Nevada | 0100 | 26-1579105 | ||||||||
(State or other jurisdiction of incorporation) | (Primary Standard Industrial Classification Code Number) | (I.R.S. Employer Identification Number) | ||||||||
91302
(818) 436-6410
Large accelerated filer o | Accelerated filer o | |||||
Non-accelerated filer o (Do not check if a smaller reporting company) | Smaller reporting company | |||||
| Title of Each Class Of Securities to be Registered | | Amount to be Registered(1) | | Proposed Maximum Offering Price per Share (2) | | Proposed Maximum Aggregate Offering Price | | Amount of Registration Fee | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Common stock, par value $0.001 per share | 16,500,000 | $0.25 | $ | 4,125,000 | $ | 562.65 | ||||||||||||
| Calculation of Registration Fee | |||||||||||
Title of Each Class Of Securities to be Registered | Amount to be Registered(1) | Proposed Maximum Offering Price per Share (2) | Proposed Maximum Aggregate Offering Price(2) | Amount of Registration Fee(2) | |||||||
| Common stock, par value $0.001 per share | 29,984,210 | $ | 0.20 | $ | 5,996,842 | $ | 772.80 | ||||
| (1) | This Registration Statement covers the resale by our selling shareholders of up to |
| (2) | Estimated solely for the purpose of calculating the registration fee |
would be unlawful prior to registration or qualification under the securities laws of any such state.
| PRELIMINARY PROSPECTUS | SUBJECT TO COMPLETION | Dated May 30, 2014 |
Yew Bio-Pharm Group, Inc.
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Forward-looking statements may include the words “may,” “could,” “will,” “estimate,” “intend,” “continue,” “believe,” “expect” or “anticipate” or other similar words. These forward-looking statements present our estimates and assumptions only as of the date of this report. Except for our ongoing obligation to disclose material information as required by the federal securities laws, we do not intend, and undertake no obligation, to update any forward-looking statement.
| ● | risks related to our ability to collect amounts owed to us by some of our largest customers; |
| ● | our ability to continue to purchase yew cuttings from our various suppliers at relatively stable prices; |
| ● | our dependence on a small number of customers for our yew raw materials, including a related party; |
| ● | our dependence on a small number of customers for our yew trees for reforestation; |
| ● | our ability to market successfully yew raw materials used in the manufacture of TCM; |
| ● | industry-wide market factors and regulatory and other developments affecting our operations; |
| ● | our ability to sustain revenues should the Chinese economy slow from its current rate of growth; |
| ● | continued preferential tax treatment for the sale of yew trees and potted yew trees; |
| ● | uncertainties about involvement of the Chinese government in business in the PRC generally; and |
| ● | any change in the rate of exchange of the Chinese Renminbi, or RMB, to the U.S. dollar, which could affect currency translations of our results of operations, which are earned in RMB but reported in dollars; |
| ● | industry-wide market factors and regulatory and other developments affecting our operations; |
| ● | a slowdown in the Chinese economy; and |
| risks related to changes in accounting interpretations. |
| · | We have entered into several land use agreements with various parties, which provide the potential for us to grow a large number of yew trees on approximately 1,019,723.5 mu (approximately 170,294 acres) over the next few decades, although we cannot currently estimate the total number of trees we will grow or the total amount of land we will put into production over such period. (Mu is a Chinese measurement of land that is equivalent to approximately 0.167 acres.) | |
| · | We employ proprietary, patented accelerated growth technology, “Northeast Yew Asexual Reproduction Method”, or the Asexual Reproduction Method, to bring yew trees to commercialization decades faster than growing yew trees naturally. | |
| · | Because of our more productive and faster rate of yew cultivation, we have a sufficient supply of raw material to allow us to use the branches and leaves, rather than the bark, of yew trees, to sell to customers for the purpose of making TCM. The yew industry is highly regulated in the PRC because the yew tree is considered an endangered species. By harvesting only branches and leaves of yew trees we respond to both environmental sensitivities and regulations, because cutting the bark of the yew trees will damage the trees and stop it from growing new branches. | |
| · | We have permits from the Heilongjiang provincial government to sell our yew trees and manufacture handicrafts using yew timber. We believe that we are one of only a handful of companies in the PRC with permissions to manufacture handicrafts using yew timber. | |
| · | The TCM raw materials and yew tree segments of our business are tax-free in the PRC. |
| · | A requirement to have only two years of audited financial statements and only two years of related MD&A; |
| · | Exemption from the auditor attestation requirement in the assessment of the emerging growth company’s internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002; |
| · | Reduced disclosure about the emerging growth company’s executive compensation arrangements; and |
| · | No non-binding advisory votes on executive compensation or golden parachute arrangements. |
The Offering
| Shares of common stock offered by selling shareholders | 29,984,210 | |||||
| Shares of common stock outstanding before the offering | 50,000,000 | |||||
| Shares of common stock outstanding after the offering | 50,000,000 | |||||
| Terms of the offering | The selling shareholders will determine when and how they will sell the securities offered in this prospectus. | |||||
| Statutory Underwriter Obligations | Zhiguo Wang and Guifang Qi are statutory underwriters within the meaning of the Securities Act. This status imposes upon such persons certain obligations. Among such obligations is the requirement that they deliver a current prospectus with the offer of their shares. | |||||
| Trading Market | There is currently | |||||
| Use of proceeds | We will not receive proceeds from the resale of shares by the selling shareholders. | |||||
| Risk Factors | The common stock offered hereby involves a high degree of risk and should not be purchased by investors who cannot afford the loss of their entire investment. See “Risk Factors” below. | |||||
| ● | the perceived advantages of our products over competing products and the availability and success of competing products; |
| ● | the effectiveness of our sales and marketing efforts; |
| ● | our product pricing and cost effectiveness; |
| ● | the safety and efficacy of our products and the prevalence and severity of adverse side effects, if any; and |
| publicity concerning our products, product candidates or competing products. |
| ● | current and changing economic and financial conditions in China; |
| ● | market acceptance of our products; |
| ● | the effectiveness of distribution channels for our products; |
| ● | the impact of price changes in our products and services or our competitors’ products and services; |
| ● | the impact of decisions by distributors to offer competing or replacement products or modify or cease their marketing practices; |
| ● | the availability of alternatives to our products; |
| ● | seasonal fluctuations in business activity; |
| ● | changes in marketing expenses related to promoting and distributing our services |
| ● | limitations on sales of yew raw materials and yew trees during certain times of the year due to the seasonal growth cycle of yew trees; and |
| potential disruptions in commerce due to catastrophic natural events or political conflict. |
| ● | Yew Pharmaceutical accounted for approximately 21% of our consolidated revenue |
| Wuchang Xinling Industry Co., Ltd. accounted for approximately 17% of our consolidated revenue |
| ● | Changchun Hengtai accounted for approximately 17% of our consolidated revenue |
| ● | Yew Pharmaceutical accounted for approximately 15% of our consolidated revenue |
| ● | Anhui Bairun accounted for approximately 11% of our consolidated revenue |
| Lianchengfa accounted for approximately 10% of our consolidated revenue |
privileges senior to our common stock. We cannot give you any assurance that any additional financing will be available to us, or if available, will be on terms favorable to us.
| ● | increasing market demand; |
| ● | inflation; |
| ● | severe climatic and environmental conditions; |
| ● | seasonal factors, and |
| changes in governmental regulations and programs. |
services of, or do not successfully recruit, key sales and marketing, technical and corporate personnel, the growth of our business could be substantially impaired. At present, we do not maintain key man insurance for any of our senior management.
consultants to assist us with a review of our existing internal controls and the design and implementation of additional internal controls that we may determine are appropriate. If we have a material weakness in our internal control over financial reporting, we may not detect errors on a timely basis and our financial statements may be materially misstated. We will be evaluating our internal controls systems to allow management to report on, and eventually allow our independent auditors to attest to, our internal controls. We will be performing the system and process evaluation and testing (and any necessary remediation) required to comply with the management certification requirements of Section 404 of the Sarbanes-Oxley
| ● | have an auditor report on our internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act; |
| ● | submit certain executive compensation matters to shareholder advisory votes, such as “say-on-pay” and “say-on-frequency”; |
| ● | obtain shareholder approval of any golden parachute payments not previously approved; and |
| ● | disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the Chief Executive’s compensation to median employee compensation. |
| ● | revoking the business and operating licenses of our Chinese entities; |
| ● | discontinuing or restricting the operations of our Chinese entities; |
| ● | imposing conditions or requirements with which YBP or our Chinese entities may not be able to comply; |
| ● | requiring YBP or our Chinese entities to restructure the relevant ownership structure or operations; |
| ● | restricting or prohibiting our use of the proceeds from any offering to finance our business and operations in the PRC; or |
| ● | imposing fines. |
been pursuing economic reform policies that encourage private economic activity and greater economic decentralization. There is no assurance, however, that the Chinese government will continue to pursue these policies, or that it will not significantly alter these policies from time to time without notice.
variation, and may be subject to influence by external forces unrelated to the legal merits of a particular matter. The PRC’s regulations and policies with respect to foreign investments are evolving. Definitive regulations and policies with respect to such matters as the permissible percentage of foreign investment and permissible rates of equity returns have not yet been published. Statements regarding these evolving policies have been conflicting and any such policies, as administered, are likely to be subject to broad interpretation and discretion and to be modified, perhaps on a case-by-case basis. The uncertainties regarding such regulations and policies present risks which may affect our ability to achieve our business objectives. We cannot assure you that we will be able to enforce any legal rights we may have under our contracts or otherwise. Our failure to enforce our legal rights may have a material adverse impact on our operations and financial position, as well as our ability to compete with other companies in our industry.
increase or decrease of capital, transfer of shares, merger, division, equity investment or creation of any security interest over any assets located in the PRC or other material changes in share capital.
employee stock ownership plan or a stock option plan will be subject to these regulations when our company becomes a publicly listed company in the United States. If we or our PRC optionees fail to comply with these regulations, we or our PRC optionees may be subject to fines and other legal or administrative sanctions.
and related topics and will record revenue gross as the prime contractor. ASC Topic 808-10-15 defines collaborative arrangements and requires collaborators to present the result of activities for which they act as the principal on a gross basis and report any payments received from (made to) the other collaborators based on other applicable authoritative accounting literature, and in the absence of other applicable authoritative literature, on a reasonable, rational and consistent accounting policy is to be elected. The Company adopted the provisions of ASC 808-10-15. The adoption of this statement did not have an impact on the Company’s consolidated financial position, results of operations or cash flows. For the years ended December 31, 2013 and 2012, the Company has not generated any revenues or activity from this collaborative agreement. yew tree forests and land use right of underlying land. The acquisition is treated as a transaction between entities under common control, see Note 8(c) for more details.TableContentsIf and whenthe price of our common stock becomes trading, it is likely that it will be considered a “penny stock”, which may makemakes it more difficult for investors to sell their shares due to suitability requirements.may beis deemed to be “penny stock” as that term is defined under the Exchange Act. Penny stocks generally are equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges or quoted on the Nasdaq system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system). Penny stock rules impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and “accredited investors.” The term “accredited investor” refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000, not including their primary residence, or an annual income exceeding $200,000 (or $300,000 jointly with their spouse).We cannot assure you that our common stock will be quoted on the OTC Bulletin Board or eventually listed on any stock exchange.Until our common stock is listed on the Nasdaq or another stock exchange, we expect that our common stock would be eligible to be quoted on the Over-The-Counter Bulletin Board, or the OTCBB; another over-the-counter quotation system or on the “pink sheets”, where our stockholders may find it more difficult to effect transactions in our common stock or obtain accurate quotations as to the market value of our common stock. There can be no assurance that a market maker will agree to file the necessary documents with FINRA, which operates the OTC Bulletin Board, nor can there be any assurance that such an application for quotation will be approved or that a regular trading market will develop or that if developed, will be sustained. In the absence of a trading market, an investor may be unable to liquidate their investment. We may ultimately seek the listing of our common stock on Nasdaq or the NYSE AMEX. However, we cannot assure you that we will be able to meet the initial listing standards of either of those or any other stock exchange, or that we will be able to maintain a listing of our common stock on either of those or any other stock exchange.In addition, we would be subject to an SEC rule that, if we failed to meet the criteria set forth in such rule, imposes various practice requirements on broker-dealers who sell securities governed by such rule to persons other than established customers and accredited investors. Consequently, such rule may deter broker-dealers from recommending or effecting transactions in our common stock, which may further affect its liquidity. This would also make it more difficult for us to raise additional capital.23—- and Mr. Wang by himself —- will have both effective and absolute control of the Company and be able to determine the outcome of most actions by the Company and its shareholders.TheyThe HDS Shareholders serve as the sole directors, and executive officers and CFO of the Company, other than the chief financial officer, or CFO, position.Company. The Founders’ Options were approved by our shareholders at a special meeting of shareholders, or the Special Meeting, on December 13, 2012, and issued to the HDS Shareholders in December 2012. As a result, the HDS Shareholders may, upon exercise, own as many as 45,611,024 shares, or 62.65%, of YBP’s common stock. In such event, the HDS Shareholders would have both effective and absolute control of the Company, allowing them, by themselves, to elect all directors of the Company and determine the outcome of most matters placed before the shareholders for action. In fact, Mr. Wang himself could own as many as 40,206,950 shares, or 55.23%, of YBP’s common stock, meaning he could take all such actions by himself.24This prospectus contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical fact are “forward-looking statements”, including, but not limited to, any projections of earnings, revenue or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements concerning proposed new services or developments; any statements regarding future economic conditions or performance; any statements of belief; and any statements of assumptions underlying any of the foregoing.Forward-looking statements may include the words “may,” “could,” “will,” “estimate,” “intend,” “continue,” “believe,” “expect” or “anticipate” or other similar words. These forward-looking statements present our estimates and assumptions only as of the date of this report. Except for our ongoing obligation to disclose material information as required by the federal securities laws, we do not intend, and undertake no obligation, to update any forward-looking statement.Although we believe that the expectations reflected in any of our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any of our forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and inherent risks and uncertainties. Some of the key factors impacting these risks and uncertainties include, but are not limited to:risks related to our ability to collect amounts owed to us by some of our largest customers;our ability to continue to purchase yew cuttings from our various suppliers at relatively stable prices;our dependence on a small number of customers for our yew raw materials, including a related party;our dependence on a small number of customers for our yew trees for reforestation;our ability to market successfully yew raw materials used in the manufacture of TCM;industry-wide market factors and regulatory and other developments affecting our operations;our ability to sustain revenues should the Chinese economy slow from its current rate of growth;continued preferential tax treatment for the sale of yew trees and potted yew trees;uncertainties about involvement of the Chinese government in business in the PRC generally; andany change in the rate of exchange of the Chinese Renminbi, or RMB, to the U.S. dollar, which could affect currency translations of our results of operations, which are earned in RMB but reported in dollars;industry-wide market factors and regulatory and other developments affecting our operations;a slowdown in the Chinese economy; andrisks related to changes in accounting interpretations.For a detailed description of these and other factors that could cause actual results to differ materially from those expressed in any forward-looking statement, please see the section entitled “Risk Factors,” beginning on page 5 of this Registration Statement on Form S-1.25DETERMINATION OF OFFERING PRICESince our common stock is not listed or quoted on any exchange or quotation system, the offering price of the shares of common stock was determined by the price of the common stock that was sold to our security holders pursuant to an exemption under Section 4(2) of the Securities Act or Regulation D or Regulation S promulgated under the Securities Act.The offering price of the shares of our common stock does not necessarily bear any relationship to our book value, assets, past operating results, financial condition or any other established criteria of value.Although our common stock is not listed on a public exchange, we will be filing to obtain a quotation on the OTC Bulletin Board concurrently with the filing of this prospectus. In order to be quoted on the OTC Bulletin Board, a market maker must file an application on our behalf in order to make a market for our common stock. There can be no assurance that a market maker will agree to file the necessary documents with FINRA, which operates the OTC Bulletin Board, nor can there be any assurance that such an application for quotation will be approved.In addition, there is no assurance that our common stock will trade at market prices in excess of the initial offering price as prices for the common stock in any public market which may develop will be determined in the marketplace and may be influenced by many factors, including the depth and liquidity.There is presently no established publicmarketon the Over the Counter Bulletin Board ("OTC:BB") under the symbol "YEWB” on November 27, 2013. Since that time there has been only limited trading. The following table sets forth, for our sharesthe period indicated, the range of common stock. We anticipate on applying forhigh and low closing “Bid” prices reported by the OTC:BB. Such quotations represent prices between dealers and may not include markups, markdowns, or commissions and may not necessarily represent actual transactions. Fiscal Year Ending December 31, 2013 Quarter Ended December 31, 2013 $ 1.10 $ 1.00 Fiscal Year Ending December 31, 2014 Quarter Ended March 31, 2014 $ 1.10 $ 0.98 April 1 through May 28, 2014 $ 0.19 $ 0.12 OTC Bulletin Board uponpenny stock regulations, a broker-dealer selling a penny stock to anyone other than an established customer or accredited investor must make a special suitability determination regarding the effectivenesspurchaser and must receive the purchaser's written consent to the transaction prior to the sale, unless the broker-dealer is otherwise exempt. Generally, an individual with a net worth in excess of $1,000,000 or annual income exceeding $100,000 individually or $300,000 together with his or her spouse is considered an accredited investor. In addition, under the registration statementpenny stock regulations the broker-dealer is required to:● Deliver, prior to any transaction involving a penny stock, a disclosure schedule prepared by the SEC relating to the penny stock market, unless the broker-dealer or the transaction is otherwise exempt; ● Disclose commissions payable to the broker-dealer and our registered representatives and current bid and offer quotations for the securities; ● Send monthly statements disclosing recent price information pertaining to the penny stock held in a customer's account, the account's value and information regarding the limited market in penny stocks; and ● Make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction, prior to conducting any penny stock transaction in the customer's account. which this prospectus forms apart. However, we can provide no assurance that ourthese regulations, broker-dealers may encounter difficulties in their attempt to buy or sell shares of common stock will be traded on the Bulletin Board or, if traded, that a public market will materialize.HoldersAs of March 11, 2013, we had 998 shareholders of our common stock.Transfer Agentstock, which may affect the ability of selling stockholders or other holders to sell their shares in the secondary market and RegistrarGlobex Transfer, LLC is currentlyhave the transfer agenteffect of reducing the level of trading activity in the secondary market. These additional sales practice and registrardisclosure requirements could impede the sale of our common stock in the market place. In addition, the liquidity for our common stock may be decreased, with a corresponding decrease in the price of our common stock. Its address is 780 Deltona Blvd., Suite 202, Deltona, Florida 32725 and its phone number is 813-344-4490.Our shares are likely to be subject to such penny stock rules for the foreseeable future.DividendsSince inceptionStockholderspaiddeclared any cash dividends on our common stock. We currentlystock since our inception and do not anticipate paying any cash dividends in the foreseeable future on our common stock, when issued pursuant to this offering. Although we intendfuture. We plan to retain ourfuture earnings, if any, for use in our business. Any decisions as to financefuture payments of dividends will depend on our earnings and financial position and such other facts, as the exploration and growth of our business, our Board of Directors deems relevant.have the discretioncontinue to declare and pay dividends in the future. Payment of dividends in the future will depend upon our earnings, capital requirements,file periodic reports, and other factors, whichinformation with the SEC. We intend to send annual reports to our Boardstockholders containing audited financial statements.Directors may deem relevant.Unregistered Securities26OverviewFor The Three-Month Period Ended March 31, 2014ninethree months ended September 30, 2012March 31, 2014 and 2011 and for the years ended December 31, 2011 and 2010,2013, we operated in three reportable business segments: (1) the TCM raw materials segment, consisting of the production and sale of yew raw materials used in the manufacture of TCM; (2) the yew tree segment, consisting of the growth and sale of yew tree seedlings and mature trees, including potted miniature yew trees; and (3) the handicrafts segment, consisting of the manufacture and sale of furniture and handicrafts made of yew timber. Our reportable segments are strategic business units that offer different products. They are managed separately based on the fundamental differences in their operations. All of our operations are conducted in the PRC. We are located in Harbin, Heilongjiang Province, China.September 30, 2012,March 31, 2014, revenues from the sale of TCM raw materials represented approximately 65.1%50.5% of consolidated revenue (including 32.2%22.0% of consolidated revenues tofrom a related parties)party); sale of yew trees represented approximately 28.9% of consolidated revenue; and the sale of handicrafts represented approximately 6.0% of consolidated revenue. For the nine months ended September 30, 2012, revenues from the sale of TCM raw materials represented approximately 59.2% of consolidated revenue (including 12.4% of consolidated revenues to related parties); sale of yew trees represented approximately 38.3% of consolidated revenue; and the sale of handicrafts represented approximately 2.5% of consolidated revenue (including 0.1% of consolidated revenues to related parties).For the three months ended September 30, 2011, revenues from the sale of TCM raw materials represented approximately 71.3% of consolidated revenue (including 20.9% of consolidated revenues to related parties); sale of yew trees represented approximately 26.7% of consolidated revenue; and the sale of handicrafts represented approximately 2.0% of consolidated revenue. For the nine months ended September 30, 2011, revenues from the sale of TCM raw materials represented approximately 60.2% of consolidated revenue (including 26.5% of consolidated revenues to related parties); sale of yew trees represented approximately 37.7% of consolidated revenue; and the sale of handicrafts represented approximately 2.1% of consolidated revenue.For the year ended December 31, 2011, revenues from the sale of TCM raw materials represented approximately 58.0% of consolidated revenue (including 23.3% of consolidated revenues to related parties); sale of yew trees represented approximately 40.3% of consolidated revenue; and the sale of handicrafts represented approximately 1.7% of consolidated revenue. For the year ended December 31, 2010, revenues from the sale of TCM raw materials represented approximately 55.5% of consolidated revenue (including 25.9% of consolidated revenues to related parties); sale of yew trees represented approximately 41.6%46.6% of consolidated revenue; and the sale of handicrafts represented approximately 2.9% of consolidated revenue. We expect that salesFor the three months ended March 31, 2013, revenues from ourthe sale of TCM raw materials segment will become an increasingly important sourcerepresented approximately 49.8% of consolidated revenue for us.(including 19.9% of consolidated revenues from a related party); sale of yew trees represented approximately 47.6% of consolidated revenue; and the sale of handicrafts represented approximately 2.6% of consolidated revenue.HDS.HDS and in the PRC. Other than expenses (approximately $182,000$36,776 and $98,000$142,000 for the ninethree months ended September 30, 2012March 31, 2014 and 2011, respectively) and approximately $153,000 and $201,000 for the year ended December 31, 2011 and 2010,2013, respectively) incurred primarily related to meeting its reporting requirements in the U.S., YBP has no other significant business operations. At September 30, 2012,March 31, 2014, YBP has approximately $23,000$11,571 in cash and holds the 100% equity interests in its subsidiaries Yew HK and JSJ. Yew HK itself has no business operations or assets other than holding of equity interests in JSJ. JSJ has no business operations and assets with a book value of approximately $54,000,$5,498, including approximately $37,000$3,238 in cash at September 30, 2012.March 31, 2014. JSJ also holds the VIE interests in HDS through the contractual27
arrangements or the Contractual Arrangements,(the “Contractual Arrangements”) described in Note 1 to Notes to Consolidated Financial Statements. In the event that we are unable to enforce the Contractual Agreements, we may not be able to exert effective control over HDS, and our ability to conduct our business may be materially and adversely affected. If the applicable PRC authorities invalidate our Contractual Agreements for any violation of PRC laws, rules and regulations, in such an event, we would lose control of the VIE resulting in its deconsolidation in financial reporting and severe loss in our markedmarket valuation.inventories,allowance for obsolete inventory, the classification of short and long-term inventory, the useful life of property and equipment and intangible assets, recovery of long-lived assets, income taxes, and the valuation of equity transactions. We base our estimates on historical experience and on various other assumptions that we believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Any future changes to these estimates and assumptions could cause a material change to our reported amounts of revenues, expenses, assets and liabilities. Actual results may differ from these estimates under different assumptions or conditions. We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of the financial statements.the Company.us. A quality assessment begins with an understanding of the nature of the risks in the entity as well as the nature of the entity’s activities including terms of the contracts entered into by the entity, ownership interests issued by the entity and the parties involved in the design of the entity. The significant terms of the agreements between us and HDS are discussed above in the “Corporate Structure and Recapitalization —- Second Restructure” section. Our assessment on the involvement with HDS reveals that we have the absolute power to direct the most significant activities that impact the economic performance of HDS. JSJ, our wholly own subsidiary, is obligated to absorb a majority of the risk of loss from HDS activities and entitles JSJ to receive a majority of HDS’s expected residual returns. In addition, HDS’s shareholders have pledged their equity interest in HDS to JSJ, irrevocably granted JSJ an exclusive option to purchase, to the extent permitted under PRC law,Law, all or part of the equity interests in HDS and agreed to entrust all the rights to exercise their voting power to the28
person(s) appointed by JSJ. Under the accounting guidance, we are deemed to be the primary beneficiary of HDS and the results of HDS are consolidated in our consolidated financial statements for financial reporting purposes.the Company’sour consolidated financial statements. As we do not have any non-controlling interest and, accordingly, did not subtract any net income in calculating the net income attributable to us. Because of the Contractual Arrangements, YBP has a pecuniary interest in HDS that requires consolidation of HDS’s financial statements with those of ours.The Company maintainsWe maintain allowances for doubtful accounts for estimated losses. The Company reviewsWe review the accounts receivable balance on a periodic basis and makesmake general and specific allowances when there is doubt as to the collectability of individual balances. In evaluating the collectability of individual receivable balances, the Company considerswe consider many factors, including the age of the balance, a customer’s historical payment history, its current credit-worthiness and current economic trends. Accounts are written off after exhaustive efforts at collection. The Company recognizedWe recognize the probability of the collection for each customer and believesbelieve the amount of the balance as of September 30, 2012March 31, 2014 could be collected and accordingly, the Companybased on a review of our outstanding balances, we did not record any allowance for doubtful accounts.The Company classifies itsWe classify our inventories based on itsour historical and anticipated levels of sales; any inventory in excess of its normal operating cycle of one year is classified as long-term on its consolidated balance sheets. Inventories are stated at the lower of cost or market value utilizing the weighted average method. Raw materials primarily include yew timber used in the production of products such as handicrafts, furniture and other products containing yew timber. Finished goods-handicraft and yew seedlings include direct materials, direct labor and an appropriate proportion of overhead.29aseveral third party independent appraiserexperts in the forestry industry and they prepared a report which indicated that the current fair value of such timber is greater than our historical cost. The appraiserreport was comprised of several forestry experts and approved by the Price Authentication Center of Heilongjiang Province of China, a provincial government institute.September 30, 2012 and DecemberMarch 31, 2011,2014, we did not provide any inventory allowance and reserve.Yewyew seedlings are accumulated until the time of harvest and are reported at the lower of cost or market.Building 15 years Machinery and equipment 10 years Office equipment 3 years Leasehold improvement 5 years Motor vehicles 4 years use rightsassetsuse rights.assets. This type of arrangement is common for the use of land in the PRC. Yew trees on land containing yew tree forests will be used to supply raw materials such as branches, leaves and fruit to us that will be used to manufacture our products. We amortize these land and yew forest use rights over the term of the respective land and yew forest use right, which ranges from 45 to 50 years. The lease agreements do not have any renewal option and we have no further obligations to the lessor. We record the amortization of these land and forest use rights as part of its cost of revenues.30—- Goodwill and Other”. This amendment is intended to simplify how an entity tests indefinite-lived assets other than goodwill for impairment by providing entities with an option to perform a qualitative assessment to determine whether further impairment testing is necessary. The amended provisions will be effective for us beginning in the first quarter of 2014, and early adoption is permitted. This amendment impacts impairment testing steps only, and therefore adoption will not have an impact on our consolidated financial position, results of operations or cash flows.31
Corrections Related to FASB Accounting Standards Update 2010-22 (SEC Update)” in Accounting Standards Update No. 2012-03. This update amends various SEC paragraphs pursuant to the issuance of SAB No. 114. The adoption of ASU 2012-03 is not expected to have a material impact on our consolidated financial position, results of operations or cash flows.(“("ASU 2012-04”2012-04"). The amendments in this update cover a wide range of topics in the Accounting Standards Codification. These amendments include technical corrections and improvements to the Accounting Standards Codification and conforming amendments related to fair value measurements. The amendments in this update will be effective for fiscal periods beginning after December 15, 2012. The adoption of ASU 2012-04 is not expected to have a material impact on our consolidated financial position, results of operations or cash flows.Enactedenacted JOBS ActHave an auditor report on our internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act;● Have an auditor report on our internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act; ● Submit certain executive compensation matters to shareholder advisory votes, such as “say-on-pay” and “say-on-frequency”; ● Obtain shareholder approval of any golden parachute payments not previously approved; and ● Disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the Chief Executive’s compensation to median employee compensation. Obtain shareholder approval of any golden parachute payments not previously approved; andDisclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the Chief Executive’s compensation to median employee compensation.32 For the Three Months
Ended September 30, For the Nine Months
Ended September 30, For the Years
Ended December 31, 2012 2011 2012 2011 2011 2010 Revenue — third parties $ 930,557 $ 954,122 $ 4,230,631 $ 3,246,602 $ 4,564,426 $ 3,789,181 Revenue — related party 442,467 251,876 602,159 1,169,688 1,396,613 1,338,871 Total revenues 1,373,024 1,205,998 4,832,790 4,416,290 5,961,039 5,128,052 Cost of revenues —
third parties 146,409 220,121 726,957 691,588 741,508 1,178,382 Cost of revenues —
related party 84,528 41,009 109,572 297,004 384,457 459,681 Total cost of revenues 230,937 261,130 836,709 988,592 1,125,965 1,638,063 Gross profit 1,142,087 944,868 3,996,081 3,427,698 4,835,074 3,489,989 Operating expenses 262,656 230,109 637,666 576,235 788,408 909,296 Income from operations 879,431 714,759 3,358,415 2,851,463 4,046,666 2,580,693 Other income (expenses) 228 (2,454 ) 1,455 (13,126 ) (6,355 ) 5,267 Net income 879,659 712,305 3,359,870 2,838,337 4,040,311 2,585,960 Other comprehensive income Unrealized foreign currency translation gain (loss) (59,359 ) 158,519 108,308 582,653 778,392 463,826 Comprehensive income $ 820,300 $ 870,824 $ 3,468,178 $ 3,420,990 $ 4,818,703 $ 3,049,786 33 Three Months Ended March 31, 2014 2013 Revenues - third parties $ 1,613,718 $ 1,440,991 Revenues - related party 454,259 357,949 Total revenues 2,067,977 1,798,940 Cost of revenues - third parties 414,616 495,659 Cost of revenues - related party 113,118 83,010 Total cost of revenues 527,734 578,669 Gross profit 1,540,243 1,220,271 Operating expenses 167,396 277,575 Other operating income 2,142 - Income from operations 1,374,989 942,696 Other income (expenses) 252 (375 ) Net income 1,375,241 942,321 Other comprehensive income: Unrealized foreign currency translation gain (loss) (257,968 ) 154,652 Comprehensive income $ 1,117,273 $ 1,096,973 THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2012 COMPARED TO THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2011RevenuesSeptember 30, 2012,March 31, 2014, we had total revenues of $1,373,024,$2,067,977, as compared to $1,205,998$1,798,940 for the three months ended September 30, 2011,March 31, 2013, an increase of $167,026$269,037 or 13.8%. For the nine months ended September 30, 2012, we had total revenues of $4,832,790, as compared to $4,416,290 for the nine months ended September 30, 2011, an increase of $416,500 or 9.4%15.0%. The increase in total revenue was attributable to the increase in revenue from all three of our business segments andTotal revenue is summarized as follows: Three Months Ended
September 30, 2012 2011 Increase Percentage
ChangeTCM raw materials $ 893,909 $ 859,497 $ 34,412 4.0 % Yew trees 396,416 322,015 74,401 23.1 % Handicrafts 82,699 24,486 58,213 237.7 % Total $ 1,373,024 $ 1,205,998 $ 167,026 13.8 % Nine Months Ended
September 30, 2012 2011 Increase Percentage
ChangeTCM raw materials $ 2,860,552 $ 2,659,234 $ 201,318 7.6 % Yew trees 1,853,504 1,665,665 187,839 11.3 % Handicrafts 118,734 91,391 27,343 29.9 % Total $ 4,832,790 $ 4,416,290 $ 416,500 9.4 % Three Months Ended March 31, Percentage 2014 2013 Increase Change TCM raw materials $ 1,043,980 $ 896,161 $ 147,819 16.5 % Yew trees 964,306 856,954 107,352 12.5 % Handicrafts 59,691 45,825 13,866 30.3 % Total $ 2,067,977 $ 1,798,940 $ 269,037 15.0 % SalesOf the total amount of revenue for the three months ended March 31, 2014 and 2013, $454,259 and $357,949, respectively, an increase of $96,310 or 26.9%, came from sales of related party, Yew Pharmaceutical.raw materials to a related party customer decreased during the first two quarters of 2012 because the related party customer had adequate inventory for its needstrees and we focused our attention on expanding such sales to third party customers. During the third quarter of 2012, sales of yew raw materials to the related party customer increased because the related party customer required more yew raw materialhandicraft are both considered as its own inventory decreased, while sales of yew raw material to third party customers decreased because such customers now had adequate inventory. Over the nine months ended September 30, 2012, the overall mix of salessteady increase of our yew raw materials consistednormal business sales. Although we expect to see a steady increase of sales primarily to third party customers compared toour revenues in the related party customer.future, the actual result will depend upon the actual market demand and available supply.September 30, 2012,March 31, 2014, cost of revenues amounted to $230,937,$527,734 as compared to $261,130$578,669 for the three months ended September 30, 2011,March 31, 2013, a decrease of $30,193$50,935 or 11.6%. For the nine months ended September 30, 2012, cost of revenues amounted to $836,709 as compared to $988,592 for the nine months ended September 30, 2011, a decrease of $151,883 or 15.4%8.8%. Our cost of revenues principally consists of the cost of raw materials such as wood plates and yews, amortization of land use rights and yew forest use rights,assets, labor, utilities, manufacturing costs, manufacturing related depreciation, machinery maintenance costs, purchasing and receiving costs, inspection costs, and other fixed costs. For the three months ended September 30, 2012,March 31, 2014, cost of revenues accounted for 16.8%25.5% of total revenues compared to 21.7%32.2% of total revenues for the three months ended September 30, 2011. For the nine months ended September 30, 2012, cost of revenues accounted for 17.3% of total revenues compared to 22.4% of total revenues for the nine months ended September 30, 2011.March 31, 2013.34werewas as follows: Three Months Ended
September 30, 2012 2011 Increase
(Decrease) Percentage
ChangeTCM raw materials $ 158,354 $ 161,226 $ (2,872 ) (1.8 )% Yew trees 21,395 88,380 (66,985 ) (75.8 )% Handicrafts 51,188 11,524 39,664 344.2 % Total $ 230,937 $ 261,130 $ (30,193 ) (11.6 )% Nine Months Ended
September 30, 2012 2011 Increase
(Decrease) Percentage
ChangeTCM raw materials $ 446,436 $ 640,843 $ (194,407 ) (30.3 )% Yew trees 320,410 287,681 32,729 11.4 % Handicrafts 69,863 60,068 9,795 16.3 % Total $ 836,709 $ 988,592 $ (151,883 ) 15.4 % Three Months Ended March 31, Percentage 2014 2013 Increase Change TCM raw materials $ 232,340 $ 199,960 $ 32,380 16.2 % Yew trees 249,331 360,687 (111,356 ) (30.9 )% Handicrafts 46,063 18,022 28,041 155.6 % Total $ 527,734 $ 578,669 $ (50,935 ) (8.8 )% September 30, 2012March 31, 2014 as compared to the three months ended March 31, 2013 was primarily a result of decreasesthe decrease in costs of revenue in ouryew tree segment and offset by increase in costs of revenue of TCM raw materials and yew trees segments, partially offset by anhandicrafts segments.our handicrafts segment.TCM raw material segment is attributable to increase in overall sales, method of extraction, increase in logistical distance, and fees associated with outsourced plant labor to third party contractor.our cost of revenues for the nine months ended September 30, 2012 as compared to the nine months ended September 30, 2011 was primarily a result of decreases in costs of revenue in our TCM raw materials, partially offset by anyew trees segment is attributable to changes of cost after performing quarterly physical inventory and related accounting adjustment. For the three months ended March 31, 2013, a transaction of yew tree cost was recorded and subsequently reversed on April 1 st , 2013. Therefore, we saw a decrease in yew tree cost compared to three months ended March 31, 2013. yew treesunit cost of single and handicrafts segments.paired of chopstick crafts had increased for the three months ended March 31, 2014 as compared to the three months ended March 31, 2013. The unit cost of paired chopstick crafts was approximately $18.00 and $7.00 for the three months ended March 31, 2014 and 2013, respectively. The unit cost of single chopstick crafts was approximately $10.00 and $4.00 for the three months ended March 31, 2014 and 2013, respectively.September 30, 2012,March 31, 2014, gross profit was $1,142,087$1,540,243 as compared to $944,868$1,220,271 for the three months ended September 30, 2011,March 31, 2013, representing gross margins of 83.2%74.5% and 78.3%, respectively. For the nine months ended September 30, 2012, gross profit was $3,996,081 as compared to $3,427,698 for the nine months ended September 30, 2011, representing gross margins of 82.7% and 77.6%67.8%, respectively. Gross profit margins by product categories were as follows: Three Months Ended
September 30, 2012 2011 Increase
(Decrease)TCM raw materials 82.3 % 81.2 % 1.1 % Yew trees 94.6 % 72.6 % 22.0 % Handicrafts 38.1 % 52.9 % (14.8 )% Total 83.2 % 78.3 % 4.9 % Three Months Ended March 31, (Decrease) 2014 2013 Increase TCM raw materials 77.7 % 77.7 % - % Yew trees 74.1 % 57.9 % 28.0 % Handicrafts 22.8 % 60.7 % (62.4 )% Total 74.5 % 67.8 % 9.8 % Nine Months Ended
September 30, 2012 2011 Increase TCM raw materials 84.4 % 75.9 % 8.5 % Yew trees 82.7 % 82.7 % 0.0 % Handicrafts 41.2 % 34.3 % 6.9 % Total 82.7 % 77.6 % 5.1 % overall increase in our overall gross profit margin for the three months ended September 30, 2012March 31, 2014 as compared to the three months ended March 31, 2013 was primarily attributable to the increase in the TCM raw materials and yew trees segments, partially offset by a decrease in our handicrafts segment. The overall increase in our gross profit margin for the nine months ended September 30, 2012 was primarily attributable to thein handicrafts segments, offset by an increase in the TCM raw materials and handicrafts segments.gross profit margin in yew trees segment.35and nine months ended September 30, 2012, the increase inMarch 31, 2014, our gross margin percentage related to the sale of TCM raw materials was primarily attributable to the operational efficiency improvements as we have had longer operation experience in the TCM raw materials segment as compared to the same periods in 2011.remained consistent with March 31, 2013.September 30, 2012March 31, 2014 as compared to the three months ended September 30, 2011March 31, 2013 is primarily attributable to the fact that the average unit selling price for our yew trees was higher, which contributed to the higher gross profit margin in 2012.changes of cost after performing quarterly physical inventory and related accounting adjustment. For the ninethree months ended September 30, 2012, theMarch 31, 2013, a transaction of yew tree cost was recorded and subsequently reversed on April 1 st , 2013. Therefore, we saw a decrease in yew tree cost and increase in related gross margin percentage related to the sale of yew trees remained consistent as compared to 2011.three months ended March 31, 2013.September 30, 2012March 31, 2014 was because we sold more high value handicraftsprimarily attributable to increase in related direct material and manufacturing overhead. Therefore, our unit cost of single and paired chopstick crafts had increased for the three months ended March 31, 2014 as compared to the same period in 2011. High value handicrafts products generally have lower profit margins compared to low value handicraft products.three months ended March 31, 2013. The increase in our gross margin percentage related to the saleunit cost of handicraftspaired chopstick crafts was approximately $18.00 and $7.00 for the ninethree months ended September 30, 2012 as compared toMarch 31, 2014 and 2013, respectively. The unit cost of single chopstick crafts was approximately $10.00 and $4.00 for the same periods in 2011 was mainly because, overall, we sold fewer high value handicrafts as a percentage of our handicrafts revenue in 2012.three months ended March 31, 2014 and 2013, respectively. Three Months Ended
September 30, Nine Months Ended
September 30, 2012 2011 2012 2011 Salary and related benefit $ 4,016 $ 3,129 $ 11,718 $ 8,714 Advertising — 61 — 9,482 Shipping and handling 303 3,568 696 10,317 Other 2,324 1,697 5,466 14,127 Total $ 6,643 $ 8,455 $ 17,880 $ 42,640 Three Months Ended March 31, 2014 2013 Salary and related benefit $ - $ 3,888 Shipping and handling 1,133 562 Other 627 1,164 Total $ 1,760 $ 5,614 September 30, 2012,March 31, 2014, selling expenses were $6,643,$1,760 as compared to $8,455$5,614 for the three months ended September 30, 2011,March 31, 2013, a decrease of $1,812$3,854, or 21.4%68.6%. The decrease in our selling expenses for the three months ended September 30, 2012March 31, 2014 was primarily attributable to the decreases in advertising and shipping and handling expenses, partially offset by the increases in salary and related benefit expenses and other expenses. For the nine months ended September 30, 2012, sellingmiscellaneous expenses were $17,880 as compared to $42,640 for the nine months ended September 30, 2011, a decrease of $24,760 or 58.1%. The decrease, partially offset by increases in our selling expenses for the nine months ended September 30, 2012 was primarily attributable to the decreases in advertising, shipping and handling expenses. other expenses, partially offset by an increase in salary and related benefit.Administrative ExpensesSeptember 30, 2012, salary and related benefit increased by $887 as compared to the three months ended September 30, 2011. The increase was attributable to the increase in salary expenses and bonuses paid, as we had more sales staff on our sales team during the three months ended September 30, 2012 as compared to the same period in 2011. For the nine months ended September 30, 2012, salary and related benefit increased by $3,004 as compared to the nine months ended September 30, 2011, which was primarily attributable to an increase in salary expenses and bonus paid, as we had more sales staff on our sales team during the nine months ended September 2012 as compared to the corresponding period in 2011.For the three and nine months ended September 30, 2012, we did not incur any advertising expenses, while we recorded advertising expenses of $61 and $9,482 for the three and nine months ended September 30, 2011, respectively. We primarily relied on our sales staff to promote our products and did not have any advertising activities during 2012.For the three months ended September 30, 2012, shipping and handling expenses decreased by $3,265 as compared to the three months ended September 30, 2011. In the third quarter of 2012, the majority of the shipping fees were either paid directly or reimbursed by our customers, while in the third quarter of 201136shipping fees were paid by us. For the nine months ended September 30, 2012, shipping and handling expenses decreased by $9,621 as compared to the nine months ended September 30, 2011. For the nine months ended September 30, 2012, a majority of the shipping fees were either paid directly by our customers or reimbursed to us by our customers, while in the nine months ended September 30, 2011 shipping fees were paid by us.For the three months ended September 30, 2012, other miscellaneous selling expenses increased by $627 as compared to the three months ended September 30, 2011. This increase was primarily attributable to the increase in materials expenditure related to handicrafts selling activities during the three months ended September 30, 2012. For the nine months ended September 30, 2012, other miscellaneous selling expenses decreased by $8,661 as compared to the nine months ended September 30, 2011. This decrease was primarily attributable to the overall decrease in materials expenditure related to selling activities.General and Administrative ExpensesFor the three months ended September 30, 2012,March 31, 2014, general and administrative expenses amounted to $256,013,$165,636, as compared to $221,654$271,961 for the three months ended September 30, 2011, an increaseMarch 31, 2013, a decrease of $34,359$106,325, or 15.5%. For the nine months ended September 30, 2012, general and administrative expenses amounted to $619,786, as compared to $533,595 for the nine months ended September 30, 2011, an increase of $86,191 or 16.2%39.1%. General and administrative expenses consisted of the following: Three Months Ended
September 30, Nine Months Ended
September 30, 2012 2011 2012 2011 Compensation and related benefits $ 52,056 $ 42,568 $ 152,061 $ 124,205 Depreciation 48,634 38,153 137,624 110,336 Travel and entertainment 27,819 25,305 68,120 77,013 Professional fees 98,374 68,674 183,628 127,902 Research and development — 694 — 15,968 Other 29,130 46,260 78,353 78,171 Total $ 256,013 $ 221,654 $ 619,786 $ 533,595 Three Months Ended March 31, 2014 2013 Compensation and related benefits $ 33,784 $ 69,262 Depreciation 35,206 47,396 Travel and entertainment 4,150 19,912 Professional fees 62,344 83,255 Other 30,152 52,136 Total $ 165,636 $ 271,961 increasedecrease in our general and administrative expenses for the three months ended September 30, 2012,March 31, 2014, as compared to the comparable period in 2011,three months ended March 31, 2013, was primarily attributable to increasesdecrease in compensation and related benefits, depreciation and professional fees, partially offset by decreases in otherall categories of expenses. The increase in our general and administrative expenses for the nine months ended September 30, 2012, as compared to the corresponding period in 2011, was primarily attributable to increases in compensation and related benefits paid, depreciation expenses, and professional fees, partially offset by the decreases in travel and entertainment expenses and research and development expenses. and nine months ended September 30, 2012, as compared to the three and nine months ended September 30, 2011, consisted of the following:For the three months ended September 30, 2012, compensation and related benefits increased by $9,488 or 22.3%March 31, 2014, as compared to the three months ended September 30, 2011. ForMarch 31, 2013, consisted of the nine months ended September 30, 2012, compensation and related benefits increased by $27,856 or 22.4% as compared to the nine months ended September 30, 2011. These increases were primarily attributable to an increase in salaries paid to our management and other administrative staff resulting from the expansion of our business.following:● ● ● ● ● For the three months ended March 31, 2014, other miscellaneous general and administrative expenses decreased by $21,984, or 42.2%, as compared to the three months ended March 31, 2013. The decrease was primarily attributable our daily operation stabilized. September 30, 2012, depreciationMarch 31, 2014, other operating income increased by $10,481$2,142, or 27.5%100.0% as compared to the three months ended September 30, 2011. March 31, 2013. The increase was primarily attributable to gain on disposal of one of our depreciable assets.ninethree months ended September 30, 2012, depreciation increased by $27,288 or 24.7%March 31, 2014, income from operations was $1,374,989 as compared to income from operations of $942,696 for the ninethree months ended September 30, 2011. These increases wereMarch 31, 2013, an increase of $432,293, or 45.9%. This increase was primarily attributable to an increase in depreciable assets. Since later part of 2011, we purchased more fixed assets as a result of the expansion of our business. As such, we had more depreciable assets during the threeoverall gross profit and nine months ended September 30, 2012 as compared to the corresponding periodsdecrease in 2011.operating expenses37Table of ContentsSeptember 30, 2012, travel and entertainment increased by $2,514 or 9.9%March 31, 2014, total other income amounted to $252 as compared to the three months ended September 30, 2011. The increase was due to more travel activities incurred during the three months ended September 30, 2012. For the nine months ended September 30, 2012, travel and entertainment decreased by $8,893 or 11.5% as compared to the nine months ended September 30, 2011. These decreases were primarily attributable to less travel and entertainment activities incurred during the first nine monthstotal other expense of 2012 as compared to the same period in 2011.Professional fees consisted primarily of legal, accounting and other fees associated with preparing to and becoming a reporting company in the United States. For the three months ended September 30, 2012, professional fees increased by $29,700 or 43.2%, as compared to the three months ended September 30, 2011. For the nine months ended September 30, 2012, professional fees increased by $55,726 or 43.6%, as compared to the nine months ended September 30, 2011. This increase was primarily attributable to the increase in legal and accounting fees as a result of our becoming a reporting company in the United States in 2012.For the three months ended September 30, 2012, other general and administrative expense decreased by $17,130 or 37.0%, as compared to the three months ended September 30, 2011. The decrease was primarily due to less office and communication expenses incurred during the three months ended September 30, 2012 as a result of our cost cutting effort. For the nine months ended September 30, 2012, other general and administrative expense remained materially consistent.Income from OperationsFor the three months ended September 30, 2012, income from operations was $879,431 as compared to $714,759$375 for the three months ended September 30, 2011, an increase of $164,672 or 23.0%. For the nine months ended September 30, 2012, income from operations was $3,358,415 as compared to $2,851,463 for the nine months ended September 30, 2011, an increase of $506,952 or 17.8%. These increases were primarily due to higher overall gross margins and a decrease in selling expenses incurred and offset by the increase in general and administrative expenses.Other Income (Expenses)March 31, 2013. For the three months ended September 30, 2012, total other income amounted to $228 as compared to total other expenses of $2,454 for the three months ended September 30, 2011. For the nine months ended September 30, 2012, total other income amounted to $1,455 as compared to total other expenses of $13,126 for the nine months ended September 30, 2011. The change in total other income (expenses) was primarily attributable to the following:For the three months ended September 30, 2012, interest income amounted to $474 as compared to interest income of $263 for the three months ended September 30, 2011. For the nine months ended September 30, 2012, interest income amounted to $2,062 as compared to interest income of $1,712 for the nine months ended September 30, 2011. These increases were the result of more money being deposited in interest-bearing accounts.For the three months ended September 30, 2012, other expense amounted to $246 as compared to other expense of $2,717 for the three months ended September 30, 2011. For the nine months ended September 30, 2012, other expense amounted to $607 as compared to other expense of $14,838 for the nine months ended September 30, 2011. The decrease was a result of better costs control related to non-operational expenses.$879,659$1,375,241 or $0.03 and $0.02 per share (basic and diluted, respectively), for the three months ended March 31, 2014, as compared to net income of $942,321 or $0.02 per share (basic and diluted), for the three months ended September 30, 2012, as compared to $712,305 or $0.02 per share (basic) and $0.01 per share (diluted), for the three months ended September 30, 2011. Our net income was $3,359,870 or $0.07 per share (basic and diluted), for the nine months ended September 30, 2012, asMarch 31, 2013.38compared to $2,838,337 or $0.07 per share (basic) and $0.06 per share (diluted), for the nine months ended September 30, 2011.September 30, 2012,March 31, 2014, we reported an unrealized loss on foreign currency translation of $59,359,$257,968, as compared to unrealizeda gain of $158,519$154,652 for the three months ended September 30, 2011. For the nine months ended September 30, 2012, we reported an unrealized gain on foreign currency translation of $108,308, as compared to $582,653 for the nine months ended September 30, 2011.March 31, 2013. The change reflects the effect of the value of the U.S. dollar in relation to the RMB. These gains (loss) are non-cash items. As described elsewhere herein, the functional currency of our subsidiary, JSJ, and our VIE, HDS, is the RMB. The accompanying consolidated financial statements have been translated and presented in U.S. dollars using period end rates of exchange for assets and liabilities, and average rates of exchange for the period for net revenues, costs, and expenses. Net gains resulting from foreign exchange transactions, if any, are included in the consolidated statements of income.September 30, 2012,March 31, 2014, comprehensive income of $820,300 was derived from our net income of $879,659, partially offset by a foreign currency translation loss of $59,359. For the three months ended September 30, 2011, comprehensive income of $870,824$1,117,273 was derived from the sum of our net income of $712,305$1,375,241 plus a foreign currency translation gainloss of $158,519.ninethree months ended September 30, 2012,March 31, 2013, comprehensive income of $3,468,178$1,096,973 was derived from the sum of our net income of $3,359,870$942,321 plus a foreign currency translation gain of $108,308. For the nine months ended September 30, 2011, comprehensive income of $3,420,990 was derived from the sum of our net income of $2,838,337 plus a foreign currency translation gain of $582,653.$154,652.and nine months ended September 30, 2012March 31, 2014 and 2011,2013, we operated in three reportable business segments: (1) the TCM raw materials segment, consisting of the production and sale of yew raw materials used in the manufacture of TCM; (2) the yew tree segment, consisting of the growth and sale of yew tree seedlings and mature trees, including potted miniature yew trees; and (3) the handicrafts segment, consisting of the manufacture and sale of furniture and handicrafts made of yew timber. Our reportable segments are strategic business units that offer different products. They are managed separately based on the fundamental differences in their operations. All of our operations are conducted in the PRC.September 30, 2012 and 2011March 31, 2014 was as follows:Three months ended September 30, 2012: TCM raw
materials Yew trees Handicrafts Total Revenues $ 451,442 $ 396,416 $ 82,699 $ 930,557 Revenues — related parties 442,467 — — 442,467 Total revenues 893,909 393,416 82,699 1,373,024 Cost of revenues 73,826 21,395 51,188 146,409 Cost of revenues — related parties 84,528 — — 84,528 Total cost of revenues $ 158,354 $ 21,395 $ 51,188 $ 230,937 39 TCM raw materials Yew trees Handicrafts Total Revenues $ 589,721 $ 964,306 $ 59,691 $ 1,613,718 Revenues - related party 454,259 - - 454,259 Total revenues 1,043,980 964,306 59,691 2,067,977 Cost of revenues 119,222 249,331 46,063 414,616 Cost of revenues - related party 113,118 - - 113,118 Total cost of revenues $ 232,340 $ 249,331 $ 46,063 $ 527,734 Three months ended September 30, 2011: TCM raw
materials Yew trees Handicrafts Total Revenues $ 607,621 $ 322,015 $ 24,486 $ 954,122 Revenues — related parties 251,876 — — 251,876 Total revenues 859,497 322,015 24,486 1,205,998 Cost of revenues 120,217 88,380 11,524 220,121 Cost of revenues — related parties 41,009 — — 41,009 Total cost of revenues $ 161,226 $ 88,380 $ 11,524 $ 261,130 ninethree months ended September 30, 2012 and 2011 isMarch 31, 2013 was as follows:Nine TCM raw materials Yew trees Handicrafts Total Revenues $ 538,212 $ 856,954 $ 45,825 $ 1,440,991 Revenues - related party 357,949 - - 357,949 Total revenues 896,161 856,954 45,825 1,798,940 Cost of revenues 116,950 360,687 18,022 495,659 Cost of revenues - related party 83,010 - - 83,010 Total cost of revenues $ 199,960 $ 360,687 $ 18,022 $ 578,669 September 30, 2012: TCM raw
materials Yew trees Handicrafts Total Revenues $ 2,259,996 $ 1,853,504 $ 117,131 $ 4,230,631 Revenues — related parties 600,556 — 1,603 602,159 Total revenues 2,860,552 1,853,504 118,734 4,832,790 Cost of revenues 337,549 320,410 68,998 726,957 Cost of revenues — related parties 108,887 — 865 109,752 Total cost of revenues $ 446,436 $ 320,410 $ 69,863 $ 836,709 NineMarch 31, 2014, we sold 6,070 kg of TCM raw materials as compared to 5,327 kg of TCM raw materials during the three months ended September 30, 2011:March 31, 2013, a 14.0% increase in sales volume due primarily to increase in our overall sales to Yew Pharmaceutical, related party, and non-related party. Although we expect to see a steady increase of our revenues in the future, the actual result will depend upon the actual market demand and available supply. TCM raw
materials Yew trees Handicrafts Total Revenues $ 1,489,546 $ 1,665,665 $ 91,391 $ 3,246,602 Revenues — related parties 1,169,688 — — 1,169,688 Total revenues 2,659,234 1,665,665 91,391 4,416,290 Cost of revenues 343,839 287,681 60,068 691,588 Cost of revenues — related parties 297,004 — — 297,004 Total cost of revenues $ 640,843 $ 287,681 $ 60,068 $ 988,592 TCM raw materials a Cooperation and Development Agreement dated January 9, 2010, or the Development Agreement with Yew Pharmaceutical, a related party, for the development, production and sale of yew-based TCM. Pursuant to the Development Agreement, we sell yew branches and leaves to Yew Pharmaceutical. Yew Pharmaceutical manufactures TCM at its own facilities in Harbin in accordance with the requirements of HFDA.the Heilongjiang Food and Drug Administration (the “HFDA”). Yew Pharmaceutical is also responsible for producing the finished product in accordance with the requirements of good manufacturing practices, or GMP.GMP requirements. In this regard, Yew Pharmaceutical received a GMP certificate in November 2009, and has filed all applications with, and obtained all approvals from, the HFDA. Three Months Ended March 31, 2014 2013 Sales volume - third parties (kg) 3,290 3,077 Sales volume - related party (kg) 2,780 2,250 Total sales volume 6,070 5,327 We have instructed our sales representatives to make frequent visits to our distributors to promote our handicraft products. December 31, 2013 to March 31, 2014 Category Change Current assets: Cash $ 99,504 $ 1,159,611 $ (1,060,107 ) (91.4 )% Accounts receivable 1,837,401 418,875 1,418,526 338.7 % Accounts receivable – related party 339,044 377,821 (38,777 ) (10.3 )% Due from related party 85,159 34,031 51,128 150.2 % Inventories 1,575,509 1,089,087 486,422 44.7 % Prepaid expenses and other assets 16,600 2,697 13,903 515.5 % Current liabilities: Accounts payable - - - - % Accrued expenses and other payables 151,138 136,713 14,425 10.6 % Taxes payable 1,898 10,232 (8,334 ) (81.5 )% Due to related parties 3,400,914 4,850,637 (1,449,723 ) (29.9 )% Working capital: Total current assets $ 3,953,217 $ 3,082,122 $ 871,093 28.3 % Total current liabilities 3,553,950 4,997,582 (1,443,634 ) (28.9 )% Working capital $ 399,267 $ (1,915,460 ) $ 2,314,727 120.8 % ● an increase in accounts receivable of approximately $1,419,000; ● an increase in inventory of approximately $486,000; ● a decrease in cash of approximately $1,060,000. ● a decrease in due to related parties of approximately $1,450,000; ● net income of approximately $1,375,000 adjusted for the add-back of non-cash items, such as depreciation of approximately $46,000 and amortization of land use rights and yew forest assets of approximately $129,000; and ● the receipt of cash from operations from changes in operating assets and liabilities, such as a decrease in inventories of approximately $264,000, a decrease in accounts receivable – related party of approximately $36,000, and an increase in accrued expenses and other payables of approximately $15,000; ● the use of cash from changes in operating assets and liabilities, such as an increase in accounts receivable of approximately $1,432,000, and an increase in prepaid expenses and other assets of approximately $14,000. ● net income of approximately $942,000 adjusted for the add-back of non-cash items, such as depreciation of approximately $56,000 and amortization of land use rights and yew forest assets of approximately $89,000; and ● the receipt of cash from operations from changes in operating assets and liabilities, such as a decrease in inventories of approximately $261,000 and an increase in accrued expenses and other payables of approximately $133,000; ● the use of cash from changes in operating assets and liabilities, such as an increase in accounts receivable of approximately $761,000, an increase in accounts receivable – related party of approximately $272,000 and an increase in prepaid expenses and other assets of approximately $302,000. 30,2009, we received approximately $2.9 million of proceeds in the aggregate from offerings and sales of our common stock. Except for the portion used to pay for professional and other expenses in the U.S., substantial portions of the proceeds we received through sales of our common stock were retained in the PRC and used to fund our working capital requirements. As the PRC government imposes controls on PRC companies’ ability to convert RMB into foreign currencies and the remittance of currency out of China, from time to time, in order to fund our corporate activities in the U.S., Zhiguo Wang, our President and CEO, advanced funds to us in the U.S. and we repaid the amounts owed to him in RMB in the PRC.Contractual obligations: Total 1 year 1-3 years 3-5 years 5+ years Operating leases $ 612,458 $ 138,508 $ 25,736 $ 902 $ 443,312 Total $ 612,458 $ 138,508 $ 25,736 $ 902 $ 443,312 5,400within our normal operating cycle of one year. Any inventory in excess of our current requirements based on historical and anticipated levels of sales is classified as long-term on our consolidated balance sheets. Our classification of long-term inventory requires us to estimate the portion of inventory that can be realized over the next 12 months.Building 15 years Machinery and equipment 10 years 3 years Leasehold improvement 5 years Motor vehicles 4 years ● Have an auditor report on our internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act; ● Submit certain executive compensation matters to shareholder advisory votes, such as “say-on-pay” and “say-on-frequency”; ● Obtain shareholder approval of any golden parachute payments not previously approved; and ● Disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the Chief Executive’s compensation to median employee compensation. Years Ended December 31, 2013 2012 Revenues - third parties $ 5,889,190 $ 5,713,237 Revenues - related party 1,550,458 1,014,287 Total revenues 7,439,648 6,727,524 Cost of revenues - third parties 1,968,682 1,095,158 Cost of revenues - related party 438,718 183,899 Total cost of revenues 2,407,400 1,279,057 Gross profit 5,032,248 5,448,467 Operating expenses 1,134,511 3,243,965 Income from operations 3,897,737 2,204,502 Other income (expenses) 1,993 1,765 Net income 3,899,730 2,206,267 Other comprehensive income: Unrealized foreign currency translation gain 966,009 181,028 Comprehensive income $ 4,865,739 $ 2,387,295 Fiscal 2013 Fiscal 2012 TCM raw materials $ 4,170,748 $ 3,745,348 $ 425,400 11.4% Yew trees 3,011,728 2,819,968 191,760 6.8% Handicrafts 257,172 162,208 94,964 58.5% Total $ 7,439,648 $ 6,727,524 $ 712,124 10.6% Fiscal 2013 Fiscal 2012 TCM raw materials $ 1,117,407 $ 615,956 $ 501,451 81.4 % Yew trees 1,097,470 578,296 519,174 89.8 % Handicrafts 192,523 84,805 107,718 127.0 % Total $ 2,407,400 $ 1,279,057 $ 1,128,343 88.2 % Fiscal 2013 Fiscal 2012 TCM raw materials 73.2 % 83.6 % (10.4 )% Yew trees 63.6 % 79.5 % (15.9 )% Handicrafts 25.1 % 47.7 % (22.6 )% Total 67.6 % 81.0 % (13.4 )% Fiscal 2013 Fiscal 2012 Salary and related benefit $ 14,462 $ 15,815 Advertising - - Shipping and handling 365 1,853 Other 8,967 6,935 Total $ 23,794 $ 24,603 Fiscal 2013 Fiscal 2012 Depreciation $ 156,705 $ 187,030 Travel and entertainment 95,496 86,238 Professional fees 339,918 285,454 Research and development 23,134 14,594 Other 495,464 118,246 Total $ 1,110,717 $ 691,562 ● For fiscal 2013, depreciation decreased by $30,325 or 16.2% as compared to fiscal 2012. These decreases were primarily attributable to the decrease in depreciable assets. During fourth quarter of fiscal 2013, we purchased additional fixed assets in approximate amount of $260,000 as a result of the expansion of our business. As such, we had less depreciable assets during fiscal 2013 as compared to fiscal 2012. ● For fiscal 2013, travel and entertainment remained consistent as compared to fiscal 2012. ● Professional fees consisted primarily of legal, accounting, consulting, and other fees associated with preparing to and becoming a reporting company in the United States in amount of $103,182, $69,983, $139,952, and $26,801 respectively. For fiscal 2013, professional fees increased by $54,464, or 19.1%, as compared to fiscal 2012. This increase was primarily attributable to the increase in legal and accounting fees as a result of our becoming a reporting company in the United States in 2013. ● For fiscal 2013, research and development expense remained materially consistent as compared to fiscal 2012. ● Other miscellaneous general and administrative expenses consisted primarily of wages, auto expenses, building maintenance expenses in amount of 243,823, 75,463, and 32,268, respectively. For fiscal 2013, other miscellaneous general and administrative expense increased by $377,218 or 319.0%, as compared to fiscal 2012. The increase was primarily due to the increase in vehicle and real property maintenance expenses incurred during fiscal 2013. Yew trees Handicrafts Total Revenues $ 2,620,290 $ 3,011,728 $ 257,172 $ 5,889,190 Revenues - related party 1,550,458 - - 1,550,458 Total revenues 4,170,748 3,011,728 257,172 7,439,648 Cost of revenues 678,689 1,097,470 192,523 1,968,682 Cost of revenues - related party 438,718 - - 438,718 Total cost of revenues $ 1,117,407 $ 1,097,470 $ 192,523 $ 2,407,400 Yew trees Handicrafts Total Revenues $ 2,732,664 $ 2,819,968 $ 160,605 $ 5,713,237 Revenues - related party 1,012,684 - 1,603 1,014,287 Total revenues 3,745,348 2,819,968 162,208 6,727,524 Cost of revenues 432,922 578,296 83,940 1,095,158 Cost of revenues - related party 183,034 - 865 183,899 Total cost of revenues $ 615,956 $ 578,296 $ 84,805 $ 1,279,057 5,16022,100 kg of TCM raw materials during the three months ended September 30, 2011,fiscal 2012, a 4.7%10.5% increase in sales volume due to increased sales efforts and customer demand, while thewith a 0.8% increase in our average unit selling price. The increase in our average unit selling price remained constant.was attributable to non-related party segment which the credit policy had intensified after careful evaluation of credit risks of each customer. We sold TCM raw materials to Yew Pharmaceutical, a related party, at a fixed price of RMB 1,000,000 (approximately $158,000)$161,000) per metric ton pursuant to the Development Agreement, and we sold TCM raw materials to other customers at a price of RMB 1,100,000 (approximately $174,000)$177,000) per metric ton.40During the nine months ended September 30, 2012,In February 2010, we sold 16,800 kg of TCM raw materials as compared to 16,420 kg of TCM raw materials during the nine months ended September 30, 2011, a 2.3% increase in sales volume due to increased sales effortsbegan selling yew branches and customer demand, with a 5.1% increase in our average unit selling price. The increase in our average unit selling price was attributable to the increaseleaves that are used in the percentageproduction of total TCM raw materials sales made to our third party customers. We sold TCM raw materials toTCM. On January 9, 2010, we entered into the Development Agreement with Yew Pharmaceutical, at a fixed pricerelated party, for the development, production and sale of RMB 1,000,000 (approximately $158,000) per metric ton pursuantyew-based TCM. Pursuant to the Development Agreement, we sell yew branches and we soldleaves to Yew Pharmaceutical. Yew Pharmaceutical manufactures TCM raw materials to other customers at its own facilities in Harbin in accordance with the requirements of the Heilongjiang Food and Drug Administration (the “HFDA”). Yew Pharmaceutical is also responsible for producing the finished product in accordance with GMP requirements. In this regard, Yew Pharmaceutical received a price of RMB 1,100,000 (approximately $174,000) per metric ton.GMP certificate in November 2009, and has filed all applications with, and obtained all approvals from, the HFDA.the three months ended September 30,fiscal 2013 and fiscal 2012, and 2011, we had revenue of $442,467$1,550,458 and $251,876,$1,012,684, respectively, from the sale of TCM raw materials to Yew Pharmaceutical pursuant to the Development Agreement. As Yew Pharmaceutical did not make TCM raw materials purchases from us during the second quarter ofFor fiscal 2013 and fiscal 2012, it made more purchases in the three months ended September 30, 2012 in order to meet its production needs. For the three months ended September 30, 2012 and 2011, revenue from the sale of TCM raw materials to third parties amounted to $451,442$2,620,290 and $607,621,$2,732,664, respectively, as we had less third-party customer demand and seasonal limitations onare seeing decrease in sales to third party customers during fiscal 2013 due to intensified credit policy. Over fiscal 2013, the saleoverall mix of sales of our TCM raw materials as a resultmaterial consisted primarily of sales to related party customers due to greater market demand compared to sales of the growth ratethird party customer.trees available for cutting branchesraw material used in the production of TCM. Yew Pharmaceutical is owned directly and leaves.indirectly primarily by Mr. Wang and Madame Qi.yewTCM raw materials to a related party customer, Yew Pharmaceutical, decreasedincreased during the first two quarters of 2012fiscal 2013 because Yew Pharmaceutical had adequate inventory for its needsgreater market demand and as we focusedintensified our attention on expanding suchcredit policy for sales to third party customers. During the third quarter of 2012, sales of yew raw materials to Yew Pharmaceutical increased because Yew Pharmaceutical required more yew raw material as its own inventory decreased, while sales of yew raw material to third party customers decreased because such customers now had adequate inventory. Accordingly, our revenue generated from the related party revenuecustomers increased and our revenue generated from the third party customers decreased during the third quarter of 2012.fiscal 2013.For the nine months ended September 30, 2012 and 2011, pursuant to the Development Agreement, we had revenue of $600,556 and $1,169,688, respectively, from the sale of TCM raw materials to Yew Pharmaceutical. For the nine months ended September 30, 2012 and 2011, revenue from the sale of TCM raw materials to third parties amounted to $2,259,996 and $1,489,546, respectively, as we actively developed more sales to third party customers during 2012. Over the nine months ended September 30, 2012, the overall mix of sales of our yew raw materials consisted primarily of sales to third party customers compared to sales to the related party customer.iswas summarized as follows: Three Months Ended
September 30, Nine Months Ended
September 30, 2012 2011 2012 2011 Sales volume — third parties (kg) 2,600 3,560 13,000 8,810 Sales volume — related party (kg) 2,800 1,600 3,800 7,610 Total sales volume 5,400 5,160 16,800 16,420 Fiscal 2013 Fiscal 2012 Sales volume - third parties (kg) 14,806 15,700 Sales volume - related party (kg) 9,610 6,400 Total sales volume 24,416 22,100 decreaseincrease in our cost of revenues in therevenue of TCM raw materials segment for the three and nine months ended September 30, 2012 as compared to the corresponding periods of 2011 was primarilyis mainly attributable to improved operational efficienciespart of the yew trees in 2012.Qingshan plant were remanufactured into TCM from whole plants between March and April of 2013, which had yielded additional 37% manufacturing cost over normal TCM. Additionally, the rising cost of plant labor and revamping the material extraction method also increase the costs of TCM. We have continued to find ways to improve our operational efficiencies and cost controls in the TCM raw materials segment since we first started this segment’s operations in 2010. As a result, we were able to reduce2010 and in the cost of revenues as a percentage of our revenue.future years.41the three months ended September 30,fiscal 2012, we sold approximately 42,000456,000 yew seedlings and trees as compared to approximately 51,000383,000 yew seedlings and trees in the three months ended September 30,fiscal 2011, a decreasean increase in volume of 17.6%19.0%. For the three months ended September 30, 2012, demand for our yew trees decreased as our customers did not have as many reforestation or landscaping projects as a result of the current slowdown in the Chinese economy. In addition, because the supply of yew trees is relatively limited while our yew forests continue to grow and reach maturity, we have become more selective in selling to customers in 2012 who are capable of paying higher prices for yew trees, thereby generating greater profit margins for us, while maintaining the sustainability of our yew trees inventory for our future revenue growth. We sold more yew trees in the potted miniature trees form as a percentage of our yew tree revenues. Potted miniature trees are higher priced than yew seedlings and customers generally purchase potted miniature trees in smaller quantities. As a result,However, we saw an increasea decrease in the average unit selling price of yew trees of 49.8%3.5% for the third quarter offiscal 2012 as compared to the third quarter offiscal 2011. The increase in our average unit selling price for yew trees was primarily attributable to the different sales revenue mix with varying unit selling prices.During the nine months ended September 30, 2012, we sold approximately 227,000 yew seedlings and trees as compared to approximately 349,000 yew seedlings and trees in the nine months ended September 30, 2011, a decrease in volume of 35.0%. During the nine months ended September 30, 2012, demand for our yew seedling products decreased as our customers did not have as many forestation or landscaping projects as a result of the current slowdown in the Chinese economy. Additionally, we sold more yew trees in the potted miniature trees form. Potted miniature trees are generally more mature and higher priced than yew seedlings and customers generally purchase potted miniature trees in smaller quantities. As such, the sales volume decreased in the nine months ended September 30, 2012 as compared to the nine months ended September 30, 2011. However, we saw an increase in the average unit selling price of yew trees of 71.3% for the nine months ended September 30, 2012 as compared to the nine months ended September 30, 2011. The increase in our average unit selling price for yew trees was primarily attributable to the different sales revenue mix with varying unit selling price. The selling price of yew trees is dependent on the age, size, shape and variety of the seedling or tree. For example, generally speaking, smaller, less developed yew seedlings or trees sell for less than more mature seedlings or trees. We sold morefewer matured and larger yew seedlingstrees as a percentage of total yew trees sales during the three and nine months ended September 30,fiscal 2012 as compared to fiscal 2011, therefore, the three and nine months ended September 30, 2011.costgross margin percentage related to the sale of revenues in the yew tree segmenttrees for the three months ended September 30,fiscal 2012 as compared to the comparable period offiscal 2011 was because we sold lesshad fewer mature yew trees sold in 2012 and we had higher profit margin on those more mature yew trees products. As a result, we saw a lower overall gross margin in our yew trees segment.youngeryew trees soldfor fiscal 2013 as compared to fiscal 2012 was higher for the three months ended September 30, 2012. due to discounts that were offered to our customers to increase sales volume.the nine months ended September 30, 2012fiscal 2013 as compared to the comparable period of 2011fiscal 2012 was attributable to the increased cost of cultivating yew trees in 2012 and overall more mature yew trees with higher costs being sold in 2012.2013. We sold approximately 42,000 and 227,000496,000 yew seedlings and trees in the three and nine months ended September 30, 2012, respectively,fiscal 2013, as compared to approximately 51,000 and 349,000456,000 yew seedlings and trees in the three and nine months ended September 30, 2011, respectively.fiscal 2012. The average cost per yew tree was approximately $0.51 and $1.41$2.12 in the three and nine months ended September 30, 2012, respectively,fiscal 2013, as compared to $1.73 and $0.82$1.27 per yew tree in the three and nine months ended September 30, 2011, respectively.fiscal 2012.onin July 18, 2012 or Fuye(the “Fuye Field Agreement,Agreement”), we acquired more than 80,000 trees —– which are not yew trees —– located on that property. These trees consist of approximately 20,000 larix, 56,700 spruce and 3,700 poplar trees. Larix trees are used primarily in landscaping and we currently anticipate that we will beginexpect to start selling larix trees to customers during 2013.in the next few years. Spruce and poplar trees are used primarily as building materials andmaterials. As of March 31, 2014, we currently anticipate that we will begin selling thesealready started to sell spruce trees to customers and anticipated to start selling poplar trees in later periods,the next few years when these trees reach maturity in several years.their maturities.42Handicraftsthe three months ended September 30,fiscal 2013 and fiscal 2012, and 2011, revenue from the sale of handicrafts made from yew timber amounted to $82,699$257,172 and $24,486,$162,208, respectively, an increase of $58,213$94,964 or 237.7%. During the nine months ended September 30, 2012 and 2011, revenue from the sale of handicrafts made from yew timber amounted to $118,734 and $91,391, including sales to a related party of $1,603 and $0, respectively, an increase of $27,343 or 29.9%58.5%. We sold more yew handicrafts, including furniture, during the three and nine months ended September 30, 2012fiscal 2013 as compared to the comparable period in 2011.fiscal 2012. We increased our sales effort in promoting our high-priced yew handicraftshandcrafts in the third quarter of 2012.fiscal 2013.August 2012,2013, we begancontinued to more actively market our handicraft products. Specific steps taken and to be taken to market our handicraft products include:We will begin● We began to engage first tier distributors to distribute our handicraft products in provincial capital cities in 10 provinces; each first tier distributor is required to reach minimal annual sales volume of 2,000,000 RMB. First tier distributors will be able to purchase handicrafts from us at a price below the price that basic distributors pay for the handicraft products. In addition to the discounted first tier distributor pricing provided, we will also provide approximately 3% - 5% commission (payable in yew seedling products) to these first tier distributors. ● We began to engage second tier distributors in smaller cities. Each second tier distributor is required to reach minimal annual sales volume of 1,000,000 RMB. These distributors will also be offered beneficial pricing off the price that basic distributors pay. We will also provide approximately 2%-3% commission (payable in yew seedling products) to the second tier distributors. ● We have instructed our sales representative to make frequent visits to our distributors to promote our handicraft products. engage first tier distributorsuse the facility to distributorexhibit and warehouse our handicraft productsproducts.provincial capital citiesJanuary 2013, we also began selling some of our more moderately-priced handicrafts on a television shopping program that is broadcast in 10 provinces; each first tier distributorHeilongjiang Province, of which Harbin is required to reach minimal annual sales volume of 2,000,000 RMB. First tier distributors will be able to purchase handicrafts from us at a price below the price that basic distributors pay for the handicraft products. In addition to the discounted first tier distributor pricing provided, we will also provide approximately 3%-5% commission (payable in yew seedling products) to these first tier distributors.We will engage second tier distributors in smaller cities. Each second tier distributor is required to reach minimal annual sales volume of 1,000,000 RMB. These distributors will also be offered beneficial pricing off the price that basic distributors pay. We will also provide approximately 2%-3% commission (payable in yew seedling products) to the second tier distributors.We have instructed our sales representative to make frequent visits to our distributors to promote our handicraft products.the three and nine months ended September 30, 2012fiscal 2013 as compared to the corresponding periods of 2011fiscal 2012 was due to increased costs incurred in connection with increased sales of handicrafts and a different product mix sold.YEAR ENDED DECEMBER 31, 2011 COMPARED TO YEAR ENDED DECEMBER 31, 2010RevenuesFor the year ended December 31, 2011 (“fiscal 2011”), we had total revenues$5,961,039, as compared to $5,128,052 for the year ended December 31, 2010 (“fiscal 2010”), an increasepre-sales of $832,987 or 16.2%. In fiscal 2011, the increase in total revenue was attributable to the increase in revenue from our TCM raw material segment for which wethis product. We began to producesell this new product in the third quarter and sellexpect sales to continue in June 2010future periods.increase in revenue fromhandicrafts segment, including the sale of yew trees, offset by the decrease in revenue from the sale of handicrafts, and is summarized as follows: Fiscal 2011 Fiscal 2010 Increase
(Decrease) Percentage
ChangeTCM raw materials $ 3,458,093 $ 2,845,067 $ 613,026 21.5 % Yew trees 2,400,245 2,131,445 268,800 12.6 % Handicrafts 102,701 151,540 (48,839 ) (32.2 )% Total $ 5,961,039 $ 5,128,052 $ 832,987 16.2 % TCM raw materialsDuring fiscal 2011, we sold 21,170 kilogram of TCM raw materials as compared to 18,350 kilogram of TCM raw materials during fiscal 2010, a 15.4% increase inright sales volume quotas to establish with minimal changeour distributors, in our average unit selling price. The increase inlight of continued slower than desired sales volume was primarily attributable to increased sales efforts and customer demand in fiscal 2011.In February 2010, we began selling yew branches and leaves that are used in the production of TCM. On January 9, 2010, we entered into the Development Agreement with Yew Pharmaceutical, a related party, for43the development, production and sale of yew-based TCM. Pursuant to the Development Agreement, we sell yew branches and leaves to Yew Pharmaceutical. Yew Pharmaceutical manufactures TCM at its own facilities in Harbin in accordance with the requirements of HFDA. Yew Pharmaceutical is also responsible for producing the finished product in accordance with the GMP requirements. In this regard, Yew Pharmaceutical received a GMP certificate in November 2009, and has filed all applications with, and obtained all approvals from, the HFDA. In fiscal 2011 and fiscal 2010, pursuant to the Development Agreement, we had revenue of $1,391,826 and $1,326,203, respectively, from the sale of TCM raw materials to Yew Pharmaceutical. Additionally, in fiscal 2011 and fiscal 2010, revenue from the sale of TCM raw materials to third parties amounted to $2,066,267 and $1,518,864, respectively. Sales volume is summarized as follows: Years Ended
December 31, 2011 2010 Sales volume — third parties (kg) 12,160 9,360 Sales volume — related party (kg) 9,010 8,990 Total sales volume 21,170 18,350 Yew treesDuring fiscal 2011, we sold approximately 383,000 pieces of yew seedlings and trees as compared to approximately 953,000 pieces of yew seedlings and trees in fiscal 2010, a decrease in volume of 59.8%. The majority of the decrease in sales volume was due to an approximately 647,000 decrease in units sold for our least mature 2009 seedling product. However, we experienced an increase in the average unit selling price of yew trees of 167.4% for fiscal 2011 as compared to fiscal 2010. The increase in our average unit selling price for yew trees was primarily attributable to the different sales revenue mix with varying unit selling price. The selling price of yew trees is dependent on the age, size and variety of the seedling or tree. For example, smaller, less developed yew seedlings or trees sell for less than more mature seedlings or trees. As we had more mature seedlings and trees sold in 2011, the average unit selling price increased in 2011 accordingly.HandicraftsDuring fiscal 2011 and 2010, revenue from the sale of handicrafts made from yew timber amounted to $102,701 and $151,540, including sales to a related party of $4,787 and $12,668, respectively, a decrease of $48,839 or 32.2%.The decrease in revenue from the sale of handicrafts was primarily attributable to the downturn in antique furniture and handicrafts market reflecting the overall impact of international economy environment, especially for higher priced items such as desks and high-end furniture, and our lack of marketing efforts. In August 2012, we began to increase our marketing efforts in this operating segment.Cost of RevenuesFor fiscal 2011, cost of revenues amounted to $1,125,965 as compared to $1,638,063 for fiscal 2010, a decrease of $512,098 or 31.3%. Our cost of revenues principally consists of the cost of raw materials such as wood plates and yews, amortization of land and yew forest use rights, labor, utilities, manufacturing costs, manufacturing related depreciation, machinery maintenance costs, purchasing and receiving costs, inspection costs, and other fixed costs. For fiscal 2011, cost of revenues accounted for 18.9% of total revenues compared to 31.9% of total revenues for fiscal 2010.Cost of revenues by product categories were as follows: 2011 2010 Decrease Percentage
ChangeTCM raw materials $ 897,154 $ 924,547 $ (27,393 ) (3.0 )% Yew trees 172,460 633,027 (460,567 ) (72.8 )% Handicrafts 56,351 80,489 (24,138 ) (30.0 )% Total $ 1,125,965 $ 1,638,063 $ (512,098 ) (31.3 )% 44The decrease in our cost of revenues in the TCM raw material segment in fiscal 2011 as compared to fiscal 2010 was primarily attributable to improved operational efficiencies in fiscal 2011.The decrease in our cost of revenues in the Yew trees segments in fiscal 2011 as compared to fiscal 2010 was attributable to the less number of yew trees sold in 2011 and the cost of cultivating yew trees being less in 2011. We sold approximately 383,000 pieces of yew seedlings and trees as compared to approximately 953,000 pieces of yew seedlings and trees in fiscal 2010. The average cost per yew tree was approximately $0.45 in 2011 as compared to $0.66 per yew tree in 2010. As a result of improved operational efficiencies, we were able to reduce our cost per yew tree in 2011.The decrease in our cost of revenues in the Handicrafts segments in fiscal 2011 as compared to fiscal 210 was due to the decrease in revenue generated from the sale of handicrafts.Gross ProfitFor fiscal 2011, gross profit was $4,835,074 as compared to $3,489,989 for fiscal 2010, representing gross margins of 81.1% and 68.1%, respectively. Gross profit margins by product categories were as follows: 2011 2010 Increase
(Decrease)TCM raw materials 74.1 % 67.5 % 6.6 % Yew trees 92.8 % 70.3 % 22.5 % Handicrafts 45.1 % 46.9 % (1.8 )% Total 81.1 % 68.1 % 13.0 % The increase in our gross margin percentage related to the sale of TCM raw materials was primarily attributable operational efficiencies from the increase in our production in fiscal 2011 as compared to fiscal 2010.The increase in our gross margin percentage related to the sale of yew trees for fiscal 2011 as compared to fiscal 2010 was because we had more mature yew seedlings and trees sold in 2011 and we had higher profit margin on those more mature yew tree products. As a result, we saw an increase in our average unit selling price and higher overall gross margin in our yew tree segment.The decrease in our gross margin percentage related to the sale of handicrafts for fiscal 2011 as compared to fiscal 2010 was mainly due to the different sales revenue mix with different gross profit margin. During fiscal 2011, we sold more handicrafts with lower profit margin, which contributed to the decrease in gross profit margin.Selling Expenses Year Ended
December 31, 2011 2010 Salary and related benefit $ 12,865 $ 2,672 Advertising 8,604 2,571 Shipping and handling 16,166 11,316 Other 16,958 13,858 Total $ 54,593 $ 30,417 For fiscal 2011, selling expenses were $54,593 as compared to $30,417 for fiscal 2010, an increase of $24,176 or 79.5%. Selling expenses consisted of the following:For fiscal 2011, salary and related benefit increase by $10,193 which was primarily attributable to an increase in salaries paid to our sales staff due to the expansion in our sales team.For fiscal 2011, advertising expenses increase by $6,033 in order to enhance our visibility.45For fiscal 2011, shipping and handling expenses increased by $4,850 due to the increase in our revenue and sales activities.For fiscal 2011, other expenses increased by $3100 primarily due to the increase in travel and entertainment expenses.General and Administrative Expenses Year Ended
December 31, 2011 2010 Compensation and related benefits $ 173,571 $ 76,584 Depreciation 154,266 133,861 Travel and entertainment 86,408 80,679 Professional fees 195,044 453,642 Research and development 16,048 24,404 Other 108,478 109,709 Total $ 733,815 $ 878,879 For fiscal 2011, general and administrative expenses amounted to $733,815 as compared to $878,879 for fiscal 2010, a decrease of $145,064 or 16.5%. General and administrative expenses consisted of the following:For fiscal 2011, compensation and related benefits increased by $96,987 or 126.6%. The increase was primarily attributable to the increase in salaries paid to our management resulting from the expansion of our business in China. Additionally, during fiscal 2011 we hired our chief financial officer and other administrative staffs in connection with becoming a public company.For fiscal 2011, depreciation increased by $20,405 or 15.2%. The increase was mainly attributable to an increase in depreciable assets.Professional fees consisted of legal, accounting and other fees associated with preparing to be a public company. For fiscal 2011, professional fees decreased by $258,598 or 57.0% as compared to fiscal 2010. The decrease was primarily attributable to a decrease in legal fees of approximately $89,000, a decrease in accounting fees of approximately $93,000 and a decrease in consulting fees of approximately $77,000 related to our efforts to prepare to become a publicly listed company in the United States.For fiscal 2011, research and development expenses decreased by $8,356 or 34.2%. The decrease was because we had less research and development activities incurred.Travel and entertainment and other expenses remained materially consistent in fiscal 2011 as compared to fiscal 2010.Income from OperationsFor fiscal 2011, income from operations was $4,046,666 as compared to $2,580,693 for fiscal 2010, an increase of $1,465,973 or 56.8%.Other Income (Expenses)For fiscal 2011, total other expenses amounted to $6,355 as compared to total other income of $5,267 for fiscal 2010. The change in total other (expenses) income was primarily attributable to a loss on fixed asset disposals of $8,998 during fiscal 2011.Net IncomeAs a result of the factors described above, our net income was $4,040,311, or $0.10 per basic share and $0.08 per diluted share for fiscal 2011, as compared to $2,585,960, or $0.06 per basic share and $0.05 per diluted share for fiscal 2010.46Foreign Currency Translation AdjustmentFor fiscal 2011, we reported an unrealized gain on foreign currency translation of $778,392 as compared to $463,826 for fiscal 2010. The change reflects the effect of the value of the U.S. dollar in relation to RMB. These gains are non-cash items. As described elsewhere herein, the functional currency of our operating subsidiary, JSJ, and our VIE, HDS, is the RMB. The accompanying consolidated financial statements have been translated and presented in U.S. dollars using period end rates of exchange for assets and liabilities, and average rates of exchange for the period for net revenues, costs, and expenses. Net gains resulting from foreign exchange transactions, if any, are included in the consolidated statements of income.Comprehensive IncomeFor fiscal 2011, comprehensive income of $4,818,703 was derived from the sum of our net income of $4,040,311 plus a foreign currency translation gain of $778,392. For fiscal 2010, comprehensive income of $3,049,786 was derived from the sum of our net income of $2,585,960 plus a foreign currency translation gain of $463,826.Segment OperationsFor the years ended December 31, 2011 and 2010, we operated in three reportable business segments: (1) the sale of yew raw materials for the production of TCM; (2) yew trees; and (3) handicrafts. Our reportable segments are strategic business units that offer different products. They are managed separately based on the fundamental differences in their operations. All of our operations are conducted in the PRC.Information with respect to these reportable business segments for the years ended December 31, 2011 and 2010 is as follows:Year Ended December 31, 2011 TCM raw
materials Yew trees Handicrafts Total Revenues $ 2,066,267 $ 2,400,245 $ 97,914 $ 4,564,426 Revenues — related parties 1,391,826 — 4,787 1,396,613 Total Revenue 3,458,093 2,400,245 102,701 5,961,039 Cost of sales 515,323 172,460 53,724 741,508 Cost of sales — related parties 381,831 — 2,627 384,457 Total Cost of sales 897,154 172,460 56,351 1,125,965 Year Ended December 31, 2010 TCM raw
materials Yew trees Handicrafts Total Revenues $ 1,518,864 $ 2,131,445 $ 138,872 $ 3,789,181 Revenues — related parties 1,326,203 — 12,668 1,338,871 Total Revenue 2,845,067 2,131,445 151,540 5,128,052 Cost of sales 471,595 633,027 73,761 1,178,383 Cost of sales — related parties 452,952 — 6,728 459,680 Total Cost of sales 924,547 633,027 80,489 1,638,063 September 30, 2012 and December 31, 2011,2013 and 2012, we had cash balances of $567,798$1,159,611 and $732,371,$386,821, respectively. These funds are primarily located in various financial institutions located in China. Our primary uses of cash have been for the purchase of yew trees, land47
use rights and yew forest assets. Additionally, we use cash for employee compensation, and for working capital.117.5148 mu (approximately 19.624.7 acres) located at Fuye Field, Beizhao Village, Hongxing Town, A’cheng District in HelongjiangHeilongjiang Province, PRC. The term of the Fuye Field Agreement is 16 years, through March 2028. During the term of the Fuye Field Agreement, we have the right to develop the property for the production of yew trees. In addition, we acquired a building and more than 80,000 trees — which are not yew trees — located onWe paid off the property. In connection with the Fuye Field Agreement, we paid approximately $1.5 million as of September 30, 2012 and there is an amount payable related to the Fuye Field Agreement of approximately $0.9 million as of September 30, 2012 which was included in accounts payable on the accompanying consolidated balance sheets. We presently expect to be able to make the additional payments required by the Fuye Field Agreement from cash-on-hand and net cash flow from operations.December 31, 2012.Nine months Ended September 30, 2012 and 201120112012 to September 30, 2012:December 31, 2013: December 31, 2011 to
September 30, 2012 Category September 30,
2012 December 31,
2011 Change Percentage
change Cash $ 567,798 $ 732,371 $ (164,573 ) (22.5 )% Accounts receivable 530,471 — 530,471 100.0 % Inventories 899,783 710,844 188,939 26.6 % Prepaid rent — related party 67,292 — 67,292 100.0 % Prepaid expenses and other assets 14,245 433 13,812 3,189.8 % Accounts payable 915,792 1,360,611 (444,819 ) (32.7 )% Accrued expenses and other payables 49,939 119,901 (69,962 ) (58.3 )% Taxes payable 11,303 500 10,803 2,160.6 % Refundable common stock subscription — 950,000 (950,000 ) (100.0 )% Due to related parties 56,098 266,488 (210,390 ) (78.9 )% Total current assets $ 2,079,589 $ 1,443,648 $ 635,941 44.1 % Total current liabilities 1,033,132 2,697,500 (1,664,368 ) (61.7 )% Working capital (deficiency) $ 1,046,457 $ (1,253,852 ) $ 2,300,309 (183.5 )% December 31, Category 2013 2012 Change Percent Change Current assets: Cash $ 1,159,611 $ 386,821 $ 772,790 199.8 % Accounts receivable 418,875 722,598 (303,723 ) -42.0 % Accounts receivable – related party 377,821 284,986 92,835 32.6 % Inventories 1,089,087 991,234 97,853 9.9 % Prepaid expenses and other assets 2,697 150 2,547 1,698.0 % Prepaid expenses – related parties 34,031 60,245 (26,214 ) -43.5 % Current liabilities: Accounts payable - 990 (990 ) -100.0 % Accrued expenses and other payables 136,713 199,098 (62,385 ) -31.3 % Taxes payable 10,232 5,722 4,510 78.8 % Due to related parties 4,850,637 47,876 4,802,761 10,031.7 % Working capital: Total current assets $ 3,082,122 $ 2,446,034 $ 636,088 26.0 % Total current liabilities 4,997,582 253,686 4,743,896 1870.0 % Working capital (deficiency) $ (1,915,460 ) $ 2,192,348 $ (4,107,808 ) -187 % increased $2,300,309decreased by $4,107,808 to $1,046,457$(1,915,460) at September 30, 2012,December 31, 2013, from a working capital deficiency of $(1,253,852)$2,192,348 at December 31, 2011.2012. This increasedecrease in working capital is primarily attributable to:An increase in accounts receivable of approximately $530,000;An increase in inventories of approximately $189,000;An increase in prepaid rent — related parties of approximately $67,000;● A decrease in accounts receivable of approximately $304,000; ● A decrease in prepaid expenses – related parties of approximately $26,000; ● An increase in due to related party of approximately $4,803,000; An increase in prepaid expenses and other assets of approximately $14,000;A decrease in accounts payable of approximately $445,000;A decrease in accrued expenses and other payables of approximately $70,000;A decrease in refundable common stock subscription of approximately $950,000;A decrease in due to related parties of approximately $210,000;48offsetOffset by:A decrease in cash of approximately $165,000; andAn increase in taxes payable of approximately $11,000.● An increase in cash of approximately $773,000; ● An increase in accounts receivable – related party of approximately $93,000; ● An increase in inventories of approximately $98,000; ● A decrease in accrued expenses and other payables of approximately $62,000. nine monthsyear ended September 30, 2012,December 31, 2013, net cash flow provided by operating activities was $345,813,$4,442,824, as compared to net cash flow provided by operating activities of $4,368,029$418,563 for the nine monthsyear ended September 30, 2011, a decreaseDecember 31, 2012, an increase of $4,022,216.$4,024,261. Because the exchange rate conversion is different for the balance sheet and the statements of cash flows, the changes in assets and liabilities reflected on the statements of cash flows isare not necessarily identical with the comparable changes reflected on the balance sheets.nine monthsyear ended September 30,December 31, 2013, net cash flow provided by operating activities of $4,442,824 was primarily attributable to:● Net income of approximately $3,900,000 adjusted for the add-back of non-cash items, such as: depreciation of approximately $180,000, and amortization of land use rights and yew forest assets of approximately $382,000, and ● The receipt of cash from operations from changes in operating assets and liabilities, such as: decrease in accounts receivable of approximately $323,000. ● The use of cash from changes in operating assets and liabilities, such as: an increase in accounts receivable – related party of approximately $82,000, an increase in inventory of approximately $223,000, and decrease in accrued expenses and other payable of approximately $65,000. $345,813$418,563 was primarily attributable to:net income of approximately $3,360,000 adjusted for the add-back of non-cash items, such as: depreciation of approximately $159,000, and amortization of land use rights and yew forest assets of approximately $259,000, and● net income of approximately $2,206,000 adjusted for the add-back of non-cash items, such as: depreciation of approximately $217,000, and amortization of land use rights and yew forest assets of approximately $347,000, and ● the receipt of cash from operations from changes in operating assets and liabilities, such as: an increase in accrued expenses and other payables of approximately $79,000; the receipt of cash from operations from changes in operating assets and liabilities of approximately $34,000,partially offsetOffset primarily by:the use of cash from changes in operating assets and liabilities, such as: an increase in accounts receivable of approximately $531,000, an increase in inventories of approximately $2,335,000 mainly due to the acquired trees from Fuye Field Agreement, an increase in prepaid rent — related parties of approximately $67,000, a decrease in accounts payable of approximately $452,000 and a decrease in accrued expenses and other payables of approximately $67,000.For the nine months ended September 30, 2011, net cash flow provided by operating activities of $4,368,029 was primarily attributable to:● The use of cash from changes in operating assets and liabilities, such as: an increase in accounts receivable of approximately $722,000, and an increase in accounts receivable – related party of approximately $285,000, and increase in prepaid expenses – related parties of approximately $60,000, and an increase in inventories of approximately $2,090,000, a decrease in accounts payable of approximately $1,369,000 and a decrease in due to related parties of approximately $157,000. net income of approximately $2,838,000 adjusted for the add-back of non-cash items, such as depreciation of approximately $128,000, amortization of land use rights and yew forest assets of approximately $213,000, loss on disposal of fixed assets of approximately $10,000; andthe receipt of cash from operations from changes in operating assets and liabilities, such as: a decrease in inventories of approximately $859,000, an increase in accounts payable of approximately $502,000,partially offset by the use of cash from changes in operating assets and liabilities, such as a decrease in advances from customers of approximately $174,000.$274,000$3,693,000 for the nine monthsyear ended September 30, 2012,December 31, 2013, as compared to net cash flow used in investing activities of approximately $5,608,000$706,000 for the nine monthsyear ended September 30, 2011.December 31, 2012. During the nine monthsyear ended September 30, 2012,December 31, 2013, we spent approximately $208,000$300,000 on purchase of property and equipment and spent approximately $66,000$3,393,000 on purchasepayment of land use rights and yew forest assets. During the nine monthsyear ended September 30, 2011,December 31, 2012, we spent approximately $134,000$314,000 on purchase of property and equipment and spent approximately $5,495,000$392,000 on purchase of land use rights and yew forest assets, offset by proceeds from disposal of property and equipment of approximately $20,000.assets.inby financing activities was approximately $239,000$210 for the nine monthsyear ended September 30, 2012,December 31, 2013, as compared to net cash flow provided by financing activities of approximately $200,000$63,000 for the nine monthsyear ended September 30, 2011.December 31, 2012. During the nine monthsyear ended September 30,December 31, 2013 and 2012, we made repayments to a related party of approximately $239,000. During the nine months ended September 30, 2011, we received proceeds from related party advances of approximately $137,000 and received proceeds from a director’s advances of approximately $63,000.49Years ended December 31, 2011 and 2010The following table sets forth information as to the principal changes in the components of our working capital from December 31, 2010 to December 31, 2011: December 31, 2010 to
December 31, 2011 Category December 31,
2011 December 31,
2010�� Change Percentage
ChangeCurrent assets: Cash $ 732,371 $ 1,850,488 $ (1,118,117 ) (60.4 )% Due from related parties — 57,131 (57,131 ) (100.0 )% Inventories 710,844 972,048 (261,204 ) (26.9 )% Prepaid expenses and other assets 433 2,250 (1,817 ) (80.8 )% Current liabilities: Accounts payable 1,360,611 1,810,092 (449,481 ) (24.8 )% Advance from customers — 322,151 (322,151 ) (100.0 )% Accrued expenses and other payables 119,901 55,604 64,297 115.6 % Taxes payable 500 7,112 (6,612 ) (93.0 )% Refundable common stock subscription 950,000 950,000 — — Due to related parties 266,488 141,276 125,212 88.6 % Working capital: Total current assets $ 1,443,648 $ 2,881,917 $ (1,438,269 ) (50.91 )% Total current liabilities 2,697,500 3,286,235 (588,735 ) (17.9 )% Working capital deficiency $ (1,253,852 ) $ (404,318 ) $ (849,534 ) (210.1 )% Our working capital deficiency increased by $436,242 to $(1,340,680) at December 31, 2011 from a working capital deficiency of $(404,318) at December 31, 2010. This increase in working capital deficiency is primarily attributable to:A decrease in cash of approximately $1,118,000,A decrease in inventories of approximately $347,962An increase in due to related parties of approximately $125,000,offset by:A decrease in accounts payable of approximately $449,000, andA decrease in advances from customers of approximately $322,000.For fiscal 2011, net cash flow provided by operating activities was $4,370,422 as compared to $7,777,324 for fiscal 2010, a decrease of $3,406,902. Because the exchange rate conversion is different for the balance sheet$210 and the statements of cash flows, the changes in assets and liabilities reflected on the statements of cash flows is not necessarily identical with the comparable changes reflected on the balance sheets.$63,000, respectively.For fiscal 2011, net cash flow provided by operating activities of $4,370,422 was primarily attributable to:net income of approximately $4,040,000 adjusted for the add-back of non-cash items, such as: depreciation of approximately $178,000, and amortization of land use rights and yew forest assets of approximately $293,000, andthe receipt of cash from operations from changes in operating assets and liabilities, such as: a decrease in inventories of approximately $606,000, a decrease in due from related parties of approximately $26,000, and an increase in accrued expenses and other payable of approximately $62,000,50offset primarily by:the use of cash from changes in operating assets and liabilities, such as: a decrease in accounts payable of approximately $511,000 and a decrease in advances from customers of approximately $329,000.For fiscal 2010, net cash flow provided by operating activities of $7,777,324 was primarily attributable to:net income of approximately $2,586,000 adjusted for the add-back of non-cash items, such as depreciation of approximately $158,000, amortization of land use rights and yew forest assets of approximately $48,000, stock-based compensation expense of $50,000, andthe receipt of cash from operations from changes in operating assets and liabilities, such as: a decrease in accounts receivable of approximately $2,354,000 related to the collection of outstanding accounts receivable balances, a decrease in advance to suppliers of approximately $633,000, an increase in accounts payable of approximately $1,737,000 and an increase in advances from customers of approximately $314,000.offset by the use of cash from changes in operating assets and liabilities, such as: an increase in inventories of approximately $222,000.Net cash flow used in investing activities was $5,687,716 for fiscal 2011 as compared to net cash flow used in investing activities of $9,164,038 for fiscal 2010. During fiscal 2011, we spent approximately $192,000 on purchase of property and equipment and spent approximately $5,516,000 on purchase of land use and yew forest assets rights, offset by proceeds from disposal of property and equipment of approximately $20,000. During fiscal 2010, we spent approximately $169,000 on purchase of property and equipment and spent approximately $9,022,000 on purchase of land use and yew forest assets rights, offset by proceeds from disposal of property and equipment of approximately $27,000.Net cash flow provided by financing activities was $88,119 for fiscal 2011 as compared to net cash flow provided by financing activities of $1,326,624 for fiscal 2010. During fiscal 2011, we received proceeds from related party advances of approximately $88,000. During fiscal 2010, we received proceeds from refundable common stock subscription of $950,000 and received proceeds from related party advances of approximately $434,000, offset by repayments made for directors’ advances of approximately $57,000.$24.5$25.7 million of our net51
assets are located in the PRC. If the foreign exchange control system prevents us from obtaining sufficient foreign currency to satisfy our currency demands, and we may not be able to move funds deposited within the PRC to fund working capital requirements in the U.S. or pay dividends, which we have declared not but might declare in the future, in currencies other than the RMB, to our shareholders.September 30, 2012,December 31, 2013, and the effect these obligations are expected to have on our liquidity and cash flows in future periods:Contractual obligations: Total 1 year 1–3 years 3–5 years 5+ years Operating leases $ 667,293 $ 36,004 $ 69,561 $ 63,924 $ 497,804 Land and yew forest rights (1) 895,532 105,778 789,754 — — Total $ 1,562,825 $ 141,782 $ 859,315 $ 63,924 $ 497,804 Contractual obligations: Total 1 year 2-3 years 3-5 years 5+ years Operating leases $ 606,357 $ 6,341 $ 136,694 $ 25,007 $ 438,315 Total $ 606,357 $ 6,341 $ 136,694 $ 25,007 $ 438,315 (1) On July 18, 2012, we entered into the Fuye Field Agreement, pursuant to which we acquired the right to use land with an area of 117.5 mu (approximately 19.6 acres), for a term of 16 years, through March 2028. We also acquired a building, and more than 80,000 trees — which are not yew trees — located on the property. During the term of the Fuye Field Agreement, we have the right to develop the property for the production of yew trees. The aggregate purchase price of RMB 15,002,300 (approximately $2,377,000) was divided into three installments. As of September 30, 2012, we made payment of RMB 9,330,000 (approximately $1.5 million) and we are required to pay RMB 670,000 (approximately $106,000) on December 25, 2012 and RMB 5,002,300 (approximately $790,000) on or before December 25, 2013.Off-BalanceOff-balance Sheet Arrangementsus.us52GeneralCompany, through YBP;discussion of our business is as of the date of filing this report, unless otherwise indicated.HKBio-Pharm Holdings Limited (individually, “Yew HK”), a corporation organized under the laws of Hong Kong, and JSJ;Heilongjiang Jinshangjing Bio-Technology Development Co., Limited (individually, “JSJ”), a corporation organized in the People’s Republic of China, (“China” or the “PRC”); and itsa deemed variable interest entity, or VIE, HDS; isHarbin Yew Science and Technology Development Co., Ltd. (individually, “HDS”), a corporation organized in the PRC.We have entered into several land use agreements with various parties, which provide the potential for us to grow a large number of yew trees on large areas of land over the next few decades, although we cannot currently estimate the number of trees we will grow or the total amount of land we will put into production over such period.● We have entered into several land use agreements with various parties, which provide the potential for us to grow a large number of yew trees on large areas of land over the next few decades, although we cannot currently estimate the number of trees we will grow or the total amount of land we will put into production over such period. ● We employ proprietary, patented accelerated growth technology, the Asexual Reproduction Method, to bring yew trees to commercialization decades faster than growing yew trees naturally. ● Because of our more productive and faster rate of yew cultivation, we have a sufficient supply of raw material to allow us to use the branches and leaves, rather than the bark, of yew trees, to sell to customers for the purpose of making TCM. The yew industry is highly regulated in the PRC because the yew tree is considered an endangered species. By harvesting only branches and leaves of yew trees we respond to both environmental sensitivities and regulations, because cutting the bark of the yew trees will damage the trees and stop it from growing new branches. ● We have permits from the Heilongjiang provincial government to sell our yew trees and manufacture handicrafts using yew timber. We believe that we are one of only a handful of companies in the PRC with permissions to manufacture handicrafts using yew timber. ● The TCM raw materials and yew tree segments of our business are tax-free in the PRC. We employ proprietary, patented accelerated growth technology, the Asexual Reproduction Method, to bring yew trees to commercialization decades faster than growing yew trees naturally.Because of our more productive and faster rate of yew cultivation, we have a sufficient supply of raw material to allow us to use the branches and leaves, rather than the bark, of yew trees, to sell to customers for the purpose of making TCM. The yew industry is highly regulated in the PRC because the yew tree is considered an endangered species. By harvesting only branches and leaves of yew trees we respond to both environmental sensitivities and regulations, because cutting the bark of the yew trees will damage the trees and stop it from growing new branches.We have permits from the Heilongjiang provincial government to sell our yew trees and manufacture handicrafts using yew timber. We believe that we are one of only a handful of companies in the PRC with permissions to manufacture handicrafts using yew timber.The TCM raw materials and yew tree segments of our business are tax-free in the PRC.53nine monthsyear ended September 30, 2012,December 31, 2013, our TCM raw materials revenue represented approximately 59.2%56.1% of consolidated revenue (including 12.4%20.8% of consolidated revenues to related parties); sale of yew trees represented approximately 38.3%40.5% of consolidated revenue; and the sale of handicrafts represented approximately 2.5%3.5% of consolidated revenue (including 0.1% of consolidated revenues to related parties).revenue. For the nine monthsyear ended September 30, 2011,December 31, 2012, our TCM raw materials revenue represented approximately 60.2%55.7% of consolidated revenue (including 26.5%15.1% of consolidated revenues to related parties); sale of yew trees represented approximately 37.7%41.9% of consolidated revenue; and the sale of handicrafts represented approximately 2.1% of consolidated revenue.For the year ended December 31, 2011, revenues from the sale of TCM raw materials represented approximately 58.0%2.4% of consolidated revenue (including 23.3%less than 0.1% of consolidated revenues to related parties); sale of yew trees represented approximately 40.3% of consolidated revenue; and the sale of handicrafts represented approximately 1.7% of consolidated revenue. For the year ended December 31, 2010, our TCM raw materials revenue represented approximately 55.5% of consolidated revenue (including 25.9% of consolidated revenues to related parties); sale of yew trees represented approximately 41.6% of consolidated revenue; and the sale of handicrafts represented approximately 2.9% of consolidated revenue.. We expect that sales from our TCM raw materials segment will become an increasingly important source of revenue for us.www.yewchina.comwww.yewbiopharm.com. No part of our website is incorporated into this registration statement or any other report we file with the Securities and Exchange Commission, or the SEC, from time to time.17,59619,759 Mu (approximately 2,9332,957 acres) of forested land. We currently have the capacity to grow up to two million yew nursery seedlings annually. We also have contractual rights to use an additional 1,000,000 Mu (approximately 166,667 acre) site in Wuchang, which land we currently do not utilize, for future expansion of our yew tree growing operations.54
utilizing the Asexual Reproduction Method addresses an imbalance between supply and demand for yew trees, both for reforestation and use in the production of cancer-fighting TCM.profit-55sharingprofit-sharing feature of this agreement, we presently intend to focus on cultivating yew trees on other land subject to existing and possibly future land use agreements as our priority for at least the next few years.Taxol®Taxol®. The PRC State Food and Drug Administration, or the SFDA, approved a new drug certification for taxol in 1995.56
yew. Alternative ways to develop taxol from renewable resources is ongoing. These include taxol-producing fungi from the yew tree and using other parts of the yew tree that may contain taxol.—- Institute of Medicinal Plants, the Northeast yew plays a role as a diuretic, detumescence and in restoring menstrual flow. The approval from HFDA allows Yew Pharmaceutical to sellZi Shan throughout the PRC.registration statement,report, the application is pending.5758the Fuye Field Agreementa land use agreement in July 2012 (the “Fuye Field Agreement”), we acquired more than 80,000 trees —– which are not yew trees —– located on that property. These trees consist of approximately 20,000 larix, 56,700 spruce and 3,700 poplar trees. Larix trees are used primarily in landscaping and we currently anticipate that we will beginexpect to start selling larix trees to customers during 2013.in the next few years. Spruce and poplar trees are used primarily as building materials andmaterials. As of March 31, 2014, we currently anticipate that we will begin selling thesealready started to sell spruce trees to customers and anticipated to start selling poplar trees in later periods,the next few years when these trees reach maturity in several years.their maturities.20102012 and 2011.2013.a pair of yew chopsticks sells for approximately RMB198;a fountain pen sells for approximately RMB 2480;● a pair of yew chopsticks sells for approximately RMB198; ● a fountain pen sells for approximately RMB 2,480; ● sculptures can sell for tens of thousands of RMB; and ● large pieces of furniture can sell for more than RMB 100,000. large pieces of furniture can sell for more than RMB 100,000.59Suppliersprimarily servesell our products exclusively in the Chinese domestic market. The sale of yew trees for reforestation in Heilongjiang Province and Jilin Province is to both state-owned enterprises and private businesses.nine monthsyear ended September 30,December 31, 2013, the following customers accounted for 10% or more of our consolidated revenue:● Yew Pharmaceutical accounted for approximately 21% of our consolidated revenue ● Wuchang Xinling Industry Co., Ltd., accounted for approximately 17% of our consolidated revenue Anhui Bairun accounted for approximately 16% of our consolidated revenueShenzhen Keiji accounted for approximately 14% of our consolidated revenueChangchun Hengtai accounted for approximately 14%● Changchun Hengtai Medicine., Ltd., or Changchun Hengtai, accounted for approximately 17% of our consolidated revenue ● Yew Pharmaceutical accounted for approximately 15% of our consolidated revenue ● Anhui Baiyun Medicine Co., Ltd., or Anhui Bairun, accounted for approximately 11% of our consolidated revenue ● Shenzhen City Lianchengfa Science and Technology, or Liangchengfa, accounted for approximately 10% of our consolidated revenue Wuchang Hongyi Co., Ltd. accounted for approximately 13% of our consolidated revenueYew Pharmaceutical accounted for approximately 12% of our consolidated revenueShenzhen Tianyitang accounted for approximately 11% of our consolidated revenueFor the year ended December 31, 2011, the following customers accounted for 10% or more of our consolidated revenue:Anhui Bairun accounted for approximately 29% of our consolidated revenueYew Pharmaceutical accounted for approximately 23% of our consolidated revenueWuchang Hongyi accounted for approximately 13% of our consolidated revenueChangchun Hengtai accounted for approximately 10% of our consolidated revenue.theThe supply of ceramic pots that we purchase from third-parties suppliers that we use to transplant cultivated yew trees is good and prices are stable.60
specifications of our customers. We currently use this facility to exhibit and warehouse our products. Prices and delivery time for custom pieces vary depending upon the item and time of year, since our artisans work primarily during the warmer months from April to September.• ● We will beginbegan to engage first tier distributors to distributor our handicraft products in provincial capital cities in 10 provinces; each first tier distributor is required to reach minimal annual sales volume of 2,000,000 RMB. First tier distributors will be able to purchase handicrafts from us at a price below the price that basic distributors pay for the handicraft products. In addition to the discounted first tier distributor pricing provided, we will also provide approximately 3%-5% commission (payable in yew seedling products) to these first tier distributors.• ● We will engageengaged second tier distributors in smaller cities. Each second tier distributor is required to reach minimal annual sales volume of 1,000,000 RMB. These distributors will also be offered beneficial pricing off the price that basic distributors pay. We will also provide approximately 2%-3% commission (payable in yew seedling products) to the second tier distributors.• ● We have instructed our sales representatives to make frequent visits to our distributors to promote our handicraft products. 61“Yew Tree Plant Extracts, Methods for Extracting the Plant Extracts and Application”, or the Yew Extract Method, was granted by the State Intellectual Property Office, or SIPO, to HDS on August 16, 2011. This patent had previously been held by Heilongjiang Yew Pharmaceutical Co., Ltd. This patent is valid for 20 years, from June 23, 2004 through June 22, 2024.“Northeast Yew Asexual Reproduction Method”, or the Asexual Reproduction Method, was granted by SIPO to HDS on September 21, 2011. This patent is valid for 20 years, from September 30, 2010 through September 29, 2030.● “Yew Tree Plant Extracts, Methods for Extracting the Plant Extracts and Application”, or the Yew Extract Method, was granted by the State Intellectual Property Office, or SIPO, to HDS on August 16, 2011. This patent had previously been held by Heilongjiang Yew Pharmaceutical Co., Ltd. This patent is valid for 20 years, from June 23, 2004 through June 22, 2024. ● “Northeast Yew Asexual Reproduction Method”, or the Asexual Reproduction Method, was granted by SIPO to HDS on September 21, 2011. This patent is valid for 20 years, from September 30, 2010 through September 29, 2030. The Asexual Reproduction Method addresses the low rooting rate problem and accelerates the seedling rate and the maturity period for Northeast yew. It increases the rooting rate to over 80% and the seedling rate to over 85% for Northeast yew. It can bring the Northeast yew to maturity and ready for commercialization for medical use in as little as two-to-three years, compared to more than 50 years for naturally growing yew trees.● The Asexual Reproduction Method addresses the low rooting rate problem and accelerates the seedling rate and the maturity period for Northeast yew. It increases the rooting rate to over 80% and the seedling rate to over 85% for Northeast yew. It can bring the Northeast yew to maturity and ready for commercialization for medical use in as little as two-to-three years, compared to more than 50 years for naturally growing yew trees. ● Large colonies can form to out-compete other organisms for nutrients. The active ingredients in the offspring were relatively stable with little difference. ● There is high chance of survival of the offspring with little variation. Large colonies can form to out-compete other organisms for nutrients. The active ingredients in the offspring were relatively stable with little difference.There is high chance of survival of the offspring with little variation.$24,404$23,134 and $16,048$14,594 of research and development expenses in 20102013 and 2011, respectively, and we did not incur research and development expenses for the nine months ended September 30, 2012.2012, respectively.62Competition63
position, but, because of the evolving nature of such regulations, we are unable to predict the impact such regulation may have in the foreseeable future.64
one entity shareholder. On June 28, 2008, 29 individual shareholders of HDS transferred their shares in HDS to Mr. Wang and one individual shareholder transferred its shares in HDS to Xingming Han, and there was an increase of the registered capital of HDS from RMB 30,000,000 to RMB 45,000,000, the balance of which was paid by Mr. Wang in the amount of RMB 10,500,000 and HEFS in the amount of RMB 4,500,000.wholly-owned foreignwholly foreign-owned enterprise, or WOFE, of YBP. HECPB is a governmental department of the City of Harbin with responsibility for business and economic cooperation and development in the city. According to the website of HECPB, it was established by the People’s Government of Harbin in 2004 and is in charge of issuing approvals and related documents to foreign companies with investments in Harbin. HECPB may be regarded as a municipal counterpart to and acting under grant of authority from MOFCOM, which has the ultimate authority with respect to matters pertaining to businesses operating in the PRC, including foreign ownership of businesses and WOFEs.
Mr. Wang 76.65 % Madame Qi 18.53 % Mr. Han 4.82 % • ● 66such month, or the Monthly Net Income, and (b) pay 80% of such Monthly Net Income to JSJ, each such payment referred to as a Monthly Payment. Within ninety (90) days after the end of each fiscal year, HDS shall (a) deliver to JSJ financial statements of HDS for such fiscal year, which shall be audited and certified by an independent certified public accountant approved by JSJ, and (b) pay an amount to JSJ equal to the shortfall, if any, of the aggregate net income of HDS for such fiscal year, as shown in such audited financial statements, as compared to the aggregate amount of the Monthly Payments paid by HDS to JSJ in such fiscal year. HDS also granted an irrevocable and exclusive option to JSJ to purchase any and all of the assets of HDS, to the extent permitted under PRC law, at the lowest price permitted by PRC law. Unless earlier terminated in accordance with the provisions of the Business Cooperation Agreement or other agreements separately executed between JSJ and HDS, the Business Cooperation Agreement is for a term of ten years and expires on November 5, 2020; however, the term of the Business Cooperation Agreement may be extended if confirmed in writing by JSJ prior to the expiration of the term thereof. The period of the extended term shall be determined exclusively by JSJ and HDS shall accept such extended term unconditionally. Unless JSJ commits gross negligence, or a fraudulent act, against HDS, HDS shall not terminate the Business Cooperation Agreement prior to the expiration of the term, including any extended term. Notwithstanding the foregoing, JSJ shall have the right to terminate the Business Cooperation Agreement at any time upon giving 30 days’ prior written notice to HDS. • ● • ● • ● 67been granted an exclusive, irrevocable power of attorney to take actions in the place and stead of the HDS Shareholder, to act on behalf of the HDS Shareholder as his or her exclusive agent and attorney with respect to all matters concerning the HDS Shareholder’s equity interests in HDS, including without limitation, the right to: 1) attend shareholders’ meetings of HDS; 2) exercise all the HDS Shareholder’s rights, including voting rights under PRC laws and HDS’s Articles of Association, including but not limited to the sale or transfer or pledge or disposition of the HDS Shareholder’s equity interests in HDS in whole or in part; and 3) designate and appoint on behalf of the HDS Shareholder the legal representative, executive director, supervisor, manager and other senior management of HDS. the State Administration of Foreign Exchange, or SAFE, pursuant to the requirements under SAFE Circular 75.
March 11,April 1, 2013, the HDS Shareholders collectively owned 22,805,512 shares, or approximately 45.61%, of YBP’s common stock, or the HDS Shareholders’ Stock. Before, during and after the Second Restructure, the HDS Shareholders served as the sole directors and principal executive officers of the Company, other than the position of CFO.68
Nevada Corporations Law allows for shareholder ratification after-the-fact of transactions requiring shareholder approval. See Item 13, “Certain Relationships and Related Transactions, and Director Independence”.The issuance of the Founders’ Options was subject to pre-issuance approval by our shareholders, which approval was obtained at the Special Meeting;● the issuance of the Founders’ Options was subject to pre-issuance approval by our shareholders, which approval was obtained at the Special Meeting; ● each Founder’s Option was fully vested upon issuance; ● each Founder’s Option is exercisable for a period of five years; ● each Founder’s Option has a per share exercise price equal to the fair market value of a shares of YBP common stock on the date of grant, or $0.22 per share; and ● each Founder’s Option has a cashless exercise feature, pursuant to which, at the optionee’s election, he or she may choose to deliver previously-owned shares of YBP common stock in payment of the exercise price or not pay the exercise price of the Founder’s Option and receive instead a reduced number of shares of YBP common stock reflecting the value of the number of shares of YBP common stock equal to the difference, if any, between the aggregate fair market value of the shares issuable upon exercise of the Founder’s Option and the exercise price of the Founder’s Option. Each Founder’s Option was fully vested upon issuance;Each Founder’s Option is exercisable for a period of five years;Each Founder’s Option has a per share exercise price equal to the fair market value of a shares of YBP common stock on the date of grant, or $0.22 per share; andEach Founder’s Option has a cashless exercise feature, pursuant to which, at the optionee’s election, he or she may choose to deliver previously-owned shares of YBP common stock in payment of the exercise price or not pay the exercise price of the Founder’s Option and receive instead a reduced number of shares of YBP common stock reflecting the value of the number of shares of YBP common stock equal to the difference, if any, between the aggregate fair market value of the shares issuable upon exercise of the Founder’s Option and the exercise price of the Founder’s Option.Number of Optionee Zhioguo Wang 20,103,475 Guifang Qi 2,488,737 Xingming Han 213,300 69Shareholder Number
Shares
Presently
Held Percentage
of Issued
Shares
Presently
Held Number
Shares Held
Assuming
Exercise of
All
Founders’
Options Percentage of
Issued Shares
Following
Exercise of All
Founders’
OptionsZhiguo Wang 20,103,475 40.21 % 40,206,950 55.23 % Guifang Qi 2,488,737 4.98 % 4,977,474 6.84 % Xingming Han 213,300 0.43 % 426,600 0.59 % All HDS Shareholders as a group (3 persons) 22,805,512 45.61 % 45,611,024 62.65 % All other existing shareholders 27,194,488 54.39 % 27,194,488 37.35 % Total 50,000,000 100.00 % 72,805,512 100.00 % Shareholder Zhiguo Wang 20,103,475 40.21 % 40,206,950 55.23 % Guifang Qi 2,488,737 4.98 % 4,977,474 6.84 % Xingming Han 213,300 0.43 % 426,600 0.59 % All HDS Shareholders as a group (3 persons) 22,805,512 45.61 % 45,611,024 62.65 % All other existing shareholders 27,194,488 54.39 % 27,194,488 37.35 % Total 50,000,000 100.00 % 72,805,512 100.00 % September 30, 2012,December 31, 2013, we had approximately 80100 employees, of whom approximately 4161 were full-time employees and approximately 39 were part-time employees. Of these employees, all full-time employees and all but two part-time employees were employed in the PRC. Our employees belong to a trade union. We believe that we maintain good labor relations with our employees. We also hire additional people for brief periods of time during peak production and processing seasons.40,00050,000 at December 31, 2011 and RMB 60,000at September 30, 20122013 and there is an additional penalty of up to RMB 50,000 that we are required to pay for our failure to make this contribution in a timely manner.About HarbinDESCRIPTION OF PROPERTIESHarbin is the capital of Heilongjiang Province in Northeast China, an area sometimes referred to in the West as Manchuria. The city lies in southern Heilongjiang Province, on the southeastern edge of the Songnen Plain and the southern bank of the Songhua River. Harbin is the tenth largest city in the PRC, with a population of approximately 9.9 million people. It serves as a key political, economic, scientific, cultural, communications and transportation hub in Northeastern China. Harbin is one of the largest railway hubs in Northeast China, with five major railways (Jingha, Binsui, Binzhou, Binbei and Labin) meeting here.Harbin enjoys a diversified economy, including light industry, textile, medicine, foodstuff, automobile, metallurgy, electronics, building materials and chemicals. The Harbin International Economic and Trade Fair has been held annually since 1990 and is one of the largest foreign trade fairs authorized by the Chinese government. The fair attracts exhibitors and visitors from throughout Asia, including Japan and Korea, and other important regional countries, including Russia.Harbin has a continental climate with hot, humid summers and extremely cold, dry and sunny winters. Both spring and fall are short transition seasons. Average annual precipitation is low, at 20.6 inches, and is heavily concentrated from May to September. Harbin’s climate is favorable for growing yew trees.The modern city of Harbin originated in 1898 from a small village, with the start of the construction of the Chinese Eastern Railway by Russia, an extension of the Trans-Siberian Railway, shortcutting substantially70the distance to Vladivostok and creating a link to the Chinese port city of Dalian and the Russian Naval Base at Port Arthur.With the establishment of the Japanese puppet state of Manchukuo, Japanese troops occupied Harbin on February 4, 1932. The Soviet Army took the city on August 20, 1945 and transferred the city’s administration to the Chinese People’s Liberation Army in April 1946.Properties2011,2012 and 2013, aggregated approximately $9,830.$11,024 and $10,336, respectively. See Item 13, “Certain Relationships and Related Transactions, and Director Independence”. None of YBP, Yew HK orowns or rents any properties.HDS leasesentered into a lease for office space in the Xiangfang District of Harbin from(the “JSJ Lease”) with the Company’s President, Zhiguo Wang, under a 15-year lease commencing January 1, 2010 and expiring December 31, 2025. We pay rentas lessor. Pursuant to the JSJ Lease, JSJ leases approximately 30 square meters of office space from Mr. Wang in Harbin, in the amountsame premises used by HDS for its office space. Rent under the JSJ Lease is RMB 10,000 annually for a term of RMB 15,000 per year.three years, expiring on June 30, 2015. We believe that the rent is at or below market for the space we are occupying. See Item 13, “Certain Relationships and Related Transactions, and Director Independence”.raterent at an annual rate of RMB 25,000 for each year of the terms as follows: RMB 250,000 on or before December 31, 2012 for the first ten years of the term; RMB 125,000 on or before December 31, 2017 for the next five years of the term; and a final payment of RMB 175,000 on or before the end of the term for the remaining seven years of the term. We made the first payment covering the first ten years of rent in the amount of RMB 250,000 in February 2012.71Date of Agreement Location Land Use Area Term March 21, 2004 Wuchang City 1,000,000 mu 30 years March 22, 2004 ChangshanChengshan Niu 125 mu 50 years April 4, 2004 Government(Beichuan VillageCommittee)Beichuan Village,Pingshan Town 400 mu(1) 50 years March 25, 2005 ZTC 361 mu 30 years January 18, 2008 Shukun Jiang andShubao Jiang 290 mu 50 years March 4, 2010 15,865 mu 45 years July 18, 2012 Huazhong Liu 117.5 mumu(2) 16 years November 15, 2013 2,565 mu 38 years (1) This agreement provides for 400 mu, which is the total usable area subject to the agreement. A survey completed after the agreement was entered into concluded that a total of 955 mu is covered by the agreement, to which revised amount the parties have agreed. (2) This agreement provides for 117.5 mu. A survey completed after the agreement was entered into concluded that a total of 148 mu is covered by the agreement, to which revised amount the parties have agreed. 72DabeilaziDalazi Mountain located in Pingshan Town, Heilongjiang Province. We paid RMB 2,370,000 for the use of the land, the yew trees thereon and the buildings thereon. We own the trees and buildings and lease the land. The lease has a term of 50 years. At the end of the 50-year term of this agreement, we will retain the right to use the land without making further payments.Beichuan Village, Pingshan Town, A’Cheng District,Pingfangdian, Wuchang City, for a term of 45 years expiring on March 4, 2055, and purchased all the yews situated thereon. We are required to make total payments of RMB 80,152,900 to Pingshan. The total payment has been divided into three installments, each installment representing a parcel of land. In 2010, we made payments in two installments aggregating RMB 42,434,000, (approximately $6,300,000), for a parcel of 10,720 mu and all the yew trees and seedlings situated thereon and had a balance due of RMB 37,718,900 as of December 31, 2010, of which amount RMB 26,314,300 (approximately $4,100,000) related to the final parcel of 5,145 mu. Subsequent to December 31, 2010, we acquired the remaining 5,145 mu and made payments aggregating RMB 31,579,600 (approximately $4,700,000), leaving a balance of RMB 6,139,300 (approximately $1,000,000).8,144,300 in 2012.—- which are not yew trees —- located on the property. These trees consist of approximately 20,000 larix, 56,700 spruce and 3,700 poplar trees.the Companyus under the Fuye Field Agreement total RMB 15,002,300, payable as follows:RMB 6,300,000 upon receipt by HDS of all related supporting documents and materials on the ownership and land use right of the property● RMB 6,300,000 upon receipt by HDS of all related supporting documents and materials on the ownership and land use right of the property ● RMB 3,700,000 on December 25, 2012 ● RMB 5,002,300 on or before December 25, 2013. RMB 3,700,000 on December 25, 2012RMB 5,002,300 on or before December 25, 2013.The CompanyWe prepaid the first installment of RMB 6,300,000 on or about June 20, 2012 and presently expectspaid the entire remaining balance of RMB 8,702,300 on or about December 31, 2012.able to make the additional payments requiredmade by the Fuye Field Agreement from cash-on-handCompany under the Wuchang Pingfangdian Forestry Centre Contract total $7.8 million in U.S. Dollars( RMB 47.2 million as the foreign exchange rate between U.S. Dollar and net cash flow from operations.RMB is 6.1) , payable as follows:● $3.51 million in U.S. dollars on or before December 31, 2013. ● $4.29 million in U.S. dollars on or before May 31, 2015. LitigationSince the assets acquired occurred between entities under common control, HDS recorded the assets received at historical carrying costs recorded by ZTC. The difference of $2,338,212 between the actual contract price and carrying costs is reflected as a reduction of shareholders’ equity (Additional paid-in capital). As of December 31, 2013, the assets purchased were transferred to HDS, the amount due to ZTC is approximately $4.8 million.From time to time, we may become involved in various lawsuits and legal proceedings, which arise, in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. We are currently not aware of any such legal proceedings or claims that we believe will have a material adverse effect on our business, financial condition or operating results.73Name Age Position Zhiguo Wang 5051 Chief Executive Officer, President, Secretary and Chairman of the BoardAdam Wasserman48 and Chief Financial Officer Guifang Qi 51 50Treasurer-YBPSecretary and DirectorXingming Han 4748 General Manager-HDS and Director Secretary of YBPChief Financial Officer since January 2010.December 15, 2013. Mr. Wang founded our company in 1996 and has served as Chairman of the Board and General Manager of HDS since its inception. Since August 2007, Mr. Wang has served as executive director of the China National Forest Industry Association. In January 2007, he was elected to the first board of directors by the Heilongjiang Province Pharmaceutical Professional Association. In August 2007, he was elected Executive Director of the China National Forest Industry Association. In December 2010, Mr. Wang was elected vice chairman of the Heilongjiang Province Forestry Industry Association. Mr. Wang is also involved in the management of other businesses, including Yew Pharmaceutical, Kairun and ZTC. He currently devotes approximately 71% of his time, or 120 hours per month, on average, to the Company’s business. Mr. Wang graduated from Northeast Forestry University, located in Harbin, for both his undergraduate and graduate degrees. Mr. Wang is the husband of Guifang Qi.Adam Wasserman has been our chief financial officer since September 2011. He is chief executive officer for CFO Oncall, Inc. and CFO Oncall Asia, Inc., collectively referred to as CFO Oncall, in which he owns 80% and 60% of such businesses, respectively. CFO Oncall provides chief financial officer services to various companies. Currently, Mr. Wasserman also serves as the Chief Financial Officer of Oriental Dragon Corp since June 2010, Apps Genius Corp since January 2011, Cleantech Solutions International, Inc. since December 2012 and other U.S listed public companies. Mr. Wasserman also served as Chief Financial Officer for Gold Horse International, Inc. from July 2007 to September 2011, Cleantech Solutions International, Inc. in 2007 and 2008, Transax International Limited from May 2005 to December 2011, and other companies all under the terms of consulting agreements with CFO Oncall. Mr. Wasserman holds a Bachelor of Science in Accounting from the State University of New York at Albany. He is a member of The American Institute of Certified Public Accountants and is a director, treasurer and an executive board member of Gold Coast Venture Capital Association. has been was the Treasurer of YBP sincefrom May 2010 anduntil December 15, 2013 when she took over the position of Secretary. She has been a director of YBP since December 2010. Since 1997, she has also served as Vice General Manager of HDS in charge of purchasing and suppliers. Madame Qi graduated from Mudanjiang Forestry School, located in Mudanjiang, Heilongjiang Province, where she majored in forestry. Madame Qi is the wife of Zhiguo Wang.74752011 and 2010.2011. Other than as set forth herein, no executive officer’s salary and bonus exceeded $100,000 in any of the applicable years. The following information includes the dollar value of base salaries, bonus awards, the number of stock options granted and certain other compensation, if any, whether paid or deferred.Name and Principal Position Year Salary
($) Bonus
($) Stock
Awards
($) Option
Awards
($) Non-equity
incentive
plan
compensation
($) Non-qualified
deferred
compensation
earnings ($) All other
compensation
($) Total
($)Zhiguo Wang President, (1) 2012 20,412 — — 1,980,690 — — — 2,001,102 Chief Executive Officer 2011 15,757 — — — — — — 15,757 2010 11,507 — — — — — — 11,507 Adam Wasserman (2) 2012 96,000 — — — — — — 96,000 Chief Financial Officer 2011 40,000 — — — — — — 40,000 2010 — — — — — — — — Guifang Qi (3) 2012 13,291 — — 245,202 — — — 258,493 Treasurer, YBP and Vice 2011 11,586 — — — — — — 11,586 General Manager, HDS 2010 9,146 — — — — — — 9,146 Xingming Han (4) 2012 20,412 — — 21,015 — — — 41,427 General Manager, HDS 2011 15,757 — — — — — — 15,757 2010 11,212 — — — — — — 11,212 Li Zhao (5) 2012 — — — — — — — — Chief Financial Officer 2011 901 — — — — — — 901 2010 4,426 — — — — — — 4,426 Shiyi Li (6) 2012 — — — — — — — — Chief Financial Officer 2011 2,188 — — — — — — 2,188 2010 N/A — — — — — — N/A Name and Principal Position Year Zhiguo Wang President, (1) 2013 21,297 — — — — — — 21,297 Chief Executive Officer 2012 20,412 — — 1,980,690 — — — 2,001,102 2011 15,757 — — — — — — 15,757 Adam Wasserman (2) 2013 88,000 — — — — — — 88,000 Chief Financial Officer 2012 96,000 — — — — — — 96,000 2011 40,000 — — — — — — 40,000 Guifang Qi (3) 2013 11,267 — — — — — — 11,267 Treasurer, YBP and Vice 2012 13,291 — — 245,202 — — — 258,493 General Manager, HDS 2011 11,586 — — — — — — 11,586 Xingming Han (4) 2013 21,297 — — — — — — 21,297 General Manager, HDS 2012 20,412 — — 21,015 — — — 41,427 2011 15,757 — — — — — — 15,757 Li Zhao (5) 2013 — — — — — — — — Chief Financial Officer 2012 — — — — — — — — 2011 901 — — — — — — 901 Shiyi Li (6) 2013 — — — — — — — — Chief Financial Officer 2012 — — — — — — — — 2011 2,188 — — — — — — 2,188 (1) Zhiguo Wang’s fiscal 2012 compensation includes the grant date fair value of 20,103,475 founder’s option valued at $1,980,690, or $0.0985 per option, using the Black-Scholes option pricing model. (2) Adam Wasserman has served as CFO sincefrom September 1, 2011.2011 until December 31, 2013.(3) Guifang Qi’s fiscal 2012 compensation includes the grant date fair value of 2,488,737 founder’s options valued at $245,202, or $0.0985 per option, using the Black-Scholes option pricing model. (4) Xingming Han’s fiscal 2012 compensation includes the grant date fair value of 213,300 founder’s options valued at $21,015, or $0.0985 per option, using the Black-Scholes option pricing model. (5) Li Zhao served as CFO from January 1, 2009 to March 10, 2011. (6) Shiyi Li served as CFO from March 10, 2011 to September 1, 2011. 76Effective September 1, 2011, Mr. Wasserman, through CFO Oncall Asia, Inc. entered into an agreement, or the Wasserman Agreement, with us providing for his appointment as our Chief Financial Officer of the Company for a period of one year. Pursuant to the Wasserman Agreement, Mr. Wasserman will receive a salary of $96,000 per year, payable in equal monthly installments. Mr. Wasserman’s compensation is paid to CFO Oncall Asia, Inc., of which he serves as Chief Executive Officer and in which he is the majority shareholder.● each Founder’s Option is fully vested upon issuance; ● each Founder’s Option is exercisable for a period of five years from the date of issuance; ● each Founder’s Option is exercisable at $0.22 per share; and ● each Founder’s Option has a cashless exercise feature, pursuant to which, at the optionee’s election, he or she may choose to deliver previously-owned shares of YBP common stock in payment of the exercise price or not pay the exercise price of the Founder’s Option and receive instead a reduced number of shares of YBP common stock reflecting the value of the number of shares of YBP common stock equal to the difference, if any, between the aggregate fair market value of the shares issuable upon exercise of the Founder’s Option and the exercise price of the Founder’s Option. 2012:2013. OPTION AWARDS STOCK AWARDS Name Zhiguo Wang 20,103,475 — — 0.22 12/13/2017 — — — — Guifang Qi 2,488,737 — — 0.22 12/13/2017 — — — — Xingming Han 213,300 — — 0.22 12/13/2017 — — — — 7778thea Cooperation and Development Agreement dated January 9, 2010 between us and Yew Pharmaceutical (the “Development Agreement”), we sell yew branches and leaves to Yew Pharmaceutical and Yew Pharmaceutical manufactures taxol-based TCM in accordance with the requirements of the HFDA.Heilongjiang Food and Drug Agency (the “HFDA”). Yew Pharmaceutical produces the TCM at its own facilities in Harbin and is responsible for producing the finished product medicine in accordance with the requirements of good manufacturing practices, filing all applications and obtaining all approvals from the HFDA. Yew Pharmaceutical is also the exclusive distributor of this TCM,Zi Shan. Under the Development Agreement, Yew Pharmaceutical pays us RMB 1,000,000 per ton of raw material. This amount is below the current market rate of approximately RMB 1,100,000 per ton of raw material. Given the 10-year term of the Development Agreement and our belief that the fair market value for yew raw material will continue to rise, the difference between fair market value and the contractually-set price at which we sell yew raw material to Yew Pharmaceutical is expected to increase, especially in later years of the term of the Development Agreement. As the purchaser of raw material for the production of TCM, Yew Pharmaceutical is also the primary customer in our TCM raw materials segment and a major customer of the Company as a whole. Yew Pharmaceutical is owned directly and indirectly primarily by Mr. Wang and Madame Qi.thea Technology Development Service Agreement we entered into withdated January 1, 2010 between us and Kairun, (the “Technology Agreement”), Kairun provides us with testing and technologies regarding utilization of yew trees to extract taxol and develop higher concentration of taxol in the yew trees we grow and cultivate. For these services, we have agreed to pay Kairun RMB 200,000 after the technologies developed by Kairun are tested and approved by us. We retain all intellectual property rights in connection with the technologies developed by Kairun. Kairun may not provide similar services to any other party without our prior written consent.79● $3.51 million in U.S. dollars on or before December 31, 2013. ● $4.29 million in U.S. dollars on or before May 31, 2015. Due to related parties Name of related party September 30,
2012 December 31,
2011Zhiguo Wang $ 54,409 $ 31,357 Yew Pharmaceutical — 62,847 Madame Qi 1,689 — ZTC — 172,284 Total $ 56,098 $ 266,488 Name of related parties 2013 2012 Zhiguo Wang $ 47,726 $ 45,976 Guifang Qi - 1,900 ZTC 4,802,911 - Total $ 4,850,637 $ 47,876 First Restructureoriginal structuring of the Company and the Second Restructuresecond restructure of the Company that we implemented in 2010 (the “Second Restructure”) involved transactions between the Company and Zhiguo Wang, Guifang Qi and Xingming Han (collectively, the HDS Shareholders,“HDS Shareholders”), who are also all of our directors and three of our executive officers. These transactions were not negotiated at arm’s length. While we have not discovered any precedent under Nevada law for a transaction like the Second Restructure, it is possible that the Second Restructure should have been approved by YBP’s shareholders because it may be viewed as having involved the sale of all or substantially all of YBP’s assets in that the stock of HDS was transferred from a wholly-owned subsidiary, JSJ, to the HDS Shareholders. However, because the Company was not yet subject to the reporting obligations of the Exchange Act, YBP was unable to issue a proxy statement to its shareholders in connection with such approval. The Company sought and obtained shareholder ratification of the Second Restructure and all of the transactions contemplated and effected in connection therewith at the Special Meeting on December 13, 2012.8011, 2013,31, 2014, the number of shares of our common stock owned of record and beneficially by all directors, executive officers and persons who beneficially own more than 5% of the outstanding shares of our common stock:Name and Address Amount and
Nature of
Beneficial
Ownership Percentage
of Class(1) Zhiguo Wang (2)(3)
No.234, Gexin Street
Nangang District, Harbin City
People’s Republic of China 47,150,561 64.76 % Guifang Qi (2)(4)
No.234, Gexin Street
Nangang District, Harbin City
People’s Republic of China 47,150,561 64.76 % Xingming Han(5)
Door 3, Floor 7, Unit 2, vice No.23 Tongzhan Street
Xiangfang District, Harbin City
People’s Republic of China 426,600 * Adam Wasserman
1643 Royal Grove Way
Weston, FL 33327 0 0 % All Directors and Executive Officers as a group
(4 persons) 47,577,161 65.35 % Name and Address Directors and Executive Officers: 47,150,561 64.76 % 47,150,561 64.76 % 426,600 * 47,577,161 65.35 % * less than 1% (1) Percentage ownership is based on 72,805,512 shares of YBP common stock deemed outstanding on March 11, 2013,31, 2014, assuming exercise of all outstanding Founders’ Options, all of which are exercisable within 60 days. Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Shares of common stock subject to options, warrants and convertible notes currently exercisable or convertible, or exercisable or convertible within 60 days, are deemed outstanding for determining the number of shares beneficially owned and for computing the percentage ownership of the person holding such options, but are not deemed outstanding for computing the percentage ownership of any other person. Except as indicated by footnote, the persons named in the table have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them.(2) Zhiguo Wang and Guifang Qi are husband and wife. (3) Consists of (i) 20,103,475 shares held by Mr. Wang; (ii) 2,488,737 shares held by Madame Qi; (iii) 1,966,137 shares held by an immediate family member living in Mr. Wang’s and Madame Qi’s residence and as to which Mr. Wang disclaims beneficial ownership; (iv) 20,103,475 shares which are issuable upon exercise of the Founder’s Option issued to Mr. Wang, which option is exercisable within 60 days; and (v) 2,488,737 shares which are issuable upon exercise of the Founder’s Option issued to Madame Qi, which option is exercisable within 60 days. (4) Consists of (i) 2,488,737 shares held by Madame Qi; (ii) 20,103,475 shares held by Mr. Wang; (iii) 1,966,137 shares held by an immediate family member living in Mr. Wang’s and Madame Qi’s residence and as to which Madame Qi disclaims beneficial ownership; (iv) 2,488,737 shares which are issuable upon exercise of the Founder’s Option issued to Madame Qi, which option is exercisable within 60 days; and (v) 20,103,475 shares which are issuable upon exercise of the Founder’s Option issued to Mr. Wang, which option is exercisable within 60 days. (5) Consists of (i) 213,300 shares held by Mr. Han; and (ii) 213,300 shares which are issuable upon exercise of the Founder’s Option issued to Mr. Han, which option is exercisable within 60 days. 11, 2013,31, 2014, 50,000,000 shares of our common stock were issued and outstanding.therefor.therefore. In the event of liquidation, the holders of common stock are entitled to share ratably in all assets remaining after payment of all liabilities. Holders of common stock do not have cumulative or preemptive rights.82Table of Contents16,500,00029,984,210 shares of common stock, consisting of shares of our common stock issued in one or more of the private placement transactions in which we engaged between March 2008 and September 2009, which amount includes 3,868,540 shares held by our management.11, 201331, 2014 and the number of shares of common stock being offered by the selling stockholders. The shares being offered hereby are being registered to permit public secondary trading, and the selling stockholders may offer all or part of the shares for resale from time to time. However, the selling stockholders are under no obligation to sell all or any portion of such shares nor are the selling stockholders obligated to sell any shares immediately upon effectiveness of this prospectus. All information with respect to share ownership has been furnished by the selling stockholders. Shares Beneficially
Owned Prior to the
Offering (1) Shares
Being Offered Shares Beneficially
Owned After the
Offering (1) Name of Beneficial Owner Number Percentage (2) Number Percentage (2) Tie Zhi Cheng 474 * 474 0 * Guangqing Yang 498 * 498 0 * Qingsheng Liu 498 * 498 0 * Yong An Zhao 498 * 498 0 * Yong Qiang Han 498 * 498 0 * Zhen Da Zhou 498 * 498 0 * Bing Ying Wang 790 * 790 0 * Guixiang Zhang 790 * 790 0 * Jing Yan Shao 790 * 790 0 * Jing Yue Peng 790 * 790 0 * Ning Shu Yang 790 * 790 0 * Liping Liu 830 * 830 0 * Liping Sun 830 * 830 0 * Jin Dong Wang 878 * 878 0 * Gui Mei Zhang 965 * 965 0 * Hong Xu Ji 965 * 965 0 * Meng Lan Yuan 965 * 965 0 * Min Luo 965 * 965 0 * Ning Zhang 965 * 965 0 * Peiye Ma 965 * 965 0 * Qing Yuan Jiang 965 * 965 0 * Ri Qiang Lu 965 * 965 0 * Rui Sun 965 * 965 0 * Shijie Guo 965 * 965 0 * Wei Dong Zhang 965 * 965 0 * Wei Na 965 * 965 0 * Yan Ling Zhao 965 * 965 0 * Yan Zuo 965 * 965 0 * Yong Wang 965 * 965 0 * Yongfa Guo 965 * 965 0 * Zhong Wei Wang 965 * 965 0 * Zu Bin Sun 965 * 965 0 * Honghai Sun 995 * 995 0 �� * Jianru Shao 995 * 995 0 * Weidong Song 995 * 995 0 * Shi Ying Yang 1,024 * 1,024 0 * 83 Name of Beneficial Owner Percentage # Shares Offered # Shares Tie Zhi Cheng 474 * 474 0 * Guangqing Yang 498 * 498 0 * Qingsheng Liu 498 * 498 0 * Yong An Zhao 498 * 498 0 * Yong Qiang Han 498 * 498 0 * Zhen Da Zhou 498 * 498 0 * Bing Ying Wang 790 * 790 0 * Guixiang Zhang 790 * 790 0 * Jing Yan Shao 790 * 790 0 * Jing Yue Peng 790 * 790 0 * Ning Shu Yang 790 * 790 0 * Liping Liu 830 * 830 0 * Liping Sun 830 * 830 0 * Jin Dong Wang 878 * 878 0 * Gui Mei Zhang 965 * 965 0 * Hong Xu Ji 965 * 965 0 * Meng Lan Yuan 965 * 965 0 * Min Luo 965 * 965 0 * Ning Zhang 965 * 965 0 * Peiye Ma 965 * 965 0 * Qing Yuan Jiang 965 * 965 0 * Ri Qiang Lu 965 * 965 0 * Rui Sun 965 * 965 0 * Shijie Guo 965 * 965 0 * Wei Dong Zhang 965 * 965 0 * Wei Na 965 * 965 0 * Yan Ling Zhao 965 * 965 0 * Yan Zuo 965 * 965 0 * Yong Wang 965 * 965 0 * Yongfa Guo 965 * 965 0 * Zhong Wei Wang 965 * 965 0 * Zu Bin Sun 965 * 965 0 * Honghai Sun 995 * 995 0 * Jianru Shao 995 * 995 0 * Weidong Song 995 * 995 0 * Shi Ying Yang 1,024 * 1,024 0 * Zhi Ling Shan 1,024 * 1,024 0 * Li Zhang 1,043 * 1,043 0 * Fajun Lian 1,493 * 1,493 0 * Hong Xia Li 1,493 * 1,493 0 * Li Zhang 1,493 * 1,493 0 * Qingbin Zhu 1,493 * 1,493 0 * Qiyuan Zhao 1,493 * 1,493 0 * Shu Qin Zhang 1,493 * 1,493 0 * Xiaorong E 1,493 * 1,493 0 * Jun Yang 1,536 * 1,536 0 * Li Zhu Zhai 1,536 * 1,536 0 * Xi Bin Wang 1,536 * 1,536 0 * Xing Kui Li 1,536 * 1,536 0 * Feng Ying Zhao 1,564 * 1,564 0 * Meng Li Wang 1,564 * 1,564 0 * Shuang Jun Cao 1,564 * 1,564 0 * Fengzhen Yang 1,580 * 1,580 0 * Jian Xie 1,580 * 1,580 0 * Li Sun 1,580 * 1,580 0 * Liu Dan Li 1,580 * 1,580 0 * Ming Yang Liu 1,580 * 1,580 0 * Shares Beneficially
Owned Prior to the
Offering (1) Shares
Being Offered Shares Beneficially
Owned After the
Offering (1) Name of Beneficial Owner Number Percentage (2) Number Percentage (2) Zhi Ling Shan 1,024 * 1,024 0 * Li Zhang 1,043 * 1,043 0 * Fajun Lian 1,493 * 1,493 0 * Hong Xia Li 1,493 * 1,493 0 * Li Zhang 1,493 * 1,493 0 * Qingbin Zhu 1,493 * 1,493 0 * Qiyuan Zhao 1,493 * 1,493 0 * Shu Qin Zhang 1,493 * 1,493 0 * Xiaorong E 1,493 * 1,493 0 * Jun Yang 1,536 * 1,536 0 * Li Zhu Zhai 1,536 * 1,536 0 * Xi Bin Wang 1,536 * 1,536 0 * Xing Kui Li 1,536 * 1,536 0 * Feng Ying Zhao 1,564 * 1,564 0 * Meng Li Wang 1,564 * 1,564 0 * Shuang Jun Cao 1,564 * 1,564 0 * Fengzhen Yang 1,580 * 1,580 0 * Jian Xie 1,580 * 1,580 0 * Li Sun 1,580 * 1,580 0 * Liu Dan Li 1,580 * 1,580 0 * Ming Yang Liu 1,580 * 1,580 0 * Wei Quan Zhou 1,580 * 1,580 0 * Xiu Lian Zhang 1,580 * 1,580 0 * Yajie Liu 1,580 * 1,580 0 * Ying Cao 1,580 * 1,580 0 * Yuming Li 1,580 * 1,580 0 * Zhanhua Chen 1,580 * 1,580 0 * Zhenwen Li 1,580 * 1,580 0 * Hongman Yu 1,659 * 1,659 0 * Jihai Song 1,659 * 1,659 0 * Jun Meng 1,659 * 1,659 0 * Lanying Wang 1,659 * 1,659 0 * Shuchun Zhang 1,659 * 1,659 0 * Shujian Sun 1,659 * 1,659 0 * Shuxiang Sun 1,659 * 1,659 0 * Wen Xin Chen 1,659 * 1,659 0 * Yandong Song 1,659 * 1,659 0 * Yukun Liu 1,659 * 1,659 0 * Zhaohui Geng 1,659 * 1,659 0 * Guang Hua Xie 1,706 * 1,706 0 * Gui Min Zhao 1,706 * 1,706 0 * Qiang Jia 1,706 * 1,706 0 * Cui Ping Yin 1,722 * 1,722 0 * Huaibin Huang 1,738 * 1,738 0 * Hui Mei Shang 1,738 * 1,738 0 * Jun Li Liu 1,738 * 1,738 0 * Li Hua Zhou 1,738 * 1,738 0 * Ling Lu 1,738 * 1,738 0 * Ling Ma 1,738 * 1,738 0 * 84 Shares Beneficially
Owned Prior to the
Offering (1) Shares
Being Offered Shares Beneficially
Owned After the
Offering (1) Name of Beneficial Owner Number Percentage (2) Number Percentage (2) Shu Mei Zhang 1,738 * 1,738 0 * Tie Li Wang 1,738 * 1,738 0 * Wen Li Xu 1,738 * 1,738 0 * Xiaowei Wang 1,738 * 1,738 0 * Yurong Cao 1,738 * 1,738 0 * Zhigang Feng 1,738 * 1,738 0 * Ning Xin 1,755 * 1,755 0 * Changjiang Yang 1,930 * 1,930 0 * Chunrong Yang 1,930 * 1,930 0 * Cheng Yu Wang 1,931 * 1,931 0 * Dacheng Wang 1,931 * 1,931 0 * Fu Wei Zhang 1,931 * 1,931 0 * Gui Ying Ma 1,931 * 1,931 0 * Guiling Zhang 1,931 * 1,931 0 * Guoqiang Xie 1,931 * 1,931 0 * Hong Ying Wang 1,931 * 1,931 0 * Hui Jun Han 1,931 * 1,931 0 * Jin Zhi Wang 1,931 * 1,931 0 * Juan Du 1,931 * 1,931 0 * Li Dong 1,931 * 1,931 0 * Li Liu 1,931 * 1,931 0 * Lihong Zou 1,931 * 1,931 0 * Ming Kai Ren 1,931 * 1,931 0 * Rui Xiang Han 1,931 * 1,931 0 * Shu Ran Miao 1,931 * 1,931 0 * Xiufen Li 1,931 * 1,931 0 * Zhao Ge Wang 1,931 * 1,931 0 * Gui Lan Zhang 1,991 * 1,991 0 * Lin Li 1,991 * 1,991 0 * Ying Pan 1,991 * 1,991 0 * Xiang De Yu 2,074 * 2,074 0 * Tao Yang 2,086 * 2,086 0 * Bin Chen 2,370 * 2,370 0 * Chang Qing Li 2,370 * 2,370 0 * Dong Wei Wang 2,370 * 2,370 0 * Gongwei Yang 2,370 * 2,370 0 * Gui Rong Wang 2,370 * 2,370 0 * Hao Qi Chen 2,370 * 2,370 0 * Hui Lin Qiao 2,370 * 2,370 0 * Jun Wang 2,370 * 2,370 0 * Jun Wu 2,370 * 2,370 0 * Lan Ying Wang 2,370 * 2,370 0 * Lei Bao 2,370 * 2,370 0 * Li Ping Zhang 2,370 * 2,370 0 * Qiuhong Ma 2,370 * 2,370 0 * Quan An Cao 2,370 * 2,370 0 * Shi Xiang Jia 2,370 * 2,370 0 * Shu Hua Qu 2,370 * 2,370 0 * Shufang Sun 2,370 * 2,370 0 * 85 Shares Beneficially
Owned Prior to the
Offering (1) Shares
Being Offered Shares Beneficially
Owned After the
Offering (1) Name of Beneficial Owner Number Percentage (2) Number Percentage (2) Tong Xu 2,370 * 2,370 0 * Wen Long Yang 2,370 * 2,370 0 * Wen Qing Liu 2,370 * 2,370 0 * Xiang Zhe Zheng 2,370 * 2,370 0 * Xianhua Hua 2,370 * 2,370 0 * Xiao Dong Wang 2,370 * 2,370 0 * Xiao Hong Yang 2,370 * 2,370 0 * Xiu Ling Wang 2,370 * 2,370 0 * Xu Gui Xie 2,370 * 2,370 0 * Yu Ming He 2,370 * 2,370 0 * Yu Qin Liu 2,370 * 2,370 0 * Yumei Wang 2,370 * 2,370 0 * Gui Zhi Yang 2,413 * 2,413 0 * Yong Hai Yu 2,413 * 2,413 0 * Cheng Hui Tang 2,489 * 2,489 0 * Jun Li 2,489 * 2,489 0 * Li Yan Hua 2,489 * 2,489 0 * Shu Min Gao 2,489 * 2,489 0 * Zhende Zhang 2,489 * 2,489 0 * Zhi Ping Xiao 2,489 * 2,489 �� 0 * Guo Zhen Dai 2,545 * 2,545 0 * Dian Jin Luan 2,560 * 2,560 0 * Jian Zhang 2,560 * 2,560 0 * Huan Qin Liu 2,607 * 2,607 0 * Jin Song 2,607 * 2,607 0 * Lifang Zhu 2,607 * 2,607 0 * Shu Jie Jiang 2,607 * 2,607 0 * Yan Han 2,607 * 2,607 0 * Zhiguo Liu 2,607 * 2,607 0 * Shi Guo Liang 2,752 * 2,752 0 * Chun Hui Jia 2,765 * 2,765 0 * Shu Qing Sun 2,852 * 2,852 0 * Gui Mei Shi 2,896 * 2,896 0 * Hua Li 2,896 * 2,896 0 * Hui Jiang 2,896 * 2,896 0 * Hui Zhu 2,896 * 2,896 0 * Huiying Liu 2,896 * 2,896 0 * Jia Zhi Wang 2,896 * 2,896 0 * Jingshu Lv 2,896 * 2,896 0 * Li Bin Du 2,896 * 2,896 0 * Li Juan Xia 2,896 * 2,896 0 * Li Ping Yang 2,896 * 2,896 0 * Li Tang 2,896 * 2,896 0 * Qing Ren Li 2,896 * 2,896 0 * Rui Yue 2,896 * 2,896 0 * Wen Xian Dong 2,896 * 2,896 0 * Xianzhang Sun 2,896 * 2,896 0 * Xin Yun Wang 2,896 * 2,896 0 * Yan Ping Qu 2,896 * 2,896 0 * 86 Shares Beneficially
Owned Prior to the
Offering (1) Shares
Being Offered Shares Beneficially
Owned After the
Offering (1) Name of Beneficial Owner Number Percentage (2) Number Percentage (2) Yi Tao Lang 2,896 * 2,896 0 * Yu Qin Wang 2,896 * 2,896 0 * Yu Zhang Yue 2,896 * 2,896 0 * Zhengguang Shao 2,896 * 2,896 0 * Zhenmei Qu 2,896 * 2,896 0 * Zhiqiang Wang 2,896 * 2,896 0 * Zhiwei Tian 2,896 * 2,896 0 * Feng Hu Ma 2,986 * 2,986 0 * Xi Qin Wang 3,072 * 3,072 0 * Lin Juan Xu 3,128 * 3,128 0 * Xiaoli Xu 3,160 * 3,160 0 * Xiuzhi Zhao 3,160 * 3,160 0 * Congge Tang 3,318 * 3,318 0 * Dingli Sun 3,318 * 3,318 0 * Fenglan Guan 3,318 * 3,318 0 * Guiying Song 3,318 * 3,318 0 * Guizhi Yin 3,318 * 3,318 0 * Hongnan Yu 3,318 * 3,318 0 * Jihua Zhang 3,318 * 3,318 0 * Jinxia Lu 3,318 * 3,318 0 * Jirong Zhang 3,318 * 3,318 0 * Lihua Zhang 3,318 * 3,318 0 * Linglin Chen 3,318 * 3,318 0 * Shuying Zhang 3,318 * 3,318 0 * Xiuhua Cao 3,318 * 3,318 0 * Xiujuan Li 3,318 * 3,318 0 * Ying Sun 3,318 * 3,318 0 * Hong Kuai Feng 3,413 * 3,413 0 * Zhan Xiang Zhang 3,413 * 3,413 0 * Fu Yu 3,476 * 3,476 0 * Guang Fa Zhang 3,476 * 3,476 0 * Gui Qin Zhang 3,476 * 3,476 0 * Hua Geng 3,476 * 3,476 0 * Jian Fu Zhang 3,476 * 3,476 0 * Jing Li 3,476 * 3,476 0 * Li Ming Hu 3,476 * 3,476 0 * Liqiu Wang 3,476 * 3,476 0 * Min Feng Zhang 3,476 * 3,476 0 * Xuejun Li 3,476 * 3,476 0 * Xueru Cai 3,476 * 3,476 0 * Yanjie Yu 3,476 * 3,476 0 * Zhong Shan Yang 3,583 * 3,583 0 * Jing Zhi Yu 3,862 * 3,862 0 * Changjun Wang 3,950 * 3,950 0 * Dongyu Wang 3,950 * 3,950 0 * Feng Yan Gai 3,950 * 3,950 0 * Fenglan Liu 3,950 * 3,950 0 * Hong Yun Jiang 3,950 * 3,950 0 * Jian Jun Yang 3,950 * 3,950 0 * 87 Shares Beneficially
Owned Prior to the
Offering (1) Shares
Being Offered Shares Beneficially
Owned After the
Offering (1) Name of Beneficial Owner Number Percentage (2) Number Percentage (2) Jie Zhao 3,950 * 3,950 0 * Jing Hai Li 3,950 * 3,950 0 * Jingzhi Peng 3,950 * 3,950 0 * Jun Yang 3,950 * 3,950 0 * Lianyu Wang 3,950 * 3,950 0 * Qiang Miao 3,950 * 3,950 0 * Suping Zhu 3,950 * 3,950 0 * Xiang Dong Yu 3,950 * 3,950 0 * Xiu Qiu Wang 3,950 * 3,950 0 * Xun Zhou 3,950 * 3,950 0 * Ya Lin Jiang 3,950 * 3,950 0 * Ya Qin Wang 3,950 * 3,950 0 * Yun Zhen Zuo 3,950 * 3,950 0 * Zhong Hua Fu 3,950 * 3,950 0 * Ying Chen 3,982 * 3,982 0 * Qiulan Bian 4,029 * 4,029 0 * Yaqin Zhao 4,108 * 4,108 0 * Jianbo He 4,213 * 4,213 0 * Hong Jun Fu 4,227 * 4,227 0 * Ya Wen Gao 4,266 * 4,266 0 * Ji Chao Wang 4,345 * 4,345 0 * Jin Qi Jiang 4,345 * 4,345 0 * Lihua Sun 4,345 * 4,345 0 * Shao Chen Song 4,345 * 4,345 0 * Xu Zhang 4,345 * 4,345 0 * Xuemei Zheng 4,345 * 4,345 0 * Chang Hai Li 4,388 * 4,388 0 * Zhaojie Zhang 4,441 * 4,441 0 * Ming Cai Ye 4,608 * 4,608 0 * Deyi Sun 4,740 * 4,740 0 * Ji Xiang Wang 4,740 * 4,740 0 * Jialan Huang 4,740 * 4,740 0 * Shuqing Zhang 4,740 * 4,740 0 * Wei Xie 4,740 * 4,740 0 * Yuying Li 4,826 * 4,826 0 * Guo Hui Wang 4,827 * 4,827 0 * Jian Chun Qi 4,827 * 4,827 0 * Shu Ran Zheng 4,827 * 4,827 0 * Yanli Ma 4,827 * 4,827 0 * Bing Yan Cui 4,828 * 4,828 0 * Chunzhu Yang 4,828 * 4,828 0 * Daowei Zhou 4,828 * 4,828 0 * De Xiang Sun 4,828 * 4,828 0 * Fan Lu Bai 4,828 * 4,828 0 * Feng Qin Hao 4,828 * 4,828 0 * Gui Jie Zhang 4,828 * 4,828 0 * Guiying Zhou 4,828 * 4,828 0 * Guo Wei 4,828 * 4,828 0 * Hong Wei Zhang 4,828 * 4,828 0 * 88 Shares Beneficially
Owned Prior to the
Offering (1) Shares
Being Offered Shares Beneficially
Owned After the
Offering (1) Name of Beneficial Owner Number Percentage (2) Number Percentage (2) Hui Dan Lu 4,828 * 4,828 0 * Jiang Li 4,828 * 4,828 0 * Jie Zhang 4,828 * 4,828 0 * Jin Guo Zhang 4,828 * 4,828 0 * Jin Song Wu 4,828 * 4,828 0 * Jing Yang 4,828 * 4,828 0 * Jingwu Zhang 4,828 * 4,828 0 * Jun Hui Liu 4,828 * 4,828 0 * Lanxiang Li 4,828 * 4,828 0 * Li Ping Yang 4,828 * 4,828 0 * Li Yu 4,828 * 4,828 0 * Lijun Zhao 4,828 * 4,828 0 * Mei Ying Xin 4,828 * 4,828 0 * Mingwen Zhao 4,828 * 4,828 0 * Ping Zhao 4,828 * 4,828 0 * Qing Zhi Liu 4,828 * 4,828 0 * Ru Xiao 4,828 * 4,828 0 * Ruihua Sun 4,828 * 4,828 0 * Shang Wei Hu 4,828 * 4,828 0 * Shou Feng Du 4,828 * 4,828 0 * Shuyuan Lu 4,828 * 4,828 0 * Tiejun Liang 4,828 * 4,828 0 * Ting Xiang Lv 4,828 * 4,828 0 * Wan He Qin 4,828 * 4,828 0 * Wen Chen Zhang 4,828 * 4,828 0 * Wen Peng 4,828 * 4,828 0 * Xiang Li Ma 4,828 * 4,828 0 * Xiao Xiang Lan 4,828 * 4,828 0 * Xin Liu 4,828 * 4,828 0 * Xing Wei Jiang 4,828 * 4,828 0 * Xirong Zhao 4,828 * 4,828 0 * Xiuyan Ben 4,828 * 4,828 0 * Yan Fei Sun 4,828 * 4,828 0 * Yan Hong Gao 4,828 * 4,828 0 * Yang Liu 4,828 * 4,828 0 * Yanlin Zhang 4,828 * 4,828 0 * Yongping Hu 4,828 * 4,828 0 * Yu Ping Xu 4,828 * 4,828 0 * Yu Qin He 4,828 * 4,828 0 * Yu Rong Su 4,828 * 4,828 0 * Yulan Yan 4,828 * 4,828 0 * Yun Bai 4,828 * 4,828 0 * Yuqin Ye 4,828 * 4,828 0 * Zhanlin Zhang 4,828 * 4,828 0 * Zhi An Tao 4,828 * 4,828 0 * Zhi Ling Wang 4,828 * 4,828 0 * Zhimin Li 4,828 * 4,828 0 * Zhiying Zhang 4,828 * 4,828 0 * Zu En Hu 4,828 * 4,828 0 * 89 Shares Beneficially
Owned Prior to the
Offering (1) Shares
Being Offered Shares Beneficially
Owned After the
Offering (1) Name of Beneficial Owner Number Percentage (2) Number Percentage (2) Hong Li 4,898 * 4,898 0 * Chang Yu Zhang 4,977 * 4,977 0 * Chunbo Zhao 4,977 * 4,977 0 * Jie Ming 4,977 * 4,977 0 * Jumei Sun 4,977 * 4,977 0 * Laibin Zhao 4,977 * 4,977 0 * Lihong Tian 4,977 * 4,977 0 * Wei Qiang Ji 4,977 * 4,977 0 * Wenli Zhao 4,977 * 4,977 0 * Xikui Qiao 4,977 * 4,977 0 * Xiu Lian Sun 4,977 * 4,977 0 * Yanju Zhao 4,977 * 4,977 0 * Ying Huang 4,977 * 4,977 0 * Yong Wei Han 4,977 * 4,977 0 * Yongxia Zhu 4,977 * 4,977 0 * Zhengze Huang 4,977 * 4,977 0 * Zhi Min Liu 4,977 * 4,977 0 * Zhiling Li 4,977 * 4,977 0 * Dewei Zhao 5,000 * 5,000 0 * Jianyi Yang 5,000 * 5,000 0 * Ping Han 5,000 * 5,000 0 * Shi Yi Li 5,000 * 5,000 0 * Wei Cao 5,000 * 5,000 0 * Xiaofeng Li 5,000 * 5,000 0 * Xue Wang 5,000 * 5,000 0 * Ling Shan Kong 5,119 * 5,119 0 * Qiao Lian Wang 5,119 * 5,119 0 * Dongmei Liu 5,214 * 5,214 0 * Feng Hong Liang 5,214 * 5,214 0 * He An Wang 5,214 * 5,214 0 * Jing Zhao 5,214 * 5,214 0 * Ku Chen 5,214 * 5,214 0 * Lan Rong Zou 5,214 * 5,214 0 * Ping Li 5,214 * 5,214 0 * Xiao Dong Liu 5,214 * 5,214 0 * Jun Lv 5,530 * 5,530 0 * Zhiyuan Sun 5,530 * 5,530 0 * Hui Li 5,609 * 5,609 0 * Shuqin Zhang 5,609 * 5,609 0 * Lianshan Chen 5,688 * 5,688 0 * Chunying Yang 5,793 * 5,793 0 * Sheng Jiang Liu 5,793 * 5,793 0 * Shukun Mao 5,793 * 5,793 0 * Xueshen Xu 5,793 * 5,793 0 * Qing Guo Wang 6,070 * 6,070 0 * Kaimei Tan 6,083 * 6,083 0 * Yi Fei Lin 6,083 * 6,083 0 * Feng Jun Xi 6,276 * 6,276 0 * Rong Guo Li 6,320 * 6,320 0 * 90 Shares Beneficially
Owned Prior to the
Offering (1) Shares
Being Offered Shares Beneficially
Owned After the
Offering (1) Name of Beneficial Owner Number Percentage (2) Number Percentage (2) Yan Hua Li 6,320 * 6,320 0 * Yong Zheng 6,350 * 6,350 0 * Songling Li 6,372 * 6,372 0 * Yueying Yu 6,478 * 6,478 0 * Shu Qin Han 6,510 * 6,510 0 * Xiaoxia Xie 6,636 * 6,636 0 * Feng Xian Zhao 6,758 * 6,758 0 * Feng Ying Tang 6,758 * 6,758 0 * Qing Sheng Li 6,758 * 6,758 0 * Xiu Rong Liu 6,758 * 6,758 0 * Anrong Wang 6,952 * 6,952 0 * Guishan Wang 6,952 * 6,952 0 * Xiuyun Zhang 6,952 * 6,952 0 * Lifen Li 7,110 * 7,110 0 * Bao Yu Xu 7,338 * 7,338 0 * Bingyou Feng 7,466 * 7,466 0 * Feng Qing Yu 7,466 * 7,466 0 * Huimin Tian 7,466 * 7,466 0 * Jiafang Xu 7,466 * 7,466 0 * Tong Chen 7,466 �� * 7,466 0 * Xueqiu Yu 7,466 * 7,466 0 * Guangren Zhang 7,724 * 7,724 0 * Honghua Zhen 7,724 * 7,724 0 * Li Feng 7,724 * 7,724 0 * Li Zhao 7,724 * 7,724 0 * Xi Ling Tong 7,724 * 7,724 0 * Lai Fa Wang 7,821 * 7,821 0 * Yan Song Zhao 7,899 * 7,899 0 * Chongbin Xiu 7,900 * 7,900 0 * Deling Wang 7,900 * 7,900 0 * Fenghua Li 7,900 * 7,900 0 * Fengqin Li 7,900 * 7,900 0 * Guanghua Liang 7,900 * 7,900 0 * Guihua Yu 7,900 * 7,900 0 * Guiqin Liu 7,900 * 7,900 0 * Haiquan Yang 7,900 * 7,900 0 * Haitao Yang 7,900 * 7,900 0 * Hong Li 7,900 * 7,900 0 * Huawei Mao 7,900 * 7,900 0 * Li Zhao 7,900 * 7,900 0 * Liping Xu 7,900 * 7,900 0 * �� Liyuan Sun 7,900 * 7,900 0 * Shouxin Ye 7,900 * 7,900 0 * Shubin Cheng 7,900 * 7,900 0 * Shuqing Wang 7,900 * 7,900 0 * Wan Zhu Liu 7,900 * 7,900 0 * Xiao Dong Liu 7,900 * 7,900 0 * Xuehua Wang 7,900 * 7,900 0 * Ya Bin Yu 7,900 * 7,900 0 * 91 Shares Beneficially
Owned Prior to the
Offering (1) Shares
Being Offered Shares Beneficially
Owned After the
Offering (1) Name of Beneficial Owner Number Percentage (2) Number Percentage (2) Yanping Dong 7,900 * 7,900 0 * Yanxi Wu 7,900 * 7,900 0 * Ying Fu 7,900 * 7,900 0 * Yongxin Hao 7,900 * 7,900 0 * Yu Qin Shan 7,900 * 7,900 0 * Zhenfeng Wang 7,900 * 7,900 0 * Zhenjia Liu 7,900 * 7,900 0 * Zhizhong Tao 7,900 * 7,900 0 * Zun Li Gao 7,900 * 7,900 0 * Qinghua Wu 7,917 * 7,917 0 * Yan Jin 8,110 * 8,110 0 * Jingzhi Sun 8,137 * 8,137 0 * Fenglan Gao 8,295 * 8,295 0 * Kunjun Xu 8,295 * 8,295 0 * Wanyou Li 8,295 * 8,295 0 * Wenming Guo 8,295 * 8,295 0 * Xiaojie Wang 8,295 * 8,295 0 * Tonghua Li 8,496 * 8,496 0 * Shu Fen Lu 8,532 * 8,532 0 * Su Zhen Wang 8,532 * 8,532 0 * Xueqin Wang 8,532 * 8,532 0 * Guan Wang 8,688 * 8,688 0 * Bai Gang He 8,690 * 8,690 0 * Bao Xiang Yu 8,690 * 8,690 0 * Baoli Wang 8,690 * 8,690 0 * Chang Jiang Xia 8,690 * 8,690 0 * Changhai Guo 8,690 * 8,690 0 * Cheng Lin Sun 8,690 * 8,690 0 * Gui Zhi Sang 8,690 * 8,690 0 * Hongju Liu 8,690 * 8,690 0 * Hongyin Wu 8,690 * 8,690 0 * Hui Tang 8,690 * 8,690 0 * Hui Zhang 8,690 * 8,690 0 * Jing Shen 8,690 * 8,690 0 * Jinwen Fan 8,690 * 8,690 0 * Jinxi Zheng 8,690 * 8,690 0 * Jun Li 8,690 * 8,690 0 * Lan Hu 8,690 * 8,690 0 * Lijun Meng 8,690 * 8,690 0 * Ling Wang 8,690 * 8,690 0 * Luxia Ma 8,690 * 8,690 0 * Mingdong Zhang 8,690 * 8,690 0 * Nong Hua Tang 8,690 * 8,690 0 * Qi Sun 8,690 * 8,690 0 * Shou Zhi Wei 8,690 * 8,690 0 * Shu You Gou 8,690 * 8,690 0 * Shuyuan Li 8,690 * 8,690 0 * Songzhi Ding 8,690 * 8,690 0 * Tong Tong 8,690 * 8,690 0 * 92 Shares Beneficially
Owned Prior to the
Offering (1) Shares
Being Offered Shares Beneficially
Owned After the
Offering (1) Name of Beneficial Owner Number Percentage (2) Number Percentage (2) Wei Ze Sun 8,690 * 8,690 0 * Weiqi Wang 8,690 * 8,690 0 * Wenying Liu 8,690 * 8,690 0 * Xia Jiang 8,690 * 8,690 0 * Xiu Ping Du 8,690 * 8,690 0 * Xiu Yan Li 8,690 * 8,690 0 * Xiufeng Shao 8,690 * 8,690 0 * Xiuhua Li 8,690 * 8,690 0 * Xiuhua Zhu 8,690 * 8,690 0 * Xiuying Liu 8,690 * 8,690 0 * Xuehai Li 8,690 * 8,690 0 * Yan Feng Ji 8,690 * 8,690 0 * Yan Qing Su 8,690 * 8,690 0 * Yanlai Zhang 8,690 * 8,690 0 * Yao Gang Zhou 8,690 * 8,690 0 * Yaru Shang 8,690 * 8,690 0 * Youcheng Yan 8,690 * 8,690 0 * Yu Hua Mei 8,690 * 8,690 0 * Yu Yan Zhao 8,690 * 8,690 0 * Yun Lan Feng 8,690 * 8,690 0 * Zhancai Gao 8,690 * 8,690 0 * Zhao Yuan Liu 8,690 * 8,690 0 * Zhao’an Wan 8,690 * 8,690 0 * Hang Xu 8,703 * 8,703 0 * Dexiang Yin 8,883 * 8,883 0 * Lijun Sun 8,895 * 8,895 0 * Shumei Di 8,927 * 8,927 0 * Qing Zhong Zhang 9,069 * 9,069 0 * Yong Lai Liu 9,211 * 9,211 0 * Yongtian Liu 9,211 * 9,211 0 * Qiu Ling Dong 9,322 * 9,322 0 * Hong Li 9,654 * 9,654 0 * Chang Li Dong 9,655 * 9,655 0 * Changchun Li 9,655 * 9,655 0 * Chun Yan Bai 9,655 * 9,655 0 * Cui Ping Wang 9,655 * 9,655 0 * Dong Ming Ge 9,655 * 9,655 0 * Fei Yu 9,655 * 9,655 0 * Feng Juan Liu 9,655 * 9,655 0 * Feng Lan Sun 9,655 * 9,655 0 * Feng Yun Zhang 9,655 * 9,655 0 * Fuzhen Liu 9,655 * 9,655 0 * Guangbo Jiang 9,655 * 9,655 0 * Guo Yu Li 9,655 * 9,655 0 * Hai Quan Cao 9,655 * 9,655 0 * Hong Yan Gong 9,655 * 9,655 0 * Lei Yu 9,655 * 9,655 0 * Lei Zhang 9,655 * 9,655 0 * Ming Xun Han 9,655 * 9,655 0 * 93 Shares Beneficially
Owned Prior to the
Offering (1) Shares
Being Offered Shares Beneficially
Owned After the
Offering (1) Name of Beneficial Owner Number Percentage (2) Number Percentage (2) Rong Hua Yan 9,655 * 9,655 0 * Shuang Yan Liu 9,655 * 9,655 0 * Shumei Shan 9,655 * 9,655 0 * Wei Dong 9,655 * 9,655 0 * Wei Xue Shan 9,655 * 9,655 0 * Xiu Qin Zhang 9,655 * 9,655 0 * Xiu Ying Yu 9,655 * 9,655 0 * Yan Ju Liu 9,655 * 9,655 0 * Yan Jun Gao 9,655 * 9,655 0 * Ye Tian 9,655 * 9,655 0 * Yun Xia Jiang 9,655 * 9,655 0 * Yuqin Shang 9,655 * 9,655 0 * Zhen Hua Yuan 9,655 * 9,655 0 * Lijuan Qi 9,656 * 9,656 0 * Yuhua Liu 9,717 * 9,717 0 * Ting Shan Yan 9,948 * 9,948 0 * Gui Yan Yin 9,954 * 9,954 0 * Hong Zeng Sun 9,954 * 9,954 0 * Airong Wang 10,000 * 10,000 0 * Bainian Li 10,000 * 10,000 0 * Baoguo Cui 10,000 * 10,000 0 * Fei Su 10,000 * 10,000 0 * Guangzhong Li 10,000 * 10,000 0 * Jianguo Tan 10,000 * 10,000 0 * Jixu Wen 10,000 * 10,000 0 * Lianfa Sun 10,000 * 10,000 0 * Senjian Gao 10,000 * 10,000 0 * Shibo Zhang 10,000 * 10,000 0 * Shufang Men 10,000 * 10,000 0 * Tiejun Zou 10,000 * 10,000 0 * Weili Wang 10,000 * 10,000 0 * Xiaojun Shen 10,000 * 10,000 0 * Xiaozhong Liu 10,000 * 10,000 0 * Xiuying Ma 10,000 * 10,000 0 * Youpeng Wang 10,000 * 10,000 0 * Yulan Zhang 10,000 * 10,000 0 * Zhiming Zhang 10,000 * 10,000 0 * Zhiwei Liu 10,000 * 10,000 0 * Yanjun Liu 10,042 * 10,042 0 * Yaxiang Wang 10,153 * 10,153 0 * Yan Cai Zhang 10,390 * 10,390 0 * Hui Wang 10,428 * 10,428 0 * Ben Ming Zang 10,524 * 10,524 0 * Limin Zhang 10,949 * 10,949 0 * Chang Hui Ma 10,972 * 10,972 0 * Jinhui Chen 11,115 * 11,115 0 * Shu Jun Cui 11,142 * 11,142 0 * Hongtao Zhang 11,447 * 11,447 0 * Qing Chun Wang 11,566 * 11,566 0 * 94 Shares Beneficially
Owned Prior to the
Offering (1) Shares
Being Offered Shares Beneficially
Owned After the
Offering (1) Name of Beneficial Owner Number Percentage (2) Number Percentage (2) Ping Lin 11,586 * 11,586 0 * Shu Fen Wan 11,586 * 11,586 0 * Wei Liu 11,586 * 11,586 0 * Ze Chu 11,586 * 11,586 0 * Bin Qin 11,850 * 11,850 0 * Junying Zhu 11,850 * 11,850 0 * Liping Zhang 11,850 * 11,850 0 * Minghai Zhang 11,850 * 11,850 0 * Xue Feng Bai 11,850 * 11,850 0 * Liping Xu 12,166 * 12,166 0 * Shu Yu Li 12,166 * 12,166 0 * Yu Xiang Li 12,166 * 12,166 0 * Yaqin Fan 12,288 * 12,288 0 * Yuanchang Liu 12,340 * 12,340 0 * Jinping Xia 12,443 * 12,443 0 * Lei Wang 12,443 * 12,443 0 * Qing Zhi Hu 12,443 * 12,443 0 * Xiling Yu 12,443 * 12,443 0 * Zhi Ping Li 12,443 * 12,443 0 * Kebin Ma 12,552 * 12,552 0 * Bao Shan Li 13,035 * 13,035 0 * Haijie Zhou 13,035 * 13,035 0 * Lian Min Tan 13,035 * 13,035 0 * Minghui Jiang 13,051 * 13,051 0 * Xiu Qin Wan 13,114 * 13,114 0 * Huijian Xue 13,193 * 13,193 0 * Yuqin Chen 13,272 * 13,272 0 * Yan Qiu Yu 13,383 * 13,383 0 * Jian Sheng Yan 13,518 * 13,518 0 * Ying Xue 13,518 * 13,518 0 * Chun Yu Zhou 13,667 * 13,667 0 * Rui Shan Zhang 13,890 * 13,890 0 * Hua Chen Wang 13,904 * 13,904 0 * Qiu Yan Zhu 14,482 * 14,482 0 * Duowen Wang 14,483 * 14,483 0 * Gui Fen Qiu 14,483 * 14,483 0 * Guoshun Jiang 14,483 * 14,483 0 * Hong Da Xu 14,483 * 14,483 0 * Hongzhu Qi 14,483 * 14,483 0 * Li Luan 14,483 * 14,483 0 * Tong Bin Xie 14,483 * 14,483 0 * Xiao Li Xu 14,483 * 14,483 0 * Xiaofei Hou 14,483 * 14,483 0 * Xue Zhi Liang 14,483 * 14,483 0 * Yu Fen Zhang 14,483 * 14,483 0 * Yu Ren Bai 14,483 * 14,483 0 * Zhaoguang Xu 14,483 * 14,483 0 * Youren Zhu 14,869 * 14,869 0 * Changyou Li 15,000 * 15,000 0 * 95 Shares Beneficially
Owned Prior to the
Offering (1) Shares
Being Offered Shares Beneficially
Owned After the
Offering (1) Name of Beneficial Owner Number Percentage (2) Number Percentage (2) Zhijie Lei 15,000 * 15,000 0 * You Min Lv 15,096 * 15,096 0 * Xiang Xun Han 15,448 * 15,448 0 * Bin Wang 15,800 * 15,800 0 * Bolun Li 15,800 * 15,800 0 * Changdi Niu 15,800 * 15,800 0 * Changmin Zhao 15,800 * 15,800 0 * Fengping Dong 15,800 * 15,800 0 * Fulun Huang 15,800 * 15,800 0 * Haisong Wang 15,800 * 15,800 0 * Huaiyu Xu 15,800 * 15,800 0 * Hui Gao 15,800 * 15,800 0 * Huijun Zhang 15,800 * 15,800 0 * Jinguo Wang 15,800 * 15,800 0 * Kemin Cao 15,800 * 15,800 0 * Meng Yang 15,800 * 15,800 0 * Qingyi Meng 15,800 * 15,800 0 * Qiong Wu 15,800 * 15,800 0 * Ruihong Fan 15,800 * 15,800 0 �� * Shihua You 15,800 * 15,800 0 * Shuling Li 15,800 * 15,800 0 * Shuwen Liu 15,800 * 15,800 0 * Wei Liu 15,800 * 15,800 0 * Xiufang Yang 15,800 * 15,800 0 * Yan Jiang Zhang 15,800 * 15,800 0 * Yanjie Jiang 15,800 * 15,800 0 * Yanyan Li 15,800 * 15,800 0 * Yao Cheng Chen 15,800 * 15,800 0 * Ying Wang 15,800 * 15,800 0 * Yongchang Chen 15,800 * 15,800 0 * Yunyi Liu 15,800 * 15,800 0 * Zhenxin Gu 15,800 * 15,800 0 * Zhimin Wang 15,800 * 15,800 0 * Guoxiang Bai 16,195 * 16,195 0 * Yansong Wang 16,413 * 16,413 0 * Xiuli Wang 16,414 * 16,414 0 * Cai Ying Zhang 16,432 * 16,432 0 * Yao Wen Sun 16,511 * 16,511 0 * Bing Liu 16,590 * 16,590 0 * Cuiyun Liu 16,590 * 16,590 0 * Shu Qin Meng 16,590 * 16,590 0 * Liping Liu 16,666 * 16,666 0 * Guihua Xu 16,985 * 16,985 0 * Ou Xu 16,994 * 16,994 0 * Longfang Xia 17,121 * 17,121 0 * Yingyu Cui 17,379 * 17,379 0 * Chong Ming Li 17,380 * 17,380 0 * Cuiyin Wei 17,380 * 17,380 0 * Guang Fen Yang 17,380 * 17,380 0 * 96 Shares Beneficially
Owned Prior to the
Offering (1) Shares
Being Offered Shares Beneficially
Owned After the
Offering (1) Name of Beneficial Owner Number Percentage (2) Number Percentage (2) Guijie Liu 17,380 * 17,380 0 * Hai Tao Jiang 17,380 * 17,380 0 * Hua Chen 17,380 * 17,380 0 * Ji Gui Chu 17,380 * 17,380 0 * Ke Min Wang 17,380 * 17,380 0 * Li Yan Sun 17,380 * 17,380 0 * Lianke Han 17,380 * 17,380 0 * Qingtao Zhang 17,380 * 17,380 0 * Qingyuan Zhang 17,380 * 17,380 0 * Rong Chang Tang 17,380 * 17,380 0 * Shi Long Bai 17,380 * 17,380 0 * Tai Zhao Li 17,380 * 17,380 0 * Xiangmin Shi 17,380 * 17,380 0 * Xin Pu 17,380 * 17,380 0 * Xin Wang 17,380 * 17,380 0 * Yankui Song 17,380 * 17,380 0 * Yanwu Wang 17,380 * 17,380 0 * Yulin Liu 17,380 * 17,380 0 * Yun Lou Li 17,380 * 17,380 0 * Zhenhe Jian 17,380 * 17,380 0 * Qinggang Wu 18,345 * 18,345 0 * Yan Xia Wang 18,345 * 18,345 0 * Jian Hua Peng 18,574 * 18,574 0 * Hong Yun Liu 19,311 * 19,311 0 * Lida Wu 19,311 * 19,311 0 * Qiuyan Chen 19,311 * 19,311 0 * Yu Xi Zhang 19,311 * 19,311 0 * Min Li Wang 19,500 * 19,500 0 * Changfei Yu 19,750 * 19,750 0 * Feng Shu Dong 19,863 * 19,863 0 * Zhenlai Li 19,908 * 19,908 0 * Chaoyang Liu 20,000 * 20,000 0 * Chengming Cui 20,000 * 20,000 0 * Chunyan Sun 20,000 * 20,000 0 * Daming Feng 20,000 * 20,000 0 * Dan Wang 20,000 * 20,000 0 * Dewen Liu 20,000 * 20,000 0 * Fuying Wang 20,000 * 20,000 0 * Guizhu Wang 20,000 * 20,000 0 * Jin’nian Liu 20,000 * 20,000 0 * Jiyu Wang 20,000 * 20,000 0 * Lijun Sun 20,000 * 20,000 0 * Lixin Liu 20,000 * 20,000 0 * Ming Yan 20,000 * 20,000 0 * Ping Wang 20,000 * 20,000 0 * Ruidong Guan 20,000 * 20,000 0 * Tinghui Wang 20,000 * 20,000 0 * Xin’gang Sun 20,000 * 20,000 0 * Xuan Li 20,000 * 20,000 0 * 97 Shares Beneficially
Owned Prior to the
Offering (1) Shares
Being Offered Shares Beneficially
Owned After the
Offering (1) Name of Beneficial Owner Number Percentage (2) Number Percentage (2) Xuexian Wang 20,000 * 20,000 0 * Yanru Dong 20,000 * 20,000 0 * Zhongwei Luo 20,000 * 20,000 0 * Yan Long Ren 20,856 * 6,952 13,904 * Qing Li 21,014 * 7,005 14,009 * Fu Lin Bian 21,242 * 7,081 14,161 * Yuanhui Dong 21,242 * 7,081 14,161 * Guifang Zhang 21,396 * 7,132 14,264 * Shuhua Zhao 21,567 * 7,189 14,378 * Guo Chao Duan 22,120 * 7,373 14,747 * Gui Fang Tan 22,208 * 7,403 14,805 * Jindao Zhang 22,208 * 7,403 14,805 * Jing Li 23,068 * 7,689 15,379 * Xingcun Zhao 23,068 * 7,689 15,379 * Yanping Cao 23,147 * 7,716 15,431 * Zhi Ping Hao 23,173 * 7,724 15,449 * Hui Cao 23,226 * 7,742 15,484 * Chuanhong Fan 23,700 * 7,900 15,800 * Chunyan Liu 23,700 * 7,900 15,800 * Da Mao Yang 23,700 * 7,900 15,800 * Fumin Jiang 23,700 * 7,900 15,800 * Jialin Yu 23,700 * 7,900 15,800 * Jin Zhong Wang 23,700 * 7,900 15,800 * Jinghua Guo 23,700 * 7,900 15,800 * Juan Wang 23,700 * 7,900 15,800 * Li Hua Wang 23,700 * 7,900 15,800 * Li Qui Zhang 23,700 * 7,900 15,800 * Li Xin Fan 23,700 * 7,900 15,800 * Long Zhou 23,700 * 7,900 15,800 * Minjun Ren 23,700 * 7,900 15,800 * Shu Min Cao 23,700 * 7,900 15,800 * Wan Hua Li 23,700 * 7,900 15,800 * Xiao Chun Jing 23,700 * 7,900 15,800 * Xinghua Song 23,700 * 7,900 15,800 * Yanhui Liu 23,700 * 7,900 15,800 * Yanyan Zhang 23,700 * 7,900 15,800 * Zhong Li 23,700 * 7,900 15,800 * Zhuo Zhang 23,700 * 7,900 15,800 * Dechun Zhang 24,138 * 8,046 16,092 * Lihua Yang 24,138 * 8,046 16,092 * Shengmao Liu 24,138 * 8,046 16,092 * Yu Mei Bai 24,138 * 8,046 16,092 * Guo Wen Li 24,525 * 8,175 16,350 * Jing Hua Guan 24,885 * 8,295 16,590 * Li Hua Yu 24,885 * 8,295 16,590 * Shu Yan 24,885 * 8,295 16,590 * Hui Leng 25,000 * 8,333 16,667 * Weihong Zhang 25,000 * 8,333 16,667 * Zhen Jiang Lian 25,122 * 8,374 16,748 * 98 Shares Beneficially
Owned Prior to the
Offering (1) Shares
Being Offered Shares Beneficially
Owned After the
Offering (1) Name of Beneficial Owner Number Percentage (2) Number Percentage (2) Congwei Chen 25,280 * 8,427 16,853 * Ying Liu 25,455 * 8,485 16,970 * Xi Bin Liu 25,722 * 8,574 17,148 * Fengxia Liu 26,070 * 8,690 17,380 * Guo Xu 26,070 * 8,690 17,380 * Shi Gang Lin 26,070 * 8,690 17,380 * Wei Tian 26,070 * 8,690 17,380 * Xiangjiu Li 26,070 * 8,690 17,380 * Xiaoli Wen 26,070 * 8,690 17,380 * Xiumin Zhang 26,070 * 8,690 17,380 * Bailing Yin 27,966 * 9,322 18,644 * Hui Lan Chi 28,001 * 9,334 18,667 * Hong Peng 28,966 * 9,655 19,311 * Meichun Wang 28,966 * 9,655 19,311 * Tai Yang Wang 28,966 * 9,655 19,311 * Yanhua Chen 28,966 * 9,655 19,311 * Yin Qi Cui 29,033 * 9,678 19,355 * Bin Hu 30,000 * 10,000 20,000 * Chuanbao Gu 30,000 * 10,000 20,000 * Deming Li 30,000 * 10,000 20,000 * Guoliang Wu 30,000 * 10,000 20,000 * Lili Wen 30,000 * 10,000 20,000 * Wenjia Yuan 30,000 * 10,000 20,000 * Yi Zhang 30,000 * 10,000 20,000 * Yonggang Sun 30,000 * 10,000 20,000 * Yonglin Gao 30,000 * 10,000 20,000 * Yuan Guang 30,000 * 10,000 20,000 * Shanling Wang 30,415 * 10,138 20,277 * Hua Guo 30,856 * 10,285 20,571 * Qingzhen Yuan 31,521 * 10,507 21,014 * Chunping Zhang 31,600 * 10,533 21,067 * Dong Yan Guan 31,600 * 10,533 21,067 * Gong Shen 31,600 * 10,533 21,067 * Guang Xia Wang 31,600 * 10,533 21,067 * Jing Liu 31,600 * 10,533 21,067 * Qingshu Zhao 31,600 * 10,533 21,067 * Wei Guo 31,600 * 10,533 21,067 * Xingwei Xu 31,600 * 10,533 21,067 * Rui Zhi Dong 32,225 * 10,742 21,483 * Yanping Xu 33,180 * 11,060 22,120 * Zhi Fan Jiao 33,197 * 11,066 22,131 * Jie Yu 33,601 * 11,200 22,401 * Chunfang Wang 33,749 * 11,250 22,499 * Zhao Ping Meng 34,491 * 11,497 22,994 * Guilian Zhang 34,523 * 11,508 23,015 * Fengling Shan 34,760 * 11,587 23,173 * Fujin Zhang 34,760 * 11,587 23,173 * Hengdong Zhang 34,760 * 11,587 23,173 * Min Wang 34,760 * 11,587 23,173 * 99 Shares Beneficially
Owned Prior to the
Offering (1) Shares
Being Offered Shares Beneficially
Owned After the
Offering (1) Name of Beneficial Owner Number Percentage (2) Number Percentage (2) Tie Li 35,343 * 11,781 23,562 * Yanrong Wei 35,550 * 11,850 23,700 * Gui Zhu 35,725 * 11,908 23,817 * Xiu Chen 36,498 * 12,166 24,332 * Yu Bin Yan 36,508 * 12,169 24,339 * Zhi Gang Li 36,581 * 12,194 24,387 * Yongqiang Yan 37,328 * 12,443 24,885 * Fei Liu 38,236 * 12,745 25,491 * Mu Zhang 38,622 * 12,874 25,748 * Bao Xin Shen 39,500 * 13,167 26,333 * Bo Yu 39,500 * 13,167 26,333 * Chongqin Dong 39,500 * 13,167 26,333 * Dian Bao Lu 39,500 * 13,167 26,333 * Hong Ting Ji 39,500 * 13,167 26,333 * Hongbo Pan 39,500 * 13,167 26,333 * Jicai Lang 39,500 * 13,167 26,333 * Jilian Yuan 39,500 * 13,167 26,333 * Jing Zhi Zhu 39,500 * 13,167 26,333 * Jun Wang 39,500 * 13,167 26,333 * Laogangyu 39,500 * 13,167 26,333 * Lili Liu 39,500 * 13,167 26,333 * Lu Bo Zhang 39,500 * 13,167 26,333 * Mingqian Liu 39,500 * 13,167 26,333 * Nanbin Liu 39,500 * 13,167 26,333 * Qingguo Li 39,500 * 13,167 26,333 * Rui Hou 39,500 * 13,167 26,333 * Ruizhe Zhang 39,500 * 13,167 26,333 * Shu Lan Gao 39,500 * 13,167 26,333 * Shu Xia Ding 39,500 * 13,167 26,333 * Shu Xian Pan 39,500 * 13,167 26,333 * Shukui Wang 39,500 * 13,167 26,333 * Wen Sheng Luo 39,500 * 13,167 26,333 * Xian Zhi Sun 39,500 * 13,167 26,333 * Xin Yu Zhao 39,500 * 13,167 26,333 * Yi Fan Zhang 39,500 * 13,167 26,333 * Yingjun Jiang 39,500 * 13,167 26,333 * Yong Jia Lv 39,500 * 13,167 26,333 * Zhao Hui Han 39,500 * 13,167 26,333 * Zhigang Wang 39,500 * 13,167 26,333 * Zhuang Nan Li 39,500 * 13,167 26,333 * Liang Wen Song 39,588 * 13,196 26,392 * Zi Feng Zhou 39,588 * 13,196 26,392 * Song Lin Yi 39,974 * 13,325 26,649 * Xin Ge 40,000 * 13,333 26,667 * Xiuzhen Hu 40,000 * 13,333 26,667 * Cheng Jun Zhang 40,843 * 13,614 27,229 * Miao Yu 41,475 * 13,825 27,650 * Xingchen Liu 43,449 * 14,483 28,966 * Chun Bo Sun 43,450 * 14,483 28,967 * 100 Shares Beneficially
Owned Prior to the
Offering (1) Shares
Being Offered Shares Beneficially
Owned After the
Offering (1) Name of Beneficial Owner Number Percentage (2) Number Percentage (2) Feng Wen Li 43,450 * 14,483 28,967 * Shu Hua Wang 43,450 * 14,483 28,967 * Tian Lei Wang 43,450 * 14,483 28,967 * Wen Zhi Zhang 43,450 * 14,483 28,967 * Xiao Hui Deng 43,450 * 14,483 28,967 * Yanping Cui 43,450 * 14,483 28,967 * Zhong Hai Zhang 43,450 * 14,483 28,967 * Jia An Lv 44,103 * 14,701 29,402 * Jing Zhang 44,148 * 14,716 29,432 * Wenzhong Guo 45,000 * 15,000 30,000 * Hongyan Liu 45,188 * 15,063 30,125 * Xiao Ying Ma 47,400 * 15,800 31,600 * Hongying Wang 47,795 * 15,932 31,863 * Chun Feng Li 48,278 * 16,093 32,185 * Yong Li Wang 48,278 * 16,093 32,185 * Zhi Hai Jiang 48,644 * 16,215 32,429 * Shu Zhen Zhang 49,217 * 16,406 32,811 * Chengqing Yang 50,000 * 16,667 33,333 * Donghui Zhao 50,000 * 16,667 33,333 * Guijin Hou 50,000 * 16,667 33,333 * Jianjun Zhao 50,000 * 16,667 33,333 * Liyanyan 50,000 * 16,667 33,333 * Min Zhou 50,000 * 16,667 33,333 * Qiuli Liu 50,000 * 16,667 33,333 * Rong Han 50,000 * 16,667 33,333 * Tongchun Bi 50,000 * 16,667 33,333 * Xiulan Cao 50,000 * 16,667 33,333 * Yanling Li 50,000 * 16,667 33,333 * Yanming Li 50,000 * 16,667 33,333 * Yongping Wang 50,000 * 16,667 33,333 * Yujie Dong 50,000 * 16,667 33,333 * Jun Ying Bai 52,028 * 17,343 34,685 * Li Wang 52,140 * 17,380 34,760 * Li Juan Feng 52,266 * 17,422 34,844 * Shi Yun Zheng 53,960 * 17,987 35,973 * Jiu Hua Zhang 54,313 * 18,104 36,209 * Yonghua Zhang 54,747 * 18,249 36,498 * Feng Gang Qiu 55,300 * 18,433 36,867 * Hongchang Liu 56,485 * 18,828 37,657 * Yuangui Zhao 57,933 * 19,311 38,622 * Fulin Wang 60,830 * 20,277 40,553 * Zhenwen Zhou 61,535 * 20,512 41,023 * Changhai Ning 62,213 * 20,738 41,475 * Gui Fen Geng 62,252 * 20,751 41,501 * Qi Li 62,568 * 20,856 41,712 * Xinxue Zhong 63,200 * 21,067 42,133 * Su Ping Wang 65,385 * 21,795 43,590 * Jie Dong 68,730 * 22,910 45,820 * Xingli Han 75,300 * 25,100 50,200 * 101 Shares Beneficially
Owned Prior to the
Offering (1) Shares
Being Offered Shares Beneficially
Owned After the
Offering (1) Name of Beneficial Owner Number Percentage (2) Number Percentage (2) En Jiang He 77,824 * 25,941 51,883 * Chun Liu Du 78,210 * 26,070 52,140 * Kuo Lei 78,210 * 26,070 52,140 * Daihong Gao 79,000 * 26,333 52,667 * Hong Zao Zou 79,000 * 26,333 52,667 * Hongmin Li 79,000 * 26,333 52,667 * Jie Teng 79,000 * 26,333 52,667 * Lijie Zhai 79,000 * 26,333 52,667 * Xiaochun Yin 79,000 * 26,333 52,667 * Zhi Ying Han 79,000 * 26,333 52,667 * Zhimin Du 79,000 * 26,333 52,667 * Liru Ma 82,950 * 27,650 55,300 * Wenting Chen 83,333 * 27,778 55,555 * Wenwei Qu 83,333 * 27,778 55,555 * Li Mei Zhang 84,511 * 28,170 56,341 * Huan Yang 85,162 * 28,387 56,775 * Ping Hu 86,900 * 28,967 57,933 * Shufan Yu 86,900 * 28,967 57,933 * Gui Rong Song 88,397 * 29,466 58,931 * Weifu Hao 90,000 * 30,000 60,000 * Ming Zhu Bi 93,308 * 31,103 62,205 * Shumin Ning 94,563 * 31,521 63,042 * Liwei Xue 94,800 * 31,600 63,200 * Cong Lin Yang 98,402 * 32,801 65,601 * Guidong Tan 100,000 * 33,333 66,667 * Jie Fu 100,000 * 33,333 66,667 * Lance Jon Kimmel 100,000 * 33,333 66,667 * Shuang Han 100,000 * 33,333 66,667 * Ting Su 100,000 * 33,333 66,667 * Xiaoqun Zhang 100,000 * 33,333 66,667 * Yongzhong Liu 100,000 * 33,333 66,667 * Zhong Xiao Yang 100,000 * 33,333 66,667 * Wan Shan Sun 101,088 * 33,696 67,392 * Liang Wang 102,700 * 34,233 68,467 * Ziying Tong 102,700 * 34,233 68,467 * Li Bin Zhai 105,320 * 35,107 70,213 * Ju Wang 114,322 * 38,107 76,215 * Han Ying Gao 114,893 * 38,298 76,595 * Yan Xin Dong 115,255 * 38,418 76,837 * Li Chen Liu 125,522 * 41,841 83,681 * Deng Quan Li 130,350 * 43,450 86,900 * Xianli Qu 135,248 * 45,083 90,165 * Lan Wang 141,015 * 47,005 94,010 * Yan Jiang Zhang 146,150 * 48,717 97,433 * Yuanxin Liu 150,000 * 50,000 100,000 * Yu Fan Lu 171,430 * 57,143 114,287 * Jiyou Jiang 183,333 * 61,111 122,222 * Xi Lin Li 183,455 * 61,152 122,303 * Yonghai Yan 190,000 * 63,333 126,667 * 102 Shares Beneficially
Owned Prior to the
Offering (1) Shares
Being Offered Shares Beneficially
Owned After the
Offering (1) Name of Beneficial Owner Number Percentage (2) Number Percentage (2) Jingfen Guo 197,500 * 65,833 131,667 * Wei Jun Shan 198,421 * 66,140 132,281 * Shu Min Liu 219,336 * 73,112 146,224 * Guangwu Yue 222,543 * 74,181 148,362 * Zhixiang Cao 237,000 * 79,000 158,000 * Long Jin 252,800 * 84,267 168,533 * Lianxue Han 270,385 * 90,128 180,257 * Yu Lan Liu 328,930 * 109,643 219,287 * Wei Shan 339,700 * 113,233 226,467 * Gui Ling Yuan 395,000 * 131,667 263,333 * 426,600 * 71,100 355,500 * Gui Ying Tong 470,000 * 156,667 313,333 * Bai Ying Zhang 482,776 * 160,925 321,851 * Wing Nin Lo 500,000 1.0 % 166,667 333,333 * Hanjia Zhao 608,300 1.2 % 202,767 405,533 * Bo Li 1,000,000 2.0 % 333,333 666,667 1.3 % Renchun Wang 1,000,000 2.0 % 333,333 666,667 1.3 % Yuan Li 1,000,000 2.0 % 333,333 666,667 1.3 % Yi Cheng Wang 1,966,137 3.9 % 655,379 1,310,758 2.6 % 4,977,474 9.5 % 829,579 4,147,895 7.9 % 40,206,950 57.6 % 2,967,861 37,239,089 53.1 % TOTAL 72,805,512 100.0 % 16,500,000 56,305,512 77.3 % Name of Beneficial Owner # Shares(1) Percentage # Shares Offered # Shares Percentage(2) Wei Quan Zhou 1,580 * 1,580 0 * Xiu Lian Zhang 1,580 * 1,580 0 * Yajie Liu 1,580 * 1,580 0 * Ying Cao 1,580 * 1,580 0 * Yuming Li 1,580 * 1,580 0 * Zhanhua Chen 1,580 * 1,580 0 * Zhenwen Li 1,580 * 1,580 0 * Hongman Yu 1,659 * 1,659 0 * Jihai Song 1,659 * 1,659 0 * Jun Meng 1,659 * 1,659 0 * Lanying Wang 1,659 * 1,659 0 * Shuchun Zhang 1,659 * 1,659 0 * Shujian Sun 1,659 * 1,659 0 * Shuxiang Sun 1,659 * 1,659 0 * Wen Xin Chen 1,659 * 1,659 0 * Yandong Song 1,659 * 1,659 0 * Yukun Liu 1,659 * 1,659 0 * Zhaohui Geng 1,659 * 1,659 0 * Guang Hua Xie 1,706 * 1,706 0 * Gui Min Zhao 1,706 * 1,706 0 * Qiang Jia 1,706 * 1,706 0 * Cui Ping Yin 1,722 * 1,722 0 * Huaibin Huang 1,738 * 1,738 0 * Hui Mei Shang 1,738 * 1,738 0 * Jun Li Liu 1,738 * 1,738 0 * Li Hua Zhou 1,738 * 1,738 0 * Ling Lu 1,738 * 1,738 0 * Ling Ma 1,738 * 1,738 0 * Shu Mei Zhang 1,738 * 1,738 0 * Tie Li Wang 1,738 * 1,738 0 * Wen Li Xu 1,738 * 1,738 0 * Xiaowei Wang 1,738 * 1,738 0 * Yurong Cao 1,738 * 1,738 0 * Zhigang Feng 1,738 * 1,738 0 * Ning Xin 1,755 * 1,755 0 * Changjiang Yang 1,930 * 1,930 0 * Chunrong Yang 1,930 * 1,930 0 * Cheng Yu Wang 1,931 * 1,931 0 * Dacheng Wang 1,931 * 1,931 0 * Fu Wei Zhang 1,931 * 1,931 0 * Gui Ying Ma 1,931 * 1,931 0 * Guiling Zhang 1,931 * 1,931 0 * Guoqiang Xie 1,931 * 1,931 0 * Hong Ying Wang 1,931 * 1,931 0 *
Prior to Offering
After the Offering Name of Beneficial Owner # Shares(1) Percentage # Shares Offered # Shares Percentage(2) Hui Jun Han 1,931 * 1,931 0 * Jin Zhi Wang 1,931 * 1,931 0 * Juan Du 1,931 * 1,931 0 * Li Dong 1,931 * 1,931 0 * Li Liu 1,931 * 1,931 0 * Lihong Zou 1,931 * 1,931 0 * Ming Kai Ren 1,931 * 1,931 0 * Rui Xiang Han 1,931 * 1,931 0 * Shu Ran Miao 1,931 * 1,931 0 * Xiufen Li 1,931 * 1,931 0 * Zhao Ge Wang 1,931 * 1,931 0 * Gui Lan Zhang 1,991 * 1,991 0 * Lin Li 1,991 * 1,991 0 * Ying Pan 1,991 * 1,991 0 * Xiang De Yu 2,074 * 2,074 0 * Tao Yang 2,086 * 2,086 0 * Bin Chen 2,370 * 2,370 0 * Chang Qing Li 2,370 * 2,370 0 * Dong Wei Wang 2,370 * 2,370 0 * Gongwei Yang 2,370 * 2,370 0 * Gui Rong Wang 2,370 * 2,370 0 * Hao Qi Chen 2,370 * 2,370 0 * Hui Lin Qiao 2,370 * 2,370 0 * Jun Wang 2,370 * 2,370 0 * Jun Wu 2,370 * 2,370 0 * Lan Ying Wang 2,370 * 2,370 0 * Lei Bao 2,370 * 2,370 0 * Li Ping Zhang 2,370 * 2,370 0 * Qiuhong Ma 2,370 * 2,370 0 * Quan An Cao 2,370 * 2,370 0 * Shi Xiang Jia 2,370 * 2,370 0 * Shu Hua Qu 2,370 * 2,370 0 * Shufang Sun 2,370 * 2,370 0 * Tong Xu 2,370 * 2,370 0 * Wen Long Yang 2,370 * 2,370 0 * Wen Qing Liu 2,370 * 2,370 0 * Xiang Zhe Zheng 2,370 * 2,370 0 * Xianhua Hua 2,370 * 2,370 0 * Xiao Dong Wang 2,370 * 2,370 0 * Xiao Hong Yang 2,370 * 2,370 0 * Xiu Ling Wang 2,370 * 2,370 0 * Xu Gui Xie 2,370 * 2,370 0 * Yu Ming He 2,370 * 2,370 0 *
Prior to Offering
After the Offering Name of Beneficial Owner # Shares(1) Percentage # Shares Offered # Shares Percentage(2) Yu Qin Liu 2,370 * 2,370 0 * Yumei Wang 2,370 * 2,370 0 * Gui Zhi Yang 2,413 * 2,413 0 * Yong Hai Yu 2,413 * 2,413 0 * Cheng Hui Tang 2,489 * 2,489 0 * Jun Li 2,489 * 2,489 0 * Li Yan Hua 2,489 * 2,489 0 * Shu Min Gao 2,489 * 2,489 0 * Zhende Zhang 2,489 * 2,489 0 * Zhi Ping Xiao 2,489 * 2,489 0 * Guo Zhen Dai 2,545 * 2,545 0 * Dian Jin Luan 2,560 * 2,560 0 * Jian Zhang 2,560 * 2,560 0 * Huan Qin Liu 2,607 * 2,607 0 * Jin Song 2,607 * 2,607 0 * Lifang Zhu 2,607 * 2,607 0 * Shu Jie Jiang 2,607 * 2,607 0 * Yan Han 2,607 * 2,607 0 * Zhiguo Liu 2,607 * 2,607 0 * Shi Guo Liang 2,752 * 2,752 0 * Chun Hui Jia 2,765 * 2,765 0 * Shu Qing Sun 2,852 * 2,852 0 * Gui Mei Shi 2,896 * 2,896 0 * Hua Li 2,896 * 2,896 0 * Hui Jiang 2,896 * 2,896 0 * Hui Zhu 2,896 * 2,896 0 * Huiying Liu 2,896 * 2,896 0 * Jia Zhi Wang 2,896 * 2,896 0 * Jingshu Lv 2,896 * 2,896 0 * Li Bin Du 2,896 * 2,896 0 * Li Juan Xia 2,896 * 2,896 0 * Li Ping Yang 2,896 * 2,896 0 * Li Tang 2,896 * 2,896 0 * Qing Ren Li 2,896 * 2,896 0 * Rui Yue 2,896 * 2,896 0 * Wen Xian Dong 2,896 * 2,896 0 * Xianzhang Sun 2,896 * 2,896 0 * Xin Yun Wang 2,896 * 2,896 0 * Yan Ping Qu 2,896 * 2,896 0 * Yi Tao Lang 2,896 * 2,896 0 * Yu Qin Wang 2,896 * 2,896 0 * Yu Zhang Yue 2,896 * 2,896 0 * Zhengguang Shao 2,896 * 2,896 0 * Zhenmei Qu 2,896 * 2,896 0 * Zhiqiang Wang 2,896 * 2,896 0 *
Prior to Offering
After the Offering Name of Beneficial Owner # Shares(1) Percentage # Shares Offered # Shares Percentage(2) Zhiwei Tian 2,896 * 2,896 0 * Feng Hu Ma 2,986 * 2,986 0 * Xi Qin Wang 3,072 * 3,072 0 * Lin Juan Xu 3,128 * 3,128 0 * Xiaoli Xu 3,160 * 3,160 0 * Xiuzhi Zhao 3,160 * 3,160 0 * Congge Tang 3,318 * 3,318 0 * Dingli Sun 3,318 * 3,318 0 * Fenglan Guan 3,318 * 3,318 0 * Guiying Song 3,318 * 3,318 0 * Guizhi Yin 3,318 * 3,318 0 * Hongnan Yu 3,318 * 3,318 0 * Jihua Zhang 3,318 * 3,318 0 * Jinxia Lu 3,318 * 3,318 0 * Jirong Zhang 3,318 * 3,318 0 * Lihua Zhang 3,318 * 3,318 0 * Linglin Chen 3,318 * 3,318 0 * Shuying Zhang 3,318 * 3,318 0 * Xiuhua Cao 3,318 * 3,318 0 * Xiujuan Li 3,318 * 3,318 0 * Ying Sun 3,318 * 3,318 0 * Hong Kuai Feng 3,413 * 3,413 0 * Zhan Xiang Zhang 3,413 * 3,413 0 * Fu Yu 3,476 * 3,476 0 * Guang Fa Zhang 3,476 * 3,476 0 * Gui Qin Zhang 3,476 * 3,476 0 * Hua Geng 3,476 * 3,476 0 * Jian Fu Zhang 3,476 * 3,476 0 * Jing Li 3,476 * 3,476 0 * Li Ming Hu 3,476 * 3,476 0 * Liqiu Wang 3,476 * 3,476 0 * Min Feng Zhang 3,476 * 3,476 0 * Xuejun Li 3,476 * 3,476 0 * Xueru Cai 3,476 * 3,476 0 * Yanjie Yu 3,476 * 3,476 0 * Zhong Shan Yang 3,583 * 3,583 0 * Jing Zhi Yu 3,862 * 3,862 0 * Changjun Wang 3,950 * 3,950 0 * Dongyu Wang 3,950 * 3,950 0 * Feng Yan Gai 3,950 * 3,950 0 * Fenglan Liu 3,950 * 3,950 0 * Hong Yun Jiang 3,950 * 3,950 0 * Jian Jun Yang 3,950 * 3,950 0 * Jie Zhao 3,950 * 3,950 0 *
Prior to Offering
After the Offering Name of Beneficial Owner # Shares(1) Percentage # Shares Offered # Shares Percentage(2) Jing Hai Li 3,950 * 3,950 0 * Jingzhi Peng 3,950 * 3,950 0 * Jun Yang 3,950 * 3,950 0 * Lianyu Wang 3,950 * 3,950 0 * Qiang Miao 3,950 * 3,950 0 * Suping Zhu 3,950 * 3,950 0 * Xiang Dong Yu 3,950 * 3,950 0 * Xiu Qiu Wang 3,950 * 3,950 0 * Xun Zhou 3,950 * 3,950 0 * Ya Lin Jiang 3,950 * 3,950 0 * Ya Qin Wang 3,950 * 3,950 0 * Yun Zhen Zuo 3,950 * 3,950 0 * Zhong Hua Fu 3,950 * 3,950 0 * Ying Chen 3,982 * 3,982 0 * Qiulan Bian 4,029 * 4,029 0 * Yaqin Zhao 4,108 * 4,108 0 * Jianbo He 4,213 * 4,213 0 * Hong Jun Fu 4,227 * 4,227 0 * Ya Wen Gao 4,266 * 4,266 0 * Ji Chao Wang 4,345 * 4,345 0 * Jin Qi Jiang 4,345 * 4,345 0 * Lihua Sun 4,345 * 4,345 0 * Shao Chen Song 4,345 * 4,345 0 * Xu Zhang 4,345 * 4,345 0 * Xuemei Zheng 4,345 * 4,345 0 * Chang Hai Li 4,388 * 4,388 0 * Zhaojie Zhang 4,441 * 4,441 0 * Ming Cai Ye 4,608 * 4,608 0 * Deyi Sun 4,740 * 4,740 0 * Ji Xiang Wang 4,740 * 4,740 0 * Jialan Huang 4,740 * 4,740 0 * Shuqing Zhang 4,740 * 4,740 0 * Wei Xie 4,740 * 4,740 0 * Yuying Li 4,826 * 4,826 0 * Guo Hui Wang 4,827 * 4,827 0 * Jian Chun Qi 4,827 * 4,827 0 * Shu Ran Zheng 4,827 * 4,827 0 * Yanli Ma 4,827 * 4,827 0 * Bing Yan Cui 4,828 * 4,828 0 * Chunzhu Yang 4,828 * 4,828 0 * Daowei Zhou 4,828 * 4,828 0 * De Xiang Sun 4,828 * 4,828 0 * Fan Lu Bai 4,828 * 4,828 0 * Feng Qin Hao 4,828 * 4,828 0 *
Prior to Offering
After the Offering Name of Beneficial Owner # Shares(1) Percentage # Shares Offered # Shares Percentage(2) Gui Jie Zhang 4,828 * 4,828 0 * Guiying Zhou 4,828 * 4,828 0 * Guo Wei 4,828 * 4,828 0 * Hong Wei Zhang 4,828 * 4,828 0 * Hui Dan Lu 4,828 * 4,828 0 * Jiang Li 4,828 * 4,828 0 * Jie Zhang 4,828 * 4,828 0 * Jin Guo Zhang 4,828 * 4,828 0 * Jin Song Wu 4,828 * 4,828 0 * Jing Yang 4,828 * 4,828 0 * Jingwu Zhang 4,828 * 4,828 0 * Jun Hui Liu 4,828 * 4,828 0 * Lanxiang Li 4,828 * 4,828 0 * Li Ping Yang 4,828 * 4,828 0 * Li Yu 4,828 * 4,828 0 * Lijun Zhao 4,828 * 4,828 0 * Mei Ying Xin 4,828 * 4,828 0 * Mingwen Zhao 4,828 * 4,828 0 * Ping Zhao 4,828 * 4,828 0 * Qing Zhi Liu 4,828 * 4,828 0 * Ru Xiao 4,828 * 4,828 0 * Ruihua Sun 4,828 * 4,828 0 * Shang Wei Hu 4,828 * 4,828 0 * Shou Feng Du 4,828 * 4,828 0 * Shuyuan Lu 4,828 * 4,828 0 * Tiejun Liang 4,828 * 4,828 0 * Ting Xiang Lv 4,828 * 4,828 0 * Wan He Qin 4,828 * 4,828 0 * Wen Chen Zhang 4,828 * 4,828 0 * Wen Peng 4,828 * 4,828 0 * Xiang Li Ma 4,828 * 4,828 0 * Xiao Xiang Lan 4,828 * 4,828 0 * Xin Liu 4,828 * 4,828 0 * Xing Wei Jiang 4,828 * 4,828 0 * Xirong Zhao 4,828 * 4,828 0 * Xiuyan Ben 4,828 * 4,828 0 * Yan Fei Sun 4,828 * 4,828 0 * Yan Hong Gao 4,828 * 4,828 0 * Yang Liu 4,828 * 4,828 0 * Yanlin Zhang 4,828 * 4,828 0 * Yongping Hu 4,828 * 4,828 0 * Yu Ping Xu 4,828 * 4,828 0 * Yu Qin He 4,828 * 4,828 0 * Yu Rong Su 4,828 * 4,828 0 *
Prior to Offering
After the Offering Name of Beneficial Owner # Shares(1) Percentage # Shares Offered # Shares Percentage(2) Yulan Yan 4,828 * 4,828 0 * Yun Bai 4,828 * 4,828 0 * Yuqin Ye 4,828 * 4,828 0 * Zhanlin Zhang 4,828 * 4,828 0 * Zhi An Tao 4,828 * 4,828 0 * Zhi Ling Wang 4,828 * 4,828 0 * Zhimin Li 4,828 * 4,828 0 * Zhiying Zhang 4,828 * 4,828 0 * Zu En Hu 4,828 * 4,828 0 * Hong Li 4,898 * 4,898 0 * Chang Yu Zhang 4,977 * 4,977 0 * Chunbo Zhao 4,977 * 4,977 0 * Jie Ming 4,977 * 4,977 0 * Jumei Sun 4,977 * 4,977 0 * Laibin Zhao 4,977 * 4,977 0 * Lihong Tian 4,977 * 4,977 0 * Wei Qiang Ji 4,977 * 4,977 0 * Wenli Zhao 4,977 * 4,977 0 * Xikui Qiao 4,977 * 4,977 0 * Xiu Lian Sun 4,977 * 4,977 0 * Yanju Zhao 4,977 * 4,977 0 * Ying Huang 4,977 * 4,977 0 * Yong Wei Han 4,977 * 4,977 0 * Yongxia Zhu 4,977 * 4,977 0 * Zhengze Huang 4,977 * 4,977 0 * Zhi Min Liu 4,977 * 4,977 0 * Dewei Zhao 5,000 * 5,000 0 * Jianyi Yang 5,000 * 5,000 0 * Ping Han 5,000 * 5,000 0 * Shi Yi Li 5,000 * 5,000 0 * Wei Cao 5,000 * 5,000 0 * Xiaofeng Li 5,000 * 5,000 0 * Xue Wang 5,000 * 5,000 0 * Ling Shan Kong 5,119 * 5,119 0 * Dongmei Liu 5,214 * 5,214 0 * Feng Hong Liang 5,214 * 5,214 0 * He An Wang 5,214 * 5,214 0 * Jing Zhao 5,214 * 5,214 0 * Ku Chen 5,214 * 5,214 0 * Lan Rong Zou 5,214 * 5,214 0 * Ping Li 5,214 * 5,214 0 * Xiao Dong Liu 5,214 * 5,214 0 * Jun Lv 5,530 * 5,530 0 * Zhiyuan Sun 5,530 * 5,530 0 *
Prior to Offering
After the Offering Name of Beneficial Owner # Shares(1) Percentage # Shares Offered # Shares Percentage(2) Hui Li 5,609 * 5,609 0 * Shuqin Zhang 5,609 * 5,609 0 * Lianshan Chen 5,688 * 5,688 0 * Chunying Yang 5,793 * 5,793 0 * Sheng Jiang Liu 5,793 * 5,793 0 * Shukun Mao 5,793 * 5,793 0 * Xueshen Xu 5,793 * 5,793 0 * Qing Guo Wang 6,070 * 6,070 0 * Kaimei Tan 6,083 * 6,083 0 * Yi Fei Lin 6,083 * 6,083 0 * Feng Jun Xi 6,276 * 6,276 0 * Rong Guo Li 6,320 * 6,320 0 * Yan Hua Li 6,320 * 6,320 0 * Yong Zheng 6,350 * 6,350 0 * Songling Li 6,372 * 6,372 0 * Yueying Yu 6,478 * 6,478 0 * Shu Qin Han 6,510 * 6,510 0 * Xiaoxia Xie 6,636 * 6,636 0 * Feng Xian Zhao 6,758 * 6,758 0 * Feng Ying Tang 6,758 * 6,758 0 * Qing Sheng Li 6,758 * 6,758 0 * Xiu Rong Liu 6,758 * 6,758 0 * Anrong Wang 6,952 * 6,952 0 * Guishan Wang 6,952 * 6,952 0 * Xiuyun Zhang 6,952 * 6,952 0 * Lifen Li 7,110 * 7,110 0 * Bao Yu Xu 7,338 * 7,338 0 * Bingyou Feng 7,466 * 7,466 0 * Feng Qing Yu 7,466 * 7,466 0 * Huimin Tian 7,466 * 7,466 0 * Jiafang Xu 7,466 * 7,466 0 * Tong Chen 7,466 * 7,466 0 * Xueqiu Yu 7,466 * 7,466 0 * Guangren Zhang 7,724 * 7,724 0 * Honghua Zhen 7,724 * 7,724 0 * Li Feng 7,724 * 7,724 0 * Li Zhao 7,724 * 7,724 0 * Xi Ling Tong 7,724 * 7,724 0 * Lai Fa Wang 7,821 * 7,821 0 * Yan Song Zhao 7,899 * 7,899 0 * Deling Wang 7,900 * 7,900 0 * Fenghua Li 7,900 * 7,900 0 * Fengqin Li 7,900 * 7,900 0 * Guanghua Liang 7,900 * 7,900 0 *
Prior to Offering
After the Offering Name of Beneficial Owner # Shares(1) Percentage # Shares Offered # Shares Percentage(2) Guihua Yu 7,900 * 7,900 0 * Guiqin Liu 7,900 * 7,900 0 * Haiquan Yang 7,900 * 7,900 0 * Haitao Yang 7,900 * 7,900 0 * Hong Li 7,900 * 7,900 0 * Huawei Mao 7,900 * 7,900 0 * Li Zhao 7,900 * 7,900 0 * Liping Xu 7,900 * 7,900 0 * Liyuan Sun 7,900 * 7,900 0 * Shouxin Ye 7,900 * 7,900 0 * Shuqing Wang 7,900 * 7,900 0 * Wan Zhu Liu 7,900 * 7,900 0 * Xuehua Wang 7,900 * 7,900 0 * Ya Bin Yu 7,900 * 7,900 0 * Yanping Dong 7,900 * 7,900 0 * Ying Fu 7,900 * 7,900 0 * Yongxin Hao 7,900 * 7,900 0 * Yu Qin Shan 7,900 * 7,900 0 * Zhenfeng Wang 7,900 * 7,900 0 * Zhenjia Liu 7,900 * 7,900 0 * Zhizhong Tao 7,900 * 7,900 0 * Zun Li Gao 7,900 * 7,900 0 * Qinghua Wu 7,917 * 7,917 0 * Yan Jin 8,110 * 8,110 0 * Jingzhi Sun 8,137 * 8,137 0 * Fenglan Gao 8,295 * 8,295 0 * Kunjun Xu 8,295 * 8,295 0 * Wanyou Li 8,295 * 8,295 0 * Wenming Guo 8,295 * 8,295 0 * Xiaojie Wang 8,295 * 8,295 0 * Tonghua Li 8,496 * 8,496 0 * Shu Fen Lu 8,532 * 8,532 0 * Su Zhen Wang 8,532 * 8,532 0 * Guan Wang 8,688 * 8,688 0 * Bai Gang He 8,690 * 8,690 0 * Bao Xiang Yu 8,690 * 8,690 0 * Baoli Wang 8,690 * 8,690 0 * Chang Jiang Xia 8,690 * 8,690 0 * Changhai Guo 8,690 * 8,690 0 * Cheng Lin Sun 8,690 * 8,690 0 * Gui Zhi Sang 8,690 * 8,690 0 * Hongju Liu 8,690 * 8,690 0 * Hongyin Wu 8,690 * 8,690 0 * Hui Tang 8,690 * 8,690 0 *
Prior to Offering
After the Offering Name of Beneficial Owner # Shares(1) Percentage # Shares Offered # Shares Percentage(2) Hui Zhang 8,690 * 8,690 0 * Jing Shen 8,690 * 8,690 0 * Jinwen Fan 8,690 * 8,690 0 * Jinxi Zheng 8,690 * 8,690 0 * Lijun Meng 8,690 * 8,690 0 * Ling Wang 8,690 * 8,690 0 * Luxia Ma 8,690 * 8,690 0 * Mingdong Zhang 8,690 * 8,690 0 * Qi Sun 8,690 * 8,690 0 * Shou Zhi Wei 8,690 * 8,690 0 * Shu You Gou 8,690 * 8,690 0 * Shuyuan Li 8,690 * 8,690 0 * Songzhi Ding 8,690 * 8,690 0 * Tong Tong 8,690 * 8,690 0 * Wei Ze Sun 8,690 * 8,690 0 * Weiqi Wang 8,690 * 8,690 0 * Wenying Liu 8,690 * 8,690 0 * Xia Jiang 8,690 * 8,690 0 * Xiu Ping Du 8,690 * 8,690 0 * Xiu Yan Li 8,690 * 8,690 0 * Xiufeng Shao 8,690 * 8,690 0 * Xiuhua Li 8,690 * 8,690 0 * Xiuhua Zhu 8,690 * 8,690 0 * Xiuying Liu 8,690 * 8,690 0 * Xuehai Li 8,690 * 8,690 0 * Yan Feng Ji 8,690 * 8,690 0 * Yan Qing Su 8,690 * 8,690 0 * Yanlai Zhang 8,690 * 8,690 0 * Yao Gang Zhou 8,690 * 8,690 0 * Youcheng Yan 8,690 * 8,690 0 * Yu Hua Mei 8,690 * 8,690 0 * Yu Yan Zhao 8,690 * 8,690 0 * Yun Lan Feng 8,690 * 8,690 0 * Zhancai Gao 8,690 * 8,690 0 * Zhao Yuan Liu 8,690 * 8,690 0 * Zhao’an Wan 8,690 * 8,690 0 * Hang Xu 8,703 * 8,703 0 * Dexiang Yin 8,883 * 8,883 0 * Lijun Sun 8,895 * 8,895 0 * Shumei Di 8,927 * 8,927 0 * Qing Zhong Zhang 9,069 * 9,069 0 * Yong Lai Liu 9,211 * 9,211 0 * Yongtian Liu 9,211 * 9,211 0 * Qiu Ling Dong 9,322 * 9,322 0 *
Prior to Offering
After the Offering Name of Beneficial Owner # Shares(1) Percentage # Shares Offered # Shares Percentage(2) Hong Li 9,654 * 9,654 0 * Chang Li Dong 9,655 * 9,655 0 * Changchun Li 9,655 * 9,655 0 * Chun Yan Bai 9,655 * 9,655 0 * Cui Ping Wang 9,655 * 9,655 0 * Dong Ming Ge 9,655 * 9,655 0 * Fei Yu 9,655 * 9,655 0 * Feng Juan Liu 9,655 * 9,655 0 * Feng Lan Sun 9,655 * 9,655 0 * Feng Yun Zhang 9,655 * 9,655 0 * Fuzhen Liu 9,655 * 9,655 0 * Guangbo Jiang 9,655 * 9,655 0 * Guo Yu Li 9,655 * 9,655 0 * Hai Quan Cao 9,655 * 9,655 0 * Hong Yan Gong 9,655 * 9,655 0 * Lei Yu 9,655 * 9,655 0 * Lei Zhang 9,655 * 9,655 0 * Ming Xun Han 9,655 * 9,655 0 * Rong Hua Yan 9,655 * 9,655 0 * Shuang Yan Liu 9,655 * 9,655 0 * Shumei Shan 9,655 * 9,655 0 * Wei Dong 9,655 * 9,655 0 * Wei Xue Shan 9,655 * 9,655 0 * Xiu Qin Zhang 9,655 * 9,655 0 * Xiu Ying Yu 9,655 * 9,655 0 * Yan Ju Liu 9,655 * 9,655 0 * Yan Jun Gao 9,655 * 9,655 0 * Ye Tian 9,655 * 9,655 0 * Yun Xia Jiang 9,655 * 9,655 0 * Yuqin Shang 9,655 * 9,655 0 * Zhen Hua Yuan 9,655 * 9,655 0 * Yuhua Liu 9,717 * 9,717 0 * Ting Shan Yan 9,948 * 9,948 0 * Gui Yan Yin 9,954 * 9,954 0 * Hong Zeng Sun 9,954 * 9,954 0 * Airong Wang 10,000 * 10,000 0 * Bainian Li 10,000 * 10,000 0 * Baoguo Cui 10,000 * 10,000 0 * Fei Su 10,000 * 10,000 0 * Guangzhong Li 10,000 * 10,000 0 * Jianguo Tan 10,000 * 10,000 0 * Jixu Wen 10,000 * 10,000 0 * Lianfa Sun 10,000 * 10,000 0 * Senjian Gao 10,000 * 10,000 0 *
Prior to Offering
After the Offering Name of Beneficial Owner # Shares(1) Percentage # Shares Offered # Shares Percentage(2) Shibo Zhang 10,000 * 10,000 0 * Shufang Men 10,000 * 10,000 0 * Weili Wang 10,000 * 10,000 0 * Xiaojun Shen 10,000 * 10,000 0 * Xiaozhong Liu 10,000 * 10,000 0 * Xiuying Ma 10,000 * 10,000 0 * Youpeng Wang 10,000 * 10,000 0 * Yulan Zhang 10,000 * 10,000 0 * Zhiming Zhang 10,000 * 10,000 0 * Zhiwei Liu 10,000 * 10,000 0 * Yanjun Liu 10,042 * 10,042 0 * Yaxiang Wang 10,153 * 10,153 0 * Yan Cai Zhang 10,390 * 10,390 0 * Hui Wang 10,428 * 10,428 0 * Ben Ming Zang 10,524 * 10,524 0 * Limin Zhang 10,949 * 10,949 0 * Chang Hui Ma 10,972 * 10,972 0 * Jinhui Chen 11,115 * 11,115 0 * Shu Jun Cui 11,142 * 11,142 0 * Hongtao Zhang 11,447 * 11,447 0 * Qing Chun Wang 11,566 * 11,566 0 * Ping Lin 11,586 * 11,586 0 * Shu Fen Wan 11,586 * 11,586 0 * Wei Liu 11,586 * 11,586 0 * Ze Chu 11,586 * 11,586 0 * Bin Qin 11,850 * 11,850 0 * Junying Zhu 11,850 * 11,850 0 * Liping Zhang 11,850 * 11,850 0 * Minghai Zhang 11,850 * 11,850 0 * Liping Xu 12,166 * 12,166 0 * Shu Yu Li 12,166 * 12,166 0 * Yu Xiang Li 12,166 * 12,166 0 * Yaqin Fan 12,288 * 12,288 0 * Yuanchang Liu 12,340 * 12,340 0 * Jinping Xia 12,443 * 12,443 0 * Lei Wang 12,443 * 12,443 0 * Qing Zhi Hu 12,443 * 12,443 0 * Xiling Yu 12,443 * 12,443 0 * Zhi Ping Li 12,443 * 12,443 0 * Kebin Ma 12,552 * 12,552 0 * Bao Shan Li 13,035 * 13,035 0 * Haijie Zhou 13,035 * 13,035 0 * Lian Min Tan 13,035 * 13,035 0 * Minghui Jiang 13,051 * 13,051 0 *
Prior to Offering
After the Offering Name of Beneficial Owner # Shares(1) Percentage # Shares Offered # Shares Percentage(2) Xiu Qin Wan 13,114 * 13,114 0 * Huijian Xue 13,193 * 13,193 0 * Yuqin Chen 13,272 * 13,272 0 * Yan Qiu Yu 13,383 * 13,383 0 * Jian Sheng Yan 13,518 * 13,518 0 * Ying Xue 13,518 * 13,518 0 * Chun Yu Zhou 13,667 * 13,667 0 * Rui Shan Zhang 13,890 * 13,890 0 * Hua Chen Wang 13,904 * 13,904 0 * Qiu Yan Zhu 14,482 * 14,482 0 * Duowen Wang 14,483 * 14,483 0 * Gui Fen Qiu 14,483 * 14,483 0 * Guoshun Jiang 14,483 * 14,483 0 * Hong Da Xu 14,483 * 14,483 0 * Hongzhu Qi 14,483 * 14,483 0 * Li Luan 14,483 * 14,483 0 * Tong Bin Xie 14,483 * 14,483 0 * Xiao Li Xu 14,483 * 14,483 0 * Xiaofei Hou 14,483 * 14,483 0 * Xue Zhi Liang 14,483 * 14,483 0 * Yu Fen Zhang 14,483 * 14,483 0 * Yu Ren Bai 14,483 * 14,483 0 * Zhaoguang Xu 14,483 * 14,483 0 * Youren Zhu 14,869 * 14,869 0 * Changyou Li 15,000 * 15,000 0 * Zhijie Lei 15,000 * 15,000 0 * You Min Lv 15,096 * 15,096 0 * Xiang Xun Han 15,448 * 15,448 0 * Bin Wang 15,800 * 15,800 0 * Bolun Li 15,800 * 15,800 0 * Changdi Niu 15,800 * 15,800 0 * Changmin Zhao 15,800 * 15,800 0 * Fulun Huang 15,800 * 15,800 0 * Haisong Wang 15,800 * 15,800 0 * Huaiyu Xu 15,800 * 15,800 0 * Huijun Zhang 15,800 * 15,800 0 * Jinguo Wang 15,800 * 15,800 0 * Kemin Cao 15,800 * 15,800 0 * Meng Yang 15,800 * 15,800 0 * Qingyi Meng 15,800 * 15,800 0 * Qiong Wu 15,800 * 15,800 0 * Ruihong Fan 15,800 * 15,800 0 * Shihua You 15,800 * 15,800 0 *
Prior to Offering
After the Offering Name of Beneficial Owner # Shares(1) Percentage # Shares Offered # Shares Percentage(2) Shuling Li 15,800 * 15,800 0 * Shuwen Liu 15,800 * 15,800 0 * Wei Liu 15,800 * 15,800 0 * Xiufang Yang 15,800 * 15,800 0 * Yan Jiang Zhang 15,800 * 15,800 0 * Yanjie Jiang 15,800 * 15,800 0 * Yanyan Li 15,800 * 15,800 0 * Yao Cheng Chen 15,800 * 15,800 0 * Ying Wang 15,800 * 15,800 0 * Yongchang Chen 15,800 * 15,800 0 * Yunyi Liu 15,800 * 15,800 0 * Zhenxin Gu 15,800 * 15,800 0 * Zhimin Wang 15,800 * 15,800 0 * Guoxiang Bai 16,195 * 16,195 0 * Yansong Wang 16,413 * 16,413 0 * Xiuli Wang 16,414 * 16,414 0 * Cai Ying Zhang 16,432 * 16,432 0 * Yao Wen Sun 16,511 * 16,511 0 * Cuiyun Liu 16,590 * 16,590 0 * Shu Qin Meng 16,590 * 16,590 0 * Liping Liu 16,666 * 16,666 0 * Guihua Xu 16,985 * 16,985 0 * Ou Xu 16,994 * 16,994 0 * Longfang Xia 17,121 * 17,121 0 * Yingyu Cui 17,379 * 17,379 0 * Chong Ming Li 17,380 * 17,380 0 * Cuiyin Wei 17,380 * 17,380 0 * Guang Fen Yang 17,380 * 17,380 0 * Guijie Liu 17,380 * 17,380 0 * Hai Tao Jiang 17,380 * 17,380 0 * Hua Chen 17,380 * 17,380 0 * Ji Gui Chu 17,380 * 17,380 0 * Ke Min Wang 17,380 * 17,380 0 * Li Yan Sun 17,380 * 17,380 0 * Lianke Han 17,380 * 17,380 0 * Qingtao Zhang 17,380 * 17,380 0 * Qingyuan Zhang 17,380 * 17,380 0 * Rong Chang Tang 17,380 * 17,380 0 * Shi Long Bai 17,380 * 17,380 0 * Tai Zhao Li 17,380 * 17,380 0 * Xiangmin Shi 17,380 * 17,380 0 * Xin Pu 17,380 * 17,380 0 * Xin Wang 17,380 * 17,380 0 * Yankui Song 17,380 * 17,380 0 * Yanwu Wang 17,380 * 17,380 0 *
Prior to Offering
After the Offering Name of Beneficial Owner # Shares(1) Percentage # Shares Offered # Shares Percentage(2) Yulin Liu 17,380 * 17,380 0 * Yun Lou Li 17,380 * 17,380 0 * Zhenhe Jian 17,380 * 17,380 0 * Qinggang Wu 18,345 * 18,345 0 * Yan Xia Wang 18,345 * 18,345 0 * Jian Hua Peng 18,574 * 18,574 0 * Hong Yun Liu 19,311 * 19,311 0 * Lida Wu 19,311 * 19,311 0 * Qiuyan Chen 19,311 * 19,311 0 * Yu Xi Zhang 19,311 * 19,311 0 * Min Li Wang 19,500 * 19,500 0 * Feng Shu Dong 19,863 * 19,863 0 * Zhenlai Li 19,908 * 19,908 0 * Chaoyang Liu 20,000 * 20,000 0 * Chengming Cui 20,000 * 20,000 0 * Chunyan Sun 20,000 * 20,000 0 * Daming Feng 20,000 * 20,000 0 * Dan Wang 20,000 * 20,000 0 * Dewen Liu 20,000 * 20,000 0 * Fuying Wang 20,000 * 20,000 0 * Guizhu Wang 20,000 * 20,000 0 * Jin’nian Liu 20,000 * 20,000 0 * Jiyu Wang 20,000 * 20,000 0 * Lijun Sun 20,000 * 20,000 0 * Lixin Liu 20,000 * 20,000 0 * Ming Yan 20,000 * 20,000 0 * Ping Wang 20,000 * 20,000 0 * Ruidong Guan 20,000 * 20,000 0 * Tinghui Wang 20,000 * 20,000 0 * Xin’gang Sun 20,000 * 20,000 0 * Xuexian Wang 20,000 * 20,000 0 * Yanru Dong 20,000 * 20,000 0 * Zhongwei Luo 20,000 * 20,000 0 * Yan Long Ren 20,856 * 20,856 0 * Qing Li 21,014 * 21,014 0 * Yuanhui Dong 21,242 * 21,242 0 * Guifang Zhang 21,396 * 21,396 0 * Shuhua Zhao 21,567 * 21,567 0 * Guo Chao Duan 22,120 * 22,120 0 * Jindao Zhang 22,208 * 22,208 0 * Jing Li 23,068 * 23,068 0 * Xingcun Zhao 23,068 * 23,068 0 * Yanping Cao 23,147 * 23,147 0 * Zhi Ping Hao 23,173 * 23,173 0 *
Prior to Offering
After the Offering Name of Beneficial Owner # Shares(1) Percentage # Shares Offered # Shares Percentage(2) Hui Cao 23,226 * 23,226 0 * Chuanhong Fan 23,700 * 23,700 0 * Chunyan Liu 23,700 * 23,700 0 * Da Mao Yang 23,700 * 23,700 0 * Fumin Jiang 23,700 * 23,700 0 * Jialin Yu 23,700 * 23,700 0 * Jin Zhong Wang 23,700 * 23,700 0 * Jinghua Guo 23,700 * 23,700 0 * Li Hua Wang 23,700 * 23,700 0 * Li Qui Zhang 23,700 * 23,700 0 * Li Xin Fan 23,700 * 23,700 0 * Long Zhou 23,700 * 23,700 0 * Shu Min Cao 23,700 * 23,700 0 * Wan Hua Li 23,700 * 23,700 0 * Xiao Chun Jing 23,700 * 23,700 0 * Xinghua Song 23,700 * 23,700 0 * Yanhui Liu 23,700 * 23,700 0 * Yanyan Zhang 23,700 * 23,700 0 * Zhong Li 23,700 * 23,700 0 * Zhuo Zhang 23,700 * 23,700 0 * Dechun Zhang 24,138 * 24,138 0 * Lihua Yang 24,138 * 24,138 0 * Shengmao Liu 24,138 * 24,138 0 * Yu Mei Bai 24,138 * 24,138 0 * Guo Wen Li 24,525 * 24,525 0 * Jing Hua Guan 24,885 * 24,885 0 * Li Hua Yu 24,885 * 24,885 0 * Shu Yan 24,885 * 24,885 0 * Hui Leng 25,000 * 25,000 0 * Weihong Zhang 25,000 * 25,000 0 * Zhen Jiang Lian 25,122 * 25,122 0 * Congwei Chen 25,280 * 25,280 0 * Ying Liu 25,455 * 25,455 0 * Xi Bin Liu 25,722 * 25,722 0 * Fengxia Liu 26,070 * 26,070 0 * Guo Xu 26,070 * 26,070 0 * Shi Gang Lin 26,070 * 26,070 0 * Wei Tian 26,070 * 26,070 0 * Xiangjiu Li 26,070 * 26,070 0 * Xiaoli Wen 26,070 * 26,070 0 * Xiumin Zhang 26,070 * 26,070 0 * Bailing Yin 27,966 * 27,966 0 * Hui Lan Chi 28,001 * 28,001 0 * Hong Peng 28,966 * 28,966 0 *
Prior to Offering
After the Offering Name of Beneficial Owner # Shares(1) Percentage # Shares Offered # Shares Percentage(2) Meichun Wang 28,966 * 28,966 0 * Tai Yang Wang 28,966 * 28,966 0 * Yanhua Chen 28,966 * 28,966 0 * Yin Qi Cui 29,033 * 29,033 0 * Bin Hu 30,000 * 30,000 0 * Chuanbao Gu 30,000 * 30,000 0 * Deming Li 30,000 * 30,000 0 * Guoliang Wu 30,000 * 30,000 0 * Lili Wen 30,000 * 30,000 0 * Wenjia Yuan 30,000 * 30,000 0 * Yi Zhang 30,000 * 30,000 0 * Yonggang Sun 30,000 * 30,000 0 * Yonglin Gao 30,000 * 30,000 0 * Yuan Guang 30,000 * 30,000 0 * Shanling Wang 30,415 * 30,415 0 * Hua Guo 30,856 * 30,856 0 * Qingzhen Yuan 31,521 * 31,521 0 * Chunping Zhang 31,600 * 31,600 0 * Dong Yan Guan 31,600 * 31,600 0 * Gong Shen 31,600 * 31,600 0 * Jing Liu 31,600 * 31,600 0 * Qingshu Zhao 31,600 * 31,600 0 * Wei Guo 31,600 * 31,600 0 * Xingwei Xu 31,600 * 31,600 0 * Rui Zhi Dong 32,225 * 32,225 0 * Yanping Xu 33,180 * 33,180 0 * Zhi Fan Jiao 33,197 * 33,197 0 * Jie Yu 33,601 * 33,601 0 * Chunfang Wang 33,749 * 33,749 0 * Zhao Ping Meng 34,491 * 34,491 0 * Guilian Zhang 34,523 * 34,523 0 * Fengling Shan 34,760 * 34,760 0 * Fujin Zhang 34,760 * 34,760 0 * Hengdong Zhang 34,760 * 34,760 0 * Yanrong Wei 35,550 * 35,550 0 * Gui Zhu 35,725 * 35,725 0 * Xiu Chen 36,498 * 36,498 0 * Yu Bin Yan 36,508 * 36,508 0 * Zhi Gang Li 36,581 * 36,581 0 * Yongqiang Yan 37,328 * 37,328 0 * Fei Liu 38,236 * 38,236 0 * Mu Zhang 38,622 * 38,622 0 * Bao Xin Shen 39,500 * 39,500 0 * Bo Yu 39,500 * 39,500 0 *
Prior to Offering
After the Offering Name of Beneficial Owner # Shares(1) Percentage # Shares Offered # Shares Percentage(2) Chongqin Dong 39,500 * 39,500 0 * Dian Bao Lu 39,500 * 39,500 0 * Hong Ting Ji 39,500 * 39,500 0 * Hongbo Pan 39,500 * 39,500 0 * Jicai Lang 39,500 * 39,500 0 * Jilian Yuan 39,500 * 39,500 0 * Jing Zhi Zhu 39,500 * 39,500 0 * Jun Wang 39,500 * 39,500 0 * Lili Liu 39,500 * 39,500 0 * Lu Bo Zhang 39,500 * 39,500 0 * Mingqian Liu 39,500 * 39,500 0 * Nanbin Liu 39,500 * 39,500 0 * Qingguo Li 39,500 * 39,500 0 * Rui Hou 39,500 * 39,500 0 * Ruizhe Zhang 39,500 * 39,500 0 * Shu Lan Gao 39,500 * 39,500 0 * Shu Xia Ding 39,500 * 39,500 0 * Shu Xian Pan 39,500 * 39,500 0 * Shukui Wang 39,500 * 39,500 0 * Xian Zhi Sun 39,500 * 39,500 0 * Xin Yu Zhao 39,500 * 39,500 0 * Yi Fan Zhang 39,500 * 39,500 0 * Yingjun Jiang 39,500 * 39,500 0 * Yong Jia Lv 39,500 * 39,500 0 * Zhao Hui Han 39,500 * 39,500 0 * Zhigang Wang 39,500 * 39,500 0 * Zhuang Nan Li 39,500 * 39,500 0 * Liang Wen Song 39,588 * 39,588 0 * Zi Feng Zhou 39,588 * 39,588 0 * Song Lin Yi 39,974 * 39,974 0 * Xiuzhen Hu 40,000 * 40,000 0 * Cheng Jun Zhang 40,843 * 40,843 0 * Xingchen Liu 43,449 * 43,449 0 * Chun Bo Sun 43,450 * 43,450 0 * Feng Wen Li 43,450 * 43,450 0 * Tian Lei Wang 43,450 * 43,450 0 * Wen Zhi Zhang 43,450 * 43,450 0 * Xiao Hui Deng 43,450 * 43,450 0 * Yanping Cui 43,450 * 43,450 0 * Zhong Hai Zhang 43,450 * 43,450 0 * Jia An Lv 44,103 * 44,103 0 * Jing Zhang 44,148 * 44,148 0 * Wenzhong Guo 45,000 * 45,000 0 * Hongyan Liu 45,188 * 45,188 0 *
Prior to Offering
After the Offering Name of Beneficial Owner # Shares(1) Percentage # Shares Offered # Shares Percentage(2) Xiao Ying Ma 47,400 * 47,400 0 * Hongying Wang 47,795 * 47,795 0 * Chun Feng Li 48,278 * 48,278 0 * Yong Li Wang 48,278 * 48,278 0 * Zhi Hai Jiang 48,644 * 48,644 0 * Shu Zhen Zhang 49,217 * 49,217 0 * Chengqing Yang 50,000 * 50,000 0 * Donghui Zhao 50,000 * 50,000 0 * Guijin Hou 50,000 * 50,000 0 * Jianjun Zhao 50,000 * 50,000 0 * Liyanyan 50,000 * 50,000 0 * Min Zhou 50,000 * 50,000 0 * Qiuli Liu 50,000 * 50,000 0 * Rong Han 50,000 * 50,000 0 * Tongchun Bi 50,000 * 50,000 0 * Xiulan Cao 50,000 * 50,000 0 * Yanling Li 50,000 * 50,000 0 * Yanming Li 50,000 * 50,000 0 * Yongping Wang 50,000 * 50,000 0 * Yujie Dong 50,000 * 50,000 0 * Jun Ying Bai 52,028 * 52,028 0 * Li Juan Feng 52,266 * 52,266 0 * Shi Yun Zheng 53,960 * 53,960 0 * Jiu Hua Zhang 54,313 * 54,313 0 * Yonghua Zhang 54,747 * 54,747 0 * Feng Gang Qiu 55,300 * 55,300 0 * Hongchang Liu 56,485 * 56,485 0 * Yuangui Zhao 57,933 * 57,933 0 * Fulin Wang 60,830 * 60,830 0 * Zhenwen Zhou 61,535 * 61,535 0 * Changhai Ning 62,213 * 62,213 0 * Gui Fen Geng 62,252 * 62,252 0 * Qi Li 62,568 * 62,568 0 * Xinxue Zhong 63,200 * 63,200 0 * Su Ping Wang 65,385 * 65,385 0 * Jie Dong 68,730 * 68,730 0 * En Jiang He 77,824 * 77,824 0 * Chun Liu Du 78,210 * 78,210 0 * Kuo Lei 78,210 * 78,210 0 * Daihong Gao 79,000 * 79,000 0 * Hong Zao Zou 79,000 * 79,000 0 * Hongmin Li 79,000 * 79,000 0 * Jie Teng 79,000 * 79,000 0 * Lijie Zhai 79,000 * 79,000 0 *
Prior to Offering
After the Offering Name of Beneficial Owner # Shares(1) Percentage # Shares Offered # Shares Percentage(2) Xiaochun Yin 79,000 * 79,000 0 * Zhi Ying Han 79,000 * 79,000 0 * Zhimin Du 79,000 * 79,000 0 * Liru Ma 82,950 * 82,950 0 * Wenting Chen 83,333 * 83,333 0 * Wenwei Qu 83,333 * 83,333 0 * Ping Hu 86,900 * 86,900 0 * Gui Rong Song 88,397 * 88,397 0 * Ming Zhu Bi 93,308 * 93,308 0 * Shumin Ning 94,563 * 94,563 0 * Liwei Xue 94,800 * 94,800 0 * Cong Lin Yang 98,402 * 98,402 0 * Guidong Tan 100,000 * 100,000 0 * Jie Fu 100,000 * 100,000 0 * Lance Jon Kimmel 100,000 * 100,000 0 * Shuang Han 100,000 * 100,000 0 * Ting Su 100,000 * 100,000 0 * Xiaoqun Zhang 100,000 * 100,000 0 * Yongzhong Liu 100,000 * 100,000 0 * Zhong Xiao Yang 100,000 * 100,000 0 * Wan Shan Sun 101,088 * 101,088 0 * Liang Wang 102,700 * 102,700 0 * Ziying Tong 102,700 * 102,700 0 * Li Bin Zhai 105,320 * 105,320 0 * Ju Wang 114,322 * 114,322 0 * Han Ying Gao 114,893 * 114,893 0 * Yan Xin Dong 115,255 * 115,255 0 * Li Chen Liu 125,522 * 125,522 0 * Deng Quan Li 130,350 * 130,350 0 * Xianli Qu 135,248 * 135,248 0 * Lan Wang 141,015 * 141,015 0 * Yan Jiang Zhang 146,150 * 146,150 0 * Yuanxin Liu 150,000 * 150,000 0 * Yu Fan Lu 171,430 * 171,430 0 * Jiyou Jiang 183,333 * 183,333 0 * Xi Lin Li 183,455 * 183,455 0 * Yonghai Yan 190,000 * 190,000 0 * Jingfen Guo 197,500 * 197,500 0 * Wei Jun Shan 198,421 * 198,421 0 * Shu Min Liu 219,336 * 219,336 0 * Guangwu Yue 222,543 * 222,543 0 * Zhixiang Cao 237,000 * 237,000 0 * Long Jin 252,800 * 252,800 0 * Yu Lan Liu 328,930 * 328,930 0 *
Prior to Offering
After the Offering Name of Beneficial Owner # Shares(1) Percentage # Shares Offered # Shares Percentage(2) Wei Shan 339,700 * 339,700 0 * 426,600 * 426,600 0 * Gui Ying Tong 470,000 * 470,000 0 * Bai Ying Zhang 482,776 * 482,776 0 * Hanjia Zhao 608,300 * 608,300 0 * Bo Li 1,000,000 1.37 % 1,000,000 0 * Renchun Wang 1,000,000 1.37 % 1,000,000 0 * Yuan Li 1,000,000 1.37 % 1,000,000 0 * Yi Cheng Wang 1,943,137 2.67 % 1,943,137 0 * 4,977,474 6.84 % 1,659,158 3,318,316 4.56 % 40,206,950 55.23 % 2,967,273 37,239,677 51.15 % TOTALS 70,542,202 96.89 % 29,984,210 40,557,992 55.71 % * Less than 1%. (1) Under applicable SEC rules, a person is deemed to beneficially own securities which the person has the right to acquire within 60 days through the exercise of any option or warrant or through the conversion of a convertible security. Also under applicable SEC rules, a person is deemed to be the “beneficial owner” of a security with regard to which the person directly or indirectly, has or shares (a) voting power, which includes the power to vote or direct the voting of the security, or (b) investment power, which includes the power to dispose, or direct the disposition, of the security, in each case, irrespective of the person’s economic interest in the security. Each listed selling security holder has the sole investment and voting power with respect to all shares shown as beneficially owned by such selling security holder, except as otherwise indicated in the footnotes to the table. (2) As of March 11,December 31, 2013, there were 72,805,512 shares of YBP common deemed outstanding, assuming exercise of all outstanding Founders’ Options, all of which are exercisable within 60 days.(3) Consists of (i) 213,300 shares of YBP stock held by Mr. Han; and (ii) 213,300 shares of YBP common stock which may be issued upon exercise of the Founder’s Option issued to Mr. Han, which option is exercisable within 60 days. (4) Consists of (i) 2,488,737 shares of YBP common stock held by Madame Qi; and (ii) 2,488,737 shares of YBP common stock which may be issued upon exercise of the Founder’s Option issued to Madame Qi, which option is exercisable within 60 days. (5) Consists of (i) 20,103,475 shares of YBP common stock held by Mr. Wang; and (ii) 20,103,475 shares of YBP common stock which may be issued upon exercise of the Founder’s Option issued to Mr. Wang, which option is exercisable within 60 days. 103Our common stock is not listed on a public exchange. We plan to apply for a quotation of our common stock on the OTC Bulletin Board concurrently with the filing of this prospectus. In order to be quoted on the OTC Bulletin Board, a market maker must file an application on our behalf in order to make a market for our common stock. There can be no assurance that a market maker will agree to file the necessary documents with FINRA, which operates the OTC Bulletin Board, nor can there be any assurance that such an application for quotation will be approved.Prior to being quoted on the OTC Bulletin Board, shareholders may sell their shares in private transactions to other individuals. The selling security holders willstockholders may, from time to time, sell someany or all of their shares at a fixed price of $0.25 per share until ourcommon stock on any stock exchange, market or trading facility on which the shares are quoted on the OTC Bulletin Board and thereaftertraded or in private transactions. These sales may be at prevailing market pricesfixed or privately negotiated prices. The offering price of $0.25 per share for the shares of common stock was determined based on the price of our common stock of $0.10 during our most recently completed private offering. We arbitrarily added an additional $0.15 over the offering price of our common stock during our most recently completed private offering to account for the potential increased value of our stock as a result of such shares having increased liquidity and being registered with the SEC and unrestricted. Such increase in value is purely speculative and not based upon any rigorous analysis. The offering price bears no relationship to the book value, assets or earnings of our company or any other recognized criteria of value.Once our common stock is quoted on OTC Bulletin Board and a market has developed for our common stock, the shares may be sold or distributed from time to time by the selling stockholders who may be deemed to be underwriters, directly to one or more purchasers or through brokers or dealers who act solely as agents, at market prices prevailing at the time of sale, at prices related to such prevailing market prices, at negotiated prices or at fixed prices, which may be changed. The distribution of the shares may be effected inuse any one or more of the following methods:methods when selling shares:ordinary brokers· ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers; · block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction; · purchases by a broker-dealer as principal and resale by the broker-dealer for its account; · an exchange distribution in accordance with the rules of the applicable exchange; · privately negotiated transactions; · short sales; · broker-dealers may agree with the selling stockholders to sell a specified number of such shares at a stipulated price per share; · a combination of any such methods of sale; and · any other method permitted pursuant to applicable law. whichinvolved. Any profits on the resale of shares of common stock by a broker-dealer acting as principal might be deemed to be underwriting discounts or commissions under the Securities Act. Discounts, concessions, commissions and similar selling expenses, if any, attributable to the sale of shares will be borne by a selling stockholder. The selling stockholders may include longagree to indemnify any agent, dealer or short sales,crosssales of the shares if liabilities are imposed on that person under the Securities Act.block tradesgrant a security interest in some or all of the shares of common stock owned by them and, if they default in the performance of their secured obligations, the pledgees or secured parties may offer and sell the shares of common stock from time to time under this prospectus after we have filed a post-effective amendment or supplement to this prospectus under the Securities Act supplementing or amending the list of selling stockholders to include the pledgee, transferee or other successors in interest as selling stockholders under this prospectus.securitiesagreements, understandings or market wherearrangements with any underwriters or broker-dealers regarding the sale of their shares of common stock, nor is there an underwriter or coordinating broker acting in connection with a proposed sale of shares of common stock by any selling stockholder. If we are notified by any selling stockholder that any material arrangement has been entered into with a broker-dealer for the sale of shares of common stock, if required, we will file a supplement to this prospectus. If the selling stockholders use this prospectus for any sale of the shares of common stock, they will be subject to the prospectus delivery requirements of the Securities Act.is trading, market where our common stock is trading,through direct sales to purchasers or sales effected through agents,through transactions in options, swaps or other derivatives (whether exchange listed of otherwise), or exchange listed or otherwise), orany combinationand activities of the foregoing.selling stockholders.104
arrangements between the selling stockholders and any other stockholder, broker, dealer or agent relating to the sale or distribution of the shares. We will not receive any proceeds from the sale of the shares of the selling security holders pursuant to this prospectus. We have agreed to bear the expenses of the registration of the shares, including legal, accounting and transfer agent fees, and such expenses are estimated to be approximately $53,263 in the aggregate.Notwithstanding anything set forth herein, no FINRA member will charge commissions that exceed 8% of the total proceeds of the offering. As statutory underwriters, Mr. Wang and Madame Qi will sell their shares being offered hereby at a fixed price of $0.25 per share for the duration of the offering. Mr. Wang is the Chief Executive Officer, President and Chairman of the Board of Directors of the Company and Madame Qi is the Treasurer and a director of the Company. Mr. Wang and Madame Qi are husband and wife. Neither Mr. Wang nor Madame Qi is a broker-dealer or the affiliate of a broker-dealer. Neither Mr. Wang nor Madame Qi has any obligation to purchase any of the securities being registered on behalf of the selling shareholders named herein, nor will either of them receive any commission or compensation in connection with the sale of the securities being registered on behalf of the selling shareholders named herein.SEC Law Firm, Los Angeles,Barnett & Linn, Calabasas, California. The principal of SEC Law Firm owns 100,000 shares of YBP common stock, 33,333 shares of which are being registered and are covered by this prospectus.EXPERTSAlbert Wong & Co.,Malone Bailey, LLP, Houston, Texas, independent registered public accounting firm, to the extent and for the periods set forth in their report appearing elsewhere herein and in the registration statement, and are included in reliance on such report, given the authority of said firm as an expert in auditing and accounting.105For the Years Ended December 31, 2011 and 2010Audited Consolidated Financial Statements for the Years Ended December 31, 2011 and 2010
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMF-1 F-2 F-3 F-4F-5F-6F-7 to F-31Unaudited Consolidated Financial Statements For the Nine Months Ended September 30, 2012 and 2011 F-4 F-32 F-5 F-33 F-6 F-26 F-34 F-27 F-28 F-35 to F-53F-29 F-1ALBERT WONG & CO.CERTIFIED PUBLIC ACCOUNTANTS7th Floor, Nan Dao Commercial Building359-361 Queen’s Road CentralHong KongTel : 2851 7954Fax: 2545 4086ALBERT WONGB. Soc., Sc., ACA., LL.B., C.P.A.(Practicing)Report of Independent Registered Public Accounting FirmTheTo the Board of Directors and Stockholders ofShareholders of:Subsidiariesits subsidiaries (collectively, the "Company") as of December 31, 20112013 and 20102012 and the related consolidated statements of income and comprehensive income, stockholders’changes in shareholders' equity and cash flows for the years then ended. TheseThe consolidated financial statements are the responsibility of the Company’sCompany's management. Our responsibility is to express an opinion on thesethe consolidated financial statements based on our audits.thean audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purposespurpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amountamounts and disclosures in the combined financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.consolidated financial position of Yew Bio-Pharm Group, Inc. and Subsidiariesits subsidiaries as of December 31, 20112013 and 20102012, and the results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America./s/ Albert Wong & Co.Hong Kong, ChinaAlbert Wong & Co.April 16, 2012, except for Notes 2, 3 and 16which are dated September 10, 2012Certified Public AccountantsF-2
/s/ MaloneBailey, LLPYEW BIO-PHARM GROUP, INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETSAS OF DECEMBERwww.malonebailey.com2011 AND 20102014 December 31, 2011 2010 (As Restated) (As Restated) ASSETS CURRENT ASSETS: Cash $ 732,371 $ 1,850,488 Due from related parties — 57,131 Inventories 710,844 972,048 Prepaid expenses and other assets 433 2,250 Total Current Assets 1,443,648 2,881,917 LONG-TERM ASSETS: Inventories, net of current portion 7,508,030 7,533,189 Property and Equipment, net 784,222 771,237 Land use rights and yew forest assets, net 15,166,197 9,485,786 Total Long-term Assets 23,458,449 17,790,212 Total Assets $ 24,902,097 $ 20,672,129 LIABILITIES AND SHAREHOLDERS’ EQUITY CURRENT LIABILITIES: Accounts payable $ 1,360,611 $ 1,810,092 Advances from customers — 322,151 Accrued expenses and other payables 119,901 55,604 Taxes payable 500 7,112 Refundable common stock subscription 950,000 950,000 Due to related parties 266,488 141,276 Total Current Liabilities 2,697,500 3,286,235 Total Liabilities 2,697,500 3,286,235 COMMITMENTS AND CONTINGENCIES SHAREHOLDERS’ EQUITY: Common Stock ($0.001 par value; 50,000,000 shares authorized; 40,500,000 shares issued and outstanding at December 31, 2011 and 2010, respectively) 40,500 40,500 Additional paid-in capital 7,208,970 7,208,970 Retained earnings 11,469,172 7,849,160 Statutory reserves 1,686,087 1,265,788 Accumulated other comprehensive income — foreign currency translation adjustment 1,799,868 1,021,476 Total Shareholders’ Equity 22,204,597 17,385,894 Total Liabilities and Shareholders’ Equity $ 24,902,097 $ 20,672,129 CONSOLIDATED BALANCE SHEETS December 31, 2013 2012 ASSETS CURRENT ASSETS: Cash $ 1,159,611 $ 386,821 Accounts receivable 418,875 722,598 Accounts receivable - related party 377,821 284,986 Inventories 1,089,087 991,234 Prepaid expenses and other assets 2,697 150 Prepaid expenses - related party 34,031 60,245 Total Current Assets 3,082,122 2,446,034 LONG-TERM ASSETS: Inventories, net of current portion 10,245,146 9,382,164 Property and equipment, net 1,033,078 885,969 Land use rights and yew forest assets, net 20,953,562 15,328,318 Total Long-term Assets 32,231,786 25,596,451 Total Assets $ 35,313,908 $ 28,042,485 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ - $ 990 Accrued expenses and other payables 136,713 199,098 Taxes payable 10,232 5,722 Due to related parties 4,850,637 47,876 Total Current Liabilities 4,997,582 253,686 Total Liabilities 4,997,582 253,686 COMMITMENTS AND CONTINGENCIES SHAREHOLDERS' EQUITY: 50,000 50,000 Additional paid-in capital 8,058,165 10,396,377 Retained earnings 16,664,138 13,182,032 Statutory reserves 2,597,118 2,179,494 Accumulated other comprehensive income - foreign currency translation adjustment 2,946,905 1,980,896 Total Shareholders' Equity 30,316,326 27,788,799 Total Liabilities and Shareholders' Equity $ 35,313,908 $ 28,042,485 F-3 For the Years Ended December 31, 2011 2010 REVENUES: Revenues $ 4,564,426 $ 3,789,181 Revenue — related party 1,396,613 1,338,871 Total Revenues 5,961,039 5,128,052 COST OF REVENUES Cost of revenues 741,508 1,178,382 Cost of revenues — related party 384,457 459,681 Total Cost of Revenues 1,125,965 1,638,063 GROSS PROFIT 4,835,074 3,489,989 OPERATING EXPENSES: Selling 54,593 30,417 General and administrative 733,815 878,879 Total Operating Expenses 788,408 909,296 INCOME FROM OPERATIONS 4,046,666 2,580,693 OTHER INCOME (EXPENSES): Interest income 2,643 3,588 Interest expense — (921 ) Other income (expense) (8,998 ) 2,600 Total Other Income (Expenses) (6,355 ) 5,267 NET INCOME $ 4,040,311 $ 2,585,960 COMPREHENSIVE INCOME: OTHER COMPREHENSIVE INCOME: Unrealized foreign currency translation gain 778,392 463,826 COMPREHENSIVE INCOME $ 4,818,703 $ 3,049,786 NET INCOME PER COMMON SHARE: Basic $ 0.10 $ 0.06 Diluted $ 0.08 $ 0.05 WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: Basic 40,500,000 40,083,562 Diluted 50,000,000 49,583,562 CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME 2013 2012 REVENUES: Revenues $ 5,889,190 $ 5,713,237 Revenues - related party 1,550,458 1,014,287 Total Revenues 7,439,648 6,727,524 COST OF REVENUES: Cost of revenues 1,968,682 1,095,158 Cost of revenues - related party 438,718 183,899 Total Cost of Revenues 2,407,400 1,279,057 GROSS PROFIT 5,032,248 5,448,467 OPERATING EXPENSES: Selling 23,794 24,603 Compensation - 2,527,800 Other general and administrative 1,110,717 691,562 Total Operating Expenses 1,134,511 3,243,965 INCOME FROM OPERATIONS 3,897,737 2,204,502 OTHER INCOME (EXPENSES): Interest income 647 2,194 Other expense 1,346 (429 ) Total Other Income (Expenses) 1,993 1,765 NET INCOME $ 3,899,730 $ 2,206,267 COMPREHENSIVE INCOME: NET INCOME $ 3,899,730 $ 2,206,267 OTHER COMPREHENSIVE INCOME: Unrealized foreign currency translation gain 966,009 181,028 COMPREHENSIVE INCOME $ 4,865,739 $ 2,387,295 NET INCOME PER COMMON SHARE: Basic $ 0.08 $ 0.05 Diluted $ 0.08 $ 0.05 WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: Basic 50,000,000 47,819,672 Diluted 50,000,000 47,819,672 F-4 Common Stock,
Par Value $0.001 Number of
Shares Amount Additional
paid-in
Capital Retained
Earnings Statutory
Reserve Accumulated
Other
Comprehensive
Income Total
Shareholders’
EquityBalance, December 31, 2009 40,000,000 $ 40,000 $ 7,159,470 $ 5,547,838 $ 981,150 $ 557,650 $ 14,286,108 Shares issue for compensation at $0.10 per share 500,000 500 49,500 — — — 50,000 Adjustment to statutory reserve — — — (284,638 ) 284,638 — — Net income for the year — — — 2,585,960 — — 2,585,960 Foreign currency translation adjustment — — — — — 463,826 463,826 Balance, December 31, 2010 40,500,000 40,500 7,208,970 7,849,160 1,265,788 1,021,476 17,385,894 Adjustment to statutory reserve — — — (420,299 ) 420,299 — — Net income for the year — — — 4,040,311 — — 4,040,311 Foreign currency translation adjustment — — — — — 778,392 778,392 Balance, December 31, 2011 40,500,000 $ 40,500 $ 7,208,970 $ 11,469,172 $ 1,686,087 $ 1,799,868 $ 22,204,597 CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY For the Years Ended December 31, 2013 Common Stock, Par Value $0.001 Total Amount Balance, December 31, 2012 50,000,000 $ 50,000 $ 10,396,377 $ 13,182,032 $ 2,179,494 $ 1,980,896 $ 27,788,799 Distribution to owners in connectin with purchase of yew forest assets from entity under common control - - (2,338,212 ) - - (2,338,212 ) Adjustment to statutory reserve - - - (417,624 ) 417,624 - - Net income for the year - - - 3,899,730 - - 3,899,730 Foreign currency translation adjustment - - - - - 966,009 966,009 Balance, December 31, 2013 50,000,000 $ 50,000 $ 8,058,165 $ 16,664,138 $ 2,597,118 $ 2,946,905 $ 30,316,326 F-5 For the Years Ended December 31, 2011 2010 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 4,040,311 $ 2,585,960 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 178,178 157,790 Amortization of land use rights and yew forest assets 292,739 47,772 Loss on disposal of fixed assets 9,975 7,849 Common stock issued for compensation — 50,000 Changes in operating assets and liabilities: Accounts receivable — 2,353,974 Accounts receivable — related party — 59,746 Prepaid taxes — 13,398 Inventories 606,202 (222,171 ) Prepaid and other current assets 1,867 4,390 Advances to suppliers — 633,435 Accounts payable (511,018 ) 1,736,923 Accrued expenses and other payable 62,115 27,798 Due to related parties 25,867 — Taxes payable (6,781 ) 6,833 Advances from customers (329,033 ) 313,627 NET CASH PROVIDED BY OPERATING ACTIVITIES 4,370,422 7,777,324 CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from disposal of property and equipment 19,695 26,554 Purchase of property and equipment (191,821 ) (169,086 ) Purchase of land use rights and yew forest assets (5,515,590 ) (9,021,506 ) NET CASH USED IN INVESTING ACTIVITIES (5,687,716 ) (9,164,038 ) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from refundable common stock subscription — 950,000 Proceeds from related party advances 88,119 434,112 Payments of directors advances — (57,488 ) NET CASH PROVIDED BY FINANCING ACTIVITIES 88,119 1,326,624 EFFECT OF EXCHANGE RATE ON CASH 111,058 27,489 NET DECREASE IN CASH (1,118,117 ) (32,601 ) CASH — beginning of year 1,850,488 1,883,089 CASH — end of year $ 732,371 $ 1,850,488 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid for: Interest $ — $ 921 Income taxes $ — $ — Non-cash investing and financing activities �� Property and equipment reclassified to inventory $ — $ 83,272 CONSOLIDATED STATEMENTS OF CASH FLOWS For the year ended CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 3,899,730 $ 2,206,267 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 179,857 217,090 Amortization of land use rights and yew forest assets 381,659 346,741 Loss on disposal of fixed assets 349 1,013 Stock-based compensation - 2,246,907 Changes in operating assets and liabilities: Accounts receivable 323,160 (722,170 ) Accounts receivable - related party (82,282 ) (284,817 ) Prepaid and other current assets (2,515 ) 284 Prepaid expenses - related party 27,823 (60,209 ) Inventories (222,738 ) (2,090,046 ) Accounts payable (1,008 ) (1,369,280 ) Accrued expenses and other payables (65,466 ) 78,597 Due to related parties - (157,025 ) Taxes payable 4,255 5,211 Advances from customers - - NET CASH PROVIDED BY OPERATING ACTIVITIES 4,442,824 418,563 CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment (299,613 ) (313,908 ) Purchase of land use rights and yew forest assets (3,393,082 ) (392,136 ) NET CASH USED IN INVESTING ACTIVITIES (3,692,695 ) (706,044 ) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from related party advances - - Repayments for related parties advances (210 ) (63,293 ) NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (210 ) (63,293 ) EFFECT OF EXCHANGE RATE ON CASH 22,871 5,224 NET DECREASE IN CASH 772,791 (345,550 ) CASH - Beginning of year 386,821 732,371 CASH - End of year $ 1,159,611 $ 386,821 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid for: Interest $ - $ - Income taxes $ - $ - Non-cash investing and financing activities Shares issued for refundable common stock subscription $ $ 950,000 Due to related party in connection with purchase of yew forest assets from entity under common control $ 2,450,600 $ Excess of acquisition price over carrying value of yew forest assets purchased from entities under common control $ 2,338,212 $ F-620112013 AND 2010
2012—- ORGANIZATION AND PRINCIPAL ACTIVITIES, was incorporated under the law of the State of Nevada on November 13, 2007. At the time of its incorporation, YBP had no operations and no substantial assets., incorporated in the People’s Republic of China (“PRC”), as part of a restructure of the Company (the “First Restructure”)., is a limited liability company incorporated under the laws of the PRC on August 22, 1996. Until February 23, 2010, HDS was owned by Zhiguo Wang (“Mr. Wang”) (62.81%), his wife Guifang Qi (“Ms.Madame Qi”)(18.53%), Xingming Han (Mr. Han)(“Mr. Han”) (4.82%), a PRC individual named Yingjun Jiang (“Mr. Jiang”) (3.22%) and Heilongjiang Hongdoushan Ecology Forest Co., Ltd, (“HEFS”) (10.62%) (Mr. Wang, Madame Qi, Mr. Han, Mr. Jiang and HEFS are collectively referred to as the “Original Shareholders”). Mr. Wang is the President and a director of the Company. Madame Qi is the wife of Mr. Wang and an officer and director of the Company. Mr. Han is an officer and director of the Company. HEFS is owned primarily by Mr. Wang and Madame Qi. amount represents the amount of the then registered capital of HDS. As a result of this transaction, HDS became a wholly-owned subsidiary of JSJ. At February 23, 2010, the Company did not have working capital to pay the Original Shareholders this amount and, accordingly, the Company recorded this amount as a liability owed to the Original Shareholders. JSJ and the Original Shareholders also entered into a Supplemental Agreement dated February 26, 2010 (the “First Supplemental Agreement”), pursuant to which JSJ had the right to put the shares of HDS back to the Original Shareholders for the original purchase price of an aggregate RMB 45,000,000, in the event that the transaction did not close or PRC governmental approval was not received, within six months following the execution of the First Transfer Agreements.F-7YEW BIO-PHARM GROUP, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010(Stated in US Dollars)
been paid, pursuant to a Supplemental Agreement to the Second Equity Transfer Agreements dated February 16, 2011, the aggregate RMB 45,000,000 amount payable by the HDS Shareholders to JSJ for the return of their HDS common stock in respect of the Second Restructure, was offset against JSJ’s liability to the HDS Shareholders in the same aggregate amount in respect of the First Transfer Agreements, which amount had not yet been paid by JSJ.Mr. Wang 76.65 % Madame Qi 18.53 % Mr. Han 4.82 % the HDS Shareholders as described below:•Exclusive Business Cooperation Agreement. Pursuant to the Exclusive Business Cooperation Agreement between JSJ and HDS (the “Business Cooperation Agreement”), JSJ has the exclusive right to provide to HDS general business operation services, including advice and strategic planning, as well as consulting services related to technology, research and development, human resources, marketing and other services deemed necessary (collectively, the “Services”). Under the Business Cooperation Agreement, JSJ has exclusive and proprietary rights and interests in all rights, ownership, interests and intellectual properties arising out of or created during the performance of the Business Cooperation Agreement, including but not limited to copyrights, patents, patent applications, software and trade secrets. HDS shall pay to JSJ a monthly consulting service fee (the “Service Fee”) in Renminbi that is equal to 100% of the monthly net income of HDS. Upon the prior written consent by JSJ, the rate of Service Fee may be adjusted pursuant to the operational needs of HDS. Within 30 days after the end of each month, HDS shall (a) deliver to JSJ the management accounts and operating statistics of HDS for such month, including the net income of HDS during such month (the ���Monthly Net Income”), and (b) pay 80% of such Monthly Net Income to JSJ (each such payment, a “Monthly Payment”). Within ninety (90) days after the end of each fiscal year, HDS shall (a) deliver to JSJ financial statements of HDS for such fiscal year, which shall be audited and certified by an independent certified public accountant approved by JSJ, and (b) pay an amount to JSJ equal to the shortfall, if any, of the aggregate net income of HDS for such fiscal year, as shown in such audited financial statements, as compared to the aggregate amount of the Monthly Payments paid by HDS to JSJ in such fiscal year. HDS also granted an irrevocable and exclusive option to JSJ to purchase any and all of the assets of HDS, to the extent permitted under PRC law, at the lowest price permitted by PRC law. Unless earlier terminated in accordance with the provisions of the Business Cooperation Agreement or other agreements separately executed between JSJ and HDS, the Business Cooperation Agreement is for a term of ten years and expires on November 5, 2020; however, the term of the Business Cooperation Agreement may be extended if confirmed in writing by JSJ prior to the expiration of the term thereof. The period of the extended term shall be determined exclusively by JSJ and HDSF-8YEW BIO-PHARM GROUP, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010(Stated in US Dollars)shall accept such extended term unconditionally. Unless JSJ commits gross negligence, or a fraudulent act, against HDS, HDS shall not terminate the Business Cooperation Agreement prior to the expiration of the term, including any extended term. Notwithstanding the foregoing, JSJ shall have the right to terminate the Business Cooperation Agreement at any time upon giving 30 days’ prior written notice to HDS.•Exclusive Option Agreement. Under an Exclusive Option Agreement among JSJ, HDS and each HDS Shareholder (individually, an “Option Agreement”), the terms of which are substantively identical to each other, each HDS Shareholder has granted JSJ or its designee the irrevocable and exclusive right to purchase, to the extent permitted under PRC law, all or any part of the HDS Shareholder’s equity interests in HDS (the “Equity Interest Purchase Option”) for RMB 10. If an appraisal is required by PRC laws at the time when and if JSJ exercises the Equity Interest Purchase Option, the parties shall negotiate in good faith and, based upon the appraisal, make a necessary adjustment to the purchase price so that it complies with any and all then applicable PRC laws. Without the consent of JSJ, the HDS Shareholders shall not sell, transfer, mortgage or dispose of their respective shares of HDS stock. Additionally, without the prior consent of JSJ, the HDS Shareholders shall not in any manner supplement, change or amend the articles of association and bylaws of HDS, increase or decrease its registered capital, change the structure of its registered capital in any other manner, or engage in any transactions that could materially affect HDS’ assets, liabilities, rights or operations, including, without limitation, the incurrence or assumption of any indebtedness except incurred in the ordinary course of business, execute any major contract over RMB 500,000, sell or purchase any assets or rights, incur of any encumbrance on any of its assets or intellectual property rights in favor of a third party or transfer of any agreements relating to its business operation to any third party. The term of each Option Agreement is ten years commencing on November 5, 2020 and may be extended at the sole election of JSJ.•Equity Interest Pledge Agreement. In order to guarantee HDS’s performance of its obligations under the Business Cooperation Agreement, each HDS Shareholder, JSJ and HDS entered into an Equity Interest Pledge Agreement (individually, a “Pledge Agreement”), the terms of which are substantially similar to each other. Pursuant to the Pledge Agreement, each HDS Shareholder pledged all of his or her equity interest in HDS to JSJ. If HDS or the HDS Shareholders breach their respective contractual obligations and such breach is not remedied to the satisfaction of JSJ within 20 days after the giving of notice of breach, JSJ, as pledgee, will be entitled to exercise certain rights, including the right to foreclose upon and sell the pledged equity interests. During the term of the Pledge Agreement, the HDS Shareholder shall not transfer his or her equity interest in HDS or place or otherwise permit any other security interest of other encumbrance to be placed on such equity interest. Upon the full payment of the Service Fee under the Business Cooperation Agreement and upon the termination of HDS’s obligations thereunder, the Pledge Agreement shall be terminated.•Power of Attorney. Under the Power of Attorney executed by each HDS Shareholder (each, a “Power of Attorney”), the terms of which are substantially similar to each other, JSJ has been granted an exclusive, irrevocable power of attorney to take actions in the place and stead of the HDS Shareholders, to act on behalf of the HDS Shareholder as his or her exclusive agent and attorney with respect to all matters concerning the HDS Shareholder’s equity interests in HDS, including without limitation, the right to: 1) attend shareholders’ meetings of HDS; 2) exercise all the HDS Shareholders’ rights, including voting rights under PRC laws and HDS’s Articles of Association, including but not limited to the sale or transfer or pledge or disposition of the HDS Shareholder’s equity interests in HDS in whole or in part; and 3) designate and appoint on behalf of the HDS Shareholders the legal representative, executive director, supervisor, manager and other senior management of HDS.F-9YEW BIO-PHARM GROUP, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010(Stated in US Dollars)To the extent that the Contractual Arrangements are enforceable under PRC law, as from time to time interpreted by relevant state agencies, they constitute the valid and binding obligations of each of the parties to each such agreement.On November 29, 2010, YBP established a wholly-owned subsidiary, Yew Bio-Pharm Holdings Limited (“Yew Bio-Pharm (HK)”), a limited liability company incorporated under the laws of Hong Kong and on January 26, 2011, YBP transferred its ownership in JSJ to Yew Bio-Pharm (HK).As a result of the Second Restructure and the Contractual Arrangements described above, the Company believes that HDS is considered a Variable Interest Entity (“VIE”) under ASC 810 “Consolidation”, because the equity investors in HDS no longer have the characteristics of a controlling financial interest, and the Company, through JSJ, is the primary beneficiary of HDS and controls HDS’s operations. Accordingly, HDS has been consolidated as a deemed subsidiary into YBP as a reporting company under ASC 810. A detailed analysis is discussed below.As required by ASC 810-10, the Company performs a qualitative assessment to determine whether the Company is the primary beneficiary of HDS which is identified as a VIE of the Company. A quality assessment begins with an understanding of the nature of the risks in the entity as well as the nature of the entity’s activities including terms of the contracts entered into by the entity, ownership interests issued by the entity and the parties involved in the design of the entity. The Company’s assessment on the involvement with HDS reveals that the Company has the absolute power to direct the most significant activities that impact the economic performance of HDS. JSJ is obligated to absorb a majority of the risk of loss from HDS activities and entitles JSJ to receive a majority of HDS’s expected residual returns. In addition, HDS’s shareholders have pledged their equity interest in HDS to JSJ, irrevocably granted JSJ an exclusive option to purchase, to the extent permitted under PRC law, all or part of the equity interests in HDS and agreed to entrust all the rights to exercise their voting power to the person(s) appointed by JSJ. Under the accounting guidance, the Company is deemed to be the primary beneficiary of HDS and the results of HDS are consolidated in the Company’s consolidated financial statements for financial reporting purposes. Accordingly, as a VIE, HDS’s sales are included in the Company’s total sales, its income from operations is consolidated with the Company’s and the Company’s net income includes all of HDS’s net income. The Company does not have any non-controlling interest and, accordingly, did not subtract any net income in calculating the net income attributable to the Company. Because of the Contractual Arrangements, YBP has a pecuniary interest in HDS that requires consolidation of HDS’s financial statements with those of the Company.Additionally, pursuant to ASC 805, as YBP and HDS are under the common control of the HDS Shareholders, the Second Restructure was accounted for in a manner similar to a pooling of interests. As a result, the Company’s historical amounts in the accompanying consolidated financial statements give retrospective effect to the Second Restructure, whereby the assets and liabilities of the Company are reflected at the historical carrying values and their operations are presented as if they were consolidated for all periods presented, with the results of the Company being consolidated from the date of the Second Transfer Agreement. The accounts of HDS are consolidated in the accompanying financial statements.As of December 31, 2011, the Company agreed to waive all management fees to be payable by HDS and the Company expects to waive such management fees in the near future due to a need of working capital in HDS to expand HDS’s operations.The Company is principally engaged in 1) processing and selling yew tree branches and leaves used in the manufacture of TCM; 2) growing and selling yew tree seedlings and mature trees, including potted miniature yew trees; and 3) manufacturing and selling furniture and handicrafts made of yew tree timber. The Company is located in Harbin, Heilongjiang Province, China.F-10YEW BIO-PHARM GROUP, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010(Stated in US Dollars)YBP has no direct or indirect legal or equity ownership interest in HDS. However, through the Contractual Arrangements, the shareholders of HDS have assigned all their rights as shareholders, including voting rights and disposition rights of their equity interests in HDS to JSJ, our indirect, wholly-owned subsidiary. YBP is deemed to be the primary beneficiary of HDS and the financial statements of HDS are consolidated in the Company’s consolidated financial statements. At December 31, 2011 and 2010, the carrying amount and classification of the assets and liabilities in the Company’s balance sheets that relate to the Company’s variable interest in the VIE is as follows: December 31,
2011 December 31,
2010 Cash $ 479,494 $ 543,063 Inventories 8,218,874 8,505,237 Prepaid expenses and other assets 283 2,100 Property and equipment, net 750,779 752,334 Land use rights and yew forest assets, net 15,166,197 9,485,786 $ 24,615,627 $ 19,288,520 Accounts payable $ 1,360,611 $ 1,810,092 Advances from customers — 322,151 Accrued expenses and other payables 73,727 44,134 Taxes payable 1,049 7,112 Due to VIE holding companies 2,164,107 1,075,225 Due to related parties 240,159 145,360 $ 3,839,653 $ 3,404,074 The assets and liabilities in the table above are held in HDS. The creditors of HDS have legal recourse only to the assets of HDS and do not have such recourse to the Company. In addition, HDS’ assets are generally restricted only to pay such liabilities. Thus, the Company’s maximum legal exposure to loss related to VIE is significantly less than the carrying value of the HDS assets due to outstanding intercompany liabilities. Restricted net assets of the VIE shall mean that amount of our proportionate share of net assets of HDS (after intercompany eliminations which as of end of the most recent fiscal year may not be transferred to the parent company by the VIE in the form of loans, advances or cash dividends without the consent of a third party (e.g. lender, regulatory agency, foreign government, etc.).NOTE 2 —SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESPrinciples of consolidationThe consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries and variable interest entities. All significant inter-company accounts and transactions have been eliminated in consolidation.F-11YEW BIO-PHARM GROUP, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010(Stated in US Dollars)Details of the Company’s subsidiaries and variable interest entities are as follows:NameDomicile and dateof incorporationRegisteredcapitalEffectiveownershipPrincipal activitiesJSJPRCOctober 29, 2009USD $100,000100%Holding companyYew Bio-Pharm (HK)Hong KongNovember 29, 2010HK $10,000100%Holding companyof JSJHDSPRCAugust 22, 1996RMB 45,000,000ContractualarrangementsSales of Yew tree components for use in pharmaceutical industry, sale of Yew tree seedlings and potted yew trees; and the manufacture of Yew tree wood handicraftsMethod of accountingThe Company maintains its general ledger and journals with the accrual method accounting for financial reporting purposes. The consolidated financial statements and notes are representations of management. Accounting policies adopted by the Company conform to generally accepted accounting principles in the United States of America and have been consistently applied in the presentation of consolidated financial statements.Use of estimatesThe preparation of the financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from these estimates. Significant estimates include the allowance for obsolete inventory, the useful life of property and equipment and intangible assets, and assumptions used in assessing impairment of long-term assets.Fair value of financial instrumentsThe Company adopted the guidance of Accounting Standards Codification (“ASC”) 820 for fair value measurements which clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows:Level 1 — Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.Level 2 — Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other then quoted prices that are observable, and inputs derived from or corroborated by observable market data.Level 3 — Inputs are unobservable inputs which reflect the reporting entity’s own assumptions on what assumptions the market participants would use in pricing the asset or liability based on the best available information.F-12YEW BIO-PHARM GROUP, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010(Stated in US Dollars)The carrying amounts reported in the balance sheets for cash, due from related parties, inventories, prepaid expenses and other assets, accounts payable, advances from customers, accrued expenses and other payables, taxes payable, refundable common stock subscription and due to related parties approximate their fair market value based on the short-term maturity of these instruments. The Company did not have any non-financial assets or liabilities that are measured at fair value on a recurring basis as of December 31, 2011 and 2010.ASC 825-10 “Financial Instruments”, allows entities to voluntarily choose to measure certain financial assets and liabilities at fair value (fair value option). The fair value option may be elected on an instrument-by-instrument basis and is irrevocable, unless a new election date occurs. If the fair value option is elected for an instrument, unrealized gains and losses for that instrument should be reported in earnings at each subsequent reporting date. The Company did not elect to apply the fair value option to any outstanding instruments.Concentrations of credit riskThe Company’s operations are conducted in the PRC. Accordingly, the Company’s business, financial condition and results of operations may be influenced by the political, economic and legal environment in the PRC, and by the general state of the PRC economy. The Company’s operations in the PRC are subject to special considerations and significant risks not typically associated with companies in North America and Western Europe. These include risks associated with, among others, the political, economic and legal environment and foreign currency exchange. The Company’s results may be adversely affected by changes in the political and social conditions in the PRC, and by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion, remittances abroad, and rates and methods of taxation, among other things.Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash. Substantially all of the Company’s cash is maintained with state-owned banks within the PRC, and no deposits are covered by insurance. The Company has not experienced any losses in such accounts and believes it is not exposed to any risks on its cash in bank accounts.CashFor purposes of the consolidated statements of cash flows, the Company considers all highly liquid instruments purchased with a maturity of three months or less and money market accounts to be cash equivalents.InventoriesInventories, consisting of raw materials, work in process, Yew seedlings and finished goods related to the Company’s Yew products are stated at the lower of cost or market value utilizing the weighted average method. Raw materials primarily include Yew wood used in the production of Yew products such as furniture, ornaments, and other products containing Yew wood. Finished goods, consisting of Yew products include direct materials, direct labor and an appropriate proportion of overhead.The Company estimates the amount of the excess inventories by comparing inventory on hand with the estimated sales that can be sold within its normal operating cycle of one year. Any inventory in excess of the Company’s current requirements based on historical and anticipated levels of sales is classified as long-term on its consolidated balance sheets. The Company’s classification of long-term inventory requires it to estimate the portion of inventory that can be realized over the next 12 months.To estimate the amount of slow-moving or obsolete inventories, the Company analyzes movement of its products, monitor competing products and technologies and evaluate acceptance of its products. Periodically, the Company will identify inventories that cannot be sold at all or can only be sold at deeply discountedF-13YEW BIO-PHARM GROUP, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010(Stated in US Dollars)prices. An allowance will be established if estimated management determines that certain inventories may not be saleable. If inventory costs exceed expected market value due to obsolescence or quantities in excess of expected demand, the Company will record reserves for the difference between the carrying cost and the market value.At December 31, 2011 and 2010, the Company did not provide any inventory allowance and reserve.In accordance with Accounting Standards Codification (“ASC”) 905, “Agriculture”, our costs of growing Yew seedlings are accumulated until the time of harvest and are reported at the lower of cost or market.Property and equipmentProperty and equipment are carried at cost and are depreciated on a straight-line basis (after taking into account their respective estimated residual value) over the estimated useful lives of the assets. The cost of repairs and maintenance is expensed as incurred; major replacements and improvements are capitalized. When assets are retired or disposed of, the cost and accumulated depreciation are removed from the accounts, and any resulting gains or losses are included in income in the year of disposition. The Company examines the possibility of decreases in the value of fixed assets when events or changes in circumstances reflect the fact that their recorded value may not be recoverable.The estimated useful lives are as follows:Building15 years Machinery and equipment10 years Office equipment3 years Leasehold improvement5 years Motor vehicles4 years Land and yew forest use rightsAll land in the PRC is owned by the PRC government and cannot be sold to any individual or company. The Company has recorded the amounts paid to the PRC government to acquire long-term interests to utilize land and yew forests as land and yew forest use rights. This type of arrangement is common for the use of land in the PRC. Yew trees on land containing yew tree forests will be used to supply raw materials such as branches, leaves and fruit to the Company that will be used to manufacture the Company’s products. The Company amortizes these land and yew forest use rights over the term of the respective land and yew forest use right, which ranges from 45 to 50 years. The lease agreements do not have any renewal option and the Company has no further obligations to the lessor. The Company records the amortization of these land and forest use rights as part of its cost of revenues.Impairment of long-lived assetsIn accordance with ASC Topic 360, the Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable, or at least annually. The Company recognizes an impairment loss when the sum of expected undiscounted future cash flows is less than the carrying amount of the asset. The amount of impairment is measured as the difference between the asset’s estimated fair value and its book value. The Company did not record any impairment charges for the years ended December 31, 2011 and 2010.F-14YEW BIO-PHARM GROUP, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010(Stated in US Dollars)Revenue recognitionThe Company generates its revenue from sales of yew seedling products, sales of yew raw materials for medical application, and sales of yew craft products. Pursuant to the guidance of ASC Topic 605 and ASC Topic 360, the Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the purchase price is fixed or determinable and collectability is reasonably assured, and no significant obligations remain.AdvertisingAdvertising is expensed as incurred and is included in selling expenses on the accompanying consolidated statements of income. Advertising expenses amounted to $8,604 and $2,571 for the years ended December 31, 2011 and 2010, respectively.Shipping costsShipping costs are included in selling expenses and amount to $13,916 and $11,316 for the years ended December 31, 2011 and 2010, respectively.Research and developmentResearch and development costs are expensed as incurred. The costs primarily consist of salaries paid for the development and improvement of the Company’s products. Research and development costs of the years ended December 31, 2011 and 2010 were $16,048 and $24,404, respectively, and are included in general and administrative expenses.Employee benefitsThe Company’s operations and employees are all located in the PRC. The Company makes mandatory contributions to the PRC government’s health, retirement benefit and unemployment funds in accordance with the relevant Chinese social security laws. The costs of these payments are charged to income in the same period as the related salary costs and are not material.Income taxesThe Company is governed by the Income Tax Law of the People’s Republic of China, Hong Kong and the United States. The Company accounts for income tax using the liability method prescribed by ASC 740, “Income Taxes”. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in effect in the year in which the differences are expected to reverse. The Company records a valuation allowance to offset deferred tax assets if based on the weight of available evidence, it is more-likely-than-not that some portion, or all, of the deferred tax assets will not be realized. The effect on deferred taxes of a change in tax rates is recognized as income or loss in the period that includes the enactment date.The Company applied the provisions of ASC 740-10-50, “Accounting for Uncertainty in Income Taxes”, which provides clarification related to the process associated with accounting for uncertain tax positions recognized in our financial statements. Audit periods remain open for review until the statute of limitations has passed. The completion of review or the expiration of the statute of limitations for a given audit period could result in an adjustment to the Company’s liability for income taxes. Any such adjustment could be material to the Company’s results of operations for any given quarterly or annual period based, in part, upon the results of operations for the given period. As of December 31, 2011 and 2010, the Company had no uncertain tax positions, and will continue to evaluate for uncertain positions in the future.F-15YEW BIO-PHARM GROUP, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010(Stated in US Dollars)Value added taxThe Company is subject to value added tax (“VAT”). The applicable VAT rate is 13% for agricultural products and 17% for handicraft products sold in the PRC. The amount of VAT liability is determined by applying the applicable tax rate to the amount of goods sold (output VAT) less VAT accrued on purchases made with the relevant supporting invoices (input VAT). Sales and purchases are recorded net of VAT (the amount of VAT is excluded from revenues and costs) collected and paid as the Company acts as an agent for the government.Foreign currency translationThe accompanying consolidated financial statements are presented in U.S. dollars (“USD”). The reporting currency of the Company is the USD. The functional currency of Yew Bio-Pharm (HK) is the Hong Kong dollar, the functional currency of the Company’s VIEs and subsidiaries located in the PRC is the RMB. For the subsidiaries whose functional currencies are the Hong Kong dollar or RMB, results of operations and cash flows are translated at average exchange rates during the period, assets and liabilities are translated at the unified exchange rate at the end of the period, and equity is translated at historical exchange rates. As a result, amounts relating to assets and liabilities reported on the statements of cash flows may not necessarily agree with the changes in the corresponding balances on the balance sheets. Translation adjustments resulting from the process of translating the local currency financial statements into U.S. dollars are included in determining comprehensive income. The foreign currency translation adjustment included in comprehensive income for the years ended December 31, 2011 and 2010 amounted to $778,392 and $463,826, respectively.All of the Company’s revenue transactions are transacted in the functional currency. The Company does not enter any material transaction in foreign currencies and, accordingly, transaction gains or losses have not had, and are not expected to have, a material effect on the results of operations of the Company.The PRC government imposes significant exchange restrictions on fund transfers out of the PRC that are not related to business operations. These restrictions have not had a material impact on the Company because it has not engaged in any significant transactions that are subject to the restrictions.The exchange rates used to translate amounts in RMB into USD for the purposes of preparing the consolidated financial statements were as follows: 2011 2010 Exchange rate on balance sheet dates USD : RMB exchange rate 6.3647 6.6118 Average exchange rate for the year USD : RMB exchange rate 6.47351 6.77875 The RMB is not freely convertible into foreign currency and all foreign exchange transactions must take place through authorized institutions. No representation is made that the RMB amounts could have been, or could be, converted into USD at the rates used in translation. In addition, the current foreign exchange control policies applicable in PRC also restrict the transfer of assets or dividends outside the PRC.Net income per share of common stockASC 260 “Earnings per Share,” requires dual presentation of basic and diluted earnings per share (“EPS”) with a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation. Basic EPS excludes dilution. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity.F-16YEW BIO-PHARM GROUP, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010(Stated in US Dollars)Basic net income per share is computed by dividing net income available to common shareholders by the weighted average number of shares of common stock outstanding during the period. Diluted income per share is computed by dividing net income by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during each period.The following table presents a reconciliation of basic and diluted net income per share: Years Ended December 31, 2011 2010 Net income available to common stockholders for basic and diluted net income per share of common stock $ 4,040,311 $ 2,585,960 Weighted average common stock outstanding — basic 40,500,000 40,083,562 Effect of dilutive securities: Subscribed common shares issuable and subject to recession 9,500,000 9,500,000 Weighted average common stock outstanding — diluted 50,000,000 49,583,562 Net income per common share — basic $ 0.10 $ 0.06 Net income per common share — diluted $ 0.08 $ 0.05 Accumulated other comprehensive incomeComprehensive income is comprised of net income and all changes to the statements of stockholders’ equity, except those due to investments by stockholders, changes in paid-in capital and distributions to stockholders. For the Company, comprehensive income for the years ended December 31, 2011 and 2010 included net income and unrealized gains from foreign currency translation adjustments.Segment reportingASC Topic 280 requires use of the “management approach” model for segment reporting. The management approach model is based on the way a company’s management organizes segments within the company for making operating decisions and assessing performance. Reportable segments are based on products and services, geography, legal structure, management structure, or any other manner in which management disaggregates a company. During the years ended December 31, 2011 and 2010, the Company operated in three reportable business segments: (1) the yew tree segment- the cultivation and sale of yew seedlings, yew trees and potted yew trees, (2) the traditional Chinese medicine (“TCM raw materials”) segment- the production and sale of raw materials used for medicinal application in the pharmaceutical industry, and (3) the handicrafts segment — the manufacture and sale of furniture and handicrafts made of yew timber (See Note 12).Related party transactionsA related party is generally defined as (i) any person that holds 10% or more of the Company’s securities including such person’s immediate families, (ii) the Company’s management, (iii) someone that directly or indirectly controls, is controlled by or is under common control with the Company, or (iv) anyone who can significantly influence the financial and operating decisions of the Company. A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties.F-17YEW BIO-PHARM GROUP, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010(Stated in US Dollars)Collaborative arrangementOn March 21, 2004, HDS entered into a Joint Venture Planting Agreement with Wuchang City Forestry Bureau, (see Note 14), which is considered a collaborative arrangement under general accepted accounting principles in the United States (“U.S. GAAP”). The purpose of this arrangement is to share some of the risks and rewards associated with this Joint Venture Planting Agreement. The Company’s current share of profits is 80%. The Company accounts for this collaborative arrangement under ASC 808, “Collaborative Arrangements” and related topics and will record revenue gross as the prime contractor. ASC Topic 808-10-15 defines collaborative arrangements and requires collaborators to present the result of activities for which they act as the principal on a gross basis and report any payments received from (made to) the other collaborators based on other applicable authoritative accounting literature, and in the absence of other applicable authoritative literature, on a reasonable, rational and consistent accounting policy is to be elected. The Company adopted the provisions of ASC 808-10-15. The adoption of this statement did not have an impact on the Company’s consolidated financial position, results of operations or cash flows. For the years ended December 31, 2011 and 2010, the Company has not generated any revenues or activity from this collaborative agreement.Recent accounting pronouncementsIn May 2011, the FASB issued ASU No. 2011-04, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs”, which is not expected to have a material impact on the consolidated financial statements upon adoption.In September 2011, the FASB issued Accounting Standards Update (“ASU”) No. 2011-08, Intangibles — Goodwill and Other (Topic 350). This Accounting Standards Update amends FASB ASC Topic 350. This amendment specifies the change in method for determining the potential impairment of goodwill. It includes examples of circumstances and events that the entity should consider in evaluating whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. The amendments are effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. The adoption does not have any material impact on the Company’s consolidated financial position and results of operations.In December 2011, FASB issued Accounting Standard Update No. 2011-12,Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income (ASU 2011-12), which indefinitely defers certain provisions of ASU 2011-05 issued earlier in June 2011and will be further deliberated by the FASB at a future date. The new ASU affects entities that report items of comprehensive income in any period presented. During the deferral period, entities will still need to comply with the existing requirements in U.S. GAAP for the presentation of reclassification adjustments. Specifically, ASC 220 gives entities the option of (1) presenting reclassification adjustments out of accumulated other comprehensive income on the face of the statement in which comprehensive income is presented or (2) disclosing reclassification adjustments in the footnotes to the financial statements. ASU 2011-12 and ASU 2011-05 share the same effective date. This guidance is effective for our interim and annual periods beginning after December 15, 2011. Management believes the adoption of this new guidance will not have a material impact on the Company’s consolidated financial statements, as it only requires a change in the format of presentation.Other accounting standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption.F-18YEW BIO-PHARM GROUP, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010(Stated in US Dollars)NOTE 3 —INVENTORIESInventories consisted of the following as of December 31, 2011 and 2010: December 31, 2011 December 31, 2010 Current
portion Long-term
portion Total Current
portion Long-term
portion Total Raw Materials $ 29,401 $ 2,817,980 $ 2,847,381 $ 9,160 $ 2,712,665 $ 2,721,825 Work in process 18,642 — 18,642 177,854 — 177,854 Finished goods — handicrafts 236,854 687,258 924,112 207,207 735,980 943,187 Yew seedlings 425,947 4,002,792 4,428,739 577,827 4,084,544 4,662,371 $ 710,844 $ 7,508,030 $ 8,218,874 $ 972,048 $ 7,533,189 $ 8,505,237 NOTE 4 —PROPERTY AND EQUIPMENTProperty and equipment consisted of the following as of December 31, 2011 and 2010: December 31, 2011 2010 Buildings and building improvements $ 267,015 $ 200,806 Machinery and equipment 520,416 500,845 Office equipment 44,841 15,433 Leasehold improvement 52,763 50,791 Motor vehicles 513,280 425,975 1,398,315 1,193,850 Less: accumulated depreciation (614,093 ) (422,613 ) $ 784,222 $ 771,237 For the years ended December 31, 2011 and 2010, depreciation expenses amounted to $178,178 and $157,790, respectively.NOTE 5 —LAND AND YEW FOREST USE RIGHTSThere is no private ownership of land in PRC. Land is owned by the government and the government grants land use rights for specified terms. The following summarizes land use rights acquired by the Company.Yew trees on land containing yew tree forests will be used to supply raw materials such as branches, leaves and fruit to the Company that will be used to for production of the Company’s products. The Company amortizes these land and yew forest use rights over the term of the respective land use right. The lease agreements do not have any renewal option and the Company has no further obligations to the lessor. The Company records the amortization of these land and yew forest use rights as part of its cost of goods sold. For the years ended December 31, 2011 and 2010, amortization expense amounted to $292,739 and $47,772, respectively. As of December 31, 2011, the Company had approximately $1,300,000 unpaid amount related to the Land Use Right and Seedling Transfer Agreement and the amount was recorded in the Company’s accounts payable on the accompanying balance sheet at December 31, 2011. As of December 31, 2011, land and yew forest use rights consisted of the following:F-19YEW BIO-PHARM GROUP, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010(Stated in US Dollars) Description Useful
life Acquisition
date Expiration
date Metric
Acres
(“Mu”)Parcel A Undeveloped forest land 50 3/2004 3/2054 125 Parcel B Undeveloped forest land 50 4/2004 4/2054 400 Parcel C Yew tree forests and underlying land 50 1/2008 1/2058 290 Parcel D Yew tree forests and underlying land 45 3/2010 3/2055 15,865 At December 31, 2011 and 2010, land and yew forest use rights consisted of the following: Useful Life December 31,
2011 December 31,
2010Land and yew forest use rights 45–50 years $ 15,546,414 $ 9,565,177 Less: accumulated amortization (380,217 ) (79,391 ) Total $ 15,166,197 $ 9,485,786 Amortization of land and yew forest use rights attributable to future periods is as follows: Amount Years ending December 31: 2012 $ 342,484 2013 342,484 2014 342,484 2015 342,484 2016 342,484 2017 and thereafter 13,453,777 Total $ 15,166,197 NOTE 6 —ACCRUED EXPENSES AND OTHER PAYABLESAt December 31, 2011 and 2010, accrued expenses and other payables consisted of the following: December 31, 2011 2010 Accrued wage $ 16,844 $ 30,462 Accrued professional fees 75,029 — Other 28,028 25,142 Total $ 119,901 $ 55,604 NOTE 7 —TAXES(a) Federal Income Tax and Enterprise Income Taxes (“EIT”)The Company is registered in the State of Nevada and is subject to the United States federal income tax at a tax rate of 34%. No provision for income taxes in the U.S. has been made as the Company had no U.S. taxable income as of December 31, 2011 and 2010.The Company’s subsidiary and VIE, JSJ and HDS, respectively, being incorporated in the PRC, are subject to PRC’s Enterprise Income Tax. Pursuant to the PRC Income Tax Laws, Enterprise Income Taxes (“EIT”) is generally imposed at 25%. However, JSJ and HDS has been named as a leading enterprise in the agricultural area and awarded with a tax exemption for the years up to December 31, 2058.F-20YEW BIO-PHARM GROUP, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010(Stated in US Dollars)The table below summarizes the difference between the U.S. Statutory federal tax rate and the Group’s effective tax rate for the years ended December 31, 2011 and 2010: Years ended December 31, 2011 2010 U.S. federal income tax rate 34 % 34 % Foreign income not recognized in the U.S. (34 %) (34 %) PRC Enterprise Income Tax 25 % 25 % Tax exemption (25 %) (25 %) Total provision for income tax — — Income before income tax expenses of $4,193,516 and $2,787,319 for the years ended December 31, 2011 and 2010, respectively, was attributed to subsidiaries with operations in China. No income tax expense related to China income incurred for the years ended December 31, 2011 and 2010.The combined effects of the income tax expense exemptions and tax reductions available to the Company for the years ended December 31, 2011 and 2010 are as follows: Years ended December 31, 2011 2010 Tax exemption effect $ 1,050,746 $ 711,593 Basic net income per share effect $ (0.03 ) $ (0.02 ) Diluted net income per share effect $ (0.02 ) $ (0.01 ) The Company has incurred United States net operating loss for income tax purposes for the years ended December 31, 2011 and 2010. The net operating loss carry forwards for United States income tax purposes amounted to $564,438 and $410,282 at December 31, 2011 and 2010, respectively, which may be available to reduce future years’ taxable income. These carry forwards will expire, if not utilized, through 2031. Management believes that the realization of the benefits arising from this loss appear to be uncertain due to Company’s limited operating history and continuing losses for United States income tax purposes. Accordingly, the Company has provided a 100% valuation allowance at December 31, 2011 and 2010. For the years ended December 31, 2011 and 2010, the valuation allowance amounted to $191,909 and $139,496, respectively, and management will review this valuation allowance periodically and make adjustments as warranted.For U.S. tax purposes, the Company has cumulative undistributed earnings of foreign subsidiary and VIE of approximately $12.0 million and $8.3 million as of December 31, 2011 and 2010, respectively, which are included in consolidated retained earnings and will continue to be indefinitely reinvested in international operations. Accordingly, no provision has been made for U.S. deferred taxes related to future repatriation of these earnings, nor is it practicable to estimate the amount of income taxes that would have to be provided if we concluded that such earnings will be remitted to the U.S. in the future.There will be no deferred income tax assets or liabilities calculation in the Federal Income Tax because the US corporation taxable loss and deferred taxable loss was the same and the use of any net operating loss carry forwards appears to be uncertain, There will be no deferred income tax assets or liabilities calculation in the Enterprise Income Tax because the Company awarded EIT exempted status under agricultural area.The Company did not have any interest and penalty provided or recognized in the income statements for the years ended December 31, 2011 and 2010 or balance sheet as of December 31, 2011 and 2010. The Company did not have uncertainty tax positions or events leading to uncertainty tax position within the next 12 months. The Company’s 2009, 2010 and 2011 U.S. Corporation Income Tax Return are subject to U.S. InternalF-21YEW BIO-PHARM GROUP, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010(Stated in US Dollars)Revenue Service examination. The Company’s 2008, 2009, 2010 and 2011 China corporate income tax returns are subject to China State Administration of Taxation examination.(b) Value Added TaxesThe applicable VAT tax rate is 13% for agricultural products and 17% for handicrafts sold in the PRC. In accordance with VAT regulations in the PRC, the Company is exempt from paying VAT on its yew seedling and trees sales as an agricultural corps cultivating company up to December 31, 2016. VAT payable in the PRC is charged on an aggregated basis at the applicable rate on the full price collected for the goods sold or taxable services provided and less any deductible VAT already paid by the taxpayer on purchases of goods in the same financial year.NOTE 8 —STOCKHOLDERS’ EQUITYAt December 31, 2011 and 2010, the Company reflected a $950,000 refundable common stock subscription liability related to 9,500,000 of the shares in the Summer 2009 Offering on the accompanying balance sheet. The 9,500,000 shares of YBP Common Stock were the subject of a rescission offering (the “Rescission Offering”) to the 62 subscribers in the Summer 2009 Offering, all of whom are residents of the PRC. In the Rescission Offering, subscribers in the 2009 Summer Offering could either 1) confirm their subscriptions of shares of YBP Common Stock or 2) elect to rescind their subscriptions of shares of YBP Common Stock and receive a refund of their respective subscription amounts, together with interest. Pursuant to the Rescission Offering, which was conducted in March 2012, all the subscribers in the 2009 Summer Offering confirmed their subscriptions for an aggregate 9,500,000 shares of YBP Common Stock.Pursuant to an agreement dated November 1, 2010 between YBP and the consultant, a resident of the U.S., YBP agreed to pay $20,000 cash and 500,000 Shares to the consultant as compensation for consulting services rendered by him to the Company. The shares were valued at $0.10 per share or $50,000 in total and the Company recorded $50,000 of compensation expense related to those Shares for the year ended December 31, 2010. The shares were recorded as outstanding as of December 31, 2011 and 2010 but not issued until April 2012. In April 2012, the Company issued the 500,000 shares to the consultant.NOTE 9 —CONCENTRATIONS OF CREDIT RISK AND MAJOR CUSTOMERSCustomersFor the years ended December 31, 2011 and 2010, customers accounting for 10% or more of the Company’s revenue were as follows: Years ended
December 31, Customer 2011 2010 A 5 % 19 % B 23 % 26 % C * 13 % D 10 % 10 % E 29 % * F 13 % * * Below 1%We did not have any accounts receivable amount at December 31, 2011 and 2010.F-22YEW BIO-PHARM GROUP, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010(Stated in US Dollars)SuppliersFor the year ended December 31, 2011, a third party supplier accounted 97% of its purchase and the Company had $1,313,982 accounts payable related to the supplier at December 31, 2011. For the year ended December 31, 2010, other than a related party supplier a related party company Heilongjiang Zishan Technology Co., Ltd. (see Note 10), the Company did not have any suppliers accounted for more than 10% of its purchases.NOTE 10 —RELATED PARTY TRANSACTIONSIn addition to several of the Company’s officers and directors, the Company conducted transactions with the following related parties:CompanyOwnershipHeilongjiang Zishan Technology Stock Co., Ltd.(“ZTC”)18% owned by Heilongjiang Hongdoushan Ecology Forest Stock Co., Ltd., 39% owned by Zhiguo Wang, Chairman and Chief Executive Officer, 31% owned by Guifang Qi, the wife of Mr. Wang and Director of the Company, and 12% owned by third partiesHeilongjiang Yew Pharmaceuticals, Co., Ltd. (“Yew Pharmaceutical”)95% owned by Heilongjiang Hongdoushan Ecology Forest Stock Co., Ltd., and 5% owned by Madame QiShanghai Kairun Bio-Pharmaceutical Co., Ltd.(“Kairun”)60% owned by Heilongjiang Zishan Technology Co., Ltd., 20% owned by Heilongjiang Hongdoushan Ecology Forest Stock Co., Ltd., and 20% owned by Mr. WangHeilongjiang Hongdoushan Ecology Forest Stock Co., Ltd. (“HEFS”)63% owned by Mr. Wang, 34% owned by Madame Qi, and 3% owned by third partiesRevenue from Related PartiesPursuant to the Cooperation and Development Agreement discussed below, the Company generated sales from its related party company, Yew Pharmaceutical. For the years ended December 31, 2011 and 2010, the Company recorded revenues to this related party as follows:Name of Related Party Revenues 2011 2010 Yew Pharmaceutical $ 1,396,613 $ 1,338,871 Total $ 1,396,613 $ 1,338,871 At December 31, 2011 and 2010, the Company did not have any accounts receivable from Yew Pharmaceutical.Cooperation and Development AgreementOn January 9, 2010, the Company entered into a Cooperation and Development Agreement (the “Development Agreement”) with Yew Pharmaceutical. Pursuant to the Development Agreement, for a period of ten years expiring on January 9, 2020, the Company shall supply cultivated yew raw materials to Yew Pharmaceutical that will be used by Yew Pharmaceutical to make TCM and other pharmaceutical products, at price of RMBF-23YEW BIO-PHARM GROUP, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010(Stated in US Dollars)1,000,000 (approximately $156,000) per metric ton. For the years ended December 31, 2011 and 2010, sales to Yew Pharmaceutical amounted to $1,396,613 and $1,338,871, respectively. At December 31, 2011 and 2010, the Company did not have any accounts receivable from Yew Pharmaceutical.PurchasesFor the years ended December 31, 2011 and 2010, the Company made purchases in the amount of $3,398 and $1,792,035, respectively, of yew seedlings from ZTC. At December 31, 2011 and 2010, there was no accounts payable amount due to ZTC related to the purchases.Operating leasesOn March 25, 2005, the Company entered into an Agreement for the Lease of Seedling Land with ZTC (the “ZTC Lease”). Pursuant to the ZTC Lease, the Company leased 361 mu of land from ZTC for a period of 30 years, expiring on March 24, 2035. Annual payments under the ZTC Lease are RMB 162,450 (approximately $25,400). The payment for the first five years of the ZTC Lease was due prior to December 31, 2010 and beginning in 2011, the Company is required to make full payment for the land use rights in advance for each subsequent five-year period. For the years ended December 31, 2011 and 2010, rent expense related to the ZTC Lease amounted to $25,095 and $23,965, respectively. At December 31, 2011 and 2010, amounts due under the ZTC lease amounted to $172,284 and $141,276, respectively, and are included in due to related parties on the accompanying balance sheets.On December 3, 2008, the Company entered into a lease for retail space in Harbin with Madame Qi (the “Store Lease”). Pursuant to the Store Lease, no payment was due for the first year and an annual payment of RMB 12,000 (approximately $1,875) is due for each of the second and third years thereof. The term of the Store Lease is three years and expired on December 3, 2011. On November 15, 2011, the Company renewed the Store Lease. Pursuant to the renewed Store Lease, the annual rent is RMB 15,600 (approximately $2,359) and the annual payment is due by May 30 of each year. The term of the renewed Store Lease is 3 years and expires on December 1, 2014. For the years ended December 31, 2011 and 2010, rent expense related to the Store Lease amounted to $1,854 and $1,770, respectively.On January 1, 2010, the Company entered into a lease for office space with Mr. Wang (the “Office Lease”). Pursuant to the Office Lease, annual payments of RMB 15,000 (approximately $2,400) are due for each of the term. The term of the Office Lease is 15 years and expires on December 31, 2025. For the years ended December 31, 2011 and 2010, rent expense related to the Office Lease amounted $2,317 and $2,213, respectively.Future minimum rental payments required under the related party operating leases are as follows:Years Ending December 31: 2012 $ 30,331 2013 30,331 2014 30,331 2015 27,880 2016 27,880 Thereafter 487,018 Total $ 633,771 F-24YEW BIO-PHARM GROUP, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010(Stated in US Dollars)Due to/due from related partiesThe Company also received from and provided advances to its officers and directors and related parties. These advances are unsecured and payable on demand.The due to/due from related parties amount at December 31, 2011 and 2010 is as follows:Name of Related Party Due from related parties Due to related parties 2011 2010 2011 2010 Zhiguo Wang $ — $ 57,131 $ 31,357 $ — Yew Pharmaceutical — — 62,847 — ZTC — — 172,284 141,276 Total $ — $ 57,131 $ 266,488 $ 141,276 Research and Development AgreementThe Company entered into a Technology Development Service Agreement dated January 1, 2010 (the “Technology Agreement”) with Kairun. The term of the Technology Agreement was two years. Under the Technology Agreement, Kairun provides the Company with testing and technologies regarding utilization of yew trees to extract taxol and develop higher concentration of taxol in the yew trees the Company grow and cultivate. For these services, the Company agreed to pay Kairun RMB 200,000 after the technologies developed by Kairun are tested and approved by the Company. The Company will retain all intellectual property rights in connection with the technologies developed by Kairun. Kairun may not provide similar services to any other party without the Company’s prior written consent. As of December 31, 2011, Kairun did not complete the service and no payment was made to Kairun. Accordingly, in February 2012, the Company entered into a supplemental agreement with Kairun, extending the term of the Technology Agreement indefinitely until project results specified in the original Technology Agreement have been achieved. Kairun is owned directly and indirectly primarily by Mr. Wang and Madame Qi.NOTE 11 —STATUTORY RESERVESThe Company is required to make appropriations to reserve funds, comprising the statutory surplus reserve and discretionary surplus reserve, based on after-tax net income determined in accordance with generally accepted accounting principles of the PRC (“PRC GAAP”). Appropriation to the statutory surplus reserve is required to be at least 10% of the after tax net income determined in accordance with PRC GAAP until the reserve is equal to 50% of the entities’ registered capital. Appropriations to the discretionary surplus reserve are made at the discretion of the Board of Directors.The statutory surplus reserve fund is non-distributable other than during liquidation and can be used to fund previous years’ losses, if any, and may be utilized for business expansion or converted into share capital by issuing new shares to existing shareholders in proportion to their shareholding or by increasing the par value of the shares currently held by them, provided that the remaining reserve balance after such issue is not less than 25% of the registered capital. For the years ended December 31, 2011 and 2010, the Company appropriated to the statutory surplus reserve in the amount of $420,299 and $284,638, respectively. The accumulated balance of the statutory reserve of the Company as of December 31, 2011 and 2010 was $1,686,087 and $1,265,788, respectively.F-25YEW BIO-PHARM GROUP, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010(Stated in US Dollars)NOTE 12 —SEGMENT INFORMATIONFor the years ended December 31, 2011 and 2010, the Company operated in three reportable business segments — (1) the yew tree segment, (2) the TCM raw materials segment and (3) the handicrafts segment. The Company’s reportable segments are strategic business units that offer different products. They are managed separately based on the fundamental differences in their operations. All of the Company’s operations are conducted in the PRC.Information with respect to these reportable business segments for the years ended December 31, 2011 and 2010 is as follows: For the Year Ended December 31, 2011 2010 Revenues: TCM raw materials $ 3,458,093 $ 2,845,067 Yew trees 2,400,245 2,131,445 Handicrafts 102,701 151,540 5,961,039 5,128,052 Cost of revenues: TCM raw materials 897,154 924,547 Yew trees 172,460 633,027 Handicrafts 56,351 80,489 1,125,965 1,638,063 Depreciation and amortization: TCM raw materials 286,196 44,239 Yew trees 30,185 48,648 Handicrafts 31,852 32,013 Other 122,684 80,662 470,917 205,562 Net income (loss): TCM raw materials 2,560,939 1,920,520 Yew trees 2,227,785 1,498,418 Handicrafts 46,350 71,051 Other (794,763 ) (904,029 ) $ 4,040,311 $ 2,585,960 December 31, 2010 TCM raw
materials Yew
trees Handicrafts Other Total Identifiable long-lived assets, net $ 8,892,246 $ 593,397 $ 182,694 $ 588,686 $ 10,257,023 Expenditures for segment assets 9,021,506 7,745 5,353 155,988 9,190,592 December 31, 2011 TCM raw
materials Yew
trees Handicrafts Other Total Identifiable long-lived assets, net $ 14,880,192 $ 600,364 $ 153,686 $ 316,177 $ 15,950,419 Expenditures for segment assets 5,515,590 61,436 — 130,385 5,707,411 F-26YEW BIO-PHARM GROUP, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010(Stated in US Dollars)The Company does not allocate any selling, general and administrative expenses to its reportable segments because these activities are managed at a corporate level and not allocable to any segment. Accordingly, depreciation, interest expense or net income by segment is not reported. The Company’s operations are located in the PRC. All revenues are derived from customers in the PRC. All of the Company’s operating assets are located in the PRC.NOTE 13 —COMMITMENTS AND CONTINGENCIESOperating leaseOn March 20, 2002, the Company leased office space in the A’cheng district in Harbin (the “A’cheng Lease”). The A’cheng Lease is for a term of 23 years and expires on March 19, 2025. Pursuant to the A’cheng Lease, lease payment shall be made as follows:YearAnnual LeaseAmountPayment Due DateMarch 2002 to February 2012RMB 25,000Before December 2012March 2012 to February 2017RMB 25,000Before December 2017March 2017 to March 2025RMB 25,000Before December 2025For the years ended December 31, 2011 and 2010, rent expense related to the A’cheng Lease amounted $3,862 and $3,688, respectively.Future minimum rental payments required under the A’cheng Lease are as follows:Years Ending December 31: 2012 $ 3,928 2013 3,928 2014 3,928 2015 3,928 2016 3,928 Thereafter 32,405 Total $ 52,045 See Note 10 for related party operating lease commitments.Seedling Purchase and Sale Long-Term Cooperation AgreementOn November 25, 2010, HDS entered into a Seedling Purchase and Sale Long-Term Cooperation Agreement (the “Seedling Agreement”) with Wuchang City Xinlin Forestry Co., Ltd (“Xinlin”), pursuant to which HDS will sell yew seedlings to Xinlin at a price equal to 90% of HDS’s publicly-published wholesale prices. Xinlin has agreed to purchase from the Company 10,000 yew seedlings annually. In 2011 and 2010, the Company made sales of $312,721 and $0, respectively, under the Seedling Agreement.Land Use Rights and Yew Forest PurchaseOn March 4, 2010, the Company entered into Land Use Right and Seedling Transfer Agreement with Heilongjiang Pingshan Yew Comprehensive Development Co., Ltd., pursuant to which the Company acquired land use rights with an area of 15,865 mu and all yew trees and seedlings situated on such land, for an aggregate cost of RMB 80,152,900 (approximately $12,500,000). The purchase price was divided into three installments, each installment representing a parcel of land. As of December 31, 2011, the Company made payments aggregated RMB 72,008,600 (approximately $11,100,000) and had a payable in the amount of RMBF-27YEW BIO-PHARM GROUP, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010(Stated in US Dollars)8,144,300 (approximately $1,300,000) related to the purchase. The payable in the amount of approximately $1,300,000 related to the land use right and seedling purchase was recorded in the Company’s accounts payable on the accompanying balance sheet at December 31, 2011. Subsequent to December 31, 2011 and through the date of this report, the Company made payments aggregated RMB 2,005,000 (approximately $300,000) and had an RMB 6,139,300 (approximately $1,000,000) unpaid amount related to the Land Use Right and Seedling Transfer Agreement.NOTE 14 —JOINT VENTURE AGREEMENT FOR PLANTING OF YEW TREESOn March 21, 2004, HDS entered into a Joint Venture Planting Agreement (the “Joint Venture Agreement”) with Wuchang City Forestry Bureau (the “Forest Bureau”), pursuant to which the Forest Bureau has given HDS access to 1,000,000 mu of forest land located in Wuchang City to develop yew tree forests and produce yew seedlings. Pursuant to the Joint Venture Agreement, the Company is required to plant yew trees on this land from 2004 to 2034. Any profits from the planting of yew trees and other agriculture shall be distributed 80% to the Company and 20% to the Forest Bureau. For the years ended December 31, 2011 and 2010, the Company has not generated any revenues or activity on this land.NOTE 15 —SUBSEQUENT EVENTSThe Company has evaluated all other subsequent events through April 16, 2012, the date these consolidated financial statements were issued, and determined that there were no other subsequent events or transactions that require recognition or disclosures in the financial statements except the following:Rescission OfferingAs December 31, 2011, 9,500,000 shares of YBP Common Stock related to the Summer 2009 Offering were subject to a Rescission Offering to the 62 subscribers, all of whom are residents of the PRC. In the Rescission Offering, subscribers in the 2009 Summer Offering would either 1) confirm their subscriptions of shares of YBP Common Stock or 2) elect to rescind their subscriptions of shares of YBP Common Stock and receive a refund of their respective subscription amounts, together with interest. Pursuant to the Rescission Offering, in which was conducted in March 2012, all the subscribers in the 2009 Summer Offering confirmed their subscriptions for an aggregate 9,500,000 shares of YBP Common Stock.OptionsGenerally, the founders of a corporation in the United States receive shares of stock in consideration of the tangible and intangible assets contributed by them to the enterprise. Since the consideration for those shares is the transfer of assets, including intellectual property, and business know-how, sometimes referred to as “sweat equity”, no payment for such shares occurs.However, unfamiliar with the usual way that founders acquire equity interests in corporations in the United States, the HDS Shareholders actually purchased their HDS Shareholders’ Stock between March 2008 and September 2009, for cash, in a series of four different offerings of YBP Common Stock during that period, at prices ranging between $0.02 and $0.10 per share, for an aggregate purchase price of $890,501.As a result of the Contractual Arrangements of the Second Restructure, in which all of the profits of HDS will be paid under the terms of the Business Cooperation Agreement to JSJ, which is an indirect wholly-owned subsidiary of YBP, combined with the actual purchase by the HDS Shareholders of the HDS Shareholders’ Stock for cash, it could be viewed that Mr. Wang, Madame Qi and Mr. Han have, in effect, paid for their HDS Shareholders’ Stock twice.F-28YEW BIO-PHARM GROUP, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010(Stated in US Dollars)Accordingly, it is the intention of the Company to rectify this situation by issuing a stock purchase option (individually a “Founder’s Option” and collectively the “Founders’ Options”) to each of Mr. Wang, Madame Qi and Mr. Han in an amount equal to the number of shares of YBP Common Stock that each of them currently owns. The terms of each Founder’s Option will be identical to each other except for the name of the optionee and the number of shares of YBP Common Stock subject to each such Founder’s Option. Those terms include:• The issuance of the Founder’s Option may be subject to pre-issuance approval or post-issuance ratification by our shareholders as described below;• Each Founder’s Option is fully vested upon issuance;• Each Founder’s Option may be exercised only upon the approval by the YBP shareholders of an amendment to YBP’s Articles of Incorporation increasing the number of shares of authorized Common Stock and the filing of an amendment of the Articles of Incorporation with the Secretary of State of Nevada;• Each Founder’s Option is exercisable for a period of five years;• Each Founder’s Option has an exercise price of $0.10 per share, which is the same price per share in the most recently completed offering of YBP’s Common Stock; and• Each Founder’s Option has a cashless exercise feature, pursuant to which, at the optionee’s election, he or she may choose not to pay the exercise price of the Founder’s Option and receive instead a reduced number of shares of YBP Common Stock reflecting the value of the number of shares of YBP Common Stock equal to the aggregate exercise price of the Founder’s Option.The number of shares of YBP Common Stock subject to each Founder’s Option is as follows:Name of OptioneeNumber ofSharesSubject toOptionZhiguo Wang20,103,475Guifang Qi2,488,737Xingming Han213,300The terms of the Founders’ Options have not been determined as a result of arm’s-length negotiations. The Board of Directors of YBP, which consists of the same persons who are the HDS Shareholders and the grantees of the Founder’s Option, may seek shareholder approval or ratification of the issuance of the Founders’ Options.To the extent that the Founders’ Options are exercised, assuming they are granted as described above, the number of shares to YBP Common Stock then held by each HDS Shareholder could as much double, which would be highly dilutive to the other existing YBP shareholders. The following chart shows the maximum effect of this dilution assuming full exercise of each Founder’s Option for cash:Assuming the options are issued, the options will be valued on the date of grant using the Black-Scholes option pricing model, using the expected and implied volatility from its peer companies’ volatilities as the Company itself does not have historical trading history, expected dividends yield of 0%, expected term of five years and risk-free interest rate on the date of grant. The value of the options granted will be immediately recognized as the Company’s compensation expenses upon issuance of the options.F-29YEW BIO-PHARM GROUP, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010(Stated in US Dollars)Shareholder Number
Shares
Presently
Held Percentage
of Issued
Shares
Presently
Held Number Shares
Held Assuming
Exercise of
Founder’s
Options Percentage of
Issued Shares
Following Exercise
of Founder’s
OptionsZhiguo Wang 20,103,475 40.21 % 40,206,950 55.23 % Guifang Qi 2,488,737 4.98 % 4,977,474 6.84 % Xingming Han 213,300 0.43 % 426,600 0.58 % All HDS Shareholders as a group (3 persons) 22,805,512 45.61 % 45,611,024 62.65 % All other existing shareholders 27,194,488 54.39 % 27,194,488 37.35 % Total 50,000,000 100.00 % 72,805,512 100.00 % Research and DevelopmentOn February 2, 2012, the Company signed a supplementary agreement to the Technology Agreement with Kairun to extend the contract period indefinitely until the results specified in the Technology Agreement have been achieved.NOTE 16 —RESTATEMENTSThe Company’s consolidated financial statements have been restated for the years ended December 31, 2011 and 2010 to reflect the proper accounting treatment for slow-moving inventory and potential reserves for slow-moving inventory. Based on analysis of inventory, the Company determined that a reclassification of certain inventory should be made from current assets to long-term assets. The Company originally recorded all inventory in current assets. However, based on analysis of inventory movement and analysis of its operating cycle of one year, it was subsequently determined that any inventory in excess of our current operating cycle of one year, based on historical and anticipated levels of sales, should be classified as long-term on its consolidated balance sheets. The classification of long-term inventory requires the Company to estimate the portion of inventory that can be realized over the next 12 months.Accordingly, the Company restated its consolidated balance sheets as of December 31, 2011 and 2010. The Company did not restate its consolidated statements of income and comprehensive income or consolidated statement of cash flows for the years ended December 31, 2011 and 2010. The respective restatement adjustments are non-cash in nature. These adjustments resulted in a decrease in our total current assets of $7,508,030 and $7,533,189 and an increase in long-term assets of $7,508,030 and $7,533,189 as of December 31, 2011 and 2010, respectively and summarized as follows: December 31,
2011
(As Previously
Reported) Adjustments
to
Restate December 31,
2011
(As Restated)Consolidated Balance Sheet: Assets: Current Assets: Inventories $ 8,218,874 $ (7,508,030 ) $ 710,844 Total Current Assets 8,951,678 (7,508,030 ) 1,443,648 Long-term Assets: Inventories, net of current portion — 7,508,030 7,508,030 Total Assets $ 24,902,097 $ — $ 24,902,097 F-30YEW BIO-PHARM GROUP, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010(Stated in US Dollars) December 31,
2010
(As Previously
Reported) Adjustments
to
Restate December 31,
2010
(As Restated)Consolidated Balance Sheet: Assets: Current Assets: Inventories $ 8,505,237 $ (7,533,189 ) $ 972,048 Total Current Assets 10,415,106 (7,533,189 ) 2,881,917 Long-term Assets: Inventories, net of current portion — 7,533,189 7,533,189 Total Assets $ 20,672,129 $ — $ 20,672,129 F-31 September 30,
2012 December 31,
2011 (Unaudited) (As Restated) ASSETS CURRENT ASSETS: Cash $ 567,798 $ 732,371 Accounts receivable 530,471 — Inventories 899,783 710,844 Prepaid rent — related party 67,292 — Prepaid expenses and other assets 14,245 433 Total Current Assets 2,079,589 1,443,648 LONG-TERM ASSETS: Inventories, net of current portion 9,703,596 7,508,030 Property and equipment, net 838,002 784,222 Land use rights and yew forest assets, net 15,034,720 15,166,197 Total long-term assets 25,576,318 23,458,449 Total Assets $ 27,655,907 $ 24,902,097 LIABILITIES AND SHAREHOLDERS’ EQUITY CURRENT LIABILITIES: Accounts payable $ 915,792 $ 1,360,611 Accrued expenses and other payables 49,939 119,901 Taxes payable 11,303 500 Refundable common stock subscription — 950,000 Due to related parties 56,098 266,488 Total Current Liabilities 1,033,132 2,697,500 Total Liabilities 1,033,132 2,697,500 COMMITMENTS AND CONTINGENCIES SHAREHOLDERS’ EQUITY: Common stock ($0.001 par value; 50,000,000 shares authorized; 50,000,000 and 40,500,000 shares issued and outstanding at September 30, 2012 and December 31, 2011, respectively) 50,000 40,500 Additional paid-in capital 8,149,470 7,208,970 Retained earnings 14,465,223 11,469,172 Statutory reserves 2,049,906 1,686,087 Accumulated other comprehensive income — foreign currency translation adjustment 1,908,176 1,799,868 Total Shareholders’ Equity 26,622,775 22,204,597 Total Liabilities and Shareholders’ Equity $ 27,655,907 $ 24,902,097 See notes to unaudited consolidated financial statementsF-32YEW BIO-PHARM GROUP, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME(UNAUDITED) For the Three Months
Ended September 30, For the Nine Months
Ended September 30, 2012 2011 2012 2011 REVENUES: Revenues $ 930,557 $ 954,122 $ 4,230,631 $ 3,246,602 Revenues — related party 442,467 251,876 602,159 1,169,688 Total Revenues 1,373,024 1,205,998 4,832,790 4,416,290 COST OF REVENUES: Cost of revenues 146,409 220,121 726,957 691,588 Cost of revenues — related party 84,528 41,009 109,752 297,004 Total Cost of Revenues 230,937 261,130 836,709 988,592 GROSS PROFIT 1,142,087 944,868 3,996,081 3,427,698 OPERATING EXPENSES: Selling 6,643 8,455 17,880 42,640 General and administrative 256,013 221,654 619,786 533,595 Total Operating Expenses 262,656 230,109 637,666 576,235 INCOME FROM OPERATIONS 879,431 714,759 3,358,415 2,851,463 OTHER INCOME (EXPENSES): Interest income 474 263 2,062 1,712 Other (expense) (246 ) (2,717 ) (607 ) (14,838 ) Total Other Income (Expenses) 228 (2,454 ) 1,455 (13,126 ) NET INCOME $ 879,659 $ 712,305 $ 3,359,870 $ 2,838,337 COMPREHENSIVE INCOME: NET INCOME $ 879,659 $ 712,305 $ 3,359,870 $ 2,838,337 OTHER COMPREHENSIVE INCOME: Unrealized foreign currency translation gain (loss) (59,359 ) 158,519 108,308 582,653 COMPREHENSIVE INCOME $ 820,300 $ 870,824 $ 3,468,178 $ 3,420,990 NET INCOME PER COMMON SHARE: Basic $ 0.02 $ 0.02 $ 0.07 $ 0.07 Diluted $ 0.02 $ 0.01 $ 0.07 $ 0.06 See notes to unaudited consolidated financial statementsF-33 For the Nine Months
Ended September 30, 2012 2011 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 3,359,870 $ 2,838,337 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 158,502 128,086 Amortization of land use rights and yew forest assets 259,221 213,131 Loss on disposal of fixed assets — 9,877 Changes in operating assets and liabilities: Accounts receivable (531,020 ) — Inventories (2,335,370 ) 859,356 Prepaid and other current assets (13,812 ) (5,043 ) Prepaid rent — related party (67,361 ) — Accounts payable (451,897 ) 501,672 Accrued expenses and other payables (66,648 ) 2,234 Due to related parties 27,247 — Taxes payable 7,081 (5,935 ) Advances from customers — (173,686 ) NET CASH PROVIDED BY OPERATING ACTIVITIES 345,813 4,368,029 CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from disposal of property and equipment — 19,982 Purchase of property and equipment (208,524 ) (133,678 ) Purchase of land use rights and yew forest assets (65,749 ) (5,494,788 ) NET CASH USED IN INVESTING ACTIVITIES (274,273 ) (5,608,484 ) CASH FLOWS FROM FINANCING ACTIVITIES: Repayments to related party (239,043 ) — Proceeds from related party advances — 137,480 Proceeds from directors advances — 62,944 NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (239,043 ) 200,424 EFFECT OF EXCHANGE RATE ON CASH 2,930 (21,968 ) NET (DECREASE) IN CASH (164,573 ) (1,061,999 ) CASH — beginning of period 732,371 1,850,488 CASH — end of period $ 567,798 $ 788,489 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid for: Interest $ — $ — Income taxes $ — $ — Non-cash investing and financing activities Common stock issued for common stock refundable subscription $ 950,000 $ — See notes to unaudited consolidated financial statementsF-34YEW BIO-PHARM GROUP, INC. AND SUBSIDIARIESNOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTSSeptember 30, 2012NOTE 1 —BASIS OF PRESENTATIONThe accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with US GAAP have been condensed or omitted as permitted by rules and regulations of the US Securities and Exchange Commission (“SEC”). The condensed consolidated balance sheet as of December 31, 2011 was derived from the audited consolidated financial statements of Yew Bio-Pharm Group, Inc. (individually “YBP” and collectively with its subsidiaries and operating variable interest entity, the “Company”). The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the consolidated balance sheet of the Company as of December 31, 2011, and the related consolidated statements of income and comprehensive income, changes in shareholders’ equity and cash flows for the year then ended included in the Company’s Registration Statement on Form 10/A filed with the SEC.In the opinion of management, all adjustments (which include normal recurring adjustments) necessary to present a fair statement of the financial position as of September 30, 2012, and the results of operations and cash flows for the nine-month period ended September 30, 2012 and 2011, have been made.The preparation of consolidated financial statements in accordance with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Company continually evaluates its estimates, including those related to bad debts, inventories, recovery of long-lived assets, income taxes, and the valuation of equity transactions. The Company bases its estimates on historical experience and on various other assumptions that it believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Any future changes to these estimates and assumptions could cause a material change to our reported amounts of revenues, expenses, assets and liabilities. Actual results may differ from these estimates under different assumptions or conditions.Details of the Company’s subsidiaries and variable interest entities (“VIE”) are as follows:NameDomicile and dateof incorporationRegisteredcapitalEffectiveownershipPrincipal activitiesHeilongjiang Jinshangjing Bio-Technology Development Co., Limited (“JSJ”)PRCOctober 29, 2009USD $100,000100%Holding companyYew Bio-Pharm Holdings Limited (“YewBio-Pharm (HK)”)Hong KongNovember 29, 2010HK$10,000100%Holding company of JSJF-35YEW BIO-PHARM GROUP, INC. AND SUBSIDIARIESNOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTSSeptember 30, 2012NameDomicile and dateof incorporationRegisteredcapitalEffectiveownershipPrincipal activitiesHarbin Yew Science and TechnologyDevelopment Co., Ltd. (“HDS”)PRCAugust 22, 1996RMB 45,000,000ContractualarrangementsProcessing and selling yew raw materials used in the manufacture of TCM; growing and selling yew tree seedlings and mature trees, including potted miniature yew trees; and manufacturing and selling furniture and handicrafts made of yew tree timberNOTE 2 —PRINCIPLES OF CONSOLIDATIONThe consolidated financial statements include the financial statements of YBP, its subsidiaries and operating VIE, in which the Company is the primary beneficiary. All significant intercompany balances and transactions have been eliminated on consolidation.YBP’s subsidiary JSJ entered into a series of contractual arrangements (the “Contractual Arrangements”) with HDS and/or Zhiguo Wang (“Mr. Wang”), his wife Guifang Qi (“Madame Qi”), and Xingming Han (Mr. Han) (collectively,(individually “Mr. Han” and collectively with Mr. Wang and Madame Qi, the “HDS Shareholders”), as described below:•●F-36YEW BIO-PHARM GROUP, INC. AND SUBSIDIARIESNOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTSSeptember 30, 2012shall accept such extended term unconditionally. Unless JSJ commits gross negligence, or a fraudulent act, against HDS, HDS shall not terminate the Business Cooperation Agreement prior to the expiration of the term, including any extended term. Notwithstanding the foregoing, JSJ shall have the right to terminate the Business Cooperation Agreement at any time upon giving 30 days’ prior written notice to HDS. ••●•●F-37YEW BIO-PHARM GROUP, INC. AND SUBSIDIARIESNOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTSSeptember 30, 2012law,Law, all or part of the equity interests in HDS and agreed to entrust all the rights to exercise their voting power to the person(s) appointed by JSJ. Under the accounting guidance, the Company is deemed to be the primary beneficiary of HDS and the results of HDS are consolidated in the Company’s consolidated financial statements for financial reporting purposes. Accordingly, as a VIE, HDS’s sales are included in the Company’s total sales, its income from operations is consolidated with the Company’s and the Company’s net income includes all of HDS’s net income. The Company does not have any non-controlling interest and, accordingly, did not subtract any net income in calculating the net income attributable to the Company. Because of the Contractual Arrangements, YBP has a pecuniary interest in HDS that requires consolidation of HDS’s financial statements with those of the Company.September 30,December 31, 2013 and 2012, the Company agreed to waive all management fees to be payable by HDS and the Company expects to waive such management fees in the near future due to a need of working capital in HDS to expand HDS’s operations.TCM;traditional Chinese medicine (“TCM”); (2) growing and selling yew tree seedlings and mature trees, including potted miniature yew trees; and (3) manufacturing and selling furniture and handicrafts made of yew tree timber. The Company is located in Harbin, Heilongjiang Province, China.September 30, 2012 and December 31, 2011,2013 and 2012, the carrying amount and classification of the assets and liabilities in the Company’s balance sheets that relate to the Company’s variable interest in the VIE iswas as follows:F-38 December 31, 2013 2012 Assets Cash $ 1,146,546 $ 343,990 Accounts receivable 418,875 722,598 Accounts receivable – related parties 377,821 284,986 Inventories (current and long-term) 11,334,233 10,373,398 Prepaid expenses and other assets 2,388 - Prepaid rent - related party 33,213 57,870 Property and equipment, net 966,148 790,563 Land use rights and yew forest assets, net 20,953,562 15,328,318 Total assets of VIE $ 35,232,786 $ 27,901,723 Liabilities Accounts payable $ - $ 990 Accrued expenses and other payables 16,294 79,981 Taxes payable 9,924 6,305 Due to VIE holding companies 1,703,324 1,939,720 Due to related parties 4,804,661 1,900 Total liabilities of VIE $ 6,534,203 $ 2,028,896 YEW BIO-PHARM GROUP, INC. AND SUBSIDIARIESNOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTSSeptember 30, 2012 September 30,
2012 December 31,
2011 Cash $ 506,987 $ 479,494 Accounts receivable 530,470 — Inventories (current and long-term) 10,603,379 8,218,874 Prepaid expenses and other assets 1,595 283 Prepaid rent — related party 64,529 — Property and equipment, net 735,639 750,779 Land use rights and yew forest assets, net 15,034,720 15,166,197 $ 27,477,319 $ 24,615,627 Accounts payable $ 900,489 $ 1,360,611 Accrued expenses and other payables 23,163 73,727 Taxes payable 8,142 1,049 Due to VIE holding companies 2,058,426 2,164,107 Due to related parties 6,623 240,159 $ 2,996,843 $ 3,839,653 3 —RESTATEMENTS2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Company’s consolidated financial statements include the financial statements of YBP, its subsidiaries and operating VIE, in which the Company is the primary beneficiary. All significant intercompany balances and transactions have been restatedeliminated on consolidation.Name Domicile and date of incorporation Registered capital Effective ownership Principal activities Heilongjiang Jinshangjing Bio-Technology Development Co., Limited (“JSJ”) USD $ 100,000 100% Holding company Yew Bio-Pharm Holdings Limited (“Yew Bio-Pharm (HK)”) HK$ 10,000 100% Holding company of JSJ Harbin Yew Science and Technology Development Co., Ltd. (“HDS”) RMB 45,000,000 Contractual arrangements Sales of yew tree components for use in pharmaceutical industry; sales of yew tree seedlings and potted yew trees; and the manufacture of yew tree wood handicrafts ● Level 1-Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date. ● Level 2-Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other then quoted prices that are observable, and inputs derived from or corroborated by observable market data. ● Level 3-Inputs are unobservable inputs which reflect the reporting entity’s own assumptions on what assumptions the market participants would use in pricing the asset or liability based on the best available information. 20112013 and 2012.reflectvoluntarily choose to measure certain financial assets and liabilities at fair value (fair value option). The fair value option may be elected on an instrument-by-instrument basis and is irrevocable, unless a new election date occurs. If the proper accounting treatmentfair value option is elected for slow-moving inventoryan instrument, unrealized gains and potential reserveslosses for slow-moving inventory. Based on analysisthat instrument should be reported in earnings at each subsequent reporting date. The Company did not elect to apply the fair value option to any outstanding instruments.inventory,credit riskdetermined that a reclassificationto concentrations of certain inventory should be made from current assets to long-term assets.credit risk consist principally of cash and trade accounts receivable. Substantially all of the Company’s cash is maintained with state-owned banks within the PRC, and no deposits are covered by insurance. The Company originally recordedhas not experienced any losses in such accounts and believes it is not exposed to any risks on its cash in bank accounts. A portion of the Company’s sales are credit sales which are primarily to customers whose ability to pay is dependent upon the industry economics prevailing in these areas; however, concentrations of credit risk with respect to trade accounts receivables is limited due to generally short payment terms. The Company also performs ongoing credit evaluations of its customers to help further reduce credit risk. December 31, 2013 December 31, 2012 Country: United States $ 8,779 0.8 % $ 17,372 4.5 % China 1,150,832 99.2 % 369,449 95.5 % Total cash and cash equivalents $ 1,159,611 100.0 % $ 386,821 100.0 % inventory inhighly liquid instruments purchased with original maturities of three months or less and money market accounts to be cash equivalents.assets. However,credit-worthiness and current economic trends. Accounts are written off after exhaustive efforts at collection. At December 31, 2013 and 2012, the Company has not established, based on analysisa review of its outstanding balances, an allowance for doubtful accounts.movement and analysis ofon hand with the estimated sales that can be sold within its normal operating cycle of one year, it was subsequently determined that anyyear. Any inventory in excess of ourthe Company’s current operating cycle of one year,requirements based on historical and anticipated levels of sales should beis classified as long-term on its consolidated balance sheets. The Company’s classification of long-term inventory requires the Companyit to estimate the portion of inventory that can be realized over the next 12 months.Accordingly,restatedanalyzes movement of its consolidated balance sheet asproducts, monitors competing products and technologies and evaluates acceptance of its products. Periodically, the Company will identify inventories that cannot be sold at all or can only be sold at deeply discounted prices. An allowance will be established if management determines that certain inventories may not be saleable. If inventory costs exceed expected market value due to obsolescence or quantities in excess of expected demand, the Company will record reserves for the difference between the carrying cost and the market value.2011.2013 and 2012, the Company did not provide any inventory allowance and reserve.Building 15 years Machinery and equipment 10 years Office equipment 3 years Leasehold improvement 5 years Motor vehicles 4 years restaterecord any impairment charges for the years ended December 31, 2013 and 2012.consolidated statementsrevenue from sales of yew seedling products, sales of yew raw materials for medical application, and sales of yew craft products. Pursuant to the guidance of ASC Topic 605 and ASC Topic 360, the Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the purchase price is fixed or determinable and collectability is reasonably assured, and no significant obligations remain.comprehensiveother equity based compensation issued to employees. The Company accounts for non-employee share-based awards in accordance with ASC 505-50 “Equity-based payments to non-employees”.statementfinancial statements are presented in U.S. dollars (“USD”). The reporting currency of the Company is the USD. The functional currency of Yew Bio-Pharm (HK) is the Hong Kong dollar, the functional currency of the Company’s VIEs and subsidiaries located in the PRC is the RMB. For the subsidiaries whose functional currencies are the Hong Kong dollar or RMB, results of operations and cash flows are translated at average exchange rates during the period, assets and liabilities are translated at the unified exchange rate at the end of the period, and equity is translated at historical exchange rates. As a result, amounts relating to assets and liabilities reported on the statements of cash flows may not necessarily agree with the changes in the corresponding balances on the balance sheets. Translation adjustments resulting from the process of translating the local currency financial statements into U.S. dollars are included in determining comprehensive income. The foreign currency translation adjustment included in comprehensive income for the periodyears ended September 30, 2011.December 31, 2013 and 2012 amounted to $966,009 and $181,028, respectively.respective restatement adjustmentsCompany does not enter any material transaction in foreign currencies and, accordingly, transaction gains or losses have not had, and are non-cashnot expected to have, a material effect on the results of operations of the Company.nature. These adjustmentsany significant transactions that are subject to the restrictions. 2013 2012 Exchange rate on balance sheet dates: USD : RMB exchange rate 6.1140 6.3161 Average exchange rate for the year USD : RMB exchange rate 6.19817 6.31984 decrease in our total current assetsreconciliation of $7,508,030basic and an increase in long-term assets of $7,508,030 as ofdiluted net income per share: Years Ended December 31, 2013 2012 Net income available to common stockholders for basic and diluted net income per share of common stock $ 3,899,730 $ 2,206,267 Weighted average common stock outstanding – basic 50,000,000 47,819,672 Effect of dilutive securities: Stock options issued to directors/officers - - Weighted average common stock outstanding – diluted 50,000,000 47,819,672 Net income per common share – basic $ 0.08 $ 0.05 Net income per common share – diluted $ 0.08 $ 0.05 2011, respectively2013 and summarized2012 included the following: 2013 2012 Stock options 22,805,512 22,805,512 Total 22,805,512 22,805,512 follows:(i) any person that holds 10% or more of the Company’s securities including such person’s immediate families, (ii) the Company’s management, (iii) someone that directly or indirectly controls, is controlled by or is under common control with the Company, or (iv) anyone who can significantly influence the financial and operating decisions of the Company. A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties.F-39TableOn March 21, 2004, HDS entered into a Joint Venture Planting Agreement with Wuchang City Forestry Bureau (see Note 14), which is considered a collaborative arrangement under U.S. GAAP. The purpose of Contentsthis arrangement is to share some of the risks and rewards associated with this Joint Venture Planting Agreement. The Company’s current share of profits is 80%. The Company accounts for this collaborative arrangement under ASC 808, “Collaborative Arrangements”YEW BIO-PHARM GROUP, INC. AND SUBSIDIARIESNOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTSSeptember 30, 2012
In March 2013, the FASB issued ASU 2013-05 “Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity.” ASU 2013-05 addresses the accounting for the cumulative translation adjustment when a parent either sells part or all of its investment in a foreign entity or no longer holds a controlling financial interest in a subsidiary or group of assets that is a nonprofit activity or a business within a foreign entity. For public entities, the ASU is effective prospectively for fiscal years, and interim periods, within those years, beginning after December 15, 2013. Early adoption is permitted. The adoption of ASU 2013-05 is not expected to have a material impact on the Company’s consolidated financial statements. December 31,
2011
(As Previously
Reported) Adjustments
to
Restate December 31,
2011
(As Restated)Consolidated Balance Sheet: Assets: Current Assets: Inventories $ 8,218,874 $ (7,508,030 ) $ 710,844 Total Current Assets 8,951,678 (7,508,030 ) 1,443,648 Long-term Assets: Inventories, net of current portion — 7,508,030 7,508,030 Total Assets $ 24,902,097 $ — $ 24,902,097 4 —3 – INVENTORIESSeptember 30, 2012 and December 31, 2011,2013 and 2012, inventories consisted of the following: September 30, 2012 December 31, 2011 Current
portion Long-term
portion Total Current
portion Long-term
portion Total Raw materials $ 208,862 $ 2,727,438 $ 2,936,300 $ 29,401 $ 2,817,980 $ 2,847,381 Work-in-process 18,732 — 18,732 18,642 — 18,642 Finished goods — handicrafts 229,740 631,004 860,744 236,854 687,258 924,112 Yew seedlings 442,449 4,125,309 4,567,758 425,947 4,002,792 4,428,739 Other trees — 2,219,845 2,219,845 — — — $ 899,783 $ 9,703,596 $ 10,603,379 $ 710,844 $ 7,508,030 $ 8,218,874 December 31, 2013 December 31, 2012 Total Total Raw materials $ 416,519 $ 2,608,829 $ 3,025,348 $ 284,628 $ 2,734,896 $ 3,019,524 Work-in-process 17,446 - 17,446 22,523 - 22,523 Finished goods - handicrafts 197,842 653,785 851,627 153,578 695,426 849,004 Yew seedlings 457,280 6,982,532 7,439,812 530,505 3,622,991 4,153,496 Other trees - - - - 2,328,851 2,328,851 $ 1,089,087 $ 10,245,146 $ 11,334,233 $ 991,234 $ 9,382,164 $ 10,373,398 5 —4 – PROPERTY AND EQUIPMENTSeptember 30, 2012 and December 31, 2011:2013 and 2012: December 31, 2013 2012 Buildings and building improvements $ 651,716 $ 402,226 Machinery and equipment 538,648 521,888 Office equipment 48,163 46,347 Leasehold improvement 54,926 53,169 Motor vehicles 659,544 641,433 Construction in progress 65,751 - 2,018,748 1,665,063 Less: accumulated depreciation (985,670 ) (779,094 ) $ 1,033,078 $ 885,969 September 30,
2012 December 31,
2011Buildings and building improvements $ 351,321 $ 267,015 Machinery and equipment 522,939 520,416 Office equipment 46,207 44,841 Leasehold improvement 53,019 52,763 Motor vehicles 639,885 513,280 1,613,371 1,398,315 Less: accumulated depreciation (775,369 ) (614,093 ) $ 838,002 $ 784,222 three monthsyears ended September 30,December 31, 2013 and 2012, and 2011, depreciation expense amounted to $55,302 and $44,150, respectively. For the nine months ended September 30, 2012 and 2011, depreciation expenses amounted to $158,502$179,857 and $128,086,$217,090, respectively.F-40YEW BIO-PHARM GROUP, INC. AND SUBSIDIARIESNOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTSSeptember 30, 20126 —5 – LAND USE RIGHTS AND YEW FOREST USE RIGHTSASSETSthese land use rights based on their terms and amortizes yew forest use rightsassets over the term of the respective land use right.rights or expected useful lives. The lease agreements do not have any renewal option and the Company has no further obligations to the lessor. The Company records the amortization of these land use rights and yew forest use rightsassets as part of its cost of revenues. For the three monthsyears ended September 30,December 31, 2013 and 2012, and 2011, amortization expense amounted to $87,050$381,659 and $88,830,$346,741, respectively. For the nine months ended September 30, 2012 and 2011, amortization expense amounted to $259,221 and $213,131, respectively. September 30, 2012,December 31, 2013, land use rights and yew forest use rightsassets consisted of the following: Description Useful
life Acquisition
date Expiration
date Metric
acres
(“Mu”)Parcel A Undeveloped forest land 50 3/2004 3/2054 125 Parcel B Undeveloped forest land 50 4/2004 4/2054 400 Parcel C Yew tree forests and underlying land 50 1/2008 1/2058 290 Parcel D Yew tree forests and underlying land 45 3/2010 3/2055 15,865 Parcel E Undeveloped forest land 16 7/2012 3/2028 117.5 Description Useful life Acquisition date Expiration date Metric acres ("Mu") Parcel A Developing forest land 50 3/2004 3/2054 125 Parcel B Developing forest land 50 4/2004 4/2054 400 Parcel C Yew tree forests 30 3/2005 3/2035 361 Parcel D Yew tree forests and underlying land 50 1/2008 12/2058 290 Parcel E Yew tree forests and underlying land 45 3/2010 3/2055 15,865 Parcel F Undeveloped forest land 16 7/2012 3/2028 148 Parcel G Yew tree forests and underlying land 22 4/2006 1/2028 5 Parcel H Yew tree forests and underlying land 38 11/2013 11/2051 2,565 September 30, 2012 and December 31, 2011,2013 and 2012, land use rights and yew forest use rightsassets consisted of the following: Useful life September 30,
2012 December 31,
2011Land and yew forest use rights 16–50 years $ 15,675,733 $ 15,546,414 Less: accumulated amortization (641,013 ) (380,217 ) Total $ 15,034,720 $ 15,166,197 Land use rights and yew forest assets 16-50 years $ 22,094,697 $ 16,058,406 Less: accumulated amortization (1,141,135 ) (730,088 ) Total $ 20,953,562 $ 15,328,318 use rightsassets attributable to future periods is as follows:Twelve-month periods ending September 30: Amount 2013 $ 348,056 2014 348,056 2015 348,056 2016 348,056 2017 348,056 2018 and thereafter 13,294,440 Total $ 15,034,720 Years ending December 31: Amount 2014 $ 507,450 2015 507,450 2016 507,450 2017 507,450 2018 507,450 2019 and thereafter 18,416,312 Total $ 20,953,562 7 —6 – ACCRUED EXPENSES AND OTHER PAYABLES September 30, 2012 and December 31, 2011,2013 and 2012, accrued expenses and other payables consisted of the following: September 30,
2012 December 31,
2011Accrued wage $ 19,939 $ 16,844 Accrued professional fees 10,000 75,029 Other 20,000 28,028 Total $ 49,939 $ 119,901 F-41 Accrued wage $ 17,821 $ 51,759 Accrued professional fees - 121,346 Other 118,892 25,993 Total $ 136,713 $ 199,098 YEW BIO-PHARM GROUP, INC. AND SUBSIDIARIESNOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTSSeptember 30, 2012
NOTE 7 – TAXESNOTE 8 —TAXESaan effective tax rate of 34%. No provision for income taxes in the U.S. has been made as the Company had no U.S. taxable income as of September 30, 2012 and December 31, 2011.2013 and 2012.beingare incorporated in the PRC and are subject to PRC’s Unified Enterprise Income Tax. Pursuant toTax Law (“EIT”). The EIT established a single unified 25% income tax rate for most companies, including the PRC Income Tax Laws, Enterprise Income Taxes (“EIT”) is generally imposed at 25%.Company’s subsidiary and VIE in China. However, JSJ and HDS has been named as a leading enterprise in the agricultural areaindustry and awarded with a tax exemption through December 31, 2058 with an exception of handicrafts sold, which is not within the scope of agricultural area. JSJ is a holding company and subject to regular corporate income tax rate of 25%, it has no operating profit for tax liabilities.up toended December 31, 2058.2013 and 2012 due to the fact that HDS is awarded with a tax exemption and has loss carry-forward from previous years to offset income tax liability generated for handicraft sales while JSJ has been incurring net losses. The combined effects of the income tax expense exemptions and tax reductions available to the Company for the years ended December 31, 2013 and 2012 are as follows: Years ended December 31, 2013 2012 Tax exemption effect $ 1,035,909 $ 1,223,766 Tax reduction due to loss carry-forward 8,152 9,751 Loss not subject to income tax (3,962 ) (20,636 ) Basic net income per share effect $ (0.02 ) $ (0.03 ) Diluted net income per share effect $ (0.02 ) $ (0.03 ) nine monthsyears ended September 30, 2012December 31, 2013 and 2011:2012: Nine Months Ended
September 30, 2012 2011 U.S. federal income tax rate 34 % 34 % Foreign income not recognized in the U.S. (34 )% (34 )% PRC enterprise income tax 25 % 25 % Tax exemption (25 )% (25 )% Total provision for income tax — — Years ended December 31, 2013 2012 U.S. federal income tax rate 34 % 34 % Foreign income not recognized in the U.S. (34 %) (34 %) PRC EIT rate 25 % 25 % PRC tax exemption and reduction (25 %) (25 %) Total provision for income taxes - - Income beforeThe deferred income tax expenses of $879,659 and $712,305 for the three months ended September 30, 2012 and 2011, respectively, and $3,359,870 and $2,838,337 for the nine months ended September 30, 2012 and 2011, respectively, was attributed to subsidiaries with operations in China. No income tax expense related to China income incurred for the nine months ended September 30, 2012 and 2011.The combined effects of the income tax expense exemptions and tax reductions availableassets or liabilities calculated pursuant to the EIT is not material due to the fact that the Company has been granted EIT exemption with respect to its yew raw materials and yew tree segments and is only subject to tax under the EIT for the three and nine months ended September 30, 2012 and 2011 are as follows:its handicrafts segment, which only represents a small portion of net revenues. Three Months Ended
September 30, Nine Months Ended
September 30, 2012 2011 2012 2011 Tax exemption effect $ 255,902 $ 188,982 $ 909,548 $ 737,027 Basic net income per share effect $ (0.01 ) $ (0.00 ) $ (0.02 ) $ (0.02 ) Diluted net income per share effect $ (0.01 ) $ (0.00 ) $ (0.02 ) $ (0.01 ) threeyears ended December 31, 2013 and nine months ended September 30, 2012 and 2011.2012. The net operating loss carry forwards for United States income tax purposes amounted to $830,018$3,258,426 and $564,438$2,997,760 at September 30, 2012 and December 31, 2011,2013 and 2012, respectively, which may be available to reduce future years’ taxable income. These carry forwards will expire, if not utilized, through 2032. Management believes that the realization of the benefits arising from this loss appear to be uncertain due to the Company’s limited operating history and continuing losses for United States income tax purposes. Accordingly, the Company has provided a 100% valuation allowance on the deferred tax asset to reduce the asset to zero at September 30, 2012 and December 31, 2011.2013 and 2012. The valuation allowance at September 30, 2012 and December 31, 20112013 and 2012 was approximately $282,206$1,107,865 and $191,909,$1,019,238, respectively. The net change in the valuation allowance was an increase of $47,527$88,626 and $13,566$897,843 during the three monthsyears ended September 30,December 31, 2013 and 2012, and 2011, respectively, and $90,297 and $33,224 during the nine months ended September 30, 2012 and 2011, respectively, and management will review this valuation allowance periodically and make adjustments as warranted.necessary.F-42 U.S. tax benefit of net operating loss carry forward $ 1,107,865 $ 1,019,238 Valuation allowance (1,107,865 ) (1,019,238 ) Net deferred tax assets $ - $ - YEW BIO-PHARM GROUP, INC. AND SUBSIDIARIESNOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTSSeptember 30, 2012$15.3$20.1 million and $12.0$16.4 million as of September 30, 2012 and December 31, 2011,2013 and 2012, respectively, which are included in consolidated retained earnings and will continue to be indefinitely reinvested in internationaloverseas operations. Accordingly, no provision has been made for U.S. deferred taxes related to future repatriation of these earnings, nor is it practicable to estimate the amount of income taxes that would have to be provided if we concluded that such earnings will be remitted to the U.S. in the future.There will be no deferred income tax assets or liabilities calculation in the Federal Income Tax because the US corporation taxable loss and deferred taxable loss was the same and the use of any net operating loss carry forwards appears to be uncertain, There will be no deferred income tax assets or liabilities calculation in the EIT because the Company awarded EIT exempted status under agricultural area.The Company did not have any interest and penalty provided or recognized in the income statements for the three and nine months ended September 30, 2012 and 2011 or balance sheet as of September 30, 2012 and December 31, 2011. The Company did not have uncertainty tax positions or events leading to uncertainty tax position within the next 12 months. The Company’s 2009, 20102011, 2012 and 20112013 U.S. Corporation Income Tax Return are subject to U.S. Internal Revenue Service examination. The Company’s 2008, 2009, 2010, 2011, 2012 and 20112013 China corporate income tax returns are subject to China State Administration of Taxation examination.seedlingraw materials and yew trees sales as an agricultural corps cultivating company up to December 31, 2016. VAT payable in the PRC is charged on an aggregated basis at the applicable rate on the full price collected for the goods sold or taxable services provided and less any deductible VAT already paid by the taxpayer on purchases of goods in the same financial year.9 —8 – STOCKHOLDERS’ EQUITYPursuant to an agreement dated November 1, 2010 between YBP and a consultant, a residentthe U.S., YBP agreed to pay $20,000 cash and 500,000 Sharesstock purchase options (“Founders’ Options”) to the consultant as compensation for consulting services rendered by him to the Company. The shares were valued at $0.10 per share or $50,000 in totalCompany’s directors/officers and the Company recorded $50,000issued the Founders’ Options to the Founders following the approval. The terms of compensation expense relatedeach Founder’s Option are identical to those Shareseach other except for the year ended December 31, 2010. The shares were recorded as outstanding as of September 30, 2012 and December 31, 2011.NOTE 10 —EARNINGS PER SHAREASC 260 “Earnings per Share,” requires dual presentation of basic and diluted earnings per share (“EPS”) with a reconciliationname of the numeratoroptionee and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation. Basic EPS excludes dilution. Diluted EPS reflects the potentialF-43YEW BIO-PHARM GROUP, INC. AND SUBSIDIARIESNOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTSSeptember 30, 2012dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity.Basic net income per share is computed by dividing net income available to common shareholders by the weighted average number of shares of the Company’s common stock outstanding duringsubject to each Founder’s Option. The principal terms of the period. Diluted income per share is computed by dividing net income byFounders’ Options include the weighted averagefollowing:● Each Founder’s Option is fully vested upon issuance; ● Each Founder’s Option is exercisable for a period of five years from the date of issuance; ● Each Founder’s Option is exercisable at $0.22 per share; and ● Each Founder’s Option has a cashless exercise feature, pursuant to which, at the optionee’s election, he or she may choose to deliver previously-owned shares of YBP common stock in payment of the exercise price or not pay the exercise price of the Founder’s Option and receive instead a reduced number of shares of YBP common stock reflecting the value of the number of shares of YBP common stock equal to the difference, if any, between the aggregate fair market value of the shares issuable upon exercise of the Founder’s Option and the exercise price of the Founder’s Option. commonsubject to each Founder’s Option is as follows:Zhiguo Wang 20,103,475 Guifang Qi 2,488,737 Xingming Han 213,300 Total 22,805,512 equivalentsprice of $0.10; expected dividend yield 0%; risk-free interest rate of 0.70%; volatility of 229.74% and potentially dilutive securities outstanding during each period.an expected term of 5 years. The Company recorded the $2,246,907 as stock-based compensation in fiscal year of 2012. Balance at beginning of year 22,805,512 $ 0.22 - $ - Issued - - 22,805,512 0.22 Exercised - - - - Forfeited - - - - Balance at end of year 22,805,512 $ 0.22 22,805,512 $ 0.22 Options exercisable at end of year 22,805,512 $ 0.22 22,805,512 $ 0.22 presentssummarizes the shares of the Company's common stock issuable upon exercise of options outstanding at December 31, 2013:Stock Options Outstanding Stock Options Exercisable $ 0.22 22,805,512 3.95 $ 0.22 22,805,512 $ 0.22 reconciliationForest and Land Use Right Acquisition Contract of basicWuchang Erhexiang Pingfangdian Forestry Centre 15th Compartments (the “Wuchang Pingfangdian Forestry Centre Contract”) with ZTC.diluted net income per share forland use right of the three months ended September 30, 2012underlying land located at Wuchang Pingfangdian Forestry Centre in Helongjiang Province, PRC. The term of the contract is 38 years, through November 7, 2051. During the term of the Wuchang Pingfangdian Forestry Centre Contract, HDS plans to harvest cut and 2011:replant the trees, sell the harvest cutting logs, promote the growth of the young trees accordingly, as well as plant yew trees of five years old or above based on the condition of the harvest cutting. Three Months Ended
September 30, 2012 2011 Net income available to common stockholders for basic and diluted net income per share of common stock $ 879,659 $ 712,305 Weighted average common stock outstanding — basic 50,000,000 40,500,000 Effect of dilutive securities: Subscribed common shares issuable and subject to recession — 9,500,000 Weighted average common stock outstanding — diluted 50,000,000 50,000,000 Net income per common share — basic $ 0.02 $ 0.02 Net income per common share — diluted $ 0.02 $ 0.01 ● RMB 21.2 million (approximately $3.5 million) on or before December 31, 2013. ● RMB 26.0 million (approximately $4.3 million) on or before May 31, 2015. following table presentsCompany already paid a reconciliationtotal of basicRMB 17.8 million (approximately $2.9 million) as of December 31, 2013.diluted net income per share forcarrying costs is reflected as a reduction of shareholders’ equity (Additional paid-in capital). As of December 31, 2013, the nine months ended September 30, 2012 and 2011:assets purchased were transferred to HDS, the amount due to ZTC is approximately $4.8 million. Nine Months Ended
September 30, 2012 2011 Net income available to common stockholders for basic and diluted net income per share of common stock $ 3,359,870 $ 2,838,337 Weighted average common stock outstanding — basic 47,052,920 40,500,000 Effect of dilutive securities: Subscribed common shares issuable and subject to recession 2,947,080 9,500,000 Weighted average common stock outstanding — diluted 50,000,000 50,000,000 Net income per common share — basic $ 0.07 $ 0.07 Net income per common share — diluted $ 0.07 $ 0.06 11 —9 – CONCENTRATIONS OF CREDIT RISK AND MAJOR CUSTOMERSthreeyears ended December 31, 2013 and nine months ended September 30, 2012, and 2011, customers accounting for 10% or more of the Company’s revenue were as follows: Three Months Ended
September 30, Nine Months Ended
September 30, Customer 2012 2011 2012 2011 A 20 % 27 % 16 % 28 % B 32 % 21 % 12 % 26 % F-44 Years Ended December 31, Customer 2013 2012 A * 17 % B 21 % 15 % C * 11 % D * 10 % E 17 % * YEW BIO-PHARM GROUP, INC. AND SUBSIDIARIESNOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTSSeptember 30, 2012 Three Months Ended
September 30, Nine Months Ended
September 30, Customer 2012 2011 2012 2011 C 13 % 24 % 14 % 14 % D * 18 % * * E 17 % * 14 % * F * * 11 % * G * * 13 % * * Less than10%Below 10%Three of the Company’s toplargestand three customers for the nine months ended September 30, 2012 accounted for 100% of the Company’s accounts receivable at September 30, 2012. The Company did not have anytotal outstanding accounts receivable at December 31, 2011.2013 and 2012, respectively.threeyears ended December 31, 2013 and nine months ended September 30, 2012, the Company did not make any significant purchases of yew seedlings. In connection with an agreement to acquire a land use right (see Note 15)rights in July 2012 (the “Fuye Field Agreement”), the Company acquired more than 80,000 trees —- which are not yew trees —- for approximately $2.2 million (the amount was included in the land use right agreement as part of the purchase price) from an individual. For the three and nine monthsyear ended September 30,December 31, 2012, this purchase accounted for 100% and 95%, respectively, of the Company’s purchase of yew seedlings and other trees and the Company haddid not have any accounts payable of $895,532 related to the supplier at September 30,December 31, 2012. For the three months ended September 30, 2011, the Company did not make any purchases of yew seedlings. For the nine months ended September 30, 2011, one company accounted for 94% of the Company’s purchase of yew seedlings and the Company had accounts payable of $2,379,308 related to the supplier at September 30, 2011.12 —10 – RELATED PARTY TRANSACTIONSCompany Ownership Heilongjiang Zishan Technology Stock Co., Ltd. (“ZTC”) 18% owned by Heilongjiang Hongdoushan Ecology Forest Stock Co., Ltd., 39% owned by Zhiguo Wang, Chairman and Chief Executive Officer, 31% owned by Guifang Qi, the wife of Mr. Wang and Director of the Company, and 12% owned by third parties. Heilongjiang Yew Pharmaceuticals, Co., Ltd. (“Yew Pharmaceutical”) 95% owned by Heilongjiang Hongdoushan Ecology Forest Stock Co., Ltd., and 5% owned by Madame Qi. Shanghai Kairun Bio-Pharmaceutical Co., Ltd. (“Kairun”) 60% owned by Heilongjiang Zishan Technology Co., Ltd., 20% owned by Heilongjiang Hongdoushan Ecology Forest Stock Co., Ltd., and 20% owned by Mr. Wang. Heilongjiang Hongdoushan Ecology Forest Stock Co., Ltd. (“HEFS”) 63% owned by Mr. Wang, 34% owned by Madame Qi, and 3% owned by third parties. F-45YEW BIO-PHARM GROUP, INC. AND SUBSIDIARIESNOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTSSeptember 30, 2012Revenue from Related PartiesPursuant to the Cooperation and Development Agreement discussed below, the Company generated salesand Revenues from its related party company, Yew Pharmaceutical. For the three and nine months ended September 30, 2012 and 2011, the Company recorded revenues from this related party, as follows:Related Party Three Months Ended
September 30, Nine Months Ended
September 30, Name of related party 2012 2011 2012 2011 Yew pharmaceutical $ 442,467 $ 251,876 $ 602,159 $ 1,169,688 Total $ 442,467 $ 251,876 $ 602,159 $ 1,169,688 At September 30, 2012 and December 31, 2011, the Company did not have any accounts receivable from Yew Pharmaceutical.Cooperation and Development AgreementTCMtraditional Chinese medicines and other pharmaceutical products, at price of RMB 1,000,000 (approximately $158,000) per metric ton.three monthsyears ended September 30,December 31, 2013 and 2012, and 2011, sales to Yew Pharmaceutical under the Development Agreement amounted to $442,467$1,550,458 and $251,876,$1,012,684, respectively. ForAdditionally, for the nine monthsyears ended September 30,December 31, 2013 and 2012, and 2011, salesthe Company recorded revenues from the sale of yew handicrafts to Yew Pharmaceutical underof $0 and $1,603, respectively. In summary, for the Development Agreement amounted to $600,558 and $1,169,688, respectively. At September 30, 2012 andyears ended December 31, 2011,2013 and 2012, the Company did not have anyrecorded revenues from the following related party: Years Ended December 31, Name of related party 2013 2012 Yew Pharmaceutical $ 1,550,458 $ 1,014,287 Total $ 1,550,458 $ 1,014,287 Pharmaceutical.Pharmaceutical, respectively.threeyears ended December 31, 2013 and nine months ended September 30, 2012, and 2011, the Company did not make any materialmade purchases in the amount of $0 and $121,047 of yew seedlings from its related party companies.ZTC, respectively. At September 30, 2012 and December 31, 2011,2013 and 2012, there werewas no accounts payable amountsamount due to ZTC related to related parties.the purchases.$25,400)$26,000). The payment for the first five years of the ZTC Lease was due prior to December 31, 2010 and beginning in 2011, the Company is required to make full payment for the land use rights in advance for each subsequent five-year period. For the three monthsyears ended September 30,December 31, 2013 and 2012, and 2011, rent expense related to the ZTC Lease amounted to $6,414$26,209 and $6,323,$25,705, respectively. For the nine months ended September 30, 2012 and 2011,At December 31, 2013, prepaid rent expense related to the ZTC Lease amounted to $19,255 and $18,727, respectively.$33,212 which was included in prepaid expenses – related parties on the accompanying consolidated balance sheets. At September 30,December 31, 2012, prepaid rent to ZTC amounted to $64,118. At December 31, 2011, amounts due under the ZTC lease amounted to $172,284, and are$57,870 which was included in due toprepaid expenses – related parties on the accompanying consolidated balance sheets.$1,875)$2,000) is due for each of the second and third years thereof. The term of the Store Lease is three years and expired on December 3, 2011. On November 15, 2011, the Company renewed the Store Lease. Pursuant to the renewed Store Lease, the annual rent is RMB 15,600 (approximately $2,359)$2,500) and the annual payment is due by May 30 of each year. The term of the renewed Store Lease is 3 years andF-46YEW BIO-PHARM GROUP, INC. AND SUBSIDIARIESNOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTSSeptember 30, 2012
expires on December 1, 2014. For the three monthsyears ended September 30,December 31, 2013 and 2012, and 2011, rent expense related to the Store Lease amounted to $616$2,517 and $467,$2,468, respectively. ForSince December 2012, the nine months ended September 30, 2012 and 2011, rent expense relatedpremises subject to the Store Lease amounted to $1,849 and $1,383, respectively. At September 30, 2012, prepaid rent to Madame Qi amounted to $411.have been used as warehouse space rather than retail space.$2,400)$2,000) are due for each of the term. The term of the Office Lease is 15 years and expires on December 31, 2025. For the three monthsyears ended September 30,December 31, 2013 and 2012, and 2011, rent expense related to the Office Lease amounted $592$2,420 and $584,$2,373, respectively. For the nine months ended September 30, 2012 and 2011, rent expense related to the Office Lease amounted $1,778 and $1,729, respectively.“Far East Office“JSJ Lease”). Pursuant to the Far East OfficeJSJ Lease, JSJ leases approximately 30 square meter of office space from Mr. Wang in Harbin. Rent under the Far East OfficeJSJ Lease is RMB 10,000 (approximately $1,600) annually. The term of the Far East OfficeJSJ Lease is three years and expires on June 30, 2015. For the three and nine monthsyear ended September 30, 2012,December 31, 2013, rent expense related to the Far East OfficeJSJ Lease amounted $395.to $1,613. At September 30, 2012,December 31, 2013, prepaid rent to Mr. Wang related to the Far East Office Lease amounted to $2,763.At September 30, 2012, the total prepaid rent for above operating lease amounted to $67,292$819 which was included in prepaid rent — relatedexpenses-related parties on the accompanying consolidated balance sheets.partyparties operating leases are as follows:Twelve-month periods ending September 30: 2013 $ 32,057 2014 32,057 2015 29,610 2016 28,015 2017 28,015 Thereafter 468,366 Total $ 618,120 Years Ending December 31: 2014 $ 6,341 2015 134,274 2016 2,420 2017 22,587 2018 2,420 Thereafter 438,315 Total $ 606,357 to/due fromto related partiesCompany also received from and provided advances to itsCompany’s officers and directors and related parties.parties, from time to time, provided advances to the Company for working capital purpose. These advances are short-term in nature and non-interest bearing and unsecured and payable on demand. The due to/due fromto related partyparties amount at September 30, 2012 and December 31, 2011 is2013 and 2012 was as follows: Due to related party Name of related party September 30,
2012 December 31,
2011Zhiguo Wang $ 54,409 $ 31,357 Yew Pharmaceutical — 62,847 Madame Qi 1,689 — ZTC — 172,284 Total $ 56,098 $ 266,488 F-47Name of related parties 2013 2012 Zhiguo Wang $ 47,726 $ 45,976 Guifang Qi - 1,900 ZTC 4,802,911 - Total $ 4,850,637 $ 47,876 ContentsYEW BIO-PHARM GROUP, INC. AND SUBSIDIARIESNOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTSSeptember 30, 2012September 30, 2012,December 31, 2013, Kairun has not yet completed the services provided for in the Technology Agreement and, therefore, no payment was made to Kairun.13 —11 – STATUTORY RESERVESthree monthsyears ended September 30,December 31, 2013 and 2012, and 2011, the Company appropriated to the statutory surplus reserve in the amount of $102,361$417,624 and $75,593, respectively. For the nine months ended September 30, 2012 and 2011, the Company appropriated to the statutory surplus reserve in the amount of $363,819 and $294,811,$493,407, respectively. The accumulated balance of the statutory reserve of the Company as of September 30, 2012 and December 31, 20112013 and 2012 was $2,049,906$2,597,118 and $1,686,087,$2,179,494, respectively.14 —12 – SEGMENT INFORMATIONthreeyears ended December 31, 2013 and nine months ended September 30, 2012, and 2011, the Company operated in three reportable business segments: (1) the TCM raw materials segment, consisting of the production and sale of yew raw materials used in the manufacture of TCM; (2) the yew tree segment, consisting of the growth and sale of yew tree seedlings and mature trees, including potted miniature yew trees; and (3) the handicrafts segment, consisting of the manufacture and sale of handicrafts and furniture made of yew timber. The Company’s reportable segments are strategic business units that offer different products. They are managed separately based on the fundamental differences in their operations. All of the Company’s operations are conducted in the PRC.F-48YEW BIO-PHARM GROUP, INC. AND SUBSIDIARIESNOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTSSeptember 30, 2012threeyears ended December 31, 2013 and nine months ended September 30, 2012 and 2011 iswas as follows: For the Three Months Ended
September 30, For the Nine Months Ended
September 30, 2012 2011 2012 2011 Revenues: TCM raw materials $ 893,909 $ 859,497 $ 2,860,552 $ 2,659,234 Yew trees 396,416 322,015 1,853,504 1,665,665 Handicrafts 82,699 24,486 118,734 91,391 1,373,024 1,205,998 4,832,790 4,416,290 Cost of revenues: TCM raw materials 158,354 161,226 446,436 640,843 Yew trees 21,395 88,380 320,410 287,681 Handicrafts 51,188 11,524 69,863 60,068 230,937 261,130 836,709 988,592 Depreciation and amortization: TCM raw materials 84,334 95,545 253,157 208,248 Yew trees 14,573 13,020 41,638 37,485 Handicrafts 7,428 9,538 23,532 23,824 Other 36,017 14,877 99,396 71,660 142,352 132,980 417,723 341,217 Net income (loss): TCM raw materials 735,555 698,271 2,414,116 2,018,391 Yew trees 375,021 233,635 1,533,094 1,377,984 Handicrafts 31,511 12,962 48,871 31,323 Other (262,428 ) (232,563 ) (636,211 ) (589,361 ) $ 879,659 $ 712,305 $ 3,359,870 $ 2,838,337 For the Years Ended December 31, 2013 2012 Revenues: TCM raw materials $ 4,170,748 $ 3,745,348 Yew trees 3,011,728 2,819,968 Handicrafts 257,172 162,208 7,439,648 6,727,524 Cost of revenues: TCM raw materials 1,117,407 615,956 Yew trees 1,097,470 578,296 Handicrafts 192,523 84,805 2,407,400 1,279,057 Depreciation and amortization: TCM raw materials 370,564 337,949 Yew trees 24,586 37,440 Handicrafts 22,900 31,346 Other 143,466 157,096 561,516 563,831 Net income (loss): TCM raw materials 3,053,341 3,129,393 Yew trees 1,914,257 2,241,672 Handicrafts 64,649 77,402 Other (1,132,515 ) (3,242,200 ) $ 3,899,732 $ 2,206,267 December 31, 2013 TCM raw materials Yew trees Handicrafts Other Total Identifiable long-lived assets, net $ 20,953,562 $ 632,583 $ 94,124 $ 306,371 $ 21,986,640 December 31, 2012 TCM raw materials Yew trees Handicrafts Other Total Identifiable long-lived assets, net $ 14,983,045 $ 734,212 $ 122,491 $ 374,539 $ 16,214,287 December 31, 2011 TCM raw
materials Yew
trees Handicrafts Other Total Identifiable long-lived assets, net $ 14,880,192 $ 600,364 $ 153,686 $ 316,177 $ 15,950,419 Expenditures for segment assets $ 5,515,590 $ 61,436 $ — $ 130,385 $ 5,707,411 September 30, 2012 TCM raw
materials Yew
trees Handicrafts Other Total Identifiable long-lived assets, net $ 14,687,708 $ 739,908 $ 130,936 $ 314,170 $ 15,872,722 Expenditures for segment assets $ 65,749 $ 83,098 $ — $ 125,426 $ 274,273 level and not allocable to any segment. Accordingly, depreciation,level. In addition, the specified amounts for interest expense and income tax expense are not included in the measure of segment profit or netloss reviewed by the chief operating decision maker and these specified amounts are not regularly provided to the chief operating decision maker. Therefore, the Company has not disclosed interest expense and income tax expense for each reportable segment.reported.reported to or reviewed by the chief operating decision maker and, therefore, the Company has not disclosed asset information for each reportable segment. The Company’s operations are located in the PRC. All revenues are derived from customers in the PRC. All of the Company’s operating assets are located in the PRC.F-49YEW BIO-PHARM GROUP, INC. AND SUBSIDIARIESNOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTSSeptember 30, 201215 —13 – COMMITMENTS AND CONTINGENCIESleaseLeaseYear Annual lease amount Payment due date March 2002 to February 2012 RMB 25,000 Before December 2012 March 2012 to February 2017 RMB 25,000 Before December 2017 March 2017 to March 2025 RMB 25,000 Before December 2025 three monthsyears ended September 30,December 31, 2013 and 2012, and 2011, rent expense related to the A’cheng Lease amounted $987$3,858 and $973,$3,784, respectively. For the nine months ended September 30, 2012 and 2011, rent expense related to the A’cheng Lease amounted $2,963 and $2,882, respectively.Twelve-month periods ending September 30: 2013 $ 3,947 2014 3,947 2015 3,947 2016 3,947 2017 3,947 Thereafter 29,438 Total $ 49,173 Years Ending December 31: 2014 $ - 2015 - 2016 - 2017 20,167 2018 - Thereafter 28,234 Total $ 48,401 1110 for related party operating lease commitments.The Company did not make sales under the Seedling Agreement for the three and nine months ended September 30, 2012. For the threeyears ended December 31, 2013 and nine months ended September 30, 2011,2012, the Company made sales of $0$1,281,928 and $311,158,$381,022, respectively, under the Seedling Agreement.Land Use Rights and Yew Forest PurchaseOn March 4, 2010, the Company entered into Land Use Right and Seedling Transfer Agreement with Heilongjiang Pingshan Yew Comprehensive Development Co., Ltd., pursuant to which the Company acquired land use rights with an area of 15,865 mu and all yew trees and seedlings situated on such land, for an aggregate cost of RMB 80,152,900 (approximately $12,500,000). The purchase price was divided into three installments, each installment representing a parcel of land and the Company paid final installment in full during the nine months ended September 30, 2012. As of September 30, 2012, there was no unpaid amount related to the Land Use Right and Seedling Transfer Agreement.F-50YEW BIO-PHARM GROUP, INC. AND SUBSIDIARIESNOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTSSeptember 30, 2012Land Use RightOn July 18, 2012, the Company entered into the Fuye Field Agreement with an individual in the PRC. Pursuant to the Fuye Field Agreement, HDS leases 117.5 mu (approximately 19.6 acres) located at Fuye Field, Beizhao Village, Hongxing Town, A’cheng District in Helongjiang Province, PRC. The term of the Fuye Field Agreement is 16 years, through March 2028. During the term of the Fuye Field Agreement, HDS has the right to develop the property for the production of yew trees. In addition, HDS acquired a building and more than 80,000 trees — which are not yew trees — located on the property.Payments to be made by the Company under the Fuye Field Agreement total RMB 15,002,300, payable as follows:RMB 6,300,000 upon receipt by HDS of all related supporting documents and materials on the ownership and land use right of the property;RMB 3,700,000 on December 25, 2012;RMB 5,002,300 on or before December 25, 2013.The Company paid RMB 9,330,000 (approximately $1.5 million) as of September 30, 2012 and the unpaid amount related to the Fuye Field Agreement was RMB 5,672,300 (approximately $0.9 million) as of September 30, 2012 which was included in accounts payable on the accompanying consolidated balance sheets. The Company presently expects to be able to make the additional payments required by the Fuye Field Agreement from cash-on-hand and net cash flow from operations.OptionsGenerally, the founders of a corporation in the United States receive shares of stock in consideration of the tangible and intangible assets contributed by them to the enterprise. Since the consideration for those shares is the transfer of assets, including intellectual property, and business know-how, sometimes referred to as “sweat equity”, no payment for such shares occurs.However, unfamiliar with the usual way that founders acquire equity interests in corporations in the United States, the HDS Shareholders actually purchased their HDS Shareholders’ Stock between March 2008 and September 2009, for cash, in a series of four different offerings of YBP Common Stock during that period, at prices ranging between $0.02 and $0.10 per share, for an aggregate purchase price of $890,501.As a result of the Contractual Arrangements of the Second Restructure, in which all of the profits of HDS will be paid under the terms of the Business Cooperation Agreement to JSJ, which is an indirect wholly-owned subsidiary of YBP, combined with the actual purchase by the HDS Shareholders of the HDS Shareholders’ Stock for cash, it could be viewed that Mr. Wang, Madame Qi and Mr. Han have, in effect, paid for their HDS Shareholders’ Stock twice.Accordingly, it is the intention of the Company to rectify this situation by issuing a stock purchase option (a “Founder’s Option”) to each of Mr. Wang, Madame Qi and Mr. Han in an amount equal to the number of shares of YBP Common Stock that each of them currently owns. The terms of each Founder’s Option will be identical to each other except for the name of the optionee and the number of shares of YBP Common Stock subject to each such Founder’s Option. Those terms include:The issuance of the Founder’s Option will be subject to pre-issuance approval by our shareholders as described below;Each Founder’s Option will be fully vested upon issuance;Each Founder’s Option may be exercised only upon the approval by the YBP shareholders of an amendment to YBP’s Articles of Incorporation increasing the number of shares of authorizedF-51YEW BIO-PHARM GROUP, INC. AND SUBSIDIARIESNOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTSSeptember 30, 2012Common Stock and the filing of an amendment of the Articles of Incorporation with the Secretary of State of Nevada;Each Founder’s Option will be exercisable for a period of five years;Each Founder’s Option will have a per share exercise price of equal to the fair market value of a share of YBP common stock on the date of grant; andEach Founder’s Option will have a cashless exercise feature, pursuant to which, at the optionee’s election, he or she may choose to deliver previously-owned shares of YBP common stock in payment of the exercise price or not pay the exercise price of the Founder’s Option and receive instead a reduced number of shares of YBP common stock reflecting the value of the number of shares of YBP common stock equal to the difference, if any, between the aggregate fair market value of the shares issuable upon exercise of the Founder’s Option and the exercise price of the Founder’s Option.The Company has scheduled a special meeting of shareholders (the “Meeting”) to be held on December 13, 2012 to approve the Founders’ Options, among other proposals to be brought before the Meeting. Shareholders of record as of the record date of October 18, 2012 will be entitled to vote at the Meeting.Assuming the options are approved by the shareholders of the Company, the options will be valued on the date of grant using the Black-Scholes option pricing model, using the expected and implied volatility from its peer companies’ volatilities as the Company itself does not have historical trading history, expected dividends yield of 0%, expected term of 5 years and risk-free interest rate on the date of grant. The value of the options granted will be immediately recognized as the Company’s compensation expenses upon the issuance of the options. The number of shares of YBP Common Stock subject to each Founder’s Option is as follows:Name of OptioneeNumber of SharesSubject to OptionZhioguo Wang20,103,475Guifang Qi2,488,737Xingming Han213,300The terms of the Founder’s Option have not been determined as a result of arm’s-length negotiations. The Board of Directors of YBP, which consists of the same persons who are the HDS Shareholders and the grantees of the Founder’s Option, may seek shareholder approval or ratification of the issuance of the Founder’s Options.To the extent that the Founder’s Options are exercised, assuming they are granted as described above, the number of shares to YBP Common Stock then held by each HDS Shareholder could as much double, which would be highly dilutive to the other existing YBP shareholders. The following chart shows the maximum effect of this dilution assuming full exercise of each Founder’s Option for cash:Shareholder Number
Shares
Presently
Held Percentage
of Issued
Shares
Presently
Held Number Shares
Held Assuming
Exercise of
Founder’s
Options Percentage of
Issued Shares
Following Exercise
of Founder’s
Options Zhiguo Wang 20,103,475 40.50 % 40,206,950 55.23 % Guifang Qi 2,488,737 4.98 % 4,977,474 6.84 % Xingming Han 213,300 0.43 % 426,600 0.58 % All HDS Shareholders as a group (3 persons) 22,805,512 45.61 % 45,611,024 62.65 % All other existing shareholders 27,194,488 54.39 % 27,194,488 37.35 % Total 50,000,000 100.00 % 72,805,512 100.00 % F-52YEW BIO-PHARM GROUP, INC. AND SUBSIDIARIESNOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTSSeptember 30, 201216 —14 – JOINT VENTURE AGREEMENT FOR PLANTING OF YEW TREESnine monthsyears ended September 30,December 31, 2013 and 2012, and 2011, the Company has not generated any revenues or activity on this land.17 —RECENT ACCOUNTING PRONOUCEMENTS15 - SUBSEQUENT EVENTS CONSOLIDATED BALANCE SHEETS March 31, December 31, 2014 2013 (Unaudited) ASSETS CURRENT ASSETS: Cash $ 99,504 $ 1,159,611 Accounts receivable 1,837,401 418,875 Accounts receivable - related party 339,044 377,821 Inventories 1,575,509 1,089,087 Due from related parties 85,159 34,031 Prepaid expenses and other assets 16,600 2,697 Total Current Assets 3,953,217 3,082,122 LONG-TERM ASSETS: Inventories, net of current portion 10,009,310 10,245,146 Property and equipment, net 976,176 1,033,078 Land use rights and yew forest assets, net 20,048,846 20,953,562 Total Long-term Assets 31,034,332 32,231,786 Total Assets $ 34,987,549 $ 35,313,908 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ - $ - Accrued expenses and other payables 151,138 136,713 Taxes payable 1,898 10,232 Due to related parties 3,400,914 4,850,637 Total Current Liabilities 3,553,950 4,997,582 Total Liabilities 3,553,950 4,997,582 COMMITMENTS AND CONTINGENCIES SHAREHOLDERS' EQUITY: Common Stock ($0.001 par value; 50,000,000 shares authorized; 50,000,000 and 50,000,000 issued and outstanding at March 31, 2014 and December 31, 2013, respectively) 50,000 50,000 Additional paid-in capital 8,058,165 8,058,165 Retained earnings 17,898,053 16,664,138 Statutory reserves 2,738,444 2,597,118 Accumulated other comprehensive income - foreign currency translation adjustment 2,688,937 2,946,905 Total Shareholders' Equity 31,433,599 30,316,326 Total Liabilities and Shareholders' Equity $ 34,987,549 $ 35,313,908 CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (UNAUDITED) For Three Months Ended March 31, 2014 2013 REVENUES: Revenues $ 1,613,718 $ 1,440,991 Revenues - related party 454,259 357,949 Total Revenues 2,067,977 1,798,940 COST OF REVENUES: Cost of revenues 414,616 495,659 Cost of revenues - related party 113,118 83,010 Total Cost of Revenues 527,734 578,669 GROSS PROFIT 1,540,243 1,220,271 OPERATING EXPENSES: Selling 1,760 5,614 Other general and administrative 165,636 271,961 Total Operating Expenses 167,396 277,575 Other Operating Income 2,142 - INCOME FROM OPERATIONS 1,374,989 942,696 OTHER INCOME (EXPENSES): Interest income 236 42 Other income (expense) 16 (417 ) Total Other Income (Expenses) 252 (375 ) NET INCOME $ 1,375,241 $ 942,321 COMPREHENSIVE INCOME: NET INCOME $ 1,375,241 $ 942,321 OTHER COMPREHENSIVE INCOME: Unrealized foreign currency translation gain (loss) (257,968 ) 154,652 COMPREHENSIVE INCOME $ 1,117,273 $ 1,096,973 NET INCOME PER COMMON SHARE: Basic $ 0.03 $ 0.02 Diluted $ 0.02 $ 0.02 WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: Basic 50,000,000 50,000,000 Diluted 68,118,682 50,000,000 CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) For the Three Months Ended March 31, 2014 March 31, 2013 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 1,375,241 $ 942,321 Depreciation 46,408 56,274 Amortization of land use rights and yew forest assets 128,546 89,244 Loss (gain) on disposal of property and equipment (2,142 ) 417 Changes in operating assets and liabilities: Accounts receivable (1,432,302 ) (760,760 ) Accounts receivable - related party 35,949 (272,041 ) Prepaid and other current assets (14,005 ) (302,193 ) Due from related party 7,045 6,859 Inventories 264,439 260,540 Accounts payable - 1,041 Accrued expenses and other payables 15,148 133,403 Due to related parties - 1,217 Taxes payable (8,320 ) (2,220 ) NET CASH PROVIDED BY OPERATING ACTIVITIES 416,007 154,102 CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from disposal of property and equipment 5,000 - Loan made to related parties (58,825 ) NET CASH USED IN INVESTING ACTIVITIES (53,825 ) - CASH FLOWS FROM FINANCING ACTIVITIES: Repayments for related parties advances (1,420,521 ) - NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (1,420,521 ) - EFFECT OF EXCHANGE RATE ON CASH (1,771 ) 3,454 NET INCREASE (DECREASE) IN CASH (1,060,110 ) 157,556 CASH - Beginning of period 1,159,611 386,821 CASH - End of period $ 99,504 $ 544,377 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid for: Interest $ - $ - Income taxes $ - $ - Non-cash investing and financing activities Reclassification of yew forest assets to Inventories $ 610,193 $ - July 2012, the Financial Accounting Standards Board (FASB) amended ASC 350,“Intangibles — Goodwillopinion of management, all adjustments (which include normal recurring adjustments) necessary to present a fair statement of the financial position as of March 31, 2014, and Other”. This amendmentthe results of operations and cash flows for the three-month period ended March 31, 2014 and 2013, have been made.Name Domicile and date of incorporation Registered capital Effective ownership Principal activities Heilongjiang Jinshangjing Bio-Technology Development Co., Limited (“JSJ”) USD $ 100,000 100% Holding company Yew Bio-Pharm Holdings Limited (“Yew Bio-Pharm (HK)”) HK$ 10,000 100% Holding company of JSJ Harbin Yew Science and Technology Development Co., Ltd. (“HDS”) RMB 45,000,000 Contractual arrangements Sales of yew tree components for use in pharmaceutical industry; sales of yew tree seedlings and potted yew trees; and the manufacture of yew tree wood handicrafts simplify how an entity tests indefinite-lived assets other than goodwill for impairmentensure compliance with applicable PRC laws and regulations (the “Second Restructure”), on November 5, 2010, JSJ entered into a series of contractual arrangements (the “Contractual Arrangements”) with HDS and/or Zhiguo Wang, his wife Guifang Qi and Xingming Han (collectively with Mr. Wang and Madame Qi, the “HDS Shareholders”), as described below:● ● ● ● providing entities with an optionrelevant state agencies, they constitute the valid and binding obligations of each of the parties to performeach such agreement.further impairment testingthe Company is necessary.the primary beneficiary of HDS which is identified as a VIE of the Company. A quality assessment begins with an understanding of the nature of the risks in the entity as well as the nature of the entity’s activities including terms of the contracts entered into by the entity, ownership interests issued by the entity and the parties involved in the design of the entity. The amended provisionsCompany’s assessment on the involvement with HDS reveals that the Company has the absolute power to direct the most significant activities that impact the economic performance of HDS. JSJ is obligated to absorb a majority of the risk of loss from HDS activities and entitles JSJ to receive a majority of HDS’s expected residual returns. In addition, HDS’s shareholders have pledged their equity interest in HDS to JSJ, irrevocably granted JSJ an exclusive option to purchase, to the extent permitted under PRC Law, all or part of the equity interests in HDS and agreed to entrust all the rights to exercise their voting power to the person(s) appointed by JSJ. Under the accounting guidance, the Company is deemed to be the primary beneficiary of HDS and the results of HDS are consolidated in the Company’s consolidated financial statements for financial reporting purposes. Accordingly, as a VIE, HDS’s sales are included in the Company’s total sales, its income from operations is consolidated with the Company’s and the Company’s net income includes all of HDS’s net income. The Company does not have any non-controlling interest and, accordingly, did not subtract any net income in calculating the net income attributable to the Company. Because of the Contractual Arrangements, YBP has a pecuniary interest in HDS that requires consolidation of HDS’s financial statements with those of the Company.Assets Cash $ 84,695 $ 1,146,546 Accounts receivable 1,837,401 418,875 Accounts receivable – related party 339,044 377,821 Due from related party 58,400 - Inventories (current and long-term) 11,584,819 11,334,233 Prepaid expenses and other assets 13,646 2,388 Prepaid expenses - related parties 26,353 33,213 Property and equipment, net 918,823 966,148 Land use rights and yew forest assets, net 20,048,846 20,953,562 Total assets of VIE $ 34,912,027 $ 35,232,786 Liabilities Accrued expenses and other payables $ 85,334 16,294 Taxes payable 716 9,924 Due to VIE holding companies 1,659,586 1,703,324 Due to related parties 3,380,613 4,804,661 Total liabilities of VIE $ 5,126,249 $ 6,534,203 March 31, 2014 December 31, 2013 Current portion Total Current portion Total Raw materials $ 127,619 $ 2,729,412 $ 2,857,031 $ 416,519 $ 2,608,829 $ 3,025,348 Work-in-process 17,561 - 17,561 17,446 - 17,446 Finished goods - handicrafts 100,417 699,562 799,979 197,842 653,785 851,627 Yew seedlings 1,329,912 6,580,336 7,910,248 457,280 6,982,532 7,439,812 $ 1,575,509 $ 10,009,310 $ 11,584,819 $ 1,089,087 $ 10,245,146 $ 11,334,233 2014 2013 U.S. federal income tax rate 34 % 34 % Foreign income not recognized in the U.S. (34 %) (34 %) PRC EIT rate 25 % 25 % PRC tax exemption and reduction (25 %) (25 %) Total provision for income taxes - - Three Months Ended March 31, 2014 2013 Tax exemption effect $ 350,294 $ 268,944 Tax reduction due to loss carry-forward 3,021 3,456 Loss not subject to income tax (832 ) (1,330 ) Basic net income per share effect $ (0.01 ) $ (0.01 ) Diluted net income per share effect $ (0.01 ) $ (0.01 ) effectiveuncertain due to the Company’s limited operating history and continuing losses for United States income tax purposes. Accordingly, the Company has provided a 100% valuation allowance on the deferred tax asset to reduce the asset to zero at March 31, 2014 and December 31, 2013. The valuation allowance at March 31, 2014 and December 31, 2013 was $1,119,660 and $1,107,865, respectively. The net change in the valuation allowance was an increase of $11,795 and $48,266 during the three months ended March 31, 2014 and 2013, respectively and management will review this valuation allowance periodically and make adjustments as necessary. U.S. tax benefit of net operating loss carry forward $ 1,119,660 $ 1,107,865 Valuation allowance (1,119,660 ) (1,107,865 ) Net deferred tax assets $ - $ - ● Each Founder’s Option is fully vested upon issuance; ● Each Founder’s Option is exercisable for a period of five years from the date of issuance; ● Each Founder’s Option is exercisable at $0.22 per share; and ● Each Founder’s Option has a cashless exercise feature, pursuant to which, at the optionee’s election, he or she may choose to deliver previously-owned shares of YBP common stock in payment of the exercise price or not pay the exercise price of the Founder’s Option and receive instead a reduced number of shares of YBP common stock reflecting the value of the number of shares of YBP common stock equal to the difference, if any, between the aggregate fair market value of the shares issuable upon exercise of the Founder’s Option and the exercise price of the Founder’s Option. Name of Optionee Zhiguo Wang 20,103,475 Guifang Qi 2,488,737 Xingming Han 213,300 Total 22,805,512 Stock Options Outstanding Stock Options Exercisable $ 0.22 22,805,512 3.70 $ 0.22 22,805,512 $ 0.22 2014 2013 Net income available to common stockholders for basic and diluted net income per share of common stock $ 1,375,241 $ 942,321 Weighted average common stock outstanding – basic 50,000,000 50,000,000 Effect of dilutive securities: Subscribed common shares issuable - - Stock options issued to directors/officers 18,118,682 - Weighted average common stock outstanding – diluted 68,118,682 50,000,000 Net income per common share – basic $ 0.03 $ 0.02 Net income per common share – diluted $ 0.02 $ 0.02 Stock options $ 22,805,512 $ 22,805,512 Total Customer 2014 2013 A * 44 % B (Yew Pharmaceutical, a related party) 22 % 20 % C * 18 % D * 11 % E 33 % * * Less than 10% Company Ownership Heilongjiang Zishan Technology Stock Co., Ltd. (“ZTC”) 18% owned by Heilongjiang Hongdoushan Ecology Forest Stock Co., Ltd., 39% owned by Zhiguo Wang, Chairman and Chief Executive Officer, 31% owned by Guifang Qi, the wife of Mr. Wang and Director of the Company, and 12% owned by third parties. Heilongjiang Yew Pharmaceuticals, Co., Ltd. (“Yew Pharmaceutical”) 95% owned by Heilongjiang Hongdoushan Ecology Forest Stock Co., Ltd., and 5% owned by Madame Qi. Shanghai Kairun Bio-Pharmaceutical Co., Ltd. (“Kairun”) 60% owned by Heilongjiang Zishan Technology Co., Ltd., 20% owned by Heilongjiang Hongdoushan Ecology Forest Stock Co., Ltd., and 20% owned by Mr. Wang. Heilongjiang Hongdoushan Ecology Forest Stock Co., Ltd. (“HEFS”) 63% owned by Mr. Wang, 34% owned by Madame Qi, and 3% owned by third parties. Name of related parties Zhiguo Wang $ 22,645 $ 47,726 ZTC 3,378,269 4,802,911 Total $ 3,400,914 $ 4,850,637 Three Months Ended March 31, 2014 2013 Revenues: TCM raw materials $ 1,043,980 $ 896,161 Yew trees 964,306 856,954 Handicrafts 59,691 45,825 2,067,977 1,798,940 Cost of revenues: TCM raw materials 232,340 199,960 Yew trees 249,331 360,687 Handicrafts 46,063 18,022 527,734 578,669 Depreciation and amortization: TCM raw materials 125,736 89,244 Yew trees 13,700 8,561 Handicrafts 7,819 7,752 Other 27,699 39,961 174,954 145,518 Net income (loss): TCM raw materials 796,227 696,201 Yew trees 694,336 496,267 Handicrafts 14,682 27,803 Other (130,004 ) (277,950 ) $ 1,375,241 $ 942,321 March 31, 2014 TCM raw materials Yew trees Handicrafts Other Total Identifiable long-lived assets, net $ 20,048,846 $ 616,598 $ 85,595 $ 273,983 $ 21,025,022 December 31, 2013 TCM raw materials Yew trees Handicrafts Other Total Identifiable long-lived assets, net $ 20,953,562 $ 632,583 $ 94,124 $ 306,371 $ 21,986,640 2014, and early2015 for public organizations with calendar year ends. Early adoption is permitted. This amendment impacts impairment testing steps only, and thereforeThe Company does not expect the adoption will not have an impact on the Company’s consolidated financial position, results of operations or cash flows.In August 2012, the FASB issued Accounting Standards Update (“ASU”) 2012-03, “Technical Amendments and Corrections to SEC Sections: Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin (SAB) No. 114, Technical Amendments Pursuant to SEC Release No. 33-9250, and Corrections Related to FASB Accounting Standards Update 2010-22 (SEC Update)” in Accounting Standards Update No. 2012-03. This update amends various SEC paragraphs pursuant to the issuance of SAB No. 114. The adoption of ASU 2012-03 is not expected to have a materialsignificant impact on its consolidated financial position or results of operations of the Company.statements.In October 2012, the FASB issued ASU 2012-04, “Technical Corrections and Improvements” in Accounting Standards Update No. 2012-04 (“ASU 2012-04”). The amendments in this update cover a wide range of topics in the Accounting Standards Codification. These amendments include technical corrections and improvements to the Accounting Standards Codification and conforming amendments related to fair value measurements. The amendments in this update will be effective for fiscal periods beginning after December 15, 2012. The adoption of ASU 2012-04 is not expected to have a material impact on financial position or results of operations of the Company.__________, 2013, 2014Securities and Exchange Commission registration fee $562.55Federal Taxes $0State Taxes and Fees $0Transfer Agent Fees $20,800.00Accounting fees and expenses $2,000.00Legal fees and expense $25,000.00Blue Sky fees and expenses $4,900.00Miscellaneous $0Securities and Exchange Commission registration fee $ 772.80 Transfer Agent Fees $ 2,000.00 Accounting fees and expenses $ 12,000.00 Legal fees and expense $ 8,000.00 Blue Sky fees and expenses $ 4,900.00 Miscellaneous $ 1,000.00 Total $ 28,672.80 Total $53,262.55All amounts are estimates other than the SEC’s registration fee. We are paying all expenses of the offering listed above. No portion of these expenses will be borne by the selling shareholders. The selling shareholders, however, will pay any other expenses incurred in selling their common stock, including any brokerage commissions or costs of sale.any breach of the director’s duty of loyalty to the corporation or its stockholders;· · · · any transaction from which the director derived an improper personal benefit. payments of unlawful dividends or unlawful stock repurchases or redemptions; orany transaction from which the director derived an improper personal benefit.II-1
would have the authority to indemnify such person against such liabilities or expenses. The Company does not currently maintain such insurance.Exhibit
No.Description3.1(1) Description 3.1(1) Articles of Incorporation of Yew Bio-Pharm Group, Inc. 3.2(1) Certificate of Amendment of Articles of Incorporation of Yew Bio-Pharm Group, Inc. dated May 19, 2010 3.3**3.3(6) Certificate of Amendment of Articles of Incorporation of Yew Bio-Pharm Group, Inc. dated December 18, 2012 3.4(1) Bylaws of Yew Bio-Pharm Group, Inc. 4.1(1) Equity Transfer Agreement dated February 23, 2010 between Heilongjiang Jinshangjing Bio-Technology Development Co., Limited and Zhiguo Wang 4.2(1) Equity Transfer Agreement dated February 23, 2010 between Heilongjiang Jinshangjing Bio-Technology Development Co., Limited and Guifang Qi II-2ExhibitNo.Description4.3(1) Equity Transfer Agreement dated February 23, 2010 between Heilongjiang Jinshangjing Bio-Technology Development Co., Limited and Xingming Han 4.4(1) Equity Transfer Agreement dated February 23, 2010 between Heilongjiang Jinshangjing Bio-Technology Development Co., Limited and Heilongjiang Ecology Stock Co. Ltd. 4.5(1) Equity Transfer Agreement dated February 23, 2010 between Heilongjiang Jinshangjing Bio-Technology Development Co., Limited and Yingjun Jiang 4.6(1) Supplemental Agreement to Equity Transfer Agreement dated February 23, 2010 among Mr. Wang, Madame Qi, Mr. Han, Heilongjiang Ecology Forest Co. Ltd. and Yingjun Jiang 4.7(1) Debtor’s and Creditors’ Rights Transfer Agreement dated May 10, 2010 among Mr. Wang, Heilongjiang Ecology Stock Co. Ltd., Yingjun Jiang and Heilongjiang Jinshangjing Bio-Technology Development Co., Limited 4.8(1) Equity Transfer Agreement dated October 28, 2010 between Heilongjiang Jinshangjing Bio-Technology Development Co., Limited and Zhiguo Wang 4.9(1) Equity Transfer Agreement dated October 28, 2010 between Heilongjiang Jinshangjing Bio-Technology Development Co., Limited and Guifang Qi 4.10(1) Equity Transfer Agreement dated October 28, 2010 between Heilongjiang Jinshangjing Bio- Technology Development Co., Limited and Xingming Han 4.11(1) Supplemental Agreement to Equity Transfer Agreement dated February 16, 2011 among Heilongjiang Jinshangjing Bio-Technology Development Co., Limited, Zhiguo Wang, Guifang Qi and Xingming Han 4.12(1) Exclusive Business Cooperation Agreement dated November 5, 2010 between Heilongjiang Jinshangjing Bio-Technology Development Co., Limited and Harbin Hongdoushan Science and Technology Development Co., Ltd. 4.13(1) Exclusive Option Agreement dated November 5, 2010 among Heilongjiang Jinshangjing Bio-Technology Development Co., Limited, Harbin Hongdoushan Science and Technology Development Co., Ltd. and Zhiguo Wang 4.14(1) Exclusive Option Agreement dated November 5, 2010 among Heilongjiang Jinshangjing Bio-Technology Development Co., Limited, Harbin Hongdoushan Science and Technology Development Co., Ltd. and Guifang Qi 4.15(1) Exclusive Option Agreement dated November 5, 2010 among Heilongjiang Jinshangjing Bio-Technology Development Co., Limited, Harbin Hongdoushan Science and Technology Development Co., Ltd. and Xingming Han 4.16(1) Equity Interest Pledge Agreement dated November 5, 2010 among Heilongjiang Jinshangjing Bio-Technology Development Co., Limited, Harbin Hongdoushan Science and Technology Development Co., Ltd. and Zhiguo Wang 4.17(1) Equity Interest Pledge Agreement dated November 5, 2010 among Heilongjiang Jinshangjing Bio-Technology Development Co., Limited, Harbin Hongdoushan Science and Technology Development Co., Ltd. and Guifang Qi 4.18(1) Equity Interest Pledge Agreement dated November 5, 2010 among Heilongjiang Jinshangjing Bio-Technology Development Co., Limited, Harbin Hongdoushan Science and Technology Development Co., Ltd. and Xingming Han 4.19(1) Power of Attorney dated November 5, 2010 - Zhiguo Wang Exhibit No. Description 4.20(1) Power of Attorney dated November 5, 2010 — Zhiguo Wang- Guifang Qi4.20(1)4.21(1) Power of Attorney dated November 5, 2010 — Guifang Qi4.21(1)Power of Attorney dated November 5, 2010 —- Xingming Han5.1* * Opinion of SEC Law FirmBarnett & LinnII-3ExhibitNo.Description10.1(1) Cooperation and Development Contract of Yew (taxus) Yinpian dated January 9, 2010 between Harbin Yew Science and Technology Development Co., Ltd. and Heilongjiang Yew Pharmaceutical Co., Ltd. 10.2(1) Technology Development Services Agreement dated January 1, 2010 between Harbin Yew Science and Technology Development Co., Ltd. and Shanghai Kairun Bio-Pharmaceutical Co., Ltd. 10.3(1) Technology Development Services Supplementary Agreement dated February 2, 2012 between Harbin Yew Science and Technology Development Co., Ltd. and Shanghai Kairun Bio-Pharmaceutical Co., Ltd. 10.4+(1) Labor Contract effective May 9, 2009 between Harbin Yew Science and Technology Development Co., Ltd. and Zhiguo Wang 10.5+(1) Labor Contract effective April 9, 2009 between Harbin Yew Science and Technology Development Co., Ltd. and Xingming Han 10.6+(1) Labor Contract effective April 9, 2009 between Harbin Yew Science and Technology Development Co., Ltd. and Guifang Qi 10.7+(1) Engagement Agreement dated August 24, 2011 between Yew Bio-Pharm Group, Inc. and CFO On Call Asia, Inc. 10.8(1) Consulting Agreement dated November 1, 2010 between Yew Bio-Pharm Group, Inc. and Richard Lo 10.9(1) Joint-Stock Construct Rare Plant Northeast Yew Contract dated March 21, 2004 between Harbin Yew Science and Technology Development Co., Ltd. and Wuchang City Forestry Bureau 10.10(1) Waste Forest Land Transfer Agreement dated March 22, 2004 between Harbin Yew Science and Technology Development Co., Ltd. and Chengshan Niu 10.11(1) Barren Hills and Uncultivated Land Use Right Transfer Agreement dated April 4, 2004 between Harbin Yew Science and Technology Development Co., Ltd. and Pingshan Town Government 10.12(1) Contract for Seedling Land dated March 25, 2005 between Harbin Yew Science and Technology Development Co., Ltd. and Heilongjiang Yew Technology Stock Co. 10.13(1) Contract for the Transfer of Forest Land Use Right and of the Ownership of Timbers dated January 18, 2008 among Harbin Yew Science and Technology Development Co., Ltd., Shukun Jiang and Shubao Jiang 10.14(1) Yew Planting Seedlings Transfer Contract dated March 4, 2010 between Harbin Yew Science and Technology Development Co., Ltd. and Heilongjiang Pingshan Yew Comprehensive Development Co., Ltd. 10.15(1) Lease Contract dated March 20, 2002 between Harbin Yew Science and Development Technology Co., Ltd. and Heilongjiang Pingshan Yew Comprehensive Development Co., Ltd. 10.16(1) Lease Contract dated December 3, 2008 between Harbin Yew Science and Technology Development Co., Ltd. and Guifang Qi 10.17(1) Lease Contract dated November 15, 2011 between Harbin Yew Science and Technology Development Co., Ltd. and Guifang Qi 10.18(1) Lease Contract dated January 1, 2010 between Harbin Yew Science and Technology Development Co., Ltd. and Zhiguo Wang 10.19+(1) Labor Contract effective April 10, 2012 between Harbin Yew Science and Technology Development Co., Ltd. and Xingming Han 10.20+(1) Labor Contract effective April 10, 2012 between Harbin Yew Science and Technology Development Co., Ltd. and Guifang Qi 10.21+(2) Labor Contract effective May 10, 2012 between Harbin Yew Science and Technology Development Co., Ltd. and Zhiguo Wang II-4ExhibitNo.Description10.22(3) Forest Transfer Contract for Fuye Field, Beizhao Village, Hongxing Town, Acheng District 10.23(4) Founder’s Option dated December 13, 2012 issued to Zhiguo Wang 10.24(4) Founder’s Option dated December 13, 2012 issued to Guifang Qi 10.25(4) Founder’s Option dated December 13, 2012 issued to Xingming Han 10.26(5) Yew Bio-Pharm Group, Inc. 2012 Equity Incentive Plan 21**10.27(7) Lease Contract dated July 1, 2012 between Heilongjiang JSJ Bio-Technology Development Co., Ltd. and Zhiguo Wang 10.28(8) ListForest and Land Use Right Acquisition Contract dated November 15, 2013 between Harbin Yew Science and Technology Development Co., Ltd. and Heilongjiang Zishan Keji Gufen Limited Company.21.1* Subsidiaries of subsidiariesthe registrant23.1* Consent of Malone Bailey, LLP 23.2* Consent of Albert WongBarnett & Co.Linn23.2**Consent of SEC Law Firm24**24.1* Power of Attorney (included on signature page)after signatures hereto)+Management compensatory agreement* Filed herewithherewith.** Previously filed(1) Incorporated by reference from the Company’s registration statement on Form 10, filed with the SEC on May 8, 2012. (2) Incorporated by reference from Amendment No. 1 to the Company’s registration statement on Form 10/A, filed with the SEC on June 29, 2012. (3) Incorporated by reference from the Company’s Current Report on Form 8-K, filed with the SEC on July 24, 2012. (4) Incorporated by reference from the Company’s Current Report on Form 8-K, filed with the SEC on December 19, 2012. (5) Incorporated by reference from the Company’s Proxy Statement, filed with the SEC on October 24, 2012. (6) Incorporated by reference from Amendment No.1 to the Company’s Registration Statement on Form S-1, filed with the SEC on January 23, 2013. (7) Incorporated by reference from the Company’s Form 10-K filed with the SEC on April 11, 2013 (8) Incorporated by reference from the Company’s Current Report on Form 8-K filed with the SEC on December 6, 2013. (1)To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:i.To include any prospectus required by section 10(a)(3) of the Securities Act of 1933;ii.To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement.iii.To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;(2)That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.II-5Tablei. To include any prospectus required by section 10(a)(3) of Contentsthe Securities Act of 1933;(3)To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.(4)Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.(5)Each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.(6)That, for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities: The undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:i.Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;ii.Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;iii.The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; andiv.Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.II-6Tableii. To reflect in the prospectus any facts or events arising after the effective date of Contentsthe registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement.March 14, 2013.May 30, 2014.Yew Bio-Pharm Group, Inc. By: Yew Bio-Pharm Group, Inc./s/ Zhiguo Wang By:/s/ Zhiguo Wang By: /s/ Zhiguo Wang Chief Executive Officer(Principal Executive Officer) By:/s/ Adam WassermanZhiguo WangAdam WassermanSave the World Air,Yew Bio-Pharm Group, Inc., whose signatures appear below, hereby constitute and appoint Zhiguo Wang and Xingming Han, and each of them, their true and lawful attorneys and agents, each with power to act alone, to sign, execute and cause to be filed on behalf of the undersigned any amendment or amendments, including post-effective amendments, to this registration statement of Yew Bio-Pharm Group, Inc. on Form S-1. Each of the undersigned does hereby ratify and confirm all that said attorneys and agents shall do or cause to be done by virtue hereof.Name Title Date Zhiguo Wang Chief Executive Officer, President, SecretaryZhiguo Wang March 14, 2013 /s/ Adam WassermanAdam Wasserman Chief Financial Officer(Principal Accounting Officer)/s/ Guifang Qi March 14, 2013Secretary-Yew Bio-Pharm Group, Inc.Guifang Qi and Director /s/ Guifang QiGuifang Qi Treasurer — Yew Bio-Pharm Group, Inc.and DirectorMarch 14, 2013Xingming Han General Manager — Harbin Yew Science Xingming Han and Technology Development Co., Ltd. March 14, 2013II-7ExhibitNo.Description3.1(1) Exhibit No. Description 3.1(1) Articles of Incorporation of Yew Bio-Pharm Group, Inc. 3.2(1) Certificate of Amendment of Articles of Incorporation of Yew Bio-Pharm Group, Inc. dated May 19, 2010 3.3**3.3(6) Certificate of Amendment of Articles of Incorporation of Yew Bio-Pharm Group, Inc. dated December 18, 2012 3.4(1) Bylaws of Yew Bio-Pharm Group, Inc. 4.1(1) Equity Transfer Agreement dated February 23, 2010 between Heilongjiang Jinshangjing Bio-Technology Development Co., Limited and Zhiguo Wang 4.2(1) Equity Transfer Agreement dated February 23, 2010 between Heilongjiang Jinshangjing Bio-Technology Development Co., Limited and Guifang Qi 4.3(1) Equity Transfer Agreement dated February 23, 2010 between Heilongjiang Jinshangjing Bio-Technology Development Co., Limited and Xingming Han 4.4(1) Equity Transfer Agreement dated February 23, 2010 between Heilongjiang Jinshangjing Bio-Technology Development Co., Limited and Heilongjiang Ecology Stock Co. Ltd. 4.5(1) Equity Transfer Agreement dated February 23, 2010 between Heilongjiang Jinshangjing Bio-Technology Development Co., Limited and Yingjun Jiang 4.6(1) Supplemental Agreement to Equity Transfer Agreement dated February 23, 2010 among Mr. Wang, Madame Qi, Mr. Han, Heilongjiang Ecology Forest Co. Ltd. and Yingjun Jiang 4.7(1) Debtor’s and Creditors’ Rights Transfer Agreement dated May 10, 2010 among Mr. Wang, Heilongjiang Ecology Stock Co. Ltd., Yingjun Jiang and Heilongjiang Jinshangjing Bio-Technology Development Co., Limited 4.8(1) Equity Transfer Agreement dated October 28, 2010 between Heilongjiang Jinshangjing Bio-Technology Development Co., Limited and Zhiguo Wang 4.9(1) Equity Transfer Agreement dated October 28, 2010 between Heilongjiang Jinshangjing Bio-Technology Development Co., Limited and Guifang Qi 4.10(1) Equity Transfer Agreement dated October 28, 2010 between Heilongjiang Jinshangjing Bio-Technology Bio- Technology Development Co., Limited and Xingming Han4.11(1) Supplemental Agreement to Equity Transfer Agreement dated February 16, 2011 among Heilongjiang Jinshangjing Bio-Technology Development Co., Limited, Zhiguo Wang, Guifang Qi and Xingming Han 4.12(1) Exclusive Business Cooperation Agreement dated November 5, 2010 between Heilongjiang Jinshangjing Bio-Technology Development Co., Limited and Harbin Hongdoushan Science and Technology Development Co., Ltd. 4.13(1) Exclusive Option Agreement dated November 5, 2010 among Heilongjiang Jinshangjing Bio-Technology Development Co., Limited, Harbin Hongdoushan Science and Technology Development Co., Ltd. and Zhiguo Wang 4.14(1) Exclusive Option Agreement dated November 5, 2010 among Heilongjiang Jinshangjing Bio-Technology Development Co., Limited, Harbin Hongdoushan Science and Technology Development Co., Ltd. and Guifang Qi 4.15(1) Exclusive Option Agreement dated November 5, 2010 among Heilongjiang Jinshangjing Bio-Technology Development Co., Limited, Harbin Hongdoushan Science and Technology Development Co., Ltd. and Xingming Han 4.16(1) Equity Interest Pledge Agreement dated November 5, 2010 among Heilongjiang Jinshangjing Bio-Technology Development Co., Limited, Harbin Hongdoushan Science and Technology Development Co., Ltd. and Zhiguo Wang II-8ExhibitNo.Description4.17(1) Equity Interest Pledge Agreement dated November 5, 2010 among Heilongjiang Jinshangjing Bio-Technology Development Co., Limited, Harbin Hongdoushan Science and Technology Development Co., Ltd. and Guifang Qi 4.18(1)Equity Interest Pledge Agreement dated November 5, 2010 among Heilongjiang Jinshangjing Bio-Technology Development Co., Limited, Harbin Hongdoushan Science and Technology Development Co., Ltd. and Xingming Han4.19(1) Power of Attorney dated November 5, 2010 —- Zhiguo Wang4.20(1)Exhibit No. Description 4.20(1) Power of Attorney dated November 5, 2010 —- Guifang Qi4.21(1) Power of Attorney dated November 5, 2010 —- Xingming Han5.1* * Opinion of SEC Law FirmBarnett & Linn10.1(1) Cooperation and Development Contract of Yew (taxus) Yinpian dated January 9, 2010 between Harbin Yew Science and Technology Development Co., Ltd. and Heilongjiang Yew Pharmaceutical Co., Ltd. 10.2(1) Technology Development Services Agreement dated January 1, 2010 between Harbin Yew Science and Technology Development Co., Ltd. and Shanghai Kairun Bio-Pharmaceutical Co., Ltd. 10.3(1) Technology Development Services Supplementary Agreement dated February 2, 2012 between Harbin Yew Science and Technology Development Co., Ltd. and Shanghai Kairun Bio-Pharmaceutical Co., Ltd. 10.4+(1) Labor Contract effective May 9, 2009 between Harbin Yew Science and Technology Development Co., Ltd. and Zhiguo Wang 10.5+(1) Labor Contract effective April 9, 2009 between Harbin Yew Science and Technology Development Co., Ltd. and Xingming Han 10.6+(1) Labor Contract effective April 9, 2009 between Harbin Yew Science and Technology Development Co., Ltd. and Guifang Qi 10.7+(1) Engagement Agreement dated August 24, 2011 between Yew Bio-Pharm Group, Inc. and CFO On Call Asia, Inc. 10.8(1) Consulting Agreement dated November 1, 2010 between Yew Bio-Pharm Group, Inc. and Richard Lo 10.9(1) Joint-Stock Construct Rare Plant Northeast Yew Contract dated March 21, 2004 between Harbin Yew Science and Technology Development Co., Ltd. and Wuchang City Forestry Bureau 10.10(1) Waste Forest Land Transfer Agreement dated March 22, 2004 between Harbin Yew Science and Technology Development Co., Ltd. and Chengshan Niu 10.11(1) Barren Hills and Uncultivated Land Use Right Transfer Agreement dated April 4, 2004 between Harbin Yew Science and Technology Development Co., Ltd. and Pingshan Town Government 10.12(1) Contract for Seedling Land dated March 25, 2005 between Harbin Yew Science and Technology Development Co., Ltd. and Heilongjiang Yew Technology Stock Co. 10.13(1) Contract for the Transfer of Forest Land Use Right and of the Ownership of Timbers dated January 18, 2008 among Harbin Yew Science and Technology Development Co., Ltd., Shukun Jiang and Shubao Jiang 10.14(1) Yew Planting Seedlings Transfer Contract dated March 4, 2010 between Harbin Yew Science and Technology Development Co., Ltd. and Heilongjiang Pingshan Yew Comprehensive Development Co., Ltd. 10.15(1) Lease Contract dated March 20, 2002 between Harbin Yew Science and Development Technology Co., Ltd. and Heilongjiang Pingshan Yew Comprehensive Development Co., Ltd. 10.16(1) Lease Contract dated December 3, 2008 between Harbin Yew Science and Technology Development Co., Ltd. and Guifang Qi II-9ExhibitNo.Description10.17(1) Lease Contract dated November 15, 2011 between Harbin Yew Science and Technology Development Co., Ltd. and Guifang Qi 10.18(1) Lease Contract dated January 1, 2010 between Harbin Yew Science and Technology Development Co., Ltd. and Zhiguo Wang 10.19+(1) Labor Contract effective April 10, 2012 between Harbin Yew Science and Technology Development Co., Ltd. and Xingming Han 10.20+(1) Labor Contract effective April 10, 2012 between Harbin Yew Science and Technology Development Co., Ltd. and Guifang Qi 10.21+(2) Labor Contract effective May 10, 2012 between Harbin Yew Science and Technology Development Co., Ltd. and Zhiguo Wang 10.22(3) Forest Transfer Contract for Fuye Field, Beizhao Village, Hongxing Town, Acheng District 10.23(4) Founder’s Option dated December 13, 2012 issued to Zhiguo Wang 10.24(4) Founder’s Option dated December 13, 2012 issued to Guifang Qi 10.25(4) Founder’s Option dated December 13, 2012 issued to Xingming Han 10.26(5) Yew Bio-Pharm Group, Inc. 2012 Equity Incentive Plan 21**10.27(7) Lease Contract dated July 1, 2012 between Heilongjiang JSJ Bio-Technology Development Co., Ltd. and Zhiguo Wang 10.28(8) ListForest and Land Use Right Acquisition Contract dated November 15, 2013 between Harbin Yew Science and Technology Development Co., Ltd. and Heilongjiang Zishan Keji Gufen Limited Company.21.1* Subsidiaries of subsidiariesthe registrant23.1* Consent of Malone Bailey, LLP Consent of Albert WongBarnett & Co.Linn23.2**Consent of SEC Law Firm24**24.1* Power of Attorney (included on signature page)after signatures hereto)+Management compensatory agreement* Filed herewithherewith.** Previously filed(1) Incorporated by reference from the Company’s registration statement on Form 10, filed with the SEC on May 8, 2012. (2) Incorporated by reference from Amendment No. 1 to the Company’s registration statement on Form 10/A, filed with the SEC on June 29, 2012. (3) Incorporated by reference from the Company’s Current Report on Form 8-K, filed with the SEC on July 24, 2012. (4) Incorporated by reference from the Company’s Current Report on Form 8-K, filed with the SEC on December 19, 2012. (5) Incorporated by reference from the Company’s Proxy Statement, filed with the SEC on October 24, 2012. (6) Incorporated by reference from Amendment No.1 to the Company’s Registration Statement on Form S-1, filed with the SEC on January 23, 2013. (7) Incorporated by reference from the Company’s Form 10-K filed with the SEC on April 11, 2013 (8) Incorporated by reference from the Company’s Current Report on Form 8-K filed with the SEC on December 6, 2013. II-10