The following discussion and analysis of our consolidated financial condition and results of operations for the fiscal years 2012 and 2011 should be read in conjunction with the consolidated financial statements and footnotes, and other information presented elsewhere in this Form 10-K.

We sell stevioside, a natural sweetener, as well as herbs used in traditional Chinese medicines. 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 2012 and 2011 our operations were organized in two operating segments related to our product lines:

- Stevioside; and
- Chinese medicine.

Recent Developments

On September 30, 2011, Qufu Shengwang repurchased the 40% equity interest in Qufu Shengwang owned by Korea Stevia Company, Limited, for $626,125 in cash. As a result of this purchase, we own 100% of the equity interest in Qufu Shengwang. On July 1, 2012, Qufu Shengwang entered the Cooperation Agreement with Hegeng (Beijing) Organic Farm Technology Co, Ltd. ("Hegeng"), a Chinese manufacturer and distributor of bio-fertilizers and pesticides, to jointly develop the bio-bacterial fertilizers based on the residues from our stevia extraction. Under the Cooperation Agreement, Hegeng provides strain and formula that we apply to the stevia residues to produce bio-bacterial fertilizers in the current facility of Qufu Shengwang. The bio-bacterial fertilizers will be distributed under Qufu Shengwang's name. We plan to start production in fiscal 2013. No additional investment in the facility would be required. Our facility has an estimated annual capacity to produce 10,000 metric tons of bio-bacterial fertilizers.

In furtherance of our efforts to move toward production of organic, all natural and low calorie products and to enhance our international position and market penetration as a Stevia producer along with our distribution partners around the world, we underwent an extensive audit in 2011 by CERES GmbH, an international organization that specializes in inspection and certification in the areas of organic farming and food processing. Upon completion of their audit in November 2011, CERES GmbH notified us that our stevia extracts production process had been certified organic and free of synthetic chemical inputs and uses clean and sanitized procedures that avoid chemical contamination under standards established by the USDA National Organic Program and European Commission (EC) 834/2007 and EC 889/2008.

In April 2012, Qufu Shengren started the construction of a new stevia extraction line in the same location of its current stevioside manufacturing facility. This line facility will apply a new stevia extraction technology to produce both high and low grade stevioside. The target annual production capacity of this line facility is estimated at 500 metric tons including 300 metric tons of high purity rebaudioside A products and 200 metric tons of low purity rebaudioside A products. We expect that the total cost of this new line will be approximately $4.7 million which will be funded from generated revenues and our working capital. We expect this new line facility to start trial production in October 2012.

Stevioside segment

Stevioside and rebaudioside are all natural low calorie sweeteners extracted from the leaves of the stevia rebaudiana plant. Stevioside is a safe and natural alternative to sugar for people needing low sugar or low calorie diets. Stevioside can be used to replace sugar in beverages and foods, including those that require baking or cooking where synthetic chemical based sweetener replacements are not suitable.

Steviosin is a natural low calorie stevioside extract for medicinal use, containing rebaudioside A at 90% with the total steviol glycosides meeting or exceeding 95% on a dry weight basis. Steviosin is used as an alternative sweetener in the pharmaceutical production in China.

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

In an effort to meet the international food safety standards mandated by larger consumer product companies that we expect to target as customers in the future, we have made capital investments to enhance our manufacturing facilities, equipment and documentation systems, changed certain manufacturing processes and carried out additional personnel training in order to meet these standards. These investments allowed us to meet the HACCP System Certification, ISO 9001:2008 Certification and ISO 22000:2005 Food Safety Certification. We obtained these certifications in November, 2010.

Chinese medicine segment

In our Chinese medicine segment, we manufacture and sell approximately 354 different extracts, which can be divided into the following three general categories:

- single traditional Chinese medicine extracts;
- compound traditional Chinese medicine extracts; and
- purified extracts, including active parts and monomer compounds such as soy isoflavone.

We are currently evaluating alternatives as to the potential disposition of the Chinese medicine segment to further streamline our product offering and focus our business on producing and selling high-quality stevia products. The exit strategy contemplated for the Chinese medicine segment has also been influenced by our concerns on the profitability of this segment in the near future. The competition in Chinese medicine market has strengthened over the past few months. In addition, the Chinese government continues to issue more regulations covering the supply of Chinese herbal raw materials and has increased the regulatory manufacturing standards on this segment. These measures are expected to further increase our raw materials and production costs in the coming quarters and beyond. However, this segment is currently operating at full capacity and we do not expect significant growth potential from this segment in the near future.

Our total revenues of $12.9 million in fiscal 2012 increased by 35.0% as compared with fiscal 2011, while our gross margin decreased slightly to 14.8% from 15.2% in fiscal 2011 primarily due to higher cost of raw materials. Our total operating expenses in fiscal 2012 decreased by approximately $0.9 million compared to fiscal 2011 primarily due to a decrease of 24.1% in general and administrative expenses. Our loss from continuing operations for fiscal 2012 was $4.4 million, compared to $5.1 million in fiscal 2011.

Our operating performance for fiscal 2012 was driven by an increase in sales revenue from higher volume of existing lower and higher grades stevia products in our Stevioside segment accompanied by higher sales revenue due to higher volume in our Chinese medicine segment. However, the actual growth of the international market, especially the U.S. market, was behind expectations as many of our manufacturing customers have ended up with higher inventories, and have reduced their purchases of raw materials.

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 fiscal 2012. Furthermore, we continue to encounter strong competition from smaller Chinese vendors who supplied cheaper and lower grade ingredients and stevioside extracts for export to Southeast Asia. As a result, some of our customers reduced purchases of our higher quality grades of stevia in favor of lower quality stevia grades, a trend which began in 2010. The increase in revenues in our Chinese medicine was due primarily to increases in volume accompanied with moderate increases in pricing during fiscal 2012 and, more recently, increased livestock breeding resulting in higher demand for these products. Even though we improved our sales revenues which resulted in a lower net loss in fiscal 2012, we experienced lower gross margin in our Stevioside segment, primarily due to higher raw material costs as compared to fiscal 2011.

We believe that there are significant opportunities for worldwide growth in our Stevioside segment, primarily in the U.S. and EU. For fiscal 2013 and beyond, we will continue to focus on our core business of producing and selling stevioside series products.

Some of the recent favorable observations related to the stevia markets in fiscal 2012 include:

• Chinese domestic food and beverages, particularly herbal tea manufacturers and the pharmaceutical industry, have increased the use of steviosides;
• In November 2011, the European Union authorized the use of steviol glucoside derived from the stevia plant for EU-wide use in certain foodstuffs;
• Southeast and South Asia have renewed and increased their interest in stevia, particularly high grade stevia.
• We were notified in November of 2011 that our stevia extracts production process has been certified organic under standards established by the USDA National Organic Program and European Commission (EC) 834/2007 and EC 889/2008 which will further expand the use of our organic stevia products in the food and beverage industry market in the US and Europe;
• We signed a Domino Sugar in December 2011 for the sale of our stevia products which we hope will further develop our market share;
• The marketing strategy to differentiate ourselves as a producer of higher quality stevia grades and product formulations through these collaboration efforts will lead to sustainable growth in stevia sales volume in the future;
• Started construction of new stevia extraction line in April 2012 for trial production anticipated in October 2012. This new line will add additional 500 metric tons to our current annual production capacity; and
• On July 1, 2012, Qufu Shengwang entered the Cooperation Agreement with Hegeng, a Chinese manufacturer and distributor of bio-fertilizers and pesticides, to jointly develop the bio-bacterial fertilizers based on the residues from our stevia extraction.

Meanwhile, we are also facing challenges in competitive pricing and raw materials for fiscal 2013 and 2014. During fiscal 2012, the market prices of stevioside series were impacted by strong price competition among Chinese manufacturers. We expect the price pressure to continue in fiscal 2013 and into fiscal 2014. We anticipate the price of stevia leaves, the raw material used to produce our stevioside series products, to increase in the coming harvest fall season for 2012.

The following table summarizes our results from continuing operations in fiscal 2012 and fiscal 2011. The percentages represent each line item as a percent of revenues:

                                                    For the Year Ended April 30, 2012
                                                                                                Corporate
                           Chinese Medicine                             Stevioside              and Other             Consolidated
Revenues                  3,102,167        100.0 %                  9,830,011        100.0 %              -       12,932,178        100.0 %
Cost of goods sold        2,823,069         91.0 %                  8,194,121         83.4 %             -        11,017,190         85.2 %
Gross profit                279,098          9.0 %                  1,635,890         16.6 %              -        1,914,988         14.8 %
Loss on disposal of
property and
equipment                         -          0.0 %                   (673,931 )      (6.9) %              -         (673,931 )      (5.2) %
Other operating
expenses                  1,444,197         46.6 %                  2,898,823         29.5 %        719,664        5,062,684         39.2 %
Other income
(expense)                   (48,600 )      (1.6) %                   (542,977 )      (5.5) %         17,490         (574,087 )      (4.4) %
Loss from continuing
operations
before income taxes
and
noncontrolling
interest                 (1,213,699 )     (39.1) %                 (2,479,841 )     (25.2) %       (702,174 )     (4,395,714 )     (34.0) %

                                                    For the Year Ended April 30, 2011
                                                                                                Corporate
                             Chinese Medicine                           Stevioside              and Other             Consolidated
Revenues                  2,274,651            100.0 %              7,307,980        100.0 %              -        9,582,631        100.0 %
Cost of goods sold        2,088,098             91.8 %              6,042,753         82.7 %                       8,130,851         84.8 %
Gross profit                186,553              8.2 %              1,265,227         17.3 %              -        1,451,780         15.2 %
Gain (loss) on
disposal of
property and
equipment                     1,024              0.0 %             (1,181,325 )     (16.2) %              -       (1,180,301 )     (12.3) %
Other operating
expenses                  1,535,652             67.5 %              3,635,718         49.7 %        280,563        5,451,933         56.9 %
Other income
(expense)                     8,661              0.4 %                 34,580          0.5 %         11,425           54,666          0.6 %
Loss from continuing
operations
before income taxes
and
noncontrolling

Revenues

Total revenues in fiscal 2012 increased by $3.3 million, or 35.0%, as compared to fiscal 2011. Stevioside revenues, which comprised 76.0% and 76.3% of our revenues in fiscal 2012 and fiscal 2011, respectively, increased by $2.5 million, or 34.5%, while Chinese medicine revenues increased by 36.4%.

The increase in Stevioside revenues was driven by higher sales revenues of both higher and lower grade Stevioside products, including steviosin, in the domestic market, accompanied by an increase in sales revenue of our higher grades stevia products in the export market. During fiscal 2012, approximately 24.9% of the higher revenues in our Stevioside segment were attributable to greater sales volume in this segment and approximately 8.1% were attributable to an increase in pricing. In addition, the demand growth for our intermediate and higher grade stevia products was slower than anticipated in international markets, especially in the U.S., where the adoption rate for stevia in the food and beverage has been slower than expected, and in the EU, where full approval of stevia did not take place until the fourth quarter of calendar 2011. We produced 266 metric tons of stevioside for fiscal 2012 as compared to 198 metric tons in fiscal 2011.

The increase in Chinese medicine revenues was due primarily to seasonally higher demand for meat and eggs, resulting in increased livestock breeding, which spurs demand for our products. The livestock breeding industry entered the traditional peek production cycle, in the third quarter of fiscal 2012, in preparation for the annual peak consumption during the Chinese holiday season featured by New Year's Day and Chinese Spring Festival during January 2012. During fiscal 2012, approximately 32.8% of the higher revenues in our Chinese medicine segment were attributable to greater sales volume in this segment and approximately 1.1% were attributable to an increase in pricing.

Cost of Revenues and Gross Margin

Cost of revenues for fiscal 2012 increased by $2.9 million, or 35.5%, compared to fiscal 2011. The increase in cost of revenues basically offset the increase in sale volume primarily due to higher raw material costs. Gross margin on Stevioside segment for fiscal 2012 was 16.6%, as compared to 17.3% for fiscal 2011.The lower gross margins for Stevioside was due primarily to higher costs of raw materials and increased competition in both the domestic and international markets which resulted in having to charge lower prices for our products to remain competitive. Gross margin on Chinese Medicine was 9.0% in fiscal 2012, compared 8.2% in fiscal 2011. The higher gross margin for Chinese Medicines was due primarily to higher sales revenue. 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 gross margin in future periods. Our consolidated gross margin for fiscal 2012 was 14.8%, compared to 15.2% in fiscal 2011.

Total Operating Expenses

Our operating expenses for fiscal 2012 decreased by approximately $0.4 million, or 7.1%, after excluding $0.7 million and $1.2 million for fiscal 2012 and 2011, respectively, for losses on disposition of obsolete property and equipment . After exclusion of the loss on disposition of obsolete property and equipment for both periods in 2012 and 2011, the decrease was primarily due to a $1.1 million reduction in general and administrative expenses for office and travel expenses, offset by an increase of $0.5 million in stock compensation expense paid primarily for consulting services and $0.3 million in selling and other consulting expenses.

Included in our operating expenses for fiscal 2012 was $0.8 million of management fees paid to Pharmaceutical Corporation. These fees are for the administrative management of our operations and include compensation payable to certain of our employees. As described elsewhere herein, Pharmaceutical Corporation is controlled by Mr. Zhang, our President and Chairman.

Net Loss

Loss from continuing operations in fiscal 2012 was $4.4 million, compared to $5.1 million in fiscal 2011. The decrease was primarily due to higher revenues offset by higher other expenses which included $0.6 million in assessment fee for manufacturing facilities used in land located within Qufu county in China . Our net loss for fiscal 2012 was $4.3 million, compared to $4.9 million in fiscal 2011.

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

At April 30, 2012, we had working capital of $10.6 million, including cash of $3 million, as compared to working capital of $14.2 million and cash of $10.6 million at April 30, 2011. We believe that our existing cash and cash equivalents and internally generated funds will be sufficient to cover working capital requirements and capital expenditures for the next twelve months. Our commitments for capital expenditures in fiscal 2013 are estimated at $5.2 million, comprised of $0.5 million for last installment on apartment complex unit, which is expected to be sold during fiscal 2013, and $4.7 million estimated for completion of the construction of a new stevia extraction line, as previously discussed. We expect to satisfy these obligations from our working capital.

At April 30, 2012 we reclassified to short term investment $1.9 million invested in the purchase of thirty apartment units complex since management has plans to resell its investment in this apartment complex due to favorable real estate market for similar units in the area in which these units are located.

Accounts receivable, net of allowance for doubtful accounts, and including accounts receivable from related parties, increased by $0.6 million during fiscal 2012. The days' sales outstanding in accounts receivable decreased to 63 days as of April 30, 2012, as compared to 79 days as of April 30, 2011.

At April 30, 2012 inventories, net of reserve for obsolescence, totaled $4.3 million, as compared to $3.3 million as of April 30, 2011. The increase is primarily due to a $0.8 million increase finished goods inventory and a $0.2 million increase in raw materials inventory in our stevioside business as we adjusted our production levels in anticipation of higher overseas demand.

At April 30, 2012, loan receivable amounted to $1.9 million, which represented an increase of $1.4 million from April 30, 2011. In December 2011, we entered into a loan agreement with Shandong Anda Biotech Co., Ltd. ( Shandong Anda), a third party which is a major supplier of stevia leaves to our company. According to the terms of the agreement, we lent Shandong Anda approximately $3.1 million. The loan will be due on December 18, 2012 and bears no interest. During the fourth quarter of fiscal 2012 Shandong Anda returned $1.5 million and the balance of the loan was $1.6 million as of April 30, 2012. During the third quarter of fiscal 2011 we also loaned $0.5 million to a subsidiary of CDI., our corporate management services provider. Payment of $0.2 million was received during the third quarter of 2012. The balance of $0.3 million plus accrued interest has been extended and is due on demand.

Our accounts payable and accrued expenses were $4.1 million at April 30, 2012, an increase of $1.6 from April 30, 2011. The balance was primarily due to the timing of payments for balances related to raw material purchases made in the ordinary course of business.

NET CASH FLOW USED IN/PROVIDED BY OPERATING ACTIVITIES:

Net cash used in operating activities was $3.9 million in fiscal 2012, as compared to net cash provided of $0.5 million in fiscal 2011.The increase resulting from cash used in operating activities was due primarily to $0.6 million increase in prepaid expenses and other current assets related to advance payments for stevia raw materials and deposits for apartment units contracted for future employees under our talent search plan sponsored by our company. We also used $0.9 million of cash to purchase raw materials inventory in stevia to support future sales, and advanced $1.6 million to a stevia supplier in a short-term loan to secure a supply of stevia leaves for our production in anticipation of the expected shortage for this product during the fall of calendar 2012.

NET CASH FLOW USED IN INVESTING ACTIVITIES:

Net cash used in investing activities amounted to $4.0 million in fiscal 2012, as compared to $1.0 million in fiscal 2011. The increase was due primarily to $0.6 million used for the purchase of the remaining 40% equity interest in Qufu Shengwang from our Korean partners, Korea Stevia Company, Limited, $1.9 million invested in purchase of apartment building for resale, and $1.6 million in capital expenditures for property and equipment, offset by $0.2 million in proceeds from repayments of loan receivable during fiscal 2012.

NET CASH FLOW PROVIDED BY FINANCING ACTIVITIES:

Net cash provided by financing activities amounted to $0.1 million in fiscal 2012 primarily due to the management fee owed to Pharmaceutical Corporation. Net cash provided by financing activities amounted to $0.1 million in fiscal 2011 primarily due to proceeds from the exercise of common stock purchase warrants with no comparable amounts for 2012.

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, 2012.

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:

                                April 30, 2012        April 30, 2011
                China             $    2,938,981      $    10,532,233
                United States             19,914               31,180
                Total             $    2,958,895      $    10,563,413

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").

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 . . .