10-K 1 suwn10-k.htm SUNWIN STEVIA INTERNATIONAL, INC. FORM 10-K



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

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

For the year ended April 30, 2019

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.

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

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

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

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, 2018 was $5,118,855.

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 12, 2019, 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.





 
TABLE OF CONTENTS
 
 
 
 
 
Page No.
Part I
 
 
 
 
Item 1.
 
Business.
 
1
Item 1A.
 
Risk Factors
 
7
Item 1B.
 
Unresolved Staff Comments.
 
12
Item 2.
 
Properties.
 
13
Item 3.
 
Legal Proceedings.
 
13
Item 4.
 
Mine Safety Disclosures.
 
13
 
 
 
 
 
Part II
 
 
 
 
Item 5.
 
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
 
13
Item 6.
 
Selected Financial Data.
 
14
Item 7.
 
Management's Discussion and Analysis of Financial Condition and Results of Operations.
 
14
Item 7A.
 
Quantitative and Qualitative Disclosures About Market Risk.
 
23
Item 8.
 
Financial Statements and Supplementary Data.
 
23
Item 9.
 
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
 
23
Item 9A.
 
Controls and Procedures.
 
23
Item 9B.
 
Other Information.
 
24
 
 
 
 
 
Part III
 
 
 
 
Item 10.
 
Directors, Executive Officers and Corporate Governance.
 
24
Item 11.
 
Executive Compensation.
 
26
Item 12.
 
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
 
29
Item 13.
 
Certain Relationships and Related Transactions, and Director Independence.
 
30
Item 14.
 
Principal Accountant Fees and Services.
 
30
 
Part IV
 
 
 
 
Item 15.
 
Exhibits, Financial Statement Schedules.
 
31
 
 
Signatures
 
33
 
i




 
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.
ii


INDEX OF CERTAIN DEFINED TERMS USED IN THIS REPORT

Our fiscal year end is April 30. The fiscal year ended April 30, 2018 is referred to as "fiscal 2018", the fiscal year ended April 30, 2019 is referred to as "fiscal 2019", and the coming fiscal year ending April 30, 2020 is referred to as "fiscal 2020."

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


PART I
 
ITEM 1.
BUSINESS

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

 
-
 
Stevioside; and
 
-
 
Corporate and other.

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, 2019 and 2018, our Stevioside segment generated revenues of $18.2 million and $19.1 million, representing 87% and 100% 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.

The ongoing advocacy to eliminate the European Union's (EU) ban on the consumption of stevia was confirmed by the European Commission in November 2011. The European Stevia Research Center and the European Stevia Association are EU based organizations that focus on stevioside research and the elimination of the EU's ban on the consumption of stevioside.  These organizations have determined that stevia is safe for use in foods.  In addition, in June 2007, the Joint Expert Committee on Food Additives concluded that steviol glycoside showed no adverse effects and was stable for use in food and acidic beverages under normal conditions and in June 2008 extended its recommendation for acceptable daily intake of up to 4 mg per kg body weight per day. 

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 2017, we have obtained certification of National Organic Program (NOP Certificate No: 50OP16SH0206 and NO: 50OP16SH0223) and certification of non-genetically modified organisms ("Non-GMO") with the ID number of 52462. 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.

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 53.8% of our sales in the Stevioside segment for the fiscal year ended April 30, 2019. Our biggest customers Qufu Shengwang Import and Export Trade Co., Ltd., a related party, accounted for 21.2% and 31.4%, respectively, of our stevioside sales for the fiscal years ended April 30, 2019 and 2018. 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%.

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. We bulk package our stevioside in 10 kilogram packages, two per box.

In July 2008, our stevioside manufacturing facility located in the Shuyuan Economic Zone of Qufu City, of the Shandong Province, received a Certificate of Good Manufacturing Practices (GMP) from the PRC.  

In early 2011, our stevia production facility operated by Qufu Shengren received ISO 22000 and ISO 9001:2008 integrated process and systems certifications, in addition to HACCP (Hazard Analysis and Critical Control Points) certification from SGS S.A. and its country head offices in UK and China for this facility. SGS is one of the world's leading inspection, verification, testing and certification companies. In an effort to meet the international food safety standards mandated by larger consumer product companies that we expect to target as customers in the future, we have 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.  These investments allowed us to meet the HACCP System Certification, ISO 9001:2015 Certification and ISO 22000:2005 Food Safety Certification.  We obtained these certifications in October 2015.
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The ISO certifications cover all of the processes throughout the production cycle that deal directly or indirectly with the end product being consumed and quality management principles.  These certifications together with our comprehensive management system demonstrate the safety of our stevia products and our compliance with the requirements for food safety management systems by incorporating all the elements of GMP and HACCP.  HACCP Certification is an international principle defining the requirements for effective control of food safety.  HACCP compliance and certification demonstrates our focus on the hazards that affect food safety and hygiene and systematic identification of such by setting up control limits at critical points during the food production process.  By achieving these high level certifications, we have further demonstrated our commitment to quality, safety and continuous improvement.

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.

Since January 2014, our facilities have the capability of producing A3-99 stevia products, which is the highest quality stevioside extracts produced in the world and are used in the pharmaceutical and food industries. We sold 6.1 metric tons of A3-99 each year and generated approximately $461,000 and $504,000 in revenue from producing A3-99 in the fiscal years ended April 30, 2019 and 2018, respectively.

Since fiscal 2014, our facilities have the capability of producing Enzyme treated stevia, which is one of the most advanced types of steviosides produced in the world for use in the food and beverage industries. We generated approximately $2,249,000 and $2,455,000 in revenue from producing over 62.3 metric tons and 45.9 metric tons of Enzyme treated stevia in the fiscal years ended April 30, 2019 and 2018, respectively.

In the fiscal years ended April 30, 2018 and 2019, we have invested a total of $2.0 million for the two years, to purchase new manufacturing equipments for our facility with annual capacity of 500 metric tons in order to meet substantially increased demand for its high-grade stevia products. The new manufacturing facility is fully equipped with stainless steel equipment and a fully automated system in order to prevent any potential contamination from operators and plastic. In addition, the new manufacturing facility uses the most advanced production equipment that is the first time to be used for stevia production in the industry, such as a scraper with centrifuge and fluidized drying system.

As of now, Sunwin Stevia has approximately 1,200 metric tons of manufacturing capacity per year to produce high-grade 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. Our total stevioside production capacity is approximately 1,200 metric tons annually, which we believe is sufficient to meet demand.  For the fiscal year ended April 30, 2019, we manufactured approximately 1,075 metric tons of stevioside, an increase of 131 metric tons from the prior year, to better supply the market demand.

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 capabilities 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.

NEW PRODUCT DEVELOPMENT

We engage in new product 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.  We are in partnership with a number of research facilities in the PRC including:
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We are working with a Jiangsu enzyme preparation company, to provide research and development for some of the enzyme modification products in order to produce better tasting products; and
 
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 Shandong Chinese Medicine University.

We pay for the use of these facilities on an as needed basis and the costs are included in our research and development expenses. For the fiscal years ended April 30, 2019 and 2018, we spent approximately $982,000 and $842,000, respectively, on research and development. 
 
For the fiscal years ended April 30, 2019 and 2018, we have invested over $2.0 million in total 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. The new manufacturing facility is fully equipped with stainless steel equipment without any plastic while it has a fully automated system in order to prevent any potential contamination from operators and plastic. In addition, the new manufacturing facility uses the most advanced production equipment that is the first time to be used for stevia production in the industry, such as scraper with centrifuge and fluidized drying system.

As of now, Sunwin Stevia has approximately 1,200 metric tons of manufacturing capacity per year to produce high-grade 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.

In fiscal 2018 and fiscal 2019 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, which are more effective than single use. It can also be used in patients with insulin therapy to reduce insulin consumption. The sales value of Metformin has been growing since Metformin entered China in 1999.

In fiscal 2018 and fiscal 2019, we have invested approximately a total of $1.1 million in this new facility. The new manufacturing facility is fully equipped with stainless steel equipment without any plastic while it has a fully automated system in order to prevent any potential contamination from operators and plastic. In addition, the new manufacturing facility uses the most advanced production equipment that is the first being used for our production in the industry, such as the scraper with centrifuge and fluidized drying system. In fiscal 2019, we have been producing Metformin at a trial capacity to test the market and determine if this is a suitable product to be added to our operation.

While we were able to market and sale our Metformin products, with our current overhead and associated expenses, its profit margin has not been as lucrative as we had projected, our Metformin production line has been operating at a net loss in fiscal 2019. On July 10, 2019, we entered into a management agreement with Ru Yuan, an unaffiliated individual, to contract out the Metformin production line for 30 years using the Company's facility in Qufu. Under the terms of this agreement, Ms. Yuan will operate the Metformin production line independently from Sunwin assuming all of its profits and liabilities and will pay to Qufu Shengren an annual contract fee of RMB3,000,000 (Approximately $436,047).

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, and agreements 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. 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.
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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.

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.
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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 President and Chairman.

In July 2004 following the transaction with Sunwin Tech, we changed the name of our company from Network USA, Inc. to Sunwin International Neutraceuticals, Inc.

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 February 5, 2009, we entered into a securities purchase agreement with WILD Flavors to purchase 20,000,000 shares of our common stock at $0.15 per share together with five year warrants to purchase 26,666,666 shares of our common stock with an exercise price of $0.35 per share. Pursuant to the terms of the securities purchase agreement, we converted our Sunwin Stevia International subsidiary into a limited liability company called Sunwin USA.
 
In July 2010 Qufu Natural Green sold its 100% ownership interest in Shengya Veterinary Medicine to Mr. Laiwang Zhang, our president and chairman of our board of directors. On September 30, 2011, Qufu Shengwang purchased the 40% equity interest in Qufu Shengwang owned by our Korean partners, Korea Stevia Company, Limited, for $626,125 in cash, and as a result of this repurchase transaction we now own 100% equity interest in all of the net assets of our subsidiary Qufu Shengwang.

In April 2012 we changed our corporate name to Sunwin Stevia International, Inc.

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.

On April 30, 2018, the Company decided that it was in its best interest to discontinue and close Sunwin Tech since it ceased operations four year ago. All assets and liabilities owned by Sunwin Tech, including the equity ownership of Qufu Natural Green transferred to and is assumed by Sunwin Stevia International, Inc.

On July 10, 2019, our wholly owned subsidiary Qufu Shengren entered into a management agreement with Ru Yuan, an unaffiliated individual (the "Contractor") to contract out the operation of the metformin production line for the term of 30 years.  In accordance with the agreement, the Contractor will be responsible for all expenses and overhead related to the operation of this production line, including employee payroll, benefits, utilities and etc., and pay an annual contract fee of RMB3,000,000 (approximately $436,047) to Qufu Shengren.

On July 30, 2019, Qufu Natural Green entered into an Asset Transfer Agreement with Na Li, an unaffiliated individual (the "Buyer") for the sale of 100% equity ownership of Qufu Shengwang. Pursuant to the Asset Transfer Agreement, the Buyer shall pay to Qufu Natural Green a total cash consideration of RMB8,000,000 (approximately $1,162,790) based on the estimated net book value as of July 30, 2019, payable in two installments of RMB5,000,000 (approximately $726,744) on July 30, 2019 and RMB3,000,000 (approximately $436,046) on September 30, 2019. The Buyer assumed all assets and liabilities of Qufu Shengwang including the amount of Qufu Shengwang's due to Qufu Natural Green of approximately RMB26,000,000 (approximately $3,779,070), and Qufu Natural Green shall assist in completing all documents required for the equity transfer after confirming receipt of the first payment. The Company received the first installment of RMB5,000,000 on July 30, 2019.

EMPLOYEES

As of August 10, 2019, we have 277 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.
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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.
 
RISKS RELATED TO OUR COMPANY

FOR THE FISCAL YEAR ENDED APRIL 30, 2019, WE INCURRED NET LOSS OF $4.9 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 $4,908,000 for the fiscal year ended April 30, 2019. The net cash used in continuing operations were approximately $5,875,000 for the fiscal year ended April 30, 2019. Additionally, we have an accumulated deficit of $38.7 million as of April 30, 2019, 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, 2020 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, 2019 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.
 
WE ARE DEPENDENT ON OUR PRESIDENT AND THE LOSS OF HIS SERVICES COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS, FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

We are dependent upon the services of Mr. Laiwang Zhang, our president and chairman of the board of directors, for the continuing growth and operation of our company because of his experience in the industry and his personal and business contacts in the PRC. We do not have an employment agreement with Mr. Zhang. We also have done business with several companies which are affiliated with Mr. Zhang as described later in this report under "Certain Relationships and Related Party Transactions."  Although we have no reason to believe that Mr. Zhang would discontinue his services with us, the interruption or loss of his services would adversely affect our ability to effectively run our business and pursue our business strategy as well as our results of operations.

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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 from the foreign exchange translation was approximately $556,000 and the gain from the foreign exchange translation was approximately $903,000 for the fiscal years ended April 30, 2019 and 2018, respectively. 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.
 
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. 

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

 On March 15, 2019, MOFCOM published the PRC Law on Foreign Investment, which will be implemented on Janurary 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 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, 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. 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. Cases of swine flu have been reported in Hong Kong and mainland China. The Chinese government and certain regional governments within China have enacted regulations to address the H1N1 virus, which may have an effect on our business. If the outbreak of swine flu were to become widespread in China or increase in severity, it could have an adverse effect on economic activity in China, and could require the temporary closure of our facilities. 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.

At August 12, 2019 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.

ITEM 1B.
UNRESOLVED STAFF COMMENTS

Not applicable for smaller reporting companies.
 
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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.

Qufu Shengren occupies approximately 354,000 square feet of land at no cost pursuant to a land lease agreement with Qufu Shengwang that expires on July 31, 2049.  Located on this land is a 215,000 square feet of manufacturing facility we are converting to a high grade stevioside production facility and warehouse facility.

 ITEM 3.
LEGAL PROCEEDINGS

We are not a party to any pending legal proceedings, and to our knowledge, none of our officers, directors or principal stockholders are a party to any legal proceeding in which they have an interest adverse to us.
 
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 2019
           
May 1, 2018 through July 31, 2018
 
$
0.08
   
$
0.04
 
August 1, 2018 through October 31, 2018
 
$
0.06
   
$
0.03
 
November 1, 2018 through January 31, 2019
 
$
0.10
   
$
0.01
 
February 1, 2019 through April 30, 2019
 
$
0.08
   
$
0.04
 
 
               
Fiscal 2018
               
May 1, 2017 through July 31, 2017
 
$
0.12
   
$
0.02
 
August 1, 2017 through October 31, 2017
 
$
0.12
   
$
0.06
 
November 1, 2017 through January 31, 2018
 
$
0.12
   
$
0.05
 
February 1, 2018 through April 30, 2018
 
$
0.10
   
$
0.05
 

On August 12, 2019, the last reported sale price of the common stock on OTC Markets was $0.07 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.

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.
- 13 -



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, 2019 and 2018 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, 2019 and 2018, our continuing operations were organized in two operating segments related to our product lines:

 
-
 
Stevioside; and
 
-
 
Corporate and other.
 
Recent Developments

Since January 2014, our facilities have the capability of producing A3-99 stevia products, which are the highest quality stevioside extracts produced in the world and are used in the pharmaceutical and food industries.

Since fiscal 2014, our facilities have the capability of producing Enzyme treated stevia, which is one of the most advanced types of steviosides produced in the world for use in the food and beverage industries.

We have obtained certification of National Organic Program (NOP Certificate No: 50OP16SH0206 and NO: 50OP16SH0223) and certification of non-genetically modified organisms ("Non-GMO") with the ID number of 52462 in the year of 2017. 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 the fiscal years ended April 30, 2019 and 2018, we have invested a total of approximately $2.0 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. The new manufacturing facility is fully equipped with stainless steel equipment without any plastic while it has a fully automated system in order to prevent any potential contamination from operators and plastic. In addition, the new manufacturing facility uses the most advanced production equipment that is the first time to be used for stevia production in the industry, such as scraper with centrifuge and fluidized drying system.

In fiscal 2018 and fiscal 2019 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.
- 14 -


In fiscal 2018 and fiscal 2019, we have invested approximately a total of $1.1 million in this new facility. The new manufacturing facility is fully equipped with stainless steel equipment without any plastic while it has a fully automated system in order to prevent any potential contamination from operators and plastic. In addition, the new manufacturing facility uses the most advanced production equipment that is the first being used for our production in the industry, such as the scraper with centrifuge and fluidized drying system. In fiscal 2019, we have been producing Metformin at a trial capacity to test the market and determine if this is a suitable product to be added to our operation.

While we were able to market and sale our Metformin products, with our current overhead and associated expenses, its profit margin has not been as lucrative as we had projected, our Metformin production line has been operating at a net loss in fiscal 2019. On July 10, 2019, we entered into a management agreement with Ru Yuan, an unaffiliated individual, to contract out the Metformin production line for 30 years. Under the terms of this agreement, Ms. Yuan will operate the Metformin production line independently from Sunwin assuming all of its profits and liabilities, including employee payroll, benefits, utilities and etc., and will pay to Qufu Shengren an annual contract fee of RMB3,000,000 (approximately $436,047).

On July 30, 2019, Qufu Natural Green entered into an Asset Transfer Agreement with Na Li, an unaffiliated individual (the "Buyer") for the sale of 100% equity ownership of Qufu Shengwang. Pursuant to the Asset Transfer Agreement, the Buyer shall pay to Qufu Natural Green a total cash consideration of RMB8,000,000 (approximately $1,162,790) based on the estimated net book value as of July 30, 2019, payable in two installments of RMB5,000,000 (approximately $726,744) on July 30, 2019 and RMB3,000,000 (approximately $436,046) on September 30, 2019. The Buyer assumed all assets and liabilities of Qufu Shengwang including the amount of Qufu Shengwang's due to Qufu Natural Green of approximately RMB26,000,000 (approximately $3,779,070), and Qufu Natural Green shall assist in completing all documents required for the equity transfer after confirming receipt of the first payment. The Company received the first installment of RMB5,000,000 on July 30, 2019.

Stevioside segment

Stevioside and rebaudioside are all natural low calorie sweeteners extracted from the leaves of the stevia rebaudiana plant.  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 synthetic chemical based sweetener replacements are not suitable. Currently the most common usage of stevia is in beverage products, years of research have led to a gradual decrease of the bitterness in stevia products, especially when used in beverages with fruity flavors.

Steviosin is a natural low calorie stevioside extract for medicinal use, containing rebaudioside A 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 is an all natural, zero calorie, dietary supplement comprised of three natural ingredients, including stevioside. Based on our strategy to develop new products in collaboration with Domino Sugar that contain our stevia products, we are evaluating our strategy for the sale and distribution of OnlySweet.

In an effort to meet the international food safety standards mandated by larger consumer product companies that we expect to target as customers in the future, we have 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.  These investments allowed us to meet the HACCP System Certification, ISO 9001:2015 Certification and ISO 22000:2005 Food Safety Certification.  We obtained these certifications in October 2015.

In our recent years, we have also obtained various other certification and qualifications to better meet the demand of our customers. We now offer an organic line of stevia products, and have received Kosher, Halal and Gras certification for certain products.

Our Performance

Our revenues totaled $20.8 million in the fiscal year ended April 30, 2019, an increase of 8.9% as compared to the fiscal year ended April 30, 2018, but our gross margin decreased to 7.6% from 8.5% primarily due to our effort to expand our shares in both domestic and international markets and we sold some products at lower sales prices than their costs to secure the market share. Our total operating expenses in the fiscal year ended April 30, 2019 increased by approximately $81,000 or 1.5% compared to the fiscal year ended April 30, 2018 primarily due to an increase of approximately $395,000 or 25.6% in selling expenses, an increase of approximately $139,000 or 16.6% in research and development expenses, and offset by a decrease of approximately $46,000 or 100.0% in loss on disposal of property and equipment and a decrease of approximately $407,000 or 13.4% in general and administrative expenses. Our net loss from continuing operations for the fiscal year ended April 30, 2019 was $4.7 million, compared to $4.2 million in the fiscal year ended April 30, 2018.
- 15 -


Our operating performance for the fiscal year ended April 30, 2019 was primarily driven by an increase of 8.9% in sales revenue from our new products in Metformin, and a 8.8% increase in sales to third parties, and an increase in sales to related party customers of approximately 9.4%.

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, 2019. The increase of revenue in Stevioside segment is primarily due to an increasing demand from the developing domestic and international market. Stevia has been widely accepted by the food industry and many new stevia manufacturers have entered this industry in the past few years, and recently we introduced a new product line. We are now focusing on new types of stevia products, including tablets, liquid, High A products, and others. We expect to consistently increase our sales of our new products; however we cannot quantify this increase and its effects on future periods.

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, 2019 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;
 
-
 
Comparing 2018 to 2011, the usages of stevia in food products shows a 25.6% growth, and in beverage products shows a 34.6% growth; 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, 2019 and 2018. During the fiscal years ended April 30, 2019, the market prices of stevioside products were 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 2020. We anticipate the price of stevia leaves, the raw material used to produce our stevioside series products, will also continue to increase in fiscal 2020 since the demand for raw material is also increasing as the market grows.

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 near future.

- 16 -

RESULTS OF OPERATIONS

The following table summarizes our results of operations for the fiscal year ended April 30, 2019 and 2018.  The percentages represent each line item as a percent of revenues:

For the Fiscal Year Ended April 30, 2019
 
   
Stevioside
   
Corporate and Other
   
Consolidated
 
Revenues
 
$
18,162,702
     
100.0
%
 
$
2,687,743
     
100.0
%
 
$
20,850,445
     
100.0
%
Cost of goods sold
   
17,094,522
     
94.1
%
   
2,173,367
     
80.9
%
   
19,267,889
     
92.4
%
Gross profit
   
1,068,180
     
5.9
%
   
514,376
     
19.1
%
   
1,582,556
     
7.6
%
Selling expenses
   
1,674,345
     
9.2
%
   
260,820
     
9.7
%
   
1,935,165
     
9.3
%
General and administrative expenses
   
1,675,535
     
9.2
%
   
961,650
     
35.8
%
   
2,637,185
     
12.6
%
Research and development expenses
   
891,974
     
4.9
%
   
89,988
     
3.3
%
   
981,962
     
4.7
%
Loss from operations
   
(3,173,674
)
   
(17.5
)%
   
(798,082
)
   
(29.7
)%
   
(3,971,756
)
   
(19.0
)%
Other income (expenses)
   
(692,202
)
   
(3.8
)%
   
-
     
-
     
(692,202
)
   
(3.3
)%
Loss from continuing operation before income taxes
 
$
(3,865,876
)
   
(21.3
)%
 
$
(798,082
)
   
(29.7
)%
 
$
(4,663,958
)
   
(22.4
)%

For the Fiscal Year Ended April 30, 2018
 
   
Stevioside
   
Corporate and Other
   
Consolidated
 
Revenues
 
$
19,142,312
     
100.0
%
 
$
-
   
$
19,142,312
     
100.0
%
Cost of goods sold
   
17,517,177
     
91.5
%
   
-
     
17,517,177
     
91.5
%
Gross profit
   
1,625,135
     
8.5
%
   
-
     
1,625,135
     
8.5
%
Selling expenses
   
1,540,283
     
8.0
%
   
-
     
1,540,281
     
8.0
%
General and administrative expenses
   
1,707,902
     
8.9
%
   
1,336,780
     
3,044,682
     
15.9
%
Loss on disposition of property and equipment
   
46,255
     
0.2
%
   
-
     
46,255
     
0.2
%
Research and development expenses
   
842,464
     
4.4
%
   
-
     
842,464
     
4.4
%
Loss from operations
   
(2,511,767
)
   
(13.1
)%
   
(1,336,780
)
   
(3,848,547
)
   
(20.1
)%
Other expenses
   
(316,993
)
   
(1.7
)%
   
-
     
(316,993
)
   
(1.7
)%
Loss from continuing operation before income taxes
 
$
(2,828,760
)
   
(14.8
)%
 
$
(1,336,780
)
 
$
(4,165,540
)
   
(21.8
)%

Revenues

Total revenues in the fiscal year ended April 30, 2019 increased by approximately $1,708,000, or 8.9%, as compared to the fiscal year ended April 30, 2018, primarily due to our new production line for Metformin, in which we invested in fiscal 2018 and 2019. We have been producing Metformin at a trial capacity to test the market and determine if this is a suitable product to be added to our operation. We generated approximately $2,688,000 in revenue from producing Metformin in the fiscal year ended April 30, 2019. Stevioside revenues, which accounts for 87.1% and 100% of our total revenues in the fiscal years ended April 30, 2019 and 2018, respectively.
- 17 -


Within our Stevioside segment, revenues from sales to third parties decreased by 9.0% while the sales to the related party increased by 9.4% in the fiscal year ended April 30, 2019, as compared to the fiscal year ended April 30, 2018, primarily due to an increasing demand from the overseas market and the results of our effort to develop sales in international market. Since we do not have the authorization to export products from China, we outsourced our exporting business to a related party, Qufu Shengwang Import and Export Corporation, which has authorizations to export. Also starting March 2016, we outsourced our exporting business to Yi-Da Tong, which is a third party export agent. In addition, our products including A3-99 and enzyme treated stevia have been well accepted by the market especially in the U.S.. While the adoption rate for stevia in the food and beverage has been slower than expected, we produced 1,070 metric tons and 944 metric tons of stevioside for the fiscal year ended April 30, 2019 and 2018, respectively, and we sold a total of 525 metric ton stevioside each year in the fiscal year ended April 30, 2019 and 2018. We sold 6.1 metric tons of A3-99 each year in the fiscal years ended April 30, 2019 and 2018, respectively, and generated approximately $461,000 and $504,000 in revenue from A3-99 in the fiscal years ended April 30, 2019 and 2018, respectively. We generated approximately $2,249,000 and $2,455,000 in revenue from producing over 62.3 metric tons and 45.9 metric tons of the customized orders for restructuring by enzyme based on our Stevioside products which accounted for approximately 12% and 13% in the fiscal years ended April 30, 2019 and 2018, respectively, of our total Stevioside segment revenues. Additionally, we also continue to generate revenue from the sale of our new products, Metformin, that were developed in the prior year.
 
Our unit sale price fluctuated from month to month in the fiscal year ended April 30, 2019, which was mainly affected by the market environment; the average unit sales price of our stevia products has decreased because of our effort to stay ahead of competition and to gain market share for the fiscal year ended April 30, 2019, as compared to the fiscal year ended April 30, 2018. 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 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 22% and 27% of total revenue of our Stevioside segment, respectively, while our enzyme treated products generated over $2.2 million in revenues with the gross profit rate of 21% and average unit price was $36 in the fiscal year ended April 30, 2019. Our low grade stevia and A3-97 products generated more than 38% and 22% of total revenue of our Stevioside segment, respectively, while we generated over $2.5 million from enzyme treated products in revenues with the gross profit rate of 13% and the average unit price was $53 in the fiscal year ended April 30, 2018. In the fiscal year ended April 30, 2019, some of our stevia products, such as A3-98, A3-95, A3-80, A3-60 and A3-40 were sold for a loss in order to avoid further losses resulting from spoilage of overstocked inventory.   

 Cost of Revenues and Gross Margin

 Cost of revenues of Stevioside segment in the fiscal year ended April 30, 2019 decreased by approximately $423,000, or 2.4%, while revenues from Stevioside segment decreased by approximately $980,000, compared to the fiscal year ended April 30, 2018. Since inventory costs exceed expected market value due to obsolescence or quantities in excess of expected demand, the Company recorded a write down of approximately $924,000 of inventories for the difference between the lower of cost or estimated net realizable value in the fiscal year ended April 30, 2019. Gross margin on Stevioside segment for the fiscal year ended April 30, 2019 was 7.6%, as compared to 8.5% for the fiscal year ended April 30, 2018. The decrease in gross margins for Stevioside was primarily due to higher raw material costs and the lower average unit sale price related to staying ahead of competition and to gain our market share during the period.
 
Total Selling Expenses

Our selling expenses for the fiscal year ended April 30, 2019 increased by approximately $395,000, or 25.6% compared to the fiscal year ended April 30, 2018. The increase was primarily due to the approximately $363,000 increase in advertising expense, $103,000 increase in office expense, $14,000 increase in travel expense, $20,000 increase in local sales taxes, $50,000 increase in warehousing expenses, $13,000 increase in commission expense, and offset by the decrease of approximately $109,000 in promotions and marketing, $54,000 decrease in salary and wage expenses, $3,000 decrease in shipping and freight and $2,000 decrease in miscellaneous expenses in the fiscal year ended April 30, 2019.

Total General and Administrative Expenses

Our general and administrative expenses for the fiscal year ended April 30, 2019 decreased by $407,000, or 13.4% compared to the fiscal year ended April 30, 2018.  The decrease was primarily due to a decrease of approximately $511,000 in stock based compensation to consultants, a decrease of approximately $188,000 in repair and maintenance fees, a decrease of approximately $94,000 in depreciation and amortization expenses, a decrease of approximately $19,000 in travel expense, a decrease of approximately $8,000 in meals and entertainment, a decrease of approximately $67,000 in property tax and other taxes, and offset by an increase of approximately $106,000 in salaries and wages, an increase of approximately $37,000 in office expense, an increase of approximately $136,000 in marketing fees, an increase of approximately $153,000 in bad debt expense, an increase of approximately $22,000 in product testing fees and an increase of approximately $26,000 in miscellaneous expenses.
- 18 -


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 2019 and fiscal 2018, 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 $0 and $46,000 in the fiscal years ended April 30, 2019 and 2018.

Research and Development Expenses

For the fiscal year ended April 30, 2019, our research and development expenses amounted to approximately $982,000 as compared to $842,000 for the fiscal year ended April 30, 2018. The increase of approximately $140,000 was primarily attributable to the increase in research and development activities related to the development of new product lines of Metformin and Stevioside products.

Other Expense

For the fiscal year ended April 30, 2019, other expense, net of other income, amounted to approximately $692,000, an increase of $375,000 as compared to other expense, net of other income, amounted to approximately $317,000 for the fiscal year ended April 30, 2018. The increase of other expense was primarily attributable to an increase in interest expense from third party of approximately $229,000 for individual loans, an increase in interest expense - related party in the amount of approximately $32,000 due to the higher interest rate for renewal loans, and a decrease in other income of approximately $114,000 primarily due to an export tax rebate.
 
Loss from Continuing Operations

As a result of the foregoing, our loss from continuing operations was $4,664,000, or $(0.02) per share (basic and diluted), for the fiscal year ended April 30, 2019, as compared with loss from continuing operations of $4,166,000, or $(0.02) per share (basic and diluted), for the fiscal year ended April 30, 2018, a change of $498,000, or 12.0%.

Loss from Discontinued Operation

Our loss from discontinued operations was $244,000, or $0.00 per share (basic and diluted), for the fiscal year ended April 30, 2019, as compared with loss from discontinued operations of $549,000, or $(0.00) per share (basic and diluted), for the fiscal year ended April 30, 2018, a change of $305,000 or 55.5%. 

The summarized operating result of discontinued operations included in our consolidated statements of operations is as follows:

 
 
Fiscal Years Ended April 30,
 
 
 
2019
   
2018
 
 
           
Revenues
 
$
2,730,140
   
$
2,897,497
 
Cost of revenues
   
2,269,216
     
2,362,722
 
Loss before income taxes
   
244,402
     
549,255
 
Income tax expense
   
-
     
-
 
 
               
Loss from discontinued operations
   
244,402
     
549,255
 
Loss from disposal, net of taxes
   
-
     
-
 
Total loss from discontinued operations
 
$
244,402
   
$
549,255
 

Net Loss

Net loss in the fiscal year ended April 30, 2019 was approximately $4,908,000, compared to $4,715,000 in the fiscal year ended April 30, 2018. The increase was primarily due to an increase in cost of raw materials which resulted in a slightly lower profit margin.
- 19 -


Foreign Currency Translation (Loss) or 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 $556,000 for the fiscal year ended April 30, 2019, as compared to a foreign currency translation gain of $903,000 for the fiscal year ended April 30, 2018. 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.  
 
At April 30, 2019, we had working capital of $2,411,000, including cash of approximately $294,000, as compared to working deficit of approximately $482,000 and cash of $76,000 at April 30, 2018. The approximate $218,000 increase in our cash at April 30, 2019 from April 30, 2018 is primarily attributable to net cash provided by financing activities of approximately $8,016,000, net cash used in operating activities of approximately $5,445,000, and cash used in investing activities of approximately $2,430,000 during the fiscal year ended April 30, 2019. 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.
 
Accounts receivable, net of allowance for doubtful accounts, including accounts receivable from related parties, decreased by approximately $203,000 during the fiscal year ended April 30, 2019 as a result of the decrease in accounts receivable from the third parties and accounts receivable from the related parties as of April 30, 2019. The days for sales outstanding in accounts receivable increased to 24 days as of April 30, 2019, as compared to 19 days on April 30, 2018. Accounts receivable, net of allowance for doubtful accounts, excluding accounts receivable from related parties, decreased by approximately $99,000 during the fiscal year ended April 30, 2019. The days for sales outstanding in accounts receivable for third party sales increased to 17 days as of April 30, 2019, as compared to 15 days on April 30, 2018. We will reevaluate and categorize accounts receivable for sales and will target to improve our collection effort in accounts receivable for related party sales and accounts receivable for third party sales in the fiscal 2020.

At April 30, 2019 our inventories, net of reserve for obsolescence, totaled approximately $11,992,000, as compared to $11,498,000 on April 30, 2018. The increase is primarily due to our increase in procurements of raw materials in order to meet our anticipated higher sales volume during the fiscal year ended April 30, 2019. These inventories have not yet been sold due to the market demands not raising as much as we predicted; however, the current inventory level will prepare us for our anticipated upcoming increase in demands.

Our accounts payable and accrued expenses were approximately $7,680,000 at April 30, 2019, a decrease of approximately $2,749,000 from April 30, 2018 balance of $10,429,000. The decrease was primarily due to the timing of payments for balances related to raw material purchases made in the ordinary course of business.
 
Loans payable at April 30, 2019 and 2018 totaled approximately $15,926,000 and $9,990,000, respectively. These loans payable consisted of short-term loans and long-term loans from multiple non-related individuals, which bear annual interest rates range from 4% to 10%.  The maturity dates of the loans payable at April 30, 2019 range from October 5, 2019 to March 8, 2021.  During the fiscal year ended April 30, 2019, the Company repaid approximately $430,000 of the prior year's loans payable and borrowed new loans of $5,869,000.

Due to related parties at April 30, 2019 and 2018 totaled approximately $6,409,000 and $2,937,000, respectively. The increase was primarily due to our increase in the balance of $3,012,000 advance from Pharmaceutical Corporation during the fiscal year ended April 30, 2019. On April 30, 2019, the balance we owed to Pharmaceutical Corporation, Qufu Shengwang Import and Export and Mr. Weidong Chai, a management member of Qufu Shengren Pharmaceutical Co., Ltd., approximately amounted $5,670,000, $558,000 and $181,000, respectively. On April 30, 2018, the balance we owed to Pharmaceutical Corporation, Qufu Shengwang Import and Export, Mr. Weidong Chai approximately amounted to $2,658,000, $103,000 and $176,000, respectively.
- 20 -


Cash Flows Analysis

NET CASH FLOW USED IN OPERATING ACTIVITIES:

Net cash used in operating activities from continuing operations was approximately $5,889,000 (total of $5,445,000 including provided by discontinued operations of $445,000) for the fiscal year ended April 30, 2019, primarily due to a net loss of approximately $4,908,000 adjusted by loss from discontinued operations of $244,000 and non-cash working capital primarily included non-cash employees' compensation of $716,000, depreciation expense and amortization of intangible assets of $1,094,000, provision for obsolete inventories of $1,000,000, and offset by a gain on disposition of property and equipment of $23,000. The decrease in net cash from operating activities was also primarily due to an increase of approximately $148,000 in accounts receivable and note receivable from a third party, an increase of approximately $52,000 in accounts receivable - related party, an increase of approximately $2,164,000 in inventories, an increase of approximately $319,000 in prepaid expenses and other current assets, a  decrease in accounts payable and accrued expenses of approximately $1,275,000 and a decrease of approximately $53,000 in taxes payable. 

Net cash used in operating activities from continuing operation was approximately $1,939,000 (total of $2,089,000 including discontinued operations of $150,000) in the fiscal year ended April 30, 2018, primarily due to a net loss of approximately $4,715,000 adjusted by loss from discontinued operations of $549,000 and non-cash working capital such as loss on disposition of property and equipment of $46,000, non-cash employees' compensation of $1,227,000, depreciation expense and amortization of intangible assets of $1,284,000. The decrease in net cash from operating activities was also primarily due to an increase of approximately $933,000 in accounts receivable and note receivable from the third party, an increase of approximately $2,127,000 in accounts receivable - related party, an increase of approximately $2,697,000 in inventories, which is offset by a decrease of approximately $2,248,000 in prepaid expenses and other current assets, an increase in accounts payable and accrued expenses of approximately $3,110,000 and an increase of approximately $70,000 in taxes payable. 

NET CASH FLOW USED IN INVESTING ACTIVITIES:

Net cash used in investing activities from continuing operations amounted to $2,360,000 in purchases of property and equipment, offset by the proceeds received from disposal of equipment of approximately $3,000 in the fiscal year ended April 30, 2019, as compared to $783,000 in the fiscal year ended April 30, 2018. In the fiscal year ended April 30, 2018, we spent approximately $785,000 in purchases of property and equipment, offset by the proceeds received from disposal of equipment of approximately $2,000. Net cash used in investing activities from discontinued operations amounted to $73,000 and $234,000 in fiscal year ended April 30, 2019 and 2018, respectively.

NET CASH FLOW PROVIDED BY FINANCING ACTIVITIES:

Net cash provided by financing activities from continuing operations amounted to approximately $9,019,000 in the fiscal year ended April 30, 2019, primarily due to proceeds from multiple non-related individual short-term and long-term loans of $5,869,000 and advances received from related parties of approximately $4,564,000, offset by repayment of short-term loans of $430,000 and repayment of related party advances of approximately $984,000. Net cash used in financing activities from discontinued operations amounted to $1,003,000 in fiscal year ended April 30, 2019.

Net cash provided by financing activities from continuing operations amounted to approximately $2,750,000 in the fiscal year ended April 30, 2018, primarily due to proceeds from multiple non-related individual short-term and long-term loans of $2,127,000 and advances received from related parties of approximately $5,748,000, offset by repayment of short-term loans of $380,000 and repayment of related party advances of approximately $4,745,000. Net cash provided by financing activities from discontinued operations amounted to $1,365,000 in fiscal year ended April 30, 2018

 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, 2019.

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: 
- 21 -


Country:
 
April 30, 2019
   
April 30, 2018
 
United States
 
$
88,506
     
30.1
%
 
$
696
     
0.9
%
China
   
205,693
     
69.9
%
   
75,221
     
99.1
%
Total cash and cash equivalents
 
$
294,199
     
100.00
%
 
$
75,917
     
100.00
%

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, 2019 (dollars in thousands), 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
   
15,926
     
6,080
     
9,846
     
-
     
-
 
Total
 
$
15,926
   
$
6,080
   
$
9,846
   
$
-
   
$
-
 

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.  
- 22 -


ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not applicable to smaller reporting company.

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, 2019.

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, 2019.

Management's Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act. Our management is also required to assess and report on the effectiveness of our internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002 ("Section 404"). Management assessed the effectiveness of our internal control over financial reporting as of April 30, 2019. During our assessment of the effectiveness of internal control over financial reporting as of April 30, 2019, management identified significant deficiencies related to (i) the U.S. GAAP expertise of our internal accounting staff, (ii) our internal audit functions and (iii) a lack of segregation of duties within accounting functions. Although management believes that these deficiencies do not amount to a material weakness, our internal controls over financial reporting were not effective at April 30, 2019.
  
Due to our size and nature, segregation of all conflicting duties may not always be possible and may not be economically feasible. As a result, we have not been able to take steps to improve our internal controls over financial reporting during the year ended April 30, 2019. However, to the extent possible, we are implementing procedures to assure that the initiation of transactions, the custody of assets and the recording of transactions will be performed by separate individuals.
 
A material weakness (within the meaning of PCAOB Auditing Standard No. 5) is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness, yet important enough to merit attention by those responsible for oversight of the company's financial reporting.

In light of this significant deficiency, we performed additional analyses and procedures in order to conclude that our consolidated financial statements for the year ended April 30, 2019 included in this Annual Report on Form 10-K were fairly stated in accordance with U.S. GAAP. Accordingly, management believes that despite our significant deficiency, our consolidated financial statements for the year ended April 30, 2019 are fairly stated, in all material respects, in accordance with U.S. GAAP.
 
- 23 -


This annual report does not include an attestation report of the Company's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit a smaller reporting company to provide only management's report in its annual report.

Changes in Internal Control

There were no changes in our internal control over financial reporting identified in connection with the evaluation of our controls performed during the fourth quarter ended April 30, 2019 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
Laiwang Zhang
 
 
57
 
President and Chairman
Dongdong Lin
 
 
45
 
Chief Executive Officer, Secretary and Director
Fanjun Wu
 
 
45
 
Chief Financial Officer
Chengxiang Yan
 
 
51
 
Director and General Manager of Qufu Natural Green

Laiwang Zhang. Mr. Zhang has served as our President and Chairman since April 30, 2004 and he has served as Chairman of Qufu Natural Green since January 2003. Mr. Zhang also serves as Chairman of Pharmaceutical Corporation, a company engaged in the sale and distribution of Chinese herb medicines, since April 2000. In 1996, Mr. Zhang founded Shandong Group, a holding company with interests in companies operating in the areas of nutritional products, Chinese herb extracts, packaged products, animal health products, animal medicine and chemical products. Since April 1996, he has been General Manager of this company. From April 1992 to April 1996 Mr. Zhang served as Manager of our subsidiary Shengya Veterinary Medicine. From 1984 to 1992, Mr. Zhang served as President of Shandong Qufu Amylum Plant, a company that manufactures amylum. Mr. Zhang graduated from Shandong Technical University in 1984 with a Master's Degree in Engineering.

Dongdong Lin. Ms. Lin has served as our Chief Executive Officer, Secretary and a member of our Board of Directors since February 2005. Ms. Lin served as Manager of the Technology Information Department of Pharmaceutical Corporation, a company engaged in the sale and distribution of Chinese herb medicines, from January 2003 to December 2004. Ms. Lin joined Shandong Group in 1996, serving as a supervisor from April 1998 to April 2000, and Manager of the Department of Export and Import from April 2000 to December 2002. Ms. Lin holds a Bachelor's Degree in Technology English from Haerbin Industry University and a Master's Degree in Economics from the China Academy of Social Science. 

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. 

Chengxiang Yan. Mr. Yan has been the General Manager of our subsidiary Qufu Natural Green since 1999 and a member of our Board of Directors since April 30, 2004 following our acquisition of Qufu Natural Green. From 1999 to 2004, Mr. Yan was the Director of the Marketing Department for that company. From 1996 to 1998, Mr. Yan was Director of the Marketing Department for Shandong Group, a holding company with interests in companies operating in the areas of nutritional products, Chinese herb extracts, packaged products, animal health products, animal medicine and chemical products, and from 1993 to 1996, he was Director of the Marketing Section for our subsidiary Shengya Veterinary Medicine owned by Shandong Group before our acquisition in 2004. Mr. Yan graduated from Shandong Agriculture University in 1993 with a Bachelor's Degree in Farming.

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. 
- 24 -


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. 

Liawang Zhang.  Mr. Zhang has over 19 years of professional experience in areas of nutritional products, Chinese herb extracts, packaged products, animal health products, animal medicine and chemical products.  He has significant experience in starting companies within our industry segments and has many professional contacts which serve to promote our efforts to expand our business and operations. 

Dongdong Lin.  Ms. Lin has over 23 years of operational experience in our industry. 

Chengxiang Yan.  Mr. Yan has over 23 years of marketing experience in our industry and an advanced degree in farming.

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, 2019 and Forms 5 and amendments thereto furnished to us with respect to the fiscal year ended April 30, 2019, 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, 2019.

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.
- 25 -


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.

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.

Summary Compensation Table

The following table summarizes all compensation recorded by us in the fiscal years ended April 30, 2019 and 2018 for:

All compensation was paid in RMB and the amounts below reflect the conversion to U.S. dollar, rounded to the nearest whole dollar, based upon an exchange rate of RMB 6.75 to $1.00. For definitional purposes in this annual report these individuals are sometimes referred to as the "named executive officers" as that term is defined under Rule 3b-7 of the Securities Exchange Act of 1934. The value attributable to any option awards is computed in accordance with FASB ASC Topic 718. 
- 26 -


Name and principal position
Year
 
Salary
($)
   
Bonus
($)
   
Stock
Awards
($)
   
Option
Awards
($)
   
No equity
incentive plan
compensation
($)
   
Non-qualified
deferred
compensation
earnings
($)
   
All other
compensation
($)
   
Total
($)
 
 
 
                                               
Laiwang Zhang (1)
2019
 
$
13,796
   
$
-
     
-
     
-
     
-
     
-
     
-
   
$
13,796
 
  2018
 
$
11,068
   
$
-
     
-
     
-
     
-
     
-
     
-
   
$
11,068
 
Dongdong Lin (2)
 2019
 
$
12,817
   
$
-
     
-
     
-
     
-
     
-
     
-
   
$
12,817
 
  2018
 
$
10,122
   
$
-
     
-
     
-
     
-
     
-
     
-
   
$
10,122
 
 
(1)
Mr. Zhang has served as our President and Chairman of the Board of Directors since April 2004.
(2)  
Ms. Lin has served as our Chief Executive Officer since February 2005.
 
Narrative Regarding Executive Compensation

Neither Mr. Zhang nor Ms. Lin is a party to an employment agreement with our company. Their compensation is determined by our Board of Directors, of which Mr. Zhang and Ms. Lin are members. The Board of Directors considers a number of factors in determining the compensation of Mr. Zhang and, Ms. Lin, including the scope of their duties and responsibilities to our company, compensation levels of executives with comparable duties in similar companies such as ours and the time they devote to our business. The Board of Directors did not consult with any experts or other third parties in establishing the compensation for Mr. Zhang or Ms. Lin. The amount of compensation payable to either Mr. Zhang or Ms. Lin can be changed at any time at the discretion of the Board of Directors.

We are required to contribute a portion of our employees' total salaries to the Chinese government's social insurance funds, including medical insurance, unemployment insurance and job injuries insurance, and a housing assistance fund, in accordance with relevant regulations.  Mr. Zhang and Ms. Lin are covered by these government sponsored programs.

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, 2019: 

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
(#)
 
Laiwang Zhang
   
0
     
0
     
0
     
0
     
0
     
0
     
0
     
0
     
0
 
Dongdong Lin
   
0
     
0
     
0
     
0
     
0
     
0
     
0
     
0
     
0
 

- 27 -

2005 Equity Compensation Plan

On March 23, 2005, our Board of Directors authorized and adopted our 2005 Equity Compensation Plan. The purpose of the plan is to encourage stock ownership by our officers, directors, key employees and consultants, and to give these persons a greater personal interest in the success of our business and an added incentive to continue to advance and contribute to us. We have currently reserved 5,000,000 of our authorized but unissued shares of common stock for issuance under the plan, and a maximum of 5,000,000 shares may be issued, unless the plan is subsequently amended (subject to adjustment in the event of certain changes in our capitalization), without further action by our Board of Directors and stockholders, as required. Subject to the limitation on the aggregate number of shares issuable under the plan, there is no maximum or minimum number of shares as to which a stock grant or plan option may be granted to any person. Shares used for stock grants and plan options may be authorized and unissued shares or shares reacquired by us, including shares purchased in the open market. Shares covered by plan options which terminate unexercised will again become available for grant as additional options, without decreasing the maximum number of shares issuable under the plan, although such shares may also be used by us for other purposes. As of August 12, 2019, there are no shares available to be issued or options outstanding under the 2005 Equity Compensation Plan.

2006 Equity Compensation Plan

On February 7, 2006, our Board of Directors authorized and adopted our 2006 Equity Compensation Plan. The purpose of the plan is to encourage stock ownership by our officers, directors, key employees and consultants, and to give such persons a greater personal interest in the success of our business and an added incentive to continue to advance and contribute to us. Our Board of Directors administers the 2006 Equity Compensation Plan including, without limitation, the selection of the persons who will be awarded stock grants and granted options, the type of options to be granted, the number of shares subject to each Option and the exercise price. We have currently reserved 6,200,000 of our authorized but unissued shares of common stock for issuance under the 2006 Equity Compensation Plan, and a maximum of 6,200,000 shares may be issued, unless the plan is subsequently amended (subject to adjustment in the event of certain changes in our capitalization). Subject to the limitation on the aggregate number of shares issuable under the plan, there is no maximum or minimum number of shares as to which a stock grant or plan option may be granted to any person. Shares used for stock grants and plan options may be authorized and unissued shares or shares reacquired by us, including shares purchased in the open market. Shares covered by plan options which terminate unexercised will again become available for grant as additional options, without decreasing the maximum number of shares issuable under the 2006 Equity Compensation Plan, although such shares may also be used by us for other purposes. As of August 12, 2019, there are no shares available to be issued or options outstanding under the 2006 Equity Compensation Plan.

2012 Equity Compensation Plan

In August, 2012, our Board of Directors authorized and adopted our 2012 Equity Compensation Plan. The purpose of the plan is to encourage stock ownership by our officers, directors, key employees and consultants, and to give these persons a greater personal interest in the success of our business and an added incentive to continue to advance and contribute to us. We have currently reserved 10,000,000 of our authorized but unissued shares of common stock for issuance under the plan, and a maximum of 10,000,000 shares may be issued, unless the plan is subsequently amended (subject to adjustment in the event of certain changes in our capitalization), without further action by our Board of Directors and stockholders, as required. Subject to the limitation on the aggregate number of shares issuable under the plan, there is no maximum or minimum number of shares as to which a stock grant or plan option may be granted to any person. Shares used for stock grants and plan options may be authorized and unissued shares or shares reacquired by us, including shares purchased in the open market. Shares covered by plan options which terminate unexercised will again become available for grant as additional options, without decreasing the maximum number of shares issuable under the plan, although such shares may also be used by us for other purposes. As of August 12, 2019, there are no shares available to be issued or options outstanding under the 2012 Equity Compensation Plan.

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.
- 28 -

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, 2019 other than their regular employee compensation.

ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

On August 12, 2019 we had 199,632,803 shares of common stock issued and outstanding. The following table sets forth information known to us as of August 12, 2019 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 the 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
 
Laiwang Zhang 
   
3,457,154
     
1.7
%
Dongdong Lin 
   
4,984,108
     
2.5
%
Fanjun Wu 
   
1,732,052
     
0.9
%
Chengxiang Yan
   
-
     
-
 
All officers and directors as a group (four persons)
   
10,173,314
     
5.1
%

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, 2018. 
 
 
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.
                       
- 29 -


ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

Related Party Transactions

From time to time we engage in transactions with related parties.  The following is a summary of the related party transactions reflected on our consolidated financial statements as of April 30, 2019 and which have occurred through the date of this report:

From time to time we sell high-grade stevia products to Qufu Shengwang Import and Export Corporation, a Chinese entity owned by our Chairman. During the fiscal years ended April 30, 2019 and 2018, sales to this related party were $4,421,864 and $4,043,074, respectively.  As of April 30, 2019 and 2018, the related party accounts receivable balances were $2,464,127 and $2,576,944, respectively.
 
From time to time, we received advances from related parties for working capital purpose and repaid funds to related parties. During the fiscal years ended April 30, 2019 and 2018, we received advances from related parties for working capital totaled $4,564,183 and $5,748,210 respectively, and we repaid to related parties a total of $984,472 and $4,745,052, respectively.

In the fiscal years ended April 30, 2019 and 2018, interest expense due to related parties amounted to $136,914 and $104,437, respectively, which were included in interest expense in the accompanying consolidated statements of operations and comprehensive loss, and in connection with the advances of $742,512 (RMB5,000,000) and $1,188,019 (RMB8,000,000) from Shangdong Shengwang Pharmaceutical Co., Ltd. ("Pharmaceutical Corporation"), a Chinese entity owned by our Chairman, Mr. Laiwang Zhang. These advances bear interest at the rate of 6.3% per annum. On August 10, 2018, the Company repaid the advance of RMB5,000,000 with accrued interest. On September 20, 2018, we received another advance of RMB5,000,000 from Pharmaceutical Corporation and the interest rate of new advance of RMB5,000,000 increased from 6.3% per annum to 7.0% per annum. The other advances bear no interest and are payable on demand. 

On April 30, 2019, the balance we owed to Pharmaceutical Corporation, Qufu Shengwang Import and Export and Mr. Weidong Chai, a management member of Qufu Shengren Pharmaceutical Co., Ltd., amounted to $5,669,776, $557,976 and $180,769, respectively. On April 30, 2018, the balances we owed to Pharmaceutical Corporation, Qufu Shengwang Import and Export, Mr. Weidong Chai amounted to $2,658,069, $103,169 and $175,781, respectively.

Director Independence

None of our directors are considered independent within The NASDAQ Stock Market's director independence standards pursuant to Marketplace Rule 5605.
 
ITEM 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES.

RBSM LLP served as our independent registered public accounting firm for the fiscal years ended April 30, 2019 and 2018. 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, 2019 and 2018.

 
 
2019
   
2018
 
Audit Fees
 
$
90,000
   
$
90,000
 
Audit - Related Fees
   
-
     
-
 
Tax Fees
   
-
     
-
 
All Other Fees
   
-
     
-
 
 
 
$
90,000
   
$
90,000
 

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.
- 30 -


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).
 
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).
- 31 -


 
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).
 
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).
- 32 -

 
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
 
 
31.1
 
 
31.2
 
 
32.1
 


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
 
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 13, 2019
By:
/s/ Dongdong Lin
 
 
Dongdong Lin, Chief Executive Officer
 
 
 
 August 13, 2019
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/ Laiwang Zhang 
President and Chairman of the Board of Director
August 13, 2019
Laiwang Zhang 
 
 
 
 
 
/s/ Dongdong Lin 
Chief Executive Officer and Director (principal executive officer)
August 13, 2019
Dongdong Lin 
 
 
 
 
 
/s/ Fanjun Wu 
Chief Financial Officer (principal financial and accounting officer)
August 13, 2019
Fanjun Wu 
 
 
 
 
 
/s/ Chengxiang Yan 
Director
August 13, 2019
Chengxiang Yan 
 
 

- 33 -



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 - 21


F -1

 
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, 2019 and 2018, 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, 2019, 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, 2019 and 2018, and the results of its operations and its cash flows for each of the two years in the period ended April 30, 2019, 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 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.
 
/s/ RBSM LLP
 
We have served as the Company's auditors since 2013.
 
New York, New York
August 13, 2019
F -2


SUNWIN STEVIA INTERNATIONAL, INC. AND SUBSIDIARIES
 
CONSOLIDATED BALANCE SHEETS
 
    
April 30
   
April 30
 
   
2019
   
2018
 
ASSETS
           
CURRENT ASSETS:
           
Cash and cash equivalents
 
$
294,199
   
$
75,917
 
Accounts receivable, net of allowance for doubtful accounts of $78,159 and $83,023, respectively
   
2,985,166
     
3,089,034
 
Accounts receivable - related party
   
2,477,659
     
2,576,944
 
Inventories, net
   
11,991,956
     
11,498,414
 
Prepaid expenses and other current assets
   
1,676,347
     
2,108,052
 
Current assets held for sale
   
4,143,059
     
3,069,614
 
                 
Total Current Assets
   
23,568,386
     
22,417,975
 
                 
Property and equipment, net
   
8,993,397
     
7,964,952
 
Non-current assets held for sale
   
2,925,706
     
3,206,259
 
                 
     Total Assets
 
$
35,487,489
   
$
33,589,186
 
                 
LIABILITIES AND STOCKHOLDERS' EQUITY
               
CURRENT LIABILITIES:
               
Accounts payable and accrued expenses
 
$
7,680,049
   
$
10,428,912
 
Short-term loans
   
6,079,983
     
8,302,489
 
Due to related parties
   
6,408,521
     
2,937,019
 
Current liabilities held for sale
   
988,748
     
1,231,091
 
                 
    Total Current Liabilities
   
21,157,301
     
22,899,511
 
                 
Long-term loans
   
9,845,706
     
1,687,857
 
Non-current liabilities held for sale
   
947,445
     
-
 
                 
Total Liabilities
   
31,950,452
     
24,587,368
 
                 
   Commitments and Contingencies
   
-
     
-
 
                 
STOCKHOLDERS' EQUITY:
               
Preferred stock, $0.001 par value; 1,000,000 shares authorized; no shares issued and outstanding
   
-
     
-
 
Common stock, $0.001 par value, 200,000,000 shares authorized; 199,632,803 and 199,632,803 shares issued and outstanding as of April 30, 2019 and 2018, respectively
   
199,633
     
199,633
 
Additional paid-in capital
   
37,681,279
     
37,681,279
 
Accumulated deficit
   
(38,735,711
)
   
(33,827,351
)
Accumulated other comprehensive income
   
4,391,836
     
4,948,257
 
                 
    Total Stockholders' Equity
   
3,537,037
     
9,001,818
 
                 
      Total Liabilities and Stockholders' Equity
 
$
35,487,489
   
$
33,589,186
 
                 
The accompanying notes are an integral part of these consolidated financial statements
 

F -3


SUNWIN STEVIA INTERNATIONAL, INC. AND SUBSIDIARIES
 
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
 
    
For the Year Ended April 30,
 
   
2019
   
2018
 
Revenues
 
$
16,428,581
   
$
15,099,238
 
Revenues - related parties
   
4,421,864
     
4,043,074
 
Total revenues
   
20,850,445
     
19,142,312
 
                 
Cost of revenues
   
15,067,810
     
13,668,867
 
Cost of revenues - related parties
   
4,200,079
     
3,848,310
 
Total cost of revenues
   
19,267,889
     
17,517,177
 
                 
Gross profit
   
1,582,556
     
1,625,135
 
                 
Operating expenses:
               
Selling expenses
   
1,935,165
     
1,540,281
 
General and administrative expenses
   
2,637,185
     
3,044,682
 
Loss on disposition of property and equipment
   
-
     
46,255
 
Research and development expenses
   
981,962
     
842,464
 
Total operating expenses, net
   
5,554,312
     
5,473,682
 
                 
Loss from operations
   
(3,971,756
)
   
(3,848,547
)
                 
Other (expenses) income
               
Other expenses income
   
111,574
     
225,968
 
Interest income
   
284
     
91
 
Interest expense - related parties
   
(136,914
)
   
(104,437
)
Interest expense
   
(667,146
)
   
(438,615
)
                 
Total other expense, net
   
(692,202
)
   
(316,993
)
                 
Loss from continuing operations before income taxes
   
(4,663,958
)
   
(4,165,540
)

   

     

 
Net loss from continuing operations
 
$
(4,663,958
)
 
$
(4,165,540
)
                 
Discontinued operations
               
Loss from discontinued operations, net of income tax
   
(244,402
)
   
(549,255
)

   

     

 
Loss from discontinued operations, net of income tax
   
(244,402
)
   
(549,255
)
                 
Net loss
 
$
(4,908,360
)
 
$
(4,714,795
)
                 
Comprehensive loss:
               
Net loss
 
$
(4,908,360
)
 
$
(4,714,795
)
Foreign currency translation adjustment
   
(556,421
)
   
932,557
 
                 
Total comprehensive loss
 
$
(5,464,781
)
 
$
(3,782,238
)
                 
Earnings per common share:
               
Continuing operations - Basic and Diluted
 
$
(0.02
)
 
$
(0.02
)
Discontinued operations - Basic and Diluted
   
(0.00
)
   
(0.00
)
Net loss per common share - basic and diluted
 
$
(0.02
)
 
$
(0.02
)
                 
Weighted average common shares outstanding - basic
   
199,632,803
     
199,632,803
 
Weighted average common shares outstanding - diluted
   
199,632,803
     
199,632,803
 
                 
The accompanying notes are an integral part of these consolidated financial statements
 

F -4

 

SUNWIN STEVIA INTERNATIONAL, INC. AND SUBSIDIARIES
 
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
 
For the Years Ended April 30, 2019 and 2018
 
 
                       
 
Number of shares
 
Amount
 
Additional Paid-in Capital
 
Accumulated Deficit
 
Accumulated Other Comprehensive Income
 
Total Stockholders' Equity
 
Balance, April 30, 2017
   
199,632,803
   
$
199,633
   
$
37,681,279
   
$
(29,112,556
)
 
$
4,044,853
   
$
12,813,209
 
Net loss for the period
   
-
     
-
             
(4,714,795
)
           
(4,714,795
)
Foreign currency translation adjustment
   
-
     
-
                     
903,404
     
903,404
 
 
                                               
Balance, April 30, 2018
   
199,632,803
   
$
199,633
   
$
37,681,279
   
$
(33,827,351
)
 
$
4,948,257
   
$
9,001,818
 
Net loss for the period
                           
(4,908,360
)
           
(4,908,360
)
Foreign currency translation adjustment
                                   
(556,421
)
   
(556,421
)
Balance, April 30, 2019
   
199,632,803
   
$
199,633
   
$
37,681,279
   
$
(38,735,711
)
 
$
4,391,836
   
$
3,537,037
 
 
                                               
The accompanying notes are an integral part of these consolidated financial statements
 

F -5

 
SUNWIN STEVIA INTERNATIONAL, INC. AND SUBSIDIARIES
 
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
    
For the Year Ended April 30,
 
   
2019
   
2018
 
CASH FLOWS FROM OPERATING ACTIVITIES:
           
Net loss
 
$
(4,908,360
)
 
$
(4,714,795
)
Loss from discontinued operations
   
(244,402
)
   
(549,255
)
Net loss from continuing operations
   
(4,663,958
)
   
(4,165,540
)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
               
Depreciation expense
   
1,093,832
     
1,175,529
 
Amortization of intangible assets
   
-
     
108,390
 
Provision for obsolete inventories
    999,548
      -
 
(Gain) loss on disposition of property and equipment
   
(23,065
)
   
46,255
 
Recovery of bad debt reserve
   
(329
)
   
(1,429
)
Stock issued for employees' compensation
   
715,553
     
1,226,668
 
Changes in operating assets and liabilities:
               
Accounts receivable and notes receivable
   
(148,347
)
   
(933,081
)
Accounts receivable - related party
   
(51,581
)
   
(2,126,700
)
Inventories
   
(2,164,379
)
   
(2,697,003
)
Prepaid expenses and other current assets
   
(318,519
)
   
2,248,492
 
Accounts payable and accrued expenses
   
(1,274,960
)
   
3,109,715
 
Taxes payable
   
(53,087
)
   
69,931
 
                 
NET CASH USED IN OPERATING ACTIVITIES FROM CONTINUING OPERATIONS
   
(5,889,292
)
   
(1,938,772
)
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES FROM DISCONTINUED OPERATIOIN
   
444,606
     
(149,886
)
NET CASH USED IN OPERATING ACTIVITIES
   
(5,444,686
)
   
(2,088,658
)
                 
CASH FLOWS FROM INVESTING ACTIVITIES:
               
Purchases of property and equipment
   
(2,360,145
)
   
(784,686
)
Proceed from disposal of equipment
   
3,260
     
1,519
 
                 
NET CASH USED IN INVESTING ACTIVITIES FROM CONRINUING OPERATIONS
   
(2,356,145
)
   
(783,167
)
NET CASH USED IN INVESTING ACTIVITIES FROM DISCONTINUED OPERATIOIN
   
(72,700
)
   
(234,220
)
NET CASH USED IN INVESTING ACTIVITIES
   
(2,429,585
)
   
(1,017,387
)
                 
CASH FLOWS FROM FINANCING ACTIVITIES:
               
Proceeds from loans
   
5,868,928
     
2,127,175
 
Repayment of short term loans
   
(429,795
)
   
(379,853
)
Advance from related parties
   
4,564,183
     
5,748,210
 
Repayment of related party advances
   
(984,472
)
   
(4,745,052
)
                 
NET CASH PROVIDED BY FINANCING ACTIVITIES FROM CONRINUING OPERATIONS
   
9,018,844
     
2,750,480
 
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES FROM DISCONTINUED OPERATIOIN
   
(1,003,033
)
   
1,365,305
 
NET CASH PROVIDED BY FINANCING ACTIVITIES
   
8,015,811
     
4,115,785
 
                 
EFFECT OF EXCHANGE RATE ON CASH
   
75,917

   
18,252
 
NET INCREASEIN CASH
   
218,282
     
46,793
 
                 
Cash at the beginning of year
   
75,917
     
29,124
 
Cash at the end of period
   
294,199
     
75,917
 
                 
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:
               
Cash paid for interest
 
$
146,689
   
$
3,950
 
                 
NON-CASH INVESTING AND FINANCING ACTIVITIES:
               
Property and equipments acquired on credit as payable
 
$
263,041
   
$
721,185
 
Accrued interest enrolled into debt
 
$
1,347,067
   
$
262,068
 
Accrued interest payable to related parties
 
$
15,900
   
$
-
 
The accompanying notes are an integral part of these consolidated financial statements
 

F -6

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, 2019 and 2018, our subsidiaries included in continuing operations and discontinued operations consisted of the following:

-       Sunwin Stevia International;
-       Qufu Natural Green Engineering Co., Ltd. ("Qufu Natural Green"), a wholly owned by Sunwin Stevia International;
-       Qufu Shengren Pharmaceutical Co., Ltd. ("Qufu Shengren"), a wholly owned by Qufu Natural Green;
-       Qufu Shengwang Stevia Biology and Science Co., Ltd. ("Qufu Shengwang"), a wholly owned by   Qufu Natural Green; and
-       Sunwin USA, LLC. ("Sunwin USA"), a wholly owned by Sunwin Stevia International.

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.

In fiscal 2018 and fiscal 2019 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, which are more effective than single use. It can also be used in patients with insulin therapy to reduce insulin consumption.

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 purchased included the product development and supply chain for OnlySweet.
 
Qufu Shengwang

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

On September 30, 2011, Qufu Shengwang purchased the 40% equity interest in Qufu Shengwang owned by our Korean partner, Korea Stevia Company, Limited, for $626,125 in cash, and as a result of this repurchase transaction we now own 100% equity interest in all of the net assets of our subsidiary Qufu Shengwang. Therefore, the non-controlling interest of $2,109,028 in our balance sheet as of April 30, 2012 has been eliminated to reflect our 100% interest in Qufu Shengwang.
F -7

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

On July 30, 2019, Qufu Shengwang was sold to an unaffiliated individual (see Note 2).
 
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.

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, and the value of stock-based compensation.  Actual results could differ from those estimates.

CASH AND CASH EQUIVALENTS

We consider all highly liquid investments with maturities of three months or less at the time of purchase to be cash and equivalents. As of April 30, 2019 and 2018, we held $294,199 and $75,917 of our cash and cash equivalents with commercial banking institutions in the PRC, respectively, and $88,506 and $696 with banks in the United States. In the PRC, there is no equivalent federal deposit insurance as in the United States, therefore the amounts held in banks in the PRC are not insured. We have not experienced any losses in such bank accounts through April 30, 2019.

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, 2019 and 2018, the allowance for doubtful accounts was $78,159 and $83,023, respectively.

INVENTORIES

Inventories, consisting of raw materials, work in process, and finished goods related to our products, are stated at the lower of cost or estimated net realizable value that can be estimated utilizing the weighted moving average method. A reserve is established when management determines that certain slow-moving inventories may be sold at below book value. These reserves are recorded based on estimates.  As of April 30, 2019 and 2018, the Company did not record a reserve for slow-moving inventories. If inventory costs exceed expected market value due to obsolescence or quantities in excess of expected demand, the Company will record a write down of inventories for the difference between the lower of cost or estimated net realizable value. In the fiscal years ended April 30, 2019 and 2018, the Company wrote down inventories of $999,548 and $235,258, 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 three to twenty 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.
F -8

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 $0 and $46,255 for the fiscal years ended April 30, 2019 and 2018, 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.

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, loans receivable, 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 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, 2019 and 2018 amounted to $125,854 and $190,189, respectively, consisted primarily of VAT taxes.

REVENUE RECOGNITION

Pursuant to the guidance of ASC 606, we record revenue when persuasive evidence of an arrangement exists, product delivery has occurred, the sales price to the customer is fixed or determinable, and collectability is reasonably assured. The adoption of this guidance is not expected to 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.

F -9

INCOME TAXES

The Company has adopted Accounting Standards Codification subtopic 740-10, Income Taxes ("ASC 740-10") which requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statement or tax returns.  Under this method, deferred tax liabilities and assets are determined based on the difference between financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.  Valuation allowances are recorded to reduce the deferred tax assets to an amount that it is more likely than not be realized.
 
We file federal and state income tax returns in the United States for our corporate operations pursuant to the U.S. Internal Revenue Code of 1986, as amended, and file separate foreign tax returns for our Chinese subsidiaries pursuant to the China's Unified Corporate Income Tax Law.
 
We apply the provisions of ASC 740-10-50, "Accounting for Uncertainty in Income Taxes", which provides clarification related to the process associated with accounting for uncertain tax positions recognized in our consolidated financial statements. Audit periods remain open for review until the statute of limitations has passed. The completion of review or the expiration of the statute of limitations for a given audit period could result in an adjustment to the Company's liability for income taxes. Any such adjustment could be material to the Company's results of operations for any given quarterly or annual period based, in part, upon the results of operations for the given period. As of April 30, 2019, 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,
 
 
 
2019
   
2018
 
Numerator:
           
Net Loss for basic and diluted attributable to common shareholders
 
$
(4,908,358
)
 
$
(4,714,795
)
   Net loss from continuing operations
 
$
(4,663,958
)
 
$
(4,165,540
)
   Net loss from discontinued operation
   
(244,402
)
   
(549,255
)
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:
               
Net loss from continuing operations - basic and diluted
 
$
(0.02
)
 
$
(0.02
)
Net loss from discontinued operations - basic and diluted
   
(0.00
)
   
(0.00
)
Net loss per common share - basic and diluted
 
$
(0.02
)
   
(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.  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.
F -10


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, 2019
RMB 6.73 to $1.00
As of April 30, 2018
RMB 6.33 to $1.00
 
Year ended April 30, 2019
 
RMB 6.75 to $1.00
Year ended April 30, 2018
RMB 6.58 to $1.00

COMPREHENSIVE LOSS
 
Comprehensive loss is comprised of net loss and all changes to the statements of stockholders' equity, except those due to investments by stockholders, changes in paid-in capital and distributions to stockholders. For the Company, comprehensive loss for fiscal years ended April 30, 2019 and 2018 included net loss and unrealized gains (losses) from foreign currency translation adjustments. 

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, 2019 and 2018, we had $205,693 and $75,221 cash held in PRC bank accounts, respectively, which are not insured. We have not experienced any losses in such accounts through April 30, 2019.

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.

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 $981,962 and $842,464 for fiscal years ended April 30, 2019 and 2018, respectively.

SHIPPING COSTS

Shipping costs are included in selling expenses and totaled $185,589 and $188,962 for the fiscal years ended April 30, 2019 and 2018, respectively.

RECLASSIFICATIONS

Certain prior year amounts have been reclassified to conform to the current period presentation for amounts related to the discontinue operations (see Note 2). These reclassifications had no impact on net earnings and financial position.
F -11


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 May 2014, the FASB issued ASU 2014-09, "Revenue from contracts with Customers (Topic 606)". Under ASU 2014-09, revenue is recognized when a customer obtains control of promised goods or services and is recognized in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. This standard, which is effective for interim and annual reporting periods in fiscal years that begin after December 15, 2017. The guidance permits two methods of adoption: retrospectively to each prior reporting period presented (full retrospective method), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (modified retrospective method). The Company adopted this standard effective May 1, 2018 by using the full retrospective method to restate prior reporting period presented. The Company has identified its revenue streams and assessed each for the impacts. The Company completed its analysis and concluded that the adoption of Topic 606 did not have a material impact in the timing or amount of revenue recognized, including the presentation of revenues in the Company's consolidated statements of income and comprehensive loss.
 
In February 2018, the FASB issued ASU 2018-02, "Income Statement—Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income". These amendments provide financial statement preparers with an option to reclassify stranded tax effects within accumulated other comprehensive income to retained earnings in each period in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act (or portion thereof) is recorded. The amendments in this ASU are effective for all entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption of ASU 2018-02 is permitted, including adoption in any interim period for the public business entities for reporting periods for which financial statements have not yet been issued. The amendments in this ASU should be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recognized. The Company is currently evaluating the impact of the adoption of ASU No. 2018-02 on its consolidated financial statements.
 
In March 2018, the FASB issued ASU 2018-05, "Income Taxes (Topic 740) - Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118". The amendments in this ASU add SEC paragraphs pursuant to the SEC Staff Accounting Bulletin No. 118, which expresses the view of the staff regarding application of Topic 740, Income Taxes, in the reporting period that includes December 22, 2017 - the date on which the Tax Cuts and Jobs Act was signed into law. The amendments are effective upon addition to the FASB Accounting Standards Codification. The adoption of this guidance is not expected to have a material impact on our consolidated financial statements.

In August 2018, the FASB issued ASU 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract. ASU 2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The standard is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, with early adoption permitted. We will adopt this standard on its effective date of January 1, 2020. We are currently evaluating the impact of this ASU on our financial position, results of operations, cash flows, or presentation thereof. 

In August 2018, the FASB issued ASU 2018-13 to modify the disclosure requirements on fair value measurements. The amendments are effective beginning after December 15, 2019. An entity is permitted to early adopt any removed or modified disclosures and delay adoption of the additional disclosures until the effective date. Most amendments should be applied retrospectively, but certain amendments will be applied prospectively. The Company is in the process of assessing the impact of the standard on the Company's fair value disclosures. However, the standard is not expected to have an impact on the Company's consolidated financial position, results of operations and cash flows.

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.
F -12


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, 2019 contained a qualification as to our ability to continue as a going concern. For the year ended April 30, 2019, the Company has incurred a net loss of approximately $5.0 million. The Company also has an accumulated deficit of $38.7 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's plans include attempting to improve its business profitability, its ability to generate sufficient cash flow from its operations to meet its operating needs on a timely basis, obtain additional working capital funds through debt and equity financings, and restructure on-going operations to eliminate inefficiencies to raise cash balance in order to meet its anticipated cash requirements for the next twelve months from the date of this report. However, there can be no assurance that these plans and arrangements will be sufficient to fund the Company's ongoing capital expenditures, working capital, and other requirements.  Management intends to make every effort to identify and develop sources of funds.  The outcome of these matters cannot be predicted at this time.  There can be no assurance that any additional financings will be available to the Company on satisfactory terms and conditions, if at all.
 
The ability of the Company to continue as a going concern is dependent upon its ability to achieve profitable operations and raise additional capital. The accompanying consolidated financial statements do not include any adjustments related to the recoverability or classification of asset-carrying amount or the amounts and classification of liabilities that may result should the Company be unable to continue as a going concern.

NOTE 2 - DISCONTINUED OPERATIONS

On April 30, 2018, the Company decided to close the Company's wholly owned subsidiary, Sunwin Tech Group, Inc. ("Sunwin Tech"), a Florida corporation, due to no operation activities in the past several years. The Board of Directors discussed with the management and determined that it is more efficient and cost beneficial to transfer all liability of Suwnin Tech for direct management by the Parent. All assets and liabilities owned by Sunwin Tech, including the equity ownership of Qufu Natural Green transferred to and is assumed by Sunwin Stevia International, Inc on Apr 30, 2018.

On July 30, 2019, Qufu Natural Green entered into an Asset Transfer Agreement with Na Li, an unaffiliated individual (the "Buyer") for the sale of 100% equity ownership of Qufu Shengwang. Pursuant to the Asset Transfer Agreement, the Buyer shall pay to Qufu Natural Green a total cash consideration of RMB8,000,000 (approximately $1,162,790) based on the estimated net book value as of July 30, 2019, payable in two installments of RMB5,000,000 (approximately $726,744) on July 30, 2019 and RMB3,000,000 (approximately $436,046) on September 30, 2019. The Buyer assumed all assets and liabilities of Qufu Shengwang including the amount of Qufu Shengwang's due to Qufu Natural Green of approximately RMB26,000,000 (approximately $3,779,070), and Qufu Natural Green shall assist in completing all documents required for the equity transfer after confirming the receipt of the first payment. The Company received the first installment of RMB5,000,000 on July 30, 2019.
 
Prior to July 30, 2019, Qufu Shangwang engaged in our Chinese medicine segment. In our Chinese medicine segment, we manufactured and sold traditional Chinese medicine formula extracts which are used in products made for use by both humans and animals. As a result of the sale, Qufu Shengwang, our Chinese medicine segment is treated as a discontinued operation.
 
  Pursuant to ASC Topic 205-20, Presentation of Financial Statements - Discontinued Operations, the results of operations from the Chinese medicine segment for the years ended April 30, 2019 and 2018 have been classified as discontinue operations and included in the line caption of to the loss from discontinued operations line in the accompanying consolidated statements of operations and comprehensive loss presented herein. The assets and liabilities also have been classified as discontinued operations under the line captions of current assets held for sale, non-current assets held for sale, current liabilities held for sale and non-current liabilities held for sale in the Company's consolidated balance sheets as of April 30, 2019 and 2018.
F -13


The assets and liabilities classified as discontinued operations in the Company's consolidated financial statements as of April 30, 2019 and 2018 were set forth below.  
 
 
 
April 30,
2019
   
April 30,
2018
 
Assets:
       
Current assets:
           
Cash
 
$
426,766
   
$
1,024,831
 
Accounts receivable, net
   
322,902
     
424,496
 
Inventories, net
   
949,705
     
1,066,157
 
Due from related parties
   
2,308,159
     
377,804
 
Prepaid expenses and other
   
135,527
     
176,327
 
Total current assets
   
4,143,059
     
3,069,614
 
Property and equipment, net
   
985,630
     
1,087,933
 
Land use rights, net
   
1,795,362
     
1,964,606
 
Other long-term asset
   
144,714
     
153,720
 
Total assets
 
$
7,068,765
   
$
6,275,873
 
Liabilities:
               
Current liabilities:
               
Accounts payable
 
$
389,521
   
$
658,337
 
Accrued expenses and other liabilities
   
599,227
     
572,754
 
Total current liabilities
   
988,748
     
1,231,091
 
Long-term loans
   
947,445
     
-
 
Total liabilities *
 
$
1,936,193
   
$
1,231,091
 

*  Not including intercompany loan of Qufu Shengwang payable to Qufu Natural Green in the amount of RMB27,354,608 (approximately $3,975,960) which was not reflected on the consolidated financial statements as of April 30, 2019 due to consolidation.

The following table presented the results of discontinued operations in the fiscal years ended April 30, 2019 and 2018:

 
 
Fiscal Years Ended April 30,
 
 
 
2019
   
2018
 
 
           
Revenues
 
$
2,730,140
   
$
2,897,497
 
Cost of revenues
   
2,269,216
     
2,362,722
 
Loss before income taxes
   
244,402
     
549,255
 
Income tax expense
   
-
     
-
 
 
               
Loss from discontinued operations
   
244,402
     
549,255
 
Loss from disposal, net of taxes
   
-
     
-
 
Total loss from discontinued operations
 
$
244,402
   
$
549,255
 

NOTE 3 - INVENTORIES

As of April 30, 2019 and 2018, inventories consisted of the following:
 
 
 
April 30, 2019
   
April 30, 2018
 
 
           
Raw materials
 
$
5,639,260
   
$
8,474,023
 
Work in process
   
3,426,545
     
1,357,484
 
Finished goods
   
2,926,151
     
1,666,907
 
 
   
11,991,956
     
11,498,414
 
Less: reserve for obsolete inventory
   
-
     
-
 
 
 
$
11,991,956
   
$
11,498,414
 

F -14


NOTE 4 - PROPERTY AND EQUIPMENT

As of April 30, 2019 and 2018, property and equipment consisted of the following:

 
 
April 30, 2019
   
April 30, 2018
 
Estimated Life
           
Office equipment
3-5 Years
 
$
77,738
   
$
50,211
 
Auto and trucks
2-10 Years
   
599,154
     
660,416
 
Manufacturing equipment
2-10 Years
   
5,353,752
     
5,050,862
 
Buildings
5-30 Years
   
8,082,483
     
8,005,238
 
Construction in process
 
   
2,001,045
     
652,955
 
 
 
   
16,114,172
     
14,419,682
 
Less: accumulated depreciation
 
   
(7,120,775
)
   
(6,454,730
)
 
      
 
$
8,993,397
   
$
7,964,952
 
 
For the fiscal years ended April 30, 2019 and 2018, depreciation expense totaled $1,093,832 and $1,175,529, of which $798,044 and $1,019,448 were included in cost of revenues, respectively, and of which $295,788 and $156,081 were included in general and administrative expenses, respectively. Depreciation is not taken during the period of construction or equipment installation. Upon completion of the installation of manufacturing equipment or any construction in progress, construction in progress balances will be classified to their respective property and equipment category. For the fiscal years ended April 30, 2019 and 2018, the Company received the proceeds from disposal of equipment of $0 and $1,519, respectively, and the Company also recognized gain (loss) on disposition of property and equipment of $23,065 and $(46,255), respectively. For the fiscal year ended April 30, 2019, the Company changed the estimated economic lives for certain property and equipment to better reflect their estimated useful lives of those assets.

NOTE 5 - RELATED PARTY TRANSACTIONS

Accounts receivable - related party and revenue - related party

For the fiscal years ended April 30, 2019 and 2018, we recorded revenue from related party of $4,421,864 and $4,043,074, respectively, related to sales of products to Qufu Shengwang Import and Export Co., Ltd. ("Qufu Shengwang Import and Export"), a Chinese entity owned by our Chairman, Mr. Laiwang Zhang. As of April 30, 2019 and 2018, related party accounts receivable totaled $2,477,659 and $2,576,944, respectively, were due from Qufu Shengwang Import and Export Corporation.

Due to (from) related parties
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, 2019 and 2018, we received advances from related parties for working capital totaled $4,564,183 and $5,748,210 respectively, and we repaid to related parties a total of $984,472 and $4,745,052, respectively.
In the fiscal years ended April 30, 2019 and 2018, interest expense related to due to related parties amounted to $136,914 and $104,437, respectively, which were included in interest expense in the accompanying consolidated statements of operations and comprehensive loss, and in connection with the advances of $742,512 (RMB5,000,000) and $1,188,019 (RMB8,000,000) from Shangdong Shengwang Pharmaceutical Co., Ltd. ("Pharmaceutical Corporation"), a Chinese entity owned by our Chairman, Mr. Laiwang Zhang. These advances bear interest at the rate of 6.3% per annum. On August 10, 2018, the Company repaid the advance of RMB5,000,000 with accrued interest. On September 20, 2018 received another advance of RMB5,000,000 from Pharmaceutical Corporation and bearing interest rate of new advance of RMB5,000,000 increased from 6.3% per annum to 7.0% per annum. The other advances bear no interest and are payable on demand. 

On April 30, 2019, the balance we owed to Pharmaceutical Corporation, Qufu Shengwang Import and Export and Mr. Weidong Chai, a management member of Qufu Shengren Pharmaceutical Co., Ltd., amounted to $5,669,776, $557,976 and $180,769, respectively. On April 30, 2018, the balance we owed to Pharmaceutical Corporation, Qufu Shengwang Import and Export, Mr. Weidong Chai amounted to $2,658,069, $103,169 and $175,781, respectively.
 
F -15

For the fiscal years ended April 30, 2019 and 2018, due to (from) related party activities consisted of the following: 

 
 
Pharmaceutical Corporation
   
Qufu Shengwang Import and Export
   
Mr. Laiwang Zhang
   
Mr. Weidong Chai
   
Total
 
Balance due to related parties, April 30, 2017
 
$
1,619,925
   
$
21,878
   
$
-
   
$
134,002
   
$
1,775,805
 
Working capital advances from related parties
   
4,882,967
     
441,963
     
394,359
     
28,921
     
5,748,210
 
Repayments
   
(4,076,880
)
   
(273,813
)
   
(394,359
)
   
-
     
(4,745,052
)
Effect of foreign currency exchange
   
232,057
     
(86,859
)
   
-
     
12,858
     
(158,056
)
Balance due to related parties, April 30, 2018
 
$
2,658,069
   
$
103,169
   
$
-
   
$
175,781
   
$
2,937,019
 
Working capital advances from related parties
   
4,041,634
     
507,293
     
-
     
15,256
     
4,564,183
 
Repayments
   
(843,678
)
   
(140,795
)
   
-
             
984,472
 
Effect of foreign currency exchange
   
(186,250
)
   
88,309
     
-
     
(10,268
)
   
(108,209
)
Balance due (from) to related parties, April 30, 2019
 
$
5,669,776
   
$
557,976
   
$
-
   
$
180,769
   
$
6,408,521
 

NOTE 6 - PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets as of April 30, 2019 and 2018 totaled $1,676,347 and $2,108,052, respectively. As of April 30, 2019, prepaid expenses and other current assets includes $1,389,963 prepayments to suppliers for merchandise that had not been shipped to us and services that had not been provided to us, $14,850 for security deposit and $271,534 for business related employees' advances. As of April 30, 2018, prepaid expenses and other current assets includes $1,248,205 prepayments to suppliers for merchandise that had not been shipped to us and services that had not been provided to us, $715,553 prepayment for employees' stock-based compensation and 144,294 for business related employees' advances.

On December 1, 2015, we entered into three year employment agreements with four employees. Pursuant to employment agreements, we issued a total of 23 million shares of the Company's common stock to them, valued at $3,680,000, as employees' stock-based compensations over three-year term of their employment from December 1, 2015 through November 30, 2018. We amortize these compensations over three years from December 1, 2015 to November 30, 2018 and we recognized $715,553, $1,226,668, $1,226,669 and $511,110 as stock-based compensation expenses during fiscal year 2019, fiscal year 2018, fiscal year 2017 and fiscal year 2016, respectively. We have not recorded any more stock-based compensation as prepaid compensation as of April 30, 2019.

NOTE 7 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses included the following as of April 30, 2019 and 2018:

Account
 
April 30,
2019
   
April 30,
2018
 
 
           
Accounts payable
 
$
5,298,580
   
$
8,511,534
 
Advanced from customers
   
26,921
     
44,488
 
Accrued salary payable
   
284,671
     
134,972
 
Tax payable
   
125,854
     
190,189
 
Deferred revenue
   
13,683
     
39,994
 
Other payable*
   
1,803,972
     
1,507,735
 
Total accounts payable and accrued expenses
 
$
7,680,049
   
$
10,428,912
 
 
* As of April 30, 2019, other payables consists of general liability, worker's compensation, and medical insurance payable of $448,528, consulting fee payable of $136,770, union and education fees payable of $131,688, interest payables for short-term loans of $765,061, advanced from the employees of $221,081 and other miscellaneous payables of $100,844. As of April 30, 2018, other payables consists of general liability, worker's compensation, and medical insurance payable of $463,185, consulting fee payable of $153,864, union and education fees payable of $139,883, interest payables for short-term loans of $384,356, advanced from the employees of $100,734 and other miscellaneous payables of $265,714.
F -16

 
NOTE 8 - LOAN PAYABLE

Short-term loan payable

Short-term loans are loans obtained from various individual lenders that are due within one year for working capital purpose. These loans are unsecured and can be renewed with 10 days advance notice prior to maturity date. As of April 30, 2019 and 2018, short-term loans consisted of the following:
 
 
 
April 30,
2019
   
April 30,
2018
 
Loan from Min Wu, an employee of Qufu Shengren, due on October 5, 2019, with an annual interest rate of 10%, renewed at October 6, 2018.
 
$
32,671
   
$
34,704
 
Loans from Jianjun Yan, non-related individual, due on October 6, 2019, with an annual interest rate of 10% at October 7, 2017, renewed at on October 7, 2018.
   
1,189,207
     
1,389,531
 
Loan from Jianjun Yan, non-related individual, due on March 31, 2020, with annual interest rate of 4%, renewed at April 1, 2019.
   
1,210,829
     
1,236,710
 
Loans from Jianjun Yan, non-related individual, due on demand, with free interest at January 27, 2018.
   
-
     
457,457
 
Loan from Junzhen Zhang, non-related individual, due on October 5, 2019, with an annual interest rate of 10%, renewed at October 6, 2018.
   
23,760
     
25,239
 
Loan from Jian Chen, non-related individual, due on January 26, 2019 and April 10, 2019, bearing an annual interest rate of 10%, with the principle amount of RMB770,000 ($114,347) and RMB330,000 ($49,006) at January 27, 2018 and April 11, 2018, respectively. Extended another one year term at January 27, 2019 and April 11, 2019, with new due date on January 27, 2020 and April 11, 2020, respectively.
   
163,353
     
173,518
 
Loan from Qing Kong, non-related individual, due on March 6, 2019, with an annual interest rate of 10%, renewed on March 7, 2019, accrued interest added to the original principal, terms were not changed, with new due date on March 6, 2020.
   
79,063
     
76,348
 
Loan from Qing Kong, non-related individual, due on January 8, 2019, with an annual interest rate of 10%, renewed on January 9, 2019, accrued interest added to the original principal, terms were not changed, with new due date on January 8, 2020.
   
32,671
     
31,549
 
Loan from Guihai Chen, non-related individual, due on March 9, 2019, with an annual interest rate of 10%, renewed on March 10, 2019, accrued interest added to the original principal, terms were not changed, with new due date on March 9, 2020.
   
19,602
     
18,929
 
Loan from Guihai Chen, non-related individual, due on September 20, 2019, with an annual interest rate of 10%, renewed at September 21, 2018.
   
29,700
     
31,549
 
Loan Weifeng Kong, non-related individual, due on November 28, 2018, with an annual interest rate of 10% at November 29, 2017, extended another one year at on November 29, 2018.
   
29,700
     
31,549
 
Loan Shidong Wang, non-related individual, due on March 7, 2019, with an annual interest rate of 4% at March 8, 2018. Renewed on March 9, 2019, accrued interest added to the original principal, terms were not changed, with new due date on March 8, 2020.
   
1,606,200
     
1,640,534
 
Loan from Xuxu Gu, non-related individual, due on March 8, 2019, with an annual interest rate of 4% at March 9, 2017, extended another two years at on March 9, 2019. *
   
-
     
1,577,436
 
Loan from Xuxu Gu, non-related individual, due on September 27, 2019, with an annual interest rate of 4% at September 28, 2017. (Reclassified from long-term loan to short-term loan on September 28, 2018)
   
1,588,976
     
-
 
Loan from Dadong Mei, non-related individual, due on March 8, 2019, with an annual interest rate of 4% at March 9, 2017. Renewed on March 9, 2019, accrued interest added to the original principal, terms were not changed, with new due date on March 8, 2021. *
   
-
     
1,577,436
 
Loan from Huagui Yong, non-related individual, due on April 8, 2020, with an annual interest rate of 6.3% at April 9, 2019.
   
74,251
     
-
 
Total
 
$
6,079,983
   
$
8,302,489
 

* The Company recorded these loans as long-term loans as of April 30, 2019. 
F -17


Long-term loan payable

Long-term loans payable obtained from various individual lenders that are due more than one year for working capital purpose. These loans are unsecured and can be renewed with one month advance notice prior to maturity date. As of April 30, 2019 and 2018, long-term loans consisted of the following:

 
 
April 30,
2019
   
April 30,
2018
 
Loan Xuxu Gu, non-related individual, due on September 27, 2019, with an annual interest rate of 4% at September 28, 2017. (Reclassified from long-term loan to short-term loan on September 28, 2018)
 
$
-
   
$
1,687,857
 
Loan from Xuxu Gu, non-related individual, due on March 8, 2019, with an annual interest rate of 4% at March 9, 2017, extended another two years at on March 9, 2019. #
   
1,603,825
     
-
 
Loan Xuxu Gu, non-related individual, due on July 13, 2020, with an annual interest rate of 4% at July 14, 2018.
   
430,657
     
-
 
Loan Xuxu Gu, non-related individual, due on August 15, 2020, with an annual interest rate of 4% at August 16, 2018.
   
504,908
     
-
 
Loan from Dadong Mei, non-related individual, due on March 8, 2019, with an annual interest rate of 4% at March 9, 2017. Renewed on March 9, 2019, accrued interest added to the original principal, terms were not changed, with new due date on March 8, 2021. #
   
1,603,825
     
-
 
Loan Mingbang Ma, non-related individual, due on May 22, 2020, with an annual interest rate of 4% at May 23, 2018.
   
297,005
     
-
 
Loan Weiwei Lian, non-related individual, due on May 29, 2020, with an annual interest rate of 4% at May 30, 2018.
   
1,485,024
     
-
 
Loan Guanghua Xia, non-related individual, due on June 8, 2020, with an annual interest rate of 4% at June 9, 2018.
   
1,336,521
     
-
 
Loan Guanghua Xia, non-related individual, due on December 31, 2020, with an annual interest rate of 4% at January 1, 2019.
   
415,807
     
-
 
Loan Guanghua Xia, non-related individual, due on January 10, 2021, with an annual interest rate of 4% at January 11, 2019.
   
831,613
     
-
 
Loan Yuehu Zhou, non-related individual, due on June 12, 2020, with an annual interest rate of 4% at June 13, 2018.
   
1,336,521
     
-
 
Total:
 
$
9,845,706
   
$
1,687,857
 

# The Company recorded these loans as short-term loans as of April 30, 2018. 

For the fiscal years ended April 30, 2019 and 2018, interest expense related to short-term loans and long-term loans amounted to $667,146 and $438,615, respectively, which were included in interest expense in the accompanying consolidated statements of operations and comprehensive loss.
 
NOTE 9 - 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.

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.
F -18


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 is reviewing the TCJA's 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,
 
 
2019
 
2018
 
U.S. Operations
 
$
(820,123
)
 
$
(1,445,170
)
Chinese Operations
 
 
(4,088,237
)
 
 
(3,269,625
)
Total
 
$
(4,908,360
)
 
$
(4,714,795
)
 
  
The Effective Tax Rate reconciliation is a follows:

 
 
 
April 30, 2019
   
April 30, 2018
 
U.S. Federal and state tax rate
   
38.0
%
   
38.0
%
Stock- based compensation
   
(4.8
)%
   
(9.9
)%
Difference in US / China statutory rate
   
(9.5
)%
   
(3.7
)%
Valuation allowance
   
(23.7
)%
   
(24.4
)%
Total provision for income taxes