The following discussion and analysis of our consolidated financial condition
and results of operations for the fiscal years ended April 30, 2022 and 2021
should be read in conjunction with the consolidated financial statements and
footnotes, and other information presented elsewhere in this Form 10-K.
OVERVIEW
We sell stevioside and other stevia derived products. Stevioside is a natural
zero calorie sweetener extracted from the leaf of the stevia plants.
Substantially all of our operations are located in the PRC. We have built an
integrated company with the sourcing and production capabilities designed to
meet the needs of our customers.
During the fiscal years ended April 30, 2022 and 2021, our continuing operations
were organized in two operating segments related to our product lines:
- Stevioside; and
- Corporate and other.
Recent Developments
Consequently, the COVID-19 pandemic still adversely affect the Company's
business operations, financial condition and operating results for 2022 and
2023, including but not limited to material negative impact to the Company's
total revenues, production capability, ability to conduct marketing and sales,
and slower collection of accounts receivables. We are able to maintain certain
income from previous existing orders and finished products, however, we believe
the effect of the COVID-19 pandemic will be most significant in our raw material
purchasing and our sales. Due to the effect of the global COVID-19 pandemic, we
expect the sourcing and availability of stevia raw material will have increased
difficulties and costs for fiscal 2022 and 2023.
We are monitoring the global outbreak and spread of COVID-19 and taking steps in
an effort to identify and mitigate the adverse impacts on, and risks to, our
business posed by its spread and the governmental and community reactions
thereto. We continue to assess and update our business continuity plans in the
context of this pandemic, including taking steps in an effort to help keep our
workforces healthy and safe. We are also working with our suppliers to
understand the existing and future negative impacts, and to take actions in an
effort to mitigate such impacts. Due to the speed with which
the COVID-19 pandemic is developing, the global breadth of its spread and the
range of governmental and community reactions thereto, there is uncertainty
around its duration and ultimate impact; therefore, any negative impact on our
overall financial and operating results (including without limitation our
liquidity) cannot be reasonably estimated at this time, but the pandemic could
lead to extended disruption of economic activity and the impact on our financial
and operating results.
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Our Performance
Our revenues totaled $35.3 million in the fiscal year ended April 30, 2022, an
increase of 38.9% as compared to the fiscal year ended April 30, 2021, and our
gross margin increased from (4.5)% to 8.8% primarily due to our revenue
increased. Our total operating expenses in the fiscal year ended April 30, 2022
increased by approximately $3,214,000 or 81.5% compared to the fiscal year ended
April 30, 2021 primarily due to an increase of approximately $518,000 or 37.2%
in selling expenses, an increase of approximately $462,000 or 32.2% in general
and administrative expenses, an increase of approximately $1,644,000 or 146.9%
in research and development expenses, and an extra expense for loss on
disposition of property and equipment of approximately $591,000 in fiscal year
ended April 30, 2022 . Our net loss from operations for the fiscal year ended
April 30, 2022 was approximately $4,594,000, compared to $5,249,000 in the
fiscal year ended April 30, 2021.
While we have broadened our stevia product offerings to include a number of
higher quality stevia grades needed in new product formulations we are
developing to introduce to the U.S. and European food and beverage industry, the
demand for higher grade stevia products has yet to materialize to the degree we
had anticipated, and thus our sales volume in higher grade stevia products was
lower than expected for the fiscal year ended April 30, 2022. The decrease of
revenue in Stevioside segment is primarily due to a decreasing demand from the
developing domestic and international market, and overall negative impact from
the global COVID-19 pandemic.
Our Outlook
We believe that there are significant opportunities for worldwide growth in our
Stevioside segment, not only in the U.S. and EU markets but also in our domestic
market. For the fiscal year ended April 30, 2022 and beyond, we will continue to
focus on our core business of producing and selling stevioside series products.
Currently there is a world-wide movement of lowering sugar intake, and more and
more consumers are becoming aware of the health benefits associated with
reduction of sugar intake. According to research data, 40% of Chinese consumers
stated that they "will not mind paying more for food and beverages with more
natural ingredients" and 80% of the interview consumers express a goal of
"having a healthier diet". We believe in this search of a more natural and
healthy diet and lifestyle, natural sweeteners such as stevia will become the
mainstream sweetener in the food and beverage markets.
Some of the recent favorable observations related to the stevia markets
includes:
- Chinese domestic food and beverages, particularly herbal tea
manufacturers and the pharmaceutical industry, have increased the use
of steviosides, and new health awareness trends have also resulted in
some new governing laws supporting the growth of this industry;
- Southeast and South Asia have renewed and increased their interest in
stevia, particularly high grade stevia;
- New global product launches mentioning stevia have increased 13% per
year on average from 2014 to 2018; and
- Stevia has been growing in popularity in the last 10 years throughout
all the global markets.
Meanwhile, we are also facing challenges in competitive pricing and raw
materials for the fiscal years ended April 30, 2022 and 2021, as well as
negative impact from the global COVID-19 pandemic, which has longer lasting
effects then we previously estimated. During the fiscal years ended April 30,
2022, the market prices of stevioside products continue to be impacted by strong
price competition among Chinese manufacturers. With this being a product gaining
large market shares in China, in the recent years we have seen many competitors
entering the market. These new competitors use lower pricing as their effort to
gain market share as they initially entering the market, thus driving down the
average prices for stevia products. We expect the pressure from pricing
competition to continue in fiscal 2022. We anticipate the price of stevia
leaves, the raw material used to produce our stevioside series products, will
also continue to increase in fiscal 2022 since the demand for raw material may
increase as the market recover, while the production of the raw material
experiences negative impact due to the global pandemic.
We intend to make adjustments internally in order to better operate in this
market; our goal is to increase sales and develop new client bases through our
marketing effort, decrease our production expenses while maintaining the
stability and quality of our products, and decrease our overall expenditures. We
believe while there are challenges and risks in this market, our high quality
high grade product and the formulations developed by our internal research and
development team differentiates us from other competitors and our efforts will
lead to sustainable growth in the future.
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RESULTS OF OPERATIONS
The following table summarizes our results of operations for the fiscal year
ended April 30, 2022 and 2021. The percentages represent each line item as a
percent of revenues:
For the Fiscal Year Ended April 30, 2022
Stevioside Corporate and Other Consolidated
Revenues $34,832,117 100.0% $429,362 100.0% $35,261,479 100.0%
Cost of goods sold 31,956,506 91.7% 200,078 46.6% 32,156,584 91.2%
Gross profit 2,875,611 8.3% 229,284 53.4% 3,104,895 8.8%
Selling expenses 1,909,651 5.5% - - 1,909,651 5.4%
General and
administrative
expenses 1,895,345 5.4% 95 0.0% 1,895,440 5.4%
Research and
development expenses 2,763,854 7.9% - - 2,763,854 7.8%
Loss on disposition of
property and equipment 590,503 1.7% - - 590,503 1.7%
(Loss) gain from
operations (4,283,742) (12.3)% 229,189 53.4% (4,054,553) (11.5)%
Other expenses (539,055) (1.5)% 20 0.0% (539,035) (1.5)%
(Loss) gain from
continuing operation
before income taxes $(4,822,797) (13.8)% $229,209 53.4% $(4,593,588) (13.0)%
For the Fiscal Year Ended April 30, 2021
Stevioside Corporate and Other Consolidated
Revenues $24,970,088 100.0% $408,747 100.0% $25,378,835 100.0%
Cost of goods sold 26,293,331 105.3% 221,228 54.1% 26,514,559 104.5%
Gross profit (1,323,243) (5.3)% 187,519 45.9% (1,135,724) (4.5)%
Selling expenses 1,390,993 5.6% 594 0.1% 1,391,587 5.5%
General and
administrative
expenses 1,398,881 5.6% 35,046 8.6% 1,433,927 5.7%
Research and
development expenses 1,119,574 4.5% - - 1,119,574 4.4%
(Loss) gain from
operations (5,232,691) (21.0)% 151,879 37.2% (5,080,812) (20.0)%
Other expenses (168,463) (0.7)% - - (168,463) (0.7)%
(Loss) gain from
continuing operation
before income taxes $(5,401,154) (21.6)% $151,879 37.2% $(5,249,275) (20.7)%
Revenues
Total revenues in the fiscal year ended April 30, 2022 increased by
approximately $9,883,000, or 38.97%, as compared to the fiscal year ended April
30, 2021, primarily due to an increasing demand from both domestic and overseas
markets as the industries recover from the COVID-19 pandemic. Our products
including A3-99 and enzyme treated stevia have been well accepted by the market,
especially in the U.S.. We sold 1,083 metric tons and 846 metric tons of
stevioside for the fiscal year ended April 30, 2022 and 2021, respectively. We
generated approximately $10,322,000 and $4,884,000 in revenue from producing
over 302 metric tons and 165 metric tons of the customized orders for
restructuring by enzyme based on our Stevioside products which accounted for
approximately 29.5% and 19.4% of our total revenues of Sativoside segment in the
fiscal years ended April 30, 2022 and 2021, respectively.
With the restructuring of our product line, we also continue to increase the
sales of our low grade stevia products. Our low grade stevia and A3-97 products
generated more than 29.9% and 18.6% of total revenue of our Stevioside segment
for the fiscal year ended April 30, 2022, respectively. Our low grade stevia and
A3-97 products generated more than 34.1% and 24.7% of total revenue of our
Stevioside segment, respectively, for the fiscal year ended April 30, 2021.
Our unit sale price fluctuated from month to month in the fiscal year ended
April 30, 2022, which was mainly affected by the market environment; the average
unit sales price of our stevia products has slightly increased for the fiscal
year ended April 30, 2022, as compared to the fiscal year ended April 30, 2021.
We are facing challenges in competitive pricing and sourcing of raw materials,
and the market prices of stevioside products were impacted by strong price
competition among Chinese manufacturers. With the increased sales on our enzyme
treated products in fiscal year ended April 30, 2022, the gross profit rate of
enzyme treated products decreased to 0.2% from 9.5%, but the average unit price
of enzyme treated products increased to $34.2 from $29.7, as compared to the
fiscal year ended April 30, 2021. In the fiscal year ended April 30, 2022, some
of our stevia products, such as A3-99, A3-98, A3-95 and A3-80, were sold for a
loss in order to avoid further losses resulting from spoilage of overstocked
inventory.
-15-
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Cost of Revenues and Gross Margin
Cost of revenues includes the cost of raw materials, labor, depreciation, and
other fixed and variable overhead costs. Cost of revenues of Stevioside segment
in the fiscal year ended April 30, 2022 increased by approximately $5,663,000,
or 21.5%, while revenues from Stevioside segment increased by approximately
$9,862,000, compared to the fiscal year ended April 30, 2021. Gross margin on
Stevioside segment for the fiscal year ended April 30, 2022 was 8.3%, as
compared to (5.3)% for the fiscal year ended April 30, 2021. The increase in
gross margins for Stevioside was primarily due to a reduction of the higher
production costs we experienced during the height of the pandemic and that we
were able to sell more of our overstocked inventories from 2021. Since the
epidemic of the novel strain of coronavirus COVID-19 pandemic adversely affected
businesses and economic activities, resulting in a drastic increase in the cost
of our production, our gross margin was negative in fiscal year 2021.
We believe the effect of the COVID-19 pandemic is the most significant in our
raw material purchasing and our sales. Due to the effect of the global COVID-19
pandemic, we expect the sourcing and availability of stevia raw material will
have increased difficulties and costs for fiscal 2022. As a result of COVID-19
related gathering laws, farmers are not able to have the same amount of nursery
workers as previous years, resulting in a decrease of stevia plants, and
relevant safety measures also resulted in an increase of general planting costs.
We expect this to cause a shortage of stevia leaves harvest this year and along
with the effect of the rain seasons, we expect to see an increase in our cost of
raw material. After we resumed production, the effect of the COVID-19 pandemic
on transportation has also made it difficult for us to efficiently procure our
raw materials.
Total Selling Expenses
Our selling expenses for the fiscal year ended April 30, 2022 increased by
approximately $518,000, or 37.2% compared to the fiscal year ended April 30,
2021. The increase was primarily due to the approximately $178,000 increase in
local sales taxes, $160,000 increase in commission expenses, $200,000 increase
in promotion and marketing expenses, $16,000 increase in shipping and freight
and $40,000 increase in salary, offset by $15,000 decrease in office expenses,
$52,000 decrease in advertising expenses, and $9,000 decrease in miscellaneous
expense in the year ended April 30, 2022.
Total General and Administrative Expenses
Our general and administrative expenses for the fiscal year ended April 30, 2022
increased by $462,000, or 32.2% compared to the fiscal year ended April 30,
2021. The increase was primarily due to an increase of approximately $170,000 in
depreciation and amortization expenses, due to a land use right we purchased in
fiscal year ended April 30, 2022, $232,000 increase in salary and wage expenses,
$57,000 increase in safety production fund, $27,000 increase in repairs and
maintenance fees, $80,000 increase in office expense, $61,000 increase in
service and professional fees, offset by a decrease of $61,000 in marketing
expenses, $29,000 in hospitality expenses, and $75,000 decrease in miscellaneous
expenses.
Research and Development Expenses
For the fiscal year ended April 30, 2022, our research and development expenses
amounted to approximately $2,764,000 as compared to $1,120,000 for the fiscal
year ended April 30, 2021. The increase of approximately $1,644,000 was
primarily attributable to the increase in research and development activities
related to the development of new product lines of Stevioside products.
Loss on Disposition of Property and Equipment
We periodically evaluate our property, plant and equipment to determine whether
any negative change in regulatory and environmental policies, technical
specifications or customer acceptance of our products impair the usefulness and
fair market value of these assets. In connection with this evaluation in fiscal
years ended April 30, 2022 and 2021, we determined that some of our equipment
needed to be replaced or otherwise removed from service. We disposed of assets
and recorded a loss on disposal of approximately $590,503 and $nil in the fiscal
years ended April 30, 2022 and 2021.
Other Expense
For the fiscal year ended April 30, 2022, other expense, net of other income,
amounted to approximately $539,000, an increase of $371,000 as compared to other
expense, net of other income, amounted to approximately $168,000 for the fiscal
year ended April 30, 2021. The increase of other expense was primarily
attributable to an increase in interest expense - third parties in the amount of
approximately $235,000, and an increase in other expense of approximately
148,000 primarily due to an export tax rebate, offset by a decrease in interest
expense - related party in the amount of approximately $10,000 and an increase
in interest income of $2,000.
-16-
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Loss from Operations
As a result of the foregoing, our loss from operations was $4,594,000 for the
fiscal year ended April 30, 2022, as compared with loss from continuing
operations of $5,249,000 for the fiscal year ended April 30, 2021, a change of
$656,000, or 12.5%. The decrease of net loss was primarily due to a higher
revenue with a higher gross profit.
Net Loss Attributable to Noncontrolling Interest
Noncontrolling interest represents the ownership interests an individual
investor and Shangdong Yulong Mining Group Co., Ltd. ("Yulong") hold in Qufu
Shengren. The amount recorded as noncontrolling interest in our unaudited
condensed consolidated statements of loss and comprehensive loss is computed by
multiplying the after-tax loss by 38.7%, the percentage ownership in Qufu
Shengren not directly attributable to us. Net loss attributable to
noncontrolling interest amounted to approximately $1,683,000 and $2,010,000 for
the year ended April 30, 2022 and 2021, respectively.
Net Loss Attributable to Sunwin Stevia International, Inc.
Net loss attributable to Sunwin Stevia International, Inc. in the fiscal year
ended April 30, 2022 was approximately $2,910,000, or $(0.01) per share (basic
and diluted), compared to $3,239,000, or $(0.02) per share (basic and diluted),
in the fiscal year ended April 30, 2021.
Foreign Currency Translation Gain
The functional currency of our subsidiaries and variable interest entities
operating in the PRC is the Chinese Yuan or Renminbi ("RMB"). The financial
statements of our subsidiaries are translated to U.S. dollars using period end
rates of exchange for assets and liabilities, and average rates of exchange (for
the period) for revenues, costs, and expenses. Net gains and losses resulting
from foreign exchange translations are included in the Comprehensive income on
the consolidated statements of operations. As a result of foreign currency
translations, which are a non-cash adjustment, we reported a foreign currency
translation loss of $48,000 for the fiscal year ended April 30, 2022, as
compared to a foreign currency translation gain of $1,006,000 for the fiscal
year ended April 30, 2021. This non-cash loss had the effect of increasing our
reported comprehensive loss.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity is the ability of a company to generate sufficient cash to meet its
operational cash requirements.
The following table provides certain selected balance sheets comparisons as of
April 30, 2022 and 2021:
-
April 30, 2022 April 30, 2021 Increase (Decrease) %
Cash and cash
equivalents $321,193 $1,565,829 $(1,244,636) (79.5)%
Accounts receivable,
net 7,404,669 1,693,801 5,710,868 337.2%
Accounts receivable -
related party - 5,999,791 (5,999,791) (100.0)%
Inventories, net 5,564,044 12,930,461 (7,366,417) (57.0)%
Prepaid expenses and
other current assets 2,765,819 661,882 2,103,937 317.9%
Total current assets 16,055,725 22,851,764 (6,796,039) (29.7)%
Property and
equipment, net 7,485,733 9,217,115 (1,731,382) (18.8)%
Land use rights, net 1,950,204 - 1,950,204 100%
Total assets $25,491,662 $32,068,879 $(6,577,217) (20.5)%
Accounts payable and
accrued expenses 12,215,238 $11,141,408 $1,073,830 9.6%
Short-term loans 4,907,506 2,955,304 1,952,202 66.1%
Due to related
parties 4,882,162 9,843,636 (4,961,474) (50.4)%
Total current
liabilities 22,004,906 23,940,348 (1,935,442) (8.1)%
Total liabilities 22,004,906 $23,940,348 $(1,935,442) (8.1)%
-17-
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As of April 30, 2022, we had working deficit of $5,949,000, including cash of
approximately $321,000, as compared to working deficit of approximately
$1,089,000 and cash of $1,566,000 as of April 30, 2021. The approximate
$1,245,000 decrease in our cash as of April 30, 2022 from April 30, 2021 is
primarily attributable to net cash used in operating activities of approximately
$1,885,000, and net cash used in investing activities of approximately
$2,472,000, offset by cash provided by financing activities of approximately
$3,108,000 during the fiscal year ended April 30, 2022. We may seek to raise
capital through additional debt and/or equity financings to fund our operations
in the future. Although we have historically raised capital from sales of equity
and from bank or individual loans, there is no assurance that we will be able to
continue to do so. If we are unable to raise additional capital or secure
additional lending in the next 12 months, management expects that we will need
to curtail or cease operations. The accompanying consolidated financial
statements do not include any adjustments related to the recoverability and or
classification of recorded asset amounts and or classification of liabilities
that might be necessary should we be unable to continue as a going concern.
The COVID-19 Pandemic. On January 30, 2020, the World Health Organization
declared the coronavirus outbreak a "Public Health Emergency of International
Concern" and on March 10, 2020, declared it to be a pandemic. Actions taken
around the world to help mitigate the spread of the coronavirus include
restrictions on travel, quarantines in certain areas, and forced closures for
certain types of public places and businesses. The coronavirus and actions taken
to mitigate it have had and are expected to continue to have an adverse impact
on the economies and financial markets of many countries, including the
geographical areas in China in which the Company operates. Consequently, the
COVID-19 pandemic may adversely affect the Company's business operations,
financial condition and operating results for 2021 and 2022, including but not
limited to material negative impact to the Company's total revenues, slower
collection of accounts receivables and significant impairment to the Company's
equity investments. Due to the high uncertainty of the evolving situation, the
Company has limited visibility on the full impact brought upon by the COVID-19
pandemic and the related financial impact cannot be estimated at this time.
Accounts receivable, net of allowance for doubtful accounts, including accounts
receivable from related party, decreased by approximately $289,000 during the
fiscal year ended April 30, 2022. The days for sales outstanding in accounts
receivable increased to 20 days as of April 30, 2022, as compared to 24 days on
April 30, 2021. We will reevaluate and categorize accounts receivable for sales
and will target to improve our collection effort in accounts receivable in the
fiscal 2022.
At April 30, 2022 our inventories, net of impairment for obsolescence, totaled
approximately $5,564,000, as compared to $12,930,000 on April 30, 2021. The
decrease is primarily due to our increase in higher sales volume during the
fiscal year ended April 30, 2022. However, due to the COVID-19 pandemic, there
has been minimal disruption in our supply chain network of certain raw
materials. We are not able to purchase enough leaves of the stevia to meet our
anticipated upcoming increase in demands.
Our accounts payable and accrued expenses were approximately $12,215,000 at
April 30, 2022, an increase of approximately $1,074,000 from April 30, 2021
balance of $11,141,000. The increase was primarily due to the timing of payments
for balances related to raw material purchases made in the ordinary course of
business.
Loans payable as of April 30, 2022 and 2021 totaled approximately 4,908,000 and
$2,955,000, respectively. These loans payable consisted of short-term loans from
multiple non-related individuals, which bear annual interest rates of 4% -
12%. Range of maturity dates of the loan payable was from August 22, 2022 to
April 18, 2023. During the year ended April 30, 2022, the Company borrowed
multiple new loans of approximately $2,629,000 and repaid loans in amount of
approximately $780,000.
Due to related parties at April 30, 2022 and 2021 totaled approximately
$4,882,000 and $9,844,000, respectively. The decrease was primarily due to our
reclassification for Qufu Shengwang Import and Export to the third party during
the fiscal year ended April 30, 2022. On April 30, 2022, the balance we owed to
Pharmaceutical Corporation and Export and Mr. Weidong Chai, a management member
of Qufu Shengren Pharmaceutical Co., Ltd., approximately amounted to $4,646,000
and $236,000, respectively. On April 30, 2021, the balance we owed to
Pharmaceutical Corporation, Qufu Shengwang Import and Export, and Mr. Weidong
Chai approximately amounted to $3,484,000, $6,140,000 and $219,000,
respectively.
Cash Flows Analysis
NET CASH FLOW USED IN OPERATING ACTIVITIES:
Net cash used in operating activities from operations was approximately
$1,885,000 for the fiscal year ended April 30, 2022, primarily due to a net loss
of approximately $4,594,000, an increase of approximately $2,175,000 in prepaid
expenses and other current assets, a decrease of approximately $5,161,000 in
accounts payable and accrued expenses, offset by a decrease of approximately
$151,000 in accounts receivable, a decrease of approximately $6,995,000 in
inventories, an increase of approximately $501,000 in taxes payable, and
non-cash working capital primarily included non-cash depreciation and
amortization expenses of $1,475,000, provision for obsolete inventories of
$331,000 and a loss on disposition of property and equipment of approximately
$591,000.
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Net cash used in operating activities from operations was approximately
$2,204,000 for the fiscal year ended April 30, 2021, primarily due to a net loss
of approximately $5,249,000, an increase of approximately $2,586,000 in accounts
receivable - related party, an increase of approximately $218,000 in
inventories, offset by a decrease of approximately $1,196,000 in accounts
receivable and note receivable from a third party, a decrease of approximately
$95,000 in prepaid expenses and other current assets, an increase in accounts
payable and accrued expenses of approximately $1,890,000, an increase of
approximately $38,000 in taxes payable, and non-cash working capital primarily
included non-cash depreciation expense of $1,340,000, impairment for obsolete
inventories of $1,277,000 and a loss on allowance for doubtful accounts of
$13,000.
NET CASH FLOW USED IN INVESTING ACTIVITIES:
Net cash used in investing activities from operations amounted to approximately
$2,472,000, including $413,000 on purchases of property and equipment and
$2,068,000 on purchase of land use right, offset by proceeds from disposal of
equipment of $9,000 in the fiscal year ended April 30, 2022.
Net cash used in investing activities from continuing operations amounted to
$766,000 on purchases of property and equipment in the fiscal year ended April
30, 2021.
NET CASH FLOW PROVIDED BYFINANCING ACTIVITIES:
Net cash provided by financing activities from operations amounted to
approximately $3,108,000 in the fiscal year ended April 30, 2022, primarily due
to the proceeds from a non-related individual short-term loan of $2,629,000 and
advances received from related parties of approximately $4,851,000, offset by
repayment of short-term loans of $780,000 and repayment of related party
advances of approximately $3,592,000.
Net cash provided by financing activities from operations amounted to
approximately $3,292,000 in the fiscal year ended April 30, 2021, primarily due
to the proceeds from a non-related individual short-term loan of $21,000 and
advances received from related parties of approximately $13,211,000, offset by
repayment of short-term loans of $922,000 and repayment of related party
advances of approximately $9,018,000.
CASH ALLOCATION BY COUNTRIES
The functional currency of our Chinese subsidiaries is the Chinese RMB.
Substantially all of our cash is held in the form of RMB at financial
institutions located in the PRC, where there is no equivalent of federal deposit
insurance as in the United States. As a result, cash accounts at financial
institutions in the PRC are not insured. We have not experienced any losses in
such accounts as of April 30, 2022.
In 1996, the Chinese government introduced regulations which relaxed
restrictions on the conversion of the RMB; however, restrictions still remain,
including but not limited to restrictions on foreign invested entities. Foreign
invested entities may only buy, sell or remit foreign currencies after providing
valid commercial documents at only those banks authorized to conduct foreign
exchanges. Furthermore, the conversion of RMB for capital account items,
including direct investments and loans, is subject to PRC government approval.
Chinese entities are required to establish and maintain separate foreign
exchange accounts for capital account items. We cannot be certain Chinese
regulatory authorities will not impose more stringent restrictions on the
convertibility of the RMB, especially with respect to foreign exchange
transactions. Accordingly, cash on deposit in banks in the PRC is not readily
deployable by us for purposes outside of the PRC. Our cash position by
geographic area was as follows:
Country: April 30, 2022 April 30, 2021
United States $18,033 5.6% $161,860 10.3%
China 303,160 94.4% 1,403,969 89.7%
Total cash and cash equivalents $321,193 100.00% $1,565,829 100.00%
-19-
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Contractual Obligations and Off-Balance-Sheet Arrangements
Contractual Obligations
We have certain fixed contractual obligations and commitments that include
future estimated payments. Changes in our business needs, cancellation
provisions, changing interest rates, and other factors may result in actual
payments differing from the estimates. We cannot provide certainty regarding the
timing and amounts of payments. We have presented below a summary of the most
significant assumptions used in our determination of amounts presented in the
tables, in order to assist in the review of this information within the context
of our consolidated financial position, results of operations, and cash flows.
The following tables summarize our contractual obligations as of April 30, 2022,
and the effect these obligations are expected to have on our liquidity and cash
flows in future periods.
Payments Due by Period
Less than
Contractual obligations: Total 1 year 1-3 years 3-5 years 5 + years
Individual loans 4,907,506 4,907,506 - - -
Total $4,907,506 4,907,506 - $- $-
Off-Balance-Sheet Arrangements
Under SEC regulations, we are required to disclose our off-balance-sheet
arrangements that have or are reasonably likely to have a current or future
effect on our financial condition, such as changes in financial condition,
revenues or expenses, results of operations, liquidity, capital expenditures or
capital resources that are material to investors. An off-balance sheet
arrangement means a transaction, agreement or contractual arrangement to which
any entity that is not consolidated with us is a party, under which we have:
- Any obligation under certain guarantee contracts,
- Any retained or contingent interest in assets transferred to an
unconsolidated entity or similar arrangement that serves as credit,
liquidity or market risk support to that entity for such assets,
- Any obligation under a contract that would be accounted for as a derivative
instrument, except that it is both indexed to our stock and classified in
stockholder's equity in our statement of financial position, and
- Any obligation arising out of a material variable interest held by us in an
unconsolidated entity that provides financing, liquidity, market risk or
credit risk support to us, or engages in leasing, hedging or research and
development services with us.
We do not have any off-balance-sheet arrangements that we are required to
disclose pursuant to these regulations. In the ordinary course of business, we
enter into operating lease commitments, purchase commitments and other
contractual obligations. These transactions are recognized in our financial
statements in accordance with accepted accounting principles generally accepted
in the U.S. ("U.S. GAAP").
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of financial statements in conformity with U.S. GAAP requires
estimates and assumptions that affect the reported amounts of assets and
liabilities, revenues and expenses, and related disclosures of contingent assets
and liabilities in the consolidated financial statements and accompanying notes.
The SEC has defined a company's critical accounting policies as the ones that
are most important to the portrayal of the company's financial condition and
results of operations, and which require the company to make its most difficult
and subjective judgments, often as a result of the need to make estimates of
matters that are inherently uncertain. Based on this definition, we have
identified the critical accounting policies and judgments addressed below. We
also have other key accounting policies, which involve the use of estimates,
judgments and assumptions that are significant to understanding our results,
which are described in Note 1 to our consolidated financial statements. Although
we believe that our estimates, assumptions and judgments are reasonable, they
are based upon information presently available. Actual results may differ
significantly from these estimates under different assumptions, judgments or
conditions.
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