The following discussion should be read in conjunction with the information contained in the preceding unaudited consolidated financial statements and footnotes and our 2012 Annual Report on Form 10-K for fiscal year ended April 30, 2012.

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 production and distribution capabilities designed to meet the needs of our customers.

During fiscal 2013 and 2012 our operations were organized in two operating segments related to our product lines:

- Stevioside, and
- Chinese Medicine.

Recent Developments

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 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.

On August 20, 2012, we entered into a worldwide stevia distribution agreement with WILD Procurement Gmbh, a Swiss corporation ("WILD Procurement") which is an affiliate of WILD Flavors. Under the terms of the agreement, WILD is granted the non exclusive worldwide right as a distributor to market and resell all stevia products manufactured by Sunwin and use of all trademarks. In conjunction with the agreement, we purchased the minority interest in Sunwin USA previously owned by WILD Flavors for an aggregate purchase price of $1,473,000, which included a cash payment of $92,541 and 7,666,666 shares of our common stock valued at $1,380,000. In light of the new distribution agreement, the previous distribution agreement between WILD Flavors and Sunwin USA was terminated.

The acquisition of the minority interest of Sunwin USA in August 2012 will change our accounting beginning in the second quarter of fiscal 2013. Because WILD Flavors had previously maintained certain approval and veto rights and maintained other minority rights to provide for WILD Flavors to effectively participate in significant decisions that would be expected to be made in the ordinary course of business under the terms of these agreements, in accordance with FASB Accounting Standards Codification 810-10-25-5 historically we did not consolidated Sunwin USA's operations and accounted for our interest in Sunwin USA as an equity method investment. Following the purchase of the minority interest Sunwin USA will now be consolidated with our company in our financial statements.

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.

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, including traditional Chinese medicine extracts and purified extracts, which may include active parts and monomer compounds such as soy isofavone.

While this segment is currently operating at full capacity, we do not expect significant growth potential from this segment in the near future. Accordingly, we continue to evaluate alternatives to the potential disposition of the Chinese Medicine segment with the view of further streamlining our product offerings and focusing our business on producing and selling high-quality stevia products. The exit strategy we are contemplating for the Chinese Medicine segment is also been influenced by our concerns regarding the continued stagnation in revenue growth and profitability of this segment in the near future. The competition in Chinese Medicine market has strengthened over the past year. 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.

Our total revenues in the first quarter of fiscal 2013 increased by 14.0%, from the same period in fiscal 2012, while our gross margin increased to 20.2% from 12.8% over the same period in fiscal 2012. One of the drivers for the increase in total revenues was due primarily to related party sales which increased by $0.8 million in the first quarter of fiscal 2013 as compared to the same period in fiscal 2012. Our sales revenues, excluding revenues from related party, decreased by 14% in the first quarter of fiscal 2013 as compared to the same period in fiscal 2012. Our operating expenses in the first quarter of fiscal 2013 increased by 9.9% from the comparable period in 2012. Our net loss from continuing operations for the first quarter of fiscal 2013 was $0.9 million, as compared to $1.0 million for the same period in fiscal 2012.

                             RESULTS OF OPERATIONS

The following table summarizes our results from continuing operations for the
three month periods ended July 31, 2012 and 2011:

                                                    July 31, 2012
                                                                             Corporate
                        Chinese Medicine               Stevioside            and other            Consolidated

Total revenues     $ 755,472        100.0 %   $ 2,492,155        100.0 %   $         -     $ 3,247,627        100.0 %
Cost of revenues     573,712         75.9 %     2,016,713         80.9 %             -       2,590,425         79.8 %
Gross profit         181,760         24.1 %       475,442         19.1 %             -         657,202         20.2 %

Total operating
expenses             265,906         35.2 %       634,144         25.5 %       639,538       1,539,588         47.4 %
Other
income(expenses)          20          0.0 %        10,465          0.4 %         1,718          12,203          0.4 %

Loss before
taxes and
noncontrolling
interest           $ (84,126 )      -11.1 %   $  (148,237 )       -6.0 %   $  (637,820 )   $  (870,183 )      -26.8 %

                                                  July 31, 2011
                                                                       Corporate
                   Chinese Medicine              Stevioside            and other             Consolidated
Total revenues   $  757,315      100.0 %   $ 2,091,131      100.0 %   $          -     $  2,848,446        100.0 %
Cost of
revenues            731,992       96.7 %     1,752,598       83.8 %              -        2,484,590         87.2 %
Gross profit         25,323        3.3 %       338,533       16.2 %              -          363,856         12.8 %

Total
operating
expenses            241,836       31.9 %       724,439       34.6 %        434,153        1,400,428         49.2 %
Other income
(expenses)              918        0.1 %        11,554        0.6 %          3,781           16,253          0.6 %

Loss before
taxes and
noncontrolling
interest         $ (215,595 )    -28.5 %   $  (374,352 )    -17.9 %   $   (430,372 )   $ (1,020,319 )      -35.8 %

Revenues

Total revenues in the first quarter of fiscal 2013 increased by $0.4 million, or 14.0%, as compared to the same period in fiscal 2012. Stevioside revenues, which comprised 76.7% and 73.4% of our revenues for the first quarter of fiscal 2013 and fiscal 2012, respectively, increased by19.2%, while revenues in our Chinese Medicine segment decreased slightly by 0.2%. Within our Stevioside segment, revenues from sales to third parties decreased by 20.8% in the first quarter of fiscal 2013 from the first quarter of fiscal 2012, while revenues from sales to a related party increased by 357% in the comparable period. We did not have any sales to related parties in our Chinese medicine segment in either period.

The overall increase in Stevioside revenues was due primarily to higher sales volume of higher grades stevia products in the domestic market to Chinese manufacturers who use our products as raw materials, accompanied with a moderate increase in sales volume in the international market. During the first quarter fiscal 2013, approximately 7.7% of the higher revenues in our Stevioside segment were attributable to greater sales volume in this segment. In addition, the demand growth for our intermediate and higher grade stevia products continue to be 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 87 metric tons of stevioside for the first quarter of fiscal 2013 as compared to 22 metric tons in the same period of fiscal 2012.

During the first quarter of fiscal 2013, the lower sales revenue in our Chinese medicine segment was attributable to approximately 13.1% of lower sales volume and approximately 1.5% were attributable to a decrease in pricing due to competitive pricing in the marketing of the products for this segment.

Cost of Revenues and Gross Margin

Cost of revenues in the first quarter of fiscal 2013 increased by $0.1 million, or 4.3%, as compared to the same period in fiscal 2012. Gross margin on Stevioside segment increased during the first quarter of fiscal 2013 to 19.1%, compared to 16.2% for the same period in fiscal 2012. The Chinese medicine gross margin increased to 24.1% in the first quarter of fiscal 2013, compared to 3.3% for the same period in fiscal 2012, primarily due to a 21.6% decrease in cost of revenues. As a result, consolidated gross margin for the first quarter of fiscal 2013 increased to 20.2%, compared to 12.8% for the same period in fiscal 2012.

Total Operating Expenses

Total operating expenses for the first quarter of fiscal 2013 increased by 9.9% from the comparable period in 2012. The increase was primarily due to $0.2 million in stock compensation expense paid for consulting services coupled with $0.1 million increase in selling expenses, offset by $0.2 million reduction in general and administrative expenses for planned reductions in office and travel related expenses in the Stevioside segment. Selling expenses as a percentage of revenues was 9.2% in the first quarter of fiscal 2013 as compared to 5.2% in the first quarter of 2012.

Net Loss

Loss from continuing operations in the first quarter of fiscal 2013 was $0.9 million, compared to $1.0 million in the same period in fiscal 2012. The decrease in net loss was primarily due to increased revenues and higher gross margins .

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 trends in the stevia segment include:

?Chinese domestic food and beverages, particularly herbal tea manufacturers and the pharmaceutical industry, have increased the use of steviosides;
?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; ?The marketing strategy to differentiate ourselves as a producer of higher quality stevia grades and product formulations through these collaboration efforts has begun to lead to growth in stevia sales volume;
?In April 2012 we began construction of new stevia extraction line with 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 with production expected to commence in fiscal 2013.

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 calendar year 2012.

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

At July 31, 2012 and April 30, 2012, we had working capital of $9.8 million and $10.6 million, respectively. Our cash balance at July 31, 2012 was $1.4 million, as compared to cash of $3.0 million at April 30, 2012. We believe that our existing cash and cash equivalents and internally generated funds will be sufficient to cover working capital requirements and capital expenditures during the fiscal year. 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.

Accounts receivable, net of allowance for doubtful accounts, excluding accounts receivable from related parties, decreased by less than $0.1 million during the first quarter of fiscal 2013. The days' sales outstanding in accounts receivable increased to 66 days as of July 31, 2012, as compared to 63 days as of April 30, 2012.

At July 31, 2012, loan receivable amounted to $1.9 million, which represented a decrease of $0.1 million from April 30, 2012. In December 2011, we entered into a loan agreement with Shandong Anda Biotech Co., Ltd. ( Shandong Anda), a third party. According to the terms of the agreement, we lent Shandong Anda approximately $3.1 million. The loan is due on December 18, 2012 and bears no interest. During the fourth quarter of fiscal 2012 Shandong Anda repaid $1.5 million of the loan, and the balance of the loan was $1.6 million as of July 31, 2012. During the third quarter of fiscal 2011 we also lent $0.5 million to CDI China, Inc., an affiliate 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 was extended to an on demand note. In May 2012, in connection with the execution of a new consulting agreement with CDI as described elsewhere herein, the payment terms of the loan were further modified to provide that $113,807 was due before August 25, 2012, which has subsequently been received, and the balance of $100,000 is due by December 31, 2012.

At July 31, 2012 inventories, net of reserve for obsolescence, amounted to $4.6 million, as compared to $4.3 million as of April 30, 2012. The increase was primarily due to purchases of raw materials for stevia products in anticipation of future demand.

Our accounts payable and accrued expenses remained relatively constant at approximately $4.1 million at July 31, 2012 and April 30, 2012, respectively. This balance, as well as that of V.A.T. taxes payable, is subject to the timing of payments for balances related to raw material purchases made in the ordinary course of business.

NET CASH FLOW USED IN OPERATING ACTIVITIES:

Net cash used in operating activities was $0.8 million during the first quarter of fiscal 2013, as compared to net cash provided by operating activities of $0.2 million during the same period in fiscal 2012. The increase resulting from cash used in operating activities was due primarily to $0.2 million increase in prepaid expenses and other current assets related to advance payments for stevia raw materials, $0.2 million to purchase raw materials inventory in stevia to support future sales, and $0.4 million in higher accounts receivable to related party due to higher sales during the period.

NET CASH FLOW USED IN INVESTING ACTIVITIES:

Net cash used in investing activities amounted to $0.7 million during the first quarter of fiscal 2013, as compared to less than $8,000 for the same period in fiscal 2012. The increase was primarily due to $0.8 million in capital expenditures for property and equipment offset by proceeds from loan.

NET CASH FLOW PROVIDED BY FINANCING ACTIVITIES:

Net cash used in financing activities amounted to less than $13,000 during the first quarter of fiscal 2013, which represented repayments of advances from related party, with no comparable amount in fiscal 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 July 31, 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 is as follows:

                                July 31, 2012     April 30, 2012
                                   (Unaudited)
                  China          $   1,447,311    $     2,938,981
                  United States          2,143             19,914
                  Total          $   1,449,454    $     2,958,895

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 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 are most important to the portrayal of our financial condition and results of operations, and which require us 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 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.

Estimates

Significant estimates for the periods reported include the allowance for doubtful accounts which is based on an evaluation of our outstanding accounts receivable including the age of amounts due, the financial condition of our specific customers and historical bad debt experience. This evaluation methodology has proven to provide a reasonable estimate of bad debt expense in the past and we intend to continue to employ this approach in our analysis of collectability. However, we are aware that given the current global economic crises, including that of the PRC, meaningful time horizons may change. We intend to enhance our focus on the evaluation of our customers' sustainability and adjust our estimates as may be indicted.

We rely on assumptions such as volatility, forfeiture rate, and expected dividend yield when calculating the fair value of our derivative liability related to common stock purchase warrants. We also rely on assumptions and estimates to calculate our reserve for obsolete inventory and the depreciation of property, plant and equipment. We make assumptions of expiration of our products held as inventory based on historical experience and if applicable, regulatory recommendation. We also group property plant and equipment into similar groups of assets and estimate the useful life of each group of assets.

Further, we rely on certain assumptions and calculations underlying our provision for taxes in the PRC. Assumptions and estimates employed in these areas are material to our reported financial conditions and results of operations. These assumptions and estimates have been materially accurate in the past and are not expected to materially change in the future. Actual results could differ from these estimates.

Revenue recognition

We follow the guidance of ASC 605, "Revenue Recognition," and the Securities and Exchange Commission's Staff Accounting Bulletin ("SAB") No. 104 and SAB Topic 13 for revenue recognition. In general, we record revenue when persuasive evidence of an arrangement exists, services have been rendered or product delivery has occurred, the sales price to the customer is fixed or determinable, and collectability is reasonably assured.

Long-lived assets

We review the carrying value of long-lived assets for impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of long-lived assets is measured by comparison of its carrying amount to the undiscounted cash flows that the asset or asset group is expected to generate. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the property, if any, exceeds its fair value.