Sunwin International Neutraceuticals, Inc. (www.sunwin.biz), headquartered in Qufu, in the Shandong Province of the People’s Republic of China, is a diversified nutraceutical company engaged in the development, manufacturing and international sale of a variety of health products for humans and animals. The Company’s agricultural processing expertise and convenient access to raw materials in select Chinese farmlands result in high-quality and cost-effective natural products that straddle the healthcare industry and the food & beverage marketplace. Products offered by the Company include a powerful low-calorie natural sweetener called stevioside, numerous herbal extracts rooted in traditional Chinese medicine (TCM), as well as a variety of veterinary medicines and feed supplements. Their innovative nature has in recent years earned state-level recognition and several industry awards for the Company. For the fiscal year ended April 30, 2005, the Company’s revenues rose 11% to $12,114,006, and the net income increased 78% to $829,114, or $.02 per share. In the first nine months of fiscal 2006 ended January 31, 2006, total revenues climbed nearly 21% to $11,065,853, and net income grew 474% to $2,025,104, or $0.04. Last September, the Company completed an upgrade and expansion of most of its manufacturing facilities, which not only increased stevioside production capacity to 300 tons per year, or a double-digit percentage share of the global demand, but also fulfilled GMP requirements mandated since the beginning of 2006 by the central government on producers of Chinese herb and veterinary medicines. Trading on the OTC Bulletin Board under the symbol SUWN, the Company is well positioned to immediately capitalize on the temporary competitive advantage resulting from the GMP certification and benefit from the overall growing health concerns among consumers globally, increasing popularity of organic foods and medicines, and the strong condition of the Chinese economy.

The term nutraceuticals, coined in 1989 by Stephen DeFelice, M.D. from the words “nutrients” and “pharmaceuticals”, describes natural, bioactive chemical compounds that have health promoting, disease preventing or medicinal properties. Popularized over the last couple of decades, nutraceuticals today are commonly found in a wide variety of food and beverage products, dietary supplements and medications, as well as animal feed and veterinary remedies.

In line with contemporary "natural" and "green" trends in a variety of industries, health-conscious consumers recently modified their lifestyles, placing emphasis on organic sourcing and high quality of food products, and increasingly embracing medicinal practices rooted in more than 3,000 years of Chinese culture. Food and beverage producers raced to eliminate harmful preservatives and other substances from foodstuff, fortified growing categories of products like cereal or soft-drinks with essential minerals and nutrients, developed less hazardous versions of favorite treats, as well as specialty victuals for people with various intolerances. These functional foods that provide medical or health benefits, but rarely contain pharmaceutics in a strict sense, quickly proliferated all over the world and the demand for them continues to grow swiftly, especially in developing nations. According to figures published by the China Health Care Association, the Chinese health food products industry generated a total value of $6 billion in 2004. Depending on the research source of older statistics and product categories taken into account, the market has been growing at high double-digit rates since 2000 and, fueled by SARS and avian flu outbreaks, nearly doubled in 2004.

The health food markets are larger and more mature in industrialized nations, but still growing at respectable pace. According to a 2004 report by Paul Yamaguchi & Associates, Inc., Japan has the highest per capita spending on functional foods of $126 per year, compared with $68 in the U.S., $51 in Europe and less than $5 in most other Asian countries. In 2004, the Japanese functional food market grew 12% to over $16 billion. In the U.S., sales reached $18.9 billion in 2004, with annual growth averaging 7.2% over the 1999-2004 period, according to an October 2005 report by Datamonitor. These figures do not include dietary supplement products, which generate nearly equal levels of revenue. In other estimates describing the magnitude of the growing global health consciousness, prepared jointly by the United Nations Conference on Trade and Development (UNCTAD) and the World Trade Organization (WTO), the combined 2005 sales of organic food and beverages in Japan, the U.S. and the European Union were projected at $60 billion.

Also, as an alternative to expensive, time-consuming, high-tech approach predominant in modern medicine, which yields often-toxic synthesized pharmaceutical products geared for acute disease treatment, time-honored herbal and other natural remedies stemming from traditional Chinese medicine gained popularity as reliable means to improve immunity, regulate blood fat content, postpone aging or ease fatigue. Unlike other forms of traditional medicine in the world, which have largely become extinct, TCM continues as a distinct branch of modern medical practice, and within China it is an important part of the public healthcare system. Driven by increasing health awareness, aging population, progressive urbanization, rising income levels and an evident shift to more natural therapeutics, the growth of global demand for herbal products is expected to be explosive and enduring, reaching $5 trillion by 2050, according to a recent World Health Organization (WHO) study. Currently, China contributes 75% of a $60 billion world trade in herbal medicines, which constitutes about 20% of the overall drug market worldwide. Although specific TCM extracts exported from China reached only $305 million in 2004, sales of these formulations have tripled since 1999 and are expected to maintain the fast pace of growth.

Natural Sweetener Stevioside
Stevioside is a 100% natural non-fermentable low-calorie compound extracted from the leaf and stem tissue of the Stevia Rebaudiana Bertoni plant, a green herb of the Aster/Chrysanthemum family, which has been used for centuries to sweeten bitter beverages and to make tea in the plant’s native Paraguay. First extracted by French chemists in 1931 and later commercialized in the 1970s in Japan, pure processed forms of stevioside are 70-400 times sweeter than sucrose, or ordinary table sugar. In addition to their extraordinary potency, the glycosides in stevia are not easily metabolized by humans, adding roughly 300 times less calories than sucrose when passing through the body. Products from stevia are also safe for millions of diabetics and hypoglycemics worldwide, as they do not adversely affect blood glucose levels. Other studies have found that the stevia leaf also contains proteins, fiber, carbohydrates, iron, phosphorus, calcium, potassium, sodium, magnesium, zinc, the flavonoid rutin, Vitamin A, Vitamin C and oil which contains 53 other constituents, making it the quintessential dietary supplement.

Stevia is grown commercially in Brazil, Paraguay, Uruguay, Central American countries, Israel, Thailand and China, where it was introduced in late 1970s. Presently, China is the largest domestic producer of stevia and the primary exporter of stevioside worldwide. Shandong Province, where the Company’s operations are located, is the main stevioside planting and production base. According to the China Stevioside Sugar Association, China supplied more than 1,000 tons of stevioside in 2002, or about 80% of worldwide demand, exporting primarily to Japan and South Korea. Japan is the world’s largest consumer of stevia, which accounts for approximately 40% of the country’s sweetener market. The current price of stevioside ranges from $25,000 to $40,000 per ton. Engaged in continuous production of stevioside since 1998, the Company produces the highest quality of extract using all natural aqueous technology, which involves purified water extraction and air dehydration to achieve pure white crystals. The Company’s extract can be used in all typical applications, including production of tabletop sweeteners, soft drinks, baked goods, tobacco and confectionery goods, pickles, fruit juices, jams and jellies, yogurts, as well as other processed vegetable, fruit and seafood products. Although the Company also purchases and resells finished stevioside product from third party manufacturers, it has passed rigorous quality inspections by Japan's National Health Joint Committee.

The Company sells stevioside on a wholesale basis to domestic food manufacturers and large foreign trade companies, which export the products to Japan, South Korea, as well as other countries in Southeast Asia and to a lesser extent globally. Stevioside is sanctioned by the Ministry of Health of China for use as a food additive and listed in the Sanitation Standard of Food Additives (GB2760). Similarly, stevia products are allowed to be sold as a food ingredient in much of Asia, including Japan, South Korea, Taiwan, Malaysia and Indonesia, parts of South America, such as Brazil and Paraguay, some Eastern European countries and Switzerland, as well as Israel and South Africa. However, some major global markets, including the U.S., the European Union (EU) and Australia, where stevioside is permitted only as a dietary supplement, remain largely inaccessible to producers of stevia-based sweeteners. In the U.S., without a GRAS (Generally Recognized As Safe) designation from the Federal Drug Administration (FDA), stevia use is limited to the confines of the Dietary Supplement and Health Education Act. As such, stevioside products are labeled, marketed and sold as dietary supplements, mostly in form of teas and shakes, but sometimes also as stand-alone extracts, which can effectively serve as sweeteners. The U.S. retail market for stevia products, which are primarily distributed through major health food stores like GNC and Whole Foods Market, although growing quickly, is currently estimated at only $20 million. The Company has recently formed a wholly owned subsidiary, Sunwin Stevia International Corp., and contracted marketing professionals in order to aggressively market its stevia throughout the U.S. and Canada, initially focusing on Florida and California. With superior taste than synthetic sweeteners and no known side effects, stevia products should eventually successfully compete within the $25 billion sweetener market in the U.S., as well as other industrialized markets currently dominated by aspartame-based products such as NutraSweet® or Equal®.

Potential policy changes with respect to stevioside’s safety deliberated by appropriate authorities in some of the most influential western markets could spur tremendous demand growth in future years, effectively multiplying the size of the global stevioside marketplace. The Joint Expert Committee on Food Additives (JECFA) administered by the Food and Agriculture Organization of the United Nations (FAO) and the WHO, which evaluated the toxicity of stevioside in 1998 not reaching any conclusion due to research incompleteness, recommended additional studies regarding the pharmacological effects of stevioside on humans to be completed and provided for another review by 2007. Recently, the pressure to legalize stevioside as a sweetener was increased by the European Stevia Research Centre (ESRC), which conducted research studies commissioned by the Scientific Committee on Food of the European Union at the Lueven Catholic University in Belgium. At its first international symposium in April 2004, ESCR essentially determined that the use of stevioside as a food additive is safe for humans, however it is uncertain if and when the EU changes its current position. However, as countries in Central America and South America generally adhere to the EU’s guidelines, a chain reaction could propel developments in Australia, where an application to admit stevioside as a food additive is currently pending, and possibly revive discussions in the U.S., the most conservative of western markets.

Traditional Chinese Medicine (TCM) Extracts
Based on TCM principles, the Company produces approximately 120 extracts used in a variety of health and veterinary products. TCM formulas usually combine several natural ingredients derived from plants, animals and/or minerals, yielding 400-600 different commonly used types of extracts. The Company’s extracts predominantly utilize widely available formulas published in the National Medicine Dictionary or in the Shandong Province industry standards. Novel formulas developed internally by the Company’s R&D personnel or with assistance of university scientists, must be approved by the Shandong Bureau of Quality and Technical Supervision prior to marketing.

Fundamentally different from Western medicine, which focuses on elimination or alleviation of symptoms, the TCM approach places emphasis on the organism’s inherent capacity for rejuvenation and recovery. Based on a holistic diagnosis and differentiation of syndromes, combating or preventing illness and improving the quality and duration of life are achieved by harmonizing the body, mind and spirit. While western medicine is associated with cutting tissue and acute care, TCM is commited to manipulation and chronic care. Typical TCM therapies, regulated under the administration of State Administration of TCM and Pharmacology, combine herbal medicine, acupuncture and qigong exercises. TCM is also used to treat a variety of chronic conditions problematic for conventional medicine, including the side effects of chemotherapy, withdrawal symptoms in drug addictions or antibiotic-resistant infections.

The Company sources most of its raw materials for TCMs from the country's well-known herbal planting bases in the Shangluo Area of Shanxi Province, nicknamed the Chinese Traditional Medicine Treasury, as well as the Haozhou Area of Anhui Province and the Anguo Area of Hebei Province, which are the two largest herbal markets in China. The extracts are sold on a wholesale basis to domestic TCM manufacturers and large producers of veterinary pharmaceuticals. Among its natural extracts, the Company offers Epimedium, a popular Chinese herb termed as Horny Goat Weed in the western world. Famed as a major component of natural sexual enhancement supplements, Epimedium has been used at least since 400 A.D. to treat fatigue and impotence. By modulating the body’s level of Cortisol, the primary stress hormone, which is known to increase under high-stress conditions, Epimedium helps restore normal metabolism, energy levels and libido. The Company’s current production levels of Epimedium, also used in veterinary products, approach 50 tons annually, which translates to a worldwide market share in excess of 10%. Other extracts offered by the Company come from roots of astragalus and scutellaria, honeysuckle flowers, hawthorne fruits and liquorice, among others.

Veterinary Medicines
The Company offers a comprehensive group of more than 200 veterinary products, including therapeutics based on TCM and western pharmaceuticals, as well as feeds, feed additives and disinfectors. They are sold on a wholesale and retail basis to livestock and poultry farmers, veterinary product outlets and large scale cultivating businesses in 28 Chinese provinces. The Company concentrates on natural herbal remedies and additives, especially for the antivirus function, utilizing its own TCM formula extracts to replace various antibiotics and additives used in Western-style veterinary care. Many TCMs have nourishment and medicament properties that accelerate the metabolism of sucrose and the synthesis of proteins and enzymes, increase the growth of the sex gland, which enhances the development of the muscular system, sterilize the organism, increase the efficiency of antibodies and adjust the overall immunity function.

Given the recent pandemic of the avian influenza, or earlier outbreak of bovine spongiform encephalopathy (BSE or Mad Cow disease), the cultivation of livestock and poultry has been under heavy scrutiny. Over the years, many countries have regulated the use of antibiotics additives through legislation, banning agricultural use of certain antibiotics, such as penicillin, acheomycin, bacteriophage, zinc-bacitracin and tylosin, which were thought to contribute to the development of increased drug-resistance among animals. Although TCMs are generally less potent than synthetic chemical compounds in terms of stimulating growth of livestock, they are increasingly regarded as more desirable, mainly due to the elimination of side-effects and drug-resistance issues.

One of the Company’s core products, a natural plant polysaccharid and flavonoid extraction compound, has no side effects associated with synthetic chemicals and can be successfully substituted for antibiotics and other additives. In addition, it leads to production of safer and healthier foods consumed by humans by resolving the problem of potentially toxic substances remaining in meat, eggs and milk products, reducing the fat and cholesterol content and also improving the taste of livestock and poultry.

The Company also sells a TCM-based product recently applied as a veterinary disinfectant to combat the avian flu virus. The active ingredient, hypericin, which is isolated from yellow flowers of Hypericum Perforatum, an herb known as St. John’s Wort, has been proven phenomenally effective in inhibiting the spread of the H5N1 and H9N2 strands of the avian flu in clinical studies performed at the South China Agricultural University. The local government of Jining City, which services a population of 7.56 million and administers 12 districts, counties and cities, including Qufu, within 4,200 square miles of the southwestern region of the Shandong Province, has designated the Company's disinfectant as a primary response to combat the avian flu virus. Recently, the Shandong Province Government Department of Livestock and Farming has submitted a fast-track application to the Livestock Farming Bureau of China Ministry of Agriculture on behalf of the Company for approval of hypericin as a bird flu treatment. Hypericin has been manufactured by the Company since 1997 and meets national sanitary standards established by the central Chinese government. Although producing only several tons of hypericin per year in the past, the Company has a manufacturing capacity of 100-150 tons annually. The market price of hypericin is approximately $50,000 per ton.

Within the veterinary group, the Company also markets a ClO₂ (chlorine dioxide) food disinfectant, a fourth generation chemical employed in both industrial and commercial applications that substituted earlier serial chlorine disinfectants. ClO₂ passes appropriate health standards mandated by the China National Food Additive Standard Committee and in February 2004 has been sanctioned by the Ministry of Agriculture, which recommended it for bird flu prevention. ClO₂ is also approved as a food additive by the U.S. Food and Drug Administration, as well as corresponding authorities in Japan, Australia, and most European countries. ClO₂ is also regarded as A-grade safe additive by the WHO and is strongly promoted on a global scale. As a stable compound, which does not require activation after production, the Company’s specific ClO₂ product has a long storage life of 18 months after dilution.

Capitalizing on its industry-leading position in China, the Company is focused on expanding and improving production of its core products and intensifying the development of new nutraceutical applications. Higher business volumes are expected to result in improved profitability due to significant economies of scale in utilization of the Company’s established base of 500 distribution centers in China, as well as export relationships with companies in Japan, South Korea, Singapore, Malaysia, the U.S., Canada and Russia. Following the September 2005 upgrade and expansion of its stevioside manufacturing facilities, which enhanced the extraction process to yield higher-purity, more flavorful extract, the Company’s capacity grew by 50%, from 200 to 300 tons per year. According to the 2004 China Stevioside Sugar Association, of which the Company is a perennial member, 300 tons will account for approximately one-sixth of the total annual capacity of the top ten stevioside manufacturers in China. With growing production volume, the Company will also likely be able to exert greater influence in setting favorable national reference unit prices for stevia seeds, leaves and stevioside, which are established by members of National Price Corresponding Team based upon the national average cost of goods sold in a certain period. In addition, although the Company already holds one of the top three positions among veterinary medicine producers in Shandong Province and one of the top 50 in China, according to the China Animal Health Association, it is also currently in the process of expanding and modernizing its manufacturing facilities for animal products.

The Company is continually cooperating with the China Agriculture Institute and other national research facilities to increase the output of stevioside by improving the manufacturing protocol and developing new products. The Company also places strong emphasis on development of novel medicines for livestock and poultry. Since 2000 the Company has successfully developed more than 40 veterinary medicines used to treat infectious bursa of fabricius of poultry, prevent and cure bird influent disease and infection of digestive canal, as well as chronic respiratory failure caused by septicemic and infective bronchitis. Currently, the Company is developing additional nine new medications under development aimed at treating diseases caused by protozoon and seasonal febrile diseases of poultry and bursa of fabricius and epiornitic. Its R&D partners for these and variety of other new products include major national and regional institutions, such as China Science Bureau, Shandong Biological Science Institute, China Medical University, Beijing Medical University, Shandong Medical University, Shandong Medical University, Shandong Agriculture University and Shandong University of Traditional Chinese Medicine.

The Company’s favorable reputation as a high-quality manufacturer is evidenced by its awards and recognition received in recent years, as well as full industry accreditation. In 2002, the Company was recognized by the Chinese central government as one of the 2,000 state-level companies for its innovative industry-pioneering technologies and awarded as one of 2,000 state-level biological product manufacturers in China. In 2003, the Company also received an award of Shandong Top-Ten Innovative, High-Tech Businesses selected by the Province Government of Shandong. The Company is registered and passed inspection by the Ministry of Agriculture of China with respect to the manufacture and distribution of veterinary medicines and the State Food and Drug Administration of China (SFDA) with respect to the manufacturing and distribution of traditional Chinese medicine extracts. It is also licensed by the Shandong Provincial Government to manufacture veterinary medicine and stevioside. Finally, the Company was one of the first to respond to the new Good Manufacturing Practice (GMP) requirements introduced by the Chinese government for manufacturers in the Chinese herb and veterinary medicine industries starting in January 2006. Unlike many of its competitors in either product group, the Company’s upgraded manufacturing facilities passed inspections by the China Ministry of Agriculture and currently meet or surpass the mandated GMP standards.

In addition to organic development of its business and maintenance of its industry-leading position in innovation and quality control, the Company is also focused on sustainable growth through strategic acquisitions. The ongoing acquisition strategy aims to consolidate stevia production in China in order to gain greater control over the supply side, as well as expand the Company’s sales network and product offering to optimize worldwide distribution capabilities.

The Company’s primary competitors in stevia processing are Huaxian Stevia Factory and Julong Stevia Company, which also have an annual output of stevioside in excess of 100 tons, as well as certain processors in Japan, domestic to the world's largest market for stevioside. The Company also competes with representatives of many different industries, which are involved in herb extraction in China, including pharmaceutical and chemical firms, health, dietary supplement and veterinary products manufacturers, biological engineering and agricultural processing companies, among others. Major companies in this group include Anhui Xuancheng Baicao Plants Industry & Trade Co., Ltd., Sichuan Shifangkangyuan Medicine Materials Co., Ltd. and Lanzhou Lantai Bio-Engineering Tech Co., Ltd. Principal competitors in the sale of veterinary medicine products are China Animal Husbandry Industry Co., Ltd., Qilu Animal Health Products Factory Co., Ltd. and Shinjaizhuang Huamu Animal Husbandry Co. Ltd.

The Company’s closest competitor listed in the U.S. is American Oriental Bioengineering, Inc. (AMEX: AOB), a producer of bioengineered health products and traditional Chinese medicinal products. Other comparable companies include Cyanotech Corporation (NASDAQ: CYAN) and Martek Biosciences Corp. (NASDAQ: MATK), both of which utilize microalgal elements for production of nutraceutical products.

Laiwang Zhang, the Company’s President and Chairman, has over two decades of executive experience in natural foods and medicines industry. Prior to joining the Company last year, he served as Chairman of its wholly owned subsidiary, Qufu Natural Green Engineering Company, Limited (QNGE), and still serves as Chairman of Shandong Shengwang Pharmaceutical Corporation, Limited (SSP), a minority shareholder of QNGE. In 1996, Mr. Zhang founded and for nearly a decade served as General Manager of Shandong Shengwang Group Corporation (SSG), a holding company with interests in companies operating in the areas of nutritional products, Chinese herb extracts, package products, animal health products, animal medicine and chemical products. Previously, Mr. Zhang also served as Manager of the Company’s subsidiary, Shengya Veterinary Drugs Factory (SVDF; formerly Shangong Qufu Veterinary Medicine Plant), and as President of Shandong Qufu Amylum Plant. Mr. Zhang graduated from Shandong Technical University in 1984 with a Masters Degree in Engineering.

Dongdong Lin, the Company’s Chief Executive Officer, was employed at SSP immediately prior to joining the Company, holding for two years the position of a Manager of the Technology Information Department. Before working for SSP, Ms. Lin spent eight years at SSG as a supervisor and later as Manager of the Department of Export and Import. She holds a Bachelors Degree in Technology English from Haerbing Industry University and a Masters Degree in Economics from the China Academy of Social Science.

Fanjun Wu, the Chief Financial Officer, served eight years at QNGE, first as Director of Finance Section and subsequently as Chief Financial Officer. Prior to joining QNGE, she was Director of Finance Section for four years at SVDF. Ms. Wu graduated from Shandong Finance and Economics College in 1994 with a Bachelor Degree in Accounting.

Chjengxiang Yan, a member of the Board of Directors, also has over a decade of industry experience serving at the Company’s affiliates in a position of the Director of the Marketing Department. During his tenure, he spent four years at SVDF and SSG each, and most recently at six years at SSP. Mr. Yan graduated from Shandong Agriculture University in 1993 with a Bachelor's Degree in Farming.

Despite disruptions related to the construction at its stevioside plant, the Company reported record revenue and earnings for the fiscal year ended April 30, 2005, primarily due to high sales growth of 325% in TCMs and 33% in the veterinary division. The total annual revenues increased 11.3% with respect to fiscal 2004, reaching $12,114,006, of which stevioside, veterinary products and TCM extracts contributed 46%, 28% and 26% respectively. The Company reported net income of $829,114, or $.02 per share, as compared to net income of $465,310, or $.03 per share last year, a growth of 78% in nominal terms.

In the first nine months of fiscal 2006, ended January 31, 2006, facilities expansion and upgrades still affected the Company’s stevioside sales, which nevertheless declined less than 1%, showing consistent improvement in consecutive quarters and especially once the construction was completed. Successfully offset by growth of 36% in TCMs and 45% in veterinary products, the Company’s total revenues for the first three quarters climbed 21%, from $9,163,681 in comparable period last fiscal year to $11,065,853 this fiscal year. As a result, the TCM and veterinary medicines share of total revenues rose to 30% each, but still remained behind the dominant stevioside portion of 40%. Supported by strong gross profit rates of the TCM and veterinary medicines divisions of 42% and 33% respectively, the Company’s total gross profit for the first nine months of fiscal 2006 reached $3,510,780 or nearly 32% of total revenues, remaining at practically the same level versus revenues as in the previous fiscal year’s comparable period. The Company reported net income of $2,025,104, or $.04 per diluted share, a 474% growth as compared to net income of $353,087, or $.01 per share, in the previous year.

In the most recent quarter ended January 31, 2006, the Company reported total revenues of $3,841,882, representing an accelerated 42% increase over the same period in the previous year, again achieving overall gross profit of 32%. With rapidly growing revenues and stabilized gross profit margins, the Company is reporting significant profits. Net income surged to $871,198, or $0.02 per share, an increase of 350% over the figures reported for the same period in fiscal 2005.

The Company also has a strong balance sheet. At January 31, 2006, the working capital equaled $7,225,260 and the Company had $3,632,324 of cash and equivalents on hand. The Company’s liquidity is continually fortified by exercise of warrants, which during the nine months ended January 31, 2006, resulted in proceeds of $1,916,550 in exchange for issuance of 12,675,000. In February 2006, additional 1,662,500 warrants were exercised for proceeds of $249,375. With no long term debt, the net worth was $10,355,629, or $0.16 per share, which is its highest level ever.

The annual financial results presented above from fiscal year 2005 and first fiscal quarter of 2006 were sourced from amended 10-K/A and 10-Q/A forms filed in response to comments by the Securities and Exchange Commission. According to a non-reliance notice issued by the Company with respect to the original filings, the amendments made were essentially immaterial.

The Company’s manufacturing facilities offer increased capacity and improved productivity, which can be used for intensified expansion into new geographical markets in the coming years, a trend that has been growing at a fast pace since China’s admission to the World Trade Organization (WTO) in December 2001. The successful expansion of its stevioside facilities, as well as the veterinary product plants, which are also essentially completed, is expected to lead to substantial organic sales growth in these divisions, further improving financial results and valuation potential. As imports of stevioside in Japan continue to increase, the Company expects manufacturing 200 tons and reselling 80 tons of stevioside by the end of fiscal 2006, which at average prices of $30,000 – 35,000 would result in $8.4 – 9.8 million in annual revenues for the twelve-month period. By becoming compliant with the current GMP standards required by the Chinese government since January 2006, the Company also improved its competitive position of the TCM and veterinary medicines divisions, as only about a third of Chinese companies in these segments have been able to conform to the strict new rules. For both divisions, the management anticipates to increase its $6.5 million fiscal 2005 revenues to $14 – 20 million in the next 12 to 24 months.

As such, despite recent stock price advancement, the shares appear to present a buying opportunity for speculative long-term investors willing to accept the general high risks associated with emerging growth companies, such as potential dilution, reduced liquidity and price volatility of bulletin board companies in general, certain risks specific to doing business in China, including complex political system, foreign exchange fluctuations and currency restrictions, as well as general business risks, such as intense competition within the nutraceutical industry and volatility of commodity prices. Assuming the Company is able to at least maintain its earnings results of $0.02 per share achieved in the last two quarters, the annualized income of $0.08 yields a P/E ratio of less than 20 at current share price level, still not fully reflecting a high organic growth potential, planned synergistic acquisitions of profitable companies or prospective margin improvements on stevia resulting from aggressive expansion into the North American market, where stevia sold as a health supplement commands retail prices representing a multiple-fold markup from the Company’s wholesale levels. Meanwhile, the Company’s management has already released statements about targeting several acquisition candidates that produce approximately 700 tons of stevioside per year in total, which could potentially increase the annual production to approximately 1,000 tons per year, representing 50% to 60% of worldwide demand. The Company’s publicly announced goal is to achieve $40 to $60 million in annual sales and $8 to $10 million in net income by April 30, 2008 through both internal organic growth and external acquisitions. Assuming the Company is consistently successful in meeting the management’s long term earnings growth targets, SUWN shares could possibly reach a price of $2.40 per share within the next 18 months, representing a P/E multiple of 30 based on current annualized earnings and reflective of the rapid growth expectations.


Alan Stone, Managing Director
Copyright © March 2006. All Rights Reserved.

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