The following discussion and analysis of our consolidated financial condition and results of operations for the fiscal years endedApril 30, 2020 and 2019 should be read in conjunction with the consolidated financial statements and footnotes, and other information presented elsewhere in this Form 10-K. OVERVIEW We sell stevioside and other stevia derived products. Stevioside is a natural zero calorie sweetener extracted from the leaf of the stevia plants. Substantially all of our operations are located in the PRC. We have built an integrated company with the sourcing and production capabilities designed to meet the needs of our customers.
During the fiscal years ended
- Stevioside; and - Corporate and other. Recent Developments In fiscal 2019 and fiscal 2020 we invested in a new production line for Metformin as one of the new product markets we intend to branch into. The new manufacturing facility is fully equipped with stainless steel equipment without any plastic while it has a fully automated system in order to prevent any potential contamination from operators and plastic. In addition, the new manufacturing facility uses the most advanced production equipment that is the first being used for our production in the industry, such as the scraper with centrifuge and fluidized drying system. In fiscal 2020, we have been producing Metformin at a trial capacity to test the market and determine if this is a suitable product to be added to our operation. - 14 - -------------------------------------------------------------------------------- While we were able to market and sale our Metformin products, with our current overhead and associated expenses, its profit margin has not been as lucrative as we had projected, our Metformin production line has been operating at a net loss in fiscal 2020. OnJuly 10, 2019 , we entered into a management agreement withRu Yuan , an unaffiliated individual, to contract out the Metformin production line for 30 years, the parties agree to review and reconfirm the terms every 5 years. Under the terms of this agreement,Ms. Yuan will operate the Metformin production line independently from Sunwin assuming all of its profits and liabilities, including employee payroll, benefits, utilities and etc., and will pay to Qufu Shengren an annual contract fee ofRMB3,000,000 (approximately$436,000 ). OnJuly 30, 2019 , Qufu Natural Green entered into an Asset Transfer Agreement with Na Li, an unaffiliated individual (the "Buyer") for the sale of 100% equity ownership of Qufu Shengwang. Pursuant to the Asset Transfer Agreement, the Buyer shall pay to Qufu Natural Green a total cash consideration ofRMB8,000,000 (approximately$1,163,000 ) based on the estimated net book value as ofJuly 30, 2019 , payable in two installments ofRMB5,000,000 (approximately$727,000 ) onJuly 30, 2019 andRMB3,000,000 (approximately$436,000 ) onSeptember 30, 2019 . The Buyer assumed all assets and liabilities of Qufu Shengwang including the amount of Qufu Shengwang's due to Qufu Natural Green of approximatelyRMB26,000,000 (approximately$3,779,000 ), and Qufu Natural Green shall assist in completing all documents required for the equity transfer after confirming receipt of the first payment. The Company received the first installment ofRMB5,000,000 onJuly 30, 2019 , and received the second installment ofRMB3,000,000 onAugust 20, 2019 . The Buyer settled all liabilities of Qufu Shengwang due to Natural Green by assuming the liabilities on behalf of Qufu Shengren in the amount of approximatelyRMB 26,000,000 (approximately$3,779,070 ) due to another third party. InApril 2020 , management made the decision to increase the operating capital of Qufu Shengren from the originalRMB 19,680,000 (approximately$2,800,000 ) toRMB 183,000,000 (approximately$26,000,000 ), this will allow for the Company to better focus on our Stevia operation and increase investment to our research and production. The increase of capital will come from additional funding ofRMB 92,470,000 (approximately$13,100,000 ) from Qufu Natural Green, andRMB 70,850,000 (approximately$10,000,000 ) debt to equity conversion of multiple creditors. OnApril 30, 2020 , seven individual creditors and three suppliers, an individual investor and Qufu Shengren entered into a series of debt transfer and conversion agreements, the individual creditors and suppliers agreed to transfer the full amount of their receivable, including principal and interest due from Qufu Shengren, at full value, to the individual investor. The individual investor then converted the full amount of the debts into equity and transfered a part of that equity toShangdong Yulong Mining Group Co., Ltd. ("Yulong"). The individual investor and Yulong became minority shareholder of Qufu Shengren as ofApril 30, 2020 accounting for 38.4% and 0.3%, respectively.
We believe this addition in capital will greatly benefit our stevia product development, manufacturing, and marketing effort. With the increased capital, we will be able to focus more on our technology advancements, improvement in manufacturing process and increase our production capacity.
The COVID-19 Pandemic
Since early 2020, the epidemic of the novel strain of coronavirus (COVID-19) (the "COVID-19 pandemic") has spread acrossChina and other countries, and has adversely affected businesses and economic activities in the first quarter of 2020 and beyond. The Company followed the restrictive measures implemented inChina , by suspending onsite operation in January, 2020 and having employees work remotely until lateMarch 2020 , when the Company assessed the situation and started to gradually resume normal operation at areas deemed safe while implementing effective health measures. Consequently, the COVID-19 pandemic may adversely affect the Company's business operations, financial condition and operating results for 2020, including but not limited to material negative impact to the Company's total revenues, production capability, ability to conduct marketing and sales, and slower collection of accounts receivables. We are able to maintain certain income from previous existing orders and finished products, however, we anticipates significant economic impact related to COVID-19. Due to the high uncertainty of the evolving situation, the Company has limited visibility on the full impact brought upon by the COVID-19 pandemic and the related financial impact cannot be estimated at this time. We believe the effect of the COVID-19 pandemic will be most significant in our raw material purchasing and our sales. Due to the effect of the global COVID-19 pandemic, we expect the sourcing and availability of stevia raw material will have increased difficulties and costs for fiscal 2021 and 2022. 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 have the same amount of nursery workers as previous years, resulting in a decrease of stevia plants and; relevant safety measures also resulted in an increase of general planting costs. We expect this to cause a shortage of stevia leaves harvest this year and along with the effect of the rain seasons, we expect to see an increase in our cost of raw material. After we resumed production, the effect of the COVID -19 pandemic on transportations has also made it difficult for us to efficiently procure our raw materials. - 15 - -------------------------------------------------------------------------------- We also expect our sales to be significantly impacted by the COVID-19 pandemic. Due to theChinese New Year holiday followed by the COVID-19 pandemic, our sales were paused for the months between January toMarch 2020 . At the resumption of production inMarch 2020 , we experienced difficulty in the delivery of our products. The ability to ship through ground transportation was very limited, if any, across provinces inChina , and air shipments internationally was also very limited, if any; this caused us to be unable to timely deliver our products even if sales were made. InMay 2020 ,China slowly resumed to normal; however, as the global situation worsened, many of our international clients were pausing their operations and no longer making new orders. We expect this low demand and difficulty in transportation situation to remain in fiscal 2021. We are monitoring the global outbreak and spread of COVID-19 and taking steps in an effort to identify and mitigate the adverse impacts on, and risks to, our business (including but not limited to our employees, customers, and other business partners) posed by its spread and the governmental and community reactions thereto. We continue to assess and update our business continuity plans in the context of this pandemic, including taking steps in an effort to help keep our workforces healthy and safe. The spread of COVID-19 has caused us to modify our business practices (including warehouse and production procedures, employee travel, employee work locations in certain cases, and cancellation of physical participation in certain meetings, events and conferences), and we expect to take further actions as may be required or recommended by government authorities or as we determine are in the best interests of our employees, customers and other business partners. We are also working with our suppliers to understand the existing and future negative impacts, and to take actions in an effort to mitigate such impacts. Due to the speed with which the COVID-19 pandemic is developing, the global breadth of its spread and the range of governmental and community reactions thereto, there is uncertainty around its duration and ultimate impact; therefore, any negative impact on our overall financial and operating results (including without limitation our liquidity) cannot be reasonably estimated at this time, but the pandemic could lead to extended disruption of economic activity and the impact on our financial and operating results. Our Performance Our revenues totaled$26.1 million in the fiscal year endedApril 30, 2020 , an increase of 25.1% as compared to the fiscal year endedApril 30, 2019 , but our gross margin increased to 16.9% from 7.6% primarily due to our effort to expand our shares in both domestic and international markets. Our total operating expenses in the fiscal year endedApril 30, 2020 decreased by approximately$712,000 or 12.8% compared to the fiscal year endedApril 30, 2019 primarily due to a decrease of approximately$423,000 or 21.9% in selling expenses, a decrease of approximately$1,192,000 or 45.2% in general and administrative expenses, and offset by an increase of approximately$903,000 or 91.9% in research and development expenses. Our net loss from continuing operations for the fiscal year endedApril 30, 2020 was approximately$1,129,000 , compared to$4,664,000 in the fiscal year endedApril 30, 2019 . While we have broadened our stevia product offerings to include a number of higher quality stevia grades needed in new product formulations we are developing to introduce to theU.S. and European food and beverage industry, the demand for higher grade stevia products has yet to materialize to the degree we had anticipated, and thus our sales volume in higher grade stevia products was lower than expected for the fiscal year endedApril 30, 2020 . The increase of revenue in Stevioside segment is primarily due to an increasing demand from the developing domestic and international market. Stevia has been widely accepted by the food industry and many new stevia manufacturers have entered this industry in the past few years, and recently we introduced a new product line. We are now focusing on new types of stevia products, including tablets, liquid, High A products, enzyme treated products and others. We expect to consistently increase our sales of our new products; however we cannot quantify this increase and its effects on future periods. Our Outlook We believe that there are significant opportunities for worldwide growth in our Stevioside segment, not only in theU.S. and EU markets but also in our domestic market. For the fiscal year endedApril 30, 2020 and beyond, we will continue to focus on our core business of producing and selling stevioside series products. Currently there is a world-wide movement of lowering sugar intake, and more and more consumers are becoming aware of the health benefits associated with reduction of sugar intake. According to research data, 40% of Chinese consumers stated that they "will not mind paying more for food and beverages with more natural ingredients" and 80% of the interview consumers express a goal of "having a healthier diet". We believe 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. - 16 - -------------------------------------------------------------------------------- Some of the recent favorable observations related to the stevia markets includes: - Chinese domestic food and beverages, particularly herbal tea manufacturers and the pharmaceutical industry, have increased the use of steviosides, and new health awareness trends have also
resulted in
some new governing laws supporting the growth of this industry;
- Southeast and
stevia, particularly high grade stevia; - New global product launches mentioning stevia have increased 13% per year on average from 2014 to 2018; and
- Stevia has been growing in popularity in the last 10 years throughout
all the global markets. Meanwhile, we are also facing challenges in competitive pricing and raw materials for the fiscal years endedApril 30, 2020 and 2019, as well as negative impact from the global COVID-19 pandemic. During the fiscal years endedApril 30, 2020 , the market prices of stevioside products continue to be impacted by strong price competition among Chinese manufacturers. With this being a product gaining large market shares inChina , in the recent years we have seen many competitors entering the market. These new competitors use lower pricing as their effort to gain market share as they initially entering the market, thus driving down the average prices for stevia products. We expect the pressure from pricing competition to continue in fiscal 2021. We anticipate the price of stevia leaves, the raw material used to produce our stevioside series products, will also continue to increase in fiscal 2021 since the demand for raw material may increase as the market grows, while the production of the raw material experiences negative impact due to the global pandemic. We intend to make adjustments internally in order to better operate in this market; our goal is to increase sales and develop new client bases through our marketing effort, decrease our production expenses while maintaining the stability and quality of our products, and decrease our overall expenditures. We believe while there are challenges and risks in this market, our high quality high grade product and the formulations developed by our internal research and development team differentiates us from other competitors and our efforts will lead to sustainable growth in the future. RESULTS OF OPERATIONS The following table summarizes our results of operations for the fiscal year endedApril 30, 2020 and 2019. The percentages represent each line item as a percent of revenues: For the Fiscal Year Ended April 30, 2020 Stevioside Corporate and Other Consolidated Revenues$ 25,238,941 100.0 %$ 852,543 100.0 %$ 26,091,484 100.0 % Cost of goods sold 21,275,494 84.3 % 416,933 48.9 % 21,692,427 83.1 % Gross profit 3,963,447 15.7 % 435,610 51.1 % 4,399,057 16.9 % Selling expenses 1,489,928 5.9 % 21,863 2.6 % 1,511,791 5.8 % General and administrative expenses 1,301,402 5.2 % 144,250 16.9 % 1,445,652 5.5 % Research and development expenses 1,884,718 7.5 % - - 1,884,718 7.2 % (Loss) gain from operations (712,601 ) (2.8 )% 269,497 31.6 % (443,104 ) (1.7 )% Other income (expenses) (686,148 ) (2.7 )% - - (686,148 ) (2.6 )% (Loss) gain from continuing operation before income taxes$ (1,398,749 ) (5.5 )%$ 269,497
31.6 %
- 17 - --------------------------------------------------------------------------------
For the Fiscal Year Ended April 30, 2019 Stevioside Corporate and Other Consolidated Revenues$ 18,162,702 100.0 %$ 2,687,743 100.0 %$ 20,850,445 100.0 % Cost of goods sold 17,094,522 94.1 % 2,173,367 80.9 % 19,267,889 92.4 % Gross profit 1,068,180 5.9 % 514,376 19.1 % 1,582,556 7.6 % Selling expenses 1,674,345 9.2 % 260,820 9.7 % 1,935,165 9.3 % General and administrative expenses 1,675,535 9.2 % 961,650 35.8 % 2,637,185 12.6 % Research and development expenses 891,974 4.9 % 89,988 3.3 % 981,962 4.7 %
Loss from operations (3,173,674 ) (17.5 )% (798,082 )
(29.7 )% (3,971,756 ) (19.0 )% Other income (expenses) (692,202 ) (3.8 )% - - (692,202 ) (3.3 )% (Loss) from continuing operation before income taxes$ (3,865,876 ) (21.3 )%$ (798,082 ) (29.7 )%$ (4,663,958 ) (22.4 )% Revenues Total revenues in the fiscal year endedApril 30, 2020 increased by approximately$5,241,000 , or 25.1%, as compared to the fiscal year endedApril 30, 2019 . Within our Stevioside segment, revenues from sales to third parties increased by 23.9% and the sales to the related party increased by 85.9% in the fiscal year endedApril 30, 2020 , as compared to the fiscal year endedApril 30, 2019 , primarily due to an increasing demand from both domestic and overseas markets and the results of our effort to do research and develop sales in diversity products. Since we do not have the authorization to export products fromChina , we outsourced our exporting business to a related party,Qufu Shengwang Import andExport Corporation , which has authorizations to export. In addition, our products including A3-99 and enzyme treated stevia have been well accepted by the market, especially in theU.S. . We sold 761 metric tons and 525 metric tons of stevioside for the fiscal year endedApril 30, 2020 and 2019, respectively. We generated approximately$5,765,000 and$2,249,000 in revenue from producing over 104 metric tons and 62.3 metric tons of the customized orders for restructuring by enzyme based on our Stevioside products which accounted for approximately 23% and 12% of our total revenues of Sativoside segment in the fiscal years endedApril 30, 2020 and 2019, respectively. Our unit sale price fluctuated from month to month in the fiscal year endedApril 30, 2020 , which was mainly affected by the market environment; the average unit sales price of our stevia products has slightly decreased because of our effort to stay ahead of competition and to gain market share for the fiscal year endedApril 30, 2020 , as compared to the fiscal year endedApril 30, 2019 . We are facing challenges in competitive pricing and sourcing of raw materials, and the market prices of stevioside products were impacted by strong price competition among Chinese manufacturers. With the restructuring of our product line, we also continue to increase the sales of our low grade stevia products. Our low grade stevia and A3-97 products generated more than 32% and 26% of total revenue of our Stevioside segment, respectively, while our enzyme treated products generated over$5.8 million in revenues with the gross profit rate of 31.6% and average unit price of$32.4 in the fiscal year endedApril 30, 2020 . Our low grade stevia and A3-97 products generated more than 22% and 27% of total revenue of our Stevioside segment, respectively, while we generated over$2.2 million from enzyme treated products in revenues with the gross profit rate of 21% and the average unit price of$36 in the fiscal year endedApril 30, 2019 . In the fiscal year endedApril 30, 2020 , some of our stevia products, such as A3-80, A3-60 and A3-50, were sold for a loss in order to avoid further losses resulting from spoilage of overstocked inventory.
Cost of Revenues and Gross Margin
Cost of revenues of Stevioside segment in the fiscal year endedApril 30, 2020 increased by approximately$4,181,000 , or 24.5%, while revenues from Stevioside segment increased by approximately$7,076,000 , compared to the fiscal year endedApril 30, 2019 . Gross margin on Stevioside segment for the fiscal year endedApril 30, 2020 was 15.7%, as compared to 5.9% for the fiscal year endedApril 30, 2019 . The increase in gross margins for Stevioside was primarily due to the improvements in efficiency of our production line to offset the higher raw material costs. 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. - 18 - --------------------------------------------------------------------------------
Total Selling Expenses
Our selling expenses for the fiscal year endedApril 30, 2020 decreased by approximately$423,000 , or 21.9% compared to the fiscal year endedApril 30, 2019 . The decrease was primarily due to an approximately$194,000 decrease in advertising expense, a decrease of approximately$109,000 in office expense, a decrease of approximately$19,000 in travel expense, a decrease of approximately$14,000 in meal and entertainment expenses, a decrease of approximately$62,000 in warehousing expenses, a decrease of approximately$24,000 in commission expense, a decrease of approximately$84,000 in shipping and freight, a decrease of approximately$14,000 in salary and wage expenses, and offset by an increase of approximately$18,000 in local sales taxes, an increase of approximately$55,000 in promotion and marketing fees, an increase of approximately$22,000 in selling expense on Metformin products, and an increase of approximately$2,000 in miscellaneous expenses in the fiscal year endedApril 30, 2020 .
Total General and Administrative Expenses
Our general and administrative expenses for the fiscal year endedApril 30, 2020 decreased by$1,192,000 , or 45.2% compared to the fiscal year endedApril 30, 2019 . The decrease was primarily due to a decrease of approximately$716,000 in stock based compensation to consultants, a decrease of approximately$61,000 in depreciation and amortization expenses, a decrease of approximately$159,000 in marketing fees, a decrease of approximately$23,000 in travel expense, a decrease of approximately$65,000 in meals and entertainment, a decrease of approximately$47,000 in office expense, a decrease of approximately$151,000 in bad debt expense, a decrease of approximately$38,000 in salaries and wages, a decrease of approximately$39,000 in auto expense, a decrease of approximately$34,000 in other taxes, and a decrease of approximately$53,000 in miscellaneous expenses, offset by an increase of approximately$66,000 in repair and maintenance fees and an increase of approximately$128,000 in safety production fund expense and fees.
Research and Development Expenses
For the fiscal year endedApril 30, 2020 , our research and development expenses amounted to approximately$1,885,000 as compared to$982,000 for the fiscal year endedApril 30, 2019 . The increase of approximately$903,000 was primarily attributable to the increase in research and development activities related to the development of new product lines of Stevioside products.
Other Expense
For the fiscal year endedApril 30, 2020 , other expense, net of other income, amounted to approximately$686,000 , a decrease of$6,000 as compared to other expense, net of other income, amounted to approximately$692,000 for the fiscal year endedApril 30, 2019 . The decrease of other expense was primarily attributable to a decrease in interest expense - related party in the amount of approximately$28,000 , a decrease in interest expense - third party in the amount of approximately$28,000 due to the less amount of renewal loan principal, and an increase in grant income of approximately$36,000 , offset by a decrease in other income of approximately$87,000 primarily due to an export tax rebate.
Loss from Continuing Operations
As a result of the foregoing, our loss from continuing operations was$1,129,000 , or$(0.01) per share (basic and diluted), for the fiscal year endedApril 30, 2020 , as compared with loss from continuing operations of$4,664,000 , or$(0.02) per share (basic and diluted), for the fiscal year endedApril 30, 2019 , a change of$3,535,000 , or 75.8%.
Loss from Discontinued Operation
Our loss from discontinued operations was$253,000 , or$0.00 per share (basic and diluted), for the fiscal year endedApril 30, 2020 , as compared with loss from discontinued operations of$244,000 , or$(0.00) per share (basic and diluted), for the fiscal year endedApril 30, 2019 , a change of$9,000 or 3.7%. - 19 - --------------------------------------------------------------------------------
The summarized operating result of discontinued operations included in our consolidated statements of operations is as follows:
Fiscal Years Ended April 30, 2020 2019 Revenues$ 733,441 $ 2,730,140 Cost of revenues 572,357 2,269,216 Loss before income taxes (20,016 ) (244,402 ) Income tax expense - - Loss from discontinued operations (20,016 ) (244,402 ) Gain from disposal, net of taxes 61,050 - Loss from sales of subsidiary (294,465 ) -
Total loss from discontinued operations
Net Loss Net loss attributable toSunwin Stevia International, Inc. in the fiscal year endedApril 30, 2020 was approximately$1,383,000 , compared to$4,908,000 in the fiscal year endedApril 30, 2019 . The decrease was primarily due to an increase in higher profit margin and lower operating expenses.
Foreign Currency Translation (Loss) or Gain
The functional currency of our subsidiaries and variable interest entities operating in the PRC is the Chinese Yuan or Renminbi ("RMB"). The financial statements of our subsidiaries are translated toU.S. dollars using period end rates of exchange for assets and liabilities, and average rates of exchange (for the period) for revenues, costs, and expenses. Net gains and losses resulting from foreign exchange translations are included in the Comprehensive income on the consolidated statements of operations. As a result of foreign currency translations, which are a non-cash adjustment, we reported a foreign currency translation gain of$166,000 for the fiscal year endedApril 30, 2020 , as compared to a foreign currency translation loss of$556,000 for the fiscal year endedApril 30, 2019 . This non-cash loss had the effect of increasing our reported comprehensive loss. LIQUIDITY AND CAPITAL RESOURCES
Liquidity is the ability of a company to generate sufficient cash to meet its operational cash requirements.
AtApril 30, 2020 , we had working capital of$3,470,000 , including cash of approximately$1,138,000 , as compared to working capital of approximately$2,411,000 and cash of$294,000 atApril 30, 2019 . The approximate$844,000 increase in our cash atApril 30, 2020 fromApril 30, 2019 is primarily attributable to net cash provided by operating activities of approximately$2,159,000 , net cash used in investing activities of approximately$627,000 , and cash used in financing activities of approximately$638,000 during the fiscal year endedApril 30, 2020 . We may seek to raise capital through additional debt and/or equity financings to fund our operations in the future. Although we have historically raised capital from sales of equity and from bank or individual loans, there is no assurance that we will be able to continue to do so. If we are unable to raise additional capital or secure additional lending in the next 12 months, management expects that we will need to curtail or cease operations. The accompanying consolidated financial statements do not include any adjustments related to the recoverability and or classification of recorded asset amounts and or classification of liabilities that might be necessary should we be unable to continue as a going concern. Accounts receivable, net of allowance for doubtful accounts, including accounts receivable from related parties, increased by approximately$285,000 during the fiscal year endedApril 30, 2020 as a result of the increase in accounts receivable from the related party in amount of approximately$557,000 as ofApril 30, 2020 . The days for sales outstanding in accounts receivable decreased to 20 days as ofApril 30, 2020 , as compared to 24 days onApril 30, 2019 . Accounts receivable, net of allowance for doubtful accounts, excluding accounts receivable from the related parties, decreased by approximately$272,000 during the fiscal year endedApril 30, 2020 . The days for sales outstanding in accounts receivable for third party sales accounted to 15 days as ofApril 30, 2020 , keeping the same as it onApril 30, 2019 . We will reevaluate and categorize accounts receivable for sales and will target to improve our collection effort in accounts receivable for related party sales and accounts receivable for third party sales in the fiscal 2020. - 20 - -------------------------------------------------------------------------------- AtApril 30, 2020 our inventories, net of reserve for obsolescence, totaled approximately$12,874,000 , as compared to$11,992,000 onApril 30, 2019 . The increase is primarily due to our increase in procurements of raw materials in order to meet our anticipated higher sales volume during the fiscal year endedApril 30, 2020 . These inventories have not yet been sold due to the market demands not raising as much as we predicted; however, the current inventory level will prepare us for our anticipated upcoming increase in demands. Our accounts payable and accrued expenses were approximately$8,533,000 atApril 30, 2020 , an increase of approximately$853,000 fromApril 30, 2019 balance of$7,680,000 . The increase was primarily due to the timing of payments for balances related to raw material purchases made in the ordinary course of business. InApril 2020 , management made the decision to increase the operating capital of Qufu Shengren from the originalRMB 19,680,000 (approximately$2,800,000 ) toRMB 183,000,000 (approximately$26,000,000 ), this will allow for the Company to better focus on our Stevia operation and increase investment to our research and production. The increase of capital will come from additional funding ofRMB 92,470,000 (approximately$13,100,000 ) from Qufu Natural Green, andRMB 70,850,000 (approximately$10,000,000 ) debt to equity conversion of multiple creditors. OnApril 30, 2020 , seven individual creditors and three suppliers, an individual investor and Qufu Shengren entered into a series of debt transfer and conversion agreements, the individual creditors and suppliers agreed to transfer the full amount of their receivable, including principal and interest due from Qufu Shengren, at full value, to the individual investor. The individual investor then converted the full amount of the debts into equity and transfered a part of that equity toShangdong Yulong Mining Group Co., Ltd. ("Yulong"). The individual investor and Yulong became minority shareholder of Qufu Shengren as ofApril 30, 2020 accounting for 38.4% and 0.3%, respectively. Due to related parties atApril 30, 2020 and 2019 totaled approximately$5,073,000 and$6,409,000 , respectively. The decrease was primarily due to our decrease in the balance of$1,688,000 advance fromPharmaceutical Corporation during the fiscal year endedApril 30, 2020 . OnApril 30, 2020 , the balance we owed toPharmaceutical Corporation , Qufu Shengwang Import and Export and Mr.Weidong Chai , a management member ofQufu Shengren Pharmaceutical Co., Ltd. , approximately amounted to$3,982,000 ,$907,000 and$184,000 , respectively. OnApril 30, 2019 , the balance we owed toPharmaceutical Corporation , Qufu Shengwang Import and Export, Mr.Weidong Chai approximately amounted to$5,670,000 ,$558,000 and$181,000 , respectively. Cash Flows Analysis
NET CASH FLOW PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Net cash provided by operating activities from continuing operations was approximately$1,944,000 (total of$2,158,000 including provided by discontinued operations of$214,000 ) for the fiscal year endedApril 30, 2020 , primarily due to a decrease of approximately$246,000 in accounts receivable and note receivable from a third party, a decrease of approximately$808,000 in prepaid expenses and other current assets, an increase in accounts payable and accrued expenses of approximately$2,735,000 and an increase of approximately$147,000 in taxes payable, and non-cash working capital primarily included non-cash depreciation expense of$1,219,000 , provision for obsolete inventories of$113,000 and a loss on disposition of property and equipment of$20,000 , offset by an increase of approximately$672,000 in accounts receivable - related party, an increase of approximately$1,542,000 in inventories, and a net loss of approximately$1,383,000 adjusted by loss from discontinued operations of$253,000 . Net cash used in operating activities from continuing operations was approximately$5,889,000 (total of$5,445,000 including provided by discontinued operations of$445,000 ) for the fiscal year endedApril 30, 2019 , primarily due to a net loss of approximately$4,908,000 adjusted by loss from discontinued operations of$244,000 and non-cash working capital primarily included non-cash employees' compensation of$716,000 , depreciation expense and amortization of intangible assets of$1,094,000 , provision for obsolete inventories of$1,000,000 , and offset by a gain on disposition of property and equipment of$23,000 . The decrease in net cash from operating activities was also primarily due to an increase of approximately$148,000 in accounts receivable and note receivable from a third party, an increase of approximately$52,000 in accounts receivable - related party, an increase of approximately$2,164,000 in inventories, an increase of approximately$319,000 in prepaid expenses and other current assets, a decrease in accounts payable and accrued expenses of approximately$1,275,000 and a decrease of approximately$53,000 in taxes payable.
Net cash used in investing activities from continuing operations amounted to$627,000 in the fiscal year endedApril 30, 2020 . We spent$1,775,000 in purchases of property and equipment, offset by the proceeds received from disposal of discontinued operations of approximately$1,143,000 and proceeds received from disposal of equipment of approximately$5,000 in the fiscal year endedApril 30, 2020 , as compared to$2,360,000 in the fiscal year endedApril 30, 2019 . - 21 - -------------------------------------------------------------------------------- Net cash used in investing activities from continuing operations amounted to$2,360,000 in purchases of property and equipment, offset by the proceeds received from disposal of equipment of approximately$3,000 in the fiscal year endedApril 30, 2019 , as compared to$783,000 in the fiscal year endedApril 30, 2018 . Net cash used in investing activities from discontinued operations amounted to$0 and$73,000 in fiscal year endedApril 30, 2020 and 2019, respectively.
Net cash used in financing activities from continuing operations amounted to approximately$638,000 in the fiscal year endedApril 30, 2020 , primarily due to repayment of short-term loans of$515,000 and repayment of related party advances of approximately$9,044,000 , offset by the proceeds from a non-related individual short-term loan of$944,000 and advances received from related parties of approximately$7,977,000 . Net cash used in financing activities from discontinued operations amounted to$0 in fiscal year endedApril 30, 2020 . Net cash provided by financing activities from continuing operations amounted to approximately$9,019,000 in the fiscal year endedApril 30, 2019 , primarily due to proceeds from multiple non-related individual short-term and long-term loans of$5,869,000 and advances received from related parties of approximately$4,564,000 , offset by repayment of short-term loans of$430,000 and repayment of related party advances of approximately$984,000 . Net cash used in financing activities from discontinued operations amounted to$1,003,000 in fiscal year endedApril 30, 2019 .
CASH ALLOCATION BY COUNTRIES
The functional currency of our Chinese subsidiaries is the Chinese RMB. Substantially all of our cash is held in the form of RMB at financial institutions located in the PRC, where there is no equivalent of federal deposit insurance as inthe United States . As a result, cash accounts at financial institutions in the PRC are not insured. We have not experienced any losses in such accounts as ofApril 30, 2020 . In 1996, the Chinese government introduced regulations which relaxed restrictions on the conversion of the RMB; however, restrictions still remain, including but not limited to restrictions on foreign invested entities. Foreign invested entities may only buy, sell or remit foreign currencies after providing valid commercial documents at only those banks authorized to conduct foreign exchanges. Furthermore, the conversion of RMB for capital account items, including direct investments and loans, is subject to PRC government approval. Chinese entities are required to establish and maintain separate foreign exchange accounts for capital account items. We cannot be certain Chinese regulatory authorities will not impose more stringent restrictions on the convertibility of the RMB, especially with respect to foreign exchange transactions. Accordingly, cash on deposit in banks in the PRC is not readily deployable by us for purposes outside of the PRC. Our cash position by geographic area was as follows: Country: April 30, 2020 April 30, 2019 United States$ 83,830 7.4 %$ 88,506 30.1 % China 1,054,090 92.6 % 205,693 69.9 % Total cash and cash equivalents$ 1,137,920 100.00 %$ 294,199
100.00 %
Contractual Obligations and Off-Balance-Sheet Arrangements
Contractual Obligations
We have certain fixed contractual obligations and commitments that include future estimated payments. Changes in our business needs, cancellation provisions, changing interest rates, and other factors may result in actual payments differing from the estimates. We cannot provide certainty regarding the timing and amounts of payments. We have presented below a summary of the most significant assumptions used in our determination of amounts presented in the tables, in order to assist in the review of this information within the context of our consolidated financial position, results of operations, and cash flows. The following tables summarize our contractual obligations as ofApril 30, 2020 (dollars in thousands), and the effect these obligations are expected to have on our liquidity and cash flows in future periods. - 22 - --------------------------------------------------------------------------------
Payments Due by Period Less than Contractual obligations: Total 1 year 1-3 years 3-5 years 5 + years Individual loans 3,378,380 3,378,380 - - - Total$ 3,378,380 3,378,380 - $ - $ -
Off-Balance-Sheet Arrangements
UnderSEC regulations, we are required to disclose our off-balance-sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, such as changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors. An off-balance sheet arrangement means a transaction, agreement or contractual arrangement to which any entity that is not consolidated with us is a party, under which we have: - Any obligation under certain guarantee contracts, - Any retained or contingent interest in assets transferred to an unconsolidated entity or similar arrangement that serves as credit, liquidity or market risk support to that entity for such assets,
- Any obligation under a contract that would be accounted for as a derivative
instrument, except that it is both indexed to our stock and classified in
stockholder's equity in our statement of financial position, and
- Any obligation arising out of a material variable interest held by us in an
unconsolidated entity that provides financing, liquidity, market risk or credit risk support to us, or engages in leasing, hedging or research and development services with us. We do not have any off-balance-sheet arrangements that we are required to disclose pursuant to these regulations. In the ordinary course of business, we enter into operating lease commitments, purchase commitments and other contractual obligations. These transactions are recognized in our financial statements in accordance with accepted accounting principles generally accepted in theU.S. ("U.S. GAAP").
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of financial statements in conformity withU.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. TheSEC has defined a company's critical accounting policies as the ones that are most important to the portrayal of the company's financial condition and results of operations, and which require the company to make its most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. Based on this definition, we have identified the critical accounting policies and judgments addressed below. We also have other key accounting policies, which involve the use of estimates, judgments and assumptions that are significant to understanding our results, which are described in Note 1 to our consolidated financial statements. Although we believe that our estimates, assumptions and judgments are reasonable, they are based upon information presently available. Actual results may differ significantly from these estimates under different assumptions, judgments or conditions.
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