UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended JanuaryJuly 31, 2018
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 | 273100 |
(Address of principal executive offices) | (Zip Code) |
(86) 537-4424999
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol (s) | Name of each exchange on which registered |
None | SUWN | Not applicable |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant has been submitted electronically and posted on its corporate Web site, if any, every Interactive Date File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] | Accelerated filer [ ] |
Non-accelerated filer [ ] | Smaller reporting company |
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 . Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X].
Indicate the number of shares outstanding of each of the issuer's classes of common equitystock as of the latest practicable date: As of March 16, 2018,
September 19, 2022, there were 199,632,803 shares of the registrant's common stock issued and outstanding.
SUNWIN STEVIA INTERNATIONAL, INC. AND SUBSIDIARIES
FORM 10-Q
QUARTERLY PERIOD ENDED JANUARYJULY 31, 2018
INDEX
Page | |
PART I-FINANCIAL INFORMATION | |
Item 1. Financial Statements | 1 |
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations | 17 |
Item 3. Quantitative and Qualitative Disclosures About Market Risk | 24 |
Item 4. Controls and Procedures | 24 |
PART II-OTHER INFORMATION | |
Item 1. Legal Proceedings | 25 |
Item 1A. Risk Factors | 25 |
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds | 25 |
Item 3. Defaults Upon Senior Securities | 25 |
Item 4. Mine Safety Disclosures | 25 |
Item 5. Other Information | 26 |
Item 6. Exhibits | 26 |
i
FORWARD LOOKING STATEMENTS
This report contains forward-looking statements regarding our business, financial condition, results of operations and prospects. Words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates" and similar expressions or variations of such words are intended to identify forward-looking statements, but are not deemed to represent an all-inclusive means of identifying forward-looking statements as denoted in this report. Additionally, statements concerning future matters are forward-looking statements.
Although forward-looking statements in this report reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by us. Consequently, forward-looking statements are inherently subject to risks and uncertainties and actual results and outcomes may differ materially from the results and outcomes discussed in or anticipated by the forward-looking statements. Factors that could cause or contribute to such differences in results and outcomes include, without limitation, those specifically addressed under the headings "Risks Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our annual report on Form 10-K, in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in this Form 10-Q and information contained in other reports that we file with the SEC. You are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this report.
We file reports with the SEC. The SEC maintains a website (www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including us. You can also read and copy any materials we file with the SEC at the SEC's Public Reference Room at 100 F Street, NE, Washington, DC 20549. You can obtain additional information about the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330 FREE.
We undertake no obligation to revise or update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this report, except as required by law. Readers are urged to carefully review and consider the various disclosures made throughout the entirety of this quarterly report, which are designed to advise interested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects.
ii
INDEX OF CERTAIN DEFINED TERMS USED IN THIS REPORT
We are on a fiscal year ending April 30, as such the year ending April 30, 20182023 is referred to as "fiscal 2018"2023" and the year ended April 30, 20172022 is referred to as "fiscal 2017"2022". Also, the three month period ended JanuaryJuly 31, 20182022 is our thirdfirst quarter and is referred to as the "third"first quarter of fiscal 2018"2023". Likewise, the three month period ended JanuaryJuly 31, 20172021 is referred to as the "third"first quarter of fiscal 2017"2022".
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 | ||
- | |||
"Qufu Natural Green" refers to our wholly owned subsidiary Qufu Natural Green Engineering Co., Ltd., a Chinese limited liability company; | |||
- | |||
"Sunwin USA" refers to Sunwin USA, LLC, a Delaware limited liability company, a 100% owned | |||
- | "Qufu Shengwang" refers to Qufu Shengwang Stevia Biology and Science Co., Ltd., a Chinese limited liability company. Qufu Natural Green owns a 100% interest in Qufu | ||
- | "Qufu Shengren" refers to Qufu Shengren Pharmaceutical Co., Ltd., a Chinese limited liability company, and a | ||
- | |||
“Qufu | |||
The information which appears on our website at www.sunwininternational.com is not part of this report.
iii
ITEM I - FINANCIAL INFORMATION
SUNWIN STEVIA INTERNATIONAL, INC. AND SUBSIDIARIES | ||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||
January 31, 2018 | April 30, 2017 | |||||||
(Unaudited) | ||||||||
ASSETS | ||||||||
CURRENT ASSETS: | ||||||||
Cash and cash equivalents | $ | 151,129 | $ | 51,116 | ||||
Accounts receivable, net of allowance for doubtful accounts of $1,111,599 and $1,182,632, respectively | 2,872,554 | 2,243,621 | ||||||
Accounts receivable - related party | 2,479,670 | 339,270 | ||||||
Inventories, net | 12,105,911 | 8,816,473 | ||||||
Prepaid expenses and other current assets | 3,140,458 | 4,729,865 | ||||||
Total Current Assets | 20,749,722 | 16,180,345 | ||||||
Property and equipment, net | 8,450,333 | 8,241,197 | ||||||
Intangible assets, net | - | 108,390 | ||||||
Land use rights, net | 1,994,687 | 1,855,055 | ||||||
Other long-term asset | 154,956 | 856,878 | ||||||
Total Assets | $ | 31,349,698 | $ | 27,241,865 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
CURRENT LIABILITIES: | ||||||||
Accounts payable and accrued expenses | $ | 9,890,617 | $ | 7,036,471 | ||||
Short-term loans | 4,594,326 | 4,366,389 | ||||||
Due to related parties | 2,022,032 | 125,312 | ||||||
Total Current Liabilities | 16,506,975 | 11,528,172 | ||||||
Long-term loans | 4,881,694 | 2,900,484 | ||||||
Total Liabilities | 21,388,669 | 14,428,656 | ||||||
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 January 31, 2018 and April 30, 2017, respectively | 199,633 | 199,633 | ||||||
Additional paid-in capital | 37,681,279 | 37,681,279 | ||||||
Accumulated deficit | (32,934,466 | ) | (29,112,556 | ) | ||||
Accumulated other comprehensive income | 5,014,583 | 4,044,853 | ||||||
Total Stockholders' Equity | 9,961,029 | 12,813,209 | ||||||
Total Liabilities and Stockholders' Equity | $ | 31,349,698 | $ | 27,241,865 | ||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements |
SUNWIN STEVIA INTERNATIONAL, INC. AND SUBSIDIARIES | ||
CONDENSED CONSOLIDATED BALANCE SHEETS | ||
July 31, 2022 (Unaudited) | April 30, 2022 | |
ASSETS | ||
CURRENT ASSETS: | ||
Cash and cash equivalents | $942,782 | $321,193 |
Accounts receivable, net | 9,661,191 | 7,404,669 |
Inventories, net | 5,118,711 | 5,564,044 |
Prepaid expenses and other current assets | 2,214,165 | 2,765,819 |
Total Current Assets | 17,936,849 | 16,055,725 |
Property and equipment, net | 7,045,606 | 7,485,733 |
Land use rights, net | 1,891,995 | 1,950,204 |
Total Assets | $26,874,450 | $25,491,662 |
LIABILITIES AND EQUITY | ||
CURRENT LIABILITIES: | ||
Accounts payable and accrued expenses | $14,315,173 | $12,215,238 |
Short-term loans | 4,589,025 | 4,907,506 |
Due to related parties | 4,781,048 | 4,882,162 |
Total Current Liabilities | 23,685,246 | 22,004,906 |
Total Liabilities | 23,685,246 | 22,004,906 |
Commitments and Contingencies | - | - |
EQUITY: | ||
Preferred stock, $0.001 par value; 1,000,000 shares authorized; no shares issued and outstanding | - | - |
Common stock, $0.001 par value, 200,000,000 shares authorized; 199,632,803 and 199,632,803 shares issued and outstanding as of July 31, 2022 and April 30, 2022, respectively | 199,633 | 199,633 |
Additional paid-in capital | 47,732,350 | 47,732,350 |
Accumulated deficit | (46,388,794) | (46,267,397) |
Accumulated other comprehensive income | 5,096,235 | 5,162,418 |
Total Sunwin Stevia International, Inc. Stockholders' Equity | 6,639,424 | 6,827,004 |
Noncontrolling interest | (3,450,220) | (3,340,248) |
Total Equity | 3,189,204 | 3,486,756 |
Total Liabilities and Equity | $26,874,450 | $25,491,662 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements |
- 1 -
SUNWIN STEVIA INTERNATIONAL, INC. AND SUBSIDIARIES | ||||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (UNAUDITED) | ||||||||||||||||
For the Three Months Ended January 31, | For the Nine Months Ended January 31, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Revenues | $ | 4,734,263 | $ | 4,280,956 | $ | 13,234,376 | $ | 10,653,073 | ||||||||
Revenues - related party | 1,591,329 | 2,129,371 | 1,858,709 | 5,591,740 | ||||||||||||
Total revenues | 6,325,592 | 6,410,327 | 15,093,085 | 16,244,813 | ||||||||||||
Cost of revenues | 5,588,776 | 5,517,286 | 13,787,493 | 14,095,338 | ||||||||||||
Gross profit | 736,816 | 893,041 | 1,305,592 | 2,149,475 | ||||||||||||
Operating expenses: | ||||||||||||||||
Selling expenses | 592,042 | 518,153 | 1,447,692 | 1,380,363 | ||||||||||||
General and administrative expenses | 774,387 | 904,759 | 2,513,984 | 2,878,408 | ||||||||||||
Loss on disposition of property and equipment | 2,430 | 36,964 | 285,150 | 40,543 | ||||||||||||
Research and development expenses | 284,351 | 283,815 | 650,654 | 393,143 | ||||||||||||
Total operating expenses, net | 1,653,210 | 1,743,691 | 4,897,480 | 4,692,457 | ||||||||||||
Loss from operations | (916,394 | ) | (850,650 | ) | (3,591,888 | ) | (2,542,982 | ) | ||||||||
Other income (expenses) | ||||||||||||||||
Other income (expenses) | 195,253 | 45,224 | 156,906 | 162,874 | ||||||||||||
Interest income | 414 | 118 | 785 | 578 | ||||||||||||
Interest expense - related party | (25,945 | ) | (38,207 | ) | (71,135 | ) | (96,320 | ) | ||||||||
Interest expense | (126,138 | ) | (62,169 | ) | (316,578 | ) | (174,414 | ) | ||||||||
Total other income (expense) | 43,584 | (55,034 | ) | (230,022 | ) | (107,282 | ) | |||||||||
Loss before income taxes | (872,810 | ) | (905,684 | ) | (3,821,910 | ) | (2,650,264 | ) | ||||||||
Provision for income taxes | - | - | - | - | ||||||||||||
Net loss | $ | (872,810 | ) | $ | (905,684 | ) | $ | (3,821,910 | ) | $ | (2,650,264 | ) | ||||
Comprehensive loss: | ||||||||||||||||
Net loss | $ | (872,810 | ) | $ | (905,684 | ) | $ | (3,821,910 | ) | $ | (2,650,264 | ) | ||||
Foreign currency translation adjustment | 532,476 | (196,829 | ) | 969,730 | (834,188 | ) | ||||||||||
Total comprehensive loss | $ | (340,334 | ) | $ | (1,102,513 | ) | $ | (2,852,180 | ) | $ | (3,484,452 | ) | ||||
Net loss per common share: | ||||||||||||||||
Net loss per share - basic and diluted | $ | (0.00 | ) | $ | (0.00 | ) | $ | (0.02 | ) | $ | (0.01 | ) | ||||
Weighted average common shares outstanding - basic and diluted | 199,632,803 | 182,066,546 | 199,632,803 | 182,066,546 | ||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements |
SUNWIN STEVIA INTERNATIONAL, INC. AND SUBSIDIARIES | ||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS | ||
(UNAUDITED) | ||
|
| |
| For the Three Months Ended July 31, | |
2022 | 2021 | |
|
|
|
Revenues | $7,709,903 | $3,881,832 |
Revenues - related party | - | 2,386,628 |
Total revenues | 7,709,903 | 6,268,460 |
Cost of revenues | 6,553,865 | 2,768,062 |
Cost of revenues - related party | - | 2,617,569 |
Total cost of revenues | 6,553,865 | 5,385,631 |
Gross profit | 1,156,038 | 882,829 |
|
|
|
Operating expenses: |
|
|
Selling expenses | 399,467 | 368,812 |
General and administrative expenses | 396,914 | 414,643 |
Research and development expenses | 435,568 | 355,713 |
Total operating expenses, net | 1,231,949 | 1,139,168 |
Loss from operations | (75,911) | (256,339) |
|
|
|
Other income (expenses): |
|
|
Other income (expenses) | 14,781 | (423,107) |
Interest income | 388 | 1,652 |
Interest expense - related party | (5,552) | (5,254) |
Interest expense | (127,857) | (67,069) |
Total other expenses | (118,240) | (493,778) |
Loss operations before income taxes | (194,151) | (750,117) |
Provision for income taxes | - | - |
Net loss | $(194,151) | $(750,117) |
Less: net loss attributable to noncontrolling interest | (72,754) | (289,924) |
Net loss attributable to Sunwin Stevia International, Inc. | $(121,397) | $(460,193) |
|
|
|
Comprehensive loss: |
|
|
Net loss | $(194,151) | $(750,117) |
Foreign currency translation adjustment | (48,187) | 10,033 |
Total comprehensive loss | $(242,338) | $(740,084) |
Less: comprehensive loss attributable to noncontrolling interest | (109,973) | (286,232) |
Comprehensive loss attributable to Sunwin Stevia International, Inc. | $(132,365) | (453,852) |
|
|
|
Earnings per common share attributable to Sunwin Stevia International, Inc.: |
|
|
Net loss per common share attributable to Sunwin Stevia International, Inc. - basic and diluted | $(0.00) | $(0.00) |
|
|
|
Weighted average common shares outstanding - basic and diluted | 199,632,803 | 199,632,803 |
|
|
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements |
- 2 -
SUNWIN STEVIA INTERNATIONAL, INC. AND SUBSIDIARIES | ||||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
(UNAUDITED) | ||||||||
For the Nine Months Ended January 31, | ||||||||
2018 | 2017 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net loss | $ | (3,821,910 | ) | $ | (2,650,264 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Depreciation expense | 1,054,856 | 992,590 | ||||||
Amortization of intangible assets | 108,390 | 243,880 | ||||||
Amortization of land use right | 39,736 | 39,398 | ||||||
Loss on disposition of property and equipment | 285,150 | 40,543 | ||||||
Allowance for doubtful accounts | - | 55,145 | ||||||
Recovery of bad debt reserve | (216,910 | ) | - | |||||
Stock issued for services | - | 108,750 | ||||||
Stock issued for employees' compensation | 920,001 | 920,001 | ||||||
Loss from sales of real estate investment held for resale | - | 2,410 | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable and notes receivable | (261,918 | ) | (877,513 | ) | ||||
Accounts receivable - related party | (1,988,620 | ) | (47,363 | ) | ||||
Inventories | (2,301,254 | ) | (3,324,235 | ) | ||||
Prepaid expenses and other current assets | 1,715,157 | (304,584 | ) | |||||
Accounts payable and accrued expenses | 2,062,513 | 3,968,486 | ||||||
Taxes payable | (37,968 | ) | (144,194 | ) | ||||
NET CASH USED IN OPERATING ACTIVITIES | (2,442,777 | ) | (976,950 | ) | ||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Purchases of property and equipment | (707,890 | ) | (750,583 | ) | ||||
Proceeds from disposal of equipment | 1,505 | - | ||||||
Proceeds from disposal of real estate investment | - | 297,513 | ||||||
NET CASH USED ININVESTING ACTIVITIES | (706,385 | ) | (453,070 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Proceeds from loans | 1,665,342 | 909,302 | ||||||
Repayment of short-term loan | (375,077 | ) | - | |||||
Advance due from related parties | 5,068,601 | 2,595,313 | ||||||
Repayment of related party advances | (3,251,990 | ) | (2,768,284 | ) | ||||
NET CASH PROVIDED BY FINANCING ACTIVITIES | 3,106,876 | 736,331 | ||||||
EFFECT OF EXCHANGE RATE ON CASH | 142,299 | (36,379 | ) | |||||
NET INCREASE (DECREASE) IN CASH | 100,013 | (730,068 | ) | |||||
Cash at the beginning of period | 51,116 | 900,071 | ||||||
Cash at the end of period | $ | 151,129 | $ | 170,003 | ||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION: | ||||||||
Cash paid for income taxes | $ | - | $ | 1,859 | ||||
Cash paid for interest | $ | 38,484 | $ | 96,320 | ||||
NON-CASH INVESTING AND FINANCING ACTIVITIES: | ||||||||
Property and equipment acquired on credit as payable | $ | 28,024 | $ | 451,786 | ||||
Accrued interests enrolled into debts | $ | 132,747 | $ | - | ||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements |
SUNWIN STEVIA INTERNATIONAL, INC. AND SUBSIDIARIES | ||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||
(UNAUDITED) | ||
|
| |
| For the Three Months Ended July 31, | |
2022 | 2021 | |
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
Net loss | $(194,151) | $(750,117) |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |
|
|
Depreciation and amortization expenses | 332,528 | 384,261 |
Loss on disposition of property and equipment | 4,636 | 394,967 |
Impairment on obsolete inventories | 78,280 | 187,704 |
Changes in operating assets and liabilities: |
|
|
Accounts receivable and notes receivable | (2,430,673) | (338,982) |
Accounts receivable - related party | - | (952,712) |
Inventories | 245,575 | 808,811 |
Prepaid expenses and other current assets | 492,718 | (1,435,530) |
Accounts payable and accrued expenses | 2,248,780 | (128,715) |
Taxes payable | 257,352 | (704) |
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES | 1,035,045 | (1,831,017) |
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
Purchases of property and equipment | (56,440) | (584) |
Purchases of land use rights | - | (2,057,268) |
NET CASH USED IN INVESTING ACTIVITIES | (56,440) | (2,057,852) |
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
Proceeds from short term loans | - | 1,194,966 |
Repayment of short term loans | (348,763) | - |
Advance from related parties | 2,236 | 5,265,725 |
Repayment of related party advances | (1,043) | (3,476,199) |
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES | (347,570) | 2,984,492 |
|
|
|
EFFECT OF EXCHANGE RATE ON CASH | (9,446) | 8,980 |
NET INCREASE IN CASH | 621,589 | (895,397) |
|
|
|
Cash at the beginning of period | 321,193 | 1,565,829 |
Cash at the end of period | 942,782 | 670,432 |
|
|
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION: |
|
|
Cash paid for income taxes | $- | $- |
Cash paid for interest | $4,256 | $- |
|
|
|
NON-CASH INVESTING AND FINANCING ACTIVITIES: |
|
|
Property and equipment acquired on credit as payable | $1,491 | $- |
Accrued interests enrolled into debts | $137,752 | $- |
Accrued interest payable to related party | $5,552 | $5,254 |
|
|
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements |
- 3 -
SUNWIN STEVIA INTERNATIONAL, INC. AND SUBSIDIARIES | ||
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY | ||
(UNAUDITED) | ||
|
| |
| For the Three Months Ended July 31, | |
2022 | 2021 | |
|
|
|
Total equity, beginning balances | $3,486,756 | $8,128,531 |
|
|
|
Common stock and additional paid-in capital: |
|
|
Beginning balances | 47,931,983 | 47,931,983 |
Common stock issued | - | - |
Liability converted to additional paid-in capital | - | - |
Ending balances | 47,931,983 | 47,931,983 |
|
|
|
Retained Earnings |
|
|
Beginning balances | (46,267,397) | (43,357,208) |
Net loss | (121,397) | (460,193) |
Ending balances | (46,388,794) | (43,817,401) |
|
|
|
Accumulated other comprehensive income(loss): |
|
|
Beginning balances | 5,162,418 | 5,193,512 |
Foreign currency translation adjustment | (66,183) | 6,341 |
Ending balances | 5,096,235 | 5,199,853 |
|
|
|
Noncontrolling Interest: |
|
|
Beginning balances | (3,340,248) | (1,639,756) |
Net loss | (72,754) | (289,924) |
Accumulated other comprehensive income(loss) | (37,218) | 3,693 |
Ending balances | (3,450,220) | (1,925,988) |
|
|
|
Total equity, ending balances | $3,189,204 | $7,388,447 |
|
|
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements |
- 4 -
SUNWIN STEVIA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 2022
NOTE 1 - ORGANIZATION AND OPERATIONS
DESCRIPTION OF BUSINESS
Sunwin Stevia International, Inc. ("Sunwin Stevia International"), a Nevada corporation, and its subsidiaries are referred to in this report as "we", "us", "our", "Sunwin" or the "Company".
We sell stevioside, a natural sweetener, and other pharmaceutical productions, such as well as herbs used in traditional Chinese medicines and veterinary products.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.
- | Stevioside; and | ||
- | Corporate and other. |
For the three months ended July 31, 2022 and Chinese Medicine product lines andfiscal year 2023, 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 subsidiary wholly owned by Sunwin Stevia International;
- Qufu Shengren Pharmaceutical Co., Ltd. ("Qufu Shengren"), a subsidiary wholly61% owned by Qufu Natural Green;
- Qufu Shengwang Stevia Biology and Science Co., Ltd. ("Qufu Shengwang"), a subsidiary wholly owned by Qufu Natural Green;
- Sunwin Tech Group, Inc.USA, LLC ("Sunwin Tech"USA"), a subsidiary wholly owned by Sunwin Stevia International; and
- Sunwin USA, LLC. ("Sunwin USA"Qufu Shengren Import and Export Co., Ltd. (“Qufu Shengren Import and Export”), a subsidiary wholly owned by Sunwin Stevia International.
Qufu Shengwang manufactures and sells stevia - based fertilizers and feed additives.
In fiscal 2009, Qufu Natural Green acquired Qufu Shengren for $3,097,242. The purchase price was equal to the value of the assets of Qufu Shengren as determined by an independent asset appraisal in accordance with asset appraisal principles in the PRC. Prior to being acquired by us, Qufu Shengren was engaged in the production and distribution of bulk drugs and pharmaceuticals. Subsequent to the acquisition, Qufu Shengren produces and distributes steviosides with a full range of grades from rebaudioside-A 10 to 99.
Since fiscal 2018 we invested in a new production line for Metformin as one of the new product markets we intend to branch into. Metformin is the raw material of Metformin hydrochloride tablets. Metformin is the first-line medication for the treatment of type 2 diabetes, particularly in people who are not satisfied with simple diet control, especially those with obesity and hyperinsulinemia. On July 10, 2019, the Company entered into the Metformin Production Line Operation Management Agreement with an unaffiliated individual to operate the Metformin production line (see Note 7).
QufuShengren Import and Export
On October 9, 2019, Qufu Shengren invested RMB2,000,000 (approximately $288,000) in a new entity, Qufu Shengren Import and Export Co., Ltd., (“Qufu Shengren Import and Export”), a Chinese limited liability company, a 100% owned subsidiary of Qufu Shengren. Qufu Shengren Import and Export focuses on the export of our Stevia products, and the import and export of technology and other relevant products; we expect to increase operations in this subsidiary in the near future.
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.
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NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements include the accounts of Sunwin and all our wholly-owned subsidiaries and have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") and pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC") for interim financial reporting. The accompanying unaudited condensed consolidated financial statements for the interim periods presented are unaudited and reflect all adjustments (consisting only of normal recurring adjustments) which are, in the opinion of management, necessary for a fair presentation of the financial position and operating results for the periods presented. Certain financial statement amounts relating to prior periods have been reclassified to conform to the current period presentation. All intercompany accounts and transactions have been eliminated in consolidation.
These unaudited condensed consolidated interim financial statements should be read in conjunction with the financial statements and footnotes for the year ended April 30, 20172022 included in our Form 10-K as filed with the SEC. The results of operations and cash flows for the ninethree months ended JanuaryJuly 31, 20182022 are not necessarily indicative of the results of operations or cash flows which may be reported for future periods or the full fiscal year.
The condensed consolidated balance sheet as of April 30, 20172022 contained herein has been derived from the audited consolidated financial statements as of April 30, 2017,2022, but do not include all disclosures required by the U.S. GAAP.
Our unaudited condensed consolidated financial statements include the accounts of Sunwin and all our wholly-owned subsidiaries.subsidiaries included in continuing operations and discontinued operations. All intercompany accounts and transactions have been eliminated in consolidation. OurQufu Shengwang is the subsidiary with discontinued operations and our subsidiaries for continuing operations include the following:
- Qufu Natural Green;
- Qufu Shengren;
- Sunwin USA; and
- Qufu Shengwang;
USE OF ESTIMATES
The preparation of unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include the allowance for doubtful accounts, the allowance for obsolete inventory, the useful life of property and equipment and intangible assets, assumptions used in assessing impairment of long-term assets and valuation of deferred tax assets, and the value of stock-based compensation. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
Cash includes cash on hand and cash in time deposits, certificates of deposit and all highly liquid investmentsinstruments with original maturities of three months or less at the time of purchase to be cash and equivalents. As of January 31, 2018, we held $150,344 of our cash and cash equivalents with commercial banking institutions in the PRC, and $785 with banks in the United States. As of April 30, 2017, we held $30,781 of our cash and cash equivalents with commercial banking institution in PRC, and $20,335 in the United States. In China, there is no equivalent federal deposit insurance as in the United States, so the amounts held in banks in China are not insured. We have not experienced any losses in such bank accounts through January 31, 2018.
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. At JanuaryWe had no bad debt expense for allowance of doubtful accounts during the three months ended July 31, 20182022 and 2021. The balances for allowance of doubtful accounts were $78,122 and $79,886 on July 31, 2022 and April 30, 2017, the allowance for doubtful accounts was $1,111,599 and $1,182,632,2022, respectively. We had recovery of bad debt for $216,910 and recognized bad debt expenses of $55,145 for the nine months ended January 31, 2018 and 2017, respectively.
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INVENTORIES
Inventories, consisting of raw materials, work in process, and finished goods related to our products, are stated at the lower of cost or market (estimatedestimated net realizable value)value that can be estimated utilizing the weighted moving average method. An allowance is established when management determines that certain inventories may not be saleable.Adjustments are recorded to write down the carrying amount of any obsolete and excess inventory to its estimated net realizable value. We continually evaluate the recoverability based on assumptions about future customer demand and market conditions. If inventory costs exceed expected market value due to obsolescence or quantities in excess of expected demand, the Company will record reservesa write down of inventories for the difference between the lower of cost or estimated net realizable value. In the three months ended July 31, 2022 and the market value. These reserves are recorded based on estimates. At January 31, 2018 and April 30, 2017,2021, the Company recorded a reserve for obsolete or slow-movingwrote down inventories of $178,776$78,280 and $163,048,$187,704, respectively.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation and amortization are provided using the straight linestraight-line method over the estimated economic lives of the assets, which range from threetwo to twentythirty years. Expenditures for major renewals and betterments that extend the useful lives of property and equipment are capitalized. Expenditures for maintenance and repairs are charged to expense as incurred. In accordance with paragraph 360-10-35-17 of the Financial Accounting Standards Board (FASB) Accounting Standards Codification ("ASC"), we examine the possibility of decreases in the value of fixed assets when events or changes in circumstances reflect the fact that their recorded value may not be recoverable.
The residual value rate and useful life of property and equipment are summarized as follows:
Property and Equipment | Residual value rate | Useful life |
Office equipment | 10% or 5% or 0% | 3-15 years |
Auto and trucks | 10% or 5% or 0% | 2-10 Years |
Manufacturing equipment | 10% or 5% or 0% | 2-15 Years |
Buildings | 10% or 5% or 0% | 5-30 Years |
Included in property and equipment is construction-in-progress which consisted of factory improvements and machinery pending installation and included the costs of construction, machinery and equipment, and or any interest charges arising from borrowings used to finance these assets during the period of construction or installation of the assets if applicable. No provision for depreciation is made on construction-in-progress until such time as the relevant assets are completed and ready for their intended use.
LONG-LIVED ASSETS
In accordance with ASC 360, we review and evaluate our long-lived assets, including property and equipment, intangible assets, and land use rights, for impairment or when events or changes in circumstances indicate that the related carrying amounts may not be recoverable. An impairment is considered to exist if the total estimated future cash flows on an undiscounted basis are less than the carrying amount of the assets, including goodwill, if any. An impairment loss is measured and recorded based on discounted estimated future cash flows. In estimating future cash flows, assets are grouped at the lowest level for which there is identifiable cash flows that are largely independent of future cash flows from other asset groups. Our estimates of future cash flows are based on numerous assumptions and it is possible that actual future cash flows will be significantly different than the estimates. Based on our evaluation, we have determined certain long-lived assets that are no longer useful for our operations, and we recorded a loss on disposition of property and equipment of $285,150$4,636 and $122,285 at January$394,967 on July 31, 20182022 and April 30, 2017,2021, respectively. We received $1,505
LAND USE RIGHTS
According to the law of PRC, the government owns all the land in the PRC. Companies or individuals are authorized to possess and $0 in cash proceeds from disposaluse the land only through land use rights granted by the Chinese government for a specified period of equipment fortime. Land use rights are being amortized using the nine months ended January 31, 2018 and 2017, respectively.
FAIR VALUE OF FINANCIAL INSTRUMENTS
We adopted ASC Section 820-10-35-37 to measure the fair value of our financial instruments. ASC Section 820-10-35-37 establishes a common definition for fair value to be applied to existing generally accepted accounting principles that require the use of fair value measurements, establishes a framework for measuring fair value, and expands disclosure about such fair value measurements. The adoption of ASC Section 820-10-35-37 did not have an impact on our financial position or operating results, but did expand certain disclosures.
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ASC Section 820-10-35-37 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Additionally, ASC Section 820-10-35-37 requires the use of valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized below:
Level 1: | Observable inputs such as quoted market prices in active markets for identical assets or liabilities |
Level 2: | Observable market-based inputs or unobservable inputs that are corroborated by market data |
Level 3: | Unobservable inputs for which there is little or no market data, which require the use of the reporting entity's own assumptions. |
The carrying amounts of our financial assets and liabilities, such as cash, accounts receivable, notes receivable, prepayments and other current assets, accounts payable, taxes payable and accrued expenses, approximate their fair values because of the short maturity of these instruments.
TAXES PAYABLE
We are required to charge for and to collect value added taxes (VAT) on our sales on behalf of the PRC tax authority. We record VAT that we billed our customers as VAT payable. In addition, we are required to pay value added taxes on our primary purchases. We record VAT that is charged by our vendors as VAT receivable. We are required to file VAT return on a monthly basis with the PRC tax authority, in which we are entitled to claim the VAT that we are charged by vendors as VAT credit and these credits can be applied to our VAT payable that we billed our customers. Accordingly, these VAT payable and receivable are presented as net amounts for financial statement purposes. Taxes payable on Januaryas of July 31, 20182022 and April 30, 20172022 amounted to $92,568$1,050,827 and $121,127,$812,545, respectively, consisted primarily of VAT taxes.
REVENUE RECOGNITION
Pursuant to the guidance of ASC Topic 605,606, 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.
In accordance with ASC 606, we recognize revenues from the sale of stevia and other productions upon shipment and transfer of title based on the trade terms. All product sales with customer specific acceptance provisions are recognized upon customer acceptance and the delivery of the products. We report revenues net of applicable sales taxes and related surcharges.The Company determines revenue recognition through the following steps:
• | Identify the contract with a customer; | ||
• | Identify the performance obligations in the contract; | ||
• | Determine the transaction price; | ||
• | Allocate the transaction price to the performance obligations in the contract; and | ||
• | Recognize revenue when (or as) the entity satisfies a performance obligation. |
The Company is also a lessor, which is an entity that is lease underlying asset to the third party, The Company’s lease revenue is recognized under ASC Topic 842, Leases, (“ASC 842”), which was adopted on May 1, 2019. In general, the Company commences rental revenue recognition when the tenant takes possession of the leased space and the leased space is substantially ready for its intended use. The Company’s lease has been accounted for as operating lease. Rental revenue is recognized on a straight-line basis over the terms of the lease of five years. Actual amounts billed in accordance with the lease during any given period may have been higher or lower than the amount of rental revenue recognized for the period. The difference by which straight-line rental revenue exceeded rents billed in accordance with lease agreements is recorded as “accounts receivable”. The difference by which rents billed in accordance with lease agreements exceeded straight-line rental revenue is recorded as “advances from customer”. The Company does not offset lease income and lease expense.
GRANT INCOME
Grants received from PRC government agencies are recognized as deferred grant income and recognized in the unaudited condensed consolidated statements of operations and comprehensive loss as and when they are earned for the specific research and development projects for which these grants are received.
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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 JanuaryJuly 31, 2018,2022, the Company had no uncertain tax positions, and will continue to evaluate for uncertain positions in the future.
BASIC AND DILUTED EARNINGS PER SHARE
Pursuant to ASC Section 260-10-45, basic loss per common share is computed by dividing loss available to common shareholders by the weighted average number of shares of common stock outstanding for the periods presented. Diluted loss per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that would then share in the income of ours, subject to anti-dilution limitations. The following table presents a reconciliation of basic and diluted net income per common share:
Three Months Ended January 31, | Nine Months Ended January 31, | |||||||||||||||
Numerator: | 2018 | 2017 | 2018 | 2017 | ||||||||||||
Net loss attributable to Sunwin Stevia International, Inc. | $ | (872,810 | ) | $ | (905,684 | ) | $ | (3,821,910 | ) | $ | (2,650,264 | ) | ||||
Numerator for basic EPS, loss applicable to common stock holders | $ | (872,810 | ) | $ | (905,684 | ) | $ | (3,821,910 | ) | $ | (2,650,264 | ) | ||||
Denominator: | ||||||||||||||||
Denominator for basic earnings per share - weighted average number of common shares outstanding | 199,632,803 | 182,066,546 | 199,632,803 | 182,066,546 | ||||||||||||
Stock awards, options, and warrants | - | - | - | - | ||||||||||||
Denominator for diluted earnings per share - adjusted weighted average outstanding average number of common shares outstanding | 199,632,803 | 182,066,546 | 199,632,803 | 182,066,546 | ||||||||||||
Basic and diluted loss per common share: | ||||||||||||||||
Loss per share - basic and diluted | $ | (0.00 | ) | $ | (0.00 | ) | $ | (0.02 | ) | $ | (0.01 | ) |
| For Three Months Ended July 31, | |
| 2022 | 2021 |
Numerator: |
|
|
Net Loss attributable to Sunwin Stevia International, Inc. | $(121,397) | $(460,193) |
Denominator: |
|
|
Denominator for basic earnings per share - weighted average number of common shares outstanding | 199,632,803 | 199,632,803 |
Stock awards, options, and warrants | - | - |
Denominator for diluted earnings per share - weighted average number of common shares outstanding | 199,632,803 | 199,632,803 |
Basic and diluted loss per common share attributable to Sunwin Stevia International, Inc.: |
|
|
Net loss per common share - basic and diluted | $(0.00) | $(0.00) |
FOREIGN CURRENCY TRANSLATION
Transactions and balances originally denominated in U.S. dollars are presented at their original amounts. Transactions and balances in other currencies are converted into U.S. dollars in accordance with ASC Section 830-20-35 and are included in determining net income or loss.
The reporting currency of the Company is the U.S. dollar. The functional currency of the parent company is the U.S. dollar and the functional currency of the Company's operating subsidiaries is the Chinese Renminbi ("RMB"). In accordance with ASC 830-20-35, the consolidated financial statements were translated into United States dollars using balance sheet date rates of exchange for assets and liabilities, and average rates of exchange for the period for the income statements and cash flows. Equity accounts were stated at their historical rate. Net gains and losses resulting from foreign exchange transactions are included in the consolidated statements of operations. Translation adjustments resulting from the process of translating the local currency financial statements into U.S. dollars are included in other comprehensive income or loss.
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RMB is not a fully convertible currency. All foreign exchange transactions involving RMB must take place either through the People's Bank of China (the "PBOC") or other institutions authorized to buy and sell foreign exchange. The exchange rate adopted for the foreign exchange transactions are the rates of exchange quoted by the PBOC, which are determined largely by supply and demand. Translation of amounts from RMB into United States dollars ("$") was made at the following exchange rates for the respective periods:
As of | RMB |
As of April 30, | RMB |
Three months ended | RMB |
Three months ended | RMB |
COMPREHENSIVE LOSS
Comprehensive loss is comprised of net loss and all changes to the statements of stockholders' equity, except those due to investments by stockholders, changes in paid-in capital and distributions to stockholders. For the Company, comprehensive loss for the ninethree months ended JanuaryJuly 31, 20182022 and 20172021 included net loss and unrealized gains (losses) from foreign currency translation adjustments.
RESEARCH AND DEVELOPMENT
Research and development costs are expensed as incurred and are included in general and administrative expenses in the accompanying statements of operations. Research and development costs are incurred on a project specific basis. Research and development costcosts were $284,351$435,568 and $283,815$355,713 for the three months ended JanuaryJuly 31, 20182022 and 2017, and $650,654 and $393,143 for the nine months ended January 31, 2018 and 2017,2021, respectively.
SHIPPING COSTS
Shipping costs are included in selling expenses and totaled $82,237$24,252 and $91,522$20,161 for the three months ended JanuaryJuly 31, 20182022 and 2017,2021, respectively.
SEGMENT REPORTING
The Company uses the "management approach" in determining reportable operating segments. The management approach considers the internal organization and $244,488reporting used by the Company's chief operating decision maker for making operating decisions and $342,913assessing 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 only one operating segment.
RECENT ACCOUNTING PRONOUNCEMENTS
In December 2019, the FASB issued ASU 2019-12 - Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This ASU provides an exception to the general methodology for calculating income taxes in an interim period when a year-to-date loss exceeds the anticipated loss for the nine months ended January 31, 2018year. This update also (1) requires an entity to recognize a franchise tax (or similar tax) that is partially based on income as an income-based tax and 2017, respectively.
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In January 2017,June 2016, the FASB issued ASU No. 2016-13, Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2017-01, Business CombinationsInstruments-Credit Losses (Topic 805)326): ClarifyingMeasurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which requires the Definitionmeasurement and recognition of a Business,expected credit losses for financial assets held at amortized cost. ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss methodology, which will result in an effortmore timely recognition of credit losses. ASU 2016-13 is effective for annual reporting periods, and interim periods within those years, beginning after December 15, 2019, excluding entities eligible to clarifybe smaller reporting company. For all other entities, the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The amendments of this ASUrequirements are effective for fiscal years beginning after December 15, 2017, and2022, including interim periods within those fiscal years. Early adoption is permitted for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. ASU 2016-13 has been amended by ASU 2019-04, ASU 2019-05, and ASU 2019-11. For entities that have not yet adopted ASU No. 2016-13, the effective dates and transition methodology for ASU 2019-04, ASU 2019-05, and ASU 2019-11 are the same as the effective dates and transition methodology in ASU 2016-13. The Company did not adopt this standard yet due to the status of smaller reporting company. We plan to adopt this standard for the year beginning May 1, 2023. We do not expect the adoption of this guidance is not expected tostandard will have a material impact on our financial statements.
A variety of proposed or otherwise potential accounting standards are currently under study by standard setting organizations and various regulatory agencies. Due to the tentative and preliminary nature of those proposed standards, we have not determined whether implementation of such proposed standards would be material to our consolidated financial statements.
GOING CONCERN
Our unaudited condensed consolidated financial statements have been prepared assuming we will continue as a going concern. The Company has incurred recurring losses with a net loss of approximately $873,000 and $3,822,000$194,000 for the three and nine months ended JanuaryJuly 31, 2018, respectively,2022 and has a significant accumulated deficit of $33.0$46.4 million at Januaryas of July 31, 2018.2022. The Company's cash balance and revenues generated are not currently sufficient and cannot be projected to cover operating expenses for the next twelve months from the date of this report. These factors raise doubt as to the ability of the Company to continue as a going concern. Management's plans include attempting to improve its business profitability, its ability to generate sufficient cash flow from its operations to meet its operating needs on a timely basis, obtain additional working capital funds through debt and equity financings, and restructure on-going operations to eliminate inefficiencies to raise cash balance in order to meet its anticipated cash requirements for the next twelve months from the date of this report. Management intends to make every effort to improve its current sales force as to furtheridentify and develop and expand the international markets for its new products as well as continuing with the current sources of funds to meet working capital needs on as needed basis.funds. The outcome of these matters cannot be predicted at this time. There can be no assurance that these plans and arrangementsany additional financings will be successful.
The ability of the Company to continue as a going concern is dependent upon its ability to achieve profitable operations and raise additional capital. The accompanying unaudited condensed consolidated financial statements do not include any adjustments related to the recoverability or classification of asset-carrying amount or the amounts and classification of liabilities that may result should the Company be unable to continue as a going concern.
NOTE 3 - INVENTORIES
Noncontrolling interest on the consolidated balance sheets resulted from the consolidation of Shengren, a 61.3% owned subsidiary starting from April 30, 2020. An individual investor and Shandong Yulong Mining Group Co., Ltd. (“Yulong”) hold 38.4% and 0.3% of the equity interest in Shengren effective at the end of date, April 30, 2020, respectively, pursuant to a series of debt transfer and conversion agreements entered into on April 30, 2020 between seven individual creditors and three suppliers, an individual investor with Yulong and Qufu Shengren. Noncontrolling interest amounted to a deficit of $3,450,220 and $3,340,248 as of July 31, 20182022 and April 30, 2017,2022.
NOTE 4 - INVENTORIES
As of July 31, 2022 and April 30, 2022, inventories consisted of the following:
January 31, 2018 | April 30, 2017 | |||||||
(unaudited) | ||||||||
Raw materials | $ | 7,406,466 | $ | 4,087,036 | ||||
Work in process | 1,740,132 | 1,802,782 | ||||||
Finished goods | 3,138,089 | 3,089,703 | ||||||
12,284,687 | 8,979,521 | |||||||
Less: reserve for obsolete inventory | (178,776 | ) | (163,048 | ) | ||||
$ | 12,105,911 | $ | 8,816,473 |
July 31, 2022 | April 30, 2022 | |
Raw materials | $650,544 | $2,417,724 |
Work in process | 1,702,829 | 1,029,797 |
Finished goods | 2,765,338 | 2,116,523 |
Inventories, gross | 5,118,711 | 5,564,044 |
Less: reserve for obsolete inventory | - | - |
Inventories, net | $5,118,711 | $5,564,044 |
- PROPERTY AND EQUIPMENT
January 31, 2018 | April 30, 2017 | ||||||||
Estimated Life | (unaudited) | ||||||||
Office equipment | 3-10 Years | $ | 70,062 | $ | 67,091 | ||||
Auto and trucks | 2-10 Years | 516,187 | 446,968 | ||||||
Manufacturing equipment | 2-20 Years | 5,016,056 | 5,109,816 | ||||||
Buildings | 5-20 Years | 9,243,773 | 8,136,080 | ||||||
Construction in process | 528,851 | 815,471 | |||||||
15,374,929 | 14,575,426 | ||||||||
Less: accumulated depreciation | (6,924,596 | ) | (6,334,229 | ) | |||||
$ | 8,450,333 | $ | 8,241,197 |
In the three months ended JanuaryJuly 31, 20182022 and 2017, depreciation expense totaled $320,8782021, the Company wrote down inventories of $78,280 and $332,714,$187,704, respectively. As a result, the Company had no reserve of which $274,270obsolete inventories as of July 31, 2022 and $261,775 were included in cost of revenues, respectively, and of which $46,608 and $70,939 were included in general and administrative expenses,April 30, 2022, respectively. For the nine months ended January 31, 2018 and 2017, depreciation expense totaled $1,054,856 and $992,590, of which $897,938 and $763,806 was included in cost of revenues, respectively, and of which $156,918 and $228,784 were included in general and administrative expenses, respectively. Depreciation is not taken during the period of construction or equipment installation. Upon completion of the installation of manufacturing equipment or any construction in progress, construction in progress balances will be classified to their respective property and equipment category.
NOTE 5 - LAND USE RIGHTS
Prepaid expenses and other current assets as of July 31, 2022 and April 30, 2022 totaled $2,214,165 and $2,765,819, respectively. As of July 31, 2022, prepaid expenses and other current assets includes $686,020 prepayments to suppliers for merchandise that had not been shipped to us and services that had not been provided to us, and $1,528,145 for business related employees' advances and advances to the following:
January 31, 2018 | April 30, 2017 | ||||||||
Estimated Life | (unaudited) | ||||||||
Land use right | 45 Years | $ | 2,528,138 | $ | 2,303,168 | ||||
Less: accumulated amortization | (533,451 | ) | (448,113 | ) | |||||
$ | 1,994,687 | $ | 1,855,055 |
NOTE 6 - PROPERTY AND EQUIPMENT
As of July 31, 2022 and April 30, 2022, property and equipment consisted of the following:
July 31, 2022 | April 30, 2022 | |
Office equipment | $450,392 | $434,867 |
Auto and trucks | 561,302 | 581,314 |
Manufacturing equipment | 6,358,604 | 6,481,114 |
Buildings | 9,243,693 | 9,452,467 |
Construction in process | 16,820 | 17,200 |
Property and equipment, gross | 16,630,811 | 16,966,962 |
Less: accumulated depreciation | (9,585,205) | (9,481,229) |
Property and equipment, net | $7,045,606 | $7,485,733 |
For the three months ended July 31, 2022 and 2021, depreciation expense totaled $317,326 and $368,436, of which $269,899 and $313,733 were included in cost of revenues, respectively, and remainder was included in operating expenses. Depreciation is not taken during the period of construction or equipment installation. Upon completion of the installation of manufacturing equipment or any construction in progress, construction in progress balances will be classified to their respective property and equipment category.
NOTE 7 – LAND USE RIGHTS
As of July 31, 2022 and April 30, 2022, land use rights consisted of the following:
(Estimated Life) | July 31, 2022 | April 30, 2022 |
Land use rights (33 Years) | 1,967,675 | 2,012,115 |
Less: accumulated amortization | (75,680) | (61,911) |
Land use rights, net | 1,891,995 | 1,950,204 |
The Company acquired the land use rights for Qufu Shengren factory in a total of RMB13,256,420 (approximately $2,052,000) on May 18, 2021. For the three months ended July 31, 2022 and 2021, amortization expense amounted to $15,202 and $15,825, respectively.
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NOTE 8 - RELATED PARTY TRANSACTIONS
Related parties of the Company consist of the followings
- related partyMr. Weidong Chai, a legal representative of Qufu Natural Green;
-Shandong Shengwang Pharmaceutical Co., Ltd. ("Pharmaceutical Corporation"), a Chinese limited liability company of which Mr. Chai is the Chairman;
-Mr. Laiwang Zhang, former Chairman of the Board of the Company, resigned on September 7, 2021; and revenue
- related party
Revenue - related party
For the three months ended JanuaryJuly 31, 20182022 we did not have revenue and 2017,cost of revenue from related party, but we hadrecorded revenue - related party of$1,591,329 and $2,129,371, respectively. For the nine months ended January 31, 2018 and 2017, we hadcost of revenue -– related party of $1,858,709$2,386,628 and $5,591,740,$2,617,569 the three months ended July 31, 2021, respectively, from Qufu Shengwang Import and Export.
Due to (from) related parties
The Company mainly finances its operations through proceeds borrowed from related parties for working capital totaled $5,068,601parties. As of July 31, 2022 and $2,595,313, respectively, and we repaid to related parties a total of $3,251,990 and $2,768,284, respectively. During the three and nine months ended January 31, 2018 and 2017, interest expense related toApril 30, 2022, due to related parties amounted to $25,945 and $38,207, and $71,135 and $96,320, respectively, which were included inconsisted the following:
July 31, | April 30, | |
Pharmaceutical Corporation | $4,542,438 | $4,646,092 |
Weidong Chai | 238,610 | 236,070 |
Total | $4,781,048 | $4,882,162 |
On September 23, 2019, the Company borrowed a one-year loan of RMB1,221,000 (approximately $189,000) from Weidong Cai, bearing an annual interest expense in the accompanying consolidated statements of operations and comprehensive loss, and in connection with the advances of $743,196 (RMB5,000,000) and $1,189,114 (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 7.87% per annum10%. On September 23, 2021 and we have repaid one2020, the parties extended the loan for another year, under the same terms and conditions, reclassified unpaid interest payable to the principal of the loansthis loan, resulting in an increase of RMB5,000,000 with its accrued interests on April 1, 2017. principal from RMB1,221,000 (approximately $189,000) to RMB1,477,410 (approximately $224,000).
NOTE 9 - OPERATING LEASE
The other advances bear no interestCompany leased Metformin production line including buildings, manufacturing equipment and are payable on demand. On January 31, 2018, the balance we owedconstruction in process to Pharmaceutical Corporation, Qufu Shengwang Import and Export, Mr. Weidong Chai, a management member of Qufu Shengren Pharmaceutical Co., Ltd., and Mr. Laiwang Zhang is $1,336,203, $126,676, $161,621 and $397,532, respectively. On April 30, 2017, the balance we owed to Qufu Shengwang Import and Export and Mr. Weidong Chai totaled $21,878 and $134,002, respectively, the balance due from Pharmaceutical Corporation was $30,568, which was repaid on July 28, 2017. On January 31, 2018 and April 30, 2017, the balance of due to (from) related parties consisted of the following:
Shandong Shengwang Pharmaceutical Co., Ltd. | Qufu Shengwang Import and Export Co., Ltd. | Weidong Chai | Laiwang Zhang | Total | ||||||||||||||||
Balance due to related parties, April 30, 2017 | $ | (30,568 | ) | $ | 21,878 | $ | 134,002 | $ | - | $ | 125,312 | |||||||||
Working capital advances from related parties | 4,191,461 | 465,863 | 13,745 | 397,532 | 5,068,601 | |||||||||||||||
Repayments | (2,865,717 | ) | (386,273 | ) | - | - | (3,251,990 | ) | ||||||||||||
Effect of foreign currency exchange | 41,027 | 25,208 | 13,874 | - | 80,109 | |||||||||||||||
Balance due to related parties, January 31, 2018 | $ | 1,336,203 | $ | 126,676 | $ | 161,621 | $ | 397,532 | $ | 2,022,032 |
NOTE 810 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses included the following as of JanuaryJuly 31, 20182022 and April 30, 2017:
Account | January 31, 2018 | April 30, 2017 | ||||||
(unaudited) | ||||||||
Accounts payable | $ | 6,623,798 | $ | 5,096,599 | ||||
Advanced from customers | 177,666 | 40,900 | ||||||
Accrued salary payable | 359,610 | 160,244 | ||||||
Tax payable | 92,568 | 121,127 | ||||||
Deferred revenue | 25,719 | 82,581 | ||||||
Other payable* | 2,611,256 | 1,535,020 | ||||||
Total accounts payable and accrued expenses | $ | 9,890,617 | $ | 7,036,471 |
Account | July 31, 2022 | April 30, 2022 |
Accounts payable | $10,258,255 | $7,945,913 |
Advanced from customers | 89,657 | 121,183 |
Advanced from third parties* | 712,471 | 1,208,900 |
Accrued salary payable | 138,228 | 101,829 |
Tax payable | 1,050,827 | 812,545 |
Other payable** | 2,065,735 | 2,024,868 |
Total accounts payable and accrued expenses | $14,315,173 | $12,215,238 |
- 13 -
* Advanced from third parties for working capital, bearing interest free and due on demands.
** As of on July 31, 2018,2022, other payables consists of commission payable of $201,310, general liability, worker's compensation, and medical insurance payable of $575,687,$412,103, consulting fee payable of $209,905,$239,578, union and education fees payable of $297,754,$131,477, interest payables for short-term loans of $521,012, advanced$341,922, safety production fund payable of $656,437, advances from the employees of $602,037$125,584, security deposit for sub-contractor of $148,432 and other miscellaneous payables of $203,551. On$10,202. As of April 30, 2017,2022, other payables consists of commission payable of $133,712, general liability, worker's compensation, and medical insurance payable of $465,505,$428,773, consulting and service fee payable of $266,852,$206,007, union and education fees payable of $280,404,$134,598, interest payables for short-term loans of $213,153, advanced$366,249, safety production fund payable of $627,138, advances from the employees of $172,435$106,253, deposit for operating lease of $151,784 and other miscellaneous payables of $2,959.
NOTE 911 -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. At Januarydate and accrued interest converted into debt principal. As of July 31, 20182022 and April 30, 2017,2022, short-term loans consisted of the following:
January 31, 2018 | April 30, 2017 | |||||||
(unaudited) | ||||||||
Loan from Min Wu, an employee of Qufu Shengren, due on October 5, 2017, with an annual interest rate of 10% at October 6, 2016. Renewed on October 6, 2017 and accrued interest of RMB20,000 ($3,180) added to the original principal amount of RMB200,000 ($31,803), terms were not changed, with new due date on October 5, 2018. | $ | 34,983 | $ | 29,005 | ||||
Loans from Jianjun Yan, non-related individual, due on October 6, 2017, with an annual interest rate of 10% at October 7, 2016. Renewed on October 7, 2017 and accrued interest of RMB800,800 ($127,336) added to the original principal amount of RMB8,008,000 ($1,273,375), terms were not changed, with new due date on October 6, 2018. | 1,400,711 | 1,161,354 | ||||||
Loans from Jianjun Yan, non-related individual, due on March 30, 2018, with annual interest rate of 4% at March 31, 2017. Repaid partial principal amount of $375,077 on August 23, 2017. | 1,192,596 | 1,450,242 | ||||||
Loan from Junzhen Zhang, non-related individual, due on October 5, 2017, with an annual interest rate of 10% at October 6, 2016. Renewed on October 6, 2017 and accrued interest ofRMB10,000 ($1,590) added to the original principal amount of RMB150,000 ($23,852), terms were not changed, with new due date on October 5, 2018. | 25,442 | 21,754 | ||||||
Loan from Jian Chen, non-related individual, due on January 26, 2018 and April 10, 2018, bearing an annual interest rate of 10%, with the principle amount of RMB700,000 ($111,309) and RMB300,000 ($47,704) at January 27, 2017 and April 11, 2017, respectively. On January 27, 2018, principle amount of RMB700,000 loan was extended anther one year. | 159,013 | 145,024 | ||||||
Loan from Qing Kong, non-related individual, due on March 6, 2017, with an annual interest rate of 10% at March 7, 2016, which renewed on March 7, 2017 and accrued interest of RMB44,000 ($6,996) added to the original principal amount of RMB440,000 ($69,966), terms were not changed, with new due date on March 6, 2018.See Note 12 | 76,962 | 63,811 | ||||||
Loan from Qing Kong, non-related individual, due on January 8,2019, with an annual interest rate of 10% at January 9,2018. | 31,803 | - | ||||||
Loan from Guihai Chen, non-related individual, due on March 10, 2017, with an annual interest rate of 10% at March 11, 2016, which renewed on March 11, 2017 and accrued interest of RMB10,000 ($1,590) added to the original principal of RMB110,000 ($17,492), terms were not changed, with new due date on March 10, 2018. See Note 12 | 19,082 | 15,953 | ||||||
Loan from Guihai Chen, non-related individual, due on September 20, 2018, with an annual interest rate of 10% at September 21, 2017. | 31,803 | - | ||||||
Loan from Weifeng Kong, non-related individual, due on November 28, 2017, with an annual interest rate of 10% at November 29, 2016, extended another one year at on November 29, 2017. | 31,803 | 29,004 | ||||||
Loan from Shidong Wang, non-related individual, due on March 7, 2018, with an annual interest rate of 4% at March 8, 2017. See Note 12 | 1,590,128 | 1,450,242 | ||||||
Total | $ | 4,594,326 | $ | 4,366,389 |
January 31, 2018 | April 30, 2017 | |||||||
(unaudited) | ||||||||
Loan from Xuxu Gu, non-related individual, due on March 8, 2019, with an annual interest rate of 4% at March 9, 2017. | $ | 1, 590,128 | $ | 1,450,242 | ||||
Loan from Dadong Mei, non-related individual, due on March 8, 2019, with an annual interest rate of 4% at March 9, 2017. | 1, 590,128 | 1,450,242 | ||||||
Loan from Xuxu Gu, non-related individual, due on September 27, 2019, with an annual interest rate of 4% at September 28, 2017. | 1,701,438 | - | ||||||
Total: | $ | 4,881,694 | $ | 2,900,484 |
July 31, 2022 | April 30, 2022 | |
Loan from Min Wu, an employee of Qufu Shengren, due on October 5, 2022, with an annual interest rate of 10%, renewed on October 6, 2021. | $32,655 | $33,393 |
Loan from Jianjun Yan, due on October 6, 2022, with an annual interest rate of 10%, renewed on October 7, 2021. | 1,590,833 | 1,626,763 |
Loan from Jianjun Yan, due on March 31, 2022, with annual interest rate of 4%, partially repaid RMB665,000 ($99,140). Remaining principal balance and accrued interest renewed on April 19, 2022 for the term of one year. | 32,952 | 134,633 |
Multiple loans from Jianjun Yan, due from May 13, 2023 to August 22, 2023, with annual interest rate of 12%, sign on period from May 14, 2022 to August 23, 2022. | 1,585,845 | 1,490,521 |
Loan from Junzhen Zhang, non-related individual, due on October 5, 2022, with an annual interest rate of 10%, renewed on October 6, 2021. | 28,736 | 29,385 |
Loan from Junzhen Zhang, non-related individual, due on November 30, 2022, with an annual interest rate of 10%, signed on December 1, 2021. | 22,858 | 23,375 |
Multiple loans from Jian Chen, non-related individual, due from May 20, 2023 to November 14, 2022, with an annual interest rate of 12%, signed from May 21, 2022 to November 15, 2021. | 1,052,272 | 1,066,928 |
Loan from Qing Kong, non-related individual, due on March 6, 2023, with an annual interest rate of 10%, renewed on March 7, 2022. | 104,169 | 106,522 |
Loan from Qing Kong, non-related individual, due on January 8, 2023, with an annual interest rate of 10%, renewed on January 9, 2022. | 43,464 | 44,445 |
Loan from Guihai Chen, non-related individual, due on March 9, 2023, with an annual interest rate of 10%, renewed on March 10, 2022. | 26,042 | 26,631 |
Loan from Guihai Chen, non-related individual, due on September 20, 2022, with an annual interest rate of 10%, renewed on September 21, 2021. | 39,513 | 40,405 |
Loan from Weifeng Kong, non-related individual, due on November 28, 2022, with an annual interest rate of 10%, renewed on November 29, 2021. | 29,686 | 30,357 |
Loan from Guohui Zhang, non-related individual, due on January 16, 2022, with an annual interest rate of 4% signed on January 17, 2021. | - | 254,148 |
Total short-term loan payable | $4,589,025 | $4,907,506 |
For the three and nine months ended JanuaryJuly 31, 20182022 and 2017,2021, interest expense related to short-term loans and long-term loans amounted to $126,138$127,857 and $62,169, and $316,578 and $174,414,$67,069, respectively, which were included in interest expense in the accompanying unaudited condensed consolidated statements of operations and comprehensive loss.
- 14 -
NOTE 1012 - SEGMENT INFORMATION
The following information is presented in accordance with ASC Topic 280, "Segment Reporting", for the three months ended JanuaryJuly 31, 20182022 and 2017;2021; we operated in threeaccounted for two reportable business segments - (1) natural sweetener (stevioside), (2) traditional Chinese medicines and (3)(2) corporate and other.other pharmaceutical. Our reportable segments are strategic business units that offer different products and are managed separately based on the fundamental differences in their operations. Condensed financial information with respect to these reportable business segments for the three and nine months ended JanuaryJuly 31, 20182022 and 20172021 is as follows:
Three Months Ended January 31, | Nine Months Ended January 31, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Revenues: | ||||||||||||||||
Chinese medicine - third party | $ | 675,927 | $ | 859,933 | $ | 2,099,147 | $ | 2,240,055 | ||||||||
Chinese medicine - related party | - | - | - | - | ||||||||||||
Total Chinese medicine | 675,927 | 859,933 | 2,099,147 | 2,240,055 | ||||||||||||
Stevioside - third party | 4,058,336 | 3,421,023 | 11,135,229 | 8,413,018 | ||||||||||||
Stevioside - related party | 1,591,329 | 2,129,371 | 1,858,709 | 5,591,740 | ||||||||||||
Total Stevioside | 5,649,665 | 5,550,394 | 12,993,938 | 14,004,758 | ||||||||||||
Total segment and consolidated revenues | $ | 6,325,592 | $ | 6,410,327 | $ | 15,093,085 | $ | 16,244,813 |
Three Months Ended January 31, | Nine Months Ended January 31, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Interest income (expense): | ||||||||||||||||
Chinese medicine | $ | 386 | $ | 105 | $ | 742 | $ | 178 | ||||||||
Stevioside | (152,055 | ) | (100,363 | ) | (387,670 | ) | (270,334 | ) | ||||||||
Total segment and consolidated interest expense | $ | (151,669 | ) | $ | (100,258 | ) | $ | (386,928 | ) | $ | (270,156 | ) | ||||
Depreciation and amortization: | ||||||||||||||||
Chinese medicine | $ | 33,531 | $ | 70,011 | $ | 170,961 | $ | 218,060 | ||||||||
Stevioside | 300,818 | 356,809 | 1,032,021 | 1,057,808 | ||||||||||||
Total segment and consolidated depreciation and amortization | $ | 334,349 | $ | 426,820 | $ | 1,202,982 | $ | 1,275,868 | ||||||||
Loss before income taxes: | ||||||||||||||||
Chinese medicine | $ | (6,964 | ) | $ | (38,147 | ) | $ | (521,873 | ) | $ | (188,043 | ) | ||||
Stevioside | (551,179 | ) | (508,840 | ) | (2,278,166 | ) | (1,336,510 | ) | ||||||||
Corporate and other | (314,667 | ) | (358,697 | ) | (1,021,871 | ) | (1,125,711 | ) | ||||||||
Total consolidated loss before income taxes | $ | (872,810 | ) | $ | (905,684 | ) | $ | (3,821,910 | ) | $ | (2,650,264 | ) |
| Three Months Ended July 31, | |
| 2022 | 2021 |
Revenues: |
|
|
Stevioside - third party | $7,607,323 | $3,775,050 |
Stevioside - related party | - | 2,386,628 |
Total Stevioside | 7,607,323 | 6,161,678 |
Corporate and other – third party | 102,580 | 106,782 |
Corporate and other – related party | - | - |
Total Corporate and other | 102,580 | 106,782 |
Total segment and consolidated revenues | $7,709,903 | $6,268,460 |
|
|
|
Interest expense: |
|
|
Stevioside | $133,021 | $70,671 |
Corporate and other | - | - |
Total segment and consolidated interest expense | $133,021 | $70,671 |
|
|
|
Depreciation and amortization: |
|
|
Stevioside | $292,174 | $327,668 |
Corporate and other | 40,354 | 56,593 |
Total segment and consolidated depreciation and amortization | $332,528 | $384,261 |
|
|
|
Income (loss) from continuing operations before income taxes: |
|
|
Stevioside | $(254,931) | $(812,243) |
Corporate and other | 60,780 | 62,120 |
Total loss from continuing operations before income taxes | $(194,151) | $(750,117) |
July 31, | April 30, | |
Segment property and equipment: | ||
Stevioside | $5,490,411 | $5,854,328 |
Corporate and other | 1,555,195 | 1,631,405 |
Total property and equipment | $7,045,606 | $7,485,733 |
- 1615 -
January 31, 2018 | April 30, 2017 | |||||||
Segment tangible assets: | ||||||||
Chinese medicine | $ | 1,088,871 | $ | 1,319,227 | ||||
Stevioside | 7,361,462 | 6,921,970 | ||||||
Corporate and other | - | - | ||||||
Total consolidated assets | $ | 8,450,333 | $ | 8,241,197 |
NOTE 1113 - CONCENTRATIONS AND CREDIT RISK
(i) Customer Concentrations
For the three months ended JanuaryJuly 31, 2018and 2017,2022 and 2021, customers accounting for 10% or more of the Company's revenue were as follows:
Net Sales | |||||||||||||||||||
For the three months ended January 31, 2018 | For the three months ended January 31, 2017 | ||||||||||||||||||
Chinese Medicine | Stevioside | Chinese Medicine | Stevioside | ||||||||||||||||
A (1) | - | 25.2 | % | - | 33.2 | % | |||||||||||||
B | - | 16.5 | % | - | * | ||||||||||||||
Total | - | 41.7 | % | - | 33.2 | % |
Net Sales | |||||||||||||||||||
For the nine months ended January 31, 2018 | For the nine months ended January 31, 2017 | ||||||||||||||||||
Chinese Medicine | Stevioside | Chinese Medicine | Stevioside | ||||||||||||||||
A (1) | - | 12.3 | % | - | 34.4 | % | |||||||||||||
B | - | 10.6 | % | - | 14.1 | % | |||||||||||||
Total | - | 22.9 | % | - | 48.5 | % |
| Three Months Ended July 31, | |
Customer | 2022 | 2021 |
A (1) | 51.0% | 38.1% |
(1) Qufu Shengwang Import and Export Co., Ltd iswas a related party an entity owned by Mr. Laiwang Zhang.
(ii) Vendor Concentrations
For the three months ended JanuaryJuly 31, 20182022 and 2017,2021, suppliers accounting for 10% or more of the Company's purchase were as follows:
Net Purchases | |||||||||||||||||||
For the three months ended January 31, 2018 | For the three months ended January 31, 2017 | ||||||||||||||||||
Chinese Medicine | Stevioside | Chinese Medicine | Stevioside | ||||||||||||||||
A | - | * | - | 18.7 | % | ||||||||||||||
B | - | 11.3 | % | - | * | ||||||||||||||
C | - | * | - | 15.9 | % | ||||||||||||||
D | - | * | - | 13.6 | % | ||||||||||||||
Total | - | 11.3 | % | - | 48.2 | % |
| Three Months Ended July 31, | |
Supplier | 2022 | 2021 |
A | 15.0% | - |
B | 14.6% | - |
C | 49.3% | 38.4% |
D | - | 15.7% |
- 17 -
Net Purchases | |||||||||||||||||||
For the nine months ended January 31, 2018 | For the nine months ended January 31, 2017 | ||||||||||||||||||
Chinese Medicine | Stevioside | Chinese Medicine | Stevioside | ||||||||||||||||
A | - | 12.7 | % | - | 13.0 | % | |||||||||||||
B | - | 14.7 | % | - | * | ||||||||||||||
C | - | * | - | 21.3 | % | ||||||||||||||
D | - | * | - | 12.0 | % | ||||||||||||||
Total | - | 27.4 | % | - | 46.3 | % |
(iii) Credit Risk
Financial instruments which potentially subject us to concentrations of credit risk consist principally of cash and trade accounts receivable. We place our cash with high credit quality financial institutions in the United States and the PRC. At JanuaryAs of July 31, 2018,2022 and April 30, 2022, we had $150,344$924,204 and $303,160 of cash balance held in PRC banks, where thererespectively. PRC banks protect consumers against loss if their bank or thrift institution fails, and each of our PRC bank account is no equivalent of federal deposit insurance as in the United States.insured up to RMB500,000 (approximately $74,000). As a result, cash held in PRC financial institutions isof $758,486 and $119,250 are not insured.insured as of July 31, 2022 and April 30, 2022. We have not experienced any losses in such accounts through JanuaryJuly 31, 2018.
Country: | July 31, 2022 | April 30, 2022 | ||
United States | $18,578 | 2.0% | $18,033 | 5.6% |
China | 924,204 | 98.0% | 303,160 | 94.4% |
Total cash and cash equivalents | $942,782 | 100.00% | $321,193 | 100.00% |
Almost all of our sales are credit sales which are primarily to customers whose ability to pay is dependent upon the industry economics prevailing in these areas; however, we believe that the concentration of credit risk with respect to trade accounts receivable is limited due to generally short payment terms. We also perform ongoing credit evaluations of our customers to help further reduce potential credit risk.
NOTE 1214 - SUBSEQUENT EVENTS
The Company has evaluated subsequent events through the amount of RMB484,000 ($76,962) loan from Qing Kong, non-related individual,date the financial statements were issued and filed with an annual interest rate of 10%the Securities and new due dateExchange Commission. Based on March 6, 2019.
- 1816 -
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the information contained in the preceding unaudited condensed consolidated financial statements and footnotes and our 20172022 Annual Report on Form 10-K for fiscal year ended April 30, 2017.
OVERVIEW
We sell stevioside, a natural sweetener. Stevioside is a natural zero calorie sweetener as well as herbs used in traditional Chinese medicines.extracted from the leaf of the stevia plants. Substantially all of our operations are located in the PRC. We have built an integrated company with the production and distribution capabilities designed to meet the needs of our customers.
Our operations were organized in two operating segments related to our product lines:
- | Stevioside, and | ||
- | Corporate and other. |
Going Concern
The accompanying unaudited condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company has a significant accumulated deficit and incurred recurring losses and, its overall sales decreased.losses. The Company's cash balance and revenues generated are not currently sufficient and cannot be projected to cover operating expenses for the next twelve months from the date of this report. These factors raise doubt as to the ability of the Company to continue as a going concern. Management's plans include attempting to improve its business profitability, its ability to generate sufficient cash flow from its operations to meet its operating needs on a timely basis, obtain additional working capital funds through debt and equity financings, and restructure on-going operations to eliminate inefficiencies to raise cash balance in order to meet its anticipated cash requirements for the next twelve months from the date of this report. Management intends to make every effort to improve its current sales forcesforecast to further develop and expand the international markets for its new products as well as continuing with the current sources of funds to meet working capitals needs on as needed basis. There can be no assurance that these plans and arrangements will be successful.
The ability of the Company to continue as a going concern is dependent upon its ability to achieve profitable operations and raise additional capital. The accompanying unaudited condensed consolidated financial statements do not include any adjustments related to the recoverability or classification of asset-carrying amount or the amounts and classification of liabilities that may result should the Company be unable to continue as a going concern.
Recent Developments
Consequently, the COVID-19 pandemic may adversely affect the Company’s business operations, financial condition and operating results for 2023, including but not limited to material negative impact to the Company’s total revenues, production capability, ability to conduct marketing and sales, and slower collection of accounts receivables. We are planningable to start building a new facility with annual capacity of 500 metric tons in order to meet substantially increased demand for our high-grade stevia products. In fiscal 2017maintain certain income from previous existing orders and finished products, however, we believe the first three quarters of fiscal 2018, we have invested approximately $88,000 and $736,000, respectively, 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 are for the first time to be used for stevia production in the industry, such as a scraper with centrifuge and fluidized drying system.
We are monitoring the global outbreak and spread of COVID-19 and taking steps in beverages and foods, including those that require baking or cooking where synthetic chemical based sweetener replacements are not suitable.
- 17 -
OUR PERFORMANCE
Our revenues totaled approximately $6,326,000$7,710,000 during the three months ended JanuaryJuly 31, 2018, a decrease2022, an increase of 1.3%23.0%, as compared with the same period in 2017, while2021, and our gross margin decreasedincreased to 11.7%15.0% from 13.9%14.1%. Our total operating expenses in the three months ended JanuaryJuly 31, 2018 decreased2022 increased by approximately $90,000,$93,000, or 5.2%8.1% compared to the same period in 2017 primarily due to a decrease of approximately $130,000, or 14.4% in general and administrative expense, and a decrease of approximately $35,000, or 93.4% in loss on disposition of property and equipment, offset by an increase of approximately $74,000, or 14.3% in selling expense. Our net loss for the three months ended January 31, 2018 was approximately $849,000, an increase of approximately $57,000 or 6.3%, compared to $906,000 in the same period in 2017.
While we have broadened our stevia product offerings to include a number of higher quality stevia grades from ourneeded 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 we hope that our sales volume in higher grade stevia products will increase in fiscal 20182023 as demand resumes and increases after the demands increase.effects of the global pandemic. Stevia has beenbecome more widely accepted by the food industry and many new stevia manufacturers have entered this industry in the past few years, andyears; recently we have 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, primarilynot only in the U.S. and EU.EU markets but also in our domestic market. For the fiscal 2018year ended April 30, 2023 and beyond, we will continue to focus on our core business of producing and selling stevioside series products.
Currently there is a world-wide movement of lowering sugar intake, and more and more consumers are becoming aware of the health benefits associated with reduction of sugar intake. According to research data, 40% of Chinese consumers stated that they "will not mind paying more for food and beverages with more natural ingredients" and 80% of the interview consumers express a goal of "having a healthier diet". We believe that, in this search of a more natural and healthy diet and lifestyle, natural sweeteners such as stevia will become the mainstream sweetener in the food and beverage markets.
Some of the recent favorable observations related to the stevia markets in fiscal 2018 include:
- | Chinese domestic food and beverages, particularly herbal tea manufacturers and the pharmaceutical industry, have increased the use of | ||
- | Southeast and South Asia have renewed and increased their interest in stevia, particularly high grade stevia; | ||
- | New global product launches mentioning stevia have increased 13% per year on average from 2014 to | ||
- | Stevia has been growing in |
Meanwhile, we are also facing challenges in competitive pricing and sourcing raw materials for the fiscal 2018.years ended April 30, 2023 and 2022, as well as negative impact from the global COVID-19 pandemic. During the fiscal 2017,years ended April 30, 2022, the market prices of stevioside products continue to be impacted by strong price competition among Chinese manufacturers. With this being a product gaining large market shares in China, in the recent years we have seen many competitors entering the market. These new competitors use lower pricing as their effort to gain market share as they initially entering the market, thus driving down the average prices for stevia products. We expect the pressure from pricing competition to continue in fiscal 2023. We anticipate the price of stevia leaves, the raw material used to produce our stevioside series products, will also continue to increase in fiscal 2023 since the demand for raw material may increase as the market grows, while the production of the raw material experiences negative impact due to the global pandemic.
We intend to make adjustments internally in order to better operate in this market; our goal is to increase sales and develop new client bases through our marketing effort, decrease our production expenses while maintaining the stability and quality of our products, and decrease our overall expenditures. We believe while there are challenges and risks in this market, our high quality high grade product and the formulations developed by our internal research and development team differentiates us from other competitors and our efforts will lead to sustainable growth in the future.
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RESULTS OF OPERATIONS
The following table summarizes our results from operations for the three month periods ended July 31, 2022 and 2021. The percentages represent each line item as a percent of revenues:
For the Three Months ended July 31, 2022 | ||||||
Stevioside | Corporate and Other | Consolidated | ||||
Revenues | $7,607,323 | 100.0% | $102,580 | 100.0% | $7,709,903 | 100.0% |
Cost of goods sold | 6,512,095 | 85.6% | 41,770 | 40.7% | 6,553,865 | 85.0% |
Gross profit | 1,095,228 | 14.4% | 60,810 | 59.3% | 1,156,038 | 15.0% |
Selling expenses | 399,467 | 5.3% | - | - | 399,467 | 5.2% |
General and administrative expenses | 396,884 | 5.2% | 30 | - | 396,914 | 5.1% |
Research and development expenses | 435,568 | 5.7% | - | - | 435,568 | 5.6% |
(Loss) income from operations | (136,691) | (1.8)% | 60,780 | 59.3% | (75,911) | (1.0)% |
Other expenses | (118,240) | (1.6)% | - | - | (118,240) | (1.5)% |
(Loss) income from continuing operations before income taxes | $(254,931) | (3.4)% | $60,780 | 59.3% | $(194,151) | (2.5)% |
For the Three Months ended July 31, 2021 | ||||||
Stevioside | Corporate and Other | Consolidated | ||||
Revenues | $6,161,678 | 100.0% | $106,782 | 100.0% | $6,268,460 | 100.0% |
Cost of goods sold | 5,340,969 | 86.7% | 44,662 | 41.8% | 5,385,631 | 85.9% |
Gross profit | 820,709 | 13.3% | 62,120 | 58.2% | 882,829 | 14.1% |
Selling expenses | 368,812 | 6.0% | - | - | 368,812 | 5.9% |
General and administrative expenses | 414,643 | 6.7% | - | - | 414,643 | 6.6% |
Research and development expenses | 355,713 | 5.8% | - | - | 355,713 | 5.7% |
(Loss) income from operations | (318,459) | (5.2)% | 62,120 | 58.2% | (256,339) | (4.1)% |
Other expenses | (493,778) | (8.0)% | - | - | (493,778) | (7.9)% |
(Loss) income from continuing operations before income taxes | $(812,237) | (13.2)% | $62,120 | 58.2% | $(750,117) | (12.0)% |
Revenues
Total revenues in the three months ended July 31, 2022 increased by approximately 23.0%, as compared to the same period in 2021. Stevioside revenues, which accounts for 98.7% and 98.3% of our total revenues in the three months ended July 31, 2022 and 2021, respectively, increased by approximately 23.5%, primarily due to an increasing demand from both domestic and overseas markets as the industries recover from the COVID-19 pandemic. We sold 264 metric tons and 214 metric tons of stevioside for the three months ended July 31, 2022 and 2021, respectively,
Our products including enzyme treated stevia have been well accepted by the market, especially in the U.S.. We generated approximately $3,014,000 and $1,690,000 in revenue from producing over 93 metric tons and 55 metric tons of the customized orders for restructuring by enzyme based on our Stevioside products which accounted for approximately 37% and 28% of our total revenues of Sativoside segment in the three months ended July 31, 2022 and 2021, respectively.
Our unit sale price fluctuated from month to month in the three months ended July 31, 2022, 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 three months ended July 31, 2022, as compared to the same period in 2021. We are facing challenges in competitive pricing and sourcing of raw materials, and the market prices of stevioside products were impacted by strong price competition among Chinese manufacturers. We expect the pressure from pricing competition to continue in fiscal 2018. We also anticipate the price of stevia leaves, the raw material used to produce our stevioside series products, to continue to increase in fiscal 2018.
For the Three Months ended January 31, 2018 | ||||||||||||||||||||||||||||
Chinese Medicine | Stevioside | Corporate and other | Consolidated | |||||||||||||||||||||||||
Total revenues | $ | 675,927 | 100.0 | % | $ | 5,649,665 | 100.0 | % | $ | - | $ | 6,325,592 | 100.0 | % | ||||||||||||||
Cost of revenues | 531,693 | 78.7 | % | 5,057,083 | 89.5 | % | - | 5,588,776 | 88.3 | % | ||||||||||||||||||
Gross profit | 144,234 | 21.3 | % | 592,582 | 10.5 | % | - | 736,816 | 11.7 | % | ||||||||||||||||||
Loss on disposition of property and equipment | 2,164 | 0.3 | % | 266 | 0.0 | % | - | 2,430 | 0.0 | % | ||||||||||||||||||
Research and development expenses | 1,387 | 0.2 | % | 282,964 | 5.0 | % | - | 284,351 | 4.5 | % | ||||||||||||||||||
Other operating expenses | 189,427 | 28.0 | % | 862,335 | 15.3 | % | 314,667 | 1,366,429 | 21.6 | % | ||||||||||||||||||
Other income | 41,779 | 6.2 | % | 1,805 | 0.0 | % | - | 43,584 | 0.7 | % | ||||||||||||||||||
Loss before income taxes | $ | (6,964 | ) | (1.0 | )% | $ | (551,179 | ) | (9.8 | )% | $ | (314,667 | ) | $ | (872,810 | ) | (13.8 | )% |
For the Three Months ended January 31, 2017 | ||||||||||||||||||||||||||||
Chinese Medicine | Stevioside | Corporate and other | Consolidated | |||||||||||||||||||||||||
Total revenues | $ | 859,933 | 100.0 | % | $ | 5,550,394 | 100.0 | % | $ | - | $ | 6,410,327 | 100.0 | % | ||||||||||||||
Cost of revenues | 737,032 | 85.7 | % | 4,780,254 | 86.1 | % | - | 5,517,286 | 86.1 | % | ||||||||||||||||||
Gross profit | 122,901 | 14.3 | % | 770,140 | 13.9 | % | - | 893,041 | 13.9 | % | ||||||||||||||||||
Loss on disposition of property and equipment | - | - | 36,964 | 0.7 | % | - | 36,964 | 0.6 | % | |||||||||||||||||||
Research and development expenses | - | - | 283,815 | 5.1 | % | - | 283,815 | 4.4 | % | |||||||||||||||||||
Other operating expenses | 160,528 | 18.7 | % | 902,352 | 16.3 | % | 360,032 | 1,422,912 | 22.2 | % | ||||||||||||||||||
Other income (expenses) | (520 | ) | (0.1 | )% | (55,849 | ) | (1.0 | )% | 1,335 | (55,034 | ) | (0.9 | )% | |||||||||||||||
Loss before income taxes | $ | (38,147 | ) | (4.4 | )% | $ | (508,840 | ) | (9.2 | )% | $ | (358,697 | ) | $ | (905,684 | ) | (14.1 | )% |
For the Nine Months ended January 31, 2018 | ||||||||||||||||||||||||||||
Chinese Medicine | Stevioside | Corporate and other | Consolidated | |||||||||||||||||||||||||
Total revenues | $ | 2,099,147 | 100.0 | % | $ | 12,993,938 | 100.0 | % | $ | - | $ | 15,093,085 | 100.0 | % | ||||||||||||||
Cost of revenues | 1,720,361 | 82.0 | % | 12,067,132 | 92.9 | % | - | 13,787,493 | 91.3 | % | ||||||||||||||||||
Gross profit | 378,786 | 18.0 | % | 926,806 | 7.1 | % | - | 1,305,592 | 8.7 | % | ||||||||||||||||||
Loss on disposition of property and equipment | 253,890 | 12.1 | % | 31,260 | 0.2 | % | 285,150 | 1.9 | % | |||||||||||||||||||
Research and development expenses | 2,330 | 0.1 | % | 648,324 | 5.0 | % | - | 650,654 | 4.3 | % | ||||||||||||||||||
Other operating expenses | 560,326 | 26.7 | % | 2,379,479 | 18.3 | % | 1,021,871 | 3,961,676 | 26.3 | % | ||||||||||||||||||
Other expenses | (84,113 | ) | (4.0 | )% | (145,909 | ) | (1.1 | )% | - | (230,022 | ) | (1.5 | )% | |||||||||||||||
Loss before income taxes | $ | (521,873 | ) | (24.9 | )% | $ | (2,278,166 | ) | (17.5 | )% | $ | (1,021,871 | ) | $ | (3,821,910 | ) | (25.3 | )% |
For the Nine Months ended January 31, 2017 | ||||||||||||||||||||||||||||
Chinese Medicine | Stevioside | Corporate and other | Consolidated | |||||||||||||||||||||||||
Total revenues | $ | 2,240,055 | 100.0 | % | $ | 14,004,758 | 100.0 | % | $ | - | $ | 16,244,813 | 100.0 | % | ||||||||||||||
Cost of revenues | 1,725,719 | 77.0 | % | 12,369,619 | 88.3 | % | - | 14,095,338 | 86.8 | % | ||||||||||||||||||
Gross profit | 514,336 | 23.0 | % | 1,635,139 | 11.7 | % | - | 2,149,475 | 13.2 | % | ||||||||||||||||||
Loss on disposition of property and equipment | - | - | 40,543 | 0.3 | % | - | 40,543 | 0.3 | % | |||||||||||||||||||
Research and development expenses | - | - | 393,143 | 2.8 | % | - | 393,143 | 2.4 | % | |||||||||||||||||||
Other operating expenses | 701,225 | 31.3 | % | 2,430,500 | 17.4 | % | 1,127,046 | 4,258,771 | 26.2 | % | ||||||||||||||||||
Other income (expense) | (1,153 | ) | (0.1 | )% | (107,464 | ) | (0.6 | )% | 1,335 | (107,282 | ) | (0.7 | )% | |||||||||||||||
Loss before income taxes | $ | (188,043 | ) | (8.4 | )% | $ | (1,336,510 | ) | (9.5 | )% | $ | (1,125,711 | ) | $ | (2,650,264 | ) | (16.3 | )% |
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Cost of Revenues and Gross Margin
Cost of revenues includes the cost of raw materials, labor, depreciation, and other fixed and variable overhead costs. Cost of revenues in the three months ended JanuaryJuly 31, 20182022 increased by 1.3%21.7%, compared to the same period in 2017.2021. Cost of revenues as a percentage of revenues increaseddecreased from 86.1%85.9% to 88.3%85.0% during the three months ended 2017 and 2017.July 31, 2022 compared to the same period in 2021. Gross margin in Stevioside segment decreasedincreased from 13.9%13.3% to 11.7%14.4% for the three months ended by JanuaryJuly 31, 2018, comparing2021, compared the same period in 2017, which was primarily due to the reduction of our sales while we incurred higher raw material costs and higher overhead costs. Gross margin in Chinese Medicine segment was 21.3% in the three months ended January 31, 2018, an increase as compared to the gross margin of 14.3% in the same period in 2017. The lower gross margin for Stevioside segment due to high market competition gain our market share on both domestic and international markets. Since we purchase our raw materials on the spot market, we are unable to predict, with any degree of certainty, our raw material costs and their impact on our gross margin in future periods.2021. Our consolidated gross margin for the three months ended by JanuaryJuly 31, 20182022 was 11.7%15.0%, as compared to 13.9%14.1% in the same period in 2017.
We believe the effect of the COVID-19 pandemic is the most significant in our raw material purchasing and our sales. Due to the effect of the global COVID-19 pandemic, we expect the sourcing and availability of stevia raw material will have increased difficulties and costs and lower average unit sale pricefor fiscal 2023. February to March is normally the nursing period for stevia plants; as a result of COVID-19 related gathering laws, farmers are not able to stay ahead of competition and to gain our market share during the period. The Chinese medicine segment gross margin decreased to 18.0% in the nine months ended January 31, 2018, compared to 23.0% forhave the same periodamount of nursery workers as previous years, resulting in 2017, duea decrease of stevia plants, and relevant safety measures also resulted in an increase of general planting costs. We expect this to similar reasons discussed above.
Selling Expenses
For the three months ended JanuaryJuly 31, 2018,2022, we had an increase of approximately $74,000,$31,000, or 14.3%8.3% in selling expenses, as compared to the same period in 2017. This increase was primarily due to the approximately $119,000 increase in promotion and marketing expenses, $24,000 increase in commission, $20,000 increase in travel and entertainment expenses, offset by a $9,000 decrease in shipping and freight, $68,000 decrease in advertising expenses, $6,000 decrease in salary and wages, $5,000 decrease in local sales related taxes, and a decrease of $1,000 in miscellaneous in the three months ended January 31, 2018.
General and Administrative Expenses
Our general and administrative expenses for the three months ended JanuaryJuly 31, 20182022 decreased by approximately $130,000,$18,000, or 14.4%4.3% from the same period in 2017.2021. The decrease was primarily due to a decrease of approximately $89,000 decrease in depreciation and amortization expenses since the disposition of property and equipment, $141,000 decrease$14,000 in repairs and maintenance fee, $48,000fees, $37,000 decrease in salaryservice and wage expenses, $56,000consulting fee, $5,000 decrease in consulting service fee,hospitality expenses and $22,000$25,000 decrease in automiscellaneous expense, offset by an increase of $18,000 in office expense, $76,000 increase in bad debt expense, $9,000 increase in travel expense, $20,000 increase in property tax and other tax expense, $4,000 increase in marketing expense, and $99,000 increase in miscellaneous expense in three months ended January 31, 2018.
Research and Development Expense
For the three and nine months ended JanuaryJuly 31, 2018,2022, our research and development expenses amounted to approximately $284,000 and $651,000,$436,000, as compared to $284,000 and $393,000$356,000 for the same periodsperiod in 2017, respectively.2021. The increase of approximately $0 and $258,000$80,000 was primarily due to the increase in spending for third party technical consulting fees on the research and development of stevioside products in the three and nine months ended JanuaryJuly 31, 2018, respectively.
Other Income (Expenses)
For the three months ended JanuaryJuly 31, 2018,2022, other income,expense, net of other expenses,income, amounted to approximately $44,000, an increaseof $98,000$118,000, a decrease of $376,000 as compared to the other expense, net of other income, ofamounted to approximately $55,000$494,000 for the three months ended JanuaryJuly 31, 2017.2021. The increasedecrease of other incomeexpenses was primarily attributable to an increasea decrease in other expenses of $150,000$438,000 attributable to a loss on disposition of property and equipment in net other income due to collect tax rebates of prior year, andthe three months ended July 31, 2022, offset by a decrease of $12,000$1,000 in interest expense – related party, offset by interest expense in the increased amount of approximately $64,000.
Net Loss
As a result of the foregoing, our loss inwas $194,000 for the three and nine months ended JanuaryJuly 31, 2018 was approximately $873,000 and $3,822,000,2022, as compared to $906,000 and $2,650,000 inwith loss from continuing operations of $750,000 for the three and nine months ended JanuaryJuly 31, 2017, respectively. This increase2021, a change of $556,000, or 74.1%. The decrease in net loss was primarily due to decrease in revenues and higher cost of revenue, hence a decrease inincreased gross profit with higherand decreased other expenses, offset by increased operating expenses mainly from higher selling expenses.
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Net Loss Attributable to Sunwin Sunwin Stevia International, Inc.
Our net loss attributable to Sunwin Sunwin Stevia International, Inc. in the three months ended July 31, 2022 was approximately $121,000, or $(0.00) per share (basic and diluted), compared to $460,000, or $(0.00) per share (basic and diluted), in the three months ended July 31, 2021.
Net Loss Attributable to Noncontrolling Interest
Noncontrolling interest represents the ownership interests an individual investor and Shangdong Yulong Mining Group Co., Ltd. ("Yulong") hold in Qufu Shengren. The amount recorded as noncontrolling interest in our unaudited condensed consolidated statements of loss and comprehensive loss is computed by multiplying the after-tax loss by 38.7%, the percentage ownership in Qufu Shengren not directly attributable to us. Net loss attributable to noncontrolling interest amounted to $73,000 and $290,000 for the three months ended July 31, 2022 and 2021.
Foreign currency translation adjustment
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 transactionstranslations are included in the Comprehensive loss on the unaudited condensed consolidated statements of operations.operations and comprehensive loss. As a result of foreign currency translations, which are a non-cash adjustment, we reported a foreign currency translation loss of $48,000 and gain of $532,000 and $970,000 for the three and nine months ended January 31, 2018, as compared to a foreign currency translation loss of $197,000 and $834,000 for the same period in 2017, respectively. This non-cash gain (loss) had the effect of increasing (decreasing) our reported comprehensive income (loss).
LIQUIDITY AND CAPITAL RESOURCES
Liquidity is the ability of a company to generate sufficient cash to meet its operational cash requirements.
On July 31, 2018,2022, we had a working capital deficit of approximately $4,243,000,$5,748,000, including cash of $151,000,approximately $943,000, as compared to the working capitaldeficit of $4,652,000 and$5,949,000, including cash of $51,000approximately $321,000 at April 30, 2017.2022. The approximate $100,000$622,000 increase in our cash at JanuaryJuly 31, 20182022 from April 30, 20172022 is primarily attributable to net cash provided by financingoperating activities in proceeds from loans, whichof approximately $1,035,000, offset fromby net cash used in investing activities of approximately $56,000, net cash used in purchasefinancing activities of propertyapproximately $348,000 and equipmenteffect of exchange rate on cash of $9,000 during the three months ended July 31, 2022. The Company's cash balance and revenues generated are not currently sufficient and cannot be projected to improve our productivity andcover operating activities. 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 inexpenses for the next 12twelve months management expects that we will need to curtail or cease operations. The accompanying unaudited condensed consolidated financial statements do not include any adjustments relatedfrom the date of this report. These factors raise doubt as to the recoverability and or classificationability of recorded asset amounts and or classification of liabilities that might be necessary should we be unablethe Company to continue as a going concern.
The COVID-19 Pandemic. On January 30, 2020, the World Health Organization declared the coronavirus outbreak a "Public Health Emergency of International Concern" and on March 10, 2020, declared it to be a pandemic. Actions taken around the world to help mitigate the spread of the coronavirus include restrictions on travel, quarantines in certain areas, and forced closures for certain types of public places and businesses. The coronavirus and actions taken to mitigate it have had and are expected to continue to have an adverse impact on the economies and financial markets of many countries, including the geographical areas in China in which the Company operates. Consequently, the COVID-19 pandemic may adversely affect the Company’s business operations, financial condition and operating results for 2022 and 2023, including but not limited to material negative impact to the Company’s total revenues, slower collection of accounts including accounts receivable fromreceivables and significant impairment to the Company’s equity investments. Due to the high uncertainty of the evolving situation, the Company has limited visibility on the full impact brought upon by the COVID-19 pandemic and the related parties, increased by approximately $2,769,000 during the nine months ended January 31, 2018. financial impact cannot be estimated at this time.
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Capital Resources
The days for sales outstanding in accounts receivable increased to 24 daysfollowing table provides certain selected balance sheets comparisons as of JanuaryJuly 31, 2018, as compared to 20 days as of April 30, 2017. The days for sales outstanding in accounts receivable for third party sales increased to 18 days as of January 31, 2018, as compared to 15 days as of April 30, 2017. We will reevaluate accounts receivable for sales and will make necessary adjustments to improve our collection efforts in accounts receivable for related party sales and accounts receivable for third party sales in the near future.
July 31, 2022 | April 30, 2022 | Increase (Decrease) | % | |
Cash and cash equivalents | $942,782 | $321,193 | $621,589 | 193.5% |
Accounts receivable, net | 9,661,191 | 7,404,669 | 2,256,522 | 30.5% |
Inventories, net | 5,118,711 | 5,564,044 | (445,333) | (8.0)% |
Prepaid expenses and other current assets | 2,214,165 | 2,765,819 | (551,654) | (19.9)% |
Total current assets | 17,936,849 | 16,055,725 | 1,881,124 | 11.7% |
Property and equipment, net | 7,045,606 | 7,485,733 | (440,127) | (5.9)% |
Land use rights | 1,891,995 | 1,950,204 | (58,209) | (3.0)% |
Total assets | $26,874,450 | $25,491,662 | $1,382,788 | 5.4% |
Accounts payable and accrued expenses | $14,315,173 | $12,215,238 | $2,099,935 | 17.2% |
Short-term loans | 4,589,025 | 4,907,506 | (318,481) | (6.5)% |
Due to related parties | 4,781,048 | 4,882,162 | (101,114) | (2.1)% |
Total current liabilities | 23,685,246 | 22,004,906 | 1,680,340 | 7.6% |
Total liabilities | $23,685,246 | $22,004,906 | $1,680,340 | 7.6% |
We maintain cash and $7,267,000 (RMB50,108,000), respectively. These loans payable consisted of short-term loans of approximately $4,594,000 (RMB28,893,000)cash equivalents in China and long-term loans of $4,882,000 (RMB30,700,000) from multiple non-related individuals, which bear annual interest rates of 10% - 4%. United States. On July 31, 2022 and April 30, 2022, bank deposits were as follows:
Country | July 31, 2022 | April 30, 2022 |
United States | $18,578 | $18,033 |
China | 924,204 | 303,160 |
Total | $942,782 | $321,193 |
The maturity dates of the loans payable at January 31, 2018 range from March 6, 2018 to September 27, 2019.
Accounts receivable, net of allowance for doubtful accounts increased by approximately $2,257,000 during the PRC. three months ended July 31, 2022, as a result of the increase in sales of product sold as of July 31, 2022. The days for sales outstanding in accounts receivable increased to 101 days as of July 31, 2022, as compared to 20 days as of April 30, 2022. We will reevaluate and categorize accounts receivable for sales and will target to improve our collection effort in fiscal 2023.
Inventories on July 31, 2022, net of reserve for obsolescence, totaled approximately $5,119,000, as compared to $5,564,000 as of April 30, 2022. The decrease is primarily due to our increase in higher sales volume during the three months ended July 31, 2022. However, due to the COVID-19 pandemic, there has been minimal disruption in our supply chain network of certain raw materials. We are not able to purchase enough leaves of the stevia to meet our anticipated upcoming increase in demands
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Our accounts payable and accrued expenses were approximately $14,315,000 on July 31, 2022, an increase of approximately $2,100,000 from April 30, 2022. The increase is primarily due to our increase in procurements of raw material as a result of the rising sales of such materials during the three months ended July 31, 2022.
Loans payable on July 31, 2022 and April 30, 2022 totaled approximately $4,589,000 and $4,908,000, respectively. These loans payable consisted of short-term loans from multiple non-related individuals, which bear annual interest rates of 4% - 12%. Range of maturity dates of the loans payable was from September 1, 2022 to July 27, 2023. During the three months ended July 31, 2022, the Company repaid loans in amount of approximately $349,000 in cash.
Due to related parties on July 31, 2022 and April 30, 2022 totaled approximately $4,781,000 and $4,882,000, respectively. As of July 31, 2022, the balance we owed Pharmaceutical Corporation and Mr. Weidong Chai, a management member of Qufu Shengren Pharmaceutical Co., Ltd., approximately amounted to $4,542,000 and $239,000, respectively. On April 30, 2022, the balance we owed to Pharmaceutical Corporation and Export and Mr. Weidong Chai approximately amounted to $4,646,000 and $236,000, respectively.
Cash Flows Analysis
NET CASH FLOW PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Net cash positionprovided by geographic area is as follow:
January 31, 2018 | April 30, 2017 | |||||||
(unaudited) | ||||||||
China | $ | 150,344 | $ | 30,781 | ||||
United States | 785 | 20,335 | ||||||
Total | $ | 151,129 | $ | 51,116 |
Net cash used in operating activities was approximately $1,831,000 for the three months ended July 31, 2021, primarily due to a net loss of approximately $750,000 adjusted by non-cash working capital, depreciation expense of $384,000, provision for obsolete inventories of $188,000 and loss on disposition of property and equipment of $395,000. Changes in operating assets and liabilities include an increase of approximately $339,000 in accounts receivable and note receivable from a third party, an increase of approximately $953,000 in accounts receivable - 27 related party, an increase of approximately $1,436,000 in prepaid expenses and other current assets, a decrease in accounts payable and accrued expenses of approximately $129,000 and a decrease of approximately $1,000 in taxes payable, offset by a decrease of approximately $809,000 in inventories.
NET CASH FLOW USED IN INVESTING ACTIVITIES:
Net cash used in investing activities from operations amounted to approximately $56,000 during the three months ended July 31, 2022 due to capital expenditures for property and equipment.
Net cash used in investing activities from operations amounted to approximately $2,058,000 during the three months ended July 31, 2021 due to capital expenditures for property and equipment of approximately $1,000 and land use rights of approximately $2,057,000.
NET CASH FLOW PROVIDED BY (USED IN) FINANCING ACTIVITIES:
Net cash used in financing activities from operations amounted to approximately $348,000 in the three months ended July 31, 2022, primarily due to repayments for short term loans in a total amount of $349,000 and repayment of related party advances of approximately $ 1,000, offset by advances received from related parties of approximately $2,000.
Net cash provided by financing activities from operations amounted to approximately $2,984,000 in the three months ended July 31, 2021, primarily due to proceeds from short term loans in a total amount of $1,195,000 and advances received from related parties of approximately $5,266,000, offset by repayment of related party advances of approximately $ 3,476,000.
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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 as 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
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 2 to our unaudited condensed consolidated financial statements. Although we believe that our estimates, assumptions and judgments are reasonable, they are based upon information presently available. Actual results may differ significantly from these estimates under different assumptions, judgments or conditions.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable to smaller reporting company.
ITEM 4. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act") that are designed to ensure that information required to be disclosed by us in reports that we file under the Exchange Act is recorded, processed, summarized and reported as specified in the SEC's rules and forms and that such information required to be disclosed by us in reports that we file under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer ("CEO"), and our Chief Financial Officer ("CFO"), to allow timely decisions regarding required disclosure.
Our management, with the participation of our CEO and CFO, performed an evaluation of the effectiveness of our disclosure controls and procedures as of JanuaryJuly 31, 2018.
Based on this evaluation our management concluded that our disclosure controls and procedures were not effective as of JanuaryJuly 31, 20182022 such that the information relating to our company, required to be disclosed in our Securities and Exchange Commission reports (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and (ii) is accumulated and communicated to our management, including our CEO, to allow timely decisions regarding required disclosure.
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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"). As reported in our Form 10-K for the year ended April 30, 2017,2022, management assessed the effectiveness of our internal control over financial reporting as of April 30, 20172022 and, during our assessment, 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, 2017.
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 three months ended JanuaryJuly 31, 2018.2022. However, to the extent possible, we will implement 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 three months ended JanuaryJuly 31, 20182022 included in this quarterly report on Form 10-Q were fairly stated in accordance with the U.S. GAAP. Accordingly, management believes that despite our significant deficiency, our consolidated financial statements for the three months ended JanuaryJuly 31, 20182022 are fairly stated, in all material respects, in accordance with the U.S. GAAP.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting identified in connection with the evaluation of our controls performed during the quarterthree months ended JanuaryJuly 31, 20182022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None.
ITEM 1A.RISK1 A. RISK FACTORS.
Risk factors describing the major risks to our business can be found under Item 1A, "Risk Factors", in our fiscal 20172022 Annual Report on Form 10-K. There has been no material change in our risk factors from those previously discussed in the fiscal 2017Annual2022 Annual Report on Form 10-K.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. MINE SAFETY DISCLOSURE.
None.
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ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS
Exhibit No. | Description of Exhibit | |
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** |
* - Filed herewith.
** - In accordance with Regulation S-T, the XBRL-formatted interactive data files that comprise Exhibit 101 to this Quarterly Report on Form 10-Q/A10-Q shall be deemed "furnished" and not "filed".
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
SUNWIN STEVIA INTERNATIONAL, INC. | |
Dated: | By: /s/ |
Chunchun Wang | |
Chief Executive Officer | |
Dated: | By: /s/ Fanjun Wu |
Fanjun Wu, | |
Chief Financial Officer |
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