Form 10-K SUNWIN STEVIA INTERNATIO For: Apr 30

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-K

 (Mark One)

 

☒ 

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the year ended April 30, 2022

 

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

Securities registered pursuant to Section 12(g) of the Act:

Common stock, par value $0.001

(Title of class)

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. [  ]Yes [X] No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. [  ]Yes  [X] No

 

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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (- 229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  Yes [ ] No [X]

 

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.

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Large accelerated filer [  ]	Accelerated filer [  ]
Non-accelerated filer[  ]	Smaller reporting company ☒ 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 [  ] ☐ [X].

 

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was sold, or the average bid and asked prices of such common equity, as of the last business day of the registrant's most recently completed second fiscal quarter. The aggregate market value on October 31, 2021 was $3,656,325.

 

Indicate the number of shares outstanding of each of the issuer's classes of common equity as of the latest practicable date: As of August 10, 2022, there were 199,632,803 shares of the registrant's common stock issued and outstanding.

 

DOCUMENTS INCORPORATED BY REFERENCE

 

List hereunder the following documents if incorporated by reference and the Part of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is incorporated: (1) Any annual report to security holders; (2) Any proxy or information statement; and (3) Any prospectus filed pursuant to Rule 424(b) or (c) under the Securities Act of 1933. The listed documents should be clearly described for identification purposes (e.g., annual report to security holders for fiscal year ended December 24, 1980).  None.

 

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TABLE OF CONTENTS

 

				Page No.
Part I
Item 1.		Business.		1
Item 1A.		Risk Factors.		6
Item 1B.		Unresolved Staff Comments.		12
Item 2.		Properties.		12
Item 3.		Legal Proceedings.		12
Item 4.		Mine Safety Disclosures.		12
Part II
Item 5.		Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.		12
Item 6.		Selected Financial Data.		13
Item 7.		Management's Discussion and Analysis of Financial Condition and Results of Operations.		13
Item 7A.		Quantitative and Qualitative Disclosures About Market Risk.		20
Item 8.		Financial Statements and Supplementary Data.		21
Item 9.		Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.		21
Item 9A.		Controls and Procedures.		21
Item 9B.		Other Information.		22
Part III
Item 10.		Directors, Executive Officers and Corporate Governance.		22
Item 11.		Executive Compensation.		24
Item 12.		Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.		25
Item 13.		Certain Relationships and Related Transactions, and Director Independence.		26
Item 14.		Principal Accountant Fees and Services.		27
Part IV
Item 15.		Exhibits, Financial Statement Schedules.		27
		Signatures		30

 

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

 

 This report contains forward-looking statements. These forward-looking statements are subject to known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These forward-looking statements were based on various factors and were derived utilizing numerous assumptions and other factors that could cause our actual results to differ materially from those in the forward-looking statements. These factors include, but are not limited to, the risk of doing business in the People's Republic of China ("PRC"), our ability to implement our strategic initiatives, our access to sufficient capital, economic, political and market conditions and fluctuations, government and industry regulation, Chinese and global competition, and other factors. Most of these factors are difficult to predict accurately and are generally beyond our control. You should consider the areas of risk described in connection with any forward-looking statements that may be made herein. Readers are cautioned not to place undue reliance on these forward-looking statements and readers should carefully review this report in its entirety, including the risks described in "Item 1A. - Risk Factors" and "Item 7 – Management's Discussion and Analysis of Financial Condition and Results of Operations." Except for our ongoing obligations to disclose material information under the federal securities laws, we undertake no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events. These forward-looking statements speak only as of the date of this report, and you should not rely on these statements without also considering the risks and uncertainties associated with these statements and our business.

 

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INDEX OF CERTAIN DEFINED TERMS USED IN THIS REPORT

 

Our fiscal year end is April 30. The fiscal year ended April 30, 2021 is referred to as "fiscal 2021", the fiscal year ended April 30, 2022 is referred to as "fiscal 2022", and the coming fiscal year ending April 30, 2023 is referred to as "fiscal 2023."

 

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 Neutraceuticals International, Inc., and our subsidiaries;
	-		"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.;
	-		"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 61% owned subsidiary of Qufu Natural Green; 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.

 The information which appears on our website at www.sunwininternational.com is not part of this report.

 

OTHER PERTINENT INFORMATION

 

 Our reporting currency is the United States dollar. Our business is conducted by our subsidiaries and variable interest entities in China, using RMB, the currency of China and our consolidated financial statements are presented in United States dollars. In this annual report, we refer to assets, obligations, commitments and liabilities in our consolidated financial statements in United States dollars. These dollar references are based on the exchange rate of RMB to United States dollars determined as of a specific date. Changes in the exchange rate will affect the amount of our obligations and the value of our assets in terms of United States dollars which may result in an increase or decrease in the amount of our obligations (expressed in dollars) and the value of our assets, including accounts receivable (expressed in dollars).

 

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PART I

 

ITEM 1.

BUSINESS

 

We sell stevioside, a natural sweetener, and other pharmaceutical products. 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.

 

STEVIOSIDE SEGMENT

 

In our Stevioside segment, we produce and sell a variety of purified steviol glycosides with rebaudioside A and stevioside as the principal components, an all natural, low calorie sweetener, and OnlySweet, a stevioside based table top sweetener. For the fiscal years ended April 30, 2022 and 2021, our Stevioside segment generated revenues of $34.8 million and $25.0 million, representing 99% and 98% of our total consolidated revenues, respectively.

 

The stevia glycosides are extracted from the leaves of the stevia rebaudiana plant of the Aster/Chrysanthemum family. The sweetness of the stevia leaves is caused by eight glycosides contained within the leaves including stevioside, rebaudioside A, C, D, E and F, steviolbioside and dulcoside A. Stevioside is the most abundant of these components and the main cause for the sweetness of the stevia leaves. Stevioside, rebaudiosides A and C as well as dulcoside A are known as the four most important steviol glycosides. Rebaudioside A is the sweetest and least bitter ingredient among the four. The higher purity of rebaudioside A brings better sensory attributes of the sweetener products.

 

The leaves of the stevia rebaudiana plant have been used for centuries to sweeten bitter beverages and to make tea in the plant's native Paraguay. Stevia is grown commercially in Brazil, Paraguay, Uruguay, Central America, Israel, Thailand and China. The stevia rebaudiana plant was first introduced to China in 1977 and commercial harvesting of stevia started in the mid-1980's. There are two major species of stevia grown in China; one was cultivated by Chinese researchers and another was introduced from Japan. Most stevioside produced in China is exported throughout Asia, primarily to Japan and South Korea; meanwhile Chinese domestic market demand is also gradually building up in recent years.

 

Worldwide use of Stevioside and Related Approvals

 

Stevioside is a safe and natural alternative to sugar for people needing low sugar or low calorie diets. Stevioside can be used to replace sugar in beverages and foods, including those that require baking or cooking where man-made chemical based sweetener replacements are not suitable. Stevioside may be used in a wide variety of consumer products including soft drinks, vegetable products, tabletop sweeteners, confectioneries, fruit products and processed seafood products in the United States, Japan, Korea, China, Taiwan, India, Indonesia, Israel, Germany, France, Brazil, Paraguay, Malaysia, Russia, Switzerland, Australia and New Zealand. 

 

We believe worldwide demand for alternative sweeteners, such as our stevia based products, will increase as more countries permit the use of stevioside as a food additive. Stevioside has been sanctioned by the Ministry of Health of China to be used as a food additive, and is listed in the Sanitation Standard of Food Additives.

 

 

In furtherance of our efforts to move toward production of organic, all natural and low calorie products and to enhance our international position and market penetration as a stevia producer along with our distribution partners around the world, we underwent an extensive audit in 2011 by CERES GmbH, an international organization that specializes in inspection and certification in the areas of organic farming and food processing. Upon completion of their audit in November 2011, CERES GmbH notified us that our stevia extracts production process had been certified organic and free of synthetic chemical inputs and uses clean and sanitized procedures that avoid chemical contamination under standards established by the USDA National Organic Program and European Commission (EC) 834/2007 and EC 889/2008.

 

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In fiscal 2022, we have obtained new certification of National Organic Program (NOP Certificate No: C8461, including the USDA Organic Certification with number of certification: CO-302076 and NASAA Organic Certification for EU) and certification of non-genetically modified organisms ("Non-GMO") with the ID number of C-253537-2021 for Enzymatically Treated Stevia Extract, C-253539-2021 for Organic Enzymatically Treated Stevia Extract, C-253538-2021 for Organic Rebaudioside A 98%, C-253536-2021 for Organic Stevia Extract and C-253540-2021 for Stevia Extract. NOP is the federal regulatory framework governing organic food. Certification is handled by state, non-profit and private agencies that have been approved by the United States Department of Agriculture (USDA). NOP regulations cover in detail all aspects of food production, processing, delivery and retail sale. Under the NOP, farmers and food processors, who wish to use the word "organic" in reference to their businesses and products, must be certified organic. A USDA Organic seal identifies products with at least 95% organic ingredients. In addition, we also maintained our Halal Certification (No: 0549180200), our Food Safety System Certification (FSSC) 22000 Certification, and our ISO 22000:2018 and ISO/TS22002-1:2009 Certifications. We will continue to put effort into maintaining and obtaining additional certification as an assurance to our customers of our product quality and safety.

 

Steviosin

 

Steviosin is a natural low calorie stevia extract for medicinal use, containing stevioside at 90% with the total steviol glycosides meeting or exceeding 95% on a dry weight basis. Steviosin is used as an alternative sweetener in the pharmaceutical production in China.

 

OnlySweet

 

OnlySweet is an all natural, zero calorie, tabletop sweetener comprised of three natural ingredients, including stevioside. In June 2008 we began production of a new blend of OnlySweet increasing its sweetness. We believe this OnlySweet formulation represented a significant advancement in quality resulting in a sweeter and more natural taste compared to other manufacturers of stevioside based sweeteners. We believe consumers are attracted to these improvements in taste, absence of aftertaste and overall mouth feel of this new blend of OnlySweet. OnlySweet is manufactured in the United States at an FDA approved blending facility.

 

Our Customers

 

The majority of our stevioside is sold on a wholesale basis to domestic food and drug manufacturers and ingredient distributor of foreign trade companies. Our top 10 customers accounted for 71.3% and 69.9% of our sales in the Stevioside segment for the fiscal year ended April 30, 2022 and 2021, respectively. Our biggest customers, Qufu Shengwang Import and Export Trade Co., Ltd, accounted for 43.4% and 32.7%, respectively, of our stevioside sales for the fiscal years ended April 30, 2022 and 2021, respectively. We do not have long term supply agreements with our customers and sales are generally made under a purchase order arrangement. The payment terms are generally 60 to 90 days after receipt of products. We control the default risk by conducting due diligence on the customers' credit record before acceptance of a purchase order.

 

Sources and Availability of Raw Materials - Stevioside

 

The Shandong Province is a primary harvesting base of stevia leaves as well as the main region for the production of stevioside in China. We purchase all raw materials directly from local suppliers at market prices and pay for the leaves at the time of purchase. We test stevia leaves prior to purchase in an effort to maintain quality control. Our internal policy is to purchase leaves with stevioside content in excess of 9%.

 

Due to the effect of the global COVID-19 pandemic, we expect the sourcing and availability of stevia raw material to have increased difficulties and costs for fiscal 2022 and 2023. February to March is normally the nursing period for stevia plants; as a result of COVID-19 related gathering laws, the farmers are not able to have the same amount of nursery workers as previous years, resulting in a decrease of stevia plants and product yield. Relevant safety measures also resulted in an increase of general plantation costs. We predict this will cause a shortage of stevia leaves harvest this year and along with the effect of the rain season, we expect to see an increase in our cost of raw material.

 

Manufacturing, Extraction and Packaging

 

We have been engaged in the continuous production of stevioside since 1998. We use a traditional extraction technology process known as "aqueous extraction" which involves the use of purified water extraction and air dehydration to produce stevioside. The extraction process for stevioside generally takes seven days. The plant leaves are first dried and then inspected to insure quality leaves are used in the extraction process. We then use a combined process involving a solid/liquid extraction procedure, followed by a liquid-purifying step that is traditionally used to extract the stevioside from the stevia leaves. This all natural method results in a pure white stevia crystal, with no brownish coloring. Once the extraction process has been completed, the final product is ready for packaging and shipment to our customers.

 

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Over the years, we have received many certifications and recognition for our effort, including Certificate of Good Manufacturing Practices (GMP), ISO and HACCP certifications, etc. which is an indication of our commitment to quality, safety and continuous improvement. In an effort to meet the international food safety standards mandated by larger consumer product companies that we expect to target as customers, we have also made capital investments to enhance our manufacturing facilities, equipment and documentation systems, changed certain manufacturing processes and carried out additional personnel training in order to meet these standards.  

 

In December 2012, Qufu Shengren finished the construction of a new stevia extraction line in the same location of its current stevioside manufacturing facility. This line facility applies a new stevia extraction technology to produce both high and low grade stevioside. The annual production capacity of this line facility is 500 metric tons including 300 metric tons of high purity Rebaudioside A products and 200 metric tons of low purity Rebaudioside A product.

 

In the fiscal years ended April 30, 2021 and 2022, we have invested a total of $1.2 million for the two years, to purchase new manufacturing equipment for our facility with annual capacity of 500 metric tons in order to meet substantially increased demand for its high-grade stevia products.

 

As of now, Sunwin Stevia has approximately 1,700 metric tons of manufacturing capacity per year to produce stevia extract. 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. We set our production schedules based on the market demands and our capacity.

 

Competition

 

There are approximately 30 stevioside manufacturers operating on a continuing basis in China. While these competitors have production capacity similar to ours, we believe we are able to compete effectively with them based on our production efficiency and product quality. In addition, other companies periodically enter the market depending upon demand. These intermittent producers may choose to stop production when raw materials are not readily available in the marketplace. The sporadic oversupply of product from these competitors can adversely affect our market share. Furthermore, if demand wanes these competitors may reduce the price of their products, which can adversely affect market prices. In addition to competing with other Chinese companies, we also compete with foreign growers and processors.

 

We are one of the few steviosin manufacturers that are GMP certified and granted with a drug approval number. We believe that the combination of eligibility to supply pharmaceutical ingredients and capability for stevia extraction provides us with a competitive advantage compared to our competitors, most of whom are either not eligible to supply pharmaceutical ingredients or not experienced in large-scale stevia extraction.

 

CORPORATE AND OTHER BUSINESS SEGMENT

 

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. This drug not only has a hypoglycemic effect, but also may have the effect of reducing body weight and hyperinsulinemia. It can be effective in patients with poor efficacy of certain sulfonylureas, such as sulfonylureas, intestinal glycosidase inhibitors or thiazolidinedione hypoglycemic agents. On July 10, 2019, the Company entered into the Metformin Production Line Operation Management Agreement with an unaffiliated individual to operate the Metformin production line.

 

NEW PRODUCT AND TECHNOLOGY DEVELOPMENT

 

We continue to engage in new product and technology developments through our internal research facilities, industry consultants and specialists to provide research and development for the planting of stevia plants, the development of biological methods to improve lower-grade stevia product to higher grade stevia and applying biological method to change the taste of stevia to meet market demand.

 

In October 2019, we invested in a new pressure spray tower which allows for our enzyme treated stevia to be produced as a granulated product instead of powder product, this reduced dusting issues and improved its water solubility. We installed new and improved resin and membrane separation equipment for this production line, which further removed any impurity in the taste of this product. Our enzyme treated stevia has a sweetness of 260 times the sweetness of cane sugar, with the improvements the taste is also very close to cane sugar with very minimal aftertaste or bitterness. We are now also able to extract the all-natural R&D element from the stevia leaves at a concentration of 95% or above. We believe these products will be greatly accepted by our clients who are used to the taste of cane sugar.

 

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INTELLECTUAL PROPERTY

 

Our success depends in part on our ability to protect our intellectual property which includes various raw materials purification technologies used in our products. We have received a trademark from the U.S. Patent and Trademark Office covering the trade name "OnlySweet", which we are using for the North American distribution of our stevia based tabletop sweetener product.

 

To protect our proprietary rights outside the PRC we generally rely on confidentiality agreements with employees and third parties, such as with consultants, vendors and customers, although we have not signed such agreements in every case. We do not have any similar agreements with any of our employees or consultants in the PRC, we aim to correct this deficiency in the near future. Despite such protections, a third party could, without authorization, utilize our propriety technologies without our consent. In the past, three of our products have been copied by our competitors. We can give no assurance that our agreements with employees, consultants and others who participate in the production of our products will not be breached, or that we will have adequate remedies for any breach, or that our proprietary technologies will not otherwise become known or independently developed by competitors.

 

GOVERNMENT REGULATION

 

Our business and operations are primarily located in the PRC. We are subject to state and local environmental laws related to certification of water release. We are subject to registration and inspection by the State Food and Drug Administration of China ("SFDA") with respect to the manufacturing and distribution of steviosides. In addition, we are licensed by the Shandong Provincial Government to manufacture stevioside. We believe we are in compliance with all provisions of those registrations, inspections and licenses and have no reason to believe that they will not be renewed as required by the applicable rules of the Central Government and the Shandong Province. In addition, our operations must conform to general governmental regulations and rules for private (non-state owned) companies doing business in China. 

 

The production, distribution and sale of our products in the United States is subject to various federal and state regulations, including but not limited to: the Federal Food, Drug and Cosmetic Act ("FDCA"); the Dietary Supplement Health and Education Act of 1994; the Occupational Safety and Health Act; various environmental statutes; and various other federal, state and local statutes and regulations applicable to the production, transportation, sale, safety, advertising, labeling and ingredients of such products.

 

Compliance with applicable federal and state regulations is essential to our business. Although we believe that we are in compliance with applicable regulations, should the FDA or any state in which we operate amend its guidelines or impose more stringent interpretations of current laws or regulations, we may not be able to comply with these new guidelines. Such regulations could require the reformulation of certain products to meet new standards, market withdrawal or discontinuation of certain products we are unable to reformulate, imposition of additional record keeping requirements, expanded documentation regarding the properties of certain products, expanded or different labeling and/or additional scientific substantiation. Failure to comply with applicable requirements could result in sanctions being imposed on us or the manufacturers of any of our products, including but not limited to fines, injunctions, product recalls, seizures and criminal prosecution.

 

The FDCA generally regulates ingredients added to foods and requires that such ingredients making up a food product are themselves safe for their intended uses.  In this regard, when a company adds an ingredient to a food, the FDCA generally requires that the ingredient either be determined by the company to be generally regarded as safe by qualified experts or go through FDA's review and approval process as a food additive.

 

PRC Legal System

 

Despite efforts to develop its legal system over the past several decades, including but not limited to legislation dealing with economic matters such as foreign investment, corporate organization and governance, commerce, taxation and trade, the PRC continues to lack a comprehensive system of laws. Further, the laws that do exist in the PRC are often vague, ambiguous and difficult to enforce, which could negatively affect our ability to do business in China and compete with other companies in our segments.

 

In September 2006, the Ministry of Commerce ("MOFCOM") promulgated the Regulations on Foreign Investors' Mergers and Acquisitions of Domestic Enterprises (M&A Regulations) in an effort to better regulate foreign investment in China. The M&A Regulations were adopted in part as a needed codification of certain joint venture formation and operating practices, and also in response to the government's increasing concern about protecting domestic companies in perceived key industries and those associated with national security, as well as the outflow of well-known trademarks, including traditional Chinese brands.

 

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As a U.S. based company doing business in China, we seek to comply with all PRC laws, rules and regulations and pronouncements, and endeavor to obtain all necessary approvals from applicable PRC regulatory agencies such as the MOFCOM, the State Assets Supervision and Administration Commission, the State Administration for Taxation, the State Administration for Industry and Commerce, the China Securities Regulatory Commission, and the State Administration of Foreign Exchange ("SAFE").

 

Currency

 

 The value of the Renminbi ("RMB"), the main currency used in China, fluctuates and is affected by, among other things, changes in China's political and economic conditions. The conversion of RMB into foreign currencies such as the U.S. dollar have generally been based on rates set by the People's Bank of China, which are set daily based on the previous day's interbank foreign exchange market rates and current exchange rates on the world financial markets.

 

OUR CORPORATE HISTORY

 

We were incorporated in Nevada in August 1987 under the name Network USA, Inc. for the purposes of completing a merger or other business combination with an operating entity. Effective on April 30, 2004, we acquired 100% of the issued and outstanding shares of Sunwin Tech from its stockholders in exchange for approximately 17,000,000 shares of our common stock which resulted in a change of control of our company. Prior to our acquisition of Sunwin Tech, effective February 1, 2004, Sunwin Tech acquired 80% of Qufu Natural Green from Pharmaceutical Corporation, a company controlled by Mr. Laiwang Zhang, our former President and Chairman.

 

In July 2004 following the transaction with Sunwin Tech Group Inc., we changed the name of our company from Network USA, Inc. to Sunwin International Neutraceuticals, Inc. and in April 2012, we changed our company name to Sunwin Stevia International, Inc. to better indicate our business and focus.

 

In February 2006, we acquired the remaining 20% of Qufu Natural Green. On November 18, 2008, Qufu Natural Green completed its acquisition of 60% interest of Qufu Shengwang. In March 2009, Qufu Natural Green completed its acquisition of 100% interest of Qufu Shengren.

 

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.

 

In April 2020, the Company increased the operating capital of Qufu Shengren from the original RMB 19,680,000 (approximately $2,800,000) to RMB183,000,000 (approximately $26,000,000). The increase of capital will come from additional funding of RMB 92,470,000 (approximately $13,100,000) from Qufu Natural Green, and RMB70,850,000 (approximately $10,000,000) debt to equity conversion of multiple creditors. As the result, the Company owned 61.3% equity ownership of Qufu Shengren, and Shangdong Yulong Mining Group Co., Ltd. ("Yulong") and the individual investor owned 38.4% and 0.3% equity ownership of Qufu Shengren, respectively.

 

EMPLOYEES

 

As of June 30, 2022, we have 242 full time employees. The number of employees excludes employees of discontinued operations. All of our employees are primarily based in Qufu, China while some managerial and sales staff occasionally work in other Chinese cities or overseas on different projects. Each full-time Chinese employee is a member of a local trade union. Labor relations have remained positive and we have not had any employee strikes or major labor disputes. Unlike trade unions in western countries, trade unions in most parts of China are organizations mobilized jointly by the government and the management of the corporation.

 

ITEM 1A.

RISK FACTORS

 

An investment in our common stock involves a high degree of risk. You should carefully consider the risks described below, together with all of the other information included in this report, before making an investment decision, and you should only consider an investment in our common stock if you can afford to sustain the loss of your entire investment. You should carefully consider the risks described below together with all of the other information included in this report before making an investment decision with regard to our securities. If any of the following risks occurs, our business, financial condition or results of operations could be harmed. In that case, the trading price of our common stock could decline, and you may lose all or part of your investment.

 

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RISKS RELATED TO OUR COMPANY

 

FOR THE FISCAL YEAR ENDED APRIL 30, 2022, WE INCURRED NET LOSS OF $4.6 MILLION. WE CANNOT ASSURE YOU THAT OUR LOSSES WILL NOT CONTINUE, AND WE BELIEVE THAT THESE MATTERS RAISE SUBSTANTIAL DOUBT ABOUT OUR ABILITY TO CONTINUE AS A GOING CONCERN FOR THE NEXT TWELVE MONTHS FROM THE ISSUANCE DATE OF THIS REPORT.

 

Our consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business.  As reflected in our accompanying consolidated financial statements, we have incurred a net loss of approximately $4,594,000 for the fiscal year ended April 30, 2022. The net cash used in operations were approximately $1,885,000 for the fiscal year ended April 30, 2022. Additionally, we have an accumulated deficit of $46.3 million as of April 30, 2022, the cash balance and revenues generated are not currently sufficient and cannot be projected to cover the operating expenses for the next twelve months from the date of this report.  Management believes that these matters, among others, raise substantial doubt about our ability to continue as a going concern for the twelve months from the issuance date of this report. Management cannot provide assurance that we will ultimately achieve profitable operations or become cash flow positive, or raise additional debt and/or equity capital. Management believes that our capital resources are not currently adequate to continue operating and maintaining our business strategy for the fiscal year ending April 30, 2023 without raising additional funds through debt and/or equity capital financings.

 

We may seek to raise capital through additional debt and/or equity financings to fund our operations in the future. Although we have historically raised capital from third parties, related parties and bank loans, there is no assurance that we will be able to continue to do so and on satisfactory terms and conditions. Our consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should we be unable to continue as a going concern.

 

OUR AUDITORS HAVE ISSUED A "GOING CONCERN" AUDIT OPINION.

 

Our independent auditors have indicated in their report on our April 30, 2022 consolidated financial statements that there is substantial doubt about our ability to continue as a going concern. We have a significant accumulated deficit, incurred recurring losses and generated negative cash flow from operating activities. These conditions raise substantial doubt about our ability to continue as a going concern for the next twelve months from the issuance date of this report. Our ability to continue as a going concern is dependent on our ability to ultimately achieve profitable operations, or become cash flow positive, or raise additional capital from debt and or equity.  However, we cannot provide assurance that we will ultimately achieve profitable operations or become cash flow positive, or raise additional capital and or if any will be available to us on satisfactory terms and conditions. 

 

OUR OPERATIONS ARE SUBJECT TO GOVERNMENT REGULATION. IF WE FAIL TO COMPLY WITH THE APPLICABLE REGULATIONS, OUR ABILITY TO OPERATE IN FUTURE PERIODS COULD BE IN JEOPARDY.

 

We are subject to state and local environmental laws related to certification of water release. We are subject to registration and inspection under the PRC Food Safety Laws by the SFDA with respect to the manufacturing and distribution of steviosides. We are also licensed by the Shandong Provincial Government to manufacture stevioside. While we are in substantial compliance with all provisions of these laws, inspections and licenses and have no reason to believe that any licenses will not be renewed as required by the applicable rules of the PRC Central Government and the Shandong Province, any non-renewal of these licenses could result in the cessation of our business activities. In addition, any change in those laws and regulations could impose costly compliance requirements on us or otherwise subject us to future liabilities.

 

OUR RECOGNITION OF UNREALIZED GAINS (LOSS) ON FOREIGN CURRENCY TRANSLATIONS CAN MATERIALLY IMPACT OUR INCOME (LOSS) FROM PERIOD TO PERIOD.

 

As described elsewhere herein, the functional currency of our Chinese subsidiaries is the RMB. As required by generally accepted accounting principles, net gains and losses resulting from foreign exchange translations are included in the Company's comprehensive loss on the consolidated statements of operations. The loss on the foreign exchange translation was approximately $48,000 for the fiscal year ended April 30, 2022, and the gain from the foreign exchange translation was approximately $1,006,000 for the fiscal year ended April 30, 2021. The recording of these non-cash gain and loss, which is required under generally accepted accounting principles in the United States, could have a material impact on our financial statements.

 

 

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WE HAVE NOT VOLUNTARILY IMPLEMENTED VARIOUS CORPORATE GOVERNANCE MEASURES, IN THE ABSENCE OF WHICH STOCKHOLDERS MAY HAVE LESS PROTECTIONS AGAINST INTERESTED DIRECTOR TRANSACTIONS, CONFLICTS OF INTEREST AND OTHER MATTERS.

 

The Sarbanes-Oxley Act of 2002 and other federal legislation have resulted in the adoption of various corporate governance measures designed to promote the integrity of corporate management and the securities markets. Some of these measures have been adopted in response to legal requirements. Others have been adopted by companies in response to the requirements of national securities exchanges, such as the NYSE MTK LLC or The Nasdaq Stock Market, on which their securities are listed. Among the corporate governance measures that are required under the rules of national securities exchanges are those that address board of directors' independence, audit committee oversight, the adoption of a code of ethics and the adoption of a related persons transaction policy. Although we have adopted a Code of Ethics, we have not yet adopted any of these other corporate governance measures and, since our securities are not yet listed on a national securities exchange, we are not required to do so. We have not adopted corporate governance measures such as an audit committee or other independent committees of our board of directors as we presently do not have any independent directors. It is possible that if we were to adopt some or all of these corporate governance measures, stockholders would benefit from somewhat greater assurances that internal corporate decisions were being made by disinterested directors and that policies had been implemented to define responsible conduct. For example, in the absence of audit, nominating and compensation committees comprised of at least a majority of independent directors and our lack of independent directors, decisions concerning matters such as the terms of related party transactions, the amount of management fee paid to a related party, compensation packages to our senior officers and recommendations for director nominees may be made by a majority of directors who have an interest in the outcome of the matters being decided. Prospective investors should bear in mind our current lack of corporate governance measures in formulating their investment decisions. 

 

WE MAY INCUR LOSSES RESULTING BUSINESS INTERRUPTIONS RESULTING FROM OCCURRENCE OF NATURAL DISASTERS, HEALTH EPIDEMICS AND OTHER OUTBREAKS OR EVENTS.

 

Our operations may be damaged in natural disasters such as earthquakes, floods, heavy rains, sand storms, tsunamis and cyclones, or other events such as fires. Such natural disasters or other events may lead to damage our raw materials. Also, our business operations could be disrupted by health epidemics, such as the COVID-19, which broke out in January 2020. A prolonged outbreak of such illness or other adverse public health developments in China or elsewhere in the world could have a material adverse effect on our business operations. In addition, our results of operations could be adversely affected to the extent that any natural disaster or health epidemic harms the Chinese economy in general.

 

RISKS RELATED TO DOING BUSINESS IN CHINA

 

RESTRICTIONS ON CURRENCY EXCHANGE MAY LIMIT OUR ABILITY TO RECEIVE AND USE OUR REVENUE EFFECTIVELY.

 

Because all of our revenue is denominated in RMB, restrictions on currency exchange may limit our ability to use revenue generated in RMB to fund any business activities we may ultimately have outside China or to make dividend payments to our shareholders in U.S. dollars. The principal regulation governing foreign currency exchange in China is the Foreign Currency Administration Rules (1996), as amended. Under these rules, RMB is freely convertible for trade and service-related foreign exchange transactions, but not for direct investment, loan or investment in securities outside China unless the prior approval of SAFE is obtained. Although the PRC government regulations now allow greater convertibility of RMB for current account transactions, significant restrictions still remain. For example, foreign exchange transactions under our subsidiaries capital accounts, including principal payments in respect of foreign currency-denominated obligations, remain subject to significant foreign exchange controls. These limitations could affect our ability to obtain foreign exchange for capital expenditures. We cannot be certain that the PRC regulatory authorities will not impose more stringent restrictions on the convertibility of RMB, especially with respect to foreign exchange transactions.

 

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FLUCTUATIONS IN THE VALUE OF THE RMB MAY HAVE A MATERIAL ADVERSE EFFECT ON YOUR INVESTMENT.

 

The change in value of the RMB against the U.S. dollar and other currencies is affected by, among other things, changes in China's political and economic conditions. On July 21, 2005, the PRC government changed its decade-old policy of pegging the value of the RMB to the U.S. dollar. Under the current policy, the RMB is permitted to fluctuate within a narrow and managed band against a basket of certain foreign currencies. Recently, the PRC has decided to proceed further with reform of the RMB exchange regime and to enhance the RMB exchange rate flexibility. There remains significant international pressure on the PRC government to adopt a more flexible currency policy, which could result in a further and more significant adjustment of the RMB against the U.S. dollar.  Any significant revaluation of the RMB may have a material adverse effect on the value of, and any dividends payable on, our common stock in foreign currency terms. More specifically, if we decide to convert our RMB into U.S. dollars for the purpose of making payments for dividends on our common stock or for other business purposes, appreciation of the U.S. dollar against the RMB would have a negative effect on the U.S. dollar amount available to us. Consequently, appreciation or depreciation in the value of the RMB relative to the U.S. dollar could materially adversely affect our financial results reported in U.S. dollar terms without giving effect to any underlying change in our business or results of operations.

 

THERE ARE SIGNIFICANT UNCERTAINTIES UNDER THE DRAFT FOREIGN INVESTMENT LAW RELATING TO THE STATE OF BUSINESS IN CHINA CONTROLLED BY FOREIGN INVESTED ENTERPRISES PRIMARILY THROUGH CONTRACTUAL ARRANGEMENTS, SUCH AS OUR BUSINESS.

 

 On March 15, 2019, MOFCOM published the PRC Law on Foreign Investment, which became effective on January 1, 2020. At the same time, MOFCOM published an accompanying explanatory note of the Foreign Investment Law, or the Explanatory Note, which contains important information about the Draft Foreign Investment Law, including its drafting philosophy and principles, main content, plans to transition to the new legal regime and treatment of business in China controlled by foreign invested enterprises, or FIEs, primarily through contractual arrangements. The draft Foreign Investment Law utilizes the concept of "actual control" for determining whether an entity is considered to be a foreign-invested enterprise, and defines "control" broadly to include, among other things, voting or board control through contractual arrangements.

 

 The Foreign Investment Law proposes significant changes to the PRC foreign investment legal regime and may have a material impact on Chinese companies listed or to be listed overseas. The proposed draft Foreign Investment Law is to regulate FIEs the same way as PRC domestic entities, except for those FIEs that operate in industries deemed to be either "restricted" or "prohibited" in a "negative list." Because the negative list has yet to be published, it is unclear whether it will differ from the current list of industries subject to restrictions or prohibitions on foreign investment. The draft Foreign Investment Law also provides that only FIEs operating in industries on the negative list will require entry clearance and other approvals that are not required of PRC domestic entities. As a result of the entry clearance and approvals, certain FIE's operating in industries on the negative list may not be able to continue to conduct their operations through contractual arrangements. It states that entities established in China but controlled by foreign investors will be treated as foreign-invested enterprises, while entities set up outside of China which are controlled by PRC persons or entities, would be treated as domestic enterprises after completion of market entry procedures. 

 

There is substantial uncertainty regarding the Foreign Investment Law, including, among others, what the actual content of the law will be as well as the adoption and effective date of the final form of the law. While such uncertainty exists, we cannot assure you that the new foreign investment law, when it is adopted and becomes effective, will not have a material and adverse effect on our ability to conduct our business through our contractual arrangements.

 

PRC laws and regulations governing the validity of these contractual arrangements are uncertain and the relevant government authorities have broad discretion in interpreting these laws and regulations. If the PRC government determines that our contractual arrangements do not comply with applicable laws and regulations, it could revoke our business and operating licenses, require us to discontinue or restrict our operations, restrict our right to collect revenues, block our website, require us to restructure our operations, impose additional conditions or requirements with which we may not be able to comply, or take other regulatory or enforcement actions against us that could be harmful to our business. The imposition of any of these penalties would result in a material and adverse effect on our ability to conduct our business.

 

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RECENT SAFE REGULATIONS COULD ADVERSELY IMPACT OUR COMPANY AND SUBJECT US TO FINES.

 

Recent PRC regulations relating to offshore investment activities by PRC residents and employee stock options granted by overseas-listed companies may increase our administrative burden, restrict our overseas and cross-border investment activity or otherwise adversely affect the implementation of our acquisition strategy. If our shareholders who are PRC residents, or our PRC employees who are granted or exercise stock options, fail to make any required registrations or filings under such regulations, we may be unable to distribute profits and may become subject to liability under PRC laws. In 2005, SAFE promulgated regulations that require PRC residents and PRC corporate entities to register with local branches of SAFE in connection with their direct or indirect offshore investment activities. These regulations apply to our shareholders who are PRC residents and may apply to any offshore acquisitions that we make in the future.

 

Under the SAFE regulations, PRC residents who make, or have previously made, direct or indirect investments in offshore companies, will be required to register those investments. In addition, any PRC resident who is a direct or indirect shareholder of an offshore company is required to file or update the registration with the local branch of SAFE, with respect to that offshore company, any material change involving its round-trip investment, capital variation, such as an increase or decrease in capital, transfer or swap of shares, merger, division, long-term equity or debt investment or creation of any security interest. If any PRC shareholder fails to make the required SAFE registration, the PRC subsidiary of that offshore parent company may be prohibited from distributing their profits and the proceeds from any reduction in capital, share transfer or liquidation, to their offshore parent company, and the offshore parent company may also be prohibited from injecting additional capital into their PRC subsidiary. Moreover, failure to comply with the various SAFE registration requirements described above could result in liability under PRC laws for evasion of applicable foreign exchange restrictions.

 

We cannot provide any assurances that all of our shareholders who are PRC residents will make or obtain any applicable registrations or approvals required by these SAFE regulations. The failure or inability of our PRC resident shareholders to comply with the registration procedures set forth in the SAFE regulations may subject our company fines and legal sanctions, restrict our cross-border investment activities, or limit our ability to distribute dividends to or obtain foreign-exchange dominated loans from our company.  As it is uncertain how the SAFE regulations will be interpreted or implemented, we cannot predict how these regulations will affect our business operations or future strategy. For example, we may be subject to a more stringent review and approval process with respect to our foreign exchange activities, such as remittance of dividends and obtaining foreign currency denominated borrowings, which may harm our results of operations and financial condition. In addition, if we decide to acquire a PRC domestic company, we cannot assure you that we or the owners of such company, as the case may be, will be able to obtain the necessary approvals or complete the necessary filings and registrations required by the SAFE regulations. This may restrict our ability to implement our acquisition strategy and could adversely affect our business and prospects.

 

IF WE BECOME DIRECTLY SUBJECT TO SCRUTINY, CRITICISM AND NEGATIVE PUBLICITY INVOLVING U.S.-LISTED CHINESE COMPANIES, WE MAY HAVE TO EXPEND SIGNIFICANT RESOURCES TO INVESTIGATE AND RESOLVE THE MATTER WHICH COULD HARM OUR BUSINESS OPERATIONS, STOCK PRICE AND REPUTATION.   

 

U.S. public companies that have substantially all of their operations in China, particularly companies like us that have completed so-called reverse acquisition transactions, have been the subject of intense scrutiny, criticism and negative publicity by investors, financial commentators and regulatory agencies, such as the SEC. Much of the scrutiny, criticism and negative publicity has centered on financial and accounting irregularities and mistakes, a lack of effective internal controls over financial accounting, inadequate corporate governance policies or a lack of adherence thereto and, in many cases, allegations of fraud. As a result of the scrutiny, criticism and negative publicity, the publicly traded stock of many U.S. listed Chinese companies has sharply decreased in value and, in some cases, has become virtually worthless. Many of these companies are now subject to shareholder lawsuits and SEC enforcement actions and are conducting internal and external investigations into the allegations. It is not clear what effect this sector-wide scrutiny, criticism and negative publicity will have on us, our business and our stock price. If we become the subject of any unfavorable allegations, whether such allegations are proven to be true or untrue, we will have to expend significant resources to investigate such allegations and/or defend our company. This situation will be costly and time consuming and distract our management from developing our growth. If such allegations are not proven to be groundless, we and our business operations will be severely affected and you could sustain a significant decline in the value of our stock. 

 

 

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THE DISCLOSURES IN OUR REPORTS AND OTHER FILINGS WITH THE SEC AND OUR OTHER PUBLIC PRONOUNCEMENTS ARE NOT SUBJECT TO THE SCRUTINY OF ANY REGULATORY BODIES IN THE PRC. 

 

We are regulated by the SEC and our reports and other filings with the SEC are subject to SEC review in accordance with the rules and regulations promulgated by the SEC under the Securities Act and the Exchange Act. Our SEC reports and other disclosure and public pronouncements are not subject to the review or scrutiny of any PRC regulatory authority. For example, the disclosures in our SEC reports and other filings are not subject to the review by China Securities Regulatory Commission, a PRC regulator that is responsible for oversight of the capital markets in China. Accordingly, you should review our SEC reports, filings and our other public pronouncements with the understanding that no PRC local regulator has done any review of us, our SEC reports, other filings or any of our other public pronouncements.

 

WE FACE RISKS RELATED TO NATURAL DISASTERS AND HEALTH EPIDEMICS IN CHINA, AND OTHER COUNTRIES GLOBALLY, WHICH COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS AND RESULTS OF OPERATIONS.

 

Our business could be materially adversely affected by natural disasters or the outbreak of health epidemics in China, globally, or other countries we do business in. For example, in May 2008, Sichuan Province suffered a strong earthquake measuring approximately 8.0 on the Richter scale that caused widespread damage and casualties. In addition, in the last decade, the PRC has suffered health epidemics related to the outbreak of avian influenza and severe acute respiratory syndrome, or SARS. In April 2009, an outbreak of the H1N1 virus, also commonly referred to as "swine flu" occurred in Mexico and has spread to other countries. Currently the epidemic of the novel strain of coronavirus (COVID-19) (the “COVID-19 pandemic”) has spread across China and other countries, this has adversely affected businesses and economic activities in the first quarter of 2020 and beyond. Consequently, the COVID-19 pandemic may adversely affect the Company’s business operations, financial condition and operating results for 2021 and 2022, 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. Such events could severely disrupt our business operations and harm our results of operations. Any future natural disasters or health epidemics in the PRC could also have a material adverse effect on our business and results of operations.

 

CERTAIN AGREEMENTS TO WHICH WE ARE A PARTY AND WHICH ARE MATERIAL TO OUR OPERATIONS LACK VARIOUS LEGAL PROTECTIONS WHICH ARE CUSTOMARILY CONTAINED IN SIMILAR CONTRACTS PREPARED IN THE UNITED STATES.

 

Although we are a U.S. company, substantially all of our business and operations are conducted in the PRC. We are a party to certain material contracts, including the leases for the facilities used by our stevioside business. While these contracts contain the basic business terms of the agreements between the parties, these contracts do not contain certain provisions which are customarily contained in similar contracts prepared in the U.S., such as representations and warranties of the parties, confidentiality and non-compete clauses, provisions outlining events of defaults, and termination and jurisdictional clauses. Because our material contracts omit these types of clauses, notwithstanding the differences in Chinese and U.S. laws we may not have the same legal protections as we would if the contracts contained these additional provisions. We anticipate that contracts we enter into in the future will likewise omit these types of legal protections. While we have yet to experience any adverse consequences as a result of the omission of these types of clauses, and we consider the contracts to which we are a party to contain all the material terms of our business arrangements with the other party, we cannot assure you that future events will not occur which could have been avoided if the contracts were prepared in conformity with U.S. standards, or what the impact, if any, of these hypothetical future events could have on our company.

 

IT MAY BE DIFFICULT FOR STOCKHOLDERS TO ENFORCE ANY JUDGMENT OBTAINED IN THE UNITED STATES AGAINST US, WHICH MAY LIMIT THE REMEDIES OTHERWISE AVAILABLE TO OUR STOCKHOLDERS.

 

Substantially all of our assets are located outside the United States and substantially all of our current operations are conducted in the PRC. Moreover, all of our directors and officers are nationals or residents of the PRC. All or a substantial portion of the assets of these persons are located outside the United States. As a result, it may be difficult for our stockholders to effect service of process within the United States upon these persons. In addition, there is uncertainty as to whether the courts of the PRC would recognize or enforce judgments of U.S. courts obtained against us or such officers and/or directors predicated upon the civil liability provisions of the securities law of the United States or any state thereof or be competent to hear original actions brought in the PRC against us or such persons predicated upon the securities laws of the United States or any state thereof.

 

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RISKS RELATED TO OUR COMMON STOCK

 

DUE TO RECENT CHINESE ACCOUNTING SCANDALS, THE PRICE OF OUR COMMON STOCK MIGHT FLUCTUATE SIGNIFICANTLY AND IF OUR STOCK PRICE DROPS SHARPLY, WE MAY BE SUBJECT TO SHAREHOLDER LITIGATION, WHICH COULD CAUSE OUR STOCK PRICE TO FALL FURTHER.

 

In the past few years, there have been well-publicized accounting problems at several U.S.-listed Chinese companies that have resulted in significant drops in the trading prices of their shares and, in some cases, have led to the resignation of outside auditors, trading halts or share delistings by NASDAQ or the New York Stock Exchange, and investigations by the Division of Enforcement of the Securities and Exchange Commission. Many, but not all, of the companies involved in these scandals had entered the U.S. trading market through "reverse mergers" into publicly traded shells. The scandals have had a broad effect on Chinese companies with shares listed or quoted in the United States.  Past or future accounting scandals in other Chinese companies could have a material adverse effect on the market for shares of our common stock and the interest of investors in our company or generally in PRC companies.  In this event, the fluctuations in the market prices of our common stock could result in decreased liquidity and/or declining stock prices unrelated to our results of operation or business. In addition, as set forth in the risk factor immediately below, we do not have any audit committee financial experts on our Board of Directors and, accordingly, the risk of future errors in our financial statements is increased.

 

PROVISIONS OF OUR ARTICLES OF INCORPORATION AND BYLAWS MAY DELAY OR PREVENT A TAKE-OVER WHICH MAY NOT BE IN THE BEST INTERESTS OF OUR STOCKHOLDERS.

 

Provisions of our articles of incorporation and bylaws may be deemed to have anti-takeover effects, which include when and by whom special meetings of our stockholders may be called, and may delay, defer or prevent a takeover attempt. In addition, certain provisions of the Nevada Revised Statutes also may be deemed to have certain anti-takeover effects which include that control of shares acquired in excess of certain specified thresholds will not possess any voting rights unless these voting rights are approved by a majority of a corporation's disinterested stockholders.

 

In addition, our articles of incorporation authorize the issuance of up to 1,000,000 shares of preferred stock with such rights and preferences as may be determined from time to time by our Board of Directors, of which no shares are currently outstanding. Our Board of Directors may, without stockholder approval, issue preferred stock with dividends, liquidation, conversion, voting or other rights that could adversely affect the voting power or other rights of the holders of our common stock. Collectively, these provisions may prevent a change of control of our company in situations where a change of control would be beneficial to our stockholders.

 

BECAUSE OUR STOCK CURRENTLY TRADES BELOW $5.00 PER SHARE, AND IS QUOTED ON THE OTC PINK TIER OF THE OTC MARKETS, OUR STOCK IS CONSIDERED A "PENNY STOCK" WHICH WILL ADVERSELY AFFECT ITS LIQUIDITY.

 

Our common stock is currently quoted on the OTC Pink Tier of the OTC Markets. As the trading price of our common stock is less than $5.00 per share, our common stock is considered a "penny stock," and trading in our common stock could be subject to the requirements of Rule 15g-9 under the Securities Exchange Act of 1934. Under this rule, broker/dealers who recommend low-priced securities to persons other than established customers and accredited investors must satisfy special sales practice requirements. The broker/dealer must make an individualized written suitability determination for the purchaser and receive the purchaser's written consent prior to the transaction. SEC regulations also require additional disclosure in connection with any trades involving a "penny stock", including the delivery, prior to any penny stock transaction, of a disclosure schedule explaining the penny stock market and its associated risks. These requirements severely limit the liquidity of securities in the secondary market because few broker or dealers are likely to undertake these compliance activities. In addition to the applicability of the penny stock rules, other risks associated with trading in penny stocks could also be price fluctuations and the lack of a liquid market.

 

A LARGE PORTION OF OUR OUTSTANDING COMMON SHARES ARE "RESTRICTED SECURITIES" AND FUTURE SALES OF THOSE SHARES BY OUR STOCKHOLDERS COULD ADVERSELY IMPACT THE MARKET PRICE OF OUR COMMON STOCK.

 

On August 10, 2022 we had 199,632,803 shares of common stock outstanding, of which approximately 77,755,305 shares are "restricted securities." Future sales of restricted common stock under Rule 144 or otherwise could negatively impact the market price of our common stock.

 

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ITEM 1B.

UNRESOLVED STAFF COMMENTS

 

Not applicable for smaller reporting companies.

 

ITEM 2.

PROPERTIES

 

All of our facilities are located in the Shuyuan Economic Zone of Qufu City, of the Shandong Province, including Qufu Natural Green and Qufu Shengren facilities which were moved from 6 Youpeng Road of Qufu City to Shuyuan Economic Zone since the fiscal year ended April 30, 2016.

 

The Company acquired the land use rights for Qufu Shengren factory in cash. Qufu Shengren owns and operates a stevia facility with an annual production capable of 500 metric tons per year on 44,486 square meters (478,847 square feet) of land located in Qufu city, Shandong. The Company occupies this land pursuant to an asset acquisition agreement entered into with Shangdong Shengwang Pharmaceutical Co., Ltd. to acquire the land use rights for this facility. The land use right was transferred from Pharmaceutical Corporation to Qufu Shengren, and the Company received Real Property Certificate issued by local government on May 18, 2021. The land use right expires in March 2054.

 

ITEM 3.

LEGAL PROCEEDINGS

 

Not applicable for our operations.

 

ITEM 4.

MINE SAFETY DISCLOSURES.

 

Not applicable for our operations.

 

PART II

 

ITEM 5.

MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

 

Our common stock is quoted on the OTC Pink Tier of the OTC Markets under the symbol "SUWN". The following table sets forth the reported high and low closing prices for our common stock as reported on the OTC Markets for the following periods. These prices do not include retail mark-ups, markdowns or commissions, and may not necessarily represent actual transactions.

 

	High	Low
Fiscal 2022
May 1, 2021 through July 31, 2021	$0.07	$0.04
August 1, 2021 through October 31, 2021	$0.12	$0.03
November 1, 2021 through January 31, 2022	$0.04	$0.01
February 1, 2022 through April 30, 2022	$0.03	$0.01
Fiscal 2021
May 1, 2020 through July 31, 2020	$0.11	$0.06
August 1, 2020 through October 31, 2020	$0.15	$0.05
November 1, 2020 through January 31, 2021	$0.13	$0.04
February 1, 2021 through April 30, 2021	$0.13	$0.04

 

On August 10, 2022, the last reported sale price of the common stock on OTC Markets was $0.01 per share, and there were 752 stockholders of record of the common stock. The number of record holders does not include beneficial owners of common stock whose shares are held in the names of banks, brokers, nominees or other fiduciaries.

 

Transfer Agent

 

Our transfer agent is Colonial Stock Transfer Company, Inc. which is located at 66 Exchange Place, Salt Lake City, Utah 84111. The phone number is (801)355-5740 and its website is www.colonialstock.com.

 

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Dividend Policy

 

We have never paid cash dividends on our common stock. We intend to keep future earnings, if any, to finance the expansion of our business, and we do not anticipate that any cash dividends will be paid in the foreseeable future. Our future payment of dividends will depend on our earnings, capital requirements, expansion plans, financial condition and other relevant factors. Under Nevada law, we are prohibited from paying dividends if the distribution would result in our company not being able to pay its debts as they become due in the usual course of business, or if our total assets would be less than the sum of our total liabilities plus the amount that would be needed, were we to be dissolved at the time of distribution, to satisfy the preferential rights upon dissolution of stockholders whose preferential rights are superior to those receiving the distribution. In addition, as a result of Chinese laws, our operating subsidiaries may be subject to restrictions on their ability to make distributions to us, including as a result of restrictions on the conversion of local currency into U.S. dollars, or other hard currency, and other regulatory restrictions.

 

RECENT SALES OF UNREGISTERED SECURITIES

 

None, other than as previously reported.

 

ITEM 6.

SELECTED FINANCIAL DATA

 

Not applicable to smaller reporting companies.   

 

ITEM 7.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

 

The following discussion and analysis of our consolidated financial condition and results of operations for the fiscal years ended April 30, 2022 and 2021 should be read in conjunction with the consolidated financial statements and footnotes, and other information presented elsewhere in this Form 10-K.

 

OVERVIEW

 

We sell stevioside and other stevia derived products. 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 sourcing and production capabilities designed to meet the needs of our customers. 

 

During the fiscal years ended April 30, 2022 and 2021, our continuing operations were organized in two operating segments related to our product lines:

 

	-		Stevioside; and
	-		Corporate and other.

 

Recent Developments

 

Consequently, the COVID-19 pandemic still adversely affect the Company’s business operations, financial condition and operating results for 2022 and 2023, 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. We are able to maintain certain income from previous existing orders and finished products, however, we believe the effect of the COVID-19 pandemic will be most significant in our raw material purchasing and our sales. Due to the effect of the global COVID-19 pandemic, we expect the sourcing and availability of stevia raw material will have increased difficulties and costs for fiscal 2022 and 2023.

 

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 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. 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. Due to the speed with which the COVID-19 pandemic is developing, the global breadth of its spread and the range of governmental and community reactions thereto, there is uncertainty around its duration and ultimate impact; therefore, any negative impact on our overall financial and operating results (including without limitation our liquidity) cannot be reasonably estimated at this time, but the pandemic could lead to extended disruption of economic activity and the impact on our financial and operating results.

 

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Our Performance

 

Our revenues totaled $35.3 million in the fiscal year ended April 30, 2022, an increase of 38.9% as compared to the fiscal year ended April 30, 2021, and our gross margin increased from (4.5)% to 8.8% primarily due to our revenue increased. Our total operating expenses in the fiscal year ended April 30, 2022 increased by approximately $3,214,000 or 81.5% compared to the fiscal year ended April 30, 2021 primarily due to an increase of approximately $518,000 or 37.2% in selling expenses, an increase of approximately $462,000 or 32.2% in general and administrative expenses, an increase of approximately $1,644,000 or 146.9% in research and development expenses, and an extra expense for loss on disposition of property and equipment of approximately $591,000 in fiscal year ended April 30, 2022 . Our net loss from operations for the fiscal year ended April 30, 2022 was approximately $4,594,000, compared to $5,249,000 in the fiscal year ended April 30, 2021.

 

While we have broadened our stevia product offerings to include a number of higher quality stevia grades needed in new product formulations we are developing to introduce to the U.S. and European food and beverage industry, the demand for higher grade stevia products has yet to materialize to the degree we had anticipated, and thus our sales volume in higher grade stevia products was lower than expected for the fiscal year ended April 30, 2022. The decrease of revenue in Stevioside segment is primarily due to a decreasing demand from the developing domestic and international market, and overall negative impact from the global COVID-19 pandemic.

 

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, 2022 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 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.

 

Some of the recent favorable observations related to the stevia markets includes:

 

	-		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, 2022 and 2021, as well as negative impact from the global COVID-19 pandemic, which has longer lasting effects then we previously estimated. During the fiscal years ended April 30, 2022, 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 2022. We anticipate the price of stevia leaves, the raw material used to produce our stevioside series products, will also continue to increase in fiscal 2022 since the demand for raw material may increase as the market recover, 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.

 

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RESULTS OF OPERATIONS

 

The following table summarizes our results of operations for the fiscal year ended April 30, 2022 and 2021.  The percentages represent each line item as a percent of revenues:

 

 

For the Fiscal Year Ended April 30, 2022
	Stevioside		Corporate and Other		Consolidated
Revenues	$34,832,117	100.0%	$429,362	100.0%	$35,261,479	100.0%
Cost of goods sold	31,956,506	91.7%	200,078	46.6%	32,156,584	91.2%
Gross profit	2,875,611	8.3%	229,284	53.4%	3,104,895	8.8%
Selling expenses	1,909,651	5.5%	-	-	1,909,651	5.4%
General and administrative expenses	1,895,345	5.4%	95	0.0%	1,895,440	5.4%
Research and development expenses	2,763,854	7.9%	-	-	2,763,854	7.8%
Loss on disposition of property and equipment	590,503	1.7%	-	-	590,503	1.7%
(Loss) gain from operations	(4,283,742)	(12.3)%	229,189	53.4%	(4,054,553)	(11.5)%
Other expenses	(539,055)	(1.5)%	20	0.0%	(539,035)	(1.5)%
(Loss) gain from continuing operation before income taxes	$(4,822,797)	(13.8)%	$229,209	53.4%	$(4,593,588)	(13.0)%

 

For the Fiscal Year Ended April 30, 2021
	Stevioside		Corporate and Other		Consolidated
Revenues	$24,970,088	100.0%	$408,747	100.0%	$25,378,835	100.0%
Cost of goods sold	26,293,331	105.3%	221,228	54.1%	26,514,559	104.5%
Gross profit	(1,323,243)	(5.3)%	187,519	45.9%	(1,135,724)	(4.5)%
Selling expenses	1,390,993	5.6%	594	0.1%	1,391,587	5.5%
General and administrative expenses	1,398,881	5.6%	35,046	8.6%	1,433,927	5.7%
Research and development expenses	1,119,574	4.5%	-	-	1,119,574	4.4%
(Loss) gain from operations	(5,232,691)	(21.0)%	151,879	37.2%	(5,080,812)	(20.0)%
Other expenses	(168,463)	(0.7)%	-	-	(168,463)	(0.7)%
(Loss) gain from continuing operation before income taxes	$(5,401,154)	(21.6)%	$151,879	37.2%	$(5,249,275)	(20.7)%

 

Revenues

 

Total revenues in the fiscal year ended April 30, 2022 increased by approximately $9,883,000, or 38.97%, as compared to the fiscal year ended April 30, 2021, primarily due to an increasing demand from both domestic and overseas markets as the industries recover from the COVID-19 pandemic. Our products including A3-99 and enzyme treated stevia have been well accepted by the market, especially in the U.S.. We sold 1,083 metric tons and 846 metric tons of stevioside for the fiscal year ended April 30, 2022 and 2021, respectively. We generated approximately $10,322,000 and $4,884,000 in revenue from producing over 302 metric tons and 165 metric tons of the customized orders for restructuring by enzyme based on our Stevioside products which accounted for approximately 29.5% and 19.4% of our total revenues of Sativoside segment in the fiscal years ended April 30, 2022 and 2021, respectively.

 

With the restructuring of our product line, we also continue to increase the sales of our low grade stevia products. Our low grade stevia and A3-97 products generated more than 29.9% and 18.6% of total revenue of our Stevioside segment for the fiscal year ended April 30, 2022, respectively. Our low grade stevia and A3-97 products generated more than 34.1% and 24.7% of total revenue of our Stevioside segment, respectively, for the fiscal year ended April 30, 2021.

 

Our unit sale price fluctuated from month to month in the fiscal year ended April 30, 2022, which was mainly affected by the market environment; the average unit sales price of our stevia products has slightly increased for the fiscal year ended April 30, 2022, as compared to the fiscal year ended April 30, 2021. We are facing challenges in competitive pricing and sourcing of raw materials, and the market prices of stevioside products were impacted by strong price competition among Chinese manufacturers. With the increased sales on our enzyme treated products in fiscal year ended April 30, 2022,  the gross profit rate of enzyme treated products decreased to 0.2% from 9.5%, but the average unit price of enzyme treated products increased to $34.2 from $29.7, as compared to the fiscal year ended April 30, 2021. In the fiscal year ended April 30, 2022, some of our stevia products, such as A3-99, A3-98, A3-95 and A3-80, were sold for a loss in order to avoid further losses resulting from spoilage of overstocked inventory.   

 

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 Cost of Revenues and Gross Margin

 

Cost of revenues includes the cost of raw materials, labor, depreciation, and other fixed and variable overhead costs. Cost of revenues of Stevioside segment in the fiscal year ended April 30, 2022 increased by approximately $5,663,000, or 21.5%, while revenues from Stevioside segment increased by approximately $9,862,000, compared to the fiscal year ended April 30, 2021. Gross margin on Stevioside segment for the fiscal year ended April 30, 2022 was 8.3%, as compared to (5.3)% for the fiscal year ended April 30, 2021. The increase in gross margins for Stevioside was primarily due to  a reduction of the higher production costs we experienced during the height of the pandemic and that we were able to sell more of our overstocked inventories from 2021. Since the epidemic of the novel strain of coronavirus COVID-19 pandemic adversely affected businesses and economic activities, resulting in a drastic increase in the cost of our production, our gross margin was negative in fiscal year 2021.

 

We believe the effect of the COVID-19 pandemic is the most significant in our raw material purchasing and our sales. Due to the effect of the global COVID-19 pandemic, we expect the sourcing and availability of stevia raw material will have increased difficulties and costs for fiscal 2022. As a result of COVID-19 related gathering laws, farmers are not able to have the same amount of nursery workers as previous years, resulting in a decrease of stevia plants, and relevant safety measures also resulted in an increase of general planting costs. We expect this to cause a shortage of stevia leaves harvest this year and along with the effect of the rain seasons, we expect to see an increase in our cost of raw material. After we resumed production, the effect of the COVID-19 pandemic on transportation has also made it difficult for us to efficiently procure our raw materials.

 

Total Selling Expenses

 

Our selling expenses for the fiscal year ended April 30, 2022 increased by approximately $518,000, or 37.2% compared to the fiscal year ended April 30, 2021. The increase was primarily due to the approximately $178,000 increase in local sales taxes, $160,000 increase in commission expenses, $200,000 increase in promotion and marketing expenses, $16,000 increase in shipping and freight and $40,000 increase in salary, offset by $15,000 decrease in office expenses, $52,000 decrease in advertising expenses, and $9,000 decrease in miscellaneous expense in the year ended April 30, 2022.

 

Total General and Administrative Expenses

 

Our general and administrative expenses for the fiscal year ended April 30, 2022 increased by $462,000, or 32.2% compared to the fiscal year ended April 30, 2021.  The increase was primarily due to an increase of approximately $170,000 in depreciation and amortization expenses, due to a land use right we purchased in fiscal year ended April 30, 2022, $232,000 increase in salary and wage expenses, $57,000 increase in safety production fund, $27,000 increase in repairs and maintenance fees, $80,000 increase in office expense, $61,000 increase in service and professional fees, offset by a decrease of $61,000 in marketing expenses, $29,000 in hospitality expenses, and $75,000 decrease in miscellaneous expenses.

 

Research and Development Expenses

 

For the fiscal year ended April 30, 2022, our research and development expenses amounted to approximately $2,764,000 as compared to $1,120,000 for the fiscal year ended April 30, 2021. The increase of approximately $1,644,000 was primarily attributable to the increase in research and development activities related to the development of new product lines of Stevioside products.

 

Loss on Disposition of Property and Equipment

 

We periodically evaluate our property, plant and equipment to determine whether any negative change in regulatory and environmental policies, technical specifications or customer acceptance of our products impair the usefulness and fair market value of these assets. In connection with this evaluation in fiscal years ended April 30, 2022 and 2021, we determined that some of our equipment needed to be replaced or otherwise removed from service. We disposed of assets and recorded a loss on disposal of approximately $590,503 and $nil in the fiscal years ended April 30, 2022 and 2021.

 

Other Expense

 

For the fiscal year ended April 30, 2022, other expense, net of other income, amounted to approximately $539,000, an increase of $371,000 as compared to other expense, net of other income, amounted to approximately $168,000 for the fiscal year ended April 30, 2021. The increase of other expense was primarily attributable to an increase in interest expense - third parties in the amount of approximately $235,000, and an increase in other expense of approximately 148,000 primarily due to an export tax rebate, offset by a decrease in interest expense - related party in the amount of approximately $10,000 and an increase in interest income of $2,000.

 

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Loss from Operations

 

As a result of the foregoing, our loss from operations was $4,594,000 for the fiscal year ended April 30, 2022, as compared with loss from continuing operations of $5,249,000 for the fiscal year ended April 30, 2021, a change of $656,000, or 12.5%. The decrease of net loss was primarily due to a higher revenue with a higher gross profit.

 

Net Loss Attributable to Noncontrolling Interest

 

Noncontrolling interest represents the ownership interests an individual investor and Shangdong Yulong Mining Group Co., Ltd. ("Yulong") hold in Qufu Shengren. The amount recorded as noncontrolling interest in our unaudited condensed consolidated statements of loss and comprehensive loss is computed by multiplying the after-tax loss by 38.7%, the percentage ownership in Qufu Shengren not directly attributable to us. Net loss attributable to noncontrolling interest amounted to approximately $1,683,000 and $2,010,000 for the year ended April 30, 2022 and 2021, respectively.

 

Net Loss Attributable to Sunwin Stevia International, Inc.

 

Net loss attributable to Sunwin Stevia International, Inc. in the fiscal year ended April 30, 2022 was approximately $2,910,000, or $(0.01) per share (basic and diluted), compared to $3,239,000, or $(0.02) per share (basic and diluted), in the fiscal year ended April 30, 2021.

 

Foreign Currency Translation Gain

 

The functional currency of our subsidiaries and variable interest entities operating in the PRC is the Chinese Yuan or Renminbi ("RMB"). The financial statements of our subsidiaries are translated to U.S. dollars using period end rates of exchange for assets and liabilities, and average rates of exchange (for the period) for revenues, costs, and expenses. Net gains and losses resulting from foreign exchange translations are included in the Comprehensive income on the consolidated statements of operations. As a result of foreign currency translations, which are a non-cash adjustment, we reported a foreign currency translation loss of $48,000 for the fiscal year ended April 30, 2022, as compared to a foreign currency translation gain of $1,006,000 for the fiscal year ended April 30, 2021. This non-cash loss had the effect of increasing our reported comprehensive loss.

 

LIQUIDITY AND CAPITAL RESOURCES

 

Liquidity is the ability of a company to generate sufficient cash to meet its operational cash requirements.  

 

The following table provides certain selected balance sheets comparisons as of April 30, 2022 and 2021:

-

 

	April 30, 2022	April 30, 2021	Increase (Decrease)	%
Cash and cash equivalents	$321,193	$1,565,829	$(1,244,636)	(79.5)%
Accounts receivable, net	7,404,669	1,693,801	5,710,868	337.2%
Accounts receivable - related party	-	5,999,791	(5,999,791)	(100.0)%
Inventories, net	5,564,044	12,930,461	(7,366,417)	(57.0)%
Prepaid expenses and other current assets	2,765,819	661,882	2,103,937	317.9%
Total current assets	16,055,725	22,851,764	(6,796,039)	(29.7)%
Property and equipment, net	7,485,733	9,217,115	(1,731,382)	(18.8)%
Land use rights, net	1,950,204	-	1,950,204	100%
Total assets	$25,491,662	$32,068,879	$(6,577,217)	(20.5)%
Accounts payable and accrued expenses	12,215,238	$11,141,408	$1,073,830	9.6%
Short-term loans	4,907,506	2,955,304	1,952,202	66.1%
Due to related parties	4,882,162	9,843,636	(4,961,474)	(50.4)%
Total current liabilities	22,004,906	23,940,348	(1,935,442)	(8.1)%
Total liabilities	22,004,906	$23,940,348	$(1,935,442)	(8.1)%

    

 

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 As of April 30, 2022, we had working deficit of $5,949,000, including cash of approximately $321,000, as compared to working deficit of approximately $1,089,000 and cash of $1,566,000 as of April 30, 2021. The approximate $1,245,000 decrease in our cash as of April 30, 2022 from April 30, 2021 is primarily attributable to net cash used in operating activities of approximately $1,885,000, and net cash used in investing activities of approximately $2,472,000, offset by cash provided by financing activities of approximately $3,108,000 during the fiscal year ended April 30, 2022. We may seek to raise capital through additional debt and/or equity financings to fund our operations in the future. Although we have historically raised capital from sales of equity and from bank or individual loans, there is no assurance that we will be able to continue to do so. If we are unable to raise additional capital or secure additional lending in the next 12 months, management expects that we will need to curtail or cease operations. The accompanying consolidated financial statements do not include any adjustments related to the recoverability and or classification of recorded asset amounts and or classification of liabilities that might be necessary should we be unable to continue as a going concern.

 

The COVID-19 Pandemic. On January 30, 2020, the World Health Organization declared the coronavirus outbreak a "Public Health Emergency of International Concern" and on March 10, 2020, declared it to be a pandemic. Actions taken around the world to help mitigate the spread of the coronavirus include restrictions on travel, quarantines in certain areas, and forced closures for certain types of public places and businesses. The coronavirus and actions taken to mitigate it have had and are expected to continue to have an adverse impact on the economies and financial markets of many countries, including the geographical areas in China in which the Company operates. Consequently, the COVID-19 pandemic may adversely affect the Company’s business operations, financial condition and operating results for 2021 and 2022, including but not limited to material negative impact to the Company’s total revenues, slower collection of accounts receivables and significant impairment to the Company’s equity investments. Due to the high uncertainty of the evolving situation, the Company has limited visibility on the full impact brought upon by the COVID-19 pandemic and the related financial impact cannot be estimated at this time.

 

Accounts receivable, net of allowance for doubtful accounts, including accounts receivable from related party, decreased by approximately $289,000 during the fiscal year ended April 30, 2022. The days for sales outstanding in accounts receivable increased to 20 days as of April 30, 2022, as compared to 24 days on April 30, 2021. We will reevaluate and categorize accounts receivable for sales and will target to improve our collection effort in accounts receivable in the fiscal 2022.

 

At April 30, 2022 our inventories, net of impairment for obsolescence, totaled approximately $5,564,000, as compared to $12,930,000 on April 30, 2021. The decrease is primarily due to our increase in higher sales volume during the fiscal year ended April 30, 2022. However, due to the COVID-19 pandemic, there has been minimal disruption in our supply chain network of certain raw materials. We are not able to purchase enough leaves of the stevia to meet our anticipated upcoming increase in demands.

 

Our accounts payable and accrued expenses were approximately $12,215,000 at April 30, 2022, an increase of approximately $1,074,000 from April 30, 2021 balance of $11,141,000. The increase was primarily due to the timing of payments for balances related to raw material purchases made in the ordinary course of business.

 

Loans payable as of April 30, 2022 and 2021 totaled approximately 4,908,000 and $2,955,000, respectively. These loans payable consisted of short-term loans from multiple non-related individuals, which bear annual interest rates of 4% - 12%.  Range of maturity dates of the loan payable was from August 22, 2022 to April 18, 2023. During the year ended April 30, 2022, the Company borrowed multiple new loans of approximately $2,629,000 and repaid loans in amount of approximately $780,000.

 

Due to related parties at April 30, 2022 and 2021 totaled approximately $4,882,000 and $9,844,000, respectively. The decrease was primarily due to our reclassification for Qufu Shengwang Import and Export to the third party during the fiscal year ended April 30, 2022. On April 30, 2022, the balance we owed to Pharmaceutical Corporation and Export and Mr. Weidong Chai, a management member of Qufu Shengren Pharmaceutical Co., Ltd., approximately amounted to $4,646,000 and $236,000, respectively. On April 30, 2021, the balance we owed to Pharmaceutical Corporation, Qufu Shengwang Import and Export, and Mr. Weidong Chai approximately amounted to $3,484,000, $6,140,000 and $219,000, respectively.

 

Cash Flows Analysis

 

NET CASH FLOW USED IN OPERATING ACTIVITIES:

 

Net cash used in operating activities from operations was approximately $1,885,000 for the fiscal year ended April 30, 2022, primarily due to a net loss of approximately $4,594,000, an increase of approximately $2,175,000 in prepaid expenses and other current assets, a decrease of approximately $5,161,000 in accounts payable and accrued expenses, offset by a decrease of approximately $151,000 in accounts receivable, a decrease of approximately $6,995,000 in inventories, an increase of approximately $501,000 in taxes payable, and non-cash working capital primarily included non-cash depreciation and amortization expenses of $1,475,000, provision for obsolete inventories of $331,000 and a loss on disposition of property and equipment of approximately $591,000.

 

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Net cash used in operating activities from operations was approximately $2,204,000 for the fiscal year ended April 30, 2021, primarily due to a net loss of approximately $5,249,000, an increase of approximately $2,586,000 in accounts receivable - related party, an increase of approximately $218,000 in inventories, offset by a decrease of approximately $1,196,000 in accounts receivable and note receivable from a third party, a decrease of approximately $95,000 in prepaid expenses and other current assets, an  increase in accounts payable and accrued expenses of approximately $1,890,000, an increase of approximately $38,000 in taxes payable, and non-cash working capital primarily included non-cash depreciation expense of $1,340,000, impairment for obsolete inventories of $1,277,000 and a loss on allowance for doubtful accounts of $13,000.

 

NET CASH FLOW USED IN INVESTING ACTIVITIES:

 

Net cash used in investing activities from operations amounted to approximately $2,472,000, including $413,000 on purchases of property and equipment and $2,068,000 on purchase of land use right, offset by proceeds from disposal of equipment of $9,000 in the fiscal year ended April 30, 2022.

 

Net cash used in investing activities from continuing operations amounted to $766,000 on purchases of property and equipment in the fiscal year ended April 30, 2021.

 

NET CASH FLOW PROVIDED BYFINANCING ACTIVITIES:

 

Net cash provided by financing activities from operations amounted to approximately $3,108,000 in the fiscal year ended April 30, 2022, primarily due to the proceeds from a non-related individual short-term loan of $2,629,000 and advances received from related parties of approximately $4,851,000, offset by repayment of short-term loans of $780,000 and repayment of related party advances of approximately $3,592,000.

 

Net cash provided by financing activities from operations amounted to approximately $3,292,000 in the fiscal year ended April 30, 2021, primarily due to the proceeds from a non-related individual short-term loan of $21,000 and advances received from related parties of approximately $13,211,000, offset by repayment of short-term loans of $922,000 and repayment of related party advances of approximately $9,018,000.

 

 CASH ALLOCATION BY COUNTRIES

 

The functional currency of our Chinese subsidiaries is the Chinese RMB. Substantially all of our cash is held in the form of RMB at financial institutions located in the PRC, where there is no equivalent of federal deposit insurance as in the United States. As a result, cash accounts at financial institutions in the PRC are not insured. We have not experienced any losses in such accounts as of April 30, 2022.

 

In 1996, the Chinese government introduced regulations which relaxed restrictions on the conversion of the RMB; however, restrictions still remain, including but not limited to restrictions on foreign invested entities. Foreign invested entities may only buy, sell or remit foreign currencies after providing valid commercial documents at only those banks authorized to conduct foreign exchanges. Furthermore, the conversion of RMB for capital account items, including direct investments and loans, is subject to PRC government approval. Chinese entities are required to establish and maintain separate foreign exchange accounts for capital account items. We cannot be certain Chinese regulatory authorities will not impose more stringent restrictions on the convertibility of the RMB, especially with respect to foreign exchange transactions. Accordingly, cash on deposit in banks in the PRC is not readily deployable by us for purposes outside of the PRC. Our cash position by geographic area was as follows: 

 

Country:	April 30, 2022		April 30, 2021
United States	$18,033	5.6%	$161,860	10.3%
China	303,160	94.4%	1,403,969	89.7%
Total cash and cash equivalents	$321,193	100.00%	$1,565,829	100.00%

 

 

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Contractual Obligations and Off-Balance-Sheet Arrangements

 

Contractual Obligations

 

 We have certain fixed contractual obligations and commitments that include future estimated payments. Changes in our business needs, cancellation provisions, changing interest rates, and other factors may result in actual payments differing from the estimates. We cannot provide certainty regarding the timing and amounts of payments. We have presented below a summary of the most significant assumptions used in our determination of amounts presented in the tables, in order to assist in the review of this information within the context of our consolidated financial position, results of operations, and cash flows. The following tables summarize our contractual obligations as of April 30, 2022, and the effect these obligations are expected to have on our liquidity and cash flows in future periods. 

 

	Payments Due by Period
Contractual obligations:	Total	Less than 1 year	1-3 years	3-5 years	5 + years
Individual loans	4,907,506	4,907,506	-	-		-
Total	$4,907,506	4,907,506	-	$-		$-

 

Off-Balance-Sheet Arrangements

 

Under SEC regulations, we are required to disclose our off-balance-sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, such as changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors. An off-balance sheet arrangement means a transaction, agreement or contractual arrangement to which any entity that is not consolidated with us is a party, under which we have:

 

	-		Any obligation under certain guarantee contracts,
	-		Any retained or contingent interest in assets transferred to an unconsolidated entity or similar arrangement that serves as credit, liquidity or market risk support to that entity for such assets,
	-		Any obligation under a contract that would be accounted for as a derivative instrument, except that it is both indexed to our stock and classified in stockholder's equity in our statement of financial position, and
	-		Any obligation arising out of a material variable interest held by us in an unconsolidated entity that provides financing, liquidity, market risk or credit risk support to us, or engages in leasing, hedging or research and development services with us.

 

We do not have any off-balance-sheet arrangements that we are required to disclose pursuant to these regulations. In the ordinary course of business, we enter into operating lease commitments, purchase commitments and other contractual obligations. These transactions are recognized in our financial statements in accordance with accepted accounting principles generally accepted in the U.S. ("U.S. GAAP").

 

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

 

The preparation of financial statements in conformity with U.S. GAAP requires estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities in the consolidated financial statements and accompanying notes. The SEC has defined a company's critical accounting policies as the ones that are most important to the portrayal of the company's financial condition and results of operations, and which require the company to make its most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. Based on this definition, we have identified the critical accounting policies and judgments addressed below. We also have other key accounting policies, which involve the use of estimates, judgments and assumptions that are significant to understanding our results, which are described in Note 1 to our consolidated financial statements. Although we believe that our estimates, assumptions and judgments are reasonable, they are based upon information presently available. Actual results may differ significantly from these estimates under different assumptions, judgments or conditions.  

 

ITEM 7A.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

 

Not applicable to smaller reporting company.

 

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ITEM 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

 

Our financial statements are contained in pages F-3 through F-22, which appear at the end of this annual report.

 

ITEM 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

 

None.

 

ITEM 9A.

CONTROLS AND PROCEDURES.

 

Evaluation of Disclosure Controls and Procedures

 

 As required by Rule 13a-15 under the Exchange Act, our management, evaluated the effectiveness of the design and operation of our controls and procedures as of April 30, 2022.

 

Disclosure controls and procedures refer to controls and other procedures designed to ensure that information required to be disclosed in the reports we file or submit under the Securities Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding the required disclosure. In designing and evaluating our controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating and implementing possible controls and procedures.

 

Management conducted its evaluation of our controls and procedures under the supervision of our chief executive officer and our chief financial officer. Based on that evaluation, we concluded that our controls and procedures were not effective as of April 30, 2022.

 

Management's Report on Internal Control Over Financial Reporting

 

(a)Disclosure Controls and Procedures. 

 

As of April 30, 2022 (the “Evaluation Date”), the company carried out an evaluation, under the supervision of and with the participation of management, including the company’s chief executive officer and chief financial officer, of the effectiveness of the design and operation of the company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934). Based on the foregoing, the chief executive officer and chief financial officer concluded that as of the Evaluation Date the company’s disclosure controls and procedures were not effective and designed to ensure that all material information required to be included in our reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission and to ensure that information required to be disclosed is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decision regarding required disclosure.

 

(b)Management’s annual report on internal control over financial reporting. 

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is a process designed under the supervision of our chief executive officer and chief financial officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our consolidated financial statements for external reporting purpose in accordance with U.S. generally accepted accounting principles.

 

Management assessed the effectiveness of our internal control over financial reporting as of April 30, 2022. In making this assessment, management used the framework set forth in the report Internal Control – Integrated framework issued in 2013 by the Committee of Sponsoring Organization of the Treadway Commission, or COSO. The COSO framework summarizes each of the components of a company’s internal control system, including (1) the control environment, (2) risk assessment, (3) control activities, (4) information and communication and (5) monitoring.

 

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Based on that evaluation, management concluded that these controls were not effective at April 30, 2022.

 

(c)Attestation report of the registered public accounting firm. 

 

Not applicable.

 

(d)Changes in internal control over financial reporting. 

 

There have been no changes in our internal controls over financial reporting occurred during the fiscal year ended April 30, 2022, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

ITEM 9B.

OTHER INFORMATION.

    

None.

 

PART III

 

ITEM 10.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

 

Directors and Executive Officers

 

The following sets forth the names and ages of each of our executive officers and directors and the positions they hold:

 

Name	Age	Positions
Chunchun Wang	38	Chief Executive Officer, Secretary and Director
Fanjun Wu	48	Chief Financial Officer
Yuyi Liu	48	Director and Accounting Manager of Qufu Shengren

 

Chunchun Wang. Mr. Wang has been working in the pharmaceutical industry since his graduation from Qufu Yuandong Professional Technical College in 2005 and has been working with the Company since March 2006 in various positions in our technology and web-based sales departments and is currently serving as the General Manager of web-based operations.

 

Fanjun Wu. Ms. Wu has been our Chief Financial Officer since April 30, 2004. Since 1997, she has been employed by Qufu Natural Green, serving as Director of Finance from 1997 to 1998 and thereafter as Chief Financial Officer. From 1992 to 1996, Ms. Wu was a Director of Finance for our subsidiary Shengya Veterinary Medicine, which was owned by Shandong Group prior to our acquisition in 2004. Ms. Wu graduated from Qufu Industrial College in 1995 with a Bachelor's Degree in Accounting. 

 

Yuyi Liu. Mr. Liu Mr. Liu is the Financial Officer of Qufu Shengren since April, 2015, previously, Mr. Liu has server as the Accounting Manager for Qufu Shengwang Stevia Biology and Science Co., Ltd. from 2012 to 2015 and the Accounting Manager for Qufu Natural Green from 2004 to 2012, both were wholly owned subsidiaries of the Company. Mr. Liu has over sixteen years of experience in the industry and is very familiar with the Company’s production and operations. 

 

There are no family relationships between any of the executive officers and directors. Each director is elected at our annual meeting of stockholders and holds office until the next annual meeting of stockholders, or until his successor is elected and qualified. 

 

Director Qualifications

 

The following is a discussion for each director of the specific experience, qualifications, attributes or skills that led to our conclusion that such person should be serving as a member of our Board of Directors as of the date of this annual report in light of our business and structure.  In addition to their individual skills and backgrounds which are focused on our industry as well as financial and managerial experience, we believe that the collective skills and experience of our Board members are well suited to guide us as we continue to grow our company.   

 

Chunchun Wang.  Mr. Wang has over 17 years of operational experience in our industry. 

 

Yuyi Liu.  Mr. Lai has over 18 years of experience in the industry and is very familiar with the Company’s operations.

 

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Stockholders Agreement - Election of Directors

 

On February 5, 2009, as part of the Securities Purchase Agreement we entered into with WILD Flavors, we entered into a stockholders agreement with WILD Flavors and certain of our shareholders who owned approximately 34% of our common stock at the time the agreement was entered into. The stockholders agreement provides that so long as WILD Flavors owns at least 4,000,000 shares of our common stock, the parties to that agreement will vote or cause their shares of our common stock to be voted to elect two members of our Board of Directors designated by WILD Flavors and three members designated by our shareholders who are a party to the stockholders agreement.  As of the date of this report, WILD Flavors has not designated anyone to be appointed to our Board of Directors.

 

Compliance with Section 16(a) of the Exchange Act

 

Based solely upon a review of Forms 3 and 4 and amendments thereto furnished to us under Rule 16a-3(d) of the Securities Exchange Act of 1934 during the fiscal year ended April 30, 2022 and Forms 5 and amendments thereto furnished to us with respect to the fiscal year ended April 30, 2022, as well as any written representation from a reporting person that no Form 5 is required, we are not aware that any officer, director or 10% or greater shareholder failed to file on a timely basis, as disclosed in the aforementioned Forms, reports required by Section 16(a) of the Securities Exchange Act of 1934 during the fiscal year ended April 30, 2022.

 

Code of Business Conduct and Ethics

 

In April 2005, we adopted a Code of Ethics applicable to our Chief Executive Officer, principal financial and accounting officers and persons performing similar functions. A Code of Ethics is a written standard designed to deter wrongdoing and to promote:

 

	-		honest and ethical conduct;
	-		full, fair, accurate, timely and understandable disclosure in regulatory filings and public statements;
	-		compliance with applicable laws, rules and regulations;
	-		the prompt reporting violation of the Code; and
	-		accountability for adherence to the Code.

 

A copy of our Code of Ethics is filed as an exhibit to this annual report and we will provide a copy, without charge, to any person desiring a copy of the Code of Ethics, by written request to us at our principal office, attention: Corporate Secretary.

 

Committees of the Board of Directors and Independence

 

Our Board of Directors has not yet established an Audit Committee, a Compensation Committee, a Nominating Committee or any committee performing a similar function. The functions of those committees are being undertaken by the entire board as a whole. Because we do not have any independent directors, our Board of Directors believes that the establishment of committees of the Board would not provide any benefits to our company and could be considered more form than substance.

 

We do not have a policy regarding the consideration of any director candidates which may be recommended by our stockholders, including the minimum qualifications for director candidates, nor has our Board of Directors established a process for identifying and evaluating director nominees. We have not adopted a policy regarding the handling of any potential recommendation of director candidates by our stockholders, including the procedures to be followed. Our Board has not considered or adopted any of these policies as we have never received a recommendation from any stockholder for any candidate to serve on our Board of Directors. Given that all our operations are located in the PRC and our lack of directors and officers insurance coverage, we do not anticipate that any of our stockholders will make such a recommendation in the near future. While there have been no nominations of additional directors proposed, in the event such a proposal is made, all members of our Board will participate in the consideration of director nominees.

 

None of our directors is an "audit committee financial expert" within the meaning of Item 407(d)(5) of Regulation S-K. In general, an "audit committee financial expert" is an individual member of the audit committee or Board of Directors who:

 

	-		understands generally accepted accounting principles and financial statements;
	-		is able to assess the general application of such principles in connection with accounting for estimates, accruals and reserves;
	-		has experience preparing, auditing, analyzing or evaluating financial statements comparable to the breadth and complexity to our financial statements;
	-		understands internal controls over financial reporting; and
	-		understands audit committee functions.

 

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Since the reverse acquisition of our company by Sunwin Tech in April 2004 our Board of Directors has been comprised of individuals who are members of our management or otherwise affiliated with our company. While we would prefer that one or more of our directors be an audit committee financial expert, none of our current directors have professional backgrounds in either finance or accounting.

 

All of our current management is located in the PRC and no member of our Board of Directors has previously served as an officer or a director of a U.S. public company. As a result of both the cultural differences between doing business in the PRC and doing business as a public company in the U.S., as well as the lack of experience of our Board of Directors with laws, rules and regulations which apply to public companies in the U.S., we are seeking to expand our Board of Directors to include qualified individuals who are also residents of the U.S. to serve as independent directors. At such time as we are able to attract additional members to our Board of Directors which include one or more independent directors, we intend to establish an Audit Committee of our Board of Directors. It is our intention that one or more of these independent directors will also qualify as an audit committee financial expert. Our securities are not quoted on a stock exchange that has requirements that a majority of our Board members be independent and we are not currently otherwise subject to any law, rule or regulation requiring that all or any portion of our Board of Directors include "independent" directors, nor are we required to establish or maintain an Audit Committee or other committee of our Board of Directors.

 

Board oversight in risk management

 

Risk is inherent with every business, and how well a business manages risk can ultimately determine its success.  We face a number of risks, including liquidity risk, operational risk, strategic risk and reputation risk.  Our Chief Executive Officer also serves as one of our three directors and we do not have a lead director.  In the context of risk oversight, at the present stage of our operations we believe that our selection of one person to serve in both positions provides the Board with additional perspective which combines the operational experience of a member of management with the oversight focus of a member of the Board. The business and operations of our company are managed by our Board as a whole, including oversight of various risks that our company faces. Because our Board is comprised of members of our management, these individuals are responsible for both the day-to-day management of the risks we face as well as the responsibility for the oversight of risk management.

 

ITEM 11.

EXECUTIVE COMPENSATION.

 

Outstanding Equity Awards at Fiscal Year End

 

The following table provides information concerning unexercised options, stock that has not vested and equity incentive plan awards for each named executive officer outstanding as of April 30, 2022: 

 

OPTION AWARDS																					STOCK AWARDS
Name	Number of securities underlying unexercised options (#) exercisable				Number of securities underlying unexercised options (#) unexercisable				Equity incentive plan awards: Number of securities underlying unexercised unearned options (#)				Option exercise price ($)				Option expiration date				Number of shares or units of stock that have not vested (#)				Market value of shares or units of stock that have not vested ($)				Equity incentive plan awards: Number of unearned shares, units or other rights that have not vested (#)				Equity incentive plan awards: Market or payout value of unearned shares, units or other rights that have not vested (#)
Chunchun Wang			0				0				0				0				0				0				0				0				0
Fanjun Wu			0				0				0				0				0				0				0				0				0

 

 

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2015 Equity Compensation Plan

 

On May 11, 2015, our board of directors authorized our 2015 Equity Compensation Plan (the "2015 Plan"). The purpose of the 2015 Plan is to enable us to offer to our employees, officers, directors and consultants, whose past, present and/or potential contributions to our company have been, are or will be important to our success, an opportunity to acquire a proprietary interest in our company. We have initially reserved 25,000,000 shares of our common stock for issuance upon awards to be made under the 2015 Plan. The maximum number of shares of common stock which may be subject to awards under the 2015 Plan made to individuals who are neither officers, directors nor employees of our company is limited to 2,500,000 shares. The 2015 Plan also contains an "evergreen formula" pursuant to which the number of shares of common stock available for issuance under the 2015 Plan will automatically increase on the first trading day of January each calendar year during the term of the 2015 Plan beginning with calendar year 2016 providing that we have sufficient authorized but unissued and unreserved shares of our common stock available, by an amount equal to 1.5% of the total number of shares of common stock outstanding on the last trading day in December of the immediately preceding calendar year, up to a maximum annual increase of 375,000 shares of common stock. Currently, there are no shares available to be issued or options outstanding under the 2015 Equity Compensation Plan.

 

Director Compensation

 

We do not have a policy establishing compensation arrangements for members of our Board of Directors and no Board member received any compensation for his or her services during the fiscal year ended April 30, 2022 other than their regular employee compensation.

 

ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

 

On August 10, 2022 we had 199,632,803 shares of common stock issued and outstanding. The following table sets forth information known to us as of August 10, 2022 relating to the beneficial ownership of shares of our common stock by:

 

	-		each person who is known by us to be the beneficial owner of more than five percent of our outstanding common stock;
	-		each director;
	-		each named executive officer; and
	-		all named executive officers and directors as a group.

 

Unless otherwise indicated, the business address of each person listed is in care of 6 Shengwang Avenue, Qufu, Shandong, China 273100. We believe that all persons named in the table have sole voting and investment power with respect to all shares of common stock shown as being owned by them. Under securities laws, a person is considered to be the beneficial owner of securities owned by them (or certain persons whose ownership is attributed to them) and that can be acquired by them within 60 days from that date, including upon the exercise of options, warrants or convertible securities. We determine a beneficial owner's percentage ownership by assuming that options, warrants or convertible securities that are held by them, but not those held by any other person, and which are exercisable within 60 days of the that date, have been exercised or converted.

 

NAME OF BENEFICIAL OWNER	AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP	% OF CLASS
Chunchun Wang	-	-
Fanjun Wu	1,732,052	0.9%
Yuyi Liu	-	-
All officers and directors as a group (three persons)	1,732,052	0.9%

 

 

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Securities Authorized for Issuance under Equity Compensation Plans

 

The following table sets forth securities authorized for issuance under any equity compensation plans approved by our shareholders as well as any equity compensation plans not approved by our shareholders as of April 30, 2022. 

 

Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)

Weighted average exercise price of outstanding options, warrants and rights (b)

Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c)

Plan category

Plans approved by our shareholders:

2005 Equity Compensation Plan *

0

N/A

0

2006 Equity Compensation Plan *

0

N/A

0

2008 Equity Compensation Plan *

0

N/A

0

2012 Equity Compensation Plan *

0

N/A

0

2015 Equity Compensation Plan

0

N/A

0

Plans not approved by shareholders:

None.

 *Equity compensation plan was retired.

 

ITEM 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

 

Related Party Transactions

 

From time to time, we received advances from related parties for working capital purposes and repaid funds to related parties. During the fiscal years ended April 30, 2022 and 2021, we received advances from related parties for working capital that totaled $4,851,127 and $13,211,425 respectively, and we repaid to related parties a total of $3,591,580 and $9,017,852, respectively.

 

The Company mainly finances its operations through proceeds borrowed from related parties. As of April 30, 2022 and 2021, due to related parties consisted the following:

 

	April 30, 2022	April 30, 2021
Pharmaceutical Corporation	$4,646,092	$3,484,266
Qufu Shengwang Import and Export	-	6,140,404
Weidong Chai	236,070	218,966
Total	$4,882,162	$9,843,636

 

On September 23, 2019, the Company borrowed a one-year loan of RMB1,221,000 (approximately $189,000) from Weidong Cai, bearing an annual interest rate of 10%. On September 23, 2021 and 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 $189,000) to RMB1,477,410 (approximately $224,000).

 

Director Independence

 

None of our directors are considered independent within The NASDAQ Stock Market's director independence standards pursuant to Marketplace Rule 5605.

 

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ITEM 14.

PRINCIPAL ACCOUNTANT FEES AND SERVICES.

RBSM LLP served as our independent registered public accounting firm for the fiscal years ended April 30, 2022 and 2021. The following table shows the fees that were billed for the audit and other services provided by such firm for the fiscal years ended April 30, 2022 and 2021.

 

	2022	2021
Audit Fees	$106,000	$92,000
Audit - Related Fees	-	-
Tax Fees	-	-
All Other Fees	-	-
	$106,000	$92,000

 

Audit Fees - This category includes the audit of our annual financial statements, review of financial statements included in our quarterly reports on Form 10-Q and services that are normally provided by the independent auditors in connection with engagements for those fiscal years. This category also includes advice on audit and accounting matters that arose during, or as a result of, the audit or the review of interim financial statements.

 

Audit-Related Fees - This category consists of assurance and related services by the independent auditors that are reasonably related to the performance of the audit or review of our financial statements and are not reported above under Audit Fees." The services for the fees disclosed under this category include consultation regarding our correspondence with the SEC and other accounting consulting.

 

Tax Fees - This category consists of professional services rendered by our independent auditors for tax compliance and tax advice. The services for the fees disclosed under this category include tax return preparation and technical tax advice.

 

All Other Fees - This category consists of fees for other miscellaneous items.

 

Our Board of Directors has adopted a procedure for pre-approval of all fees charged by our independent auditors. Under the procedure, the Board approves the engagement letter with respect to audit, tax and review services. Other fees are subject to pre-approval by the Board, or, in the period between meetings, by a designated member of Board. Any such approval by the designated member is disclosed to the entire Board at the next meeting. 

 

PART IV

 

ITEM 15.

EXHIBITS, FINANCIAL STATEMENT SCHEDULES.

 

a) The following documents are filed as a part of this report or are incorporated by reference to previous filings, if so indicated

 

Exhibit No.			Description of Exhibit
	2.1		Agreement and Plan of Merger dated March 28, 2012 between Sunwin International Neutraceuticals, Inc. and Sunwin Stevia International, Inc. (Incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K as filed on April 20, 2012).
	3.1		Articles of Incorporation (Incorporated by reference to the Annual Report on Form 10-KSB for the fiscal year ended April 30, 2000).
	3.2		Certificate of Amendment to Articles of Incorporation (Incorporated by reference to the Form 8-K/A as filed on July 30, 2004).
	3.3		By-Laws (Incorporated by reference to the Annual Report on Form 10-KSB for the fiscal year ended April 30, 2000).
	3.4		Articles of Merger as filed with the Secretary of State of Nevada on March 29, 2012 (Incorporated by reference to Exhibit 3.3 to the Current Report on Form 8-K as filed on April 20, 2012).
	4.1		Form of $0.65 common stock purchase warrant (Incorporated by reference to the Report on Form 8-K as filed on March 23, 2007).
	4.2		Common Stock Purchase Warrant between Sunwin International Neutraceuticals, Inc. and Wild Flavors, Inc. dated February 5, 2009 (Incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K as filed on February 11, 2009).

 

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	4.3		Stockholders Agreement dated February 5, 2009 Sunwin International Neutraceuticals, Inc., Laiwang Zhang, Dongdong Lin, Xingyuan Li, Junzhen Zhang, Xiangsheng Kong, Weidong Chai, Laiwang Zhang, Fanjun Wu and Wild Flavors, Inc. (Incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K as filed on February 11, 2009).
	10.1		Share Exchange Agreement dated April 30, 2004 between Network USA, Inc. and the stockholders of Sunwin Tech Group, Inc. (Incorporated by reference to the Report on Form 8-K as filed with on May 12, 2004).
	10.2		Stock Purchase Agreement between Sunwin Tech Group, Inc., Qufu Natural Green Engineering Company, Limited and Shandong Shengwang Pharmaceutical Group Corporation (Incorporated by reference to the Annual Report on Form 10-K for the fiscal year ended April 30, 2004).
	10.3	+	2005 Equity Compensation Plan (Incorporated by reference to the Report on Form 8-K as filed on April 28, 2005).
	10.4		Lease agreement dated October 1, 2002 between Shandong Shengwang Pharmaceutical Corporation and Qufu Natural Green Engineering Co., Ltd. (Incorporated by reference to the Annual Report on Form 10-KSB/A for the fiscal year ended April 30, 2005).
	10.5		Lease agreement dated October 6, 2002 between Qufu LuCheng Chiya Resident Commitment and Qufu Natural Green Engineering Co., Ltd. (Incorporated by reference to the Annual Report on Form 10-KSB/A for the fiscal year ended April 30, 2005).
	10.6		Lease agreement dated April 1, 2004 between Qufu ShengDa Industry Co., Ltd. and Qufu Natural Green Engineering Co., Ltd.( Incorporated by reference to the Annual Report on Form 10-KSB/A for the fiscal year ended April 30, 2005).
	10.7		Stock Purchase Agreement dated February 7, 2006 between Sunwin International Neutraceuticals, Inc., Qufu Natural Green Engineering Company and Shandong Shengwang Pharmaceutical Group Corporation (Incorporated by reference to the Quarterly Report on Form 10-QSB for the period ended January 31, 2006).
	10.8		2006 Equity Compensation Plan (Incorporated by reference to the Quarterly Report on Form 10-QSB for the period ended January 31, 2006).
	10.9		Consulting Agreement between China Direct Investments, Inc. and Sunwin International Neutraceuticals, Inc dated April 22, 2011 (Incorporated by reference to the Exhibit 10.21 to the Quarterly Report on Form 10-Q for the period ended July 31, 2011).
	10.10		Acquisition Agreement by and among Qufu Natural Green Engineering Co., Ltd. and Qufu Shengwang Stevia Biology and Science Co., Ltd. and Shandong Shengwang Group, Co., Ltd. dated June 30, 2008 (Incorporated by reference to Exhibit 10.13 to the Current Report on Form 8-K as filed on July 7, 2008).
	10.11		Stock Sale And Purchase Agreement between Sunwin International Neutraceuticals, Inc. and Shandong Shengwang Group Co., Ltd. (Incorporated by reference to Exhibit 10.14 to the Current Report on Form 8-K as filed on July 7, 2008).
	10.12		Amendment to the June 30, 2008 Acquisition Agreement by and among Qufu Natural Green Engineering Co., Ltd. and Qufu Shengwang Stevia Biology and Science Co., Ltd. and Shandong Shengwang Group Co., Ltd. dated September 2, 2008. (Incorporated by reference to Exhibit 10.15 to the Current Report on Form 8-K as filed on September 8, 2008).
	10.13		Amendment to the June 30, 2008 Stock Sale and Purchase Agreement between Sunwin International Neutraceuticals, Inc. and Shandong Shengwang Group Co., Ltd. dated September 2, 2008 (Incorporated by reference Exhibit 10.16 to the Current Report on Form 8-K as filed on September 8, 2008).
	10.14		November 18, 2008 Second Amendment to Acquisition Agreement by and among Qufu Natural Green Engineering Co., Ltd. and Qufu Shengwang Stevia Biology and Science Co., Ltd. and Shandong Shengwang Group, Co., Ltd. dated as of June 30, 2008 (Incorporated by reference Exhibit 10.19 to the Current Report on Form 8-K as filed on November 26, 2008).
	10.15		November 18, 2008 Second Amendment to Stock Sale And Purchase Agreement between Sunwin International Neutraceuticals, Inc. and Shandong Shengwang Group Co., Ltd. dated as of June 30, 2008 (Incorporated by reference Exhibit 10.20 to the Current Report on Form 8-K as filed on November 26, 2008).
	10.16		Securities Purchase Agreement between Sunwin International Neutraceuticals, Inc. and Wild Flavors, Inc. dated February 5, 2009 (Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K as filed on February 11, 2009).
	10.17		Form of Operating Agreement between Sunwin International Neutraceuticals, Inc. and Wild Flavors, Inc. (Incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K as filed on February 11, 2009).
	10.18		Distributorship Agreement dated February 5, 2009 among Sunwin International Neutraceuticals, Inc., Sunwin Stevia International Corp. and Wild Flavors, Inc. (Incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K as filed on February 11, 2009).
	10.19		Consulting and Management Agreement between Sunwin International Neutraceuticals, Inc. and China Direct Investments, Inc. dated as of April 29, 2009. (Incorporated by reference to Exhibit 10.24 to the Annual Report on Form 10-K filed on July 29, 2009).
	10.20		Stock Sale and Purchase Agreement dated June 29, 2010 among Qufu Natural Green Engineering, Shengya Veterinary Medicine Co., Ltd., and Mr. Laiwang Zhang (Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on July 7, 2010).

 

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	10.21		Stock Transfer Agreement between Korea Stevia Co, Ltd. and Qufu Shengwang Stevia Biology and Science Co., Ltd. dated September 30, 2011 (Incorporated by reference to Exhibit 10.22 to the Quarterly Report on Form 10-Q for the period ended October 31, 2011).
	10.22		Commercial Housing Purchase and Sale Contract between Qufu Jinxuan Real Estate Development Co., Ltd. and Qufu Natural Green Engineering Co., Ltd. dated August 25, 2011 (Incorporated by reference to Exhibit 10.23 to the Quarterly Report on Form 10-Q for the period ended October 31, 2011).
	10.23		Loan Agreement dated November 18, 2011 by and between Qufu Natural Green Engineering Co., Ltd. and Shandong Shengwang Pharmaceutical Co., Ltd. (Incorporated by reference to Exhibit 10.24 to the Quarterly Report on Form 10-Q for the period ended January 31, 2012).
	10.24		Supplier Agreement dated December 2, 2012 by and between Sunwin International Neutraceuticals, Inc. and Domino Foods, Inc. (Incorporated by reference to Exhibit 10.25 to the Quarterly Report on Form 10-Q for the period ended January 31, 2012).
	10.25		Loan Agreement dated December 16, 2011 by and between Qufu Natural Green Engineering Co., Ltd. and Shandong Anda Bio-Tech Co., Ltd. (Incorporated by reference to Exhibit 10.26 to the Quarterly Report on Form 10-Q for the period ended January 31, 2012).
	10.26		Confirmation of Amendment to Loan Agreement with Shandong Shengwang Pharmaceutical Co., Ltd. (Incorporated by reference to Exhibit 10.27 to the Quarterly Report on Form 10-Q for the period ended January 31, 2012).
	10.27		Loan agreement dated December 22, 2010 between Sunwin International Neutraceuticals, Inc. and CDI China, Inc.
	10.28		Cooperation Agreement dated July 1, 2012 by and between Hegeng (Beijing) Organic Farm Technology Co.,Ltd. and Qufu Shengwang Stevia Biology and Science Co. Ltd.
	10.29		Consulting agreement dated May 5, 2015 by and between Yuejian Wang and Sunwin Stevia International, Inc.
	10.30		Translation of the Metformin Production Line Operation Management Agreement dated July 10, 2019
	10.31		Translation of the Asset Transfer Agreement dated July 30, 2019
	14.1		Code of Ethics (Incorporated by reference to Exhibit 14 to the Registration Statement on Form SB-2 as filed on May 27, 2005).
	16.1		Letter dated December 6, 2013 from RBSM LLP (incorporated by reference to the Current Report on Form 8-K as filed on December 9, 2013).
	21.1		Subsidiaries of the registrant.*
	31.1		Section 302 Certification of Chief Executive Officer.*
	31.2		Section 302 Certification of Chief Financial Officer.*
	32.1		Section 906 Certificate of Chief Executive Officer and Chief Financial Officer.*
101.INS			XBRL INSTANCE DOCUMENT*
101.SCH			XBRL TAXONOMY EXTENSION SCHEMA*
101.CAL			XBRL TAXONOMY EXTENSION CALCULATION LINKBASE*
101.DEF			XBRL TAXONOMY EXTENSION DEFINITION LINKBASE*
101.LAB			XBRL TAXONOMY EXTENSION LABEL LINKBASE*
101.PRE			XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE*

 

+ Management contract or compensatory plan or arrangement.

* filed herewith

 

 

-29-

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SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

	Sunwin Stevia International, Inc.
August 10, 2022	By:	/s/ Chunchun Wang
		Chunchun Wang, Chief Executive Officer
August 10, 2022	By:	/s/ Fanjun Wu
		Fanjun Wu, Chief Financial Officer

 

 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

Signature	Title	Date
/s/ Chunchun Wang	Chief Executive Officer and Director (principal executive officer)	August 10, 2022
Chunchun Wang
/s/ Fanjun Wu	Chief Financial Officer (principal financial and accounting officer)	August 10, 2022
Fanjun Wu
/s/ Yuyi Liu	Director	August 10, 2022
Yuyi Liu

 

-30-

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

 

 

	Page
Report of Independent Registered Public Accounting Firm	F - 2
Consolidated Financial Statements:
Consolidated Balance Sheets	F - 3
Consolidated Statements of Operations and Comprehensive Loss	F - 4
Consolidated Statement of Changes in Stockholders' Equity	F - 5
Consolidated Statements of Cash Flows	F - 6
Notes to Consolidated Financial Statements	F- 7 to F - 20

 

 

F - 1

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors and Stockholders of

Sunwin Stevia International, Inc.

 

Opinion on the Financial Statements

 

We have audited the accompanying consolidated balance sheets of Sunwin Stevia International, Inc. and Subsidiaries (the "Company") as of April 30, 2022 and 2021, and the related consolidated statements of operations and comprehensive loss, changes in stockholders' equity, and cash flows for each of the two years in the period ended April 30, 2022, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of April 30, 2022 and 2021, and the results of its operations and its cash flows for each of the two years in the period ended April 30, 2022, in conformity with accounting principles generally accepted in the United States of America.

 

The Company's Ability to Continue as a Going Concern

 

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has a significant accumulated deficit, incurred recurring losses and, generated negative cash flow from operating activities. These raise substantial doubt about the Company's ability to continue as a going concern. Management's plans, with respect to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

Basis for Opinion

 

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

 

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

Critical Audit Matters

 

Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements, and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

 

We did not identify any critical audit matters during the course of our audit for the year ended April 30, 2022.

 

 

/s/ RBSM LLP

 

We have served as the Company's auditors since 2013.

 

New York, New York

August 10, 2022

Firm ID: 587

 

F - 2

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SUNWIN STEVIA INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
	April 30, 2022	April 30, 2021
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$321,193	$1,565,829
Accounts receivable, net	7,404,669	1,693,801
Accounts receivable - related party	-	5,999,791
Inventories, net	5,564,044	12,930,461
Prepaid expenses and other current assets	2,765,819	661,882
Total Current Assets	16,055,725	22,851,764
Property and equipment, net	7,485,733	9,217,115
Land use rights, net	1,950,204	-
Total Assets	$25,491,662	$32,068,879
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses	$12,215,238	$11,141,408
Short-term loans	4,907,506	2,955,304
Due to related parties	4,882,162	9,843,636
Total Current Liabilities	22,004,906	23,940,348
Total Liabilities	22,004,906	23,940,348
Commitments and Contingencies	-	-
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 April 30, 2022 and 2021, respectively	199,633	199,633
Additional paid-in capital	47,732,350	47,732,350
Accumulated deficit	(46,267,397)	(43,357,208)
Accumulated other comprehensive income	5,162,418	5,193,512
Total Sunwin Stevia International, Inc. Stockholders' Equity	6,827,004	9,768,287
Noncontrolling interest	(3,340,248)	(1,639,756)
Total Equity	3,486,756	8,128,531
Total Liabilities and Equity	$25,491,662	$32,068,879
The accompanying notes are an integral part of these consolidated financial statements

 

F - 3

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SUNWIN STEVIA INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
	For the Years Ended April 30, 2021
	2022	2021
Revenues	$35,261,479	$17,216,385
Revenues - related party	-	8,162,450
Total revenues	35,261,479	25,378,835
Cost of revenues	32,156,584	17,106,712
Cost of revenues - related party	-	9,407,847
Total cost of revenues	32,156,584	26,514,559
Gross profit	3,104,895	(1,135,724)
Operating expenses:
Selling expenses	1,909,651	1,391,587
General and administrative expenses	1,895,440	1,433,927
Research and development expenses	2,763,854	1,119,574
Loss on disposition of property and equipment	590,503	-
Total operating expenses, net	7,159,448	3,945,088
Loss from operations	(4,054,553)	(5,080,812)
Other income (expenses)
Other income (expenses)	(63,052)	84,947
Interest income	2,967	993
Interest expense - related parties	(22,215)	(32,290)
Interest expense	(456,735)	(222,113)
Total other expense, net	(539,035)	(168,463)
Loss from operations before income taxes	(4,593,588)	(5,249,275)
Provision for income taxes	-	-
Net loss	$(4,593,588)	$(5,249,275)
Less: net loss attributable to noncontrolling interest	(1,683,399)	(2,010,461)
Net loss attributable to Sunwin Stevia International, Inc.	$(2,910,189)	$(3,238,814)
Comprehensive income (loss):
Net loss	$(4,593,588)	$(5,249,275)
Foreign currency translation adjustment	(48,187)	1,006,319
Total comprehensive loss	(4,641,775)	(4,242,956)
Less: comprehensive loss attributable to noncontrolling interest	(1,700,492)	(1,639,756)
Comprehensive loss attributable to Sunwin Stevia International, Inc.	$(2,941,283)	$(2,603,200)
Earnings per common share attributable to Sunwin Stevia International, Inc.:
Net loss per common share attributable to Sunwin Stevia International, Inc. - basic and diluted	$(0.01)	$(0.02)
Weighted average common shares outstanding – basic and diluted	199,632,803	199,632,803
The accompanying notes are an integral part of these consolidated financial statements

 

F - 4

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SUNWIN STEVIA INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(UNAUDITED)
	For the Year Ended April 30,
	2022	2021
Total equity, beginning balances	$8,128,531	$12,371,487
Common stock and additional paid-in capital:
Beginning balances	47,931,983	47,931,983
Common stock issued	-	-
Ending balances	47,931,983	47,931,983
Accumulated deficit
Beginning balances	(43,357,208)	(40,118,394)
Net loss	(2,910,189)	(3,238,814)
Ending balances	(46,267,397)	(43,357,208)
Accumulated other comprehensive income/(loss):
Beginning balances	5,193,512	4,557,898
Foreign currency translation adjustment	(31,094)	635,614
Ending balances	5,162,418	5,193,512
Noncontrolling Interest:
Beginning balances	(1,639,756)	-
Net loss	(1,683,399)	(2,010,461)
Accumulated other comprehensive income/(loss)	(17,093)	370,705
Ending balances	(3,340,248)	(1,639,756)
Total equity, ending balances	$3,486,756	$8,128,531
The accompanying notes are an integral part of these consolidated financial statements

 

 

F - 5

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SUNWIN STEVIA INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
	For the Years Ended April 30,
	2022	2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$(4,593,588)	$(5,249,275)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization expenses	1,475,366	1,339,581
Allowance for doubtful accounts	-	13,051
Impairment for obsolete inventories	331,443	1,276,893
Loss on disposition of property and equipment	590,503	-
Changes in operating assets and liabilities:
Accounts receivable	151,365	1,195,885
Accounts receivable - related party	-	(2,585,789)
Inventories	6,994,959	(217,854)
Prepaid expenses and other current assets	(2,174,918)	95,376
Accounts payable and accrued expenses	(5,161,431)	1,890,082
Taxes payable	501,451	38,442
NET CASH USED IN OPERATING ACTIVITIES	(1,884,850)	(2,203,608)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment	(412,935)	(765,549)
Purchases of land use rights	(2,068,020)	-
Proceed from disposal of equipment	9,105	-
NET CASH USED IN INVESTING ACTIVITIES	(2,471,850)	(765,549)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from loans	2,628,506	20,792
Repayment of short-term loans	(780,007)	(922,255)
Advance from related parties	4,851,127	13,211,425
Repayment of related party advances	(3,591,580)	(9,017,852)
NET CASH PROVIDED BY FINANCING ACTIVITIES	3,108,046	3,292,110
EFFECT OF EXCHANGE RATE ON CASH	4,018	104,956
NET (DECREASE) INCREASE IN CASH	(1,244,636)	427,909
Cash at the beginning of year	1,565,829	1,137,920
Cash at the end of year	321,193	1,565,829
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:
Cash paid for interest	$31,352	$23,846
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Property and equipment acquired on credit as payable	$3,543	$6,243
Payment for equipment offsets part of rental income	$-	$54,860
Accrued interest enrolled into debt	$213,866	$203,126
Accrued interest payable to related party	$22,215	$19,226
The accompanying notes are an integral part of these consolidated financial statements

 

F - 6

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NOTE 1 - ORGANIZATION, NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

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.

 

For the fiscal years ended April 30, 2022 and 2021, our subsidiaries included in operations consisted of the following:

 

-    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"), 61.3% owned by Qufu Natural;

-   Sunwin USA, LLC ("Sunwin USA"), wholly owned by Sunwin Stevia International; and

-  Qufu Shengren Import and Export Co., Ltd. (“Qufu Shengren Import and Export”), wholly owned subsidiary of Qufu Shengren.

 

Qufu Shengren

 

In fiscal year 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. This drug not only has hypoglycemic effect, but also may have the effect of reducing body weight and hyperinsulinemia. It can be effective in patients with poor efficacy of certain sulfonylureas, such as sulfonylureas, intestinal glycosidase inhibitors or thiazolidinedione hypoglycemic agents. It can also be used in patients with insulin therapy to reduce insulin consumption. On July 10, 2019, the Company entered into the Metformin Production Line Operation Management Agreement with an unaffiliated individual to operate the Metformin production line.

 

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 approximately $1,625,874, which includes the issuance of 7,666,666 shares of our common stock valued at approximately $1,533,333 and a cash payment of $92,541. The purchase included the product development and supply chain for OnlySweet.

 

BASIS OF PRESENTATION

 

The accompanying 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 with the rules and regulations of the U.S. Securities and Exchange Commission for financial information. All significant intercompany accounts and transactions have been eliminated in consolidation.

 

F - 7

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USE OF ESTIMATES

 

The preparation of 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 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.  Actual results could differ from those estimates.

 

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 $3,340,248 and $1,639,756 as of April 30, 2022 and 2021.

 

CASH AND CASH EQUIVALENTS

 

Cash includes cash on hand and cash in time deposits, certificates of deposit and all highly liquid instruments with original maturities of three months or less.

 

CONCENTRATIONS OF CREDIT RISK

 

Substantially all of our operations are carried out in the PRC. Accordingly, our business, financial condition and results of operations may be influenced by the political, economic and legal environment in the PRC, and by the general state of the PRC's economy. Our operations in the PRC are subject to specific considerations and significant risks not typically associated with companies in North America. Our results may be adversely affected by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things.

 

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 China. As of April 30, 2022 and 2021, we had $303,160 and $1,403,969 cash held in PRC bank accounts, respectively.  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 $76,000), As a result, cash held in PRC financial institutions of $119,250 is not insured. We have not experienced any losses in such accounts through April 30, 2022.

 

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.

 

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 April 30, 2022 and 2021, we have no bad debt expense for allowance of doubtful accounts.

 

F - 8

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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. Adjustments are recorded to write down the carrying amount of any obsolete and excess inventory to its estimated net realizable value. We continually evaluate the recoverability based on assumptions about future customer demand and market conditions. 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. In the fiscal years ended April 30, 2022 and 2021, the Company wrote down inventories of $331,443 and $1,276,893, 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 Accounting Standards Codification ("ASC"), 360-10-35-17 of the Financial Accounting Standards Board (FASB), we examine the possibility of decreases in the value of property and equipment when events or changes in circumstances reflect the fact that their recorded value may not be recoverable.

 

The residual value rate and useful life of property and equipment are summarized as follows:

 

Property and Equipment	Residual value rate	Useful life
Office equipment	10% or 5% or 0%	3-15 years
Auto and trucks	10% or 5% or 0%	2-10 Years
Manufacturing equipment	10% or 5% or 0%	2-15 Years
Buildings	10% or 5% or 0%	5-30 Years

 

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 continuing operating and we recorded a loss of sale of disposed equipment. The Company recorded a loss on disposition of equipment of $590,503 and $nil for the fiscal years ended April 30, 2022 and 2021, respectively.

 

FAIR VALUE OF FINANCIAL INSTRUMENTS

 

We follow the ASC Section 825-10-50-10 for disclosures regarding the fair value of financial instruments and have 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.

 

 

F - 9

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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, inventories, prepayments and other current assets, accounts payable and accrued expenses, and taxes payable, 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, which we are entitled to claim the VAT that we 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 April 30, 2022 and 2021 amounted to $812,545 and $330,738, respectively, consisted of VAT taxes, property taxes, income taxes and other 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 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.

 

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.

 

F - 10

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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 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 April 30, 2022, the Company had no uncertain tax positions, and will continue to evaluate for uncertain positions in the future.

 

BASIC AND DILUTED LOSS PER SHARE

 

Pursuant to ASC 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 us, subject to anti-dilution limitations. The following table presents a reconciliation of basic and diluted net income per ordinary share:

 

	For Fiscal Years Ended April 30,
	2022	2021
Numerator:
Net loss attributable to Sunwin Stevia International, Inc.	$(2,910,189)	$(3,238,814)
Denominator:
Denominator for basic earnings per share - weighted average number of common shares outstanding	199,632,803	199,632,803
Stock awards, options, and warrants	-	-
Denominator for diluted earnings per share - weighted average number of common shares outstanding	199,632,803	199,632,803
Basic and diluted loss per common share attributable to Sunwin Stevia International, Inc.:
Net loss per common share - basic and diluted	$(0.01)	(0.02)

 

 

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 statements of operations 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 and comprehensive loss. 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 April 30, 2022	RMB 6.59 to $1.00
As of April 30, 2021	RMB 6.47 to $1.00
Year ended April 30, 2022	RMB 6.41 to $1.00
Year ended April 30, 2021	RMB 6.73 to $1.00

 

F - 11

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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 fiscal years ended April 30, 2022 and 2021 included net loss and unrealized gains (losses) from foreign currency translation adjustments. 

 

STOCK-BASED COMPENSATION

 

Stock-based compensation is accounted for based on the requirements of the Share-Based Payment topic of ASC 718 which requires recognition in the financial statements of the cost of employee and director services received in exchange for an award of equity instruments over the period the employee or director is required to perform the services in exchange for the award (presumptively, the vesting period). ASC 718 also requires measurement of the cost of employee and director services received in exchange for an award based on the grant-date fair value of the award.

 

RESEARCH AND DEVELOPMENT

 

Research and development costs are expensed as incurred in the accompanying consolidated statements of operations and comprehensive loss. Research and development costs are incurred on a project specific basis. Research and development costs were $2,763,854 and $1,119,574 for fiscal years ended April 30, 2022 and 2021, respectively.

 

SHIPPING COSTS

 

Shipping costs are included in selling expenses and totaled $95,202 and $79,442 for the fiscal years ended April 30, 2022 and 2021, respectively.

 

ADVERTISING

 

Advertising is expensed as incurred and is included in selling expenses and totaled $nil and $51,670 for the fiscal years ended April 30, 2022 and 2021, respectively.

 

SEGMENT REPORTING

 

The Company uses the "management approach" in determining reportable operating segments. The management approach considers the internal organization and reporting used by the Company's chief operating decision maker for making operating decisions and assessing performance as the source for determining the Company's reportable segments. The Company's chief operating decision maker has been identified as the chief executive officer of the Company who reviews financial information of separate operating segments based on U.S. GAAP. The chief operating decision maker now reviews results analyzed by customer. This analysis is only presented at the revenue level with no allocation of direct or indirect costs. Consequently, the Company has determined that it has two operating segments.

 

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.

 

 

F - 12

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In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss methodology, which will result in more timely recognition of credit losses. ASU 2016-13 is effective for annual reporting periods, and interim periods within those years, beginning after December 15, 2019, excluding entities eligible to be smaller reporting company. For all other entities, the requirements are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. ASU 2016-13 has been amended by ASU 2019-04, ASU 2019-05, and ASU 2019-11. For entities that have not yet adopted ASU No. 2016-13, the effective dates and transition methodology for ASU 2019-04, ASU 2019-05, and ASU 2019-11 are the same as the effective dates and transition methodology in ASU 2016-13. The Company did not adopt this standard yet due to the status of smaller reporting company. We plan to adopt this standard for the year beginning May 1, 2023. We do not expect the adoption of this standard will have material impact on our 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 consolidated financial statements have been prepared assuming we will continue as a going concern. The report of our independent registered public accounting firm on our consolidated financial statements for the year ended April 30, 2022 contained a qualification as to our ability to continue as a going concern. For the year ended April 30, 2022, the Company has a net loss of approximately $4.6 million. The Company also has an accumulated deficit of $46.3 million and its 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 cannot provide assurance that we will ultimately achieve profitable operations or become cash flow positive, or raise additional debt and/or equity capital. Management believes that our capital resources are not currently adequate to continue operating and maintaining our business strategy for the fiscal year ending April 30, 2022 without raising additional funds through debt and/or equity capital financings.

  

NOTE 2 - INVENTORIES

 

As of April 30, 2022 and 2021, inventories consisted of the following:

 

	April 30, 2022	April 30, 2021
Raw materials	$2,417,724	$5,850,859
Work in process	1,029,797	3,220,583
Finished goods	2,116,523	3,859,019
Inventories, gross	5,564,044	12,930,461
Less: reserve for obsolete inventory	-	-
Total inventories, net	$5,564,044	$12,930,461

 

In the fiscal years ended April 30, 2022 and 2021, the Company wrote down inventories of $331,443 and $1,276,893, respectively. As a result, the Company had no reserve of obsolete inventories as of April 30, 2022 and 2021, respectively.

 

NOTE 3 - PREPAID EXPENSES AND OTHER CURRENT ASSETS

 

Prepaid expenses and other current assets as of April 30, 2022 and 2021 totaled $2,765,819 and $661,882, respectively. As of April 30, 2022, prepaid expenses and other current assets includes $1,510,032 prepayments to suppliers for merchandise that had not been shipped to us and services that had not been provided to us, $1,255,787 for business related employees' advances and advances to the third party. As of April 30, 2021, prepaid expenses and other current assets includes $435,006 prepayments to suppliers for merchandise that had not been shipped to us and services that had not been provided to us and $226,876 for business related employees' advances.

 

F - 13

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NOTE 4 - PROPERTY AND EQUIPMENT

 

As of April 30, 2022 and 2021, property and equipment consisted of the following:

 

	April 30, 2022	April 30, 2021
Office equipment	$434,867	$429,478
Auto and trucks	581,314	646,606
Manufacturing equipment	6,481,114	7,646,765
Buildings	9,452,467	10,476,629
Construction in process	17,200	17,522
Property and equipment, gross	16,966,962	19,217,000
Less: accumulated depreciation	(9,481,229)	(9,999,885)
Property and equipment, net	$7,485,733	$9,217,115

 

For the fiscal years ended April 30, 2022 and 2021, depreciation expense totaled $1,411,735 and $1,339,581, of which $1,209,196 and $1,142,787 were included in cost of revenues, respectively, and remainder was included in operating expenses. 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. The Company had a disposition of equipment in total amount of $590,503, and the Company received the proceeds from disposal of equipment of $9,105 for the fiscal year ended April 30, 2022. The Company did not have a disposition of equipment for the fiscal years ended April 30, 2021.

 

NOTE 5 – LAND USE RIGHTS

 

The Company acquired the land use rights for Qufu Shengren factory in cash. Qufu Shengren owns and operates a stevia facility with an annual production capable of 500 metric tons per year on 44,486 square meters (478,847 square feet) of land located in Qufu city, Shandong. The Company occupies this land pursuant to an asset acquisition agreement entered into with Shangdong Shengwang Pharmaceutical Co., Ltd. ("Pharmaceutical Corporation") to acquire the land use rights for this facility. The land use right was transferred from Pharmaceutical Corporation to Qufu Shengren, and the Company received Real Property Certificate issued by local government on May 18, 2021. The land use right expires in March 2054. The initial cost of this land use rights is RMB13,256,420 (approximately $2,012,000). We use the straight-line method for amortization over a period 33 years. During the fiscal years ended April 30, 2022, amortization expense amounted to $63,631. Land use right with net book value of $1,950,204 as of April 30, 2022.  

 

NOTE 6 - RELATED PARTY TRANSACTIONS

 

Related parties of the Company consist of the followings

 

-Mr. Weidong Chai, a legal representative of Qufu Natural Green; 

-Shandong Shengwang Pharmaceutical Co., Ltd. ("Pharmaceutical Corporation"), a Chinese limited liability company which Mr. Chai is the Chairman of Pharmaceutical Corporation; 

-Mr. Laiwang Zhang, former Chairman of the Board, resigned on September 7, 2021; and 

-Qufu Shengwang Import and Export Co., Ltd. ("Qufu Shengwang Import and Export"), a Chinese limited liability company, controlled by Mr. Laiwang Zhang. Due to recent changes in management personnel, Qufu Shengwang Import and Export is no longer considered a related party, and transactions with Qufu Shengwang Import and Export have been reclassified to third party transactions in fiscal 2022. 

 

Accounts receivable - related party and revenue - related party

 

As of April 30, 2022 and 2021, $nil and $5,999,791 in accounts receivable - related party, respectively, were related to sales of products to Qufu Shengwang Import and Export. For the fiscal year ended April 30, 2022 we did not have revenue and cost of revenue from related party, but we recorded revenue - related party and cost of revenue – related party of $8,162,450 and $9,407,847 the fiscal year ended April 30, 2021, respectively, from Qufu Shengwang Import and Export.

 

F - 14

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Due to related parties

 

The Company mainly finances its operations through proceeds borrowed from related parties. As of April 30, 2022 and 2021, due to related parties consisted the following:

 

	April 30, 2022	April 30, 2021
Pharmaceutical Corporation	$4,646,092	$3,484,266
Qufu Shengwang Import and Export	-	6,140,404
Weidong Chai	236,070	218,966
Total	$4,882,162	$9,843,636

 

On September 23, 2019, the Company borrowed a one-year loan of RMB1,221,000 (approximately $189,000) from Weidong Cai, bearing an annual interest rate of 10%. On September 23, 2021 and 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 $189,000) to RMB1,477,410 (approximately $224,000).

 

NOTE 7 - OPERATING LEASE

 

The Company leased Metformin production line including buildings, manufacturing equipment and construction in process to the third party lessee for five year, effective July 10, 2019. The lessee paid lease deposit of RMB1,000,000 (approximately $152,000) as guarantee and annual lease fee of RMB3,000,000 (approximately $455,000). The Company recorded revenues of $429,362 and $408,747 in fiscal 2022 and 2021, respectively.

 

NOTE 8 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES

 

Accounts payable and accrued expenses included the following as of April 30, 2022 and 2021:

 

Account	April 30, 2022	April 30, 2021
Accounts payable	$7,945,913	$8,155,842
Advanced from customers	121,183	143,695
Advanced from third parties*	1,208,900	-
Accrued salary payable	101,829	155,071
Tax payable	812,545	330,738
Other payable**	2,024,868	2,356,062
Total accounts payable and accrued expenses	$12,215,238	$11,141,408

 

* Advanced from third parties for working capital, bearing interest free and due on demands.

 

** As of April 30, 2022, other payables consists of general liability, worker's compensation, and medical insurance payable of $428,773, consulting and service fee payable of $206,007, union and education fees payable of $134,598, interest payables for short-term loans of $366,249, safety production fund payable of $627,138, advances from the employees of $106,253, deposit for operating lease of $151,784 and other miscellaneous payables of $4,066. As of April 30, 2021, other payables consists of general liability, worker's compensation, and medical insurance payable of $412,328, consulting and service fee payable of $209,871, union and education fees payable of $137,123, interest payables for short-term loans of $147,433, safety production fund payable of $262,449, advances from the employees of $159,909, deposit for operating lease of $154,631 and other miscellaneous payables of $872,318.

 

F - 15

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NOTE 9 – SHORT-TERM LOANS

 

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 and accrued interest converted into debt principal. As of April 30, 2022 and 2021, short-term loans totaled in the amounts of $4,907,506 and $2,955,304, respectively.

 

As of April 30, 2022 and 2021, short-term loans consisted of the following:

 

	April 30, 2022	April 30, 2021
Loan from Min Wu, an employee of Qufu Shengren, due on October 5, 2022, with an annual interest rate of 10%, renewed on October 6, 2021.	$ 33,393	$34,019
Loan from Jianjun Yan, due on October 6, 2022, with an annual interest rate of 10%, renewed on October 7, 2021.	1,626,763	1,506,610
Loan from Jianjun Yan, due on March 31, 2022, with annual interest rate of 4%, partially repaid RMB4,500,000 ($702,006). Remaining principal balance and accrued interest renewed on April 19, 2022 for the term of one year.	134,633	806,711
Multiple loans from Jianjun Yan, due from May 13, 2022 to August 22, 2022, with annual interest rate of 12%, sign on period from May 14, 2021 to August 23, 2021.	1,490,521	-
Loan from Junzhen Zhang, non-related individual, due on October 5, 2022, with an annual interest rate of 10%, renewed on October 6, 2021.	29,385	27,215
Loan from Junzhen Zhang, non-related individual, due on November 30, 2022, with an annual interest rate of 10%, signed on December 1, 2021.	23,375	21,648
Multiple loans from Jian Chen, non-related individual, due from May 20, 2022 to November 14, 2022, with an annual interest rate of 12%, signed from May 21, 2021 to November 15, 2021.	1,066,928	-
Loan from Qing Kong, non-related individual, due on March 6, 2023, with an annual interest rate of 10%, renewed on March 7, 2022.	106,522	98,655
Loan from Qing Kong, non-related individual, due on January 8, 2023, with an annual interest rate of 10%, renewed on January 9, 2022.	44,445	41,163
Loan from Guihai Chen, non-related individual, due on March 9, 2023, with an annual interest rate of 10%, renewed on March 10, 2022.	26,631	24,664
Loan from Guihai Chen, non-related individual, due on September 20, 2022, with an annual interest rate of 10%, renewed on September 21, 2021.	40,405	37,421
Loan from Weifeng Kong, non-related individual, due on November 28, 2022, with an annual interest rate of 10%, renewed on November 29, 2021.	30,357	30,926
Loan from Huagui Yong, non-related individual, due on April 8, 2022, with an annual interest rate of 6.3%, renewed on April 9, 2021.	-	77,316
Loan from Guohui Zhang, non-related individual, due on January 16, 2022, with an annual interest rate of 4% signed on January 17, 2021.	254,148	248,956
Total short-term loan payable	$ 4,907,506	$2,955,304

 

For the fiscal years ended April 30, 2022 and 2021, interest expense related to short-term loans amounted to $456,735 and $222,113, respectively, which were included in interest expense in the accompanying consolidated statements of operations and comprehensive loss.

 

NOTE 10 - INCOME TAXES

 

We account for income taxes under ASC 740, "Accounting For Income Tax". ASC 740 requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial statements and the tax basis of assets and liabilities, and for the expected future tax benefit to be derived from tax losses and tax credit carry forwards. ASC 740 additionally requires the establishment of a valuation allowance to reflect the likelihood of realization of deferred tax assets.

 

F - 16

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On December 22, 2017, the Tax Cuts and Jobs Act (the TCJA), which significantly modified U.S. corporate income tax law, was signed into law by President Trump. The TCJA contains significant changes to corporate income taxation, including but not limited to the reduction of the corporate income tax rate from a top marginal rate of 35% to a flat rate of 21%, limitation of the tax deduction for interest expense to 30% of earnings (except for certain small businesses), limitation of the deduction for net operating losses to 80% of current year taxable income and generally eliminating net operating loss carrybacks, allowing net operating losses to carryforward without expiration, one-time taxation of offshore earnings at reduced rates regardless of whether they are repatriated, elimination of U.S. tax on foreign earnings (subject to certain important exceptions), immediate deductions for certain new investments instead of deductions for depreciation expense over time, and modifying or repealing many business deductions and credits (including changes to the orphan drug tax credit and changes to the deductibility of research and experimental expenditures that will be effective in the future). Notwithstanding the reduction in the corporate income tax rate, the overall impact of the new federal tax law is uncertain, including to what extent various states will conform to the newly enacted federal tax law.

 

The Company has not recorded the necessary provisional adjustments in the financial statements in accordance with its current understanding of the TCJA and guidance currently available as of this filing. But it is reviewing the TCJA's potential ramifications.

 

On March 27, 2020, President Trump signed into law the “Coronavirus Aid, Relief, and Economic Security Act” (CARES Act or Act below). (References to the Code below are references to the Internal Revenue Code of 1986, as amended. Section references below are references to sections of the Act.), provisions relevant to the Company:

 

Section 2303. Modifications for net operating losses (NOL): Under Code Section 172(a) the amount of the NOL deduction is equal to the lesser of (a) the aggregate of the NOL carryovers to such year and NOL carrybacks to such year, or (b) 80% of taxable income computed without regard to the deduction allowable in this section. Thus, NOLs are currently subject to a taxable-income limitation and cannot fully offset income. The Act temporarily removes the taxable income limitation to allow an NOL to fully offset income.

 

Code Section 172(b)(1) provides that, except for farming losses and losses of property and casualty insurance companies, an NOL for any tax year is carried forward to each tax year following the tax year of the loss but isn’t carried back to any tax year preceding the tax year of the loss. The Act provides that NOLs arising in a tax year beginning after Dec. 31, 2018, and before Jan. 1, 2021 can be carried back to each of the five tax years preceding the tax year of such loss.

 

Section 2306. Modifications of limitation on business interest: The 2017 Tax Cuts and Jobs Act of 2017 (TCJA) generally limited the amount of business interest allowed as a deduction to 30% of adjusted taxable income. The Act temporarily and retroactively increases the limitation on the deductibility of interest expense under Code Section 163(j)(1) from 30% to 50% for tax years beginning in 2019 and 2020. (Code Section 163(j)(10)(A)(i) as amended by Act Section 2306(a)).

 

The Company has not recorded the necessary provisional adjustments in the financial statements in accordance with its current understanding of the CARES Act and guidance currently available as of this filing. But is reviewing the CARES Act potential ramifications.

 

Our subsidiaries in the PRC are governed by the Income Tax Law of the People's Republic of China concerning Foreign Investment Enterprises and Foreign Enterprises and local income tax laws (the PRC Income Tax Law"). Pursuant to the PRC Income Tax Law, our PRC subsidiaries are subject to tax at a maximum statutory rate of 25% (inclusive of state and local income taxes).

 

The components of loss before income tax consisted of the following:

 

	Fiscal Years Ended April 30,
	2022	2021
U.S. Operations	$(75)	$(35,046)
Chinese Operations	(2,910,115)	(3,203,769)
Total	$(2,910,190)	$(3,238,815)

 

 

F - 17

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The Effective Tax Rate reconciliation is a follows:

 

	April 30, 2022	April 30, 2021
U.S. Federal and state tax rate	21.0%	21.0%
Difference in US / China statutory rate	4%	4%
Valuation allowance	(25.0)%	(25.0)%
Total provision for income taxes	0.0%	0.0%

   

    The table below summarizes the reconciliation of our income tax provision (benefit) computed at the statutory U.S. Federal rate and the actual tax provision:

 

	Fiscal Years Ended April 30,
	2022	2021
Expected tax at statutory rates	$(611,140)	$(680,151)
Foreign Taxes at rate different than U.S. taxes	(116,404)	(128,151)
Valuation allowances	727,544	808,302
Tax provision	$-	$-

 

We have a net operating loss ("NOL") carry forward for U.S. income tax purposes aggregating approximately $14.2 million as of April 30, 2022, expiring through the tax year 2040, subject to the Internal Revenue Code Section 382/383, which places a limitation on the amount of taxable income that can be offset by net operating losses after a change in ownership. In addition, to U.S. NOL's, we have a PRC NOL for our Chinese operations as of April 30, 2022 of approximately $36.3 million that expires in 2027.

 

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Included in the deferred tax asset is the aforementioned NOL and the tax benefit associated with the issuance of stock-based compensation. The realization of the deferred tax assets is dependent on future taxable income, in addition to the exercise of stock options; we are not able to predict if such future taxable income will be more likely than not sufficient to utilize the benefit. As such, we do not believe the benefit is more likely than not to be realized and we recognize a full valuation allowance for those deferred tax assets. Our deferred tax assets as of April 30, 2022 and 2021 are as follows:

 

	Fiscal Years Ended April 30,
	2022	2021
Deferred tax assets from NOL carry forwards	$12,062,349	$11,290,083
Total deferred tax asset	12,062,349	11,290,083
Valuation allowance	(12,062,349)	(11,290,083)
Deferred tax asset, net of allowance	$-	$-

 

    

 

F - 18

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NOTE 11 - SEGMENT INFORMATION

 

The following information is presented in accordance with ASC Topic 280, "Segment Reporting", for fiscal years ended April 30, 2022 and 2021; we operated in two reportable business segments - (1) natural sweetener (stevioside), (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. Financial information with respect to these reportable business segments for the fiscal years ended April 30, 2022 and 2021 are as follows:

 

	Fiscal Years Ended April 30,
	2022	2021
Revenues:
Stevioside - third party	$34,832,117	$16,807,638
Stevioside - related party	-	8,162,450
Total Stevioside	34,832,117	24,970,088
Corporate and other – third party	429,362	408,747
Corporate and other – related party	-	-
Total Corporate and other	429,362	408,747
Total segment and consolidated revenues	$35,261,479	$25,378,835
Interest expense:
Stevioside	$(478,950)	$(254,403)
Corporate and other	-	-
Total segment and consolidated interest expense	$(478,950)	$(254,403)
Depreciation and amortization expenses:
Stevioside	$1,273,175	$1,118,956
Corporate and other	202,191	220,625
Total segment and consolidated depreciation and amortization expenses	$1,475,366	$1,339,581
Gain (loss) from continuing operations before income taxes:
Stevioside	$(4,822,797)	$(5,401,154)
Corporate and other	229,209	151,879
Total loss from operations before income taxes	$(4,593,588)	$(5,249,275)

 

 

	April 30, 2022	April 30, 2021
Segment property and equipment:
Stevioside	$5,854,328	$7,354,695
Corporate and other	1,631,405	1,862,420
Total property and equipment, net	$7,485,733	$9,217,115

 

 

NOTE 12 – CONCENTRATIONS AND CREDIT RISK

 

(i)   Customer Concentrations

 

For fiscal years ended April 30, 2022 and 2021, customers accounting for 10% or more of the Company's revenues were as follows:

 

	Years Ended April 30,
	2022	2021
Customer
A (1)	43.4%	32.6%
B	-	12.0%

 

(1)  Qufu Shengwang Import and Export Co., Ltd was a related party in fiscal 2021.

 

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 (ii)    Vendor Concentrations

 

For fiscal years ended April 30, 2022 and 2021, suppliers accounting for 10% or more of the Company's purchases were as follows:

 

	Years Ended April 30,
	2022	2021
Supplier
A	34.5%	16.5%
B	-	25.5%
C	-	13.0%

 

-Less than 10%. 

 

(iii)    Credit Risk

 

Financial instruments which potentially subject us to concentrations of credit risk consist principally of cash and cash equivalents and trade accounts receivable. We place our cash and cash equivalents with high credit quality financial institutions in the United States and the PRC. As of April 30, 2022 and 2021, we had $303,160 and $1,403,969 of cash held in PRC banks. 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 $76,000), As a result, cash held in PRC financial institutions of $119,250 is not insured. We have not experienced any losses in such accounts through April 30, 2022. Our cash position by geographic area was as follows:

 

	April 30, 2022		April 30, 2021
Country
United States	$18,033	5.6%	$161,860	10.3%
China	303,160	94.4%	1,403,969	89.7%
Total cash and cash equivalents	$321,193	100.00%	$1,565,829	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 13 - SUBSEQUENT EVENTS

 

The Company has evaluated subsequent events through the date the financial statements were issued and filed with the Securities and Exchange Commission. Based on our evaluation, no other event has occurred requiring adjustment or disclosure in the notes to the consolidated financial statements.

 

 

F - 20