The accompanying notes are an integral part of these consolidated financial statements.

4

Taxus Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements

(Unaudited)

NOTE 1 – ORGANIZATION AND NATURE OF BUSINESS

Taxus Pharmaceuticals, Inc. (“Taxus”) was incorporated in the state of Nevada on February 17, 2012. The accompanying consolidated financial statements include the financial statements of Taxus and its subsidiaries (collectively the “Company”). The Company is currently engaged in the business of selling pharmaceutical drugs, medicines and chemical reagents. Its immediate future primary business plan is to propagate yew, extract paclitaxel from yew, and sell paclitaxel extraction.

On March 28, 2012, Taxus entered into a stock exchange agreement with Stand Giant International Limited (“Stand Giant”) which was incorporated on February 18, 2011 in the city of Hong Kong, the People’s Republic of China (“PRC”) , with registered 10,000 shares of common stock, par value of Hong Kong Dollar (“HK$”) 1 per share, amounted $1,285 (HK$10,000). Pursuant to the stock exchange agreement, Taxus issued 13,244,500 shares in exchange for all of the issued and outstanding shares of Stand Giant. This transaction is treated as a recapitalization of Stand Giant as it is the accounting acquirer. As a result of the recapitalization, Stand Giant became a wholly owned subsidiary of the Company and the historical financial statements of Stand Giant become those of the Company.

On May 13, 2011, Stand Giant contributed capital of $157,400 to form Hongshan Energy Technology Services (Taiyuan) Company, Ltd., a Wholly Foreign-Owned Enterprise (“WFOE”) in the city of Taiyuan, Shanxi Province, PRC.

On June 28, 2011, WFOE entered into a series of agreements, including an Exclusive Consulting Service Agreement, a Call Option Agreement, and a Share Pledge Agreement (collectively “Hongshan Agreements”) with Shanxi Hongshan Pharmaceuticals Co., Ltd. (“Hongshan Pharmaceuticals”), and its shareholders Jiayue Zhang and Tong Zhang. Hongshan Pharmaceuticals was incorporated on August 4, 2000 under the laws of the PRC. Hongshan Energy’s compensation for the services provided under the Consulting Service Agreement is the post-tax net earnings of Hongshan Pharmaceuticals, which also subject Hongshan Energy to the risk of assuming the loss of Hongshan Pharmaceuticals in the event that Hongshan Pharmaceuticals suffers net loss in any fiscal year. Additionally, under a Call Option Agreement, the shareholders of Hongshan Pharmaceuticals have vested their voting rights over Hongshan Pharmaceuticals to Hongshan Energy. In order to further reinforce Hongshan Energy’s rights, Hongshan Pharmaceuticals and its shareholders have granted Hongshan Energy, under the Call Option Agreement, the exclusive right and option to acquire all of their equity interests in Hongshan Pharmaceuticals. Further, the shareholders of Hongshan Pharmaceuticals pledged all of their rights, titles and interests in Hongshan Pharmaceuticals to Hongshan Energy under the Share Pledge Agreement. The shareholders of Hongshan Pharmaceuticals also granted power of attorney to Hongshan Energy to exercise all the shareholder's rights and shareholder's voting rights. After the execution of the Hongshan Agreements, Hongshan Pharmaceuticals became the WFOE’s Variable Interest Entities (“VIE”) as defined in FASB ASC 810 (formerly FIN-46R).

On the same day, WFOE entered into an Exclusive Consulting Service Agreement, a Call Option Agreement, and a Share Pledge Agreement (collectively “Renji Agreements”) with Jinzhong Renji Pharmaceuticals Co., Ltd. (“Renji Pharmaceuticals”), and its shareholders Jinying Zhang and Fuying Zhang. Renji Pharmaceuticals was incorporated on June 5, 2007 under the laws of the PRC. Hongshan Energy’s compensation for the services provided under the Consulting Service Agreement is the post-tax net earnings of Renji, which also subject Hongshan Energy to the risk of assuming the loss of Renji Pharmaceuticals in the event that Renji Pharmaceuticals suffers net loss in any fiscal year. Additionally, under a Call Option Agreement, the shareholders of Renji Pharmaceuticals have vested their voting rights over Renji Pharmaceuticals to Hongshan Energy. In order to further reinforce Hongshan Energy’s rights, Renji Pharmaceuticals and its shareholders have granted Hongshan Energy, under the Call Option Agreement, the exclusive right and option to acquire all of their equity interests Renji Pharmaceuticals. Further, the shareholders of Renji Pharmaceuticals pledged all of their rights, titles and interests in Renji Pharmaceuticals to Hongshan Energy under the Share Pledge Agreement. The shareholders of Renji Pharmaceuticals also granted power of attorney to Hongshan Energy to exercise all the shareholder's rights and shareholder's voting rights. After the execution of the Renji Agreements, Renji Pharmaceuticals became WFOE’s VIE as defined in FASB ASC 810 (formerly FIN-46R).

5

Taxus Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements

(Unaudited)

NOTE 1 – ORGANIZATION AND NATURE OF BUSINESS (CONTINUED)

On December 27, 2011, Hongshan Pharmaceuticals acquired 94% equity interest in Shanxi Kunyuan Health Products Co., Ltd. (“Kunyuan”). Kunyuan was incorporated on November 21, 2000 under the laws of the PRC. As a result of the acquisition, Kunyuan became a majority owned subsidiary of Hongshan Pharmaceuticals. The purchase price of the business was $1,479,560. As of March 31, 2013, the Company has paid $901,740 and the outstanding obligation was $598,500.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION AND CONSOLIDATION

As disclosed in Note 1, Kunyuan and Renji Pharmaceuticals are VIEs of the WFOE. VIEs are those entities in which the WFOE, through contractual arrangements, bears the risks of, and enjoys the rewards normally associated with ownership of the entities, and therefore the WFOE is the primary beneficiary of these entities. As a result, the VIEs are consolidated by the WFOE following the provision of ASC 810 "Consolidation of Variable Interest Entities" ("ASC 810"), and eventually consolidated into the Company’s financial statements. All inter-company transactions and balances have been eliminated in consolidation. The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) applicable to financial information.

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) applicable to interim financial information. Accordingly, the Company does not include all of the information and disclosures required by accounting principles generally accepted in the United States of America for complete financial statements. Interim results are not necessarily indicative of results for a full year. In the opinion of management, all adjustments considered necessary for a fair presentation of the financial position and the results of operations and cash flows for the interim periods have been included.

In preparing the accompanying unaudited consolidated financial statements, the Company evaluated the period from March 31, 2013 through the date the financial statements were issued for material subsequent events requiring recognition or disclosure. No such events were identified for this period.

INTERIM FINANCIAL STATEMENTS

These consolidated interim financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2012, as not all disclosures required by US GAAP for annual financial statements are presented. The interim consolidated financial statements follow the same accounting policies and methods of computations as the audited consolidated financial statements for the year ended December 31, 2012.

RISK AND UNCERTAINTIES

The Company's operations are carried out in the PRC. Accordingly, the Company's business, financial condition and results of operations may be adversely influenced by the PRC’s political, economic and legal environments as well as by the general state of the PRC’s economy. Specially, the Company's business may be negatively influenced by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things.

6

Taxus Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements

(Unaudited)

NOTE 3 – INVENTORY

Inventory consists of yew tree bonsais for decorative and landscaping uses by Shanxi Hongshan Pharmaceuticals, and medicines and chemical reagents held for sale by Renji Pharmaceuticals. Total inventory as of March 31, 2013 and December 31, 2012 consists of the following:

NOTE 4 – PROPERTY AND EQUIPMENT

Property and equipment as of March 31, 2013 and December 31, 2012 consists of the following:

Depreciation expense for the three months ended March 31, 2013 and 2012 was $31,159 and $12,425, respectively. Amortization of matured yew trees included in depreciation expenses for the three months ended March 31, 2013 and 2012 was $7,288 and $0, respectively.

NOTE 5 – INTANGIBLE ASSETS

Intangible assets as of March 31, 2013 and December 31, 2012 consist of the following:

Intangible assets are stated at cost. Intangible assets with finite life are amortized over their estimated useful life using straight-line method. Amortization expense for the three months ended March 31, 2013 and 2012 was $1,846 and $1,840, respectively.

7

Taxus Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements

(Unaudited)

NOTE 6 – GOODWILL

On December 27, 2011, the company completed its acquisition of 94% equity interest in Kunyuan for a consideration of $1,479,560. Goodwill, which is equal to the excess of cost over the fair value of acquired assets, has been recorded in conjunction with the acquisition. Goodwill is accounted for in accordance with ASC 350 (formerly SFAS 142 “Goodwill and Other Intangible Assets”). Under ASC 350, goodwill is not amortized and is subject to impairment test, at least annually. As of March 31, 2013, the Company concluded that there was no impairment of goodwill.

NOTE 7 – LOANS FROM UNRELATED PARTY

The loans are unsecured, non-interest bearing and payable on demand. There is no financial or non-financial covenants associated with the loans. The proceeds from the loans are utilized for working capital. As of March 31, 2013 and December 31, 2012, the Company had outstanding loans from unrelated party of $647,917 and $637,570, respectively.

NOTE 8 – DUE TO SHAREHOLDER

The Company’s shareholder, Mr. Jiayue Zhang, made certain interest-free advances to the Company for working capital needs. As of March 31, 2013 and December 31, 2012, the balance due to shareholder was $3,726,016 and $3,706,952, respectively. Mr. Zhang has agreed that no demand for payment will be made until December 31, 2015 and that he will continue providing necessary funds to the Company whenever needed.

NOTE 9 – CAPITAL LEASE OBLIGATION – FUTURE MINIMUM LEASE PAYMENTS

The Company leased a machine under lease agreement that is classified as capital lease obligation. The cost of machine under capital lease obligation included in the property and equipment was $ 75,899 and $75,471 as of March 31, 2013 and December 31, 2012, respectively. Accumulated amortization on the capital lease of the leased machinery as of March 31, 2013 and December 31, 2012 was $68,798 and $61,510, respectively. Depreciation of assets under capital leases was included in depreciation expense.

The future minimum lease payments required under the capital leases and the present values of the net minimum lease payments as of March 31, 2013 were $7,101, which will be paid off in 2013.

NOTE 10 – AUTO LOAN

The Company entered into a series of 36-month car purchase agreements with various dealers. The cost included in the property and equipment was $77,439 and $77,003 as of March 31, 2013 and December 31, 2012, respectively. Accumulated amortization on the loan of these cars as of March 31, 2013 and December 31, 2012 was $33,676 and $30,205, respectively.

Auto loan consists of loans used to purchase vehicles with various monthly principal and interest payments.  The amounts as of March 31, 2013 and December 31, 2012 consist of the following:

8

Taxus Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements

(Unaudited)

NOTE 11 – COMMITMENTS AND CONTINGENCIES

The Company has leased four parcels of land from the local villages, Yuci city of Shanxi province, PRC. Three of which were leased for 65 years effective September 1, 2009; whereas one was leased for 70 years effective September 09, 2010. The leased land is mountainous and used to plant and grow yew trees. The total space of land under these four leases is 2,252 acres (13,672 Mu). Annual lease payments are approximately $25,975 (RMB163,672) beginning December 31, 2009 through December 31, 2013, and thereafter will decrease to approximately $2,170 (RMB13,672) through the end of the lease term. Lease payments for the three months ended March 31, 2013 and 2012 were expensed.

The Company has leased a parcel of land with area of 9.2 acres (56 mu) in Zibo city of Shandong province, PRC from Ping Yu, an unrelated vendor. The land is used to store yew trees for the Company’s future production. The land was leased for 30 years effective April 3, 2008 with annual payments approximately $10,666 (RMB 67,200) through the end of the lease term on April 2, 2038. Lease payments for the three months ended March 31, 2013 and 2012 were expensed.

NOTE 12 – INCOME TAX

Taxus is a U.S. holding company incorporated in the state of Nevada and does not engage in any business operations. It did not generate any revenues for the three months ended March 31, 2012 and 2011, and therefore there was no income tax provision or benefit for U.S. income tax purpose.

Stand Giant was incorporated in Hong Kong, PRC. It is exempt from taxes on income or capital gains under the tax laws thereof.

The Company’s Chinese subsidiaries and VIEs are governed by PRC’s Income Tax Law and are subject to statutory income tax rate of 25%. There is no provision for income taxes as these operating subsidiaries have incurred operating losses as of March 31, 2013.

FASB ASC 740 (formerly Fin 48), Accounting for Uncertainty in Income Taxes,  clarifies the accounting for income taxes by prescribing a minimum probability threshold that a tax position must meet before a financial statement benefit is recognized. The minimum threshold is defined in ASC 740 as a tax position that is more likely than not to be sustained upon examination by the applicable taxing authority, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The Company has evaluated its tax position and has not identified any such tax uncertainties, and therefore did not accrue for any such tax liability nor did it recognize any such benefit for the quarter ended March 31, 2013.

NOTE 13 – SEGMENTS

ASC 280-10 (formerly SFAS 131), “Disclosure about Segments of an Enterprise and Related Information” requires that companies disclose segment data based on how management makes decision about allocating resources to segments and evaluating their performance.

The Company has evaluated the structure of its organization and has determined, based on the requirements of ASC 280-10, that the Company has the following three reportable segments, identified based on the nature of products, the type or class of customers, and the methods used to distribute the Company’s products:

Retail pharmacy through operation of Renji Pharmaceuticals;

Retail of dietary supplements (mainly Kunyuan 919 oral solution) through Kunyuan;

Yew tree cultivation, paclitaxel extraction and bonsai sales through Hongshan Pharmaceuticals;

The Company defines its segments as those business units whose operating results are regularly reviewed by the chief operating decision maker (“CODM”) to analyze performance and allocate resources.

For the three months ended March 31, 2013 and 2012, all of the Company’s operations were carried out in one geographical segment – P.R.C.

9

Taxus Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements

(Unaudited)

NOTE 13 – SEGMENTS (CONTINUED)

The following table sets out the Company’s segment information. The "Unallocated" column in the following table contains the reconciliation between the amounts for reportable segments and the consolidated amounts, which consists primarily of corporate items not allocated to the reportable segments, intersegment eliminations. Intersegment sales are accounted for at fair value as if sales were to third parties.

Summarized financial information concerning reportable segments is shown in the following table:

NOTE 14 – STOCK AUTHORIZATION AND ISSUANCE

According to Article III of Taxus Pharmaceuticals, Inc. Certificate of Incorporation filed on February 17, 2012, the Company is authorized to issue two classes of shares to be designated respectively preferred stock and common stock. The total number of shares of preferred stock the Company is authorized to issue is 10,000,000 with a par value of $0.0001 per share. The total number of shares of common stock the Company is authorized to issue is 100,000,000 with a par value of $0.0001 per share.

On March 13 and 22, 2012, Taxus issued 9,398,000 shares of common stock for $0.01 per share to 45 individuals. The proceeds from the transaction were $93,980. On March 28, 2012, Taxus entered into a stock exchange agreement with Stand Giant. Pursuant to the stock exchange agreement, Taxus issued an agreement of 13,244,500 common shares in exchange for all of the issued and outstanding shares of Stand Giant. As a result of the stock exchange transaction, Stand Giant became a wholly owned subsidiary of the company. As of March 31, 2013, 22,642,500 shares of common stock were issued and outstanding.

NOTE 15 – EARNINGS (LOSS) PER SHARE

The Company presents earnings (loss) per share on a basic and diluted basis. Basic earnings (loss) per share have been computed by dividing net earnings by the weighted average number of shares outstanding. Diluted earnings (loss) per share have been computed by dividing net earnings by the weighted average number of shares outstanding including the dilutive effect of equity securities. The computation of basic net earnings (loss) per share and diluted net earnings (loss) per share for three months ended March 31, 2013 and 2012 are as follows:

10

Taxus Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements

(Unaudited)

NOTE 15 – EARNINGS (LOSS) PER SHARE (CONTINUED)

NOTE 16 – RISK OF CONCENTRATIONS AND CREDIT RISK

For the three months ended March 31, 2013 and 2012, no single customer accounted for more than 10% of the Company’s sales.

For the three months ended March 31, 2013 and 2012, no single vendor accounted for more than 10% of the Company’s purchases.

Financial instruments which potentially subject the Company to credit risk consist principally of cash on deposit with financial institutions. Management believes that the financial institutions that hold the Company’s cash and cash equivalents are financially sound and minimal credit risk exists with respect to these investments.