SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Mar. 31, 2014 |
Accounting Policies [Abstract] | ' |
Basis of presentation | ' |
Basis of presentation |
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The consolidated financial statements of the Company are prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”). |
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Principles of consolidation | ' |
Principles of consolidation |
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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. |
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Use of estimates | ' |
Use of estimates |
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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. |
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Cash and cash equivalents | ' |
Cash and cash equivalents |
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For the purposes of the statement of cash flow, the Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. |
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Accounts receivable | ' |
Accounts receivable |
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The Company recognizes as accounts receivable any products shipped where payments have not been rendered. As of March 31, 2014 and 2013, the Company considered all its accounts receivable to be collectable and no provision for doubtful accounts had been made in the consolidated financial statements. |
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Inventory | ' |
Inventory |
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Inventory is primarily composed of raw materials and packing materials for manufacturing, work in process, and finished goods. Inventories are valued at the lower of cost or market with cost determined on a weighted average basis. Management compares the cost of inventory with the market value and an allowance is made for writing down the inventory to its market value, if lower than cost. |
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Property and equipment | ' |
Property and equipment |
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Property and equipment are stated at cost. The cost of an asset comprises its purchase price and any directly attributable costs of bringing the asset to its present working condition and locations for its intended use. Leasehold improvements are stated at cost and amortized over the shorter of the useful life of the assets or the length of the lease in accordance to ASC 840-10-35-6. Depreciation and amortization are calculated using the straight-line method over the following useful lives: |
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Buildings | 30-35 years | | | | | | |
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Machinery, equipment and automobiles | 7-15 years | | | | | | |
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Furniture and fixtures | 7-10 years | | | | | | |
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Leasehold improvements | 30 years | | | | | | |
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Expenditures for maintenance and repairs are charged to expense as incurred. Additions, renewals and betterments are capitalized. |
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Intangible Assets | ' |
Intangible Assets |
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| (i) | Land Use Rights: | | | | | |
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All land in the PRC is owned by the government and cannot be sold to any individual or company. However, the government may grant a “land use right” for occupying, developing and using land. The Company records land use rights obtained as intangible assets at cost, which is amortized evenly over the grant period of 50 years. |
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| (ii) | Patents: | | | | | |
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In March 2010, the Company purchased one patent from Shandong YCT Corp. The patent is the Company’s exclusive right to use an aglycone type and purification method of biotransformation in the gingko product manufacturing process for a period of 20 years from the patent application date. The patent was recorded at cost when purchased, and is being amortized over the shorter of its remaining legal life, 16.5 years, or its useful life, on a straight-line basis. |
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In October 2011, two patents were transferred to the Company based on a purchase agreement signed with Jining Tianruitong Technology development Company, Limited on October 26, 2010; which are “Treatment to ischemic encephalopathy and its preparation method” (ZL200510045001.9) and “Chinese herbal medicine compound to treat renal insufficiency and its preparation” (ZL200710013301.8). The patents were recorded at cost when purchased, and are being amortized over the shorter of the remaining legal lives, 13.75 years and 14.95 years, respectively; or their useful lives, on a straight-line basis. |
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Development costs of acer truncatum bunge planting | ' |
Development costs of acer truncatum bunge planting |
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The Company has started development of the acer truncatum bunge planting bases and completed planting of 2,200Mu (1Mu is equal to approximately 666.67 square meters) as of the year ended March 31, 2014. The agricultural product (e.g., seeds, oil extract, etc.) derived from the planting is intended to be the supply for an integrated usage including edible oil, protein, medicine and health care, tannin extract, industrial chemicals, nectar source, nervonic acid, and specialty lumber, as well as for landscaping and conservation of soil and water. |
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The Company accounts for the development costs of the planting in accordance to ASC Codification 905. Pursuant to ASC 905-360-25-3, limited-life land development costs and direct and indirect development costs of orchards, groves, vineyards, and intermediate-life plants shall be capitalized during the development period. Pursuant to ASC 905-360-35-7, costs capitalized during the development period under paragraph 905-360-25-3 shall be depreciated over the estimated useful life of the land development or that of the tree, vine, or plant. The planting is currently in the development stage with production expected in 2015; therefore, no depreciation expenses were recognized as of March 31, 2014. |
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Revenue recognition | ' |
Revenue recognition |
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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. |
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Unearned revenue | ' |
Unearned revenue |
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Revenue from the sale of goods or services is recognized at the time that goods are delivered or services are rendered. Receipts in advance for goods to be delivered or services to be rendered in a subsequent period are carried forward as unearned revenue. |
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Impairment of long-lived assets | ' |
Impairment of long-lived assets |
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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). |
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Income taxes | ' |
Income taxes |
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The Company accounts for income tax under the asset and liability method as stipulated by ASC 740 formerly Statement of Financial Accounting Standards (”SFAS”) No. 109, “ Accounting for 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 asset will not be realized. The Company didn’t recognize any deferred tax amount at March 31, 2014 and 2013. |
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China YCT International, Inc. is a holding company of Shandong Spring Pharmaceutical Co., Ltd and does not have any operating activities. Although the contract of the acquisition of the US patent was executed by the holding company, in substance, the patent was acquired and is used by the Company’s operating entity in China. For the same reason, the amortization of the patent was a deduction to the Chinese operating entity’s tax liability. Therefore, the Company does not incur any US income tax liabilities. |
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Value-added tax | ' |
Value-added tax |
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Sales revenue represents the invoiced value of goods, net of a Value-Added Tax (“VAT”). All of the Company’s products that are sold in the PRC are subject to a Chinese value-added tax at a rate of 17% of the gross sales price. This VAT may be offset by VAT paid by the Company on raw materials and other materials included in the cost of producing their finished product. |
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The Company recorded net VAT payable in the amount of $205,101 and $349,994 as of March 31, 2014 and 2013, respectively. |
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Research and development | ' |
Research and development |
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Research and development costs are related primarily to the Company’s development of its intellectual property. Research and development costs are expensed as incurred. The costs of material and equipment that are acquired or constructed for research and development activities and have alternative future uses are classified as plant and equipment and depreciated over their estimated useful lives. |
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The research and development expense for the years ended March 31, 2014 and 2013 was $1,234,393 and $1,756,053, respectively. |
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Advertising costs | ' |
Advertising costs |
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Advertising costs for newspaper and television are expensed as incurred in accordance to the ASC 720-35 “Advertising Costs”. Pursuant to ASC 720-35-25-5, costs of communication advertising are not incurred until the item or service has been received and shall not be reported as expenses before the item or service has been received, except as discussed in paragraph 340-20-25-2. |
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Advertising costs for newspaper and television are expensed as incurred. The Company incurred advertising costs of $321,669 and $759,866 for the years ended March 31, 2014 and 2013, respectively. |
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Mailing and handling costs | ' |
Mailing and handling costs |
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The Company accounts for mailing and handling fees in accordance with the FASB Accounting Standards Codification (“ASC”) 605-45 (Emerging Issues Task Force (EITF) Issue No. 00-10, Accounting for Shipping and Handling Fees and Costs). The Company includes shipping and handling fees billed to customers in net revenues. Amounts incurred by the Company for freight are included in cost of goods sold. For the years ended March 31, 2014 and 2013, the Company incurred $1,272,887 and $1,125,610 mailing and handling costs, respectively. |
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Stock Based Compensation | ' |
Stock Based Compensation |
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The Company measures compensation expense for its non-employee stock-based compensation under FASB ASC 718. The fair value of the stock issued is used to measure the transaction, as this is more reliable than the fair value of the services received. Fair value is measured as the value of the Company’s common stock on the date that the commitment for performance by the counterparty has been reached or the counterparty’s performance is complete. The fair value of the equity instrument is charged directly to compensation expense. |
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Net income (loss) per share ("EPS") | ' |
Net income (loss) per share (“EPS”) |
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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 EPS reflects 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 nil shares common stock equivalents available for dilution purposes as of March 31, 2014 and 2013. |
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Risks and uncertainties | ' |
Risks and uncertainties |
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The Company’s operations are carried out in the PRC. Accordingly, the Company’s business, financial condition and results of operations may be influenced by the political, economic and legal environments in the PRC, and by the general state of the PRC’s economy. The Company’s operations in the PRC are subject to specific considerations and significant risks not typically associated with companies in the North America and Western Europe. These include risks associated with, among others, the political, economic and legal environments and foreign currency exchange. The Company’s results may be adversely affected by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things. |
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Fair Value of Financial Instruments | ' |
Fair Value of Financial Instruments |
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For certain of the Company’s financial instruments, including cash and cash equivalents, restricted cash, accounts receivable, accounts payable, accrued liabilities and short-term debt, the carrying amounts approximate their fair values due to their short maturities. |
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As of March 31, 2014, the Company did not identify any financial instruments that are required to be presented on the balance sheet at fair value other than those whose carrying amounts approximate fair value due to their short maturities. |
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Foreign currency translation | ' |
Foreign currency translation |
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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,” with the RMB as the functional currency for the Chinese subsidiary. 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 translations of foreign currency transactions and balances are reflected in the statements of income. |
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Translation adjustments resulting from this process amounted to $841,999 and $453,773 for the years ended March 31, 2014 and 2013, respectively. |
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The following exchange rates were adopted to translate the amounts from RMB into United States dollars (“USD$”) for the respective periods: |
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| | March 31, 2014 | | March 31, 2013 | |
Year End RMB Exchange Rate (RMB/USD$) | | | 6.1521 | | | 6.2689 | |
Average Period RMB Exchange Rate (RMB/USD$) | | | 6.1551 | | | 6.2785 | |
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Recent accounting pronouncements | ' |
Recent accounting pronouncements |
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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. |
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