UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-Q
 
 
☒
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended December 31, 2015
 
 
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from                  to                    
 
Commission file number: 0-53600
 
CHINA YCT INTERNATIONAL GROUP, INC.
(Exact name of registrant as specified in its charter)
 
Delaware
65-2954561
(State or other jurisdiction of incorporation or organization)
(IRS Employer Identification No.)
 
c/o Shandong Spring Pharmaceutical Co., Ltd Economic Development Zone.
Gucheng Road Sishui County Shandong Province PR China 273200
(Address of principal executive offices)         (Zip Code)
 
Issuer's telephone number: 406-282-3188
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.      Yes      ☒   No      ☐
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     Yes     ☒   No     ☐
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer ☐ Accelerated filer ☐
Non-accelerated filer ☐ (Do not check if a smaller reporting company) Smaller reporting company ☒
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes ☐       No ☒
 
The number of shares outstanding of the issuer's common stock on February 11, 2016 was 29,720,690

CHINA YCT INTERNATIONAL GROUP, INC.
 
FORM 10-Q
 
December 31, 2015
 
Table of Contents
 
 
 
Page
PART I - FINANCIAL INFORMATION
 
 
 
Item 1:
Financial Statements
2
     
Item 2:
Management's Discussion and Analysis of Financial Condition and Results of Operations
13
     
Item 3:
Quantitative and Qualitative Disclosures About Market Risk
21
     
Item 4:
Controls and Procedures
21
 
  
 
PART II - OTHER INFORMATION
 
 
 
Item 1:
Legal Proceedings
22
     
Item 1A:
Risk Factors
22
     
Item 2:
Unregistered Sales of Equity Securities and Use of Proceeds
22
     
Item 3:
Defaults Upon Senior Securities
22
     
Item 4:
Removed and Reserved
22
     
Item 5:
Other Information
22
     
Item 6:
Exhibits
23

1
 
CHINA YCT INTERNATIONAL GROUP, INC.
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2015 AND 2014
(UNAUDITED)
 
Table of Contents

 
Page
 
 
Consolidated Balance Sheets as of December 31, 2015 and March 31, 2015 (Unaudited)
 4
 
 
Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended December 31, 2015 and 2014 (Unaudited)
 5
 
 
Consolidated Statements of Cash Flows for the Nine Months Ended December 31, 2015 and 2014 (Unaudited)
 6
 
 
Notes to Consolidated Financial Statements (Unaudited)
7- 14

2
CHINA YCT INTERNATIONAL GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
 
  
December 31,
2015
    
March 31,
2015
  
 
        
Assets
  
   
 
Current assets:
  
   
 
Cash and cash equivalent
  
$
4,749,825
    
$
13,083,532
  
Accounts receivable
    
240,210
      
95,544
  
Prepaid leases – current portion
    
956,811
      
685,934
  
Deferred tax assets
    
38,459
      
-
  
Inventory
    
3,160,443
      
896,843
  
Total current assets
    
9,145,748
      
14,761,853
  
                 
Prepaid leases
    
2,540,314
      
2,060,441
  
Development cost of acer truncatum bunge planting
    
41,956,141
      
32,078,148
  
Plant, property, and equipment, net
    
12,948,548
      
12,864,161
  
Intangible assets, net
    
13,608,911
      
15,393,272
  
Total assets
  
$
80,199,662
    
$
77,157,875
  
 
                
Liabilities and Stockholders' Equity
                
Liabilities:
                
Current liabilities:
                
Accounts payable and other accrued expenses
  
$
158,847
    
$
145,321
  
Taxes payable
    
718,940
      
1,603,063
  
Total current liabilities
    
877,787
      
1,748,384
  
Total liabilities
    
877,787
      
1,748,384
  
 
                
Stockholders' Equity
                
Preferred stock, par value $500.00 per share; 45 shares authorized and issued and outstanding at December 31, 2015 and March 31, 2015.
    
22,500
      
22,500
  
Common stock, par value $0.001 per share; 100,000,000 shares authorized;  29,720,690 and 29,700,690 shares issued and outstanding at December 31, 2015 and March 31, 2015, respectively.
    
29,720
      
29,701
  
Additional paid-in capital
    
4,494,356
      
4,210,407
  
Statutory reserve
    
1,828,504
      
1,828,504
  
Retained earnings
    
72,579,429
      
64,566,532
  
Accumulated other comprehensive income
    
367,366
      
4,751,847
  
Total stockholders' equity
    
79,321,875
      
75,409,491
  
Total liabilities and stockholders' equity
  
$
80,199,662
    
$
77,157,875
  
 
The accompanying notes are an integral part of these financial statements.
3
CHINA YCT INTERNATIONAL GROUP, INC.
CONSOLIDATED STATEMENTS
OF COMPREHENSIVE INCOME
(Unaudited)

 
  
THREE MONTHS ENDED
DECEMBER 31,
    
NINE MONTHS ENDED
DECEMBER 31,
  
 
  
2015
    
2014
    
2015
    
2014
  
 
                
Revenue
  
$
11,858,027
    
$
9,511,534
    
$
37,467,517
    
$
26,365,663
  
Cost of Goods Sold
    
6,781,646
      
4,826,870
      
20,485,954
      
13,397,445
  
Gross Profit
    
5,076,381
      
4,684,664
      
16,981,563
      
12,968,218
  
Operating Expenses
                                
Selling Expenses
    
1,417,716
      
1,309,858
      
3,090,522
      
2,496,500
  
General &Administrative Expenses
    
1,014,651
      
1,024,914
      
2,645,877
      
2,287,081
  
Research & Development Expenses
    
247,259
      
87,949
      
     659,836
      
566,050
  
Total operating expenses
    
2,679,626
      
2,422,721
      
6,396,235
      
5,349,631
  
Income from operation
    
2,396,755
      
2,261,943
      
10,585,328
      
7,618,587
  
Interest income
    
4,015
      
19,542
      
25,620
      
72,031
  
Income before income tax
    
2,400,770
      
2,281,485
      
10,610,948
      
7,690,618
  
Income tax
    
562,081
      
615,188
      
2,598,051
      
1,898,351
  
Net income
    
1,838,689
      
1,666,297
      
8,012,897
      
5,792,267
  
Other comprehensive income (loss)
                                
Foreign currency translation adjustment
    
(1,619,240
)
    
387,442
      
(4,384,481
)
    
309,794
  
Comprehensive income
  
$
219,449
    
$
2,053,739
    
$
3,628,416
    
$
6,102,061
  
                               
Earnings per common share Basic and Diluted
  
$
0.06
    
$
0.06
    
$
0.27
    
$
0.20
  
                               
Weighted average number of common shares outstanding Basic and Diluted
    
29,716,777
      
29,700,690
      
29,706,072
      
29,690,953
  
 
The accompanying notes are an integral part of these financial statements.
4
 
CHINA YCT INTERNATIONAL GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

 
  
NINE MONTHS ENDED
DECEMBER 31,
  
 
  
2015
    
2014
  
Cash Flows From Operating Activities:
  
   
 
Net income
  
$
8,012,897
    
$
5,792,267
  
Adjustments to reconcile net income to net cash provided by operating activities:
                
Depreciation and amortization
    
2,120,630
      
1,460,809
  
Issuance of common shares for compensation and service
    
10,000
      
30,350
  
Amortization of stock-based compensation expenses
    
273,968
      
-
  
Deferred taxes
    
(39,919
)
    
-
  
Changes in operating assets and liabilities:
                
Prepaid lease
    
(1,598,491
)
    
280,811
  
Inventory
    
(2,399,986
)
    
(607,729
)
Accounts receivable
    
(155,530
)
    
42,049
  
Taxes payable
    
(827,670
)
    
67,391
  
Accounts payable and other accrued expenses
    
22,202
      
(21,183
)
Net cash provided by operating activities
    
5,418,101
      
7,044,765
  
                 
Cash flows from investing activities:
                
Acquisition of plant and equipment
    
(1,278,362
)
    
(43,693
)
Development cost of acer truncatum bunge planting
    
(12,055,180
)
    
(1,525,623
)
Net cash used in investing activities
    
(13,333,542
)
    
(1,569,316
)
 
                
Effect of exchange rate changes on cash and cash equivalents
    
(418,266
)
    
95,252
  
Net increase (decrease) in cash and cash equivalents
    
(8,333,707
)
    
5,570,701
  
Cash and cash equivalents at beginning of period
    
13,083,532
      
18,624,644
  
Cash and cash equivalents at end of period
  
$
4,749,825
    
$
24,195,345
  
                 
Supplemental disclosures of cash flow information:
                
Cash paid during the periods for:
                
Interest
  
$
-
    
$
-
  
Income taxes
  
$
2,983,005
    
$
1,828,974
  
 
The accompanying notes are an integral part of these financial statements.
5

CHINA YCT INTERNATIONAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
 
NOTE 1 - ORGANIZATION AND PRINCIPAL ACTIVITIES
 
China YCT International Group, Inc. ("China YCT") ("the Company") was incorporated in the State of Florida, in the United States of America (the "USA") in January 1989, and reincorporated in the State of Delaware on April 4, 2007.   China YCT, through its 100% owned subsidiary Landway Nano Bio-Tech, Inc. ("Landway Nano"), incorporated in Delaware, owns 100% of Shandong Spring Pharmaceutical Co., Ltd. ("Shandong Spring"), incorporated in the People's Republic of China ("PRC"). China YCT International Group, Inc. and its subsidiaries are collectively referred to as the "Company". Shandong Spring is engaged in the business of research, developing, manufacturing, and selling traditional Chinese medicine and other healthcare products in China.
 
NOTE 2 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
Basis of presentation
 
The unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and the rules and regulations of the Securities and Exchange Commission. In the opinion of management, the unaudited financial statements have been prepared on the same basis as the annual financial statements and reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the financial position as of December 31, 2015 and the results of operations and cash flows for the periods ended December 31, 2015 and 2014. The financial data and other information disclosed in these notes to the interim financial statements related to these periods are unaudited. The results for the three and nine months ended December 31, 2015 are not necessarily indicative of the results to be expected for any subsequent periods or for the entire year ending March 31, 2016. The balance sheet on March 31, 2015 has been derived from the audited financial statements at that date.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to the Securities and Exchange Commission's rules and regulations. These unaudited financial statements should be read in conjunction with our audited financial statements and notes thereto for the year ended March 31, 2015 as included in our Annual Report on Form 10-K. 

Principles of consolidation
 
The consolidated financial statements include the financial statements of China YCT, Landway Nano and its wholly owned subsidiary, Shandong Spring.  All inter-company transactions and balances are eliminated in consolidation.
 
Use of estimates
 
The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Actual results may differ from those estimates. Significant accounting estimates reflected in the Company's consolidated financial statements include: the valuation of inventory, the estimated useful lives and impairment of property, equipment, and intangible assets.
6

 Revenue recognition
 
The Company's revenue recognition policies are in compliance with Staff Accounting Bulletin ("SAB") 104, included in the Codification as ASC 605, Revenue Recognition. Sales revenue is recognized on the date of shipment to customers when a formal arrangement exists, the price is fixed or determinable, the delivery is completed, no other significant obligations of the Company exist, and collectability is reasonably assured. Payments received before all of the relevant criteria for revenue recognition are recorded as customer deposits.
  
Impairment of long-lived assets
 
The Company reviews and evaluates the net carrying value of its long-lived assets at least annually, or upon the occurrence of other events or changes in circumstances that indicate that the related carrying amounts may not be recoverable. Per ASC 360-10-35-21, a long-lived asset (asset group) shall be tested for recoverability whenever events or changes in circumstances indicate that its carrying amount may not be recoverable. Per ASC 360-10-35-17, an impairment loss shall be recognized only if the carrying amount of the long-lived asset (asset group) is not recoverable and exceeds its fair value. The carrying amount of a long-lived asset (asset group) is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset (asset group).
 
Income taxes
 
The Company accounts for income tax under the asset and liability method as stipulated by ASC 740 "Income Taxes", which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of the events that have been included in the financial statements or tax returns.  Deferred Income taxes are recognized for all significant temporary differences between tax and financial statements bases of assets and liabilities.  Valuation allowances are established against net deferred tax assets when it is more likely than not that some portion or all of the deferred tax assets will not be realized.
 
China YCT International, Inc. is a holding company of Shandong Spring Pharmaceutical Co., Ltd and does not have any operating activities.  Therefore, the Company does not incur any U.S. income tax liabilities.
 
Stock Based Compensation
 
The Company recognizes compensation expense for stock-based compensation in accordance with ASC Topic 718. For employee stock-based awards, we calculate the fair value of the award on the date of grant using the Black-Scholes method for stock options and the quoted price of our common stock for unrestricted shares; the expense is recognized over the service period for awards expected to vest. For non-employee stock-based awards, we calculate the fair value of the award on the date of grant in the same manner as employee awards, however, the awards are revalued at the end of each reporting period and the pro rata compensation expense is adjusted accordingly until such time the nonemployee award is fully vested, at which time the total compensation recognized to date equals the fair value of the stock-based award as calculated on the measurement date, which is the date at which the award recipient's performance is complete. The estimation of stock-based awards that will ultimately vest requires judgment, and to the extent actual results or updated estimates differ from original estimates, such amounts are recorded as a cumulative adjustment in the period estimates are revised. We consider many factors when estimating expected forfeitures, including types of awards, employee class, and historical experience.
7

Earnings per common share ("EPS")

Basic EPS excludes dilution and is computed by dividing net income (loss) attributable to common stockholders by the weighted average number of common shares outstanding for the period. Diluted shares reflect the potential dilution that could occur if securities or other contracts to issue common stock (convertible preferred stock, forward contracts, warrants to purchase common stock, contingently issuable shares, common stock options and warrants and their equivalents using the treasury stock method) were exercised or converted into common stock. There were no shares of common stock equivalents available for dilution purposes as of December 31, 2015 and 2014.

Fair Value of Financial Instruments
 
The Company has adopted the provisions of ASC Topic 820, "Fair Value Measurements and Disclosures", which defines fair value as used in numerous accounting pronouncements, establishes a framework for measuring fair value and expands disclosure of fair value measurements.

The estimated fair  value of certain financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued expenses are carried at historical cost basis, which approximates fair values because of the short-term maturing of these instruments.

ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.  ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.  ASC 820 describes three levels of inputs that may be used to measure fair value:

Level 1 – quoted prices in active markets for identical assets or liabilities.
 
Level 2 – quoted prices for similar assets and liabilities in active markets or inputs that are observable
 
Level 3 – inputs that are unobservable (for example cash flow modeling inputs based on assumptions)

We have no financial assets or liabilities measured at fair value on a recurring basis.
 
Foreign currency translation
 
The accounts of the Company's Chinese subsidiary are maintained in RMB and the accounts of the U.S. parent company are maintained in USD. The accounts of the Chinese subsidiary were translated into USD in accordance with Accounting Standards Codification ("ASC") Topic 830 "Foreign Currency Matters". According to Topic 830, all assets and liabilities were translated at the exchange rate on the balance sheet date; stockholders' equity is translated at historical rates and statement of income items are translated at the weighted average exchange rate for the period. The resulting translation adjustments are reported under other comprehensive income in accordance with ASC Topic 220, "Comprehensive Income." Gains and losses resulting from the foreign currency transactions are reflected in the statements of income.
8
 
Translation adjustments resulting from this process amounted to $(1,619,240) and $387,442 for the three months ended December 31, 2015 and 2014, and $(4,384,481) and $309,794 for the nine months ended December 31, 2015 and 2014, respectively.
The following exchange rates were used to translate the amounts from RMB into United States dollars ("USD") for the respective periods:
 
December 31,
  
December 31,
  
 
2015
  
2014
  
Period End Exchange Rate (RMB/USD)
    
6.4936
      
6.1190
  
Average Period Exchange Rate (RMB/USD)
    
6.2559
      
6.1362
  

Recent accounting pronouncements
 
The Company's management has evaluated all the recently issued accounting pronouncements through the filing date of these consolidated financial statements and does not believe that they will have a material effect on the Company's consolidated financial position and results of operations.

NOTE 3 - INVENTORY
 
Inventory consists of finished goods, work-in-process, packaging materials, and raw materials. No allowance for inventory was made for the three and nine months ended December 31, 2015 and 2014.
 
The components of inventories as of December 31, 2015 and March 31, 2015 were as follows:
 
 
December 31,
    
March 31,
 
 
  
2015
    
2015
  
Raw materials
  
$
925,812
    
$
68,349
  
Packaging materials
    
477,296
      
181,847
  
Work-in-process
    
1,360,239
      
289,188
  
Finished goods
    
397,096
      
357,459
  
Total Inventories
  
$
3,160,443
    
$
896,843
  
 

9
NOTE 4 – PLANT, PROPERTY, AND EQUIPMENT, NET
 
The components of property and equipment were as follows:

 
December 31,
   
March 31,
  
 
  
2015
    
2015
  
Machinery & Equipment
  
$
1,758,137
    
$
1,495,311
  
Office equipment and automobiles
    
229,054
      
193,519
  
Building
    
12,746,960
      
12,586,247
  
Leasehold Improvements
    
1,231,982
      
1,302,465
  
Subtotal
    
15,966,133
      
15,577,542
  
Less: Accumulated Depreciation & Amortization
    
(3,017,585
)
    
(2,713,381
)
Total plant, property and equipment, net
  
$
12,948,548
    
$
12,864,161
  

The depreciation and amortization expense for the three months ended December 31, 2015 and 2014 was $153,964 and $161,063, respectively.
 
The depreciation and amortization expense for the nine months ended December 31, 2015 and 2014 was $468,176 and $452,267, respectively.

 NOTE 5 - MAJOR CUSTOMER AND VENDOR

The Company sold products through ten distributors during the three and nine months ended December 31, 2015 and 2014. Sales to two distributors represented 23% and 19% of total sales for the three months ended December 31, 2015 and sales to three distributors represented 40%, 22%, and 17% of total sales for the three months ended December 31, 2014, respectively.

The Company's sales through two distributors represented 27% and 21% of total sales for the nine months ended December 31, 2015, and sales through three distributors represented 30%, 27%, and 17% of total sales for the nine months ended December 31, 2014, respectively.

The Company sold 6 and 11 products during the three months ended December 31, 2015 and 2014. Sales of three products represented 51%, 17%, and 11% of total sales for the three months ended December 31, 2015. Sales of one product represented 73% of total sales for the three months ended December 31, 2014.

The Company sold 16 and 11 products during the nine months ended December 31, 2015 and 2014. Sales of two products represented 57% and 12% of total sales for the nine months ended December 31, 2015.  Sales of one product represented 70% of total sales for the nine months ended December 31, 2014.

The Company purchases its products from Shandong Yong Chun Tang Biotechnology Co., Ltd ("Shandong YCT") according to the contract signed on December 26, 2006 between the Company and Shandong YCT. On February 9, 2010 and February 26, 2015, the Company renewed the Purchase and Sale Contract with Shandong YCT for a term of five years ending on February 28, 2015 and for a term of two years ending on February 28, 2017, respectively. Pursuant to the contract renewed on February 26, 2015, the Company could purchase 10 products from Shandong YCT at fixed prices. On June 25, 2015, the Company made an amendment to the renewed Purchase and Sale Contract with Shandong YCT. Pursuant to the amended Purchase and Sale Contract with Shandong YCT, the Company no longer purchases and sells the 10 products included in the contract renewed on February 26, 2015 and agreed to purchase and sell four new products without changes in other terms of the previous contract. The Company can purchase these four new products from Shandong YCT at fixed prices. Total purchases from Shandong YCT represented 37% and 24% of our total purchases during the three months ended December 31, 2015 and 2014, respectively.  The purchases from two other vendors represented 32% and 16% of the Company's total purchases for the three months ended December 31, 2015. The purchases from two other vendors represented 41% and 28% of the Company's total purchases for the three months ended December 31, 2014. Total purchases from Shandong YCT represented 34% and 21% of our total purchases during the nine months ended December 31, 2015 and 2014, respectively.  The purchases from two other vendors represented 31% and 20% of the Company's total purchases for the nine months ended December 31, 2015. The purchases from two other vendors represented 22% and 15% of the Company's total purchases for the nine months ended December 31, 2014.

10
NOTE 6 - TAXES PAYABLE
 
Taxes payable at December 31, 2015 and March 31, 2015 were as follows:

 
As of
  
 
December 31,
  
March 31,
  
2015
  
2015
  
 
    
Corporate Income Tax
  
$
631,804
    
$
1,019,371
  
Value-Added Tax
    
68,409
      
500,991
  
Other Tax & Fees
    
18,727
      
82,701
  
Total Tax Payable
  
$
718,940
    
$
1,603,063
  
 
NOTE 7 - INCOME TAXES
 
The Company is incorporated in the United States of America and is subject to United States federal taxation. No provisions for income taxes have been made, as the Company had no U.S. taxable income for the three and nine months ended December 31, 2015 and 2014.

The Company's Chinese subsidiaries are governed by the Income Tax Law of the PRC concerning the privately run and foreign invested enterprises, which are generally subject to tax at a statutory rate of 25% on income reported in the statutory financial statements after appropriate tax adjustments.
 
The reconciliation of income tax expense at the U.S. statutory rate of 35% to the Company's effective tax rate is as follows:
 
 
Nine Months Ended
December 31,
  
 
2015
  
2014
  
 
 
 
U.S. Statutory rate
  
$
3,713,832
    
$
2,691,716
  
Tax rate difference between China and U.S.
    
(1,061,095
)
    
(769,062
)
Permanent difference
    
(54,686
)
    
(24,303
)
Effective tax rate
  
$
2,598,051
    
$
1,898,351
  
 

11
The provisions for income taxes are summarized as follows:
 
 
  
Nine Months ended
December 31,
  
 
  
2015
    
2014
  
Current
  
$
2,637,970
    
$
1,898,351
  
Deferred
    
(39,919
)
    
-
  
Total
  
$
2,598,051
    
$
1,898,351
  
 
NOTE 8 - STOCKHOLDERS' EQUITY
 
Stock Issued for compensation and service
 
On May 16, 2014, in accordance with the Company's agreement with the independent director, the Company issued 16,667 shares of common stock to one independent director, which were valued at $12,500 based on the quoted price at issuance.
 
On June 30, 2014, the Company issued 21,000 shares of common stock to non-employee consultants for their service.  The total value of $17,850 was determined based on the quoted price at issuance.

 On October 19, 2015, in accordance with the Company's agreement with the independent director, the Company issued 20,000 shares of common stock to one independent director, which were valued at $10,000 based on the quoted price at issuance.

Stock Option Plan 

On July 23, 2015, the Company adopted a stock option plan that was approved by its Board of Directors on June 15, 2015.  This plan is intended to retain and provide incentives for talented employees, officers and directors, and to align stockholder and employee interests.  Under this stock option plan, the participants of the plan include the Company's directors, officers and some employees who were previously determined by the Board of Directors.  On July 23, 2015, the Company signed stock option agreements with each participant and granted options to purchase a total of 2.6 million shares of Common Stock to the participants.  The vesting period of the stock options is ten months from July 23, 2015, the grant date of the stock options.  Immediately following the date when the stock options are vested, the participants will have five consecutive business days to exercise the stock options at an exercise price of $0.40 per share.    Stock options not exercised within the five consecutive business days will expire.  The Company assessed the fair value of the total granted stock options on the grant date using a Black-Scholes Stock Option Pricing Model and recognized the compensation expense based on the fair value of the stock options.  The estimated fair value of the total granted stock options on the grant date was $529,100.  For the three and nine months ended December 31, 2015, the Company amortized $155,819 and $273,968 of stock-based compensation expense based on the fair value of the stock options.

Stock Warrant
 
On August 1, 2015, the Company executed a warrant in favor of a non-employee holder. The warrant would have been released to the holder of the warrant, had the Company's common stock been approved for listing on the NASDAQ Stock Market or such other mutually agreed-upon, United States-registered national securities exchange, on the date that the Company received notice of such approval (the "Notice").  The number of shares of common stock issuable upon exercise of the warrant would have equaled six percent (6%) of the total issued and outstanding shares (on a fully diluted basis) of the Company's common stock on the date of the Notice at an exercise price of $0.36 per share. Based on the number of issued and outstanding shares as of August 1, 2015 (on a fully diluted basis), the warrant would have been exercisable for 1,938,041 shares of common stock, which amount would then have been subjected to adjustment should the Company have issued any additional shares of Common Stock or options, rights or warrants to receive common stock, or securities convertible into common stock, prior the date of the Notice.  The Company had no obligation to deliver the Warrant to the holder if the Company did not receive the Notice on or before July 13, 2016. If the Warrant had been delivered, the Warrant would have expired on August 1, 2020. The Company would have had to account for the warrant in accordance with ASC paragraph 505-50-S99-1. Pursuant to ASC paragraph 505-50-S99-1, if the Company received the right to receive future services in exchange for unvested, forfeitable equity instruments, those equity instruments would have been treated as unissued for accounting purposes until the future services were received (that is, the instruments were not considered issued until they vested). Consequently, there was no recognition at the measurement date and no entry had been recorded as of December 21, 2015 when the stock warrant was terminated.
 
Effective December 21, 2015, the Company and the non-employee warrant holder agreed to terminate the Company's engagement of the holder dated July 1, 2015 and the Warrant.  The Company has no further obligations to the non-employee holder. The termination of the Warrant has no impact on the Company's current and future financial statements.


NOTE 9 – SUBSEQUENT EVENTS

The Company has evaluated subsequent events that have occurred after the date of the balance sheet through the date of issuance of these financial statements and determined that no subsequent event requires disclosure.

12
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operation
 
You should read the following discussion together with our consolidated financial statements and the related notes included elsewhere in this Form 10-Q and our audited financial statements included in our Annual Report on Form 10-K. This discussion contains forward-looking statements. These forward-looking statements are based on information available at the time the statements are made and/or management's belief as of that time with respect to future events and involve risks and uncertainties that could cause actual results and outcomes to be materially different. Important factors that could cause such differences include but are not limited to: competitive factors, general economic conditions, customer relations, relationships with vendors, the interest rate environment, governmental regulation and supervision, seasonality, distribution networks, product introductions and acceptance, technological change, changes in industry practices, onetime events and other factors described herein and in other filings made by the company with the Securities and Exchange Commission. While we may elect to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, and therefore, you should not rely on these forward-looking statements as representing our views as of any date subsequent to the date this Form 10-Q is filed with the Securities and Exchange Commission.
 
Overview
 
China YCT International Group, Inc. ("China YCT") was incorporated in the State of Florida in January 1989, and reincorporated in the State of Delaware on April 4, 2007. China YCT principally operates through two of its wholly-owned subsidiaries: Landway Nano Bio-Tech, Inc. ("Landway Nano"), incorporated in Delaware, and Shandong Spring Pharmaceutical Co., Ltd. ("Shandong Spring"), incorporated in the People's Republic of China (the "PRC"). China YCT International Group, Inc. and its subsidiaries are collectively referred to as the "Company". China YCT, through its wholly-owned subsidiary, Shandong Spring, is engaged in the business of developing, manufacturing, and selling its own medicine made primarily from gingko extract, development of the acer truncatum bunge planting bases, and distributing health care supplement products manufactured by another company in the PRC.

Results of Operations
 
The following table sets forth information from our statements of comprehensive income for the three months ended December 31, 2015 and 2014, in dollars:

   
Three Months Ended
          
   
December 31,
    
$
    
%
  
   
2015
    
2014
    
Change
    
Change
  
Revenues
    $
11,858,027
      $
9,511,534
      $
2,346,493
      
24.7
%
Cost of Sales
    $
(6,781,646
)
    $
(4,826,870
)
    $
(1,954,776
)
    
40.5
%
Gross Profit
    $
5,076,381
      $
4,684,664
      $
391,717
      
8.4
%
Operating Expenses
    $
(2,679,626
)
    $
(2,422,721
)
    $
(256,905
)
    
10.6
%
Operating Income
    $
2,396,755
      $
2,261,943
      $
134,812
      
6.0
%
Interest Income, net
    $
4,015
      $
19,542
      $
(15,527
)
    
(79.5
)%
Income Tax Provision
    $
(562,081
)
    $
(615,188
)
    $
53,107
      
(8.6
)%
Net Income
    $
1,838,689
      $
1,666,297
      $
172,392
      
10.3
%
Comprehensive Income
    $
219,449
      $
2,053,739
      $
(1,834,290
)
    
(89.3
)%

13
The following table sets forth information from our statements of comprehensive income for the nine months ended December 31, 2015 and 2014, in dollars:

   
Nine Months Ended
          
   
December 31,
    
$
    
%
  
   
2015
    
2014
    
Change
    
Change
  
Revenues
    $
37,467,517
      $
26,365,663
      $
11,101,854
      
42.1
%
Cost of Sales
    $
(20,485,954
)
    $
(13,397,445
)
    $
(7,088,509
)
    
52.9
%
Gross Profit
    $
16,981,563
      $
12,968,218
      $
4,013,345
      
30.9
%
Operating Expenses
    $
(6,396,235
)
    $
(5,349,631
)
    $
(1,046,604
)
    
19.6
%
Operating Income
    $
10,585,328
      $
7,618,587
      $
2,966,741
      
38.9
%
Interest Income, net
    $
25,620
      $
72,031
      $
(46,411
)
    
(64.4
)%
Income Tax Provision
    $
(2,598,051
)
    $
(1,898,351
)
    $
(699,700
)
    
36.9
%
Net Income
    $
8,012,897
      $
5,792,267
      $
2,220,630
      
38.3
%
Comprehensive Income
    $
3,628,416
      $
6,102,061
      $
(2,473,645
)
    
(40.5
)%

Revenue
 
During the three months ended December 31, 2015, we realized $11,858,027 in revenue, representing an increase of 24.7% or $2,346,493 as compared to $9,511,534 for the same period in 2014.  Revenue increased from the sales of a new product, Acer truncatum oil, and increased sales of the health care products.

During the nine months ended December 31, 2015, we realized $37,467,517 in revenue, representing an increase of 42.1 % or $11,101,854 as compared to $26,365,663 for the same period in 2014.  Revenue increased from the sales of a new product, Acer truncatum oil and increased sales of both the Huoliyuan capsules and the health care products.

During the three and nine months ended December 31, 2015, we increased advertising and promotion of our Huoliyuan capsules after obtaining the certification pursuant to the criteria set forth by the Good Manufacturing Practices (revised 2010) issued by China Food and Drug Administration (hereafter referred to as new GMP) in the third quarter of 2014. Starting in the quarter ended June 30, 2015, we also increased the promotion and sales of the health care products through our distributors' greater marketing effort on recruiting new customers. In the quarter ended December 31, 2015, we further increased the promotion of our Acer truncatum oil, Huoliyuan, capsules, and health products by organizing a big marketing event.   We intended that  this event would boost sales of all of our products, especially our Huoliyuan capsules, during the Chinese New Year and the fourth quarter ended March 31, 2016.
14

Part of our revenues were generated by us as the distributor for the health care products manufactured by Shandong YCT. We entered into a Purchase & Sale Contract with Shandong YCT on December 26, 2006, which sets forth the wholesale price that we pay to Shandong YCT for each of the products it produces. On February 9, 2010 and February 26, 2015, we renewed the Purchase and Sale Contract with Shandong YCT for a term of five years ending on February 28, 2015 and for a term of two years ending on February 28, 2017, respectively. Pursuant to the contract renewed on February 26, 2015, we can purchase 10 products from Shandong YCT on fixed prices, with the products selected by us according to their sales volume and profit. On June 25, 2015, the Company made an amendment to the renewed Purchase and Sale Contract. Pursuant to the amended Purchase and Sale Contract, the Company no longer purchases and sells the 10 products included in the contract renewed on February 26, 2015 and agreedto purchase and sell four new products without changes in other terms of the previous contract. The Company can purchase these four new products from Shandong YCT at fixed prices. The Company made this strategic product switch because it determined that there was a much bigger market for these four new products.  During the three months ended December 31, 2015, 31.5% of our total revenue was generated as the distributor of Shandong YCT, as compared to 27.5% during the three months ended December 31, 2014.  During the nine months ended December 31, 2015, 35.8% of our total revenue was generated as the distributor of Shandong YCT, as compared to 30.0% during the nine months ended December 31, 2014.

The sales of Huoliyuan Capsule accounted for 50.9% of our revenue during the three months ended December 31, 2015, compared to 72.5% during the three months ended December 31, 2014.  The sales of Huoliyuan Capsule accounted for 56.8% of our revenue during the nine months ended December 31, 2015, compared to 70.0% during the nine months ended December 31, 2014.  Since July 2010, the Company has manufactured and distributed our own product, Huoliyuan Capsule. Since late 2011, we have made great efforts towards marketing and developing new customers for Huoliyuan Capsule.

Since the quarter ended September 30, 2015, the Company has produced Acer truncatum Bunge Seed Oil and sold the product to customers through its distributors.  The Acer truncatum Bunge Seed Oil was extracted from the acer truncatum pods that were purchased from third party vendors.  The Company's self-grown acer truncatum pods will not be  ready to be used for production until approximately the third quarter of 2017. The sales of Acer truncatum Bunge Seed Oil accounted for 17.6% and 7.4% of revenue for the three and nine months ended December 31, 2015
 
The following is the sales breakdown by products during the three months ended December 31, 2015 and 2014:

   
For the three months ended
December 31,
  
   
2015
    
2014
  
Health care supplements
    $
3,738,119
      
31.5
%
    $
2,616,764
      
27.5
%
Drugs (Huoliyuan Capsule)
    
6,036,747
      
50.9
%
    
6,894,770
      
72.5
%
Acer truncatum oil
    
2,083,161
      
17.6
%
    
-
      
0.0
%
Total
    $
11,858,027
      
100
%
    $
9,511,534
      
100
%


15
The following is the sales breakdown by products during the nine months ended December 31, 2015 and 2014:

   
For the nine months ended
December 31,
  
   
2015
    
2014
  
Health care supplements
    $
13,422,592
      
35.8
%
    $
7,916,858
      
30.0
%
Drugs (Huoliyuan Capsule)
    
21,297,092
      
56.8
%
    
18,448,805
      
70.0
%
Acer truncatum oil
    
2,747,833
      
7.4
%
    
-
      
0.0
%
Total
    $
37,467,517
      
100
%
    $
26,365,663
      
100
%

Cost of Goods Sold and Gross Margin
 
Our costs of revenue were comprised primarily of the cost of finished goods we purchased from Shandong YCT, the raw materials we purchased from third party vendors, and the manufacturing costs of Acer Truncatum Bunge Seed Oil, and our own patented drug, Huoliyuan Capsule. The cost of manufacturing Huoliyuan Capsule was approximately 52.0% and 74.3% of the total cost of goods sold during the three months ended December 31, 2015 and 2014, respectively.  The cost of manufacturing Huoliyuan Capsule was approximately 57.2% and 75.0% of the total cost of goods sold during the nine months ended December 31, 2015 and 2014, respectively.
 
During the three months ended December 31, 2015, our cost of goods sold totaled $6,781,646, representing an increase of $1,954,776 or 40.5% as compared to $4,826,870 during the three months ended December 31, 2014, due to increased sales of the health care products and our new product, Acer truncatum Bunge Seed Oil. The percentages of the costs of goods sold to total revenues increased from 50.7% for the three months ended December 31, 2014 to 57.2% for the three months ended December 31, 2015 primarily due to slightly higher raw material costs in Huoliyuan and the sale of new healthcare products that have higher costs but a bigger market.

During the nine months ended December 31, 2015, our cost of goods sold totaled $20,485,954, representing an increase of $7,088,509 or 52.9% as compared to $13,397,445 during the nine months ended December 31, 2014, due to the increased sales of the Huoliyuan capsules, the health care products, and our new product, Acer truncatum Bunge Seed Oil. The percentage of the costs of goods sold to total revenues increased from 50.8% for the nine months ended December 31, 2014 to 54.7% for the nine months ended December 31, 2015 primarily due to slightly higher raw material costs in Huoliyuan and the sale of new healthcare products that have higher costs but a bigger market.

Gross Profit
 
Gross profit for the three months ended December 31, 2015 was $5,076,381, an increase of 8.4% or $391,717 as compared to the same period for the prior year. Gross profit as a percentage of net revenues was approximately 42.8% for the three months ended December 31, 2015, decreased from 49.3% for the same period of 2014.  In this quarter, we continue to sell new healthcare products that had lower margins but a bigger market.  In addition, our cost for production of Huoliyuan was slightly higher compared with that for the same period of the prior year due to slightly higher raw material costs.
16
The comparison of the profits for the three months ended December 31, 2015 and 2014 as follows:

 
December 31,
    
December 31,
          
 
  
2015
    
2014
    
Change in $
    
Change in %
  
Health care supplements
    $
1,667,164
      $
1,378,044
      $
289,120
      
21.0
%
Drugs (Huoliyuan capsule)
    
2,399,847
      
3,306,620
      
(906,773
)
    
(27.4
)%
Acer truncatum oil
    
1,009,370
      
-
      
1,009,370
      
100.0
%
Total
    $
5,076,381
      $
4,684,664
      $
391,717
      
8.4
%

Gross profit for the nine months ended December 31, 2015 was $16,981,563, an increase of 30.9% or $4,013,345 as compared to the same period for the prior year. Gross profit as a percentage of net revenues was approximately 45.3% for the nine months ended December 31, 2015, decreased from 49.2% for same period of 2014. During the nine months ended December 31, 2015, we sold new healthcare products that had lower margins but a bigger market.  In addition, our cost for production of Huoliyuan was slightly higher compared with that for the same period of the prior year due to slightly higher raw material costs.

The comparison of the profits for the nine months ended December 31, 2015 and 2014 as follows:

 
December 31,
    
December 31,
          
 
  
2015
    
2014
    
Change in $
    
Change in %
  
Health care supplements
    $
6,394,919
      $
4,567,497
      $
1,827,422
      
40.0
%
Drugs (Huoliyuan capsule)
    
9,268,834
      
8,400,721
      
868,113
      
10.3
%
Acer truncatum oil
    
1,317,810
      
-
      
1,317,810
      
100.0
%
Total
    $
16,981,563
      $
12,968,218
      $
4,013,345
      
30.9
%

Research and Development Expenses
 
Our research and development expenses for the three months ended December 31, 2015 were $247,259 or approximate 2.1% of total corresponding revenue, an increase of $159,310 or 181.1%, as compared to $87,949 or approximately 0.9% of total corresponding revenue for the three months ended December 31, 2014.  Our research and development expenses for the nine months ended December 31, 2015 were $659,836 or approximate 1.8% of total corresponding revenue, an increase of $93,786 or 16.6%, as compared to $566,050 or approximately 2.1% of total corresponding revenue for the nine months ended December 31, 2014.  For the three and nine months ended December 31, 2015, we increased the purchase of material used in research and development of advanced technology to refine and extract the beneficial compounds in plants.

Our long-term goal is to utilize advanced biological technology to refine and extract the beneficial compounds in plants that have traditionally been known to have medicinal benefits, primarily gingko and acer truncatum bunge plants. As of December 31, 2015, we had 27 staff members who are  engaged in research and development of new technologies and resulting products.
17
Selling, General and Administrative Expenses
 
Our selling expenses consist primarily of sales commissions, advertising and promotion expenses, freight charges and related compensation. Our selling expenses for the three months ended December 31, 2015 were $1,417,716 or 12.0% of our total revenue for the period, representing a slight decrease on the percentage of total revenue from 13.8% for the prior year's quarter ended December 31, 2014.

Our selling expenses for the nine months ended December 31, 2015 were $3,090,522 or 8.2% of our total revenue for the period, representing a decrease on the percentage of total revenue from 9.5% for the prior year's nine months ended December 31, 2014.

Our G&A expenses for the three months ended December 31, 2015 were $1,014,651 or 8.6% of our total revenue for the period, representing a decrease on the percentage of total revenue from 10.8% for the prior year's quarter ended December 31, 2014.  The decrease on the percentage of G&A over total revenue compared with the three months ended December 31, 2014 was mainly due to the faster growth of the sales revenue. The G&A expenses for the three months ended December 31, 2015 slightly decreased by 1.0% or $10,263 from the three months ended December 31, 2014.

Our G&A expenses for the nine months ended December 31, 2015 were $ 2,645,877 or 7.1% of our total revenue for the period, representing a decrease on the percentage of total revenue from 8.7% for the prior year's nine months ended December 31, 2014.  The decrease on the percentage of G&A over total revenue compared with the nine months ended December 31, 2014, was mainly due to the faster growth of the sales revenue. The G&A expenses for the nine months ended December 31, 2015 increased by 15.7% or $358,796 from the nine months ended December 31, 2014, mainly due to amortization of stock-based compensation expenses and increase in the amortization of prepaid leases.
 
Net Income

As a result of the above, during the three months ended December 31, 2015, we realized net income of $1,838,689,  representing a 10.3% or $172,392 increase, compared to $1,666,297 during the three months ended December 31, 2014. The increase was mainly due to higher revenue from the sales of health care products and Acer truncatum Bunge Seed Oil in the three months ended December 31, 2015.

During the nine months ended December 31, 2015, we realized net income of $8,012,897, representing a 38.3% or $2,220,630 increase, compared to $5,792,267 during the nine months ended December 31, 2014. The increase was mainly due to higher revenue from the sales of Huoliyuan Capsule, health care products, and Acer truncatum Bunge Seed Oil in the nine months ended December 31, 2015.

Comprehensive Income
 
Our business operates entirely in Chinese RMB, but we report our results in our SEC filings in USD. The conversion of our accounts from RMB to USD results in translation adjustments, which are reported as a middle step between net income and comprehensive income. The net income is added to the retained earnings on our balance sheet while the translation adjustment is added to a line item on our balance sheet labeled "other comprehensive income," since it is more reflective of changes in the relative values of U.S. and Chinese currencies than of the success of our business. During the three months ended December 31, 2015, the effect of converting our financial results to USD was a loss of $1,619,240 to our other comprehensive income, as compared to a gain of $387,442 during the three months ended December 31, 2014 as a result of the currency exchange rate fluctuation.
 
18
During the nine months ended December 31, 2015, the effect of converting our financial results to USD was a loss of $4,384,481 to our other comprehensive income, as compared to a gain of $309,794 during the nine months ended December 31, 2014 as a result of the currency exchange rate fluctuation.

Liquidity and Capital Resources
 
Our principal sources of liquidity were generated from our operations. As of December 31, 2015, we had $8,267,961 in working capital, a decrease of $4,745,508 or 36.5% as compared to $13,013,469 in working capital as of March 31, 2015. The principle reasons for the decline in working capital were the significant investment activities in acer truncatum bunge planting during the nine months ended December 31, 2015 and the increase in inventory at December 31, 2015. Based on our current operating plan, we believe that existing cash and cash equivalents balances, and the funds to be generated by operations will be sufficient to meet our working capital and capital requirements for our current operations for at least the next 12 months. Our operations produced positive cash flow of $5,418,101 during the nine months ended December 31, 2015. We had accounts receivable of $240,210 outstanding as of December 31, 2015. We expect our marketing activities to continue to help generate positive cash flow.  The operations of our own manufacturing since fiscal year 2010 and the development of our own acer truncatum bunge planting bases have put some pressure on our cash flow. We may be required to seek additional capital and reduce certain spending as needed on an on-going basis. There can be no assurance that any additional financing will be available on acceptable terms.
 
In order to fully implement our business plan, however, we will require capital contributions far in excess of our current asset value. Our budget for bringing our manufacturing facility to an operating level that assures profitability is $10 million. Our expectation, therefore, is that we will seek to access the capital markets in both the U.S. and China to obtain the funds we require. At present we have no commitment from any source for additional funds and there can be no assurance that the funds will be available on terms acceptable to us.
 
The following table sets forth a summary of our cash flows for the periods indicated:
 
   
Nine months ended December 31,
          
   
2015
    
2014
    
Change in $
    
Change in %
  
Net cash provided by operating activities
  
$
5,418,101
    
$
7,044,765
    
$
(1,626,664
)
    
(23.1
)%
Net cash used in investing activities
  
$
(13,333,542
)
  
$
(1,569,316
)
  
$
(11,764,226
)
    
749.6
%
Effect of exchange rate change on cash and cash equivalents
  
$
(418,266
)
  
$
95,252
    
$
(513,518
)
    
(539.1
)%
Net increase (decrease) in cash and cash equivalents
  
$
(8,333,707
)
  
$
5,570,701
    
$
(13,904,408
)
    
(249.6
)%
Cash and cash equivalents, beginning balance
  
$
13,083,532
    
$
18,624,644
    
$
(5,541,112
)
    
(29.8
)%
Cash and cash equivalents, ending balance
  
$
4,749,825
    
$
24,195,345
    
$
(19,445,520
)
    
(80.4
)%


19
Operating Activities
 
Net cash provided by operating activities was $5,418,101 for the nine months ended December 31, 2015, which was a decrease of 23.1% or $1,626,664 from the $7,044,765 net cash provided by operating activities for the same period of the prior year. The decrease of net cash provided by operating activities was mainly due to the increase in prepaid lease and inventory.
On July 2, 2015, the Company entered into a new Farmland Leasing Agreement with Zhongce Shen Village for 2,000Mu of farmland for the development of the acer truncatum bunge planting bases. The lease payment is about RMB1,000 (approximately USD 157) per Mu annually and payable for five years of rents in advance. The first lease payment was for the rents of the first five years in the amount of RMB10,000,000 (approximately USD1,572,006).

Investing Activities
 
During the nine months ended December 31, 2015, our net cash used by investing activities was $13,333,542, as compared to $1,569,316 of net cash used for the nine months ended December 31, 2014. The cash used in investing activities for the nine months ended December 31, 2015 of $13,333,542 was primarily attributable to the capital expenditures of $12,055,180 in acer truncatum bunge planting and the acquisition of office and production equipment and construction spending of $1,278,362. 
 
Financing Activities
 
No net cash was generated or used by financing activities over the three and nine months ended December 31, 2015 and 2014.
 
Off-Balance Sheet Arrangements
 
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition or results of operations.
 
Critical Accounting Policies and Estimates
 
We have made no material changes to our critical accounting policies in connection with the preparation of financial statements for the three and nine months ended December 31, 2015.
 
New Accounting Pronouncements
 
The Company's management has evaluated all the recently issued accounting pronouncements through the filing date of the consolidated financial statements and does not believe that they will have a material effect of the Company's consolidated financial position and results of operations. 

20
Item 3. Quantitative and Qualitative Disclosures about Market Risk
 
A smaller reporting company is not required to provide the information required by this Item.
 
Item 4. Controls and Procedures
 
Evaluation of Disclosure Controls and Procedures
 
The term "disclosure controls and procedures" (defined in SEC Rule 13a-15(e)) refers to the controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files under the Securities Exchange Act of 1934 (the "Exchange Act") is recorded, processed, summarized and reported within required time periods. The Company's management, with the participation of the Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company's disclosure controls and procedures as of the end of the period covered by this quarterly report on Form 10-Q (the "Evaluation Date"). Based on that evaluation, the Company's Chief Executive Officer and Chief Financial Officer have concluded that, as of the Evaluation Date, such controls and procedures were effective.
 
Changes in internal controls.
 
The term "internal control over financial reporting" (defined in SEC Rule 13a-15(f)) refers to the process of a company that is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company's management, with the participation of the Chief Executive Officer and Chief Financial Officer, has evaluated any changes in the Company's internal control over financial reporting that occurred during the quarter ended December 31, 2014, and they have concluded that there was no change to the Company's internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.
 
21
PART II.  OTHER INFORMATION
 
Item 1. Legal Proceedings
 
There are no material pending legal proceedings to which the Company is a party.
 
Item 1A. Risk Factors
 
A smaller reporting company is not required to provide the information required by this Item.
 
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
 
Not Applicable
 
Item 3. Defaults Upon Senior Securities.
 
None
 
Item 4. Removed and Reserved
 
Item 5. Other Information
 
None
  
22
Item 6. Exhibits

31.1
Rule 13a-14(a)/ 15d-14(a) Certification of Chief Executive Officer
   
31.2
Rule 13a-14(a)/ 15d-14(a) Certification of Chief Financial Officer
   
32
Section 1350 Certification of Chief Executive Officer and Chief Financial Officer
   
101.  INS
XBRL Instance Document.
   
101.  SCH
XBRL Taxonomy Extension Schema Document.
   
101. CAL
XBRL Taxonomy Extension Calculation Linkbase Document.
   
101.  DEF
XBRL Taxonomy Extension Definition Linkbase Document.
   
101.  LAB
XBRL Taxonomy Extension Label Linkbase Document.
   
101.  PRE
XBRL Taxonomy Extension Presentation Linkbase Document.
 
23
 
SIGNATURES
 
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
CHINA YCT INTERNATIONAL GROUP, LTD.
 
Date: February 12, 2016
 
/s/ Yan Tinghe
Yan Tinghe 
Chief Executive Officer (Principal Executive Officer)
 
 
/s/ Li Chuanmin
Li Chuanmin
Chief Financial Officer (Principal Financial Officer)
 
 
 
24


EXHIBIT 31.1
I, Yan Tinghe, certify that:

1.      I have reviewed this quarterly report on Form10-Q of China YCT International Group, Inc.;
 
2.      Based on my knowledge, this report does not contain any untrue statement o f a material factor omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3.      Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
4.      The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules13a-15(f) and15d-15(f)) for the registrant and have:
 
a.      designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
b.      designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
c.      evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
d.      disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
 
5.      registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
 
a.      All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
 
b.      Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
 
Date: February 12, 2016
/s/Yan Tinghe
  Yan Tinghe,
Chief Executive Officer
 
 
 


EXHIBIT 31.2
 Rule13a-14(a) Certification
 
I, Li Chuanmin, certify that:
 
1.      I have reviewed this quarterly report on Form10-Q of China YCT International Group, Inc.;
 
2.      Based on my knowledge, this report does not contain any untrue statement o f a material factor omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3.      Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
4.      The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules13a-15(f) and15d-15(f)) for the registrant and have:
 
a.      designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
b.      designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
c.      evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
d.      disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
 
5.      registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
 
a.      All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
 
b.      Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
 
Date: February  12, 2016
 
By:
/s/ Li Chuanmin
 
Li Chuanmin,
Chief Financial Officer
 
 
 
 


EXHIBIT 32
 
Rule13a-14(b) Certification
 
In connection with the Quarterly Report of China YCT International Group, Inc. (the "Company") on Form 10-Q for the period ending December 31, 2015 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), each of the undersigned, in the capacities and on the dates indicated below, hereby certifies, pursuant to 18U.S.C. Section1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:
 
 
(1)
The Report fully complies with the requirements of Section13(a) or15(d)of the Securities Exchange Act of 1934; and
 
 
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
 
 
February 12, 2016                                                                               By: /s/Yan Tinghe
                                                                                                       Yan Tinghe, Chief Executive Officer

February12, 2016                                                                              By: /s/ Li Chuanmin
                                                                                                       Li Chuanmin, Chief Financial Officer

Assigned original of this written statement required by Section 906 has been provided to China YCT International Group, Inc. and will be retained by China YCT International Group, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.






v3.3.1.900
Document and Entity Information - shares
 9 Months Ended
Dec. 31, 2015
Feb. 11, 2016
Document and Entity Information:    
Entity Registrant Name China YCT International Group, Inc.  
Document Type 10-Q  
Document Period End Date Dec. 31, 2015  
Trading Symbol cyig  
Amendment Flag false  
Entity Central Index Key 0000847464  
Current Fiscal Year End Date --03-31  
Entity Common Stock, Shares Outstanding   29,720,690
Entity Filer Category Smaller Reporting Company  
Entity Current Reporting Status Yes  
Entity Voluntary Filers No  
Entity Well-known Seasoned Issuer No  
Document Fiscal Year Focus 2016  
Document Fiscal Period Focus Q3  


v3.3.1.900
CONSOLIDATED BALANCE SHEETS - USD ($)
Dec. 31, 2015
Mar. 31, 2015
Current assets:    
Cash and cash equivalent $ 4,749,825 $ 13,083,532
Accounts receivable 240,210 95,544
Prepaid leases - current portion 956,811 685,934
Deferred tax assets 38,459  
Inventory 3,160,443 896,843
Total current assets 9,145,748 14,761,853
Prepaid leases 2,540,314 2,060,441
Development cost of acer truncatum bunge planting 41,956,141 32,078,148
Plant, property, and equipment, net 12,948,548 12,864,161
Intangible assets, net 13,608,911 15,393,272
Total assets 80,199,662 77,157,875
Current liabilities:    
Accounts payable and other accrued expenses 158,847 145,321
Taxes payable 718,940 1,603,063
Total current liabilities 877,787 1,748,384
Total liabilities 877,787 1,748,384
Stockholders' Equity    
Preferred stock, par value $500.00 per share; 45 shares authorized and issued and outstanding at December 31, 2015 and March 31, 2015. 22,500 22,500
Common stock, par value $0.001 per share; 100,000,000 shares authorized; 29,720,690 and 29,700,690 shares issued and outstanding at December 31, 2015 and March 31, 2015, respectively. 29,720 29,701
Additional paid-in capital 4,494,356 4,210,407
Statutory reserve 1,828,504 1,828,504
Retained earnings 72,579,429 64,566,532
Accumulated other comprehensive income 367,366 4,751,847
Total stockholders' equity 79,321,875 75,409,491
Total liabilities and stockholders' equity $ 80,199,662 $ 77,157,875


v3.3.1.900
CONSOLIDATED BALANCE SHEETS PARENTHETICAL {verbose} - $ / shares
Dec. 31, 2015
Mar. 31, 2015
CONSOLIDATED BALANCE SHEETS PARENTHETICAL    
Preferred stock par value $ 500.00 $ 500.00
Preferred stock shares authorized 45 45
Preferred stock shares issued 45 45
Preferred stock shares outstanding 45 45
Common stock par value $ 0.001 $ 0.001
Common stock shares authorized 100,000,000 100,000,000
Common stock shares issued 29,720,690 29,700,690
Common stock shares outstanding 29,720,690 29,700,690


v3.3.1.900
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($)
 3 Months Ended 9 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2015
Dec. 31, 2014
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME        
Revenue $ 11,858,027 $ 9,511,534 $ 37,467,517 $ 26,365,663
Cost of Goods Sold 6,781,646 4,826,870 20,485,954 13,397,445
Gross profit 5,076,381 4,684,664 16,981,563 12,968,218
Operating Expenses        
Selling Expenses 1,417,716 1,309,858 3,090,522 2,496,500
General &Administrative Expenses 1,014,651 1,024,914 2,645,877 2,287,081
Research & Development Expenses 247,259 87,949 659,836 566,050
Total operating expenses 2,679,626 2,422,721 6,396,235 5,349,631
Income from operation 2,396,755 2,261,943 10,585,328 7,618,587
Interest income 4,015 19,542 25,620 72,031
Income before income tax 2,400,770 2,281,485 10,610,948 7,690,618
Income tax 562,081 615,188 2,598,051 1,898,351
Net income 1,838,689 1,666,297 8,012,897 5,792,267
Other comprehensive income (loss)        
Foreign currency translation adjustment (1,619,240) 387,442 (4,384,481) 309,794
Comprehensive income $ 219,449 $ 2,053,739 $ 3,628,416 $ 6,102,061
Earnings per common share: Basic and Diluted $ 0.06 $ 0.06 $ 0.27 $ 0.20
Weighted average number of common shares outstanding: Basic and Diluted 29,716,777 29,700,690 29,706,072 29,690,953


v3.3.1.900
CONSOLIDATED STATEMENT OF CASH FLOWS - USD ($)
 9 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Cash Flows From Operating Activities:    
Net income $ 8,012,897 $ 5,792,267
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation and amortization 2,120,630 1,460,809
Issuance of common shares for compensation and service 10,000 30,350
Amortization of stock-based compensation expenses 273,968  
Deferred taxes (39,919)  
Changes in operating assets and liabilities:    
Change in prepaid lease (1,598,491) 280,811
Change in inventory (2,399,986) (607,729)
Change in accounts receivable (155,530) 42,049
Change in taxes payable (827,670) 67,391
Change in accounts payable and accrued expenses 22,202 (21,183)
Net cash provided by operating activities 5,418,101 7,044,765
Cash flows from investing activities:    
Acquisition of plant and equipment (1,278,362) (43,693)
Development cost of acer truncatum bunge planting (12,055,180) (1,525,623)
Net cash used in investing activities (13,333,542) (1,569,316)
Effect of exchange rate changes on cash and cash equivalents (418,266) 95,252
Net increase (decrease) in cash and cash equivalents (8,333,707) 5,570,701
Cash and cash equivalents at beginning of period 13,083,532 18,624,644
Cash and cash equivalents at end of period $ 4,749,825 $ 24,195,345
Cash paid during the periods for:    
Interest
Income taxes $ 2,983,005 $ 1,828,974


v3.3.1.900
Note 1 - Organization and Principal Activities
 9 Months Ended
Dec. 31, 2015
Notes  
Note 1 - Organization and Principal Activities

NOTE 1 - ORGANIZATION AND PRINCIPAL ACTIVITIES

 

China YCT International Group, Inc. ("China YCT") ("the Company") was incorporated in the State of Florida, in the United States of America (the "USA") in January 1989, and reincorporated in the State of Delaware on April 4, 2007.   China YCT, through its 100% owned subsidiary Landway Nano Bio-Tech, Inc. ("Landway Nano"), incorporated in Delaware, owns 100% of Shandong Spring Pharmaceutical Co., Ltd. ("Shandong Spring"), incorporated in the People's Republic of China ("PRC"). China YCT International Group, Inc. and its subsidiaries are collectively referred to as the "Company". Shandong Spring is engaged in the business of research, developing, manufacturing, and selling traditional Chinese medicine and other healthcare products in China.


v3.3.1.900
Note 2 - Basis of Presentation and Summary of Significant Accounting Policies
 9 Months Ended
Dec. 31, 2015
Notes  
Note 2 - Basis of Presentation and Summary of Significant Accounting Policies

NOTE 2 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of presentation

 

The unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and the rules and regulations of the Securities and Exchange Commission. In the opinion of management, the unaudited financial statements have been prepared on the same basis as the annual financial statements and reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the financial position as of December 31, 2015 and the results of operations and cash flows for the periods ended December 31, 2015 and 2014. The financial data and other information disclosed in these notes to the interim financial statements related to these periods are unaudited. The results for the three and nine months ended December 31, 2015 are not necessarily indicative of the results to be expected for any subsequent periods or for the entire year ending March 31, 2016. The balance sheet on March 31, 2015 has been derived from the audited financial statements at that date.

 

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to the Securities and Exchange Commission's rules and regulations. These unaudited financial statements should be read in conjunction with our audited financial statements and notes thereto for the year ended March 31, 2015 as included in our Annual Report on Form 10-K. 

 

Principles of consolidation

 

The consolidated financial statements include the financial statements of China YCT, Landway Nano and its wholly owned subsidiary, Shandong Spring.  All inter-company transactions and balances are eliminated in consolidation.

 

Use of estimates

 

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Actual results may differ from those estimates. Significant accounting estimates reflected in the Company's consolidated financial statements include: the valuation of inventory, the estimated useful lives and impairment of property, equipment, and intangible assets.

 

Revenue recognition

 

The Company's revenue recognition policies are in compliance with Staff Accounting Bulletin ("SAB") 104, included in the Codification as ASC 605, Revenue Recognition. Sales revenue is recognized on the date of shipment to customers when a formal arrangement exists, the price is fixed or determinable, the delivery is completed, no other significant obligations of the Company exist, and collectability is reasonably assured. Payments received before all of the relevant criteria for revenue recognition are recorded as customer deposits.

 

Impairment of long-lived assets

 

The Company reviews and evaluates the net carrying value of its long-lived assets at least annually, or upon the occurrence of other events or changes in circumstances that indicate that the related carrying amounts may not be recoverable. Per ASC 360-10-35-21, a long-lived asset (asset group) shall be tested for recoverability whenever events or changes in circumstances indicate that its carrying amount may not be recoverable. Per ASC 360-10-35-17, an impairment loss shall be recognized only if the carrying amount of the long-lived asset (asset group) is not recoverable and exceeds its fair value. The carrying amount of a long-lived asset (asset group) is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset (asset group).

 

Income taxes

 

The Company accounts for income tax under the asset and liability method as stipulated by ASC 740 "Income Taxes", which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of the events that have been included in the financial statements or tax returns.  Deferred Income taxes are recognized for all significant temporary differences between tax and financial statements bases of assets and liabilities.  Valuation allowances are established against net deferred tax assets when it is more likely than not that some portion or all of the deferred tax assets will not be realized.

 

China YCT International, Inc. is a holding company of Shandong Spring Pharmaceutical Co., Ltd and does not have any operating activities.  Therefore, the Company does not incur any U.S. income tax liabilities.

 

Stock Based Compensation

 

The Company recognizes compensation expense for stock-based compensation in accordance with ASC Topic 718. For employee stock-based awards, we calculate the fair value of the award on the date of grant using the Black-Scholes method for stock options and the quoted price of our common stock for unrestricted shares; the expense is recognized over the service period for awards expected to vest. For non-employee stock-based awards, we calculate the fair value of the award on the date of grant in the same manner as employee awards, however, the awards are revalued at the end of each reporting period and the pro rata compensation expense is adjusted accordingly until such time the nonemployee award is fully vested, at which time the total compensation recognized to date equals the fair value of the stock-based award as calculated on the measurement date, which is the date at which the award recipient's performance is complete. The estimation of stock-based awards that will ultimately vest requires judgment, and to the extent actual results or updated estimates differ from original estimates, such amounts are recorded as a cumulative adjustment in the period estimates are revised. We consider many factors when estimating expected forfeitures, including types of awards, employee class, and historical experience.

 

Earnings per common share ("EPS")

 

Basic EPS excludes dilution and is computed by dividing net income (loss) attributable to common stockholders by the weighted average number of common shares outstanding for the period. Diluted shares reflect the potential dilution that could occur if securities or other contracts to issue common stock (convertible preferred stock, forward contracts, warrants to purchase common stock, contingently issuable shares, common stock options and warrants and their equivalents using the treasury stock method) were exercised or converted into common stock. There were no shares of common stock equivalents available for dilution purposes as of December 31, 2015 and 2014.

 

Fair Value of Financial Instruments

 

The Company has adopted the provisions of ASC Topic 820, "Fair Value Measurements and Disclosures", which defines fair value as used in numerous accounting pronouncements, establishes a framework for measuring fair value and expands disclosure of fair value measurements.

 

The estimated fair  value of certain financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued expenses are carried at historical cost basis, which approximates fair values because of the short-term maturing of these instruments.

 

ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.  ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.  ASC 820 describes three levels of inputs that may be used to measure fair value:

 

Level 1 – quoted prices in active markets for identical assets or liabilities.

 

Level 2 – quoted prices for similar assets and liabilities in active markets or inputs that are observable

 

Level 3 – inputs that are unobservable (for example cash flow modeling inputs based on assumptions)

 

We have no financial assets or liabilities measured at fair value on a recurring basis.

 

Foreign currency translation

 

The accounts of the Company's Chinese subsidiary are maintained in RMB and the accounts of the U.S. parent company are maintained in USD. The accounts of the Chinese subsidiary were translated into USD in accordance with Accounting Standards Codification ("ASC") Topic 830 "Foreign Currency Matters". According to Topic 830, all assets and liabilities were translated at the exchange rate on the balance sheet date; stockholders' equity is translated at historical rates and statement of income items are translated at the weighted average exchange rate for the period. The resulting translation adjustments are reported under other comprehensive income in accordance with ASC Topic 220, "Comprehensive Income." Gains and losses resulting from the foreign currency transactions are reflected in the statements of income.

 

Translation adjustments resulting from this process amounted to $(1,619,240) and $387,442 for the three months ended December 31, 2015 and 2014, and $(4,384,481) and $309,794 for the nine months ended December 31, 2015 and 2014, respectively.

The following exchange rates were used to translate the amounts from RMB into United States dollars ("USD") for the respective periods:

 

December 31,

 

December 31,

 

 

2015

 

2014

 

Period End Exchange Rate (RMB/USD)

 

 

6.4936

 

 

 

6.1190

 

Average Period Exchange Rate (RMB/USD)

 

 

6.2559

 

 

 

6.1362

 

 

Recent accounting pronouncements

 

The Company's management has evaluated all the recently issued accounting pronouncements through the filing date of these consolidated financial statements and does not believe that they will have a material effect on the Company's consolidated financial position and results of operations.


v3.3.1.900
Note 3 - Inventory
 9 Months Ended
Dec. 31, 2015
Notes  
Note 3 - Inventory

NOTE 3 - INVENTORY

 

Inventory consists of finished goods, work-in-process, packaging materials, and raw materials. No allowance for inventory was made for the three and nine months ended December 31, 2015 and 2014.

 

The components of inventories as of December 31, 2015 and March 31, 2015 were as follows:

 

 

 

December 31,

 

 

March 31,

2015

 

2015

Raw materials

 

$

925,812

 

 

$

68,349

Packaging materials

 

 

477,296

 

 

 

181,847

Work-in-process

 

 

1,360,239

 

 

 

289,188

Finished goods

 

 

397,096

 

 

 

357,459

Total Inventories

 

$

3,160,443

 

 

$

896,843

 

 


v3.3.1.900
Note 4 - Plant, Property, and Equipment, Net
 9 Months Ended
Dec. 31, 2015
Notes  
Note 4 - Plant, Property, and Equipment, Net

NOTE 4 – PLANT, PROPERTY, AND EQUIPMENT, NET

 

The components of property and equipment were as follows:

 

 

 

December 31, 

 

 

March 31,

2015

2015

Machinery & Equipment

 

$

1,758,137

 

 

$

1,495,311

Office equipment and automobiles

 

 

229,054

 

 

 

193,519

Building

 

 

12,746,960

 

 

 

12,586,247

Leasehold Improvements

 

 

1,231,982

 

 

 

1,302,465

Subtotal

 

 

15,966,133

 

 

 

15,577,542

Less: Accumulated Depreciation & Amortization

 

 

(3,017,585)

 

 

 

(2,713,381)

Total plant, property and equipment, net

 

$

12,948,548

 

 

$

12,864,161

 

The depreciation and amortization expense for the three months ended December 31, 2015 and 2014 was $153,964 and $161,063, respectively.

The depreciation and amortization expense for the nine months ended December 31, 2015 and 2014 was $468,176 and $452,267, respectively.

 

 


v3.3.1.900
Note 5 - Major Customer and Vendor
 9 Months Ended
Dec. 31, 2015
Notes  
Note 5 - Major Customer and Vendor

NOTE 5 - MAJOR CUSTOMER AND VENDOR

 

The Company sold products through ten distributors during the three and nine months ended December 31, 2015 and 2014. Sales to two distributors represented 23% and 19% of total sales for the three months ended December 31, 2015 and sales to three distributors represented 40%, 22%, and 17% of total sales for the three months ended December 31, 2014, respectively.

 

The Company's sales through two distributors represented 27% and 21% of total sales for the nine months ended December 31, 2015, and sales through three distributors represented 30%, 27%, and 17% of total sales for the nine months ended December 31, 2014, respectively.

 

The Company sold 6 and 11 products during the three months ended December 31, 2015 and 2014. Sales of three products represented 51%, 17%, and 11% of total sales for the three months ended December 31, 2015. Sales of one product represented 73% of total sales for the three months ended December 31, 2014.

 

The Company sold 16 and 11 products during the nine months ended December 31, 2015 and 2014. Sales of two products represented 57% and 12% of total sales for the nine months ended December 31, 2015.  Sales of one product represented 70% of total sales for the nine months ended December 31, 2014.

 

The Company purchases its products from Shandong Yong Chun Tang Biotechnology Co., Ltd ("Shandong YCT") according to the contract signed on December 26, 2006 between the Company and Shandong YCT. On February 9, 2010 and February 26, 2015, the Company renewed the Purchase and Sale Contract with Shandong YCT for a term of five years ending on February 28, 2015 and for a term of two years ending on February 28, 2017, respectively. Pursuant to the contract renewed on February 26, 2015, the Company could purchase 10 products from Shandong YCT at fixed prices. On June 25, 2015, the Company made an amendment to the renewed Purchase and Sale Contract with Shandong YCT. Pursuant to the amended Purchase and Sale Contract with Shandong YCT, the Company no longer purchases and sells the 10 products included in the contract renewed on February 26, 2015 and agreed to purchase and sell four new products without changes in other terms of the previous contract. The Company can purchase these four new products from Shandong YCT at fixed prices. Total purchases from Shandong YCT represented 37% and 24% of our total purchases during the three months ended December 31, 2015 and 2014, respectively.  The purchases from two other vendors represented 32% and 16% of the Company's total purchases for the three months ended December 31, 2015. The purchases from two other vendors represented 41% and 28% of the Company's total purchases for the three months ended December 31, 2014. Total purchases from Shandong YCT represented 34% and 21% of our total purchases during the nine months ended December 31, 2015 and 2014, respectively.  The purchases from two other vendors represented 31% and 20% of the Company's total purchases for the nine months ended December 31, 2015. The purchases from two other vendors represented 22% and 15% of the Company's total purchases for the nine months ended December 31, 2014.


v3.3.1.900
Note 6 - Taxes Payable
 9 Months Ended
Dec. 31, 2015
Notes  
Note 6 - Taxes Payable

NOTE 6 - TAXES PAYABLE

 

Taxes payable at December 31, 2015 and March 31, 2015 were as follows:

 

 

As of

 

 

December 31,

 

March 31,

 

2015

 

2015

 

 

 

 

Corporate Income Tax

 

$

631,804

 

 

$

1,019,371

 

Value-Added Tax

 

 

68,409

 

 

 

500,991

 

Other Tax & Fees

 

 

18,727

 

 

 

82,701

 

Total Tax Payable

 

$

718,940

 

 

$

1,603,063

 


v3.3.1.900
Note 7 - Income Taxes
 9 Months Ended
Dec. 31, 2015
Notes  
Note 7 - Income Taxes

NOTE 7 - INCOME TAXES

 

The Company is incorporated in the United States of America and is subject to United States federal taxation. No provisions for income taxes have been made, as the Company had no U.S. taxable income for the three and nine months ended December 31, 2015 and 2014.

 

The Company's Chinese subsidiaries are governed by the Income Tax Law of the PRC concerning the privately run and foreign invested enterprises, which are generally subject to tax at a statutory rate of 25% on income reported in the statutory financial statements after appropriate tax adjustments.

 

The reconciliation of income tax expense at the U.S. statutory rate of 35% to the Company's effective tax rate is as follows:

 

 

 

Nine Months Ended December 31,

 

 

2015

 

 

2014

 

 

 

 

 

 

U.S. Statutory rate

 

$

3,713,832

 

 

$

2,691,716

Tax rate difference between China and U.S.

 

 

(1,061,095)

 

 

 

(769,062)

Permanent difference

 

 

(54,686)

 

 

 

(24,303)

Effective tax rate

 

$

2,598,051

 

 

$

1,898,351

 

The provisions for income taxes are summarized as follows:

 

 

 

Nine Months ended December 31,

 

 

 

2015

 

 

 

2014

Current

 

$

2,637,970

 

 

$

1,898,351

Deferred

 

 

(39,919)

 

 

 

-

Total

 

$

2,598,051

 

 

$

1,898,351


v3.3.1.900
Note 8 - Stockholders' Equity
 9 Months Ended
Dec. 31, 2015
Notes  
Note 8 - Stockholders' Equity

NOTE 8 - STOCKHOLDERS' EQUITY

 

Stock Issued for compensation and service

 

On May 16, 2014, in accordance with the Company's agreement with the independent director, the Company issued 16,667 shares of common stock to one independent director, which were valued at $12,500 based on the quoted price at issuance.

 

On June 30, 2014, the Company issued 21,000 shares of common stock to non-employee consultants for their service.  The total value of $17,850 was determined based on the quoted price at issuance.

 

On October 19, 2015, in accordance with the Company's agreement with the independent director, the Company issued 20,000 shares of common stock to one independent director, which were valued at $10,000 based on the quoted price at issuance.

 

Stock Option Plan 

 

On July 23, 2015, the Company adopted a stock option plan that was approved by its Board of Directors on June 15, 2015.  This plan is intended to retain and provide incentives for talented employees, officers and directors, and to align stockholder and employee interests.  Under this stock option plan, the participants of the plan include the Company's directors, officers and some employees who were previously determined by the Board of Directors.  On July 23, 2015, the Company signed stock option agreements with each participant and granted options to purchase a total of 2.6 million shares of Common Stock to the participants.  The vesting period of the stock options is ten months from July 23, 2015, the grant date of the stock options.  Immediately following the date when the stock options are vested, the participants will have five consecutive business days to exercise the stock options at an exercise price of $0.40 per share.    Stock options not exercised within the five consecutive business days will expire.  The Company assessed the fair value of the total granted stock options on the grant date using a Black-Scholes Stock Option Pricing Model and recognized the compensation expense based on the fair value of the stock options.  The estimated fair value of the total granted stock options on the grant date was $529,100.  For the three and nine months ended December 31, 2015, the Company amortized $155,819 and $273,968 of stock-based compensation expense based on the fair value of the stock options.

 

Stock Warrant

 

On August 1, 2015, the Company executed a warrant in favor of a non-employee holder. The warrant would have been released to the holder of the warrant, had the Company's common stock been approved for listing on the NASDAQ Stock Market or such other mutually agreed-upon, United States-registered national securities exchange, on the date that the Company received notice of such approval (the "Notice").  The number of shares of common stock issuable upon exercise of the warrant would have equaled six percent (6%) of the total issued and outstanding shares (on a fully diluted basis) of the Company's common stock on the date of the Notice at an exercise price of $0.36 per share. Based on the number of issued and outstanding shares as of August 1, 2015 (on a fully diluted basis), the warrant would have been exercisable for 1,938,041 shares of common stock, which amount would then have been subjected to adjustment should the Company have issued any additional shares of Common Stock or options, rights or warrants to receive common stock, or securities convertible into common stock, prior the date of the Notice.  The Company had no obligation to deliver the Warrant to the holder if the Company did not receive the Notice on or before July 13, 2016. If the Warrant had been delivered, the Warrant would have expired on August 1, 2020. The Company would have had to account for the warrant in accordance with ASC paragraph 505-50-S99-1. Pursuant to ASC paragraph 505-50-S99-1, if the Company received the right to receive future services in exchange for unvested, forfeitable equity instruments, those equity instruments would have been treated as unissued for accounting purposes until the future services were received (that is, the instruments were not considered issued until they vested). Consequently, there was no recognition at the measurement date and no entry had been recorded as of December 21, 2015 when the stock warrant was terminated.

 

Effective December 21, 2015, the Company and the non-employee warrant holder agreed to terminate the Company's engagement of the holder dated July 1, 2015 and the Warrant.  The Company has no further obligations to the non-employee holder. The termination of the Warrant has no impact on the Company’s current and future financial statements.



v3.3.1.900
Note 9 - Subsequent Events
 9 Months Ended
Dec. 31, 2015
Notes  
Note 9 - Subsequent Events

NOTE 9 – SUBSEQUENT EVENTS

 

The Company has evaluated subsequent events that have occurred after the date of the balance sheet through the date of issuance of these financial statements and determined that no subsequent event requires disclosure.


v3.3.1.900
Note 2 - Basis of Presentation and Summary of Significant Accounting Policies: Basis of Presentation (Policies)
 9 Months Ended
Dec. 31, 2015
Policies  
Basis of Presentation

Basis of presentation

 

The unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and the rules and regulations of the Securities and Exchange Commission. In the opinion of management, the unaudited financial statements have been prepared on the same basis as the annual financial statements and reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the financial position as of December 31, 2015 and the results of operations and cash flows for the periods ended December 31, 2015 and 2014. The financial data and other information disclosed in these notes to the interim financial statements related to these periods are unaudited. The results for the three and nine months ended December 31, 2015 are not necessarily indicative of the results to be expected for any subsequent periods or for the entire year ending March 31, 2016. The balance sheet on March 31, 2015 has been derived from the audited financial statements at that date.

 

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to the Securities and Exchange Commission's rules and regulations. These unaudited financial statements should be read in conjunction with our audited financial statements and notes thereto for the year ended March 31, 2015 as included in our Annual Report on Form 10-K. 


v3.3.1.900
Note 2 - Basis of Presentation and Summary of Significant Accounting Policies: Principles of Consolidation (Policies)
 9 Months Ended
Dec. 31, 2015
Policies  
Principles of Consolidation

Principles of consolidation

 

The consolidated financial statements include the financial statements of China YCT, Landway Nano and its wholly owned subsidiary, Shandong Spring.  All inter-company transactions and balances are eliminated in consolidation.


v3.3.1.900
Note 2 - Basis of Presentation and Summary of Significant Accounting Policies: Use of Estimates (Policies)
 9 Months Ended
Dec. 31, 2015
Policies  
Use of Estimates

Use of estimates

 

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Actual results may differ from those estimates. Significant accounting estimates reflected in the Company's consolidated financial statements include: the valuation of inventory, the estimated useful lives and impairment of property, equipment, and intangible assets.


v3.3.1.900
Note 2 - Basis of Presentation and Summary of Significant Accounting Policies: Revenue Recognition (Policies)
 9 Months Ended
Dec. 31, 2015
Policies  
Revenue Recognition

Revenue recognition

 

The Company's revenue recognition policies are in compliance with Staff Accounting Bulletin ("SAB") 104, included in the Codification as ASC 605, Revenue Recognition. Sales revenue is recognized on the date of shipment to customers when a formal arrangement exists, the price is fixed or determinable, the delivery is completed, no other significant obligations of the Company exist, and collectability is reasonably assured. Payments received before all of the relevant criteria for revenue recognition are recorded as customer deposits.


v3.3.1.900
Note 2 - Basis of Presentation and Summary of Significant Accounting Policies: Impairment of Long-lived Assets (Policies)
 9 Months Ended
Dec. 31, 2015
Policies  
Impairment of Long-lived Assets

Impairment of long-lived assets

 

The Company reviews and evaluates the net carrying value of its long-lived assets at least annually, or upon the occurrence of other events or changes in circumstances that indicate that the related carrying amounts may not be recoverable. Per ASC 360-10-35-21, a long-lived asset (asset group) shall be tested for recoverability whenever events or changes in circumstances indicate that its carrying amount may not be recoverable. Per ASC 360-10-35-17, an impairment loss shall be recognized only if the carrying amount of the long-lived asset (asset group) is not recoverable and exceeds its fair value. The carrying amount of a long-lived asset (asset group) is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset (asset group).


v3.3.1.900
Note 2 - Basis of Presentation and Summary of Significant Accounting Policies: Income Taxes (Policies)
 9 Months Ended
Dec. 31, 2015
Policies  
Income Taxes

Income taxes

 

The Company accounts for income tax under the asset and liability method as stipulated by ASC 740 "Income Taxes", which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of the events that have been included in the financial statements or tax returns.  Deferred Income taxes are recognized for all significant temporary differences between tax and financial statements bases of assets and liabilities.  Valuation allowances are established against net deferred tax assets when it is more likely than not that some portion or all of the deferred tax assets will not be realized.

 

China YCT International, Inc. is a holding company of Shandong Spring Pharmaceutical Co., Ltd and does not have any operating activities.  Therefore, the Company does not incur any U.S. income tax liabilities.


v3.3.1.900
Note 2 - Basis of Presentation and Summary of Significant Accounting Policies: Stock Based Compensation (Policies)
 9 Months Ended
Dec. 31, 2015
Policies  
Stock Based Compensation

Stock Based Compensation

 

The Company recognizes compensation expense for stock-based compensation in accordance with ASC Topic 718. For employee stock-based awards, we calculate the fair value of the award on the date of grant using the Black-Scholes method for stock options and the quoted price of our common stock for unrestricted shares; the expense is recognized over the service period for awards expected to vest. For non-employee stock-based awards, we calculate the fair value of the award on the date of grant in the same manner as employee awards, however, the awards are revalued at the end of each reporting period and the pro rata compensation expense is adjusted accordingly until such time the nonemployee award is fully vested, at which time the total compensation recognized to date equals the fair value of the stock-based award as calculated on the measurement date, which is the date at which the award recipient's performance is complete. The estimation of stock-based awards that will ultimately vest requires judgment, and to the extent actual results or updated estimates differ from original estimates, such amounts are recorded as a cumulative adjustment in the period estimates are revised. We consider many factors when estimating expected forfeitures, including types of awards, employee class, and historical experience.


v3.3.1.900
Note 2 - Basis of Presentation and Summary of Significant Accounting Policies: Earnings Per Common Share ("EPS") (Policies)
 9 Months Ended
Dec. 31, 2015
Policies  
Earnings Per Common Share ("EPS")

Earnings per common share ("EPS")

 

Basic EPS excludes dilution and is computed by dividing net income (loss) attributable to common stockholders by the weighted average number of common shares outstanding for the period. Diluted shares reflect the potential dilution that could occur if securities or other contracts to issue common stock (convertible preferred stock, forward contracts, warrants to purchase common stock, contingently issuable shares, common stock options and warrants and their equivalents using the treasury stock method) were exercised or converted into common stock. There were no shares of common stock equivalents available for dilution purposes as of December 31, 2015 and 2014.


v3.3.1.900
Note 2 - Basis of Presentation and Summary of Significant Accounting Policies: Fair Value of Financial Instruments (Policies)
 9 Months Ended
Dec. 31, 2015
Policies  
Fair Value of Financial Instruments

Fair Value of Financial Instruments

 

The Company has adopted the provisions of ASC Topic 820, "Fair Value Measurements and Disclosures", which defines fair value as used in numerous accounting pronouncements, establishes a framework for measuring fair value and expands disclosure of fair value measurements.

 

The estimated fair  value of certain financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued expenses are carried at historical cost basis, which approximates fair values because of the short-term maturing of these instruments.

 

ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.  ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.  ASC 820 describes three levels of inputs that may be used to measure fair value:

 

Level 1 – quoted prices in active markets for identical assets or liabilities.

 

Level 2 – quoted prices for similar assets and liabilities in active markets or inputs that are observable

 

Level 3 – inputs that are unobservable (for example cash flow modeling inputs based on assumptions)

 

We have no financial assets or liabilities measured at fair value on a recurring basis.


v3.3.1.900
Note 2 - Basis of Presentation and Summary of Significant Accounting Policies: Foreign Currency Translation (Policies)
 9 Months Ended
Dec. 31, 2015
Policies  
Foreign Currency Translation

Foreign currency translation

 

The accounts of the Company's Chinese subsidiary are maintained in RMB and the accounts of the U.S. parent company are maintained in USD. The accounts of the Chinese subsidiary were translated into USD in accordance with Accounting Standards Codification ("ASC") Topic 830 "Foreign Currency Matters". According to Topic 830, all assets and liabilities were translated at the exchange rate on the balance sheet date; stockholders' equity is translated at historical rates and statement of income items are translated at the weighted average exchange rate for the period. The resulting translation adjustments are reported under other comprehensive income in accordance with ASC Topic 220, "Comprehensive Income." Gains and losses resulting from the foreign currency transactions are reflected in the statements of income.

 

Translation adjustments resulting from this process amounted to $(1,619,240) and $387,442 for the three months ended December 31, 2015 and 2014, and $(4,384,481) and $309,794 for the nine months ended December 31, 2015 and 2014, respectively.

The following exchange rates were used to translate the amounts from RMB into United States dollars ("USD") for the respective periods:

 

December 31,

 

December 31,

 

 

2015

 

2014

 

Period End Exchange Rate (RMB/USD)

 

 

6.4936

 

 

 

6.1190

 

Average Period Exchange Rate (RMB/USD)

 

 

6.2559

 

 

 

6.1362

 


v3.3.1.900
Note 2 - Basis of Presentation and Summary of Significant Accounting Policies: Recent Accounting Pronouncements (Policies)
 9 Months Ended
Dec. 31, 2015
Policies  
Recent Accounting Pronouncements

Recent accounting pronouncements

 

The Company's management has evaluated all the recently issued accounting pronouncements through the filing date of these consolidated financial statements and does not believe that they will have a material effect on the Company's consolidated financial position and results of operations.


v3.3.1.900
Note 2 - Basis of Presentation and Summary of Significant Accounting Policies: Foreign Currency Translation: Schedule of Intercompany Foreign Currency Balances (Tables)
 9 Months Ended
Dec. 31, 2015
Tables/Schedules  
Schedule of Intercompany Foreign Currency Balances

December 31,

 

December 31,

 

 

2015

 

2014

 

Period End Exchange Rate (RMB/USD)

 

 

6.4936

 

 

 

6.1190

 

Average Period Exchange Rate (RMB/USD)

 

 

6.2559

 

 

 

6.1362

 


v3.3.1.900
Note 3 - Inventory: Schedule of Inventory (Tables)
 9 Months Ended
Dec. 31, 2015
Tables/Schedules  
Schedule of Inventory

 

 

 

December 31,

 

 

March 31,

2015

 

2015

Raw materials

 

$

925,812

 

 

$

68,349

Packaging materials

 

 

477,296

 

 

 

181,847

Work-in-process

 

 

1,360,239

 

 

 

289,188

Finished goods

 

 

397,096

 

 

 

357,459

Total Inventories

 

$

3,160,443

 

 

$

896,843

 

 


v3.3.1.900
Note 4 - Plant, Property, and Equipment, Net: Property, Plant and Equipment (Tables)
 9 Months Ended
Dec. 31, 2015
Tables/Schedules  
Property, Plant and Equipment

 

 

 

December 31, 

 

 

March 31,

2015

2015

Machinery & Equipment

 

$

1,758,137

 

 

$

1,495,311

Office equipment and automobiles

 

 

229,054

 

 

 

193,519

Building

 

 

12,746,960

 

 

 

12,586,247

Leasehold Improvements

 

 

1,231,982

 

 

 

1,302,465

Subtotal

 

 

15,966,133

 

 

 

15,577,542

Less: Accumulated Depreciation & Amortization

 

 

(3,017,585)

 

 

 

(2,713,381)

Total plant, property and equipment, net

 

$

12,948,548

 

 

$

12,864,161


v3.3.1.900
Note 6 - Taxes Payable: Schedule of Taxes Payable (Tables)
 9 Months Ended
Dec. 31, 2015
Tables/Schedules  
Schedule of Taxes Payable

 

 

As of

 

 

December 31,

 

March 31,

 

2015

 

2015

 

 

 

 

Corporate Income Tax

 

$

631,804

 

 

$

1,019,371

 

Value-Added Tax

 

 

68,409

 

 

 

500,991

 

Other Tax & Fees

 

 

18,727

 

 

 

82,701

 

Total Tax Payable

 

$

718,940

 

 

$

1,603,063

 


v3.3.1.900
Note 7 - Income Taxes: Schedule of Effective Income Tax Rate Reconciliation (Tables)
 9 Months Ended
Dec. 31, 2015
Tables/Schedules  
Schedule of Effective Income Tax Rate Reconciliation

 

 

 

Nine Months Ended December 31,

 

 

2015

 

 

2014

 

 

 

 

 

 

U.S. Statutory rate

 

$

3,713,832

 

 

$

2,691,716

Tax rate difference between China and U.S.

 

 

(1,061,095)

 

 

 

(769,062)

Permanent difference

 

 

(54,686)

 

 

 

(24,303)

Effective tax rate

 

$

2,598,051

 

 

$

1,898,351


v3.3.1.900
Note 7 - Income Taxes: Schedule of Provision for Income Tax Expense (Benefit) (Tables)
 9 Months Ended
Dec. 31, 2015
Tables/Schedules  
Schedule of Provision for Income Tax Expense (Benefit)

 

 

 

Nine Months ended December 31,

 

 

 

2015

 

 

 

2014

Current

 

$

2,637,970

 

 

$

1,898,351

Deferred

 

 

(39,919)

 

 

 

-

Total

 

$

2,598,051

 

 

$

1,898,351


v3.3.1.900
Note 1 - Organization and Principal Activities (Details)
 9 Months Ended
Dec. 31, 2015
Landway Nano Bio-Tech, Inc.  
Subsidiary or Equity Method Investee, Cumulative Percentage Ownership after All Transactions 100.00%
Shandong Spring Pharmaceutical Co., Ltd.  
Subsidiary or Equity Method Investee, Cumulative Percentage Ownership after All Transactions 100.00%


v3.3.1.900
Note 2 - Basis of Presentation and Summary of Significant Accounting Policies: Foreign Currency Translation (Details) - USD ($)
 3 Months Ended 9 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2015
Dec. 31, 2014
Details        
Foreign currency translation adjustment $ (1,619,240) $ 387,442 $ (4,384,481) $ 309,794


v3.3.1.900
Note 2 - Basis of Presentation and Summary of Significant Accounting Policies: Foreign Currency Translation: Schedule of Intercompany Foreign Currency Balances (Details)
Dec. 31, 2015
Dec. 31, 2014
Details    
Foreign Currency Exchange Rate, Translation 6.4936 6.1190
Foreign Currency Exchange Rate Translation Average Rate 6.2559 6.1362


v3.3.1.900
Note 3 - Inventory: Schedule of Inventory (Details) - USD ($)
Dec. 31, 2015
Mar. 31, 2015
Details    
Raw Materials $ 925,812 $ 68,349
Packaging materials 477,296 181,847
Work-in-process 1,360,239 289,188
Finished goods 397,096 357,459
Inventory $ 3,160,443 $ 896,843


v3.3.1.900
Note 4 - Plant, Property, and Equipment, Net: Property, Plant and Equipment (Details) - USD ($)
Dec. 31, 2015
Mar. 31, 2015
Details    
Machinery and Equipment, Gross $ 1,758,137 $ 1,495,311
Office Equipment and Automobiles 229,054 193,519
Buildings and Improvements, Gross 12,746,960 12,586,247
Leasehold Improvements, Gross 1,231,982 1,302,465
Property, Plant and Equipment, Gross 15,966,133 15,577,542
Accumulated Depreciation, Depletion and Amortization, Property, Plant, and Equipment (3,017,585) (2,713,381)
Plant, property, and equipment, net $ 12,948,548 $ 12,864,161


v3.3.1.900
Note 4 - Plant, Property, and Equipment, Net (Details) - USD ($)
 3 Months Ended 9 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2015
Dec. 31, 2014
Details        
Depreciation $ 153,964 $ 161,063 $ 468,176 $ 452,267


v3.3.1.900
Note 5 - Major Customer and Vendor (Details)
 3 Months Ended 9 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2015
Dec. 31, 2014
Number Of Major Distributors The Company sold products through ten distributors The Company sold products through ten distributors The Company sold products through ten distributors The Company sold products through ten distributors
Concentration Risk, Other Risk Sales to two distributors represented 23% and 19% of total sales sales to three distributors represented 40%, 22%, and 17% of total sales sales through two distributors represented 27% and 21% of total sales  
Concentration Risk, Product Sales of three products represented 51%, 17%, and 11% of total sales Sales of one product represented 73% of total sales Sales of two products represented 57% and 12% of total sales Sales of one product represented 70% of total sales
Shandong YCT        
Concentration Risk, Supplier 37% 24% 34% 21%
Other Vendor 1        
Concentration Risk, Supplier 32% 41% 31% 22%
Other Vendor 2        
Concentration Risk, Supplier 16% 28% 20% 15%


v3.3.1.900
Note 6 - Taxes Payable: Schedule of Taxes Payable (Details) - USD ($)
Dec. 31, 2015
Mar. 31, 2015
Details    
Corporate Income Tax $ 631,804 $ 1,019,371
Value-Added Tax 68,409 500,991
Other Tax & Fees 18,727 82,701
Taxes payable $ 718,940 $ 1,603,063


v3.3.1.900
Note 7 - Income Taxes (Details)
 9 Months Ended
Dec. 31, 2015
Details  
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent 25.00%


v3.3.1.900
Note 7 - Income Taxes: Schedule of Effective Income Tax Rate Reconciliation (Details) - USD ($)
 3 Months Ended 9 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2015
Dec. 31, 2014
Details        
Effective Income Tax Rate Reconciliation at Federal Statutory Income Tax Rate, Amount     $ 3,713,832 $ 2,691,716
Effective Income Tax Rate Reconciliation, Foreign Income Tax Rate Differential, Amount     (1,061,095) (769,062)
Permanent difference     (54,686) (24,303)
Income tax $ 562,081 $ 615,188 $ 2,598,051 $ 1,898,351


v3.3.1.900
Note 7 - Income Taxes: Schedule of Provision for Income Tax Expense (Benefit) (Details) - USD ($)
 3 Months Ended 9 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2015
Dec. 31, 2014
Details        
Current Federal Tax Expense (Benefit)     $ 2,637,970 $ 1,898,351
Deferred Income Tax Expense (Benefit)     (39,919)  
Income tax $ 562,081 $ 615,188 $ 2,598,051 $ 1,898,351


v3.3.1.900
Note 8 - Stockholders' Equity (Details) - USD ($)
 3 Months Ended 9 Months Ended
Dec. 31, 2015
Dec. 31, 2015
Dec. 31, 2014
Issuance of common shares for compensation and service   $ 10,000 $ 30,350
Amortization of stock-based compensation expenses $ 155,819 273,968  
Independent Director      
Issuance of common shares for compensation and service   $ 10,000 12,500
Non-employee Consultant      
Issuance of common shares for compensation and service     $ 17,850
Common Stock | Independent Director      
Stock Issued During Period, Shares, New Issues   20,000 16,667
Common Stock | Non-employee Consultant      
Stock Issued During Period, Shares, New Issues     21,000