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.

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 $1,625,874, which included a cash payment of $92,541 and 7,666,666 shares of our common stock valued at $1,533,333. 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.

In December 2012, Qufu Shengren completed 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 completion of this high tech expansion of its production facilities brings us total bulk stevia production capacity to 1,300 metric tons including 500 metric tons of steviosin which is a stevioside extract used in the pharmaceutical industry. We expect that the total cost of this new line to be approximately $4.7 million which has been funded from generated revenues and our working capital. We have begun trial production of our new line and anticipate our additional production capabilities will be fully operational in the third quarter of calendar 2013.

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.

Three months ended October 31, 2012 compared to same period in 2011

Our total revenues in the second quarter of fiscal 2013 decreased by 31.3%, from the same period in fiscal 2012, while our gross margin decreased to 16.3% from 19.4% over the same period in fiscal 2012. Our sales revenues, excluding revenues from related party, decreased by 28.5% in the second quarter of fiscal 2013 as compared to the same period in fiscal 2012. Our operating expenses in the second quarter of fiscal 2013 increased by 25.1% from the comparable period in 2012. Our net loss from continuing operations for the second quarter of fiscal 2013 was $1.4 million, as compared to $0.8 million for the same period in fiscal 2012. The decrease in revenues for the third quarter of fiscal 2013 resulted from lower sales volume primarily from our lower grade stevia manufactured by our Natural Green subsidiary and also from Chinese medicine segment.

Six months ended October 31, 2012 compared to same period in 2011

Our total revenues of $5.7 million in the first six months of fiscal 2013 decreased by $0.7 million, or 11.2%, compared with the same period in fiscal 2012, while our gross margin increased to 18.6% from 16.4% over the same period in fiscal 2012. Our sales revenues, excluding revenues from related party, decreased by $1.2 million, or 22.0%, in the first six months of fiscal 2013 as compared to the same period in fiscal 2012. Our operating expenses during the first six months of fiscal 2013 increased by 17.5% compared with the same period in fiscal 2012. Our net loss from continuing operations for the first six months of fiscal 2013 was $2.2 million, compared to $1.8 million for the same period in fiscal 2012.

Our operating performance in the first six months of fiscal 2013 was driven by lower sales volume in our Chinese Medicine segment accompanied by an decrease in sales volume of lower grades stevia products in our Stevioside 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 in collaboration with WILD Flavors and Domino Sugar 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 has remained low for the first six months of fiscal 2013. 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. During the first six months of fiscal 2013, the decrease in sales revenues in our Chinese medicine was due primarily to lower sales volume from seasonality impact during this second quarter of fiscal 2013 (July and August are off periods) and lower pricing from fierce local competition.

                             RESULTS OF OPERATIONS

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

                                                    October 31, 2012
                                                                              Corporate
                        Chinese Medicine                Stevioside            and other             Consolidated

Total revenues     $ 608,828         100.0 %   $ 1,840,856        100.0 %   $         -        2,449,684         100.0 %
Cost of revenues     472,225          77.6 %     1,577,175         85.7 %             -        2,049,400          83.7 %
Gross profit         136,603          22.4 %       263,681         14.3 %             -          400,284          16.3 %

Total operating
expenses              41,199           6.8 %       804,377         43.7 %       919,177        1,764,753          72.0 %
Other
income(expenses)          99           0.0 %         (118)          0.0 %             -              (19 )        0.00 %

Income (loss)
before taxes and
noncontrolling
interest           $  95,503          15.6 %   $  (540,814 )      -29.4 %   $  (919,177 )     (1,364,488 )       -55.7 %




                                                 October 31, 2011
                                                                         Corporate
                    Chinese Medicine              Stevioside             and other            Consolidated
Total revenues   $  852,110       100.0 %   $ 2,715,060       100.0 %   $         -     $ 3,567,170         100.0 %
Cost of
revenues            739,113        86.7 %     2,136,921        78.7 %             -       2,876,034          80.6 %
Gross profit        112,997        13.3 %       578,139        21.3 %             -         691,136          19.4 %

Total
operating
expenses            226,394        26.6 %     1,161,696        42.8 %        22,624       1,410,714          39.6 %
Other income
(expenses)          (56,934 )      -6.7 %        12,526         0.5 %         3,592         (40,816 )        -1.1 %

Income (loss)
before taxes
and
noncontrolling
interest         $ (170,331 )     -20.0 %   $  (571,031 )     -21.0 %   $   (19,032 )   $  (760,394 )       -21.3 %

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

                                                   October 31, 2012
                                                                           Corporate
                      Chinese Medicine               Stevioside            and other              Consolidated

Total revenues   $ 1,364,300       100.0 %   $ 4,333,011       100.0 %   $          -     $  5,697,311         100.0 %
Cost of
revenues           1,045,937        76.7 %     3,593,888        82.9 %              -        4,639,825          81.4 %
Gross profit         318,363        23.3 %       739,123        17.1 %              -        1,057,486          18.6 %

Total
operating
expenses             307,105        22.5 %     1,438,521        33.2 %      1,558,715        3,304,341          58.0 %
Other income             119        0.00 %        10,347         0.2 %          1,718           12,184           0.2 %

Loss before
taxes and
noncontrolling
interest         $    11,377         0.8 %   $  (689,051 )     -15.9 %   $ (1,556,997 )   $ (2,234,671 )       -39.2 %

                                                   October 31, 2011
                                                                          Corporate
                    Chinese Medicine               Stevioside             and other              Consolidated
Total revenues   $ 1,609,425       100.0 %   $ 4,806,191       100.0 %   $          -     $  6,415,616         100.0 %
Cost of
revenues           1,471,105        91.4 %     3,889,519        80.9 %              -        5,360,624          83.6 %
Gross profit         138,320         8.6 %       916,672        19.1 %              -        1,054,992          16.4 %

Total
operating
expenses             468,230        29.1 %     1,886,135        39.2 %        456,777        2,811,142          43.8 %
Other income
(expenses)           (56,016 )      -3.5 %        24,080         0.5 %          7,373          (24,563 )        -0.4 %

Loss before
taxes and
noncontrolling
interest         $  (385,926 )     -24.0 %   $  (945,383 )     -19.7 %   $   (449,404 )   $ (1,780,713 )       -27.8 %

Revenues

Total revenues in the second quarter of fiscal 2013 decreased by $1.1 million, or 31.3%, as compared to the same period in fiscal 2012. Stevioside revenues, which comprised 75.1% and 76.1% of our revenues for the second quarter of fiscal 2013 and fiscal 2012, respectively, decreased by 32.2%, while revenues in our Chinese Medicine segment decreased by 28.6%. Within our Stevioside segment, revenues from sales to third parties decreased by 28.4% in the second quarter of fiscal 2013 from the same period in fiscal 2012, while revenues from sales to related parties decreased by 43.2% from the comparable period in fiscal 2012. We did not have any sales to related parties in our Chinese medicine segment in either period.

During the second quarter of fiscal 2013, the lower sales revenue in our Chinese medicine segment was primarily due to approximately 24.5% of lower sales volume and approximately 35.5% were attributable to a decrease in pricing due to competitive pricing in the marketing of the products for this segment.

The overall decrease in Stevioside revenues was due primarily to lower sales volume of lower grades stevia products in the domestic market to Chinese manufacturers who use our products as raw materials. 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 46.7 metric tons of stevioside for the second quarter of fiscal 2013 as compared to 112.9 metric tons in the same period of fiscal 2012.

Total revenues for the first six months of fiscal 2013 decreased by $0.7 million, or 11.2%, compared to the same period in fiscal 2012.Stevioside revenues, which comprised 76.1% and 74.9 % of our revenues for the first six months of fiscal 2013 and fiscal 2012, respectively, decreased by $0.5 million, or 9.9%, while Chinese Medicine revenues decreased by $0.2 million, or 15.2%.

The decrease in Stevioside revenues was driven by lower sales volume of our lower grade Stevioside products in the domestic market, accompanied by a moderate increase in sales volume of our higher grades stevia products in the export market. 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 also continue to experience significant downward pressure on pricing for some of our products as some of our smaller competitors have been required to liquidate their inventory while under financial distress. We produced 133.7 metric tons of stevioside for the first six months of fiscal 2013 as compared to 135.1 metric tons during the same period in fiscal 2012

Cost of Revenues and Gross Margin

Cost of revenues in the second quarter of fiscal 2013 decreased by $0.8 million, or 28.7%, as compared to the same period in fiscal 2012. Gross margin on Stevioside segment decreased during the second quarter of fiscal 2013 to 14.3%, compared to 21.3% for the same period in fiscal 2012. The Chinese medicine gross margin increased to 22.4% in the second quarter of fiscal 2013, compared to 13.3% for the same period in fiscal 2012, primarily due to 36.1% decrease in cost of revenues. As a result, consolidated gross margin for the second quarter of fiscal 2013 decreased to 16.3%, compared to 19.4% for the same period in fiscal 2012.

Cost of revenues for the first six months of fiscal 2013 decreased by $0.7 million, or 13.5%, compared to the same period in fiscal 2012. Gross margin on Stevioside segment for the first six months of fiscal 2013 was 17.1%, as compared to 19.1% for the same period in fiscal 2012.The lower gross margins for Stevioside was due primarily to lower sales volume in lower grade stevia 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 23.3% in the first six months fiscal 2013, compared to 8.6% for the same period in fiscal 2012. The higher gross margin for Chinese Medicines was due primarily to lower costs during the period. 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 margins in future periods. Our consolidated gross margin for the first six months of fiscal 2013 was 18.6%, compared to 16.4% for the same period in fiscal 2012.

Total Operating Expenses

Total operating expenses for the second quarter of fiscal 2013 increased by 25.1% from the comparable period in 2012. The increase of $1.1 million in general and administrative expenses was primarily due to $0.8 million in stock compensation expense paid to employees. Selling expenses as a percentage of revenues was 7.9% in the second quarter of fiscal 2013 as compared to 7.1% in the second quarter of 2012.

Operating expenses increased by $0.5 million, or 17.5%, in the first six months of fiscal 2013 compared to the same period in fiscal 2012. The increase of $1.1 million in general and administrative expenses was primarily due to $0.8 million in stock compensation expense paid to employees during the second quarter of fiscal 2013.

Net Loss

Loss from continuing operations in the second quarter of fiscal 2013 was $1.4 million, compared to $0.8 million in the same period in fiscal 2012. The increase in net loss was primarily due to lower sales revenues.

Loss from continuing operations in the first six months of fiscal 2013 was $2.2 million, compared to $1.8 million for the same period in fiscal 2012. The increase was due primarily to lower sales revenues and higher general and administrative expense due to stock compensation expense paid to employees.

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 December 2012 we completed the construction of our new stevia extraction line with trial production underway. This new line will add additional 1,300 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 calendar year 2013.

Meanwhile, we are also facing challenges in competitive pricing and raw materials for fiscal 2013 and 2014. During fiscal 2013, 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 2013.

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

At October 31, 2012 and April 30, 2012, we had working capital of $8.0 million and $10.6 million, respectively. Our cash balance at October 31, 2012 was $0.6 million, as compared to cash of $3.0 million at April 30, 2012. 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. 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 2013 fiscal year.

Accounts receivable, net of allowance for doubtful accounts, excluding accounts receivable from related parties, decreased by less than $3,000 during the second quarter of fiscal 2013. The days' sales outstanding in accounts receivable increased to 76 days as of October 31, 2012, as compared to 63 days as of April 30, 2012.

At October 31, 2012, loan receivable amounted to $0.8 million, which represented a decrease of $1.1 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 fiscal 2012 Shandong Anda repaid $1.5 million of the loan, and during the fourth quarter of fiscal 2013 an additional $0.8 million was repaid, and the balance of the loan was $0.8 million as of October 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. At October 31, 2012, the balance of this loan was $42,087, which is comprised of $22,821 in principal and $19,266 in accrued interest. Both the principal and accrued interest are now due on demand.

At October 31, 2012, inventories, net of reserve for obsolescence, amounted to $4.9 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 increased to $4.9 million at October 31, 2012 from $4.1 million at April 30, 2012. This balance, as well as that of V.A.T. taxes payable, is subject to timing of payments for purchases 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 $0.9 million during the first six months of fiscal 2013, as compared to $1.8 million during the same period in fiscal 2012. The decrease resulting from cash used in operating activities was due primarily to a $0.9 million increase in accounts payable and accrued expenses due to purchases during the quarter coupled with an $0.8 million increase in non-cash stock compensation expense paid to employees in the second quarter of 2013.

Net cash used in operating activities was $1.8 million during the first six months of fiscal 2012, as compared to net cash provided by operating activities of $1.4 million during the first six months of fiscal 2011. The decrease resulting from cash used in operating activities was due primarily to $1.3 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 $0.8 million of cash to purchase raw materials inventory in stevia to support future sales under our collaboration agreement with WILD Flavors and Domino Sugar.

NET CASH FLOW USED IN INVESTING ACTIVITIES:

Net cash used in investing activities amounted to $1.4 million during the first six months of fiscal 2013, as compared to $1.0 million for the same period in fiscal 2012. The increase was primarily due to $2.5 million in capital expenditures for property and equipment offset by $1.1 million in loan proceeds.

Net cash used in investing activities amounted to $1.0 million during the second quarter of fiscal 2012, as compared to $0.1 million for the same period 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, and $0.4 million in capital expenditures for property and equipment during fiscal 2012.

. . .