Spring Pharmaceutical (CYIG) CORRESP Correspondence with SEC

McLaughlin & Stern, llp

  steven w. schuster Partner Direct Phone: (212) 448-6216 Direct Fax: 1(800) 203-1556 E–Mail: sschuster@mclaughlinstern.com 260 Madison Avenue New York, New York 10016 (212) 448–1100 Fax (212) 448–0066 Millbrook Office Franklin Avenue P.O. Box 1369 Millbrook, New York 12545 (845) 677–5700 Fax (845) 677–0097

April 5, 2012

BY MAIL AND EDGAR TRANSMISSION

Mr. Jim Rosenberg

Senior Assistant Chief Accountant

U.S. Securities and Exchange Commission

Division of Corporation Finance

100 F Street, NE

Washington, DC 20549

Re: China YCT International Group, Inc.

Form 10-K for the Fiscal Year Ended March 31, 2011

Filed September 9, 2011

File No. 000-53600

Dear Mr. Rosenberg:

On behalf of our client, China YCT International Group, Inc. (the “Company”), we are responding to the comments of the staff of the Division of Corporation Finance (the “Staff”) of the Securities and Exchange Commission (the “Commission”) set forth in your letter, dated March 22, 2012, with respect to the Company’s Annual Report on Form 10K for the fiscal year ended March 31, 2011 filed on September 9, 2011 (File No. 000-53600) (the “10K”). References to page numbers in our responses refer to page numbers in the 10K. For your convenience, the Commission’s comments have been repeated herein in bold, with responses immediately following each of the Commission’s comments.

1.            Please note that the firm-based literature you refer to in your response to comment 2 is not authoritative accounting guidance. Furthermore, the section you refer to in the article applies to forward or futures contracts that require an entity to repurchase its own shares without any contingency. Since you will only be required to repurchase your shares if you do not meet specified conditions, it appears that the repurchase was not a certain future event as of the date of the October amendment. Accordingly, it appears that your contingent obligation to repurchase your shares is more akin to a written put option. Since you did not receive any monetary consideration for the contingent obligation, it appears that the offsetting debit at the inception date should be recorded to expense. Please confirm our understanding or provide us the authoritative literature you rely upon to support your classification as equity.

Answer:

We agree with the Staff’s position that the contingent obligation to repurchase our shares is more akin to a written put option instead of a forward contract. And, we also follow the Staff’s guidance that book the offsetting debit of the contingent obligation to expense at the inception date.

2.            In your response to comment 2 you indicate that you recorded a $23,391,902 liability at December 31, 2011 under ASC 480-10-25-8 for your obligation to repurchase your shares under your October 21, 2011 amendment. It appears that this liability is the same liability recorded at March 31, 2011, June 30, 2011 and September 30, 2011 that you previously attributed to the two contingencies to issue additional shares of common stock for the acquisition of the patent. You previously represented to us in your February 2, 2010 response to comment 2 of our January 13, 2012 letter that these two contingencies should only be recorded when the contingencies are resolved or such resolution becomes probable. For your liability under ASC 480-10-25-8 to repurchase your common stock, please tell us the fair value of the obligation on October 21, 2011 and December 31, 2011. In your response, please tell us for each date the number of potential shares you would need to repurchase, the fair value per share and the probability weighting you assigned to the final contingency not being met triggering your obligation to repurchase those shares.

Answers:

We agree that the contingent liability in the amount of $23,391,902 recorded on March 31, 2011 and forward is different from the company’s obligation, under ASC 480-10-25-8, to repurchase its shares according to the company’s October 21, 2011 amended agreement. By December 31, 2011, the company had not been certain if the obligation needed to be recorded under the ASC 480-10-25-8, we therefore attempted to indicate that there was a recorded contingent liability on our financial statements.

· Because $23,391,902 of liability is an obligation to issue additional shares to Dr. Liu upon the occurrence of certain predetermined events, the liability should only be recognized when the contingencies are resolved. On September 9, 2011, the Company’s stock was successfully listed on OTCQB which meant the first contingency was resolved. Therefore, the liability to issue 11,063,968 shares of common stocks should have been recorded for the quarter ended September 30, 2011 and forward. However, the second contingency hasn’t been resolved, so the liability to issue 20,546,711 shares should not have been recognized by December 31, 2011.

· For the liability under ASC 480-10-25-8 to repurchase the company’s common shares, the fair value of the obligation on October 21, 2011 and December 31, 2011 are determined as follows:

The fair value of the obligation on October 21, 2011 should be the market price of the shares that the company is obligated to repurchase if the financing is failing and weighted by the probability of the Company failing to meet the financing target of $20,000,000 or achieving the listing on NASDAQ or a major foreign stock exchange. On October 21, 2011 and December 31, 2011, the company had issued and was obligated to issue 55,318,920 common shares to Dr. Liu. Therefore, the number of potential shares we would need to repurchase was 55,318,920 on both dates.

Per ASC 820-10-20 “Readily Determinable Fair Value”, “ The fair value of an equity security is readily determinable if sales prices or bid-and-asked quotations are currently available on a securities exchange registered with the U.S. Securities and Exchange Commission (SEC) or in the over-the-counter market, provided that those prices or quotations for the over-the-counter market are publicly reported by the National Association of Securities Dealers Automated Quotations systems or by Pink Sheets LLC. Restricted stock meets that definition if the restriction terminates within one year. ”

Because the sales price of the company’s common stock shares was currently available in the over-the-counter market, the fair value of the company’s stock is readily determinable and is the sales price of the stock on October 21, 2011 and December 31, 2011. Because the company’s common stock was not traded on October 21, 2011 and December 31, 2011, the closest quotations were the prices on October 23, 2011, which was $0.40/per share, and December 22, which was $0.40/per share as well. Therefore, the fair values per share for both dates were $0.40.

Because the company was working with a placement agent who was performing due diligence in anticipation of an offering to investors for the company and the company’s investment director came to the United States to discuss financing opportunities and other alternative options with the placement agent, the Company determined that on October 21, 2011 and December 31, 2011, the chance that the final contingency would not be met, thereby triggering our obligation to repurchase those shares, was around 15%. Thus, the probability weighting that we assigned to the final contingency not being met and thereby triggering our obligation to repurchase those shares was 15% for both dates.

Therefore, the fair value of the obligation at October 21, 2011 and December 31, 2011 is calculated as followed:

$3,319,135 = 55,318,920 x $0.40/per share x 15%

3.            Please provide us disclosure you intend to provide under ASC 250-10-50-7, in light of the restatements you must make to your March 31, 2011 Form 10-K and your Forms 10-Q for June 30, 2011, September 30, 2011 and December 31, 2011. In addition, please tell us when you plan to file Item 4.02 under Form 8-K.

(1) Per ASC 250-10-50-7, “Correction of an Error in Previously Issued Financial Statements”, “When financial statements are restated to correct an error, the entity shall disclose that its previously issued financial statements have been restated, along with a description of the nature of the error. The entity also shall disclose both of the following:

a.             The effect of the correction on each financial statement line item and any per-share amounts affected for each prior period presented;

b.            The cumulative effect of the change on retained earnings or other appropriate components of equity or net assets in the statement of financial position, as of the beginning of the earliest period presented. ”

(i) Our previously issued financial statements for the year ended March 31, 2011,and for the quarters ended June 30, 2011, September 31, 2011, and December 31, 2011 have been restated. On February 28, 2011, we acquired a US patent which was accounted for as an acquisition of an asset. However, we recognized the contingent considerations which would be accounted for under the acquisition of a business. Therefore, we overstated the fair value of the patent. We restated our financial statements to correct this error.

(ii) The effects of the correction on each financial statement line item and per share amounts affected for each prior period are as follows:

	Increase ( Decrease)
	Year Ended			Quarter Ended
	March 31, 2011			June 30, 2011			September 30, 2011			December 31, 2011
Balance Sheet Items:
Intangible Assets, net		(23,195,331	)		(22,605,620	)		(19,267,909	)		(18,751,804	)
Contingent liability		(23,391,902	)		(23,391,902	)		(20,625,910	)		(20,625,910	)
Derivative Liability		-			-			-			3,319,135
Tax liability		147,428			442,284			124,937			(711,753	)
Income Statement Item:
G&A Expense: Amortization Expense		(196,571	)		(589,712	)		(571,719	)		(472,123	)
Other Expense: Derivative liability		-			-			-			3,319,135
Tax Expense		49,143			147,428			124,937			(711,753	)

(ii) The cumulative effect of the change on retained earnings or other appropriate components of equity or net assets in the statement of financial position, as of the beginning of the earliest period presented.

	Increase (Decrease)
	As of						As of
	March 31, 2011			June 30, 2011			September 31, 2011			December 31, 2011
Net Assets		(23,195,331	)		(22,605,620	)		(19,267,909	)		(18,751,804	)
Retained Earnings		147,428			589,712			1,036,494			(1,098,765	)

(2) We expect to file the 8-K with respect to Item 4.02, Non-Reliance on Previously Issued Financial Statements during the week of April 9.

As per our auditor’s and our conference call with the Staff, attached please find a copy of our draft revisions to the financial statements for the year ended March 31, 2011, and the quarters ended June 30, September 30 and December 31, 2011, for the Staff’s confirmation before we decide to file the amended periodic reports.

Thank you very much for your review. Should you have any questions regarding this letter, please feel free to contact the undersigned at (212) 448-6216.

Very truly yours,

/s/  Steven Schuster

Steven W. Schuster

Summary of Adjustment Journal Entries

Brief Description of Journal Entries	Journal Entry	Amount	Affected Periods
Derecognize the value of the US patent for the	Dr. Contingent Liabilities	23,391,902	Mar 31 2011, Q1-Q3
contingent considerations: 31,610,679 shares x $0.74/per share	Cr.  Intangible Asset - US Patent	23,391,902
Adjust amortization expense and accumulated	Dr. Accumulated amortization	196,571	Mar 31 2011, Q1-Q3
amortization for the overstated value of the patent	Cr. Amortization Expense	196,571
Record the increase in the tax expense and tax	Dr. Tax Expense	49,143	Mar 31 2011, Q1-Q3
liability for tax impact due to the lower amortization expense	Cr. Tax Liability	49,143
Adjust amortization expense and accumulated	Dr. Accumulated amortization	589,712	Q1
amortization for the overstated value of the patent for the quarter ended June 30, 2011	Cr. Amortization Expense	589,712
Record the increase in the tax expense and tax	Dr. Tax Expense	147,428	Q1
liability for tax impact due to the lower amortization expense for the quarter ended June 30, 2011	Cr. Tax Liability	147,428
Recognize additional consideration paid to Dr. Liu	Dr. Intangible Asset - US Patent	2,765,992	Q2
by accruing the liability to issue 11M to Dr. Liu upon the listing of company's stock over OTCQB on 9/9/2011 (11,063,968 x $0.25/per share on 9/19/2011; 9/9/2011 no trading price)	Cr. Liability	2,765,992

Record the net decrease in the amortization expense and accumulated amortization (net of decreased	Dr. Accumulated amortization	571,719	Q2
amortization due to the derecognized value of the US patent on March 31, 2011 and increased amortization due to an additionally recognized value of the patent on September 9, 2011).	Cr. Amortization Expense	571,719
Recording the net decrease in the tax expense and liability due to the lower amortization expense caused by the adjusted lower value of the patent and the increased tax expense and liability due to the	Dr. Tax Expense	124,937	Q2
higher amortization expense caused by the recorded additional value of the patent upon the issuing 11M shares to Dr. Liu, for the quarter ended September 30, 2011	Cr. Tax Liability	124,937
Accrue a derivative liability occurred since Oct 21, 2011 due to the amended contract term which subjects the Company to be obligated to repurchase the issued shares if the predetermined financing target is not met.  The outstanding shares included initially	Dr. Other Expense	3,319,135	Q3
issued 44M shares and the additional 11M shares to be issued to Dr. Liu.  (The calculation of the derivative liability: 3,319,135=55,318,920 x $0.40 x 15%)	Cr. Derivative Liability	3,319,135
Record the net decrease in the amortization expense and accumulated amortization for the quarter	Dr. Accumulated amortization	472,123	Q3
ended September 31, 2011	Cr. Amortization Expense	472,123
Record the net decrease in the tax expense and liability.	Dr. Tax Payable	711,753	Q3
	Cr. Tax Expense	711,753

China YCT International Group, Inc.

Consolidated Financial Statements

CHINA YCT INTERNATIONAL GROUP, INC.

CONSOLIDATED BALANCE SHEET

			UNIT: USD$
	Years Ended March 31,
	2011		2010
Assets
Current assets:
Cash and cash equivalent	$	6,046,804	$	11,911,933
Prepaid accounts		15,602,258		91,962
Inventory		59,183		324,855
Total current assets		21,708,245		12,328,750
Plant, property and equipment, net		9,629,558		5,033,596
Construction in progress		211,189		4,627,665
Intangible assets, net		40,560,015		8,093,111
Total assets		72,109,007		30,083,122
Liabilities and Stockholders’ Equity (Deficit)
Liabilities:
Current liabilities:
Accounts payable		0		2,299,928
Tax payable		1,683,944		1,204,097
Other payable		229,561		267,182
Total current liabilities		1,913,505		3,771,207
Contingency		0		0
Total liabilities		1,913,505		3,771,207
Stockholders’ equity
Preferred stock, par value $500.00 per share; 45 shares authorized and issued at September 30, 2010 and March 31, 2010		22,500		22,500
Common stock, par value $0.001 per share; 100,000,000 shares authorized, 29,461,304 shares issued and oustanding at March 31, 2010; and 73,731,361 shares issued and oustanding at March 31, 2011.		73,758		29,461
Additional paid-in capital		36,868,554		4,138,480
Statutory reserve		956,633		956,633
Retained earnings		30,232,764		20,012,077
Accumulated other comprehensive income		2,041,293		1,152,764
Total stockholders’ equity		70,195,502		26,311,915
Total liabilities and stockholders’ equity	$	72,109,007	$	30,083,122

CHINA YCT INTERNATIONAL GROUP, INC.

CONSOLIDATED INCOME STATEMENT

			UNIT: USD$
	FOR THE YEARS ENDED MARCH 31,
	2011		2010
Sales Revenue	$	33,465,334	$	32,012,404
Cost of Goods Sold		16,181,183		14,201,533
Gross Profit		17,284,151		17,810,871
Selling Expenses		2,649,477		3,570,477
G&A Expense		752,026		1,269,668
R&D Expenses		280,385		322,270
Total expense		3,681,888		5,162,415
Income from operation		13,602,263		12,648,456
Interest Income (Expense)		22,769		-
Other income (Expense)				21,345
Profit before tax		13,625,032		12,669,801
Income tax		3,410,265		3,216,742
Net income		10,214,768		9,453,059
Other comprehensive income
Foreign currency translation adjustment		1,329,603		22,188
Comprehensive income	$	11,544,371	$	9,475,247
Basic and diluted income per common share
Basic and Diluted		0.32		0.32
Weighted average number of common shares outstanding
Basic and Diluted		35,762,801		29,425,695

CHINA YCT INTERNATIONAL GROUP, INC.

CONSOLIDATED STATEMENT OF STOCKHOLDER EQUITY

																		UNIT: USD$
CHINA YCT	Preferred Stock								Additional
INTERNATIONAL GROUP,	Series A				Common shares				paid in		Statutory		Accumulated		Retained
INC.	Shares		Amount		Shares		Amount		Capital		Reserve		OCI		Earnings			Total
Balance - March 31, 2009		45		22,500		29,380,073		29,380		4,063,039				1,130,576		11,515,651			16,761,146
Issuance of common shares to independent directors						81,231		81		75,441									75,522
Net income for the year																9,453,059			9,453,059
Statutory reserve												956,633				(956,633	)		-
Foreign currency translation adjustment														22,188					22,188
Balance - March 31, 2010		45		22,500		29,461,304		29,461		4,138,480		956,633		1,152,764		20,012,077			26,311,915
Issuance of common shares to independent directors						41,997		42		25,664									25,706
Issuance of common shares for the owner of an acquired patent						44,255,087		44,255		32,704,410									32,748,665
Net income for the year																10,214,768			10,214,768
Adjustment to Retained Earnings																5,919			5,919
Foreign currency translation adjustment														888,529					888,529
Balance - March 31, 2011		45	$	22,500		73,758,388	$	73,758	$	36,868,554	$	956,633	$	2,041,293	$	30,232,764		$	70,195,502

CHINA YCT INTERNATIONAL GROUP, INC.

CONSOLIDATED STATEMENT OF CASH FLOWS

				UNIT: USD$
	YEAR ENDED MARCH 31,
	2011			2010
Cash Flows From Operating Activities:
Net income	$	10,214,768		$	9,453,059
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		848,531			262,452
Issue of common shares as compensation		19,760			75,522
Changes in operating assets and liabilities:
Inventory		265,672			(316,508	)
Advance to suppliers					(91,962	)
Other receivable from related parties					2,075,549
Accounts payable		(2,299,928	)		1,843,360
Taxes payable		479,847			718,659
Accrued expenses and other payables		(37,621	)		77,292
Net cash provided by (used in) operating activities		9,491,029			14,097,423
Cash flows from investing activities:
Addition to plant and equipment		(5,217,486	)		(5,523,378	)
Reduction of construction in progress		4,416,476
Investment in Intagible Assets		7,870			(6,738,643	)
Prepayment for acquisition of patent		(15,602,258	)
Net cash provided by (used in) investing activities		(16,395,398	)		(12,262,021	)
Effect of exchange rate changes on cash and cash equivalents		1,039,240			28,151
Net increase (decrease) in cash and cash equivalents		(5,865,129	)		1,863,553
Cash and cash equivalents at beginning of period		11,911,933			10,048,380
Cash and cash equivalents at ending of period	$	6,046,804		$	11,911,933
Supplemental disclosures of cash flow information:
Cash paid during the periods for:
Interest	$	1,004.18			-
Income taxes	$	2,956,202		$	2,668,826
Non-cash investing activities:
Stock issued for acquisition of patent	$	32,748,664		$	-
Non-cash financing activities:
Stock issued for services	$	41,997		$	45,000

CHINA YCT INTERNATIONAL GROUP, INC.

CONDENSED CONSOLIDATED BALANCE SHEET

	UNIT: USD$
	June 30, 2011		March 31, 2011
	(Unaudited)		(Audited)
Assets
Current assets:
Cash and cash equivalent	$	16,316,460	$	6,046,804
Prepaid accounts		5,551,348		15,602,258
Inventory		1,635,250		59,183
Total current assets		23,503,059		21,708,245
Plant, property and equipment, net		9,677,789		9,629,558
Construction in progress		213,956		211,189
Intangible assets, net		39,531,385		40,560,015
Total assets		72,926,189		72,109,007
Liabilities and Stockholders’ Equity (Deficit)
Liabilities:
Current liabilities:
Accounts payable		209,871		0
Tax payable		951,218		1,683,944
Other payable		113,937		229,561
Total current liabiliites		1,275,025		1,913,505
Contingency		0		0
Total liabilities		1,275,025		1,913,505
Stockholders’ Equity
Preferred stock, par value $500.00 per share; 45 shares authorized and issued at September 30, 2010 and March 31, 2010		22,500		22,500
Common stock, par value $0.001 per share; 100,000,000 shares authorized; 73,780,610 and 73,758,388 shares issued and outstanding at June 30, 2011 and March 31, 2011, respectively		73,780		73,758
Additional paid-in capital		36,879,643		36,868,554
Statutory reserve		956,633		956,633
Retained earnings		31,457,806		30,232,764
Accumulated other comprehensive income		2,260,801		2,041,293
Total stockholders’ equity		71,651,163		70,195,502
Total liabilities and stockholders’ equity	$	72,926,189	$	72,109,007

CHINA YCT INTERNATIONAL GROUP, INC.

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

(Unaudited)

	UNIT: USD$
	FOR THE THREE MONTHS ENDED
	June 30, 2011		June 30, 2010
Sales Revenue	$	7,944,264	$	5,661,519
Cost of Goods Sold		3,582,345		3,061,321
Gross Profit		4,361,919		2,600,198
Selling Expenses		1,179,552		502,713
G&A Expense		907,564		294,536
R&D Expenses		193,518		60,338
Total expense		2,280,634		857,587
Income from operation		2,081,285		1,742,611
Interest income (Expense)		-41		-
Other income (Expense)		68,215		-
Profit before tax		2,149,459		1,742,611
Income tax		913,306		459,298
Net income		1,236,153		1,283,313
Other comprehensive income
Foreign currency translation adjustment		219,508		144,853
Compenhensive income	$	1,455,661	$	1,428,166
Basic and diluted income per common share
Basic and Diluted		0.02		0.04
Weighted average number of common shares outstanding
Basic and Diluted		73,731,361		29,471,503

CHINA YCT INTERNATIONAL GROUP, INC.

CONSOLIDATED STATEMENT OF STOCKHOLDER EQUITY

																		UNIT: USD$
CHINA YCT INTERNATIONAL	Preferred Stock								Additional
GROUP, INC.	Series A				Common shares				paid		Statutory		Accumulated		Retained
	Shares		Amount		Shares		Amount		in capital		Reserve		OCI		Earnings			Total
Balance - March 31, 2010		45		22,500		29,461,304		29,461		4,138,480		956,633		1,152,764		20,012,077			26,311,915
Issuance of common shares to independent directors						41,997		42		25,664									25,706
Issuance of common shares for the owner of an acquired patent						44,255,087		44,255		32,704,410									32,748,665
Net income for the year																10,214,768			10,214,768
Adjustment to Retained Earnings																5,919			5,919
Foreign currency translation adjustment														888,529					888,529
Balance - March 31, 2011		45	$	22,500		73,758,388	$	73,758	$	36,868,554	$	956,633	$	2,041,293	$	30,232,764		$	70,195,502
Net income for the quarter																1,236,153			1,236,153
Issuance of common shares to independent directors						22,222		22		11,089									11,111
Adjustment to Retained Earnings																(11,111	)		(11,111	)
Foreign currency translation adjustment														219,508					219,508
Balance - June 30, 2011		45	$	22,500		73,780,610	$	73,780	$	36,879,643	$	956,633	$	2,260,801	$	31,457,806		$	71,651,163

CHINA YCT INTERNATIONAL GROUP, INC.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW

(Unaudited)

	UNIT: USD$
	THREE MONTHS ENDED
	June 30, 2011			June 30, 2010
Cash Flows From Operating Activities:
Net income	$	1,236,153		$	1,283,313
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		635,294			147,414
Issue of common shares as compensation					19,760
Changes in operating assets and liabilities:
Inventory		(1,576,067	)		71,837
Accounts payable		209,871			(2,299,928	)
Taxes payable		(292,570	)		(478,039	)
Accrued expenses and other payables		(115,624	)		42,292
Net cash provided by (used in) operating activities		97,056			(1,213,351	)
Cash flows from investing activities:
Addition to plant and equipment		(77,596	)		(52,618	)
Prepayment to a third party verndor for acquisition of patent		10,030,688			(7,355,192	)
Net cash provided by (used in) investing activities		9,953,092			(7,407,810	)
Effect of exchange rate changes on cash and cash equivalents		219,508			101,975
Net increase (decrease) in cash and cash equivalents		10,269,655			(8,519,186	)
Cash and cash equivalents at beginning of period		6,046,804			11,911,933
Cash and cash equivalents at ending of period	$	16,316,460		$	3,392,747
Supplemental disclosures of cash flow information:
Cash paid during the periods for:
Interest		81			0
Income taxes	$	1,936,972		$	1,231,593
Non-cash financing activities:
Stock issued for services		22,222			14,970

CHINA YCT INTERNATIONAL GROUP, INC.

CONSOLIDATED BALANCE SHEET

	September 30, 2011 (Unaudited)		UNIT: USD$ March 31, 2011 Audited
Assets
Current assets:
Cash and cash equivalent	$	19,697,004	$	6,046,804
Prepaid accounts		5,653,292		15,602,258
Inventory		1,804,397		59,183
Total current assets		27,154,694		21,708,245
Plant, property and equipment, net		9,800,061		9,629,558
Construction in progress		217,885		211,189
Intangible assets, net		41,557,121		40,560,015
Total assets		78,729,760		72,109,007
Liabilities and Stockholders’ Equity (Deficit)
Liabilities:
Current liabilities:
Tax payable		1,471,382		1,683,944
Other payable		116,029		229,561
Total current liabiliites		1,587,411		1,913,505
Contingent Liability		2,765,992		0
Total liabilities		4,353,403		1,913,505
Stockholders’ Equity
Preferred stock, par value $500.00 per share; 45 shares authorized and issued at September 30, 2010 and March 31, 2010		22,500		22,500
Common stock, par value $0.001 per share; 73,780,610 and 73,731,361 shares authorized and issued at September 30, 2011 and March 31, 2011, respectively.		73,780		73,758
Additional paid-in capital		36,879,643		36,868,554
Statutory reserve		956,633		956,633
Retained earnings		33,766,821		30,232,764
Accumulated other comprehensive income		2,676,980		2,041,293
Total stockholders’ equity		74,376,357		70,195,502
Total liabilities and stockholders’ equity	$	78,729,760	$	72,109,007

CHINA YCT INTERNATIONAL GROUP, INC.

CONSOLIDATED STATEMENT OF OPERATIONS

(Unaudited)

	FOR THE THREE MONTHS ENDED				FOR THE SIX MONTHS ENDED
	September 30, 2011		September 30, 2010		September 30, 2011		September 30, 2010
Sales Revenue	$	8,421,007	$	5,752,798	$	16,365,271	$	11,414,317
Cost of Goods Sold		3,599,224		3,114,136		7,181,569		6,175,456
Gross Profit		4,821,783		2,638,662		9,183,702		5,238,861
Selling Expenses		612,003		430,682		1,791,555		933,395
G&A Expense		1,030,741		288,304		1,938,305		502,914
R&D Expenses		200,303		61,651		393,821		121,989
Total expense		1,843,048		780,637		4,123,682		1,558,298
Income from operation		2,978,735		1,858,025		5,060,020		3,680,563
Interest income (Expense)		75,961		-		144,135		-
Profit before tax		3,054,696		1,858,025		5,204,155		3,680,563
Income tax		745,681		484,502		1,658,987		943,800
Net income		2,309,015		1,373,523		3,545,168		2,736,763
Other comprehensive income
Foreign currency translation adjustment		416,179		391,336		635,687		536,189
Comprehensive income	$	2,725,194	$	1,764,859	$	4,180,855	$	3,272,952
Basic and diluted income per common share
Basic and Diluted	$	0.03	$	0.05	$	0.05	$	0.09
Weighted average number of common shares outstanding
Basic and Diluted		73,780,610		29,471,503		73,780,610		29,473,902

CHINA YCT INTERNATIONAL GROUP, INC.

CONSOLIDATED STATEMENT OF STOCKHOLDER EQUITY

																		UNIT: USD$
	Preferred Stock Series A				Common shares				Additional paid in		Statutory		Accumulated		Retained
	Shares		Amount		Shares		Amount		capital		Reserve		OCI		Earnings			Total
Balance - March 31, 2011		45		22,500		73,758,388		73,758		36,868,554		956,633		2,041,293		30,232,764			70,195,502
Issuance of common shares to independent directors						22,222		22		11,089									11,111
Adjustment to net income																(11,111	)		(11,111	)
Net income for the quarter																1,236,153			1,236,153
Foreign currency translation adjustment														219,508					219,508
Balance - June 30, 2011		45	$	22,500		73,780,610	$	73,780	$	36,879,643	$	956,633	$	2,260,801	$	31,457,806		$	71,651,163
Net income for the quarter																2,309,015			2,309,015
Foreign currency translation adjustment														416,179					416,179
Balance - September 30, 2011		45	$	22,500		73,780,610	$	73,780	$	36,879,643	$	956,633	$	2,676,980	$	33,766,821		$	74,376,357

CHINA YCT INTERNATIONAL GROUP, INC.

CONSOLIDATED STATEMENT OF CASH FLOW

(Unaudited)

				UNIT: USD$
	SIX MONTH ENDED
	September 30, 2011			September 30, 2010
Cash Flows From Operating Activities:
Net income	$	3,545,168		$	2,683,871
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		2,238,513			304,005
Issue of common shares as compensation		-			19,760
Changes in operating assets and liabilities:
Inventory		(1,745,214	)		287,192
Accounts payable					(2,299,928	)
Taxes payable		(212,562	)		(183,003	)
Accrued expenses and other payables		(113,352	)		42,668
Net cash provided by (used in) operating activities		3,712,553			854,565
Cash flows from investing activities:
Addition to plant and equipment		-			(188,590	)
Prepayment to a third party verndor for acquisition of patent		9,948,966			(7,437,187	)
Net cash provided by (used in) investing activities		9,948,966			(7,625,777	)
Effect of exchange rate changes on cash and cash equivalents		(11,319	)		435,404
Net increase (decrease) in cash and cash equivalents		13,650,200			(6,335,808	)
Cash and cash equivalents at beginning of period		6,046,804			11,911,933
Cash and cash equivalents at ending of period		19,697,004			5,576,125
Supplemental disclosures of cash flow information:
Cash paid during the periods for:
Income taxes	$	1,355,915		$	1,697,382

CHINA YCT INTERNATIONAL GROUP, INC.

CONDENSED CONSOLIDATED BALANCE SHEET

			UNIT: USD$
	December 31, 2011		March 31, 2011
	(Unaudited)		(Audited)
Assets
Current assets:
Cash and cash equivalent	$	18,443,850	$	6,046,804
Prepaid accounts		67,627		15,602,258
Inventory		2,483,981		59,183
Other receivable from related parties		-		-
Total current assets		20,995,458		21,708,245
Plant, property and equipment, net		9,784,841		9,629,558
Construction in progress		219,752		211,189
Intangible assets, net		51,765,878		40,560,015
Total assets		82,765,929		72,109,007
Liabilities and Stockholders’ Equity (Deficit)
Liabilities:
Current liabilities:
Accounts payable		-		-
Tax payable		944,076		1,683,944
Other payable		1,753,911		229,561
Total current liabilities		2,697,987		1,913,505
Contingency		2,765,992		0
Derivative liability		3,319,135		0
Total liabilities		8,783,114		1,913,505
Stockholders’ Equity
Preferred stock, par value $500.00 per share; 45 shares authorized and issued at December 31, 2011 and March 31, 2011		22,500		22,500
Common stock, par value $0.001 per share; 29,476,409 shares authorized and issued; at December 31, 2011 and March 31, 2011, respectively		29,525		29,503
Common stock subject to return, par value $0.001 per share; 44,254,952 shares authorized and issued; at December 31, 2011 and March 31, 2011, respectively		44,255		44,255
Additional paid-in capital		4,130,999		4,119,910
Additional paid-in capital subject to return		32,748,644		32,748,644
Statutory reserve		956,633		956,633
Retained earnings		33,156,493		30,232,764
Accumulated other comprehensive income		2,893,766		2,041,293
Total stockholders’ equity		73,982,815		70,195,502
Total liabilities and stockholders’ equity	$	82,765,929	$	72,109,007

CHINA YCT INTERNATIONAL GROUP, INC.

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

(Unaudited)

									UNIT: USD$
	FOR THE THREE MONTHS					FOR THE NINE MONTHS
	ENDED					ENDED
	December 31,			December 31,		December 31,			December 31,
	2011			2010		2011			2010
Sales Revenue	$	10,112,489		$	9,886,824	$	26,477,760		$	21,301,142
Cost of Goods Sold		4,712,730			4,613,157		11,894,299			10,788,613
Gross Profit		5,399,758			5,273,667		14,583,461			10,512,529
Selling Expenses		713,694			843,458		2,505,249			1,776,853
G&A Expense		1,578,298			352,096		3,516,603			855,011
R&D Expenses		183,693			111,221		577,514			233,210
Total expense		2,475,685			1,306,775		6,599,366			2,865,074
Income from operation		2,924,074			3,966,892		7,984,095			7,647,455
Interest income (Expense)		65,818			18,273		209,953			18,273
Other income (Expense)		(3,319,135	)		580,211		(3,319,135	)		580,211
Profit before tax		(329,243	)		4,565,376		4,874,913			8,245,939
Income tax		281,087			1,141,919		1,940,074			2,085,719
Net income		(610,330	)		3,423,457		2,934,839			6,160,220
Other comprehensive income
Foreign currency translation adjustment		216,785			510,647		852,472			2,199,600
Compenhensive income	$	(393,545	)	$	3,934,104	$	3,787,311		$	8,359,820
Basic and diluted income per common share
Basic and Diluted		0.00			0.12		0.04			0.21
Weighted average number of common shares outstanding
Basic and Diluted		73,780,610			29,473,902		73,780,610			29,473,902

CHINA YCT INTERNATIONAL GROUP, INC.

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(Unaudited)

CHINA YCT																		UNIT: USD$
INTERNATIONAL	Preferred Stock								Additional
GROUP, INC.	Series A				Common shares				paid in		Statutory		Accumulated		Retained
	Shares		Amount		Shares		Amount		Capital		Reserve		OCI		Earnings			Total
Balance - March 31, 2011		45	$	22,500		73,758,388	$	73,758	$	36,868,554	$	956,633	$	2,041,293	$	30,232,764		$	70,195,502
Issuance of common shares to independent directors						22,222		22		11,089									11,111
Adjustment to net income																-11,111			-11,111
Net income for the year																1,236,153			1,236,153
Foreign currency translation adjustment														219,508					219,508
Balance - June 30, 2011		45	$	22,500		73,780,610	$	73,780	$	36,879,643	$	956,633	$	2,260,801	$	31,457,806		$	71,,651,163
Net income for the year																2,309,015			2,309,015
Foreign currency translation adjustment														416,179					416,179
Balance - September 30, 2011		45	$	22,500		73,780,610	$	73,780	$	36,879,643	$	956,633	$	2,676,980	$	33,766,821		$	74,376,357
Net income for the year																(610,330	)		(610,330	)
Foreign currency translation adjustment														216,785					216,785
Balance - December 31, 2011		45	$	22,500		73,780,610	$	73,780	$	36,879,643	$	956,633	$	2,893,766	$	33,156,493		$	73,982,815

CHINA YCT INTERNATIONAL GROUP, INC.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW

(Unaudited)

				UNIT: USD$
	NINE MONTH ENDED
	December 31, 2011			December 31, 2010
Cash Flows From Operating Activities:
Net income		2,934,839		$	6,160,220
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		1,766,390			463,077
Issue of common shares as compensation		-			19,760
Changes in operating assets and liabilities:
Inventory		(2,424,798	)		197,645
Advance to suppliers
Other receivable from related parties
Accounts payable		-			(2,299,928	)
Customer deposit
Taxes payable		(739,868	)		278,575
Accrued expenses and other payables		7,609,478			43,005
Net cash provided by (used in) operating activities		9,146,041			4,862,354
Cash flows from investing activities:
Addition to plant and equipment		(511,491	)		(563,183	)
Loan repaid from (provided to) related party					-
Prepayment/deposit to Jining Tianruitong for purchasing of drug patents		4,107,691			(15,354,102	)
Net cash provided by (used in) investing activities		3,596,200			(15,917,285	)
Effect of exchange rate changes on cash and cash equivalents		(345,195	)		1,046,836
Net increase (decrease) in cash and cash equivalents		12,397,046			(10,008,095	)
Cash and cash equivalents at beginning of period		6,046,804			11,911,933
Cash and cash equivalents at ending of period		18,443,850		$	1,903,839
Supplemental disclosures of cash flow information:
Cash paid during the periods for:
Interest		-			-
Income taxes		2,178,687		$	2,144,058