-03-24
10-Q 2013-10-31 Filed 2013-12-16
10-K 2013-04-30 Filed 2013-08-02
10-Q 2013-01-31 Filed 2013-03-25
10-Q 2012-10-31 Filed 2012-12-14
10-Q 2012-07-31 Filed 2012-09-12
10-K 2012-04-30 Filed 2012-07-30
10-Q 2012-01-31 Filed 2012-03-19
10-Q 2011-10-31 Filed 2011-12-15
10-Q 2011-07-31 Filed 2011-09-14
10-K 2011-04-30 Filed 2011-07-29
10-Q 2011-01-31 Filed 2011-03-17
10-Q 2010-10-31 Filed 2010-12-15
10-Q 2010-07-31 Filed 2010-09-14
10-K 2010-04-30 Filed 2010-07-29
10-Q 2010-01-31 Filed 2010-03-22
8-K 2020-07-06
8-K 2019-07-30
8-K 2019-07-10

SUWN 10Q Quarterly Report

Note 1 - Organization and Operations
Note 2 - Summary of Significant Accounting Policies
Note 3 - Noncontrolling Interest
Note 5 - Inventories
Note 6 - Prepaid Expenses and Other Current Assets
Note 7 - Property and Equipment
Note 8 - Related Party Transactions
Note 9 - Operating Lease
Note 10 - Accounts Payable and Accrued Expenses
Note 11 - Loan Payable
Note 12 - Stockholders' Equity.
Note 13 - Segment Information
Note 14 - Concentrations and Credit Risk
Note 15 - Subsequent Events
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures.
Part II - Other Information
Item 1. Legal Proceedings.
Item 1 A. Risk Factors.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Item 3. Defaults Upon Senior Securities.
Item 4. Mine Safety Disclosure.
Item 5. Other Information.
Item 6. Exhibits
EX-31.1 exh31-1.htm
EX-31.2 exh31-2.htm
EX-32.1 exh32-1.htm

Sunwin Stevia Earnings 2020-10-31

Balance SheetIncome StatementCash Flow
40322416802012201420172020
Assets, Equity
10.07.34.61.9-0.8-3.52012201420172020
Rev, G Profit, Net Income
5.02.0-1.0-4.0-7.0-10.02012201420172020
Ops, Inv, Fin

10-Q 1 suwn10-q.htm SUNWIN STEVIA INTERNATIONAL, INC. FORM 10-Q


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q
 (Mark One)
 
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended October 31, 2020

or

[  ] 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: 000-53595

SUNWIN STEVIA INTERNATIONAL, INC.
(Exact name of registrant as specified in charter)

NEVADA
56-2416925
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
 
6 SHENGWANG AVE., QUFU, SHANDONG, CHINA
273100
(Address of principal executive offices)
(Zip Code)

(86) 537-4424999
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
 
Title of each class
 Trading Symbol (s)
Name of each exchange on which registered
None
 SUWN
Not applicable

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes [X] No [  ]

Indicate by check mark whether the registrant has been submitted electronically and posted on its corporate Web site, if any, every Interactive Date File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [ ]

Indicate by check mark 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.

Large accelerated filer  [  ]
Accelerated filer              [  ]
Non-accelerated filer    [  ]
Smaller reporting company  [X]
Emerging growth company [  ]
 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided  pursuant  to Section 7(a)(2)(B) of the Securities Act.   

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [  ] No [X].

Indicate the number of shares outstanding of each of the issuer's classes of common equity as of the latest practicable date: As of December 11, 2020, there were 199,632,803 shares of the registrant's common stock issued and outstanding.


SUNWIN STEVIA INTERNATIONAL, INC. AND SUBSIDIARIES
FORM 10-Q
 QUARTERLY PERIOD ENDED OCTOBER 31, 2020
 
INDEX
 
 
Page
PART I-FINANCIAL INFORMATION
 
 
 
Item 1.    Financial Statements
1
 
 
Item 2.    Management's Discussion and Analysis of Financial Condition and Results of Operations
18
 
 
Item 3.    Quantitative and Qualitative Disclosures About Market Risk
27
 
 
Item 4.    Controls and Procedures
27
 
 
PART II-OTHER INFORMATION
 
 
Item 1.    Legal Proceedings
28
 
 
Item 1A.  Risk Factors
28
 
 
Item 2.     Unregistered Sales of Equity Securities and Use of Proceeds
28
 
 
Item 3.     Defaults Upon Senior Securities
28
 
 
Item 4.     Mine Safety Disclosures
28
 
 
Item 5.     Other Information
29
 
 
Item 6.     Exhibits
29
i



FORWARD LOOKING STATEMENTS

This report contains forward-looking statements regarding our business, financial condition, results of operations and prospects. Words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates" and similar expressions or variations of such words are intended to identify forward-looking statements, but are not deemed to represent an all-inclusive means of identifying forward-looking statements as denoted in this report. Additionally, statements concerning future matters are forward-looking statements

Although forward-looking statements in this report reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by us. Consequently, forward-looking statements are inherently subject to risks and uncertainties and actual results and outcomes may differ materially from the results and outcomes discussed in or anticipated by the forward-looking statements. Factors that could cause or contribute to such differences in results and outcomes include, without limitation, those specifically addressed under the headings "Risks Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our annual report on Form 10-K, in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in this Form 10-Q and information contained in other reports that we file with the SEC. You are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this report

We file reports with the SEC. The SEC maintains a website (www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including us. You can also read and copy any materials we file with the SEC at the SEC's Public Reference Room at 100 F Street, NE, Washington, DC 20549. You can obtain additional information about the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330

We undertake no obligation to revise or update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this report, except as required by law. Readers are urged to carefully review and consider the various disclosures made throughout the entirety of this quarterly report, which are designed to advise interested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects.

ii



INDEX OF CERTAIN DEFINED TERMS USED IN THIS REPORT

We are on a fiscal year ending April 30, as such the year ending April 30, 2021 is referred to as "fiscal 2021" and the year ended April 30, 2020 is referred to as "fiscal 2020".  Also, the three month period ended October 31, 2020 is our second quarter and is referred to as the "second quarter of fiscal 2021". Likewise, the three month period ended October 31, 2019 is referred to as the "second quarter of fiscal 2020".

When used in this report, the terms:
 
 
-
 
"Sunwin", "we", "us" and the "Company" refers to Sunwin Stevia International, Inc., a Nevada corporation formerly known as Sunwin Nutraceuticals International, Inc., and our subsidiaries;
 
-
 
"Sunwin Tech" refers to our wholly owned subsidiary Sunwin Tech Group, Inc., a Florida corporation, which was closed on April 30, 2018 and all of its assets and liabilities were transferred to the Company;
 
-
 
"Qufu Natural Green" refers to our wholly owned subsidiary Qufu Natural Green Engineering Co., Ltd., a Chinese limited liability company;
 
-
 
"Sunwin USA" refers to Sunwin USA, LLC, a Delaware limited liability company, a 100% owned subsidiary of Sunwin. Sunwin USA was previously Sunwin Stevia International Corp., a Florida corporation, it changed its name to Sunwin USA in May 2009;
 
-
 
"Qufu Shengwang" refers to Qufu Shengwang Stevia Biology and Science Co., Ltd., a Chinese limited liability company. Qufu Natural Green owns a 100% interest in Qufu Shengwang. On July 30, 2019, Qufu Natural Green sold its 100% interest of Qufu Shengwang to a third party; 
 
-
 
"Qufu Shengren" refers to Qufu Shengren Pharmaceutical Co., Ltd., a Chinese limited liability company, and a 100% owned subsidiary of Qufu Natural Green. On April 30, 2020, the Company increased the total amount of capital of Qufu Sheng through a series of debt transfer and conversion agreements with investors, ownership of Qufu Natural Green became 61%; and
 
-
 
“Qufu Shengren Import and Export" refers to Qufu Shengren Import and Export Co., Ltd., a Chinese limited liability company, a 100% owned subsidiary of Qufu Shengren.
 
 
 
 
  We also use the following terms when referring to certain related parties:
 
 
-
 
Mr. Laiwang Zhang, Chairman and a principal shareholder of our Company;
 
-
 
"Pharmaceutical Corporation" refers to Shandong Shengwang Pharmaceutical Co., Ltd., a Chinese limited liability company which is controlled by Mr. Laiwang Zhang;
 
-
 
"Qufu Shengwang Import and Export" refers to Qufu Shengwang Import and Export Co., Ltd., a Chinese limited liability company, controlled by Mr. Zhang; and
 
-
 
Mr. Weidong Chai, a management member of Qufu Shengren Pharmaceutical Co., Ltd.
 
 The information which appears on our website at www.sunwininternational.com is not part of this report.
iii


ITEM I - FINANCIAL STATEMENTS
 
SUNWIN STEVIA INTERNATIONAL, INC. AND SUBSIDIARIES
 
CONDENSED CONSOLIDATED BALANCE SHEETS
 
 
           
 
 
October 31,
2020
   
April 30,
2020
 
 
 
(Unaudited)
       
ASSETS
           
CURRENT ASSETS:
           
Cash and cash equivalents
 
$
396,579
   
$
1,137,920
 
Accounts receivable, net
   
2,200,198
     
2,713,567
 
Accounts receivable - related party
   
1,458,545
     
3,034,365
 
Inventories, net
   
15,328,881
     
12,874,497
 
Prepaid expenses and other current assets
   
960,832
     
693,552
 
Total Current Assets
   
20,345,035
     
20,453,901
 
Property and equipment, net
   
9,125,596
     
8,901,548
 
Total Assets
 
$
29,470,631
   
$
29,355,449
 
 
               
LIABILITIES AND STOCKHOLDERS' EQUITY
               
CURRENT LIABILITIES:
               
Accounts payable and accrued expenses
 
$
10,040,575
   
$
8,533,131
 
Short-term loans
   
2,997,613
     
3,378,380
 
Due to related parties
   
5,094,261
     
5,072,451
 
Total Current Liabilities
   
18,132,449
     
16,983,962
 
Total Liabilities 
   
18,132,449
     
16,983,962
 
 
               
Commitments and Contingencies
               
 
               
STOCKHOLDERS' EQUITY:
               
Preferred stock, $0.001 par value; 1,000,000 shares authorized; no shares issued and outstanding
   
-
     
-
 
Common stock, $0.001 par value, 200,000,000 shares authorized; 199,632,803 and 199,632,803 shares issued and outstanding as of October 31, 2020 and April 30, 2020, respectively
   
199,633
     
199,633
 
Additional paid-in capital
   
47,732,350
     
47,732,350
 
Accumulated deficit
   
(41,184,373
)
   
(40,118,394
)
Accumulated other comprehensive income
   
4,986,925
     
4,557,898
 
  Total Sunwin Stevia International, Inc. Stockholders' Equity
   
11,734,535
     
12,371,487
 
Noncontrolling interest
   
(396,353
)
   
-
 
  Total Stockholders' Equity
   
11,338,182
     
12,371,487
 
 
               
Total Liabilities and Stockholders' Equity
 
$
29,470,631
   
$
29,355,449
 
 
               
 
               
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
 
- 1 -

SUNWIN STEVIA INTERNATIONAL, INC. AND SUBSIDIARIES
 
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
 
(UNAUDITED)
 
    
For the Three Months Ended
October 31,
   
For the Six Months Ended
October 31,
 
   
2020
   
2019
   
2020
   
2019
 
Revenues
 
$
3,931,149
     
4,846,915
   
$
9,219,004
   
$
9,953,097
 
Revenues - related parties
   
502,695
     
2,314,666
     
2,254,518
     
4,098,559
 
Total revenues
   
4,433,844
     
7,161,581
     
11,473,522
     
14,051,656
 
Cost of revenues
   
3,991,702
     
3,618,881
     
9,254,694
     
7,739,510
 
Cost of revenues - related parties
   
546,254
     
2,068,261
     
2,155,762
     
3,716,500
 
Total cost of revenues
   
4,537,956
     
5,687,142
     
11,410,456
     
11,456,010
 
Gross profit
   
(104,112
)
   
1,474,439
     
63,066
     
2,595,646
 
     
-
                         
Operating expenses:
                               
Selling expenses
   
256,566
     
502,773
     
567,481
     
877,205
 
General and administrative expenses
   
172,384
     
281,733
     
645,560
     
684,095
 
Research and development expenses
   
71,129
     
339,401
     
432,567
     
645,952
 
Total operating expenses, net
   
500,079
     
1,123,907
     
1,645,608
     
2,207,252
 
Income (Loss) from operations
   
(604,191
)
   
350,532
     
(1,582,542
)
   
388,394
 
                                 
Other (expenses) income
                               
Other expense
   
(2,252
)
   
(37,907
)
   
(1,187
)
   
(39,442
)
Grant income
   
10
     
-
     
576
     
14,313
 
Interest income
   
262
     
184
     
493
     
268
 
Interest expense - related party
   
(4,867
)
   
(28,359
)
   
(21,674
)
   
(64,100
)
Interest expense
   
(47,413
)
   
(92,559
)
   
(109,944
)
   
(237,346
)
Total other expense
   
(54,260
)
   
(158,641
)
   
(131,736
)
   
(326,307
)
                                 
Income (loss) from continuing operations before income taxes
   
(658,451
)
   
191,891
     
(1,714,278
)
   
62,087
 
Provision for income taxes
   
-
     
-
     
-
     
-
 
Net income (loss) from continuing operations
   
(658,451
)
 
$
191,891
   
$
(1,714,278
)
 
$
62,087
 
                                 
Discontinued operations
                               
Loss from discontinued operations, net of income tax
   
-
     
-
     
-
     
(20,016
)
Loss from disposal of discontinued operations
   
-
     
-
             
(960
)
Loss from sales of discontinued operations
   
-
     
-
     
-
     
(232,455
)
Loss from discontinued operations, net of income tax
   
-
     
-
     
-
     
(253,431
)
                                 
Net income (loss)
   
(658,451
)
   
191,891
     
(1,714,278
)
   
(191,344
)
Less: net loss attributable to noncontrolling interest
   
(255,071
)
   
-
     
(648,299
)
   
-
 
Net income (loss) attributable to Sunwin Stevia International, Inc.
   
(403,380
)
 
$
191,891
   
$
(1,065,979
)
 
$
(191,344
)
                                 
Comprehensive gain (loss):
                               
Net income (loss)
   
(403,380
)
 
$
191,891
   
$
(1,065,979
)
 
$
(191,344
)
Foreign currency translation adjustment
   
549,797
     
(106,388
)
   
680,973
     
162,171
 
Total comprehensive gain (loss)
   
146,417
     
85,503
     
(385,006
)
   
(29,173
)
Less: foreign currency translation adjustment attributable to noncontrolling interest
   
203,417
     
-
     
251,946
     
-
 
Comprehensive gain (loss) attributable to Sunwin Stevia International, Inc.
   
(57,000
)
 
$
85,503
   
$
(636,952
)
 
$
(29,173
)
                                 
Earnings per common share attributable to Sunwin Stevia International, Inc.:
                         
Continuing operations - basic and diluted
 
$
(0.00
)
 
$
0.00
   
$
(0.01
)
 
$
0.00
 
Discontinued operations - basic and diluted
   
-
     
-
     
-
     
(0.00
)
Net loss per common share - basic and diluted
 
$
(0.00
)
 
$
0.00
   
$
(0.01
)
 
$
(0.00
)
                                 
Weighted average common shares outstanding - basic and diluted
   
199,632,803
     
199,632,803
     
199,632,803
     
199,632,803
 
                                 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
 
- 2 -

SUNWIN STEVIA INTERNATIONAL, INC. AND SUBSIDIARIES
 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 
(UNAUDITED)
 
 
     
  
 
For the Six Months Ended October 31,
 
 
 
2020
   
2019
 
CASH FLOWS FROM OPERATING ACTIVITIES:
           
Net loss
 
$
(1,714,278
)
 
$
(191,344
)
Loss from discontinued operations
   
-
     
(253,431
)
Net (loss) profit from continuing operations
   
(1,714,278
)
   
62,087
 
Adjustments to reconcile net loss to net cash provided by operating activities:
               
Depreciation expense
   
626,560
     
568,345
 
Loss on disposition of property and equipment
   
-
     
20,426
 
Changes in operating assets and liabilities:
           
-
 
Accounts receivable and notes receivable
   
647,614
     
739,720
 
Accounts receivable - related party
   
1,677,074
     
(510,987
)
Inventories
   
(1,679,993
)
   
(1,815,660
)
Prepaid expenses and other current assets
   
(320,653
)
   
(1,947,403
)
Accounts payable and accrued expenses
   
1,074,321
     
2,564,069
 
Taxes payable
   
(88,526
)
   
106,853
 
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES FROM CONTINUING OPERATIONS
   
222,119
     
(212,550
)
NET CASH USED IN DISCONTINUED OPERATING ACTIVITIES FROM DISCONTINUED OPERATIONS
   
-
     
(339,925
)
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
   
222,119
     
(552,475
)
 
               
CASH FLOWS FROM INVESTING ACTIVITIES:
               
Proceed from disposal of discontinued operations
   
-
     
1,145,049
 
Purchases of property and equipment
   
(97,289
)
   
(1,027,761
)
Proceed from disposal of equipment
   
-
     
30,473
 
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES FROM CONTINUING OPERATIONS
   
(97,289
)
   
147,761
 
NET CASH USED IN INVESTING ACTIVITIES FROM DISCONTINUED OPERATIONS
   
-
     
-
 
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
   
(97,289
)
   
147,761
 
 
               
CASH FLOWS FROM FINANCING ACTIVITIES:
               
Proceeds from loans
   
-
     
429,393
 
Repayment of short term loans
   
(678,362
)
   
-
 
Advance from related parties
   
7,538,516
     
3,813,512
 
Repayment of related party advances
   
(7,755,243
)
   
(3,795,447
)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES FROM CONTINUING OPERATIONS
   
(895,089
)
   
447,458
 
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES FROM DISCONTINUED OPERATIONS
   
-
     
-
 
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
   
(895,089
)
   
447,458
 
 
               
EFFECT OF EXCHANGE RATE ON CASH
   
28,918
     
(26,113
)
NET INCREASE (DECREASE) IN CASH
   
(741,341
)
   
16,631
 
 
               
Cash at the beginning of period
   
1,137,920
     
294,199
 
Cash at the end of period
   
396,579
     
310,830
 
 
               
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:
               
Cash paid for income taxes
 
$
-
   
$
-
 
Cash paid for interest
 
$
17,077
   
$
60,235
 
 
               
NON-CASH INVESTING AND FINANCING ACTIVITIES:
               
Property and equipment acquired on credit as payable
 
$
244,896
   
$
223,885
 
Accrued interest payable to related party
 
$
8,897
   
$
27,978
 
Liability assumed in connection with discontinued operations
 
$
-
   
$
3,565,397
 
 
               
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
 
- 3 -


SUNWIN STEVIA INTERNATIONAL, INC. AND SUBSIDIARIES
 
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
 
(UNAUDITED)
 
   
Three Months Ended October 31, 2020
 
 
Number of Shares
 
Amount of Common Shares
 
Additional Paid-in Capital
 
Accumulated Deficit
 
Accumulated Other Comprehensive Income
 
Noncontrolling Interest
 
Total Stockholders' Equity
 
 
                           
Balance, July 31, 2020
   
199,632,803
   
$
199,633
   
$
47,732,350
   
$
(40,780,993
)
 
$
4,640,545
   
$
(344,699
)
 
$
11,446,836
 
Net loss for the three months ended October 31, 2020
   
-
     
-
     
-
     
(403,380
)
   
-
     
(255,071
)
   
(658,451
)
Foreign currency translation adjustment
   
-
     
-
     
-
     
-
     
346,380
     
203,417
     
549,797
 
 
                                                       
Balance, October 31, 2020
   
199,632,803
   
$
199,633
   
$
47,732,350
   
$
(41,184,373
)
 
$
4,986,925
   
$
(396,353
)
 
$
11,338,182
 

Six Months Ended October 31, 2020
 
 
Number of Shares
 
Amount of Common Shares
 
Additional Paid-in Capital
 
Accumulated Deficit
 
Accumulated Other Comprehensive Income
 
Noncontrolling Interest
 
Total Stockholders' Equity
 
 
                           
Balance, April 30, 2020
   
199,632,803
   
$
199,633
   
$
47,732,350
   
$
(40,118,394
)
 
$
4,557,898
   
$
-
   
$
12,371,487
 
Net loss for the six months ended October 31, 2020
   
-
     
-
     
-
     
(1,065,979
)
   
-
     
(648,299
)
   
(1,714,278
)
Foreign currency translation adjustment
   
-
     
-
     
-
     
-
     
429,027
     
251,946
     
680,973
 
 
                                                       
Balance, October 31, 2020
   
199,632,803
   
$
199,633
   
$
47,732,350
   
$
(41,184,373
)
 
$
4,986,925
   
$
(396,353
)
 
$
11,338,182
 

Three Months Ended October 31, 2019
 
 
 
Number of Shares
   
Amount of Common Shares
   
Additional Paid-in Capital
   
Accumulated Deficit
   
Accumulated Other Comprehensive Income
   
Total Stockholders' Equity
 
 
                                   
Balance, July 31, 2019
   
199,632,803
   
$
199,633
   
$
37,681,279
   
$
(38,886,491
)
 
$
4,427,940
   
$
3,422,361
 
Net income for the three months ended October 31, 2019
   
-
     
-
     
-
     
191,891
     
-
     
191,891
 
Foreign currency translation adjustment
   
-
     
-
     
-
     
-
     
(106,388
)
   
(106,388
)
 
                                               
Balance, October 31, 2019
   
199,632,803
   
$
199,633
   
$
37,681,279
   
$
(38,694,600
)
 
$
4,321,552
   
$
3,507,864
 

Six Months Ended October 31, 2019
 

 
Number of Shares
   
Amount of Common Shares
   
Additional Paid-in Capital
   
Accumulated Deficit
   
Accumulated Other Comprehensive Income
   
Total Stockholders' Equity
 
 
                                   
Balance, April 30, 2019
   
199,632,803
   
$
199,633
   
$
37,681,279
   
$
(38,503,256
)
 
$
4,159,381
   
$
3,537,037
 
Net loss for the six months ended October 31, 2019
   
-
     
-
     
-
     
(191,344
)
   
-
     
(191,344
)
Foreign currency translation adjustment
   
-
     
-
     
-
     
-
     
162,171
     
162,171
 
 
                                               
Balance, October 31, 2019
   
199,632,803
   
$
199,633
   
$
37,681,279
   
$
(38,694,600
)
 
$
4,321,552
   
$
3,507,864
 
 
                                               
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
 

- 4 -


SUNWIN STEVIA INTERNATIONAL, INC. AND SUBSIDIARIES
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2020

NOTE 1 - ORGANIZATION AND OPERATIONS
 
DESCRIPTION OF BUSINESS

Sunwin Stevia International, Inc. ("Sunwin Stevia International"), a Nevada corporation, and its subsidiaries are referred to in this report as "we", "us", "our", "Sunwin" or the "Company".

We sell stevioside, a natural sweetener, and other pharmaceutical productions, such as Metformin. Substantially all of our operations are located in the People's Republic of China (the "PRC"). We have built an integrated company with the sourcing and production capabilities designed to meet the needs of our customers. Our operations are organized into two operating segments related to our product lines:

 
-
 
Stevioside; and
 
-
 
Corporate and other.

For the six months ended October 31, 2020 and fiscal year 2020, our subsidiaries included in continuing operations and discontinued operations consisted of the following:

-   Sunwin Stevia International;
-   Sunwin USA, LLC ("Sunwin USA"), wholly owned by Sunwin Stevia International;
-   Qufu Natural Green Engineering Co., Ltd. ("Qufu Natural Green"), wholly owned by Sunwin Stevia International;
-   Qufu Shengren Pharmaceutical Co., Ltd. ("Qufu Shengren"), 100% owned by Qufu Natural Green. On April 30, 2020, the Company increased the total amount of capital of Qufu Shengren through a series of debt transfer and conversion agreements with investors, ownership of Qufu Natural Green became 61%; (see Note 12)
-   Qufu Shengwang Stevia Biology and Science Co., Ltd. ("Qufu Shengwang"), 100% owned by Qufu Natural Green. On July 30, 2019, Qufu Natural Green sold its 100% interest of Qufu Shengwang to a third party; and
-   Qufu Shengren Import and Export Co., Ltd. (“Qufu Shengren Import and Export”), wholly owned subsidiary of Qufu Shengren.

Qufu Shengren

In fiscal 2009, Qufu Natural Green acquired Qufu Shengren for $3,097,242. The purchase price was equal to the value of the assets of Qufu Shengren as determined by an independent asset appraisal in accordance with asset appraisal principles in the PRC. Prior to being acquired by us, Qufu Shengren was engaged in the production and distribution of bulk drugs and pharmaceuticals.  Subsequent to the acquisition, Qufu Shengren produces and distributes steviosides with a full range of grades from rebaudioside-A 10 to 99.

Since fiscal 2018 we invested in a new production line for Metformin as one of the new product markets we intend to branch into. Metformin is the raw material of Metformin hydrochloride tablets. Metformin is the first-line medication for the treatment of type 2 diabetes, particularly in people who are not satisfied with simple diet control, especially those with obesity and hyperinsulinemia. On July 10, 2019, our wholly owned subsidiary Qufu Shengren entered into a management agreement with Ru Yuan, an unaffiliated individual (the "Contractor"), to contract out the operation of the Metformin production line.

In April 2020, management made the decision to increase the operating capital of Qufu Shengren from the original RMB 19,680,000 (approximately $2,800,000) to RMB 183,000,000 (approximately $26,000,000); this will allow the Company to better focus on our Stevia operation and increase investment in our research and production.

Qufu Shengren Import and Export

On October 9, 2019, Qufu Shengren invested RMB2,000,000 (approximately $288,000) in a new entity, Qufu Shengren Import and Export Co., Ltd., (“Qufu Shengren Import and Export”), a Chinese limited liability company, a 100% owned subsidiary of Qufu Shengren. Qufu Shengren Import and Export focuses on the export of our Stevia products, and the import and export of technology and other relevant products; we expect to increase operations in this subsidiary in the near future.

- 5 -


Sunwin USA

In fiscal year 2009, we entered into a distribution agreement with WILD Flavors to assist our 55% owned subsidiary, Sunwin USA, in the marketing and worldwide distribution of our stevioside-based sweetener products and issued WILD Flavors a 45% interest in Sunwin USA.  In August 2012, the Company entered into an Exchange Agreement with WILD Flavors pursuant to which it purchased its 45% membership interest in Sunwin USA for an aggregate consideration of $1,625,874, which includes the issuance of 7,666,666 shares of our common stock valued at $1,533,333 and a cash payment of $92,541. The purchase included the product development and supply chain for OnlySweet.

Qufu Shengwang

In fiscal 2009, Qufu Natural Green acquired a 60% interest in Qufu Shengwang from its shareholder, Shandong Group, for $4,026,851. The purchase price represented 60% of the value of the net tangible assets of Qufu Shengwang as of April 30, 2008. Shandong Group is owned by Laiwang Zhang, our President and Chairman of the Board of Directors. Qufu Shengwang manufactures and sells stevia - based fertilizers and feed additives.

On September 30, 2011, Qufu Shengwang purchased the 40% equity interest in Qufu Shengwang owned by our Korean partner, Korea Stevia Company, Limited, for $626,125 in cash, and as a result of this repurchase transaction we now own 100% equity interest in all of the net assets of our subsidiary Qufu Shengwang. Therefore, the non-controlling interest of $2,109,028 in our balance sheet as of April 30, 2012 has been eliminated to reflect our 100% interest in Qufu Shengwang.

On July 1, 2012, Qufu Shengwang entered into a Cooperation Agreement with Hegeng (Beijing) Organic Farm Technology Co, Ltd. ("Hegeng"), a Chinese manufacturer and distributor of bio-fertilizers and pesticides, to jointly develop bio-bacterial fertilizers based on the residues from our stevia extraction. Under the Cooperation Agreement, Hegeng provides a strain and formula that we apply to the stevia residues to produce bio-bacterial fertilizers in the current facility of Qufu Shengwang. The bio-bacterial fertilizers will be distributed under Qufu Shengwang's name. No additional investment in the facility would be required. During the third quarter of fiscal year 2014, we decided to suspend the agreement with Hegeng due to a lack of sales since the reaction to the products was lower than anticipated in the fertilizer market.

On July 30, 2019, Qufu Shengwang was sold to an unaffiliated individual (see Note 4).

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements include the accounts of Sunwin and all our wholly-owned subsidiaries and have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") and pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC") for interim financial reporting. The accompanying unaudited condensed consolidated financial statements for the interim periods presented are unaudited and reflect all adjustments (consisting only of normal recurring adjustments) which are, in the opinion of management, necessary for a fair presentation of the financial position and operating results for the periods presented. Certain financial statement amounts relating to prior periods have been reclassified to conform to the current period presentation. All intercompany accounts and transactions have been eliminated in consolidation.

These unaudited condensed consolidated interim financial statements should be read in conjunction with the financial statements and footnotes for the year ended April 30, 2020 included in our Form 10-K as filed with the SEC. The results of operations and cash flows for the six months ended October 31, 2020 are not necessarily indicative of the results of operations or cash flows which may be reported for future periods or the full fiscal year.

The condensed consolidated balance sheet as of April 30, 2020 contained herein has been derived from the audited consolidated financial statements as of April 30, 2020, but do not include all disclosures required by the U.S. GAAP.
 
Our unaudited condensed consolidated financial statements include the accounts of Sunwin and all our wholly-owned subsidiaries included in continuing operations and discontinued operations. All intercompany accounts and transactions have been eliminated in consolidation. Qufu Shengwang is the subsidiary with discontinued operations and our subsidiaries for continuing operations include the following:
 
-     Qufu Natural Green;
-     Qufu Shengren;
-     Sunwin USA; and
-     Qufu Shengren Import and Export
- 6 -


USE OF ESTIMATES

The preparation of unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include the allowance for doubtful accounts, the allowance for obsolete inventory, the useful life of property and equipment and intangible assets, assumptions used in assessing impairment of long-term assets and valuation of deferred tax assets, and the value of stock-based compensation.  Actual results could differ from those estimates.

CASH AND CASH EQUIVALENTS

We consider all highly liquid investments with maturities of three months or less at the time of purchase to be cash and equivalents. As of October 31, 2020, we held $340,817 of our cash and cash equivalents with commercial banking institutions in the PRC, and $55,762 with banks in the United States. As of April 30, 2020, we held $1,054,090 of our cash and cash equivalents with commercial banking institution in PRC, and $83,830 in the United States. PRC banks protect consumers against loss if their bank or thrift institution fails, and each of our PRC bank account is insured up to RMB500,000 (approximately $75,000), As a result, cash held in PRC financial institutions of $166,327 and $946,274 is not insured as of October 31, 2020 and April 30, 2020, respectively. We have not experienced any losses in such bank accounts through October 31, 2020.
 
ACCOUNTS RECEIVABLE

Accounts receivable and other receivable are reported at net realizable value. We have established an allowance for doubtful accounts based upon factors pertaining to the credit risk of specific customers, historical trends, and other information. Delinquent accounts are written off when it is determined that the amounts are uncollectible after exhaustive efforts on collection. As of October 31, 2020 and April 30, 2020, the allowance for doubtful accounts was $78,774 and $74,665, respectively.

INVENTORIES

Inventories, consisting of raw materials, work in process, and finished goods related to our products, are stated at the lower of cost or estimated net realizable value that can be estimated utilizing the weighted moving average method. A reserve is established when management determines that certain slow-moving inventories may be sold at below book value. These reserves are recorded based on estimates.  As of October 31, 2020, the Company did not record a reserve for slow-moving inventories. If inventory costs exceed expected market value due to obsolescence or quantities in excess of expected demand, the Company will record a write down of inventories for the difference between the lower of cost or estimated net realizable value. As of October 31, 2020 and April 30, 2020, the Company wrote down inventories of $367,337 and $113,155, respectively. 

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost. Depreciation and amortization are provided using the straight line method over the estimated economic lives of the assets, which range from two to thirty years. Expenditures for major renewals and betterments that extend the useful lives of property and equipment are capitalized. Expenditures for maintenance and repairs are charged to expense as incurred. In accordance with paragraph 360-10-35-17 of the Financial Accounting Standards Board (FASB) Accounting Standards Codification ("ASC"), we examine the possibility of decreases in the value of fixed assets when events or changes in circumstances reflect the fact that their recorded value may not be recoverable.

Included in property and equipment is construction-in-progress which consisted of factory improvements and machinery pending installation and included the costs of construction, machinery and equipment, and or any interest charges arising from borrowings used to finance these assets during the period of construction or installation of the assets if applicable. No provision for depreciation is made on construction-in-progress until such time as the relevant assets are completed and ready for their intended use.

LONG-LIVED ASSETS

In accordance with ASC 360, we review and evaluate our long-lived assets, including property and equipment, intangible assets, and land use rights, for impairment or when events or changes in circumstances indicate that the related carrying amounts may not be recoverable. An impairment is considered to exist if the total estimated future cash flows on an undiscounted basis are less than the carrying amount of the assets, including goodwill, if any. An impairment loss is measured and recorded based on discounted estimated future cash flows. In estimating future cash flows, assets are grouped at the lowest level for which there is identifiable cash flows that are largely independent of future cash flows from other asset groups. Our estimates of future cash flows are based on numerous assumptions and it is possible that actual future cash flows will be significantly different than the estimates. Based on our evaluation, we have determined certain long-lived assets that are no longer useful for our operations, and we recorded a loss on disposition of property and equipment of $0 and $19,842 at October 31, 2020 and April 30, 2020, respectively.
- 7 -




FAIR VALUE OF FINANCIAL INSTRUMENTS

We adopted ASC Section 820-10-35-37 to measure the fair value of our financial instruments. ASC Section 820-10-35-37 establishes a common definition for fair value to be applied to existing generally accepted accounting principles that require the use of fair value measurements, establishes a framework for measuring fair value, and expands disclosure about such fair value measurements. The adoption of ASC Section 820-10-35-37 did not have an impact on our financial position or operating results, but did expand certain disclosures.
 
ASC Section 820-10-35-37 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Additionally, ASC Section 820-10-35-37 requires the use of valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized below:

Level 1:
Observable inputs such as quoted market prices in active markets for identical assets or liabilities
Level 2:
Observable market-based inputs or unobservable inputs that are corroborated by market data
Level 3:
Unobservable inputs for which there is little or no market data, which require the use of the reporting entity's own assumptions.
 
The carrying amounts of our financial assets and liabilities, such as cash, accounts receivable, notes receivable, prepayments and other current assets, accounts payable, taxes payable and accrued expenses, approximate their fair values because of the short maturity of these instruments.  

TAXES PAYABLE

We are required to charge for and to collect value added taxes (VAT) on our sales on behalf of the PRC tax authority. We record VAT that we billed our customers as VAT payable. In addition, we are required to pay value added taxes on our primary purchases. We record VAT that is charged by our vendors as VAT receivable. We are required to file VAT return on a monthly basis with the PRC tax authority, in which we are entitled to claim the VAT that we are charged by vendors as VAT credit and these credits can be applied to our VAT payable that we billed our customers. Accordingly, these VAT payable and receivable are presented as net amounts for financial statement purposes. Taxes payable as of October 31, 2020 and April 30, 2020 amounted to $189,390 and $266,708, respectively, consisted primarily of VAT taxes.

REVENUE RECOGNITION
 
Pursuant to the guidance of ASC 606, we record revenue when persuasive evidence of an arrangement exists, product delivery has occurred, the sales price to the customer is fixed or determinable, and collectability is reasonably assured. The adoption of this guidance did not have a material impact on our unaudited condensed consolidated financial statements. 

In accordance with ASC 606, we recognize revenues from the sale of stevia and other productions upon shipment and transfer of title based on the trade terms. All product sales with customer specific acceptance provisions are recognized upon customer acceptance and the delivery of the products. We report revenues net of applicable sales taxes and related surcharges. The Company determines revenue recognition through the following steps:
 
 
Identify the contract with a customer;
 
 
Identify the performance obligations in the contract;
 
 
Determine the transaction price;
 
 
Allocate the transaction price to the performance obligations in the contract; and
 
 
Recognize revenue when (or as) the entity satisfies a performance obligation.
 

The Company is also a lessor, which is an entity that is lease underlying asset to the third party, The Company’s lease revenue is recognized under ASC Topic 842, Leases, (“ASC 842”), which was adopted on May 1, 2019. In general, the Company commences rental revenue recognition when the tenant takes possession of the leased space and the leased space is substantially ready for its intended use. The Company’s lease has been accounted for as operating lease. Rental revenue is recognized on a straight-line basis over the terms of the lease of five years. Actual amounts billed in accordance with the lease during any given period may have been higher or lower than the amount of rental revenue recognized for the period. The difference by which straight-line rental revenue exceeded rents billed in accordance with lease agreements is recorded as “accounts receivable”. The difference by which rents billed in accordance with lease agreements exceeded straight-line rental revenue is recorded as “advances from customer”. The Company does not offset lease income and lease expense.
- 8 -



GRANT INCOME
 
Grants received from PRC government agencies are recognized as deferred grant income and recognized in the unaudited condensed consolidated statements of operations and comprehensive loss as and when they are earned for the specific research and development projects for which these grants are designated for.

INCOME TAXES
 
The Company has adopted Accounting Standards Codification subtopic 740-10, Income Taxes ("ASC 740-10") which requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statement or tax returns.  Under this method, deferred tax liabilities and assets are determined based on the difference between financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.  Valuation allowances are recorded to reduce the deferred tax assets to an amount that it is more likely than not be realized.

We file federal and state income tax returns in the United States for our corporate operations pursuant to the U.S. Internal Revenue Code of 1986, as amended, and file separate foreign tax returns for our Chinese subsidiaries pursuant to the China's Unified Corporate Income Tax Law.
 
We apply the provisions of ASC 740-10-50, "Accounting for Uncertainty in Income Taxes", which provides clarification related to the process associated with accounting for uncertain tax positions recognized in our consolidated financial statements. Audit periods remain open for review until the statute of limitations has passed. The completion of review or the expiration of the statute of limitations for a given audit period could result in an adjustment to the Company's liability for income taxes. Any such adjustment could be material to the Company's results of operations for any given quarterly or annual period based, in part, upon the results of operations for the given period. As of October 31, 2020, the Company had no uncertain tax positions, and will continue to evaluate for uncertain positions in the future.

BASIC AND DILUTED EARNINGS PER SHARE

Pursuant to ASC Section 260-10-45, basic loss per common share is computed by dividing loss available to common shareholders by the weighted average number of shares of common stock outstanding for the periods presented. Diluted loss per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that would then share in the income of ours, subject to anti-dilution limitations. The following table presents a reconciliation of basic and diluted net income per common share:

 
 
Three Months Ended
October 31,
   
Six Months Ended
October 31,
 
Numerator:
                       
 
 
2020
   
2019
   
2020
   
2019
 
Net income (loss) attributable to Sunwin Stevia International, Inc.
 
$
(403,380
)
 
$
191,891
   
$
(1,065,979
)
 
$
(191,344
)
   Net income (loss) from continuing operations
 
$
(403,380
)
 
$
191,891
   
$
(1,065,979
)
 
$
62,087
 
   Net loss from discontinued operation
   
-
     
-
     
-
     
(253,431
)
Denominator:
                               
Denominator for basic earnings per share - weighted average number of common shares outstanding
   
199,632,803
     
199,632,803
     
199,632,803
     
199,632,803
 
Stock awards, options, and warrants
   
-
     
-
     
-
     
-
 
Denominator for diluted earnings per share - adjusted weighted average outstanding average number of common shares outstanding
   
199,632,803
     
182,066,546
     
199,632,803
     
199,632,803
 
Basic and diluted loss per common share:
                               
Net income (loss) from continuing operations - basic and diluted
 
$
(0.00
)
 
$
0.00
   
$
(0.01
)
 
$
0.00
 
Net loss from discontinued operations - basic and diluted
   
-
     
-
     
-
     
(0.00
)
Net income (loss) per common share - basic and diluted
 
$
(0.00
)
 
$
0.00
   
$
(0.01
)
 
$
(0.00
)

- 9 -


FOREIGN CURRENCY TRANSLATION

Transactions and balances originally denominated in U.S. dollars are presented at their original amounts. Transactions and balances in other currencies are converted into U.S. dollars in accordance with ASC Section 830-20-35 and are included in determining net income or loss.

The reporting currency of the Company is the U.S. dollar. The functional currency of the parent company is the U.S. dollar and the functional currency of the Company's operating subsidiaries is the Chinese Renminbi ("RMB").  In accordance with ASC 830-20-35, the consolidated financial statements were translated into United States dollars using balance sheet date rates of exchange for assets and liabilities, and average rates of exchange for the period for the income statements and cash flows. Equity accounts were stated at their historical rate. Net gains and losses resulting from foreign exchange transactions are included in the consolidated statements of operations.  Translation adjustments resulting from the process of translating the local currency financial statements into U.S. dollars are included in other comprehensive income or loss.
 
RMB is not a fully convertible currency. All foreign exchange transactions involving RMB must take place either through the People's Bank of China (the "PBOC") or other institutions authorized to buy and sell foreign exchange. The exchange rate adopted for the foreign exchange transactions are the rates of exchange quoted by the PBOC, which are determined largely by supply and demand. Translation of amounts from RMB into United States dollars ("$") was made at the following exchange rates for the respective periods:
 
As of October 31, 2020
RMB 6.68 to $1.00
As of April 30, 2020
RMB 7.05 to $1.00
 
 
Six months ended October 31, 2020
RMB 6.94 to $1.00
Six months ended October 31, 2019
RMB 6.99 to $1.00

COMPREHENSIVE LOSS
 
   Comprehensive loss is comprised of net loss and all changes to the statements of stockholders' equity, except those due to investments by stockholders, changes in paid-in capital and distributions to stockholders. For the Company, comprehensive loss for the three and six months ended October 31, 2020 and 2019 included net loss and unrealized gains from foreign currency translation adjustments. 

RESEARCH AND DEVELOPMENT

Research and development costs are expensed as incurred and are included in general and administrative expenses in the accompanying statements of operations. Research and development costs are incurred on a project specific basis. Research and development costs were $71,129 and $339,401 for the three months ended October 31, 2020 and 2019, and $432,567 and $645,952 for the six months ended October 31, 2020 and 2019, respectively.
 
SHIPPING COSTS

Shipping costs are included in selling expenses and totaled $19,462 and $25,200 for the three months ended October 31, 2020 and 2019, and $35,978 and $48,095 for the six months ended October 31, 2020 and 2019, respectively.

ADVERTISING

              Advertising is expensed as incurred and is included in selling expenses and totaled $40,443 and $208,896 for the three months ended October 31, 2020 and 2019, and $54,876 and $248,250 for the six months ended October 31, 2020 and 2019, respectively.

RECLASSIFICATIONS

Certain prior year amounts have been reclassified to conform to the current period presentation for amounts related to the discontinue operations (see Note 4). These reclassifications had no impact on net earnings and financial position.


- 10 -



RECENT ACCOUNTING PRONOUNCEMENTS

In December 2019, the FASB issued ASU 2019-12 - Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This ASU provides an exception to the general methodology for calculating income taxes in an interim period when a year-to-date loss exceeds the anticipated loss for the year. This update also (1) requires an entity to recognize a franchise tax (or similar tax) that is partially based on income as an income-based tax and account for any incremental amount incurred as a non-income-based tax, (2) requires an entity to evaluate when a step-up in the tax basis of goodwill should be considered part of the business combination in which goodwill was originally recognized for accounting purposes and when it should be considered a separate transaction, and (3) requires that an entity reflect the effect of an enacted change in tax laws or rates in the annual effective tax rate computation in the interim period that includes the enactment date. The standard is effective for the Company for fiscal years beginning after December 15, 2020, with early adoption permitted. The Company is currently in the process of evaluating the impact of the adoption on its consolidated financial statements.

A variety of proposed or otherwise potential accounting standards are currently under study by standard setting organizations and various regulatory agencies. Due to the tentative and preliminary nature of those proposed standards, we have not determined whether implementation of such proposed standards would be material to our consolidated financial statements.
 
GOING CONCERN
 
Our unaudited condensed consolidated financial statements have been prepared assuming we will continue as a going concern.  The Company has incurred recurring losses with a net loss of approximately $1,714,000 for the six months ended October 31, 2020 and has a significant accumulated deficit of $41.2 million as of October 31, 2020. The Company's cash balance and revenues generated are not currently sufficient and cannot be projected to cover operating expenses for the next twelve months from the date of this report. These factors raise doubt as to the ability of the Company to continue as a going concern. Management's plans include attempting to improve its business profitability, its ability to generate sufficient cash flow from its operations to meet its operating needs on a timely basis, obtain additional working capital funds through debt and equity financings, and restructure on-going operations to eliminate inefficiencies to raise cash balance in order to meet its anticipated cash requirements for the next twelve months from the date of this report. Management intends to make every effort to identify and develop sources of funds.  The outcome of these matters cannot be predicted at this time.  There can be no assurance that any additional financings will be available to the Company on satisfactory terms and conditions, if at all.

The ability of the Company to continue as a going concern is dependent upon its ability to achieve profitable operations and raise additional capital. The accompanying unaudited condensed consolidated financial statements do not include any adjustments related to the recoverability or classification of asset-carrying amount or the amounts and classification of liabilities that may result should the Company be unable to continue as a going concern.

NOTE 3 - NONCONTROLLING INTEREST
 
Noncontrolling interest on the consolidated balance sheets resulted from the consolidation of Shengren, a 61.3% owned subsidiary starting from April 30, 2020. An individual investor and Shandong Yulong Mining Group Co., Ltd. (“Yulong”) hold 38.4% and 0.3% of the equity interest in Shengren effective at the end of date, April 30, 2020, respectively, pursuant to a series of debt transfer and conversion agreements entered into on April 30, 2020 between seven individual creditors and three suppliers, an individual investor with Yulong and Qufu Shengren. Noncontrolling interest amounted to a deficit of $396,353 as of October 31, 2020.

NOTE 4 - DISCONTINUED OPERATIONS

On July 30, 2019, Qufu Natural Green entered into an Asset Transfer Agreement with Na Li, an unaffiliated individual (the "Buyer") for the sale of 100% equity ownership of Qufu Shengwang. Pursuant to the Asset Transfer Agreement, the Buyer shall pay to Qufu Natural Green a total cash consideration of RMB8,000,000 (approximately $1,163,000) based on the estimated net book value as of July 30, 2019. The Buyer assumed all assets and liabilities of Qufu Shengwang including the amount Qufu Shengwang owes to Qufu Natural Green of approximately RMB26,000,000 (approximately $3,779,000), and Qufu Natural Green shall assist in completing all documents required for the equity transfer after confirming the receipt of the first payment. The Company received the first installment of RMB5,000,000 on July 30, 2019, and received the second installment of RMB3,000,000 on August 20, 2019. The Buyer settled all liabilities of Qufu Shengwang due to Natural Green by assuming the liabilities on behalf of Qufu Shengren in the amount of approximately RMB 26,000,000 (approximately $3,779,000) due to another third party.
 
The Company did not have assets and liabilities on discontinued operations in the Company's condensed consolidated financial statements as of October 31, 2020 and April 30, 2020. The following table presents the results of discontinued operations in the three and six months ended October 31, 2020 and 2019:
- 11 -



 
 
Three Months Ended October 31,
   
Six Months Ended October 31,
 
 
 
2020
   
2019
   
2020
   
2019
 
 
                       
Revenues
 
$
-
   
$
-
   
$
-
   
$
733,441
 
Cost of revenues
   
-
     
-
     
-
     
572,357
 
Gross profit
   
-
     
-
     
-
     
161,084
 
Operating expenses
   
-
     
-
     
-
     
172,142
 
Other income, net
   
-
     
-
     
-
     
8,958
 
Loss before income taxes
   
-
     
-
     
-
     
20,016
 
Income tax expense
   
-
     
-
     
-
     
-
 
Loss from discontinued operations
   
-
     
-
     
-
     
20,016
 
Loss from disposal, net of taxes
   
-
     
-
     
-
     
960
 
Loss from sales of subsidiary
   
-
     
-
     
-
     
232,455
 
Total loss from discontinued operations
 
$
-
   
$
-
   
$
-
   
$
253,431
 

For the six months ended October 31, 2020 and 2019, loss from discontinued operations amounted to $0 and $20,016. The Company realized a loss of $233,415 from the disposal of 100% equity of Qufu Shengwang, which was reflected as loss from sale of discontinued operations on the condensed consolidated statement of operations for the three months ended October 31, 2019.

NOTE 5 - INVENTORIES

As of October 31, 2020 and April 30, 2020, inventories consisted of the following:
  
 
 
October 31, 2020
   
April 30, 2020
 
 
 
(unaudited)
       
Raw materials
 
$
3,722,426
   
$
4,676,361
 
Work in process
   
5,303,804
     
3,235,156
 
Finished goods
   
6,302,651
     
4,962,980
 
 
   
15,328,881
     
12,874,497
 
Less: reserve for obsolete inventory
   
-
     
-
 
Total inventories, net 
 
$
15,328,881
   
$
12,874,497
 

NOTE 6 - PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets as of October 31, 2020 and April 30, 2020 totaled $960,832 and $693,552, respectively. As of October 31, 2020, prepaid expenses and other current assets includes $758,087 prepayments to suppliers for merchandise that had not been shipped to us and services that had not been provided to us, and $202,745 for business related employees' advances. As of April 30, 2020, prepaid expenses and other current assets includes $510,723 prepayments to suppliers for merchandise that had not been shipped to us and services that had not been provided to us and $182,829 for business related employees' advances.

NOTE 7 - PROPERTY AND EQUIPMENT

As of October 31, 2020 and April 30, 2020, property and equipment consisted of the following:

 
 
October 31, 2020
   
April 30, 2020
 
Estimated Life 
 
(unaudited)
       
Office equipment
3-15 Years
 
$
478,408
   
$
394,019
 
Auto and trucks
2-10 Years
   
618,634
     
586,364
 
Manufacturing equipment
2-15 Years
   
7,203,540
     
6,559,726
 
Buildings
5-30 Years
   
9,788,820
     
9,248,227
 
Construction in process
 
   
16,411
     
7,834
 
 
 
   
18,105,813
     
16,796,170
 
Less: accumulated depreciation
 
   
(8,980,217
)
   
(7,894,622
)
Total property and equipment, net 
    
 
$
9,125,596
   
$
8,901,548
 

- 12 -



For the three months ended October 31, 2020 and 2019, depreciation expense totaled $322,121 and $297,357, of which $298,290 and $264,745 were included in cost of revenues, respectively, and of which $23,831 and $32,612 were included in general and administrative expenses, respectively. For the six months ended October 31, 2020 and 2019, depreciation expense totaled $626,560 and $568,345, of which $581,013 and $497,332 was included in cost of revenues, respectively, and of which $45,547 and $71,013 were included in general and administrative expenses, respectively. Depreciation is not taken during the period of construction or equipment installation. Upon completion of the installation of manufacturing equipment or any construction in progress, construction in progress balances will be classified to their respective property and equipment category.

NOTE 8 - RELATED PARTY TRANSACTIONS

Accounts receivable - related party and revenue - related party

As of October 31, 2020 and April 30, 2020, $1,458,545 and $3,034,365 in accounts receivable - related party, respectively, were related to sales of products to Qufu Shengwang Import and Export Co., Ltd. ("Qufu Shengwang Import and Export"), a Chinese entity owned by our Chairman, Mr. Laiwang Zhang. For the three months ended October 31, 2020 and 2019, we recorded revenue - related party and cost of revenue – related party of $502,695 and $2,314,666, and $546,254 and $2,068,261, respectively, from Qufu Shengwang Import and Export. For the six months ended October 31, 2020 and 2019, we recorded revenue - related party and cost of revenue – related party of $2,254,518 and $4,098,559, $2,155,762 and $3,716,500, respectively, from Qufu Shengwang Import and Export.

Due to related parties

From time to time, we receive advances from related parties and advance funds to related parties for working capital purposes. In the six months ended October 31, 2020 and 2019, we received advances from related parties for working capital that totaled $7,538,516 and $3,813,512, respectively, and we repaid to related parties a total of $7,755,243 and $3,795,447, respectively.

In the three months ended October 31, 2020 and 2019, interest expense related to due to related parties amounted to $4,867 and $28,359, and six months ended October 31, 2020 and 2019, interest expense related to due to related parties amounted to $21,674 and $64,100, respectively, which were included in interest expense in the accompanying condensed consolidated statements of operations and comprehensive loss, and in connection with the advances of RMB5,000,000 (approximately $717,000) and RMB8,000,000 (approximately $1,147,000) from Shangdong Shengwang Pharmaceutical Co., Ltd. ("Pharmaceutical Corporation"), a Chinese entity owned by our Chairman, Mr. Laiwang Zhang. These advances bear interest at the rate of 7.0% and 6.3% per annum, respectively. On December 12, 2019 and August 9, 2020, we repaid in full amount of the above advance of RMB8,000,000 and RMB5,000,000 with accrued interests, respectively.

On September 23, 2019, the Company borrowed a one-year loan of RMB1,221,000 (approximately $175,000) from Weidong Cai, a management member of Qufu Shengren, bearing an annual interest rate of 10%. On September 23, 2020, the parties extended the loan for another year, under the same terms and conditions, reclassified unpaid interest payable to the principal of this loan, resulting in an increase of principal from RMB1,221,000 (approximately $175,000)  to RMB1,343,100 (approximately $201,000).

As of October 31, 2020, the balance we owed Pharmaceutical Corporation, Qufu Shengwang Import and Export and Mr. Weidong Chai amounted to $3,418,493, $1,471,087, and $204,681, respectively. On April 30, 2020, the balance we owed to Pharmaceutical Corporation, Qufu Shengwang Import and Export and Mr. Weidong Chai amounted to $3,981,915, $906,879, and $183,657, respectively.

As of October 31, 2020 and April 30, 2020, balance due to related party activities consisted of the following: 
 
 
 
Shandong Shengwang Pharmaceutical
Co., Ltd.
   
Qufu
Shengwang
Import and Export Co., Ltd.
   
Mr. Wedong Chai
   
Total
 
Balance due to related parties, April 30, 2020
 
$
3,981,915
   
$
906,879
   
$
183,657
   
$
5,072,451
 
Working capital advances from related parties
   
289,875
     
7,237,415
     
11,226
     
7,538,516
 
Repayments
   
(1,042,920
)
   
(6,711,603
)
   
(720
)
   
(7,755,243
)
Effect of foreign currency exchange
   
189,623
     
38,396
     
10,518
     
238,537
 
Balance due to related parties, October 31, 2020
 
$
3,418,493
   
$
1,471,087
   
$
204,681
   
$
5,094,261
 
  
- 13 -


NOTE 9 - OPERATING LEASE

On July 10, 2019, we entered into the Metformin Production Line Operation Management Agreement (the “Agreement”) with Ru Yuan, an unaffiliated individual, to contract out the Metformin production line which was built by the Company. Under the terms of this agreement, Ru Yuan's (“lessee”) lease includes the fixed assets of Metformin production line including buildings, manufacturing equipment and construction in process. The lessee will pay to Qufu Shengren an annual contract fee of RMB3,000,000 (approximately $436,000) in July every year. On August 1, 2019, the Company (“lessor”) signed an addendum for Agreement with lessee to clarify the term of lease for five years, with conditional renewal options and the Company has the right to monitor operating and provide maintenance service for the underlying assets of the Metformin production line. The Company also has the right to terminate the Agreement if lessee fails to make payment timely. Under our analysis with the new lease standard, this lease agreement is classified as a cancellable operating lease. The Company received a total amount of RMB3,000,000 lease payment and the lease deposit of RMB1,000,000 as guarantee in 2019.

The Company received the second year's lease payment of RMB3,000,000 in August 2020. The Company recorded revenues of $100,809 and $107,114 from this operating lease in the three months ended October 31, 2020 and 2019, and the Company recorded revenues of $198,201 and $112,251 from this operating lease in the six months ended October 31, 2020 and 2019.
  
NOTE 10 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses included the following as of October 31, 2020 and April 30, 2020:

Account
 
October 31,
2020
   
April 30,
2020
 
 
 
(unaudited)
       
Accounts payable
 
$
7,206,899
   
$
6,443,200
 
Advanced from customers
   
388,835
     
172,512
 
Accrued salary payable
   
105,755
     
142,199
 
Tax payable
   
189,390
     
266,708
 
Other payable*
   
2,149,696
     
1,508,512
 
Total accounts payable and accrued expenses
 
$
10,040,575
   
$
8,533,131
 
 
* As of on October 31, 2020, other payables consists of general liability, worker's compensation, and medical insurance payable of $413,789, consulting fee payable of $220,065, union and education fees payable of $132,724, interest payables for short-term loans of $106,235, safety production fund payable of $199,540, advances from the employees of $118,187, security deposit for sub-contractor of $149,671 and other miscellaneous payables of $809,484. As of April 30, 2020, other payables consists of general liability, worker's compensation, and medical insurance payable of $409,811, consulting and service fee payable of $256,304, union and education fees payable of $125,800, interest payables for short-term loans of $129,976, safety production fund payable of $140,274, advances from the employees of $98,775, deposit for operating lease of $141,864 and other miscellaneous payables of $205,708.

NOTE 11 -LOAN PAYABLE

Short-term loan payable

Short-term loans are obtained from various individual lenders that are due within one year for working capital purpose. These loans are unsecured and can be renewed with 10 days advance notice prior to maturity date. As of October 31, 2020 and April 30, 2020, short-term loans consisted of the following:
- 14 -



 
 
October 31,
2020
   
April 30,
2020
 
 
 
(unaudited)
       
Loan from Min Wu, an employee of Qufu Shengren, due on October 5, 2021, with an annual interest rate of 10%, renewed at October 6, 2020.
 
$
32,928
   
$
31,210
 
Loans from Jianjun Yan, non-related individual, due on October 6, 2021, with an annual interest rate of 10%, renewed at on October 7, 2020.
   
1,458,289
     
1,256,562
 
Loan from Jianjun Yan, non-related individual, due on March 31, 2021, with annual interest rate of 4%, renewed at April 1, 2020, and partially repaid approximately $504,000 in July 2020.
   
745,319
     
1,202,965
 
Loan from Junzhen Zhang, non-related individual, due on October 5, 2021, with an annual interest rate of 10%, renewed at October 6, 2020, and accrued interest converted into debt principal.
   
26,342
     
22,698
 
Loan from Jian Chen, non-related individual, due on January 27, 2021 and April 11, 2021, bearing an annual interest rate of 10%, with the principal amount of RMB770,000 ($109,236) and RMB440,000 ($62,420), renewed on January 27, 2020 and April 11, 2020, respectively. The Company repaid off these loans and accrued interest to him in July 2020.
   
-
     
171,656
 
Loan from Qing Kong, non-related individual, due on March 6, 2021, with an annual interest rate of 10%, renewed on March 7, 2020.
   
86,809
     
82,281
 
Loan from Qing Kong, non-related individual, due on January 8, 2021, with an annual interest rate of 10%, renewed on January 9, 2020.
   
36,220
     
34,331
 
Loan from Guihai Chen, non-related individual, due on March 9, 2021, with an annual interest rate of 10%, renewed on March 10, 2020.
   
21,702
     
20,570
 
Loan from Guihai Chen, non-related individual, due on September 20, 2021, with an annual interest rate of 10%, renewed at September 21, 2020, and accrued interest converted into debt principal.
   
36,220
     
31,210
 
Loan Weifeng Kong, non-related individual, due on November 28, 2020, with an annual interest rate of 10%, renewed on November 29, 2019. (see more on Note 15)
   
29,934
     
28,373
 
Loan from Huagui Yong, non-related individual, due on April 8, 2021, with an annual interest rate of 6.3% at April 9, 2020.
   
74,836
     
70,932
 
Loan from Guohui Zhang, non-related individual, due on January 16, 2021, with an annual interest rate of 4% at January 17, 2020.
   
449,014
     
425,592
 
Total short-term loan payable
 
$
2,997,613
   
$
3,378,380
 

For the three and six months ended October 31, 2020 and 2019, interest expense related to short-term loans amounted to $47,413 and $92,559, and $109,944 and $237,346, respectively, which were included in interest expense in the accompanying unaudited condensed consolidated statements of operations and comprehensive loss.

NOTE 12 - STOCKHOLDERS' EQUITY.

As of October 31, 2020, we are authorized to issue 200,000,000 shares of common stock. We had 199,632,803 shares issued and outstanding as of October 31, 2020 and April 30, 2020.

In April 2020, management made the decision to increase the operating capital of Qufu Shengren from the original RMB 19,680,000 (approximately $2,800,000) to RMB 183,000,000 (approximately $26,000,000), this will allow the Company to better focus on our Stevia operation and increase investment in our research and production. The increase of capital will come from additional funding of RMB 92,470,000 (approximately $13,100,000) from Qufu Natural Green, and RMB 70,850,000 (approximately $10,000,000) debt to equity conversion of multiple creditors. On April 30, 2020, seven individual creditors and three suppliers, an individual investor and Qufu Shengren entered into a series of debt transfer and conversion agreements, the individual creditors and suppliers agreed to transfer the full amount of their receivable, including principal and interest due from Qufu Shengren, at full value, to the individual investor. The individual investor then converted the full amount of the debts into equity and transferred a part of that equity to Shangdong Yulong Mining Group Co., Ltd. ("Yulong"). The individual investor and Yulong became minority shareholders of Qufu Shengren as of April 30, 2020, accounting for 38.4% and 0.3%, respectively.

- 15 -


NOTE 13 - SEGMENT INFORMATION

The following information is presented in accordance with ASC Topic 280, "Segment Reporting", for the three and six months ended October 31, 2020 and 2019; we accounted for two reportable business segments - (1) natural sweetener (stevioside), and (2) corporate and other pharmaceutical. Our reportable segments are strategic business units that offer different products and are managed separately based on the fundamental differences in their operations. Condensed financial information with respect to these reportable business segments for the three and six months ended October 31, 2020 and 2019 is as follows: 

 
 
Three Months Ended October 31,
   
Six Months Ended October 31,
 
 
 
2020
   
2019
   
2020
   
2019
 
Revenues:
                       
Stevioside - third parties
 
$
3,830,340
     
4,768,613
     
9,020,803
     
9,296,279
 
Stevioside - related parties
   
502,695
     
2,314,666
     
2,254,518
     
4,098,559
 
Total Stevioside
   
4,333,035
     
7,083,279
     
11,275,321
     
13,394,838
 
 
                               
Corporate and other – third party
   
100,809
     
78,302
     
198,201
     
656,818
 
Corporate and other – related party
   
-
     
-
     
-
     
-
 
Total Corporate and other
   
100,809
     
78,302
     
198,201
     
656,818
 
Total segment and consolidated revenues
 
$
4,433,844
     
7,161,581
     
11,473,522
     
14,051,656
 

 
 
Three Months Ended October 31,
   
Six Months Ended October 31,
 
 
 
2020
   
2019
   
2020
   
2019
 
Interest (expense) income:
                       
Stevioside
 
$
(52,018
)
 
$
(120,734
)
 
$
(131,125
)
 
$
(301,178
)
Corporate and other
   
-
     
-
     
-
     
-
 
Total segment and consolidated interest expense
 
$
(52,018
)
 
$
(120,734
)
 
$
(131,125
)
 
$
(301,178
)
Depreciation and amortization:
                               
Stevioside
 
$
266,078
   
$
253,500
   
$
519,854
   
$
487,523
 
Corporate and other
   
56,042
     
43,857
     
106,706
     
80,822
 
Total segment and consolidated depreciation and amortization
 
$
322,120
   
$
297,357
   
$
626,560
   
$
568,345
 
Income (loss) from continuing operations before income taxes:
                               
Stevioside
 
$
(705,674
)
 
$
203,668
   
$
(1,769,927
)
 
$
38,596
 
Corporate and other
   
47,223
     
(11,777
)
   
55,649
     
23,491
 
Total consolidated income (loss) from continuing operations before income taxes
 
$
(658,451
)
 
$
191,891
   
$
(1,714,278
)
 
$
62,087
 

         
 
October 31,
2020
 
April 30,
2020
 
Segment property and equipment:
       
  Stevioside
 
$
7,211,452
   
$
6,976,153
 
  Corporate and other
   
1,914,144
     
1,925,395
 
    Total property and equipment
 
$
9,125,596
   
$
8,901,548
 

- 16 -


NOTE 14 - CONCENTRATIONS AND CREDIT RISK
 
(i)    Customer Concentrations
 
For the three and six months ended October 31, 2020 and 2019, customers accounting for 10% or more of the Company's revenue were as follows:

 
 
For the three months ended October 31,
 
 
For the six months ended October 31,
 
Customer
 
2020
 
 
2019
 
 
2020
 
 
2019
 
A (1)
 
 
11.3
%
 
 
32.3
%
 
 
19.6
%
 
 
29.2
%
B
 
 
*
 
 
 
*
 
 
 
*
 
 
 
10.9
%
C
 
 
*
 
 
 
         * 
 
 
 
25.7
%
 
 
 * 
 
D
   
10.9
%
   
-
     
10.4
%
   
-
 

(1)    Qufu Shengwang Import and Export Co., Ltd is a related party.

*     Less than 10%.

(ii)    Vendor Concentrations

For the three and six months ended October 31, 2020 and 2019, suppliers accounting for 10% or more of the Company's purchase were as follows:

 
 
For the three months ended October 31,
 
 
For the six months ended October 31,
 
Supplier
 
2020
 
 
2019
 
 
2020
 
 
2019
 
A
 
 
-
 
 
 
29.1
%
 
 
*
 
 
 
23.9
%
B
 
 
-
 
 
 
16.3
%
 
 
*
 
 
 
17.4
%
C
 
 
-
 
 
 
25.9
%
 
 
-
 
 
 
13.7
D
 
 
33.5
%
 
 
11.7
%
 
 
24.6
%
 
 
11.3
%
E
   
20.3
%
   
*
     
24.3
%
   
*
 
F
   
18.2
%
   
-
     
10.6
%
   
-
 

*
Less than 10%.

(iii)    Credit Risk
 
Financial instruments which potentially subject us to concentrations of credit risk consist principally of cash and trade accounts receivable. We place our cash with high credit quality financial institutions in the United States and the PRC. As of October 31, 2020 and April 30, 2020, we had $340,817 and $1,054,090 of cash balance held in PRC banks, respectively. PRC banks protect consumers against loss if their bank or thrift institution fails, and each of our PRC bank accounts is insured up to RMB500,000 (approximately $75,000). As a result, cash held in PRC financial institutions of $166,327 and $946,274 are not insured as of October 31, 2020 and April 30, 2020. We have not experienced any losses in such accounts through October 31, 2020. Our cash position by geographic area was as follows: 

Country:
 
October 31, 2020
 
 
April 30, 2020
 
United States
 
$
55,762
 
 
 
14.1
%
 
$
83,830
 
 
 
7.4
%
China
 
 
340,817
 
 
 
85.9
%
 
 
1,054,090
 
 
 
92.6
%
Total cash and cash equivalents
 
$
396,579
 
 
 
100.00
%
 
$
1,137,920
 
 
 
100.00
%
 
Almost all of our sales are credit sales which are primarily to customers whose ability to pay is dependent upon the industry economics prevailing in these areas; however, we believe that the concentration of credit risk with respect to trade accounts receivable is limited due to generally short payment terms. We also perform ongoing credit evaluations of our customers to help further reduce potential credit risk.

NOTE 15 - SUBSEQUENT EVENTS
 
On November 29, 2020, we renewed the RMB200,000 ($29,934) loan from Weifeng Kong, a non-related individual, with an annual interest rate of 10% and the new due date will be November 28, 2021.
- 17 -


ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the information contained in the preceding unaudited condensed consolidated financial statements and footnotes and our 2020 Annual Report on Form 10-K for fiscal year ended April 30, 2020.

OVERVIEW
 
We sell stevioside, a natural sweetener. Stevioside is a natural zero calorie sweetener extracted from the leaf of the stevia plants. Substantially all of our operations are located in the PRC. We have built an integrated company with the production and distribution capabilities designed to meet the needs of our customers.
 
Our operations were organized in two operating segments related to our product lines:
 
 
-
 
Stevioside, and
 
-
 
Corporate and other.
 
Going Concern

The accompanying unaudited condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company has a significant accumulated deficit and incurred recurring losses. The Company's cash balance and revenues generated are not currently sufficient and cannot be projected to cover operating expenses for the next twelve months from the date of this report. These factors raise doubt as to the ability of the Company to continue as a going concern. Management's plans include attempting to improve its business profitability, its ability to generate sufficient cash flow from its operations to meet its operating needs on a timely basis, obtain additional working capital funds through debt and equity financings, and restructure on-going operations to eliminate inefficiencies to raise cash balance in order to meet its anticipated cash requirements for the next twelve months from the date of this report. Management intends to make every effort to improve its current sales forecast to further develop and expand the international markets for its new products as well as continuing with the current sources of funds to meet working capitals needs on as needed basis.  There can be no assurance that these plans and arrangements will be successful.
 
The ability of the Company to continue as a going concern is dependent upon its ability to achieve profitable operations and raise additional capital. The accompanying unaudited condensed consolidated financial statements do not include any adjustments related to the recoverability or classification of asset-carrying amount or the amounts and classification of liabilities that may result should the Company be unable to continue as a going concern.
 
Recent Developments

Sunwin Stevia has approximately 1,300 metric tons of manufacturing capacity per year to produce various specifications of stevia extracts. With these manufacturing facilities, Sunwin Stevia is able to deliver stevia products containing Rebaudioside A in a range of 50% to 99% with a format of powder, granular, or tablet; as well as Rebaudioside B, Rebaudioside D, Rebaudioside M and enzyme treated stevia products. In 2020, we have made technical upgrades on our enzyme treated stevia production line, improving the production process of our enzyme treated stevia products.

In April 2020, management made the decision to increase the operating capital of Qufu Shengren from the original RMB 19,680,000 (approximately $2,800,000) to RMB 183,000,000 (approximately $26,000,000), this will allow for the Company to better focus on our Stevia operation and increase investment to our research and production. The increase of capital will come from additional funding of RMB 92,470,000 (approximately $13,100,000) from Qufu Natural Green, and RMB 70,850,000 (approximately $10,000,000) debt to equity conversion of multiple creditors. On April 30, 2020, seven individual creditors and three suppliers, an individual investor and Qufu Shengren entered into a series of debt transfer and conversion agreements, the individual creditors and suppliers agreed to transfer the full amount of their receivable, including principal and interest due from Qufu Shengren, at full value, to the individual investor. The individual investor then converted the full amount of the debts into equity and transferred a part of that equity to Shangdong Yulong Mining Group Co., Ltd. ("Yulong"). The individual investor and Yulong became minority shareholders of Qufu Shengren as of April 30, 2020, accounting for 38.4% and 0.3%, respectively.

We believe this addition in capital will greatly benefit our stevia product development, manufacturing, and marketing effort. With the increased capital, we will be able to focus more on our technology advancements, improvement in manufacturing process and increase our production capacity.
- 18 -



Impact of COVID-19 Pandemic on the Company’s Operations
 
Since early 2020, the epidemic of the novel strain of coronavirus (COVID-19) (the “COVID-19 pandemic”) has spread across China and other countries, and has adversely affected businesses and economic activities in the first quarter of 2020 and beyond. The Company followed the restrictive measures implemented in China, by suspending onsite operation in January, 2020 and having employees work remotely until late March 2020, when the Company assessed the situation and started to gradually resume normal operation at areas deemed safe while implementing effective health measures. Consequently, the COVID-19 pandemic may adversely affect the Company’s business operations, financial condition and operating results for 2020, including but not limited to material negative impact to the Company’s total revenues, production capability, ability to conduct marketing and sales, and slower collection of accounts receivables. As of October 2020, we have been able to resume some of our manufacturing operations, however, our sales and promotional efforts as still severely impacted by the global pandemic. We are able to maintain certain income from previous existing orders and finished products, however, we anticipate significant economic impact related to COVID-19. Due to the high uncertainty of the evolving situation, the Company has limited foresight on the full impact brought upon by the COVID-19 pandemic and the related financial impact cannot be estimated at this time.

We are monitoring the global outbreak and spread of COVID-19 and taking steps in an effort to identify and mitigate the adverse impacts on, and risks to, our business (including but not limited to our employees, customers, and other business partners) posed by its spread and the governmental and community reactions thereto. We continue to assess and update our business continuity plans in the context of this pandemic, including taking steps in an effort to help keep our workforces healthy and safe. The spread of COVID-19 has caused us to modify our business practices (including warehouse and production procedures, employee travel, employee work locations in certain cases, and cancellation of physical participation in certain meetings, events and conferences), and we expect to take further actions as may be required or recommended by government authorities or as we determine are in the best interests of our employees, customers and other business partners. We are also working with our suppliers to understand the existing and future negative impacts, and to take actions in an effort to mitigate such impacts.

OUR PERFORMANCE
 
 Our revenues totaled approximately $4,434,000 during the three months ended October 31, 2020, a decrease of 38.1%, as compared with the same period in 2019, and our gross margin decreased to (2.3)% from 20.6%. Our total operating expenses in the three months ended October 31, 2020 decreased by approximately $624,000, or 55.5% compared to the same period in 2019 primarily due to a decrease of approximately $246,000, or 49.0% in selling expense, a decrease of approximately $109,000, or 38.8% in general and administrative expense, and a decrease of approximately $268,000, or 79.0% in research and development expenses. Our net loss from continuing operations for the three months ended October 31, 2020 was approximately $658,000, compared to a net income from continuing operations of $192,000 in three months ended October 31, 2019.

Our revenues totaled approximately $11,474,000 during the six months ended October 31, 2020, a decrease of 18.3%, as compared with the same period in 2019, and our gross margin decreased to 0.5% from 18.5%. Our total operating expenses in the six months ended October 31, 2020 decreased by approximately $562,000, or 25.4% compared to the same period in 2019 primarily due to a decrease of approximately $310,000, or 35.3% in selling expense, a decrease of approximately $39,000, or 5.6% in general and administrative expense, and a decrease of approximately $213,000, or 33.0% in research and development expenses. Our net loss from continuing operations for the six months ended October 31, 2020 was approximately $1,714,000, compared to a net income from continuing operations of $62,000 in six months ended October 31, 2019.

Our Outlook

We believe that there are significant opportunities for worldwide growth in our Stevioside segment, not only in the U.S. and EU markets but also in our domestic market. For the fiscal year ended April 30, 2020 and beyond, we will continue to focus on our core business of producing and selling stevioside series products.

Currently there is a world-wide movement of lowering sugar intake, and more and more consumers are becoming aware of the health benefits associated with reduction of sugar intake. According to research data, 40% of Chinese consumers stated that they “will not mind paying more for food and beverages with more natural ingredients" and 80% of the interview consumers express a goal of "having a healthier diet". We believe that, in this search of a more natural and healthy diet and lifestyle, natural sweeteners such as stevia will become the mainstream sweetener in the food and beverage markets.

- 19 -


Some of the recent favorable observations related to the stevia markets in fiscal 2020 include:

 
-
 
Chinese domestic food and beverages, particularly herbal tea manufacturers and the pharmaceutical industry, have increased the use of steviosides, and new health awareness trends have also resulted in some new governing laws supporting the growth of this industry;
 
-
 
Southeast and South Asia have renewed and increased their interest in stevia, particularly high grade stevia;
 
-
 
New global product launches mentioning stevia have increased 13% per year on average from 2014 to 2018; and 
 
-
 
Stevia has been growing in popularity in the last 10 years throughout all the global markets.

Meanwhile, we are also facing challenges in competitive pricing and raw materials for the fiscal years ended April 30, 2020 and 2019, as well as negative impact from the global COVID-19 pandemic. During the fiscal years ended April 30, 2020, the market prices of stevioside products continue to be impacted by strong price competition among Chinese manufacturers. With this being a product gaining large market shares in China, in the recent years we have seen many competitors entering the market. These new competitors use lower pricing as their effort to gain market share as they initially entering the market, thus driving down the average prices for stevia products. We expect the pressure from pricing competition to continue in fiscal 2021. We anticipate the price of stevia leaves, the raw material used to produce our stevioside series products, will also continue to increase in fiscal 2021 since the demand for raw material may increase as the market grows, while the production of the raw material experiences negative impact due to the global pandemic.

We intend to make adjustments internally in order to better operate in this market; our goal is to increase sales and develop new client bases through our marketing effort, decrease our production expenses while maintaining the stability and quality of our products, and decrease our overall expenditures. We believe while there are challenges and risks in this market, our high quality high grade product and the formulations developed by our internal research and development team differentiates us from other competitors and our efforts will lead to sustainable growth in the future.

RESULTS OF OPERATIONS

The following table summarizes our results from operations for the three month periods ended October 31, 2020 and 2019. The percentages represent each line item as a percent of revenues: 

For the Three Months ended October 31, 2020
 
 
 
Stevioside
   
Corporate and Other
   
Consolidated
 
Revenues
 
$
4,333,035
     
100.0
%
 
$
100,809
     
100.0
%
 
$
4,433,844
     
100.0
%
Cost of goods sold
   
4,481,914
     
103.4
%
   
54,605
     
54.2
%
   
4,537,956
     
102.3
%
Gross profit
   
(150,316
)
   
(3.5
)%
   
46,204
     
45.8
%
   
(104,112
)
   
(2.3
)%
Selling expenses
   
255,990
     
5.9
%
   
576
     
0.6
%
   
256,566
     
5.8
%
General and administrative expenses
   
173,979
     
4.0
%
   
(1,595
)
   
(1.6
)%
   
172,384
     
3.9
%
Research and development expenses
   
71,129
     
1.6
%
   
-
     
-
     
71,129
     
1.6
%
Loss from operations
   
(651,414
)
   
(15.0
)%
   
47,223
     
46.8
%
   
(604,191
)
   
(13.6
)%
Other expenses
   
(54,260
)
   
(1.3
)%
   
-
     
-
     
(54,260
)
   
(1.2
)%
(Loss) income from continuing operations before income taxes
 
$
(705,674
)
   
(16.3
)%
 
$
47,223
     
46.8
%
 
$
(658,451
)
   
(14.9
)%

For the Three Months ended October 31, 2019
 
 
 
Stevioside
   
Corporate and Other
   
Consolidated
 
Revenues
 
$
7,083,279
     
100.0
%
 
$
78,302
     
100.0
%
 
$
7,161,581
     
100.0
%
Cost of goods sold
   
5,648,003
     
79.7
%
   
39,139
     
50.0
%
   
5,687,142
     
79.4
%
Gross profit
   
1,435,276
     
20.3
%
   
39,163
     
50.0
%
   
1,474,439
     
20.6
%
Selling expenses
   
502,773
     
7.1
%
   
-
     
-
     
502,773
     
7.0
%
General and administrative expenses
   
273,733
     
3.9
%
   
8,000
     
10.2
%
   
281,733
     
3.9
%
Research and development expenses
   
339,401
     
4.8
%
   
-
     
-
     
339,401
     
4.7
%
Income from operations
   
319,369
     
5.5
%
   
31,163
     
39.8
%
   
350,532
     
4.9
%
Other expenses
   
(115,701
)
   
(1.6
)%
   
(42,940
)
   
(54.8
)%
   
(158,641
)
   
(2.2
)%
Income (loss) from continuing operation before income taxes
 
$
203,668
     
2.9
%
 
$
(11,777
)
   
(15.0
)%
 
$
191,891
     
2.7
%

- 20 -


The following table summarizes our results from operations for the six month periods ended October 31, 2020 and 2019.

For the Six Months ended October 31, 2020
 
 
 
Stevioside
   
Corporate and Other
   
Consolidated
 
Revenues
 
$
11,275,321
     
100.0
%
 
$
198,201
     
100.0
%
 
$
11,473,522
     
100.0
%
Cost of goods sold
   
11,303,750
     
100.3
%
   
106,706
     
53.8
%
   
11,410,456
     
99.5
%
Gross profit
   
(28,429
)
   
(0.3
)%
   
91,495
     
46.2
%
   
63,066
     
0.5
%
Selling expenses
   
566,905
     
5.0
%
   
576
     
0.3
%
   
567,481
     
4.9
%
General and administrative expenses
   
610,290
     
5.4
%
   
35,270
     
17.8
%
   
645,560
     
5.6
%
Research and development expenses
   
432,567
     
3.8
%
   
-
     
-
     
432,567
     
3.8
%
Income (loss) from operations
   
(1,638,191
)
   
(14.5
)%
   
55,649
     
28.1
%
   
(1,582,542
)
   
(13.8
)%
Other expenses
   
(131,736
)
   
(1.2
)%
   
-
     
-
     
(131,736
)
   
(1.1
)%
Income (loss) from continuing operations before income taxes
 
$
(1,769,927
)
   
(15.7
)%
 
$
55,649
     
28.1
%
 
$
(1,714,278
)
   
(14.9
)%


For the Six Months ended October 31, 2019
 
 
 
Stevioside
   
Corporate and Other
   
Consolidated
 
Revenues
 
$
13,394,838
     
100.0
%
 
$
656,818
     
100.0
%
 
$
14,051,656
     
100.0
%
Cost of goods sold
   
11,038,469
     
82.4
%
   
417,541
     
63.6
%
   
11,456,010
     
81.5
%
Gross profit
   
2,356,369
     
17.6
%
   
239,277
     
36.4
%
   
2,595,646
     
18.5
%
Selling expenses
   
855,157
     
6.4
%
   
22,048
     
3.4
%
   
877,205
     
6.2
%
General and administrative expenses
   
534,945
     
4.0
%