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

OVERVIEW



We sell stevioside, a natural sweetener. Stevioside is a natural zero calorie
sweetener extracted from the leaf of the stevia plants.. Substantially all of
our operations are located in the PRC. We have built an integrated company with
the production and distribution capabilities designed to meet the needs of our
customers.

Our operations were organized in two operating segments related to our product lines:



  -   Stevioside, and
  -   Corporate and other.



Going Concern

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

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

Recent Developments

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

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

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


                                     - 18 -
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Impact of COVID-19 Pandemic on the Company's Operations



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

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

OUR PERFORMANCE



 Our revenues totaled approximately $7,040,000 during the three months ended
July 31, 2020, an increase of 2.2%, as compared with the same period in 2019,
and our gross margin decreased to 2.4% from 16.3%. Our total operating expenses
in the three months ended July 31, 2020 increased by approximately $62,000, or
5.7% compared to the same period in 2019 primarily due to an increase of
approximately $71,000, or 17.6% in general and administrative expense and an
increase of approximately $55,000, or 17.9% in research and development
expenses, offset by a decrease of approximately $64,000, or 17.0% in selling
expense. Our net loss from continuing operations for the three months ended July
31, 2020 was approximately $1,056,000, compared to a net loss from continuing
operations of $130,000 in the same period in fiscal 2020.

Our operating performance for the three months ended July 31, 2020 showed an
increase of 2.2% in sales revenue of from stevia products, including a 3.6%
increase in sales to third parties, and offset by a decrease in sales to related
party customers of approximately 1.8%.

While we have broadened our stevia product offerings to include a number of
higher quality stevia grades needed in new product formulations we are
developing to introduce to the U.S. and European food and beverage industry, the
demand for higher grade stevia products has yet to materialize to the degree we
had anticipated, and we hope that our sales volume in higher grade stevia
products will increase in fiscal 2022 as demand resumes and increases after the
effects of the global pandemic. Stevia has become more widely accepted by the
food industry and many new stevia manufacturers have entered this industry in
the past few years; 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, not only in the U.S. and EU markets but also in our domestic
market. For the fiscal year ended April 30, 2020 and beyond, we will continue to
focus on our core business of producing and selling stevioside series products.

Currently there is a world-wide movement of lowering sugar intake, and more and
more consumers are becoming aware of the health benefits associated with
reduction of sugar intake. According to research data, 40% of Chinese consumers
stated that they "will not mind paying more for food and beverages with more
natural ingredients" and 80% of the interview consumers express a goal of
"having a healthier diet". We believe that, in this search of a more natural and
healthy diet and lifestyle, natural sweeteners such as stevia will become the
mainstream sweetener in the food and beverage markets.
                                     - 19 -
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Some of the recent favorable observations related to the stevia markets in fiscal 2020 include:

- Chinese domestic food and beverages, particularly herbal tea


           manufacturers and the pharmaceutical industry, have increased

the use


           of steviosides, and new health awareness trends have also

resulted in


           some new governing laws supporting the growth of this industry;

- Southeast and South Asia have renewed and increased their interest in


           stevia, particularly high grade stevia;
       -   New global product launches mentioning stevia have increased 13% per
           year on average from 2014 to 2018; and

- Stevia has been growing in popularity in the last 10 years throughout


           all the global markets.



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

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

RESULTS OF OPERATIONS



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

                                    For the Three Months ended July 31, 2020
                                Stevioside                 Corporate and Other                Consolidated
Revenues                $  6,942,286         100.0 %    $    97,392          100.0 %   $  7,039,678         100.0 %
Cost of goods sold         6,820,399          98.2 %         52,101           53.5 %      6,872,500          97.6 %
Gross profit                 121,887           1.8 %         45,291           46.5 %        167,178           2.4 %
Selling expenses             310,915           4.5 %              -              -          310,915           4.4 %
General and
administrative
expenses                     436,311           6.3 %         36,865           37.9 %        473,176           6.7 %
Research and
development expenses         361,438           5.2 %              -              -          361,438           5.1 %
(Loss) income from
operations                  (986,777 )       (14.2 )%         8,426            8.7 %       (978,351 )       (13.9 )%
Other expenses               (77,476 )        (1.1 )%             -              -          (77,476 )        (1.1 )%
(Loss) income from
continuing operations
before income taxes     $ (1,064,253 )       (15.3 )%   $     8,426            8.7 %   $ (1,055,827 )       (15.0 )%





                                   For the Three Months ended July 31, 2019
                               Stevioside                 Corporate and Other               Consolidated
Revenues                $ 6,311,559         100.0 %    $    578,516         100.0 %   $ 6,890,075         100.0 %
Cost of goods sold        5,390,466          85.5 %         378,402          65.4 %     5,768,868          83.7 %
Gross profit                921,093          14.5 %         200,114          34.6 %     1,121,207          16.3 %
Selling expenses            352,384           5.6 %          22,048           3.8 %       374,432           5.4 %
General and
administrative
expenses                    261,211           4.1 %         141,151          24.4 %       402,362           5.8 %
Research and
development expenses        304,903           4.8 %           1,648           0.3 %       306,551           4.4 %
Income from
operations                    2,595           0.1 %          35,267           6.1 %        37,862           0.5 %
Other expenses             (167,666 )        (2.7 )%              -             -        (167,666 )        (2.4 )%
(Loss) income from
continuing operations
before income taxes     $  (165,071 )        (2.6 )%   $     35,267           6.1 %   $  (129,804 )        (1.9 )%



                                     - 20 -

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Revenues



Total revenues in the three months ended July 31, 2020 increased by
approximately 2.2%, as compared to the same period in 2019. Stevioside revenues,
which accounts for 98.6% and 91.6% of our total revenues in the three months
ended July 31, 2020 and 2019, respectively, increased by approximately 10.0%,
while Metformin revenues decreased by approximately $481,000 or 83.2%. The
decrease in our Metformin revenues was the result of our operating lease for the
Metformin production line to a third party. Since July 2019, we no longer
operate in the direct production and sales of Metformin products.

Within our Stevioside segment, revenues from sales to third parties increased by
14.6% and sales to the related party decreased by 1.8% in the three months ended
July 31, 2020, as compared to the same period in 2019, primarily due to an
increasing demand from the domestic market and the results of our effort to
develop sales in the domestic market. We have been trying to develop our
domestic and international market in the past fiscal year. Since we do not have
the authorization to export products from China, we outsourced all of our
exporting business to a related party, Qufu Shengwang Import and Export, which
has authorizations to export. While the adoption rate for stevia in the food and
beverage sector has been slower than expected, we sold 233 metric tons and 180
metric tons of stevioside for the three months ended July 31, 2020 and 2019,
respectively. We generated approximately $1,340,000,000 and $1,306,000 in
revenue from producing over 40 metric tons and 35 metric tons of the customized
orders for restructuring by enzyme based on our Stevioside products.
Restructuring by enzyme based on our Stevioside products accounted for
approximately 18.8% and 20.7% in the three months ended July 31, 2020 and 2019,
respectively, of our total Stevioside segment revenues.

Our unit sale price fluctuated from month to month in the three months ended
July 31, 2020, which was mainly affected by the market environment; the average
unit sale price decreased by approximately 7.5% compared to the same period in
2019. We face challenges due to competitive pricing and difficulties sourcing
raw materials for in the three months ended July 31, 2020, the market prices of
stevioside products were impacted by strong price competition among Chinese
manufacturers. We also anticipate the price of stevia leaves, the raw material
used to produce our stevioside series products, to continue to increase in the
near future. 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 35.7% and 35.6% of total revenue of our
Stevioside segment, respectively.

Cost of Revenues and Gross Margin



Cost of revenues in the three months ended July 31, 2020 increased by 19.1%,
compared to the same period in 2019. Cost of revenues as a percentage of
revenues increased from 83.7% to 97.6% during the three months ended 2020
compared to the same period in 2019. Gross margin in Stevioside segment
decreased from 14.6% to 1.8% for the three months ended by July 31, 2020,
compared the same period in 2019. Our consolidated gross margin for the three
months ended by July 31, 2020 was 2.4%, as compared to 13.3% in the same period
in 2019, which was primarily due to the epidemic of the novel strain of
coronavirus COVID-19 pandemic adversely affected businesses and economic
activities in 2020.

We believe the effect of the COVID-19 pandemic is the most significant in our
raw material purchasing and our sales. Due to the effect of the global COVID-19
pandemic, we expect the sourcing and availability of stevia raw material will
have increased difficulties and costs for fiscal 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 transportation has also made it difficult for us to efficiently procure our
raw materials.

Selling Expenses

For the three months ended July 31, 2020, we had a decrease of approximately
$64,000, or 17.0% in selling expenses, as compared to the same period in 2019.
The decrease was primarily due to the approximately $82,000 decrease in
marketing expense, $25,000 decrease in advertising expenses, $20,000 decrease in
travel expense, $14,000 decrease in salary, $22,000 decrease in selling expense
on Metformin product, $6,000 decrease in shipping and freight, and $12,000
decrease in miscellaneous expense, offset by approximately $117,000 increase in
promotion expense in the three months ended July 31, 2020.

General and Administrative Expenses



Our general and administrative expenses for the three months ended July 31, 2020
increased by approximately $71,000, or 17.6% from the same period in 2019. The
increase was primarily due to an increase of approximately $104,000 in repairs
and maintenance fees, a $35,000 increase in safety production fund, and $16,000
increase in miscellaneous expense, offset by a decrease of approximately $27,000
in depreciation expense due to disposition of property and equipment in last
fiscal year, $28,000 decrease in salary and wage expenses, $19,000 decrease in
service and consulting fee,  and $10,000 decrease in insurance expense.
                                     - 21 -
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Research and Development Expense



For the three months ended July 31, 2020, our research and development expenses
amounted to approximately $361,000, as compared to $307,000 for the same period
in 2019. The increase of $55,000 was primarily due to the increase in spending
for third party technical consulting fees in the three months ended July 31,
2020.

 Other Income (Expenses)

For the three months ended July 31, 2020, other expense, net of other income,
amounted to approximately $77,000, a decrease of $90,000 as compared to the
other expense, net of other income, amounted to approximately $167,000 for the
three months ended July 31, 2019. The decrease of other expenses was primarily
attributable to a decrease of interest expense to third parties and related
parties of $101,000, an increase in other expenses of $3,000, and offset by a
decrease of grant income of $14,000.

Net Loss from Continuing Operations



As a result of the foregoing, our loss from continuing operations was $1,056,000
for the three months ended July 31, 2020, as compared with loss from continuing
operations of $130,000 for the three months ended July 31, 2019, a change of
$926,000, or 713.4%. The increase in net loss was primarily due to decreased
gross profit and  increased operating expenses, offset by decreased other
expenses in the three months ended July 31, 2020, compared to the three months
ended July 31, 2019.

Loss from Discontinued Operations



We did not have discontinued operations incurred in the three months ended July
31, 2020. Our loss from discontinued operations amounted to $20,000 for the
three months ended July 31, 2019, and the Company also recorded a loss from
disposal discontinued operations of approximately $233,000 at July 31, 2019. Our
total loss from discontinued operations amounted to $253,000 or $0.00 per share
(basic and diluted) for the three months ended July 2019.

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



                                             For the Three Months Ended July 31,
                                           2020                     2019

Revenues                                  $     -         $                 733,441
Cost of revenues                                -                           572,357
Gross profit                                    -                           161,084
Operating expenses                              -                           172,142
Other income, net                               -                             8,958
Loss before income taxes                        -                            20,016
Income tax expense                              -                                 -

Loss from discontinued operations               -

20,016


Loss from disposal, net of taxes                -

233,415


Total loss from discontinued operations   $     -         $

253,431

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, 2020 was approximately $663,000, or $(0.00) per
share (basic and diluted), compared to $383,000, or $(0.00) per share (basic and
diluted),  in the three months ended July 31, 2019.

Net Loss Attributable to Noncontrolling Interest



Noncontrolling interest represents the ownership interests an individual
investor and 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 for three
months ended July 31, 2020 by the percentage ownership in Qufu Shengren not
directly attributable to us. For the three months ended July 31, 2020, the
noncontrolling interest attributable to ownership interests in Qufu Shengren not
directly attributable to us was 38.7%. Net loss attributable to noncontrolling
interest amounted to $393,000 for the three months ended July 31, 2020.
                                     - 22 -
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Foreign Currency Translation Gain



The functional currency of our subsidiaries and variable interest entities
operating in the PRC is the Chinese Yuan or Renminbi ("RMB"). The financial
statements of our subsidiaries are translated to U.S. dollars using period end
rates of exchange for assets and liabilities, and average rates of exchange (for
the period) for revenues, costs, and expenses. Net gains and losses resulting
from foreign exchange translations are included in the Comprehensive loss on the
unaudited condensed consolidated statements of operations and comprehensive
loss. As a result of foreign currency translations, which are a non-cash
adjustment, we reported a foreign currency translation gain of $131,000 and
$269,000 for the three months ended July 31, 2020 and 2019, respectively. This
non-cash gain had the effect of reducing our reported comprehensive loss.

                        LIQUIDITY AND CAPITAL RESOURCES

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



At July 31, 2020, we had working capital deficit of approximately $2,612,000,
including cash of approximately $876,000, as compared to working capital of
approximately $3,470,000, including cash of approximately $1,138,000 at April
30, 2020. The approximate $262,000 decrease in our cash at July 31, 2020 from
April 30, 2020 is primarily attributable to net cash used in investing
activities of approximately $138,000 and cash used in financing activities for
repayment loans of approximately $2,880,000, offset by net cash provided by
operating activities of approximately $2,747,000 during the three months  ended
July 31, 2020. The Company's cash balance and revenues generated are not
currently sufficient and cannot be projected to cover operating expenses for the
next twelve months from the date of this report. These factors raise doubt as to
the ability of the Company to continue as a going concern. Management's plans
include attempting to improve its business profitability, its ability to
generate sufficient cash flow from its operations to meet its operating needs on
a timely basis, obtain additional working capital funds through debt and equity
financings, and restructure on-going operations to eliminate inefficiencies to
raise cash balance in order to meet its anticipated cash requirements for the
next twelve months from the date of this report. Management intends to make
every effort to improve its current sales force as 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 capital needs on as needed basis. There
can be no assurance that these plans and arrangements will be successful.

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 2020, including but not limited to
material negative impact to the Company's total revenues, slower collection of
accounts receivables and significant impairment to the Company's equity
investments. Due to the high uncertainty of the evolving situation, the Company
has limited visibility on the full impact brought upon by the COVID-19 pandemic
and the related financial impact cannot be estimated at this time.

                                     - 23 -
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Capital Resources

The following table provides certain selected balance sheets comparisons as of July 31, 2020 and April 30, 2020:



                                     July 31,        April 30,         Increase
                                       2020             2020          (Decrease)           %

Cash and cash equivalents          $    875,632     $  1,137,920     $   (262,288 )         (23.0 )%
Accounts receivable, net              2,109,377        2,713,567         (604,190 )         (22.3 )%
Accounts receivable - related
party                                 1,833,476        3,034,365       (1,200,889 )         (39.6 )%
Inventories, net                     13,203,055       12,874,497          328,558             2.6 %
Prepaid expenses and other
current assets                        1,024,203          693,552          330,651            47.7 %
Total current assets                 19,045,743       20,453,901       (1,408,158 )          (6.9 )%
Property and equipment, net           8,834,544        8,901,548          (67,004 )          (0.8 )%
Total assets                       $ 27,880,287     $ 29,355,449     $ (1,475,162 )          (5.0 )%

Accounts payable and accrued
expenses                           $ 10,816,147     $  8,533,131     $  2,283,016            26.8 %
Short-term loans                      2,739,032        3,378,380         (639,348 )         (18.9 )%
Due to related parties                2,878,273        5,072,451       (2,194,178 )         (43.3 )%
Total current liabilities            16,433,451       16,983,962         (550,511 )          (3.2 )%
Total liabilities                  $ 16,433,451     $ 16,983,962     $   (550,511 )          (3.2 )%

We maintain cash and cash equivalents in China and United States. At July 31, 2020 and April 30, 2020, bank deposits were as follows:



               July 31,       April 30,
Country          2020           2020
United States   $  55,483     $    83,830
China             820,149       1,054,090
Total           $ 875,632     $ 1,137,920



The majority of our cash balances at July 31, 2020 are in the form of RMB stored
in bank account of China. Cash held in banks in the PRC is not insured. The
value of cash on deposit in mainland China of $820,149 as of July 31, 2020 has
been converted based on the exchange rate as of July 31, 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 use outside of
China.

Accounts receivable, net of allowance for doubtful accounts, including accounts
receivable from related parties, decreased by approximately $1,805,000 during
the three months ended July 31, 2020, as a result of the decrease in both
accounts receivable from the third parties and accounts receivable from related
party as of July 31, 2020. The days for sales outstanding in accounts receivable
increased to 63 days as of July 31, 2020, as compared to 20 days as of April 30,
2020. Accounts receivable, net of allowance for doubtful accounts, excluding
accounts receivable from the related parties, decreased by approximately
$604,000 during the three months ended July 31, 2020. The days for sales
outstanding in accounts receivable for third party sales increased to 42 days as
of July 31, 2020, as compared to 15 days as of April 30, 2020. 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 fiscal 2021.

Inventories at July 31, 2020, net of reserve for obsolescence, totaled
approximately $13,203,000, as compared to $12,874,000 as of April 30, 2020. The
increase is primarily due to our increase in procurements of raw materials in
order to meet our anticipated higher sales volume during the fiscal year ended
April 30, 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 price.
                                     - 24 -
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Our accounts payable and accrued expenses were approximately $10,816,000 at July
31, 2020, an increase of approximately $2,283,000 from April 30, 2020. The
increase is primarily due to our increase in procurements of raw material as a
result of the raising sales of such materials during the three months ended July
31, 2020.

Loans payable at July 31, 2020 and April 30, 2020 totaled approximately
$2,739,000 and $3,378,000, respectively. These loans payable consisted of
short-term loans from multiple non-related individuals, which bear annual
interest rates of 4% - 10%. Range of maturity dates of the loans payable was
from September 20, 2020 to April 8, 2021. During the three months ended July 31,
2020, loan amount of approximately $667,000 was repaid in cash.

Due to related parties at July 31, 2020 and April 30, 2020 totaled approximately
$2,878,000 and $5,072,000, respectively. The decrease was a result of our
repayment to related parties more than our borrowing from them during the three
months ended July 31, 2020. As of July 31, 2020, the balance we owed Qufu
Shengren Pharmaceutical Co., Ltd. ("Pharmaceutical Corporation") and Mr. Weidong
Chai, a management member of Pharmaceutical Corporation amounted to
approximately $3,276,0000 and $190,000, respectively. Qufu Shengwang Import
and Export Co., Ltd. owed the Company an amount of approximately $588,000 as of
July 31, 2020. On April 30, 2020, the balance we owed to Pharmaceutical
Corporation, Qufu Shengwang Import and Export and Mr. Weidong Chai amounted to
approximately $3,982,000, $907,000, and $184,000, respectively.

Cash Flows Analysis

NET CASH FLOW PROVIDED BY OPERATING ACTIVITIES:



Net cash provided by operating activities was approximately $2,747,000 for the
three months ended July 31, 2020, primarily due to a decrease of approximately
$596,000 in accounts receivable and note receivable from a third party, a
decrease of approximately $1,217,000 in accounts receivable - related party

and


an  increase in accounts payable and accrued expenses of approximately
$2,229,000, offset by an increase of approximately $189,000 in inventories, an
increase of approximately $290,000 in prepaid expenses and other current assets,
a decrease of approximately $65,000 in taxes payable, and a net loss of
approximately $1,056,000 adjusted by non-cash working capital, depreciation
expense of $304,000.

Net cash provided by operating activities from continuing operations was
approximately $711,000 (total of $713,000 including net cash provided by
discontinued operations of $1,000) for the three months ended July 31, 2019,
primarily due to a net loss of approximately $130,000 adjusted by loss from
discontinued operations of $253,000 and offset by non-cash working capital that
primarily included depreciation expense of $271,000 and a loss on disposition of
property and equipment of $20,000. The increase in net cash from operating
activities was also primarily due to an  increase in accounts payable and
accrued expenses of approximately $2,652,000 and offset by an increase of
approximately $234,000 in accounts receivable and note receivable from a third
party, an increase of approximately $90,000 in accounts receivable - related
party, an increase of approximately $935,000 in inventories, an increase of
approximately $820,000 in prepaid expenses and other current assets and a
decrease of approximately $23,000 in taxes payable.

NET CASH FLOW (USED IN) PROVIDED BY INVESTING ACTIVITIES:



Net cash used in investing activities from operations amounted to approximately
$138,000 during the three months ended July 31, 2020 due to capital expenditures
for property and equipment.

Net cash provided by investing activities from continuing operations amounted to
$67,000 in investment activities, including the proceeds received from disposal
of discontinued subsidiary of approximately $727,000 and proceeds received from
disposal of equipment of $6,000, offset by approximately $665,000 in purchases
of property and equipment in the three months ended July 31, 2019. Net cash used
in investing activities from discontinued operations amounted to $0 in three
months ended July 31, 2019.

NET CASH FLOW USED IN FINANCING ACTIVITIES:



Net cash used in financing activities from operations amounted to approximately
$2,880,000 in the three months ended July 31, 2020, primarily due to repayment
of short term loans in a total amount of approximately $667,000 and repayment of
related party advances of approximately $5,268,000 and offset by advances
received from related parties of approximately $3,055,000.

Net cash used in financing activities from continuing operations amounted to
approximately $283,000 in the three months ended July 31, 2019, primarily due to
repayment of related party advances of approximately $947,000 and offset by
advances received from related parties of approximately $664,000. Net cash used
in financing activities from discontinued operations amounted to $1,000 in in
the three months ended July 31, 2019.
                                     - 25 -
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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.

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