The following discussion of our consolidated results of operations and cash
flows for the years ended December 31, 2020 and 2019, and consolidated financial
conditions as of December 31, 2020, and 2019 should be read in conjunction with
our consolidated financial statements and the related notes included elsewhere
in this document.



Overview




We are a major grower and seller of yew trees and manufacturer of products made
from yew trees, we also sell branches and leaves of yew trees for the
manufacture of TCM containing taxol, which TCM has been approved in the PRC for
use as a secondary treatment of certain cancers, meaning it must be administered
in combination with other pharmaceutical drugs. The yew industry is highly
regulated in the PRC because the Northeast yew tree is considered an endangered
species. In the third quarter of 2016, we started to sell handmade yew-related
products, such as yew essence oil soaps, yew candles and yew extracts.



For the years ended December 31, 2020 and 2019, we operated in two reportable
business 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.



For the year ended December 31, 2020 and 2019, revenues from the PRC segment
accounted for approximately 99.83% and 98.73% of consolidated revenue; revenues
from USA segment accounted for approximately 0.17% and 1.27% of consolidated
revenue.



27







YBP's revenues were mostly generated by HDS in the PRC. The expenses incurred in
the U.S. were primarily related to fulfilling the reporting requirements of
public listed company, stock-based compensation, office daily operations,
inventory write-down and other costs. As of December 31, 2020, YBP had
approximately $1,888,000 assets and held the 100% equity interests in its
subsidiaries Yew HK and JSJ. Yew HK itself has no business operations or assets
other than holding of equity interests in JSJ. JSJ had no business operations
and assets with a book value of approximately $12,000, including approximately
$10,000in cash at December 31, 2020. JSJ also holds the VIE interests in HDS
through the contractual arrangements (the "Contractual Arrangements") described
in Notes to Consolidated Financial Statements. On November 4, 2014, HDS
established a new subsidiary, Harbin Yew Food Co. LTD. ("HYF"), to develop and
cultivate wood ear mushroom. For the year ended December 31, 2020, HYF had
limited activities. In the event that we are unable to enforce the Contractual
Agreements, we may not be able to exert effective control over HDS and HYF, and
our ability to conduct our business may be materially and adversely affected. If
the applicable PRC authorities invalidate our Contractual Agreements for any
violation of PRC laws, rules and regulations, we would lose control of the VIE
and its subsidiary resulting in its deconsolidation in financial reporting and
severe loss in our market valuation. On June 8, 2016, YBP established a new
subsidiary, MC Commerce Holding Inc. (MC), to sales the Company's yew products
in American market. MC had limited operation activities for the year ended
December 31, 2020.



In December 2019, COVID-19 was reported in China. Since then, COVID-19 has
spread globally, to include the United States and several European countries.
Many countries around the world have imposed quarantines and restrictions on
travel and mass gatherings to slow the spread of the virus and have closed
non-essential businesses. The pandemics could result in increased travel
restrictions, market downturns and changes in the behavior of the terminal
customers of our products related to pandemic fears. In addition, our certain
customers could decrease the demand on our products due to the outbreak of the
COVID-19. To date, our business is impact by the outbreak of the coronavirus
(COVID-19) in China, which resulted the decrease of our revenue during the first
half of 2020. The extent to which the coronavirus impacts our results will
depend on future developments and reactions in China, which are highly uncertain
and will include emerging information concerning the severity of the coronavirus
and the actions taken by governments to attempt to contain the coronavirus. Any
decreased collectability of accounts receivable, or reduction of purchase orders
could further negatively impact our results of operations.

Critical accounting policies and estimates





Our discussion and analysis of our financial condition and results of operations
are based upon our consolidated financial statements, which have been prepared
in accordance with accounting principles generally accepted in the United
States. The preparation of these consolidated financial statements requires us
to make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses, and related disclosure of contingent assets
and liabilities. We continually evaluate our estimates, including those related
to bad debts, allowance for obsolete inventory, and the classification of short
and long-term inventory, the useful life of property and equipment and land use
rights and yew forest assets, recovery of long-lived assets, write-down in value
of inventory, and the valuation of equity transactions. We base our estimates on
historical experience and on various other assumptions that we believed to be
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. Any future changes to these estimates
and assumptions could cause a material change to our reported amounts of
revenues, expenses, assets and liabilities. Actual results may differ from these
estimates under different assumptions or conditions. We believe the following
critical accounting policies affect our significant judgments and estimates used
in the preparation of the financial statements.



Variable interest entities



Pursuant to ASC 810 and related subtopics related to the consolidation of
variable interest entities, we are required to include in our consolidated
financial statements the financial statements of VIEs. The accounting standards
require a VIE to be consolidated by a company if that company is subject to the
risk of loss for the VIE or is entitled to receive the VIE's residual returns.
VIEs are those entities in which we, through contractual arrangements, bear the
risk of, and enjoy the rewards normally associated with ownership of the entity,
and therefore we are the primary beneficiary of the entity. HDS is considered a
VIE, and we are the primary beneficiary. We entered into agreements with HDS
pursuant to which we shall receive 100% of HDS's net income. In accordance with
these agreements, HDS shall pay consulting fees equal to 100% of its net income
to our wholly-owned subsidiary, JSJ. JSJ shall supply the technology and
administrative services needed to service the HDS.



The accounts of HDS are consolidated in the accompanying financial statements.
As a VIE, HDS' sales are included in our total sales, its income from operations
is consolidated with ours, and our net income includes all of HDS' net income,
and their assets and liabilities are included in our consolidated balance
sheets. The VIEs do not have any non-controlling interest and, accordingly, we
did not subtract any net income in calculating the net income attributable to
us. Because of the contractual arrangements, we have pecuniary interest in HDS
that requires consolidation of HDS' financial statements with our financial
statements.



As required by ASC 810-10, we perform a qualitative assessment to determine
whether we are the primary beneficiary of HDS which is identified as a VIE of
us. A quality assessment begins with an understanding of the nature of the risks
in the entity as well as the nature of the entity's activities including terms
of the contracts entered into by the entity, ownership interests issued by the
entity and the parties involved in the design of the entity. The significant
terms of the agreements between us and HDS are discussed above in the "Corporate
Structure and Recapitalization - Second Restructure" section. Our assessment on
the involvement with HDS reveals that we have the absolute power to direct the
most significant activities that impact the economic performance of HDS. JSJ,
our wholly own subsidiary, is obligated to absorb the risk of loss from HDS
activities and is entitled to receive HDS's expected residual returns. In
addition, HDS' 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, we are deemed to be the primary beneficiary of
HDS and the results of HDS' operation are consolidated in our consolidated
financial statements for financial reporting purposes.



28







Accordingly, as a VIE, HDS' sales are included in our total sales, its income
from operations is consolidated with our income from operations and our net
income includes all of HDS' net income. All the equity (net assets) and profits
(losses) of HDS are attributed to us. Therefore, no non-controlling interest in
HDS is presented in our consolidated financial statements. As we do not have any
non-controlling interest and, accordingly, did not subtract any net income in
calculating the net income attributable to us. Because of the Contractual
Arrangements, YBP has a pecuniary interest in HDS that requires consolidation of
HDS' financial statements with those of ours.



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, our historical amounts in the
accompanying consolidated financial statements give retrospective effect to the
Second Restructure, whereby our assets and liabilities are reflected at the
historical carrying values and their operations are presented as if they were
consolidated for all periods presented, with our results of operations being
consolidated from the date of the Second Transfer Agreement. The accounts of HDS
are consolidated in the accompanying financial statements.



Accounts receivable



Accounts receivable are presented net of an allowance for doubtful accounts. We
maintain allowances for doubtful accounts for estimated losses. We review the
accounts receivable balance on a periodic basis and make general and specific
allowances when there is doubt as to the collectability of individual balances.
In evaluating the collectability of individual receivable balances, we consider
many factors, including the age of the balance, a customer's historical payment
history, its current credit-worthiness and current economic trends. Accounts are
written off after exhaustive efforts at collection. We recognize the probability
of the collection for each customer.



Inventories



Inventories consisted of raw materials, work-in-progress, finished
goods-handicrafts, yew seedlings, yew candles and other trees (consisting of
larix, spruce and poplar trees). We classify our inventories based on our
historical and anticipated levels of sales; any inventory in excess of its
normal operating cycle of one year is classified as long-term on our
consolidated balance sheets. Inventories are stated at the lower of cost or net
realizable value utilizing the weighted average method. Raw materials primarily
include yew timber used in the production of products such as handicrafts,
furniture and other products containing yew timber. Finished goods-handicraft
and yew seedlings include direct materials and direct labor.



We estimate the amount of the excess inventories by comparing inventory on hand
with the estimated sales that can be sold within our normal operating cycle of
one year. Any inventory in excess of our current requirements based on
historical and anticipated levels of sales is classified as long-term on our
consolidated balance sheets. Our classification of long-term inventory requires
us to estimate the portion of inventory that can be realized over the next

12
months.



To estimate the amount of slow-moving or obsolete inventories, we analyze
movement of our products, monitor competing products and technologies and
evaluate acceptance of our products. Periodically, we identify inventories that
cannot be sold at all or can only be sold at deeply discounted prices. An
allowance will be established if management determines that certain inventories
may not be saleable. If inventory costs exceed expected net realizable value due
to obsolescence or quantities in excess of expected demand, we will record
reserves for the difference between the carrying cost and the estimated net
realizable value.

Our handicraft and yew furniture products are hand-made by traditional Chinese artisans.





In accordance with 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. We examine
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




29

Land use rights and yew forest assets





All land in the PRC is owned by the PRC government and cannot be sold to any
individual or company. We have recorded the amounts paid to the PRC government
to acquire long-term interests to utilize land and yew forests as land use
rights and yew forest assets. This type of arrangement is common for the use of
land in the PRC. Yew trees on land containing yew tree forests are used to
supply raw materials such as branches, leaves and fruit to us that will be used
to manufacture our products. We amortize these land and yew forest use rights
over the term of the respective land and yew forest use right, which ranges from
15 to 50 years. The lease agreements do not have any renewal option and we have
no further obligations to the lessor. We record the amortization of these land
and forest use rights as part of our cost of revenues.



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"), which was adopted on January 1, 2018
using the full retrospective method. The adoption of ASC 606 did not impact the
Company's previously reported financial statements in any prior period nor did
it result in a cumulative effect adjustment to retained earnings.



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.



Income taxes




We are governed by the Income Tax Law of the PRC, Hong Kong and the United
States. We account 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. We record 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.



We apply 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 our liability for
income taxes. Any such adjustment could be material to our results of operations
for any given quarterly or annual period based, in part, upon the results of
operations for the given period. Currently, we have no uncertain tax positions,
and will continue to evaluate for uncertain positions in the future.



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.



30







Operating leases

Prior to the adoption of ASC 842 on January 1, 2019:





Leases, mainly leases of offices, where substantially all the rewards and risks
of ownership of assets remain with the lessor are accounted for as operating
leases. Payments made under operating leases are recognized as an expense on a
straight-line basis over the lease term. The Company had no finance leases for
any of the periods stated herein.

Upon and hereafter the adoption of ASC 842 on January 1, 2019:


The Company determines if an arrangement is a lease at inception. 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 at commencement
date in determining the present value of lease payments. The Company has elected
to adopt the following lease policies in conjunction with the adoption of ASU
2016-02: (i) for leases that have lease terms of 12 months or less and does not
include a purchase option that is reasonably certain to exercise, the Company
elected not to apply ASC 842 recognition requirements; and (ii) the Company
elected to apply the package of practical expedients for existing arrangements
entered into prior to January 1, 2019 to not reassess (a) whether an arrangement
is or contains a lease, (b) the lease classification applied to existing leases,
and(c) initial direct costs.



Segment reporting



ASC Topic 280 requires use of the "management approach" model for segment
reporting. The management approach model is based on the way a company's
management organizes segments within the company for making operating decisions
and assessing performance. Reportable segments are based on products and
services, geography, legal structure, management structure, or any other manner
in which management disaggregates a company. The Company managed and reviewed
its business as two operating segments starting from year 2018. 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.

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 certain Joint Venture Planting Agreements with
Qingan State-owned Bureau (the "Qingan Forest Bureau") in June 2018 and May
2019, respectively (see Note 16), which is considered a collaborative
arrangement 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 share of profits is 80% for the collaborative agreement with
Wuchang City Forestry Bureau and Qingan State-owned Bureau dated in June 2018,
and is 70% for the collaborative agreement with Qingan State-owned Bureau dated
in May 2019. The Company accounts for this collaborative arrangement under ASC
808, "Collaborative Arrangements" and related topics and will record revenue
gross as the prime contractor. ASC Topic 808-10-15 defines collaborative
arrangements and requires collaborators to present the result of activities for
which they act as the principal on a gross basis and report any payments
received from (made to) the other collaborators based on other applicable
authoritative accounting literature, and in the absence of other applicable
authoritative literature, on a reasonable, rational and consistent accounting
policy is to be elected. The Company adopted the provisions of ASC 808-10-15.
The adoption of this statement did not have an impact on the Company's
consolidated financial position, results of operations or cash flows. For the
years ended December 31, 2020 and 2019, the Company has not generated any
revenues or activity from this collaborative agreement.

Recent accounting pronouncements





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.



Currency exchange rates



Our reporting currency is the U.S. dollar, and the functional currency of our
operating subsidiaries and VIE is the RMB. All of our sales are denominated in
RMB. As a result, changes in the relative values of U.S. dollars and RMB affect
our reported levels of revenues and profitability as the results of our
operations are translated into U.S. dollars for reporting purposes. In
particular, fluctuations in currency exchange rates could have a significant
impact on our financial stability due to a mismatch among various foreign
currency-denominated sales and costs. Fluctuations in exchange rates between the
U.S. dollar and RMB affect our gross and net profit margins and could result in
foreign exchange and operating losses.



31







Our exposure to foreign exchange risk primarily relates to currency gains or
losses resulting from timing differences between signing of sales contracts and
settling of these contracts. Furthermore, we translate monetary assets and
liabilities denominated in other currencies into RMB, the functional currency of
our operating subsidiaries. Our results of operations and cash flow are
translated at average exchange rates during the period, and assets and
liabilities are translated at the unified exchange rate at the end of the
period. Translation adjustments resulting from this process are included in
accumulated other comprehensive income in our statement of shareholders' equity.
We have not used any forward contracts, currency options or borrowings to hedge
our exposure to foreign currency exchange risk. We cannot predict the impact of
future exchange rate fluctuations on our results of operations and may incur net
foreign currency losses in the future.



Our financial statements are expressed in U.S. dollars, which is the functional
currency of our parent company. The functional currency of our operating
subsidiaries and affiliates is RMB. To the extent we hold assets denominated in
U.S. dollars, any appreciation of the RMB against the U.S. dollar could result
in a charge in our statement of operations and a reduction in the value of our
U.S. dollar denominated assets. On the other hand, a decline in the value of RMB
against the U.S. dollar could reduce the U.S. dollar equivalent amounts of

our
financial results.



Results of Operations




The following tables set forth key components of our results of operations for
the periods indicated, in dollars. The discussion following the table is based
on these results:



                                                   Years Ended
                                                  December 31,
                                              2020             2019
Revenues                                  $ 27,307,687     $ 27,883,649
Cost of revenues                            23,780,672       27,109,518
Gross profit                                 3,527,015          774,131
Operating expenses                             958,316         (237,388 )
Income from operations                       2,568,699        1,011,519
Other expenses                              (1,075,049 )        (14,799 )
Income Tax                                     (28,768 )        (11,214 )
Net income                                   1,464,882          985,506

Other comprehensive income (loss): Foreign currency translation adjustment 2,799,088 (544,809 ) Comprehensive income

$  4,263,970     $    440,697




32

Year Ended December 31, 2020 Compared to Year Ended December 31, 2019





Revenues




For the year ended December 31, 2020, we had total revenues of $27,307,687, as
compared to $27,883,649 for the year ended December 31, 2019, a decrease of
$575,962 or 2.07%. The decrease in total revenue was attributable to the
decrease in revenues from extracts, partially offset by increase in revenues
from sales of TCM raw materials.

Total revenue is summarized as follows:





                             Years Ended
                            December 31,                Increase        Percentage
                        2020             2019          (Decrease)         Change

TCM raw materials $ 16,659,547 $ 10,705,727 $ 5,953,820

  55.61 %
Handicrafts                9,621          155,132         (145,511 )         (93.80 )%
Extracts              10,430,000       16,662,404       (6,232,404 )         (37.40 )%
Others                   208,519          360,386         (151,867 )         (42.14 )%
Total               $ 27,307,687     $ 27,883,649     $   (575,962 )          (2.07 )%




For the year ended December 31, 2020 compared to December 31, 2019, the increase
in revenue of TCM raw material was mainly attributable to the increase in demand
from our related party, Yew Pharmaceutical . The decrease in revenue of extracts
was mainly attributable to the increase in demand of pine needle extract,
complex taxus cuspidate extract, and composite northeast yew extract.



Cost of Revenues



For the year ended December 31, 2020, cost of revenues amounted to $23,780,672
as compared to $27,109,518 for the year ended December 31, 2019, a decrease of
$3,328,846 or 12.28%. For the year ended December 31, 2020, cost of revenues
accounted for 87.08% of total revenues compared to 97.22% of total revenues for
the year ended December 31, 2019.

Cost of revenues by product categories is as follows:





                             Years Ended
                            December 31,                Increase        Percentage
                        2020             2019          (Decrease)         Change
TCM raw materials   $ 12,969,257     $  9,962,940     $  3,006,317            30.18 %
Handicrafts                9,474           88,162          (78,688 )         (89.25 )%
Extracts              10,059,610       16,624,332       (6,564,722 )         (39.49 )%
Others                   742,331          434,084          308,247            71.01 %
Total               $ 23,780,672     $ 27,109,518     $ (3,328,846 )         (12.28 )%




The decrease in our cost of revenues for the year ended December 31, 2020 as
compared to the year ended December 31, 2019 was primarily a result of the
decrease in costs of revenue in extracts, partially offset by increases in

TCM
raw materials.



33







Gross Profit



For the year ended December 31, 2020, gross profit was $3,527,015 as compared to
$774,131 for the year ended December 31, 2019, representing gross profit margins
of 12.92% and 2.78%, respectively. Gross profit margins by categories are as
follows:



                           Years Ended December 31,
                      2020           2019        Increase
TCM raw materials       22.15 %        6.94 %        15.21 %
Handicrafts              1.53 %       43.17 %       (41.64 )%
Extracts                 3.55 %        0.23 %         3.32 %
Others                (256.00 )%     (20.45 )%     (235.55 )%
Total                   12.92 %        2.78 %        10.14 %





The increase in our overall gross profit margin for the year ended December 31,
2020 as compared to the year ended December 31, 2019 was primarily attributable
to the higher gross margin yields of TCM raw materials and Extracts.



The increase in our gross margin percentage related to the sale of TCM raw
materials for the year ended December 31, 2020 as compared to the year ended
December 31, 2019, was primarily attributable to the fact that conversion rate
from Yew tree into yew foliage for the year ended December 31, 2020 was higher
than it for the year ended December 31, 2019.



Operating Expenses



For the year ended December 31, 2020, operating expenses amounted to $958,316,
as compared to $(237,388) for the year ended December 31, 2019, an increase of
$1,195,704 or 503.69%.

The increase was mainly due to the fact that the Company had $30,658 bad debt recovery as of December 31, 2020 compared with $1,688,406 bad debt recovery during prior year after offset with $177,583 decrease of stock-based compensation over the two years.





Income from Operations



For the year ended December 31, 2020, income from operations was $2,568,699, as
compared to income from operations of $1,011,519 for the year ended December 31,
2019, an increase of $1,557,180, or 153.94%. The increase was primarily
attributable to the reasons stated above.



Other Expenses

For the year ended December 31, 2020, total other expense was $1,075,049 as compared to total other expense was $14,799 for the year ended December 31, 2019. The increase is mainly attributable to the increase of exchange loss.





Net Income



As a result of the factors described above, our net income was $1,464,882 or
$0.03 per share (basic and diluted), for the year ended December 31, 2020, as
compared to net income of $985,506 or $0.02 per share (basic and diluted), for
the year ended December 31, 2019.

Foreign Currency Translation Adjustment





For the year ended December 31, 2020, we reported an unrealized gain on foreign
currency translation of $2,799,088, as compared to an unrealized loss $544,809
for the year ended December 31, 2019. The change reflects the effect of the
value of the U.S. dollar in relation to the RMB. These gains and loss are
non-cash items. As described elsewhere herein, the functional currency of our
subsidiary, JSJ, and our VIE, HDS and HYF, is RMB. The accompanying consolidated
financial statements have been translated and presented in U.S. dollars using
period end rates of exchange for assets and liabilities, and average rates of
exchange for the period for net revenues, costs, and expenses. Net gains or loss
resulting from foreign exchange transactions, if any, are included in the
consolidated statements of income.



Comprehensive Income (Loss)



For the year ended December 31, 2020, comprehensive income of $4,263,970 was
derived from the sum of our net income of $1,464,882 and foreign currency
translation gain of $2,799,088. For the year ended December 31, 2019,
comprehensive income of $440,697 was derived from the sum of our net income of
$985,506 and foreign currency translation loss of $544,809.



34







Segment Information



For the year ended December 31, 2020, we operated in two reportable business
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.

Information with respect to these reportable business segments for the years ended December 31, 2020 and 2019 was as follows:





                                                  For the year ended                                For the year ended
                                                  December 31, 2020                                 December 31, 2019
                                     Revenues-       Revenues -                        Revenues-        Revenues -
                                       third          related                            third           related
                                      parties         parties           Total           parties           party            Total

Revenues:
PRC                                  $  843,427     $ 26,418,449     $ 27,261,876     $  9,678,548     $ 17,850,376     $ 27,528,924

USA                                      45,811                -           45,811          354,725                -          354,725

Total revenues                       $  889,238     $ 26,418,449     $ 27,307,687     $ 10,033,273     $ 17,850,376     $ 27,883,649




During the years ended December 31, 2020 and 2019, the revenue from PRC segment
was $27,261,876 and $27,528,924, respectively, decrease of $267,048 or 0.97% due
to the decrease demand on Asia market. The decrease in PRC segment was mainly
due to the decrease in revenue from third parties in the amount of $8,835,121,
offset by the increase in revenue from related parties in the amount of
$8,568,073.



During the years ended December 31, 2020 and 2019, the revenue from USA segment
was $45,811 and $354,725, respectively, decrease of $308,914 or 87.09%. The
decrease in USA segment was due to the decrease in revenue from third parties in
the amount of $308,914 attributable to our China customers' decreased oversea
demand.

Liquidity and Capital Resources





Liquidity is the ability of a company to generate funds to support its current
and future operations, satisfy its obligations and otherwise operate on an
ongoing basis. At December 31, 2020 and 2019, we had cash balances of $563,792
and $742,294, respectively. These funds were primarily located in various
financial institutions located in China. Our primary uses of cash have been for
the purchase of yew trees, land use rights and yew forest assets. Additionally,
we use cash for employee compensation and working capital. Our working capital
decreased by $1,725,779 to $(535,726) at December 31, 2020, from working capital
of $1,190,053 at December 31, 2019.



35







For the year ended December 31, 2020, net cash flow provided by operating
activities was $17,340,086, as compared to $11,953,657 for the year ended
December 31, 2019, an increase of $5,386,429. Because the exchange rate
conversion is different for the balance sheet and the statements of cash flows,
the changes in assets and liabilities reflected on the statements of cash flows
are not necessarily identical with the comparable changes reflected on the
balance sheets.

For the year ended December 31, 2020, net cash flow provided by operating activities of $17,340,086 was primarily attributable to:

? net income of approximately $1,465,000 adjusted for the add-back of non-cash

items, such as amortization of land use rights and yew forest assets of

approximately $2,761,000, inventory reserves of approximately $733,000, and


  sale of yew forest assets as inventory of approximately $10,065,000; and

the receipt of cash from operations from changes in operating assets and liabilities, such as a decrease in accounts receivable of approximately $7,561,000, and a decrease in inventories, net of approximately $2,739,000.





partially offset by:

? the use of cash from changes in operating assets and liabilities, such as an

increase in accounts receivable - related parties of approximately $8,336,000.

For the year ended December 31, 2019, net cash flow provided by operating activities of $11,953,657 was primarily attributable to:

? net income of approximately $986,000 adjusted for the add-back of non-cash

items, such as stock-based compensation of approximately $284,000, amortization

of land use rights and yew forest assets of approximately $1,754,000, bad debt

recovery of approximately $1,688,000, inventory write-down of approximately

$168,000, and sale of yew forest assets as inventory of approximately
  $7,644,000; and

the receipt of cash from operations from changes in operating assets and liabilities, such as a decrease in accounts receivable-related parties of approximately $6,053,000, and a decrease in inventories, net of $3,589,000.





partially offset by:

? the use of cash from changes in operating assets and liabilities, such as an


  increase in accounts receivable of approximately $7,742,000.




36



Net cash flow used in investing activities was approximately $17,000,000 for the
year ended December 31, 2020. During the year ended December 31, 2020, we have
made prepayment in approximately $4,600,000 for purchase of yew forest assets
and approximately $12,700,000 for purchase of land use right and yew forest
assets. Net cash flow used in investing activities was approximately $15,000,000
for the year ended December 31, 2019. During the year ended December 31, 2019,
we have made payment in approximately $14,700,000 for purchase of land use

right
and yew forest assets.



Net cash flow used in financing activities was approximately $14,000 for the
year ended December 31, 2020 and consisted of proceeds of approximately
$11,814,000 new borrowings from banks and offset by repayments of approximately
$11,934,000 bank loans. Net cash flow provided by financing activities was
approximately $2,900,000 for the year ended December 31, 2019 and consisted of
proceeds of approximately $12,000,000 from banks and offset by repayments of
approximately $9,000,000.



We have historically financed our operations and capital expenditures through
cash flows from operations, bank loans and advances from related parties. From
March 2008 to September 2009, we received approximately $2.9 million of proceeds
in the aggregate from offerings and sales of our common stock. Except for the
portion used to pay for professional and other expenses in the U.S., substantial
portions of the proceeds we received through sales of our common stock were
retained in the PRC and used to fund our working capital requirements. As the
PRC government imposes controls on PRC companies' ability to convert RMB into
foreign currencies and the remittance of currency out of China, from time to
time, in order to fund our corporate activities in the U.S., Zhiguo Wang, our
President and CEO, advanced funds to us in the U.S. and we repaid the amounts
owed to him in RMB in the PRC.

.

The majority of our funds are maintained in RMB in bank accounts in China. We
receive most of our revenue in the PRC. Under existing PRC foreign exchange
regulations, payments of current account items, including profit distributions,
interest payments and expenditures from trade related transactions, can be made
in foreign currencies by complying with certain procedural requirements.
However, approval from China's State Administration of Foreign Exchange ("SAFE")
or its local counterparts is required where RMB is to be converted into foreign
currency and remitted out of China to pay capital expenses such as the repayment
of loans denominated in foreign currencies. The PRC government may also, at its
discretion, restrict access to foreign currencies for current account
transactions. As of December 31, 2020, and 2019, approximately $50.3 million and
$44.6 million, respectively, of our net assets are located in the PRC. If the
foreign exchange control system in the PRC prevents us from obtaining sufficient
foreign currency to satisfy our currency demands, we may not be able to transfer
funds deposited within the PRC to fund working capital requirements in the U.S.
or pay any dividends in currencies other than the RMB, to our shareholders.

Contractual Obligations and Off-Balance Sheet Arrangements





We have certain potential commitments that include future estimated payments.
Changes in our business needs, cancellation provisions, changing interest rates
and other factors may result in actual payments differing from the estimates. We
cannot provide certainty regarding the timing and amounts of payments. We have
presented below a summary of the most significant assumptions used in our
determination of amounts presented in the tables, in order to assist in the
review of this information within the context of our consolidated financial
position, results of operations and cash flows.



The following tables summarize our contractual obligations as of December 31,
2020, and the effect these obligations are expected to have on our liquidity and
cash flows in future periods:



Years Ending December 31:



                                   Obligations
              Debt obligations       Operating lease         Total
2021         $        8,979,899                79,997       9,059,896
2022                          -                80,327          80,327
2023                          -                33,594          33,594
2024                          -                29,332          29,332
2025                          -                26,314          26,314
Thereafter                    -               211,830         211,830
Total        $        8,979,899               461,393       9,441,292

Off-Balance Sheet Arrangements





We have not entered into any financial guarantees or other commitments to
guarantee the payment obligations of any third parties. We have not entered into
any derivative contracts that are indexed to our shares and classified as
shareholder's equity or that are not reflected in our consolidated financial
statements. Furthermore, we do not have any retained or contingent interest in
assets transferred to an unconsolidated entity that serves as credit, liquidity
or market risk support to such entity. We do not have any variable interest in
any unconsolidated entity that provides financing, liquidity, market risk or
credit support to us or engages in leasing, hedging or research and development
services with us.



37

© Edgar Online, source Glimpses