NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the Years Ended December 31, 2020 and 2019
NOTE
1 - ORGANIZATION AND PRINCIPAL ACTIVITIES
Yew
Bio-Pharm Group, Inc. (individually “YBP” and collectively with its subsidiaries and affiliates, the “Company”)
was incorporated under the law of the State of Nevada on November 13, 2007. On October 29, 2009, YBP established a wholly-owned
subsidiary, Heilongjiang Jinshangjing Bio-Technology Development Co., Limited (“JSJ”), a wholly-owned foreign enterprise
(“WOFE”) incorporated in the People’s Republic of China (“PRC”), as part of a restructure of the
Company (the “First Restructure”).
Harbin
Yew Science and Technology Development Co., Ltd. (“HDS”) is a limited liability company incorporated under the laws
of the PRC on August 22, 1996. Until February 23, 2010, HDS was primarily owned by Zhiguo Wang (“Mr. Wang”) (62.81%)
and his wife Guifang Qi directly and indirectly (91.96%) and two PRC individuals (total 9.04%) (collectively as the “Original
Shareholders”). Mr. Wang was the President and a director of the Company. Madame Qi is the wife of Mr. Wang and was an officer
and director of the Company.
Pursuant
to the First Restructure, on February 23, 2010, the Company, through JSJ, entered into an Equity Transfer Agreement (collectively,
the “First Transfer Agreements”) with each of the Original Shareholders. Pursuant to the First Transfer Agreements,
the terms of which are substantially identical to each other, the Original Shareholders transferred all of their respective ownership
in HDS to JSJ for an aggregate RMB45,000,000, which 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 sufficient working
capital to pay the purchase amount and, accordingly, the Company recorded this amount as a liability. 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
RMB45,000,000, 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.
Upon
execution of the First Transfer Agreement, Mr. Wang, Madame Qi and Mr. Han (collectively, the “HDS Shareholders”)
owned approximately 41.5% of YBP’s common stock (the “Common Stock”) and no other individual shareholder owned
more than 2.5% of YBP’s Common Stock. Before, during and after the First Restructure, the HDS Shareholders served as the
sole directors and principal executive officers of the Company and are responsible for all decisions and operations of the Company
and HDS, and control the assets of the Company and HDS.
On
May 10, 2010, JSJ, Mr. Wang entered into a Debtor’s and Creditors’ Rights Agreement (the “Creditors’ Agreement”)
with the rest Original Shareholders except Madame Qi, who agree to assign their rights, including the right to be paid for the
HDS shares transferred to JSJ, under their respective First Transfer Agreements, to Mr. Wang, and Mr. Wang assumed the obligations
of Mr. Jiang and HEFS under their respective First Transfer Agreements. Before, during and after the First Restructure, the HDS
Shareholders served as the sole directors and principal executive officers of the Company.
In
October 2010, the Company determined, in consultation with its professional advisors, that the First Restructure did not meet
certain technical PRC legal requirements and that the Company would need to be further reorganized (the “Second Restructure”).
Accordingly, on October 28, 2010, JSJ and each of the HDS Shareholders entered into new Equity Transfer Agreement (collectively,
the “Second Transfer Agreements”), the terms of which are substantially identical to each other, pursuant to which
100% of the common stock of HDS was transferred by JSJ back to the HDS Shareholders for aggregate consideration of RMB45,000,000.
Since the consideration of RMB45,000,000 due to the HDS Shareholders in the First Restructure had not yet been paid, pursuant
to a Supplemental Agreement to the Second Equity Transfer Agreements dated February 16, 2011, the aggregate RMB45,000,000 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.
As
discussed above, Mr. Jiang and HEFS had assigned to Mr. Wang their respective rights and obligations vis-a-vis JSJ resulting from
the First Restructure, pursuant to the First Supplemental Agreement and the Creditors’ Agreement, since as of such time
Mr. Jiang and HEFS had not yet been paid for the transfer of their interests in HDS to JSJ in the First Restructure in the amount
of 3.22% and 10.62% of HDS’s equity interest, respectively. Therefore, in the Second Restructure, pursuant to the Second
Transfer Agreements, JSJ transferred to Mr. Wang not only his previous shareholdings in HDS before the First Restructure (representing
62.81% of HDS’s total equity), but also an additional 13.84% of the equity in HDS as a result of Mr. Wang’s being
assigned Mr. Jiang’s 3.22% equity interest in HDS and HEFS’s 10.62% equity interest in HDS.
After
the foregoing transactions were completed, the HDS Shareholders then owned 100% of the shares of HDS in the following percentages:
Mr. Wang
|
|
|
76.65
|
%
|
Madame Qi
|
|
|
18.53
|
%
|
Mr. Han
|
|
|
4.82
|
%
|
Pursuant
to a restructuring plan intended to ensure 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:
●
|
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 RMB 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 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.
|
|
|
●
|
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 RMB10. 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 RMB500,000, 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.
|
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).
The
Company believes that HDS is considered a 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.
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, 2020, 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.
On
November 4, 2014, HDS established a new subsidiary, Harbin Yew Food Co. Ltd. (“HYF”), to develop and cultivate wood
ear mushroom. The Company plans to operate three production lines, including wood ear mushroom polysaccharide, powder, tea and
other packaged wood ear mushroom products. The move marks the Company’s entrance into the organic food and functional beverage
market. HYF had limited operation activities for the years ended December 31, 2020 and 2019.
On
June 8, 2016, YBP established a new subsidiary, MC Commerce Holding Inc. (“MC”), in the State of California to sell
yew oil candles and yew oil soaps in American market. MC had limited operation activities for the years ended December 31, 2020
and 2019. On July 26, 2016, YBP transferred its 49% equity interest in MC to HDS.
The
Company is principally engaged in (1) processing and selling yew raw materials used in the manufacture of traditional Chinese
medicine (“TCM”); (2) growing and selling yew tree seedlings and mature trees, including potted miniature yew trees;
(3) manufacturing and selling furniture and handicrafts made of yew tree timber; and (4) selling agricultural products and export
products (Yew candles, pine needle extracts, complex taxus cuspidate extract, composite northeast yew extract, and yew essential
oil soap). The Company’s operating VIE and its subsidiary are located in Harbin, Heilongjiang Province, China.
YBP
has no direct or indirect legal or equity ownership interest in HDS. However, through the Contractual Arrangements, the stockholders
of HDS have assigned all their rights as stockholders, 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, 2020 and 2019, 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 and VIE’s subsidiary are as follows:
|
|
December
31,
2020
|
|
|
December
31,
2019
|
|
Assets
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
549,771
|
|
|
$
|
688,863
|
|
Accounts receivable
|
|
|
250,000
|
|
|
|
7,692,600
|
|
Accounts receivable - related parties,
net
|
|
|
9,045,669
|
|
|
|
193,000
|
|
Inventories (current and noncurrent),
net
|
|
|
416,304
|
|
|
|
2,991,237
|
|
Prepaid expenses and other assets
|
|
|
75,866
|
|
|
|
37,202
|
|
Prepaid expenses - related parties
|
|
|
-
|
|
|
|
5,829
|
|
Advance to suppliers
|
|
|
15,415
|
|
|
|
-
|
|
Advance to suppliers - related parties
|
|
|
4,854,273
|
|
|
|
-
|
|
Property and equipment, net
|
|
|
483,139
|
|
|
|
466,025
|
|
Long-term investment in an affiliate
|
|
|
4,172,550
|
|
|
|
3,009,527
|
|
Land use rights and yew forest assets,
net
|
|
|
41,952,483
|
|
|
|
40,048,696
|
|
Operating lease right of use
|
|
|
236,833
|
|
|
|
259,331
|
|
VAT input credit
|
|
|
56,637
|
|
|
|
349,096
|
|
Total assets of VIE and its subsidiary
|
|
$
|
62,108,940
|
|
|
$
|
55,741,406
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Accrued expenses and other payables
|
|
$
|
271,312
|
|
|
$
|
131,420
|
|
Accounts payable for acquisition of
yew forests and others
|
|
|
389,028
|
|
|
|
796,346
|
|
Accounts payable for acquisition of
yew forests and others - related parties
|
|
|
-
|
|
|
|
16,629
|
|
Advance from customer
|
|
|
985
|
|
|
|
50,071
|
|
Short-term borrowings
|
|
|
8,899,979
|
|
|
|
8,541,517
|
|
Operating lease liability, current and
noncurrent
|
|
|
259,686
|
|
|
|
262,763
|
|
Long-term deferred income
|
|
|
1,172,928
|
|
|
|
892,375
|
|
Due to related parties and VIE holding
companies
|
|
|
97,461
|
|
|
|
614,265
|
|
Total liabilities
of VIE and its subsidiary
|
|
$
|
11,091,379
|
|
|
$
|
11,305,386
|
|
Although
the structure the Company has adopted is consistent with longstanding industry practice, and is commonly adopted by comparable
companies in China, the PRC government may not agree that these arrangements comply with PRC licensing, registration or other
regulatory requirements, with existing policies or with requirements or policies that may be adopted in the future. There are
uncertainties regarding the interpretation and application of PRC laws and regulations including those that govern the Company’s
contractual arrangements, which could limit the Company’s ability to enforce these contractual arrangements. If the Company
or any of its variable interest entities are found to be in violation of any existing or future PRC laws, rules or regulations,
or fail to obtain or maintain any of the required permits or approvals, the relevant PRC regulatory authorities would have broad
discretion to take action in dealing with such violations or failures, including levying fines, revoking business and other licenses
of the Company’s variable interest entities, requiring the Company to discontinue or restrict its operations, restricting
its right to collect revenue, requiring the Company to restructure its operations or taking other regulatory or enforcement actions
against the Company. In addition, it is unclear what impact the PRC government actions would have on the Company and on its ability
to consolidate the financial results of its variable interest entities in the consolidated financial statements, if the PRC government
authorities were to find the Company’s legal structure and contractual arrangements to be in violation of PRC laws, rules
and regulations. If the imposition of any of these government actions causes the Company to lose its right to direct the activities
of HDS and through HDS’s equity interest in its subsidiary or the right to receive their economic benefits, the Company
would no longer be able to consolidate the HDS and its subsidiary.
NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles
of consolidation
The
consolidated financial statements include the financial statements of YBP, its subsidiaries and operating VIE and its subsidiary,
in which the Company is the primary beneficiary. All significant intercompany balances and transactions have been eliminated on
consolidation.
Details
of the Company’s subsidiaries and variable interest entities (“VIE”) are as follows:
Name
|
|
Domicile
and Date of Incorporation
|
|
Registered
Capital
|
|
Effective
Ownership
|
|
|
Principal
Activities
|
Heilongjiang
Jinshangjing Bio-Technology Development Co., Limited (“JSJ”)
|
|
PRC
October 29, 2009
|
|
US$
100,000
|
|
|
100
|
%
|
|
Holding
company
|
Yew Bio-Pharm Holdings
Limited (“Yew Bio-Pharm (HK)”)
|
|
Hong Kong November
29, 2010
|
|
HK$ 10,000
|
|
|
100
|
%
|
|
Holding company
of JSJ
|
Harbin Yew Science
and Technology Development Co., Ltd. (“HDS”)
|
|
PRC August 22,
1996
|
|
RMB 45,000,000
|
|
|
Contractual
arrangements
|
|
|
Sales of yew tree
components for use in pharmaceutical industry; sales of yew tree seedlings; the manufacture of yew tree wood handicrafts;
and the sales of candle, pine needle extract, yew essential oil soap, complex taxus cuspidate extract and composite northeast
yew extract
|
Harbin Yew Food
Co., Ltd (“HYF”)
|
|
PRC November 4,
2014
|
|
RMB 100,000
|
|
|
100
|
% (1)
|
|
Sales of wood ear
mushroom drink
|
MC Commerce Holding
Inc.(“MC”)
|
|
State of California,
United State June 8, 2016
|
|
|
|
|
100
|
% (2)
|
|
Sales of yew oil
candles and yew oil soaps
|
Harbin Jingchibai
Bio-Technology Development Co., Limited (“JCB”)
|
|
PRC March 18, 2020
|
|
RMB 1,000,000
|
|
|
51
|
% (3)
|
|
Sales of yew oil
candles and yew oil soaps, no active operation since its incorporation
|
Yew
(Guangzhou) Bio-Technology Co., Ltd
|
|
PRC
December 24, 2020
|
|
RMB
10,000,000
|
|
|
80
|
%
|
|
Cosmetic
marketing and sales
|
(1)
|
Wholly-owned
subsidiary of HDS
|
(2)
|
51%
owned by YBP and 49% owned by HDS
|
(3)
|
JCB
was cancelled of its registration on December 3, 2020
|
Method
of accounting
The
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 estimates
The
preparation of consolidated financial statements in accordance with generally accepted accounting principles in the United State
of America (“U.S. 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 may differ from these estimates
under different assumptions or conditions. Significant estimates include allowance for accounts receivable, slow-moving and obsolete
inventory, the classification of short and long-term inventory, the useful life of property and equipment and land use rights
and yew forest assets, assumptions used in assessing impairment of long-term assets, write-down in value of inventory and the
valuation of stock-based compensation.
Fair
value of financial instruments
The
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 than 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.
|
The
carrying amounts reported in the balance sheets for cash, accounts receivable, accounts payable, and short-term borrowings, 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, 2020 and 2019.
Transactions
involving related parties cannot be presumed to be carried out on an arm’s-length basis, as the requisite conditions of
competitive, freemarket dealings may not exist. Representations about transactions with related parties, if made, shall not imply
that the related party transactions were consummated on terms equivalent to those that prevail in arm’s-length transactions
unless such representations can be substantiated. It is not, however, practical to determine the fair value of amounts due from/to
related parties due to their related party nature
Concentrations
of credit risk
The
Company’s operations are mainly 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 and accounts receivable.
Substantially all of the Company’s cash is maintained with state-owned banks in the PRC, and part of 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. 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.
At
December 31, 2020 and 2019, the Company’s cash balances by geographic area were as follows:
|
|
December
31, 2020
|
|
|
December
31, 2019
|
|
Country:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
3,071
|
|
|
|
0.5
|
%
|
|
$
|
46,855
|
|
|
|
6.3
|
%
|
China
|
|
|
560,721
|
|
|
|
99.5
|
%
|
|
|
695,439
|
|
|
|
93.7
|
%
|
Total cash
|
|
$
|
563,792
|
|
|
|
100.0
|
%
|
|
$
|
742,294
|
|
|
|
100.0
|
%
|
In
China, a depositor has up to RMB500,000 insured by the People’s Bank of China Financial Stability Bureau (“FSD”).
In the United States, the standard insurance amount is $250,000 per depositor in a bank insured by the Federal Deposit Insurance
Corporation (“FDIC”). As of December 31, 2020, approximately $242,000 of the Company’s cash held by financial
institutions, was insured, and the remaining balance of approximately $322,000 was not insured. As
of December 31, 2019, approximately $216,000 of the Company’s cash held by financial institutions, was insured, and the
remaining balance of approximately $526,000 was not insured.
Cash
For
purposes of the consolidated statements of cash flows, the Company considers all highly liquid instruments purchased with original
maturities of three months or less and money market accounts to be cash equivalents. As of December 31, 2020 and 2019, the Company
has no cash equivalents.
Accounts
receivable
Accounts
receivable are presented net of an allowance for doubtful accounts. If necessary, the Company shall maintain allowances for doubtful
accounts for estimated losses. The Company reviews accounts receivable on a periodic basis and makes 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 considers many factors, including the age of the balance, a customer’s historical payment history,
its current credit-worthiness and economic trends. Accounts are written off after exhaustive efforts at collection. At December
31, 2020 and 2019, the Company has an allowance for doubtful accounts in the amount of $386,000 and $193,000, respectively.
Inventories
Inventories,
consisting of raw materials, yew seedlings and finished goods related to the Company’s yew products are stated at the lower
of cost or net realizable value, with cost computed on a weighted-average basis. Raw materials primarily include yew wood used
in the production of yew products such as furniture, ornaments, and other products containing yew wood, yew foliage and tender
conifer foliage. Finished goods consist of yew handicrafts, yew candles, pine needle extracts, yew essential oil soap, complex
taxus cuspidate extract and composite northeast yew extract products.
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 value 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, monitors competing
products and technologies and evaluates acceptance of its products. Periodically, the Company identifies 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 net realizable value due to obsolescence or slow-moving,
the Company will record reserves for the difference between the carrying cost and the net realizable value, with cost computed
on a weighted-average basis.
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 net realizable value, with cost computed
on a weighted-average basis.
Property
and equipment
Property
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:
Building
|
|
|
10-20
years
|
|
Machinery
and equipment
|
|
|
3-10
years
|
|
Office
equipment
|
|
|
2-5
years
|
|
Motor
vehicles
|
|
|
4-10
years
|
|
Land
use rights and yew forest assets
All
land in the PRC is owned by 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 use rights and yew forests. 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. The Company amortizes land use rights based on their terms and yew forest assets
over the shorter of the respective land use rights or expected useful lives, which generally ranges from 15 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 use rights and yew forest assets as part of its cost of revenues.
Impairment
of long-lived assets
In
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. For the years ended
December 31, 2020 and 2019, the Company determined that there was no impairment of long-lived assets.
Revenue
recognition
The
Company accounts for revenue arising from contracts and customers in accordance with Accounting Standards Update (ASU or Update)
No. 2014-09, Revenue from Contracts with Customers (“ASC 606”) since January 1, 2018.
Under
ASC 606, the Company recognizes revenue when its customer obtains control of promised goods, in an amount that reflects the consideration
which the Company expects to receive in exchange for those goods. To determine revenue recognition for arrangements that the Company
determines are within the scope of ASC 606, the Company performs the following five steps: (i) identify the contract(s) with a
customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the
transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the Company satisfies
a performance obligation. The Company only applies the five-step model to contracts when it is probable that Company will collect
the consideration it is entitled to in exchange for the goods it transfers to the customer. At contract inception, once the contract
is determined to be within the scope of ASC 606, the Company assesses the goods promised within each contract and determines those
that are performance obligations and assesses whether each promised good is distinct. The Company then recognizes as revenue the
amount of the transaction price, which is allocated to the respective performance obligation, when the performance obligation
is satisfied. Generally, the Company’s performance obligations are satisfied when the customers take possession of the products,
which normally occurs upon shipment or delivery depending on the terms of the contracts.
In
general, the Company’s products within its segments are aligned according to the nature and economic characteristics of
its products and provide meaningful disaggregation of each business segment’s results of operations. Disaggregation of revenue
by business segment are included in Note 14 - SEGMENT INFORMATION.
Stock-based
compensation
The
Company accounts for stock options and other equity-based compensation issued in accordance with ASC 718 “Stock Compensation”
after adoption of ASC 2018-07 on January 1, 2019, which requires the measurement and recognition of compensation expense related
to the fair value of equity-based compensation awards that are ultimately expected to vest. Stock-based compensation expense recognized
includes the compensation cost for all share-based compensation payments granted to employees and nonemployees, net of estimated
forfeitures, over the employees’ requisite service period or the non-employee performance period based on the grant date
fair value estimated in accordance with the provisions of ASC 718. ASC 718 is also applied to awards modified, repurchased, or
cancelled during the periods reported. Please see Note 9 for additional information.
Advertising
Advertising
is expensed as incurred and included in selling, general and administrative expenses in the accompanying Consolidated Statements
of Operations and Comprehensive Income (loss). The Company incurred $Nil for the years ended December 31, 2020 and 2019.
Employee
benefits
The
Company’s major operations and most employees are 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 the same accounts and in the same period as the related salary costs and are not material.
Income
taxes
The
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, 2020, the Company had no uncertain tax positions, and
will continue to evaluate for uncertain positions in the future.
Value
added tax
The
Company is subject to value added tax (“VAT”). The applicable VAT rate is 13% for agricultural products, 16% for handicraft
products, yew essential oil soap, yew candles, complex taxus cuspidate extract, composite northeast yew extract and pine needle
extracts sold in the PRC for the years of 2020 and 2019. 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.
Government
grants
Government
grants include cash and other subsidies received from the PRC government by the Company and its subsidiaries. Government grants
are recognized when received and all the conditions specified in the grants have been met. As of December 31, 2020 and 2019, the
Company has received government grants in the amounts of $1,172,928 and $892,375, respectively, for afforestation that were recorded
initially as deferred income and recognized over the terms of the land use rights related to the yew forest assets the grants
awarded to.
Foreign
currency translation
The
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, and 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 (loss) for the years ended December 31, 2020 and 2019 amounted to $2,799,088
and $(544,809), respectively.
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 are
as follows:
|
|
2020
|
|
|
2019
|
|
Exchange rate on balance sheet dates:
|
|
|
|
|
|
|
|
|
USD: RMB exchange rate
|
|
|
6.5326
|
|
|
|
6.9668
|
|
|
|
|
|
|
|
|
|
|
Average exchange rate for the year
|
|
|
|
|
|
|
|
|
USD: RMB exchange rate
|
|
|
6.9020
|
|
|
|
6.9072
|
|
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 stock
ASC
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. 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. Potentially dilutive common shares consist of restricted common stock and common stock
options using the treasury stock method.
Comprehensive
income (loss)
The
Company follows ASC 220, “Comprehensive Income” to recognize the elements of comprehensive income. Comprehensive 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 (loss) for the
years ended December 31, 2020 and 2019 included net income and unrealized gains (losses) from foreign currency translation adjustments.
Operating
leases
The
Company adopted ASC 842 “Leases” on January 1. 2019. The Company determines if an arrangement is a lease at inception
and whether a contract is or contains a lease by determining whether it conveys the right to control the use of the identified
asset for a period of time. If the contract provides us the right to substantially all of the economic benefits from the use of
the identified asset and the right to direct the use of the identified asset, we consider it to be, or contain, a lease. Operating
leases are included in operating lease right-of-use (“ROU”) assets, operating lease liability, and operating lease
liability, non-current in the Company’s consolidated balance sheets. ROU assets represent the Company’s right to use
an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising
from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease
payments over the lease term. When determining the lease term, the Company includes options to extend or terminate the lease when
it is reasonably certain that it will exercise that option, if any. As the Company’s leases do not provide an implicit rate,
the Company used an incremental borrowing rate based on the information available in the market at commencement date in determining
the present value of lease payments.
Segment
reporting
The
Company managed and reviewed its business as two operating segments: the business of HDS, JSJ and HYF in PRC was managed and reviewed
as PRC segment and the business of YBP, Yew Bio-Pharm (HK), and MC was managed and reviewed as USA segment. PRC and USA segments
retain all of the reported consolidated amounts.
Related
party transactions
A
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.
Collaborative
arrangement
HDS
entered into a Joint Venture Planting Agreement with Wuchang City Forestry Bureau on March 21, 2004 and four more Joint Venture
Planting Agreements with Qingan State-owned Bureau (the “Qingan Forest Bureau”) in June 2018 and May 2019, respectively
(see Note 6), which are considered collaborative arrangements under 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 shares of profits
are 80% and 70% for the collaborative agreements with Wuchang City Forestry Bureau and Qingan State-owned Bureau entered dated
on June 2018 and May 2019, respectively. The Company accounts for this collaborative arrangement under ASC 808, “Collaborative
Arrangements” and related topics, and records revenue at a gross basis as the Company acts as a principal pursuant to ASC
Topic 808-10-15. For the years ended December 31, 2020 and 2019, the Company has not generated any revenues or activity from this
collaborative agreements.
Recent
Accounting Pronouncements Adopted
In
February 2016, the Financial Accounting Standards Board (“FASB”) issued new leasing guidance (“Topic 842”)
that replaced the existing lease guidance (“Topic 840”). Topic 842 established a right-of-use (“ROU”)
model that requires a lessee to record a ROU asset and lease liability on the balance sheet for all leases with terms longer than
12 months. Leases are classified as either finance or operating, with classification affecting the pattern of expense recognition
in the statement of operations. The Company adopted Topic 842 on its effective date of January 1, 2019 using a modified retrospective
transition approach. The Company elected the package of practical expedients permitted under the transition guidance within Topic
842, which allowed the Company to carry forward its identification of contracts that are or contain leases, its historical lease
classification and its accounting for initial direct costs for existing leases. The impact of adopting Topic 842 was not material
to the Company’s result of operations or cash flows for the years ended December 31, 2020 and 2019. The Company recognized
operating lease liabilities of approximately $350,000 upon adoption, with corresponding ROU assets on its balance sheet as
of January 1, 2019.
In
January 2017, the FASB issued ASU No. 2017-04, “Intangibles and Other (Topic 350): Simplifying the Test for Goodwill Impairment”,
which eliminates the requirement to calculate the implied fair value of goodwill, but rather requires an entity to record an impairment
charge based on the excess of a reporting unit’s carrying value over its fair value. This amendment is effective for annual
or interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted. The Company
adopted ASU No. 2017-04 on January 01, 2020 and the adoption did not have an impact on the Company’s financial position
and results of operations.
Recent
Accounting Pronouncements Not Adopted
In
June 2016, the FASB issued ASU 2016-13, “Financial Instruments—Credit Losses”. The standard, including subsequently
issued amendments (ASU 2018-19, ASU 2019-04, ASU 2019-05, ASU 2019-10 and ASU 2019-11), requires a financial asset measured at
amortized cost basis, such as accounts receivable and certain other financial assets, to be presented at the net amount expected
to be collected based on relevant information about past events, including historical experience, current conditions, and reasonable
and supportable forecasts that affect the collectability of the reported amount. In November 2019, the FASB issued ASU No. 2019-10
to postpone the effective date of ASU No. 2016-13 for public business entities eligible to be smaller reporting companies defined
by the SEC to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company
is evaluating the impact of this guidance on its consolidated financial statements.
In
December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes which is intended
to simplify various aspects related to accounting for income taxes. The standard is effective for fiscal years, and interim periods
within those years, beginning after December 15, 2020, with early adoption permitted. The standard will be adopted upon the effective
date for us beginning January 1, 2021. The Company is currently evaluating the effects of the standard on our consolidated financial
statements and related disclosures.
In
March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform
on Financial Reporting. The standard provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships,
and other transactions in which the reference LIBOR or another reference rate are expected to be discontinued as a result of the
Reference Rate Reform. The standard is effective for all entities. The standard may be adopted as of any date from the beginning
of an interim period that includes or is subsequent to March 12, 2020 through December 31, 2022. The Company is currently evaluating
the effects of the standard on our consolidated financial statements and related disclosures.
The
management does not believe that other than disclosed above, accounting pronouncements the recently issued but not yet adopted
will have a material impact on its financial position, results of operations or cash flows.
NOTE
3 – INVENTORIES, NET
Inventories
consisted of raw materials, finished goods including handicrafts, yew essential oil soap, complex cuspidate extract, composite
northeast yew extract, yew candles and pine needle extracts, yew seedlings and other trees, which consist of larix, spruce and
poplar trees. The Company classifies its inventories based on its 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. As of December
31, 2020 and 2019, inventories consisted of the following:
|
|
December
31, 2020
|
|
|
December
31, 2019
|
|
|
|
Current
portion
|
|
|
Long-term
portion
|
|
|
Total
|
|
|
Current
portion
|
|
|
Long-term
portion
|
|
|
Total
|
|
Raw materials
|
|
$
|
-
|
|
|
$
|
97,109
|
|
|
$
|
97,109
|
|
|
$
|
16,761
|
|
|
$
|
91,056
|
|
|
$
|
107,817
|
|
Finished goods
|
|
|
80,999
|
|
|
|
2,589,696
|
|
|
|
2,670,695
|
|
|
|
2,770,352
|
|
|
|
2,613,724
|
|
|
|
5,384,076
|
|
Total
|
|
|
80,999
|
|
|
|
2,686,805
|
|
|
|
2,767,804
|
|
|
|
2,787,113
|
|
|
|
2,704,780
|
|
|
|
5,491,893
|
|
Inventory reserve
|
|
|
(66,391
|
)
|
|
|
(1,902,021
|
)
|
|
|
(1,968,412
|
)
|
|
|
(149,724
|
)
|
|
|
(1,125,165
|
)
|
|
|
(1,274,889
|
)
|
Inventories,
net
|
|
$
|
14,608
|
|
|
$
|
784,784
|
|
|
$
|
799,392
|
|
|
$
|
2,637,389
|
|
|
$
|
1,579,615
|
|
|
$
|
4,217,004
|
|
Inventories
as of December 31, 2020 and 2019 consisted of the inventory purchased from related parties as follows:
|
|
December
31,
|
|
|
|
2020
|
|
|
2019
|
|
Inventories, net
|
|
$
|
-
|
|
|
$
|
-
|
|
Inventories - related
parties, net
|
|
|
14,608
|
|
|
|
2,637,389
|
|
Total
|
|
$
|
14,608
|
|
|
$
|
2,637,389
|
|
|
|
December
31,
|
|
|
|
2020
|
|
|
2019
|
|
Long-term inventories,
net
|
|
$
|
416,305
|
|
|
$
|
395,032
|
|
Long-term inventories - related parties,
net
|
|
|
368,479
|
|
|
|
1,184,583
|
|
Total
|
|
$
|
784,784
|
|
|
$
|
1,579,615
|
|
NOTE
4 - PROPERTY AND EQUIPMENT, NET
Property
and equipment consisted of the following as of December 31, 2020 and 2019:
|
|
December
31,
|
|
|
|
2020
|
|
|
2019
|
|
Buildings and building improvements
|
|
$
|
671,491
|
|
|
$
|
629,641
|
|
Motor vehicles
|
|
|
459,809
|
|
|
|
498,137
|
|
Machinery and equipment
|
|
|
535,061
|
|
|
|
501,713
|
|
Office equipment
|
|
|
144,189
|
|
|
|
35,424
|
|
|
|
|
1,810,550
|
|
|
|
1,664,915
|
|
Less: accumulated depreciation
|
|
|
(1,321,355
|
)
|
|
|
(1,190,012
|
)
|
Total property and equipment, net
|
|
$
|
489,195
|
|
|
$
|
474,903
|
|
For
the years ended December 31, 2020 and 2019, depreciation expenses amounted to $56,272 and $59,703, respectively.
NOTE
5 - LAND USE RIGHTS AND YEW FOREST ASSETS, NET
There
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 and leaves, the Company’s
customers for production of TCM. The Company amortizes land use rights based on their terms and amortizes yew forest assets over
the term of the respective land use 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
assets as part of its cost of revenues.
At
December 31, 2020 and 2019, land use rights and yew forest assets consisted of the following:
|
|
Useful
Life
|
|
December
31,
2020
|
|
|
December
31,
2019
|
|
Land use rights and yew
forest assets
|
|
15-50 years
|
|
$
|
46,281,816
|
|
|
$
|
44,760,976
|
|
Less: accumulated amortization
|
|
|
|
|
(4,329,333
|
)
|
|
|
(4,712,280
|
)
|
Land use rights and yew forest assets,
net
|
|
|
|
$
|
41,952,483
|
|
|
$
|
40,048,696
|
|
|
|
December
31,
|
|
|
|
2020
|
|
|
2019
|
|
Land use rights, net
|
|
$
|
268,199
|
|
|
$
|
243,877
|
|
Yew forest assets, net
|
|
|
41,684,284
|
|
|
|
39,804,819
|
|
Land use rights and yew forest assets,
net
|
|
$
|
41,952,483
|
|
|
$
|
40,048,696
|
|
Amortization
of land use rights and yew forest assets attributable to future periods is as follows:
Years
ending December 31:
|
|
Land
Use Right
|
|
|
Yew
Forest Assets
|
|
|
Total
Amortization
|
|
2021
|
|
$
|
10,153
|
|
|
$
|
2,901,814
|
|
|
$
|
2,911,967
|
|
2022
|
|
|
10,153
|
|
|
|
2,901,814
|
|
|
|
2,911,967
|
|
2023
|
|
|
10,153
|
|
|
|
2,901,814
|
|
|
|
2,911,967
|
|
2024
|
|
|
10,153
|
|
|
|
2,901,814
|
|
|
|
2,911,967
|
|
2025
|
|
|
10,153
|
|
|
|
2,901,814
|
|
|
|
2,911,967
|
|
2026 and thereafter
|
|
|
217,434
|
|
|
|
27,175,214
|
|
|
|
27,392,648
|
|
Total, net
|
|
$
|
268,199
|
|
|
$
|
41,684,284
|
|
|
$
|
41,952,483
|
|
Joint
Venture Planting Agreements
On
March 21, 2004, HDS entered into a Joint Venture Planting Agreement (the “Joint Venture Planting Agreement(s)”) 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. The Company is required to plant
and maintain yew trees on this forest land from 2004 to 2034. Any profits from the planting and sales 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, 2020 and 2019, the Company
has not generated any revenues or activity on this land.
On
June 14, 2018 and May 16, 2019, HDS entered into four Joint Venture Planting Agreements with Qingan State-owned Forestry Bureau
(the “Qingan Forest Bureau”), pursuant to which the Qingan Forest Bureau grant HDS access to the forest land totally
15,730 mu located in Qingan City to develop yew tree forests and produce yew seedlings and foliage. Pursuant to the Joint Venture
Agreement, the Company is required to plant and maintain yew trees on this forest land for 20 and 30 years, respectively. Any
profits from the planting and/or sale of yew trees and other agriculture shall be distributed 70-80% to the Company and 20-30%
to the Qingan Forest Bureau.
The
Company accounts for the collaborative arrangements in accordance with ASC 808, “Collaborative Arrangements” and related
topics, and records the forest lands grant under yew forest assets and revenue at a gross basis as the Company acts as a principal
pursuant to the Joint Venture Planning Agreement. For the year ended December 31, 2020, the Company has not generated any revenues
from the forest lands governed by the Joint Venture Agreements.
NOTE
6 - TAXES
(a)
Federal Income Tax and Enterprise Income Taxes
Provision
for income taxes for the years ended December 31, 2020 and 2019 consisted of:
Year
ended December 31, 2020
|
|
Federal
|
|
|
State
|
|
|
Foreign
|
|
|
Total
|
|
Current
|
|
$
|
-
|
|
|
$
|
780
|
|
|
$
|
27,968
|
|
|
$
|
28,768
|
|
Deferred
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
$
|
-
|
|
|
$
|
780
|
|
|
$
|
27,968
|
|
|
$
|
28,768
|
|
Year
ended December 31, 2019
|
|
Federal
|
|
|
State
|
|
|
Foreign
|
|
|
Total
|
|
Current
|
|
$
|
(9,889
|
)
|
|
$
|
-
|
|
|
$
|
21,103
|
|
|
$
|
11,214
|
|
Deferred
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
$
|
(9,889
|
)
|
|
$
|
-
|
|
|
$
|
21,103
|
|
|
$
|
11,214
|
|
Significant
components of the deferred tax assets and liabilities for income taxes as of December 31, 2020 and 2019 consisted of the following:
|
|
December
31,
|
|
|
|
2020
|
|
|
2019
|
|
Deferred tax assets
|
|
|
|
|
|
|
|
|
Net
operating loss carry-forward
|
|
$
|
384,987
|
|
|
$
|
361,712
|
|
Inventory write-down
|
|
|
-
|
|
|
|
311,536
|
|
Total
|
|
|
384,987
|
|
|
|
673,248
|
|
Valuation allowance
|
|
|
(384,987
|
)
|
|
|
(673,248
|
)
|
Net deferred tax assets
|
|
$
|
-
|
|
|
$
|
-
|
|
The
Company, YBP, registered in the State of Nevada, and its subsidiary, MC, registered in the State of California, are subject to
the United States federal income tax at a tax rate of 21%. $780 and $(9,889) of provision for income taxes for YBP has been made
as of December 31, 2020 and 2019, respectively. No provision for income taxes for MC has been made as MC had no U.S. taxable income
as of December 31, 2020 and 2019.
The
Company’s subsidiary, Yew Bio-Pharm (HK), is incorporated in Hong Kong and has no operating profit or tax liabilities during
the years. Yew Bio-Pharm (HK) is subject to tax at 16.5% on the assessable profits arising in or derived from Hong Kong.
The
Company’s subsidiary, JSJ, and VIE and its subsidiary, HDS and HYF, 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, HDS has been named as a leading enterprise in the agricultural industry and awarded with a tax exemption through
December 31, 2058 with the exception of sales of handicrafts, yew candle, pine needle extracts and yew essential oil soap which
are not within the scope of agricultural area.
For
the years ended December 31, 2020 and 2019, the provision for income taxes was $28,768 and $11,214, respectively. As of December
31, 2020, the income tax payable, current and noncurrent were $115,327 and $973,647, respectively.
The
table below summarizes the difference between the U.S. statutory federal tax rate and the Company’s effective tax rate for
the years ended December 31, 2020 and 2019:
|
|
Years
Ended
December
31,
|
|
|
|
2020
|
|
|
2019
|
|
U.S. federal income tax
rate
|
|
|
21.0
|
%
|
|
|
21.0
|
%
|
Tax rate difference
|
|
|
7.4
|
%
|
|
|
8.0
|
%
|
PRC tax exemption
|
|
|
(44.6
|
)%
|
|
|
(51.6
|
)%
|
Income tax from previous year
|
|
|
-
|
%
|
|
|
(1.0
|
)%
|
Income tax on undistributed earnings
|
|
|
-
|
%
|
|
|
-
|
%
|
GILTI tax
|
|
|
-
|
%
|
|
|
-
|
%
|
Others
|
|
|
0.1
|
%
|
|
|
2.1
|
%
|
Valuation allowance
|
|
|
18.0
|
%
|
|
|
22.6
|
%
|
Effective tax rate
|
|
|
1.9
|
%
|
|
|
1.1
|
%
|
For
U.S. income tax purposes, the Company has no cumulative undistributed earnings of foreign subsidiary and VIE as of December 31,
2020 and 2019, respectively. 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.
The
U.S. Tax Cuts and Jobs Act (the “Tax Act”) was enacted on December 22, 2017 and imposed a mandatory one-time tax on
accumulated earnings of foreign subsidiaries, introducing new tax regimes, and imposed a mandatory one-time tax on accumulated
earnings of foreign subsidiaries, introducing new tax regimes, and changing how foreign earnings are subject to U.S. tax. The
one-time transition tax, based on the Company’s total post-1986 earnings and profits (“E&P”) that it previously
deferred from U.S. income taxes, is recognized a one-time transition tax of $1,431,835 for the transition tax on accumulated undistributed
earnings of non-U.S. subsidiaries during the year ended December 31, 2018. The Company elected to pay the one-time transition
tax over eight years commencing in 2018. For the years ended December 31, 2020 and 2019, $114,547 and $114,547 transition tax
payments have been made, respectively.
In
addition, the 2017 Tax Act also creates a new requirement that certain income (i.e., Global Intangible Low-Taxed Income (“GILTI”))
earned by controlled foreign corporations (“CFCs”) must be included currently in the gross income of the CFCs’
U.S. shareholder. GILTI is the excess of the shareholder’s net CFC tested income over the net deemed tangible income return,
which is currently defined as the excess of (1) 10 percent of the aggregate of the U.S. shareholder’s pro rata share of
the qualified business asset investment of each CFC with respect to which it is a U.S. shareholder over (2) the amount of certain
interest expense taken into account in the determination of net CFC-tested income. The Company has elected to recognize the tax
on GILTI as a period expense in the period the tax is incurred. For the years ended December 31, 2020 and 2019, no GILTI tax expense
was recorded and no GILTI tax payable outstanding as of December 31, 2020 and 2019.
ASC
740 requires recognition and measurement of uncertain income tax positions using a “more-likely-than-not” approach.
The management evaluated the Company’s tax positions and considered that no provision for uncertainty in income taxes was
necessary as of December 31, 2020 and 2019.
In
the normal course of business, the Company is subject to examination by taxing authorities. With few exceptions, the Company is
no longer subject to U.S. federal income tax examinations for years before 2017.
(b)
Value Added Taxes (“VAT”)
The
applicable VAT tax rate is 13% for agricultural products, 17% and 16% for handicrafts, yew candles complex taxus cuspidate extract,
composite northeast yew extract and pine needle extracts sold in the PRC, respectively. In accordance with VAT regulations in
the PRC, the Company is exempt from paying VAT on its yew raw materials and yew trees sales as an agricultural corps cultivating
company up to December 31, 2020. The company’s sales of yew candles, handmade essence oil soaps, and pine needle extracts
and export products are under VAT tax-exempt treaty and thus are eligible for return of VAT Input credits. 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 fiscal year. As of December
31, 2020 and 2019, the Company held $56,637 and $349,096 VAT input credit, respectively.
NOTE
7 - SHORT-TERM BORROWINGS AND NOTE PAYABLE
Loans
from China Everbright Bank
On
December 22, 2016, HDS entered into a credit agreement with China Everbright Bank (“CEB”) which agreed to provide
a line of credit of $2,800,000 (approximately RMB20 million) to the Company for the period of three years. On February 25, 2020,
the Company entered into another credit agreement with CEB, pursuant to which CEB provides another line of credit of RMB20 million
(approximately $2,820,000) to the Company for the period of three years. These loans carry interest rates ranging from 4.30% to
5.65% per annum and the interests are payable when the loans are due. The loans with CEB are secured by properties and land use
rights of Yew Pharmaceutical. In addition, Zhiguo Wang, Madame Qi, Yew Pharmaceutical, and ZTC provided personal guarantees to
the loans. HDS paid two $1,400,000 back in March and April 2020, totaling $2,800,000 under the initial line of credit, resulted
the initial line of credit was paid off in its entirety. As of December 31, 2020 and 2019, the Company held approximately
$2,800,000 loans from CEB.
Loans
from Bank of Yingkou
On
August 2018, HDS entered into two loan agreements with Bank of Yingkou Harbin Branch (“Yingkou Bank”), through which
HDS obtained two bank loans in the amounts of RMB15 million (approximately $2,153,000) and RMB5 million (approximately $718,000)
each with one year term. The loans carry 5.4375% interest rate annum and is payable monthly. Heilongjiang Zishan Technology Co.,
Ltd. (“ZTC”), a related party controlled by Zhiguo Wang and his wife Madame Qi, collateralized its buildings and land
use right with Yingkou Bank to secure the loan. In addition, HEFS, HBP, Yew Pharmaceutical, and ZTC provided guarantees to the
loans. HDS paid off the two loans in their entireties in July and August 2019.
On
July 26, 2019, HDS entered into a loan agreement with Bank of Yingkou Harbin Branch (“Yingkou Bank”), through which
HDS obtained a bank loan in the amount of RMB15 million (approximately $2,153,000), payable on July 25, 2020. The loan carried
an interest rate of 6.525% per annum and is payable monthly. Heilongjiang Zishan Technology Co., Ltd. (“ZTC”), a related
party controlled by Zhiguo Wang and his wife Madame Qi, collateralized its buildings and land use right with Yingkou Bank to secure
the loan. In addition, HEFS, HBP, Yew Pharmaceutical, and ZTC provided guarantees to the loan. HDS renewed the RMB15 million (approximately
$2,200,000) bank loan with Yingkou Bank on July 24, 2020 with the expiration date on July 23, 2021. As of December 31, 2020 and
2019, approximately $2,300,000 (RMB 15 million) and $2,153,000 (RMB 15 million) were outstanding under the loan agreement, respectively.
On
August 20, 2019, HDS entered into another loan agreement with Yingkou Bank, pursuant to which HDS obtained a bank loan in the
amount of RMB5 million (approximately $718,000), payable on August 19, 2020. The loan carries an interest rate of 6.525% per annum
and is payable monthly. ZTC, a related party controlled by Zhiguo Wang and his wife Madame Qi, collateralized its buildings and
land use right with Yingkou Bank to secure the loan. In addition, HEFS, HBP, Yew Pharmaceutical, and ZTC provided guarantees to
the loan. HDS renewed the RMB5 million (approximately $735,000) for another year with maturity date on July 23, 2021. As of December
31, 2020 and 2019, approximately $765,000 (RMB5 million) and $718,000 (RMB5 million) were outstanding under the loan agreement,
respectively.
Loan
from Postal Saving Bank of China
On
May 13, 2019, HDS entered into a credit agreement with Postal Saving Bank of China who agreed to provide a line of credit of RMB20
million (approximately $2,830,000) to the Company for the period of ten years. These loans have interest rate of 5.22% per annum
payable monthly. Zhiguo Wang and his wife Madame Qi, pledged buildings and land use rights they owned with Postal Saving Bank
of China to secure the loans. In addition, Zhiguo Wang and his wife Madame Qi, Yicheng Wang and Lei Zhang provided personal guarantees
to the loans. As of December 31, 2020 and 2019, approximately $3,100,000 (RMB20 million) and $2,900,00 (RMB20 million) were outstanding
under the line of credit, respectively.
SBA
loans
On
May 1, 2020, the Company got a Promissory Note (the “Note”) of $70,920 from Paycheck Protection Program (the “PPP
Loan”) through Bank of America (the “Lender”) under the CARES Act excused by government due to the COVID-19
crisis. The interest rate on this Note is a fixed rate of 1.00% per annum. The loan will be due in one payment of all outstanding
principal plus all accrued unpaid interest in two years after the date of this Note (“Maturity Date”). According to
the program terms, the PPP loan will be fully forgiven if the funds are used for payroll costs, interest on mortgages, rent, and
utilities. Loan payments will also be deferred for six months. No collateral or personal guarantees are required. $70,920 PPP
Loan was outstanding as of December 31, 2020.
On
July 2020, the Company received advances of the SBA Economic Injury Disaster Loans (“EIDL”) totaling $9,000 under
the CARES Act. The advances will reduce the amount that will ultimately be forgiven under the PPP program.
Other
loan
On
January 30, 2020, Yicheng Wang entered into a loan agreement with the Company, pursuant to which the Company lent RMB600,000 to
Yicheng Wang for the period from January 30, 2020 to January 29, 2021 at the interest rate of 5.00%. On February 24 and 25, 2020,
Yicheng Wang paid the entire loan amount off.
During
the years ended December 31, 2020 and 2019, interest expense was $481,852 and $390,380, respectively.
NOTE
8 – STOCK-BASED COMPENSATION
The
Company’s board of Directors adopted 2012 Equity Incentive Plan (“2012 Plan”) and 2019 Equity Incentive Plan
(“2019 Plan”) on September 25, 2012 and October 29, 2019, respectively. Pursuant to the 2012 Plan
and 2019 Plan, the Company authorized to issue and reserved up to 15,000,000 and 5,000,000 shares of common
stock for grants to employees and non-employees, respectively. The per share price upon exercise of an option will be determined
by the Company’s compensation committee in its discretion on the date of grant, provided that such price will not be less
than 100% and 80% of the fair market Value of the common stock on the date of grant to a qualified and a non-qualified stock option,
respectively. Vesting terms of stock options are determined in the discretion of our compensation committee. The maximum
term of stock options granted under the both Plans is 10 years.
As
of December 31, 2020 and 2019, the Company has totally grant 7,738,737 shares of options with life term from two to four years,
and the shares available to grant under the 2012 Equity Incentive Plan was 2,261,263.
On
February 28, 2019, the Company entered into an agreement with Chineseinvestor.com, pursuant to which both parties reached an agreement
to cancel to issue the common shares of 375,000 to Chineseinvestor.
On
October 3, 2019 the Board approved to extend the expiration date of 5,000,000 options issued to Zhiguo Wang and 2,488,737 options
issued to Guifang Qi from December 31, 2019 to December 31, 2021, and 200,000 options issued to William B. Barnett from October
11, 2019 to December 31, 2021. The Company treated these extensions as modifications of the awards upon their extraordinary services
rendered to the Company and recognized incremental compensation cost. The Company measured the incremental compensation cost as
the excess of the fair value of the modified award over the fair value of the original award immediately before its terms were
modified. As a result of these modifications, the Company recognized incremental compensation cost of $284,461 in stock-based
compensation expense during the year ended December 31, 2019, and the weighted average remaining contractual life was changed
to 2 years.
The
fair value of the Company’s option as of the date of revaluation upon modification on October 3, 2019 was determined using
the following management assumptions:
Name
of Optionee
|
|
Expected
Terms
(In
Years)
|
|
|
Computed
Volatility
|
|
|
Risk
free Interest Rate (%)
|
|
|
Expected
Dividends
|
|
|
Fair
Value
|
|
Before the modification
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Zhiguo Wang
|
|
|
0.25
|
|
|
|
125
|
%
|
|
|
1.70
|
|
|
|
-
|
|
|
|
9,285
|
|
Guifang Qi
|
|
|
0.25
|
|
|
|
125
|
%
|
|
|
1.70
|
|
|
|
-
|
|
|
|
4,622
|
|
William B. Barnett
|
|
|
0.02
|
|
|
|
29
|
%
|
|
|
1.78
|
|
|
|
-
|
|
|
|
-
|
|
After the modification
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Zhiguo Wang
|
|
|
2.25
|
|
|
|
127
|
%
|
|
|
1.39
|
|
|
|
-
|
|
|
|
194,285
|
|
Guifang Qi
|
|
|
2.25
|
|
|
|
127
|
%
|
|
|
1.39
|
|
|
|
-
|
|
|
|
96,705
|
|
William B. Barnett
|
|
|
2.25
|
|
|
|
127
|
%
|
|
|
1.39
|
|
|
|
-
|
|
|
|
7,378
|
|
Stock
option activities for the years ended December 31, 2020 and 2019 are summarized in the following table.
|
|
Year
Ended
December
31, 2020
|
|
|
Year
Ended
December
31, 2019
|
|
|
|
Number
of
Stock
Options
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Weighted
Average Remaining Contractual Life in Years
|
|
|
Number
of
Stock
Options
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Weighted
Average Remaining Contractual Life in Years
|
|
Balance at beginning of
year
|
|
|
7,738,737
|
|
|
$
|
0.22
|
|
|
|
2.0
|
|
|
|
7,738,737
|
|
|
$
|
0.22
|
|
|
|
3.0
|
|
Issued
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
Expired
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
Forfeited
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
Balance at end of year
|
|
|
7,738,737
|
|
|
$
|
0.22
|
|
|
|
1.0
|
|
|
|
7,738,737
|
|
|
$
|
0.22
|
|
|
|
2.0
|
|
Options exercisable at end of year
|
|
|
7,738,737
|
|
|
$
|
0.22
|
|
|
|
1.0
|
|
|
|
7,738,737
|
|
|
$
|
0.22
|
|
|
|
2.0
|
|
The
following table summarizes the shares of the Company’s common stock issuable upon exercise of options outstanding at December
31, 2020:
Stock
Options Outstanding
|
|
Stock
Options Exercisable
|
|
Range
of Exercise Price
|
|
Number
Outstanding at December 31, 2020
|
|
|
Weighted
Average Remaining Contractual Life (Years)
|
|
|
Weighted
Average Exercise Price
|
|
|
Number
Exercisable at December 31, 2020
|
|
|
Weighted
Average Exercise Price
|
|
$
|
0.22-0.25
|
|
|
7,738,737
|
|
|
|
1.00
|
|
|
$
|
0.22
|
|
|
|
7,738,737
|
|
|
$
|
0.22
|
|
The
Company’s outstanding stock options and exercisable stock options had intrinsic value of $0, based upon the Company’s
closing stock price of $0.11 as of December 31, 2020. Stock option expense recognized during the years ended December 31, 2020
and 2019 amounted to $Nil and $284,461, respectively.
NOTE
9 - EARNINGS PER SHARE
The
following table presents a reconciliation of basic and diluted net income per share for the years ended December 31, 2020 and
2019:
|
|
For
the Years Ended
December
31,
|
|
|
|
2020
|
|
|
2019
|
|
Net income (loss) available
to common stockholders for basic and diluted net income per share of common stock
|
|
$
|
1,464,882
|
|
|
$
|
985,506
|
|
Weighted average common stock outstanding
- basic
|
|
|
51,700,000
|
|
|
|
51,760,616
|
|
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
Stock options issued
to directors/officers/employees
|
|
|
-
|
|
|
|
-
|
|
Weighted average common stock outstanding
- diluted
|
|
|
51,700,000
|
|
|
|
51,760,616
|
|
Net income (loss) per common share -
basic
|
|
$
|
0.03
|
|
|
$
|
0.02
|
|
Net income (loss) per common share -
diluted
|
|
$
|
0.03
|
|
|
$
|
0.02
|
|
Diluted
net income (loss) per share is computed using the weighted average number of common shares and dilutive potential common shares
outstanding during the respective periods. The anti-dilutive securities included options to purchase common shares are 7,738,737
and 7,738,737 on a weighted average basis for the years ended December 31, 2020 and 2019, respectively.
NOTE
10 - LEASES
The
Company leases office space from third parties and related parties.
Leases
is classified as operating at inception of the lease. Operating leases result in the recognition of ROU assets and lease liabilities
on the balance sheet. ROU assets represent the Company’s right to use the leased asset for the lease term and lease liabilities
represent the obligation to make lease payments. The liability is calculated as the present value of the remaining minimum rental
payments for existing operating leases using either the rate implicit in the lease or, if none exists, the Company’s incremental
borrowing rate. The Company uses incremental borrowing rate at 6.44% annum. Lease expense for these leases is recognized on a
straight-line basis over the lease term.
The
components of lease expense consist of the following:
|
|
Classification
|
|
For
the Year Ended
December
31, 2020
|
|
|
For
the Year Ended
December
31, 2019
|
|
Operating
lease cost
|
|
Selling,
general and administrative expense
|
|
$
|
74,172
|
|
|
$
|
128,664
|
|
Net lease
cost
|
|
|
|
$
|
74,172
|
|
|
$
|
128,664
|
|
Balance
sheet information related to leases consists of the following:
|
|
Classification
|
|
As
of
December
31,
2020
|
|
As
of
December
31,
2019
|
|
Assets
|
|
|
|
|
|
|
|
|
Operating
lease ROU assets
|
|
Right-of-use
assets
|
|
$
|
333,402
|
|
$
|
399,817
|
|
Total
leased assets
|
|
|
|
$
|
333,402
|
|
$
|
399,817
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
Current
portion
|
|
|
|
|
|
|
|
|
|
Operating
lease liabilities
|
|
Current
maturities of operating lease liabilities
|
|
$
|
65,476
|
|
$
|
52,104
|
|
|
|
|
|
|
|
|
|
|
|
Non-current
portion
|
|
|
|
|
|
|
|
|
|
Operating
lease liabilities
|
|
Operating
lease liabilities
|
|
|
292,409
|
|
|
351,145
|
|
Total
lease liabilities
|
|
|
|
$
|
357,885
|
|
$
|
403,249
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average remaining lease term
|
|
|
|
|
|
|
|
|
|
Operating
leases
|
|
|
|
|
10.9
years
|
|
|
6.2
years
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average discount rate
|
|
|
|
|
|
|
|
|
|
Operating
leases
|
|
|
|
|
6.44
|
|
|
6.44
|
|
Cash
flow information related to leases consists of the following:
|
|
For
the Year Ended
December
31, 2020
|
|
|
For
the Year Ended
December
31, 2019
|
|
Cash paid for amounts included in
the measurement of lease liabilities:
|
|
|
|
|
|
|
|
|
Operating cash flows
from operating leases
|
|
$
|
74,401
|
|
|
$
|
127,127
|
|
The
minimum future lease payments as of December 31, 2020 are as follows:
Years
Ending December 31,
|
|
Operating
Leases
|
|
2021
|
|
$
|
79,997
|
|
2022
|
|
|
80,327
|
|
2023
|
|
|
33,594
|
|
2024
|
|
|
29,332
|
|
2025
|
|
|
26,314
|
|
Thereafter
|
|
|
211,830
|
|
Total lease payments
|
|
|
461,393
|
|
Less: Interest
|
|
|
(76,608
|
)
|
Present value of lease liabilities
|
|
$
|
384,785
|
|
NOTE
11 - CONCENTRATIONS OF CREDIT RISK AND MAJOR CUSTOMERS
Customers
For
the years ended December 31, 2020 and 2019, customers accounting for 10% or more of the Company’s revenue were as follows:
|
|
Revenue
For the Years Ended
|
|
|
AR
as of
|
|
|
|
December
31,
|
|
|
December
31,
|
|
Customer
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
A (Yew Pharmaceutical, a
related party)
|
|
|
61.0
|
%
|
|
|
38.4
|
%
|
|
|
32.2
|
%
|
|
|
-
|
|
B (HongKong YIDA Commerce Co., Limited,
a related party)
|
|
|
*
|
|
|
|
25.6
|
%
|
|
|
*
|
|
|
|
2.5
|
%
|
C (GOLDEN PEACH TRAVEL SERVICE COMPANY
LTD)
|
|
|
*
|
|
|
|
34.1
|
%
|
|
|
*
|
|
|
|
97.6
|
%
|
D (LIFEFORFUN LIMITED, a related party)
|
|
|
25.8
|
%
|
|
|
-
|
|
|
|
65.2
|
%
|
|
|
-
|
|
Suppliers
For
the years ended December 31, 2020 and 2019, suppliers accounting for 10% or more of the Company’s purchase were and major
suppliers whose accounts payable accounted for 10% or more of the Company’s total accounts payable as follows:
|
|
Purchase
For the Years Ended
|
|
|
AP
as of
|
|
|
|
December
31,
|
|
|
December
31,
|
|
Customer
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
A (Yew Pharmaceutical, a
related party)
|
|
|
40.1
|
%
|
|
|
47
|
%
|
|
|
-
|
|
|
|
-
|
|
E (Heilongjiang Weishahe Agriculture
Technology Co., Ltd)
|
|
|
10.2
|
%
|
|
|
|
*%
|
|
|
68.3
|
%
|
|
|
85.3
|
%
|
F (Xingcai Shi)
|
|
|
|
*%
|
|
|
|
*%
|
|
|
18.1
|
%
|
|
|
-
|
|
NOTE
12 - RELATED PARTY TRANSACTIONS
In
addition to several of the Company’s officers and directors, the Company conducted transactions with the following related
parties:
Company
|
|
Ownership
|
Heilongjiang
Zishan Technology Co., Ltd. (“ZTC”)
|
|
51%
owned by Heilongjiang Hongdoushan Ecology Forest Co., Ltd., 34% owned by Zhiguo Wang, Chairman and Chief Executive Officer,
11% owned by Guifang Qi, the wife of Mr. Wang and director of the Company, and 4% owned by third parties.
|
|
|
|
Heilongjiang
Yew Pharmaceutical 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 Co., Ltd. (“HEFS”)
|
|
63%
owned by Mr. Wang, 34% owned by Madame Qi, and 3% owned by third parties.
|
|
|
|
Hongdoushan
Bio-Pharmaceutical Co., Ltd. (“HBP”)
|
|
30%
owned by Mr. Wang, 19% owned by Madame Qi and 51% owned by HEFS
|
|
|
|
Heilongjiang
Pingshan Hongdoushan Development Co., Ltd. (“HDS Development”)
|
|
80%
owned by HEFS and 20% owned by Kairun
|
|
|
|
Wuchang
City Xinlin Forestry Co., Ltd. (Xinlin)
|
|
98%
owned by ZTC and 2% owned by HEFS
|
|
|
|
Wonder
Genesis Global Ltd.
|
|
Jinguo
Wang is the Company’s director.
|
|
|
|
DMSU
Digital Technology Limited(“DMSU”)
|
|
Significantly
influenced by the Company
|
|
|
|
HongKong
YIDA Commerce Co., Limited(“YIDA”)
|
|
Significantly
influenced by the Company
|
|
|
|
LIFEFORFUN
LIMITED
|
|
Significantly
influenced by the Company
|
|
|
|
Jinguo
Wang
|
|
Management
of HDS and Legal person of Xinlin
|
|
|
|
Zhiguo
Wang
|
|
Principal
shareholder and CEO of the Company
|
|
|
|
Guifang
Qi
|
|
Principal
shareholder and the wife of CEO
|
|
|
|
Cai
Wang
|
|
Employee
of the Company
|
|
|
|
Weihong
Zhang
|
|
Employee
of the Company
|
|
|
|
Xue
Wang
|
|
Employee
of the Company
|
|
|
|
Chunping
Wang
|
|
Employee
of the Company
|
|
|
|
Jimin
Lu
|
|
Employee
of the Company
|
Transactions
with Yew Pharmaceutical
On
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 traditional Chinese
medicines and other pharmaceutical products, at price of RMB 1,000,000 (approximately $146,000) per metric ton. In addition, the
Company entered into a series of wood ear mushroom selling agreements with Yew Pharmaceuticals, pursuant to which the Company
sells wood ear mushroom collected from local peasants to Yew Pharmaceuticals for manufacturing of wood ear mushroom products.
Furthermore, the Company entered into a series of yew candles, yew essential oil soaps, complex taxus cuspidate extract, composite
northeast yew extract and pine needle extracts purchase agreements with Yew Pharmaceuticals, pursuant to which the Company purchases
yew candles and pine needle extracts as finished goods and then sells to third party and related party. The Company has not renewed
the Development Agreement with Yew Pharmaceutical yet. We currently enter into individual agreement for each single transaction.
For
the years ended December 31, 2020 and 2019, total revenues from Yew Pharmaceutical under the above agreement amounted to $16,659,547
and $10,705,727, and the corresponding cost of revenues amounted to $14,792,713 and $9,962,940, respectively. At December 31,
2020 and 2019, the Company had $2,982,114 and $Nil accounts receivable from Yew Pharmaceutical, respectively.
For
the years ended December 31, 2020 and 2019, the total purchase of yew candles, yew essential oil soap, complex taxus cuspidate
extract, composite northeast yew extract, wood ear mushroom extract, and pine needle extracts from Yew Pharmaceutical amounted
to $7,980,296 and $13,299,780, respectively. For the years ended December 31, 2020 and 2019, the products purchased from Yew Pharmaceutical
in the amount of $10,059,610 and $16,633,020 were sold and included in the total
cost of revenues of $23,846,886 and $27,109,518, respectively. At December 31, 2020 and 2019, the Company had $Nil and $16,629
accounts payable to Yew Pharmaceutical, respectively.
Transactions
with HBP
For
the years ended December 31, 2020 and 2019, HBP paid off operation expense on behalf of HYF in the amount of $Nil and $1,737.
As of December 31, 2020 and 2019, HYF had due to HBP in the amount of $96,282 and $103,158, respectively, which was included in
due to related parties in the accompanying consolidated balance sheets.
Transactions
with Lifeforfun Limited
For
the years ended December 31, 2020 and 2019, total revenues from Lifeforfun Limited amounted to $7,056,000 and $Nil. As of December
31, 2020 and 2019, the Company had $6,036,080 and $Nil accounts receivable from Lifeforfun Limited, respectively.
Transactions
with DMSU
On
February 10, 2020, the Company entered a payment schedule agreement with DMSU regarding the outstanding accounts receivable under
2018 and 2020 sales contracts. Pursuant to the payment schedule, DMSU agreed to make payments in 2020 totaling of $1,000,000 out
of total $5,304,000 receivable balance under 2018 sales contracts and the remaining will be paid within next three years. Regarding
the 2020 sales contracts entered, DMSU will arrange payments of the entire transaction within six months after goods are delivered.
For
the year ended December 31, 2020, total revenues from DMSU amounted to $2,592,000. The company collected approximately $2,753,000
from DMSU during the year of 2020, of which $161,000 was recorded as recovery of accounts receivable due from DMSU previously
written off under 2018 sales contracts. The company further collected approximately $757,000 from DMSU subsequently during the
first quarter.
For
the year ended December 31, 2019, there was $Nil sales transaction the Company conducted with DMSU. The Company recovered approximately
$1,034,000 of accounts receivable previously written off from DMSU. The amount 1,034,000 was recorded in bad debt recovery.
Transactions
with YIDA
For
the years ended December 31, 2020 and 2019, total revenues from YIDA amounted to $Nil and $7,144,649. As of December 31, 2020
and 2019, the Company had $Nil and $193,000 accounts receivable, which were net of allowance for doubtful account $386,000 and
$193,000 from YIDA, respectively.
Transactions
with ZTC
For
the years ended December 31, 2020 and 2019, HDS purchased yew forest assets from ZTC in the amount of $1,057,664 and $2,121,880,
respectively. Since the assets purchase occurred between entities under common control, the Company recorded the assets received
at historical carrying costs recorded by ZTC, which amounted to $935,885 and $1,729,793, respectively. The differences between
the actual contract price and carrying costs are recorded as additional paid-in capital in the amount of $121,779 and $392,087,
respectively. As of December 31, 2020 and 2019, the Company had $124,150 and $Nil advance to ZTC, respectively.
Transactions
with Xinlin
For
the years ended December 31, 2020 and 2019, HDS purchased yew forest assets from Xinlin in the amount of $463,634 and $148,396,
respectively. Since the assets purchase occurred between entities under common control, the Company recorded the assets received
at historical carrying costs recorded by Xinlin, which amounted to $410,316 and $121,981, respectively. The differences between
the actual contract price and carrying costs are recorded as additional paid-in capital in the amount of $53,318 and $26,415,
respectively. As of December 31, 2020 and 2019, the Company had no balance payable to Xinlin.
Transactions
with Jinguo Wang
For
the years ended December 31, 2020 and 2019, HDS purchased yew forest assets and yew seedlings from Jinguo Wang in the amount of
$1,124,312 and $1,078,121, respectively. As of December 31, 2020 and 2019, the Company had no accounts payable to Jinguo Wang.
Transactions
with Weihong Zhang
For
the years ended December 31, 2020 and 2019, HDS purchased yew forest assets from Weihong Zhang in the amount of $28,977 and $789,032,
respectively.
Transactions
with Chunping Wang
For
the years ended December 31, 2020 and 2019, HDS purchased yew forest assets from Chunping Wang in the amount of $870,762 and $1,653,347,
respectively.
Transactions
with Xue Wang
For
the years ended December 31, 2020 and 2019, HDS purchased yew forest assets from Xue Wang in the amount of $751,956 and $157,054,
respectively.
Transactions
with Cai Wang
For
the years ended December 31, 2020 and 2019, HDS purchased yew forest assets from Cai Wang in the amount of $391,191 and $81,075,
respectively.
Loans
Guaranteed
As
of December 31, 2020 and 2019, the Company’s certain loans were guaranteed by related parties (see note 8).
Operating
Leases
On
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 $24,000). 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 years ended December 31, 2020 and 2019, rent expense related to the ZTC Lease amounted
to approximately $24,000 and $24,000, respectively. At December 31, 2020 and 2019,
prepaid rent to ZTC amounted to approximately $Nil and $5,800 which was included
in prepaid expenses-related parties in the accompanying consolidated balance sheets.
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 RMB15,000 (approximately $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 years ended December 31, 2020 and 2019, rent expense related to the Office
Lease amounted to approximately $2,200 and $2,200, respectively. As of December 31, 2020 and 2019, the Company had no unpaid rent
related to the Office Lease.
On
July 1, 2012, the Company entered into a lease for office space with Mr. Wang (the “JSJ Lease”). Pursuant to the JSJ
Lease, JSJ leases approximately 30 square meter of office space from Mr. Wang in Harbin. Rent under the JSJ Lease is RMB10,000
(approximately $1,500) annually. The term of the JSJ Lease is three years and expires on June 30, 2015. On July 1, 2015, the Company
and Mr. Wang renewed the JSJ Lease. The renewed lease expires on June 30, 2018. On July 1, 2018, the Company renewed JSJ Lease
for three years, which will now expire on June 30, 2021. Pursuant to the renewed lease agreement, the annual payment will be RMB
10,000 (approximately $1,500). For the years ended December 31, 2020 and 2019, rent expense related to the JSJ Lease amounted
to approximately $1,400 and $1,400, respectively. As of December 31, 2020 and 2019, the unpaid rent was approximately $Nil and
$700 respectively, which was included in due to related parties in the accompanying consolidated balance sheets.
The
Company entered into two forest land leases with Mr. Wang. Pursuant to the Leases, Mr.Wang leases two forest land with area of
20 mu and 73 mu, respectively, to the Company for free. The leases terms are for the periods from January 9, 2008 to November
24, 2022 and from January 30, 2007 to December 30, 2026, respectively.
On
January 1, 2015, HYF entered into a lease agreement with HBP, pursuant to which HBP leases a warehouse, with an area of 225 square
meters, and a workshop, with an area of 50 square meters, both of which are located at No.1 Zisan Road, Shangzhi economic development
district, Shangzhi City, Heilongjiang Province, to HYF in exchange for no consideration for the period from January 1, 2015 to
December 31, 2020.
The
Company leased office space in the A’cheng district in Harbin (the “A’cheng Lease”) from HDS Development
on March 20, 2002. 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:
Period
|
|
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
|
For
the years ended December 31, 2020 and 2019, rent expense related to the A’cheng Lease amounted approximately $3,600 and
$3,600, respectively. At December 31, 2020 and 2019, the prepaid rent was $Nil.
The
Company leased an apartment the Nangang district (the “Jixing Lease”) in Harbin from Ms. Qi on October 1, 2016. The
initial lease term of Jixing Lease is one year and renewed twice currently with the expiration date on September 30, 2019. For
the years ended December 31, 2020 and 2019, rent expense related to the Jixing Lease amounted approximately $Nil and $1,100, respectively.
Due
to Related Parties
The
Company’s officers, directors and other related parties, from time to time, provided advances to the Company for working
capital purpose. These advances and payables are usually short-term in nature, non-interest bearing, unsecured and payable on
demand.
The
following summarized the Company’s due to related parties as of December 31, 2020 and 2019:
|
|
December
31,
2020
|
|
|
December
31,
2019
|
|
Zhiguo Wang and Guifang
Qi
|
|
$
|
555,078
|
|
|
$
|
530,621
|
|
HBP
|
|
|
96,282
|
|
|
|
103,158
|
|
Total
|
|
$
|
651,360
|
|
|
$
|
633,779
|
|
NOTE
13 - STATUTORY RESERVES
The
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. The accumulated balance of the statutory reserve
of the Company as of December 31, 2020 and 2019 was $3,762,288, which has reached the 50% of the entities registered capital.
NOTE
14 - SEGMENT INFORMATION
The
Company managed and reviewed its business as two operating segments. The business of HDS, JSJ and HYF in PRC was managed and reviewed
as PRC segment. The business of YBP, Yew Bio-Pharm (HK), and MC was managed and reviewed as USA segment. PRC and USA segments
retain all of the reported consolidated amounts.
The
geographical distributions of the Company’s financial information for the year ended December 31, 2020 and 2019 were as
follows:
|
|
For
the Years Ended
December
31,
|
|
Geographic Areas
|
|
2020
|
|
|
2019
|
|
Revenue
|
|
|
|
|
|
|
|
|
PRC
|
|
$
|
27,261,876
|
|
|
$
|
27,552,181
|
|
USA
|
|
|
100,831
|
|
|
|
354,725
|
|
Elimination Adjustment
|
|
|
(55,020
|
)
|
|
|
(23,257
|
)
|
Total Revenue
|
|
$
|
27,307,687
|
|
|
$
|
27,883,649
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) from operations
|
|
|
|
|
|
|
|
|
PRC
|
|
$
|
3,848,461
|
|
|
$
|
2,047,256
|
|
USA
|
|
|
(1,279,761
|
)
|
|
|
(1,031,772
|
)
|
Elimination Adjustment
|
|
|
-
|
|
|
|
(3,965
|
)
|
Total Income from operations
|
|
$
|
2,568,700
|
|
|
$
|
1,011,519
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
|
|
|
|
|
|
PRC
|
|
$
|
2,729,064
|
|
|
$
|
1,977,627
|
|
USA
|
|
|
(1,264,181
|
)
|
|
|
(988,156
|
)
|
Elimination Adjustment
|
|
|
-
|
|
|
|
(3,965
|
)
|
Total net income
|
|
$
|
1,464,883
|
|
|
$
|
985,506
|
|
The
geographical distribution of the Company’s financial information as of December 31, 2020 and 2019 were as follows:
|
|
As
of December 31,
|
|
Geographic Areas
|
|
2020
|
|
|
2019
|
|
Long-term assets
|
|
|
|
|
|
|
|
|
PRC
|
|
$
|
52,130,997
|
|
|
$
|
44,547,842
|
|
USA
|
|
|
498,830
|
|
|
|
1,363,586
|
|
Elimination adjustment
|
|
|
(4,172,549
|
)
|
|
|
(3,376,072
|
)
|
Total long-term assets
|
|
$
|
48,457,078
|
|
|
$
|
42,535,356
|
|
|
|
|
|
|
|
|
|
|
Reportable assets
|
|
|
|
|
|
|
|
|
PRC
|
|
$
|
61,362,889
|
|
|
$
|
55,407,391
|
|
USA
|
|
|
1,278,250
|
|
|
|
2,146,518
|
|
Elimination adjustment
|
|
|
(4,194,477
|
)
|
|
|
(3,347,192
|
)
|
Total reportable assets
|
|
$
|
58,446,662
|
|
|
$
|
54,206,717
|
|
The
Company does not allocate any selling, general and administrative expenses, other income/expenses to its reportable segments because
these activities are managed at a corporate level. In addition, the specified amounts for interest expense and income tax expense
are not included in the measure of segment profit or loss reviewed by the chief operating decision maker and these specified amounts
are not regularly provided to the chief operating decision maker.
Asset
information by reportable segment is not 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.
NOTE
15 - SUBSEQUENT EVENT
The
Company has evaluated all subsequent events through the date these consolidated financial statements were issued and determine
that there were no subsequent events or transactions that require recognition or disclosures in the consolidated financial statements.