10-Q

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, 2017

☐  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period fromto 

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 1934 during 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 ☒
Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided to Section 7(a)(2)(B) of the Securities Act.  ☐

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 14, 2017 was 29,789,168.

CHINA YCT INTERNATIONAL GROUP, INC.

CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2017 AND 2016

(UNAUDITED)

Table of Contents

	Page
Consolidated Balance Sheets as of December 31, 2017 and March 31, 2017 (Unaudited)	1
Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended December 31, 2017 and 2016 (Unaudited)	2
Consolidated Statements of Cash Flows for the Nine Months Ended December 31, 2017 and 2016 (Unaudited)	3
Notes to Consolidated Financial Statements (Unaudited)	4- 9

CHINA YCT INTERNATIONAL GROUP, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

	DECEMBER 31, 2017		MARCH 31, 2017
Assets
Current assets:
Cash and cash equivalents	$	18,768,536	$	10,308,622
Accounts receivable		209,784		1,134,967
Inventories		3,442,024		5,483,040
Purchase deposit to vendors		-		650,790
Purchase deposit to related party		1,304,919		-
Prepaid expenses		180,473		-
Prepaid leases – current portion		785,582		900,547
Total current assets		24,691,318		18,477,966
Prepaid leases		770,737		1,265,252
Development cost of acer truncatum bunge planting		47,384,846		42,055,972
Plant, property, and equipment, net		16,501,938		14,487,135
Intangible assets, net		11,740,353		12,042,758
Deferred tax assets		261,277		508,521
Security deposit to related party		1,530,409		1,449,422
Total assets	$	102,880,878	$	90,287,026
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable to related party	$	-	$	706,048
Accounts payable and other accrued expenses		282,982		251,307
Taxes payable		1,079,580		2,028,190
Total current liabilities		1,362,562		2,985,545
Stockholders' Equity
Preferred stock, par value $500 per share; 45 shares authorized, issued and outstanding at December 31, 2017 and March 31, 2017.		22,500		22,500
Common stock, par value $0.001 per share; 100,000,000 shares authorized;  29,789,168 shares issued and outstanding at December 31, 2017 and March 31, 2017.		29,789		29,789
Additional paid-in capital		4,322,838		4,322,838
Statutory reserve		1,828,504		1,828,504
Retained earnings		91,884,263		83,061,604
Accumulated other comprehensive income (loss)		582,006		(4,386,845	)
Total stockholders' equity attributable to the Company		98,669,900		84,878,390
Noncontrolling interest		2,848,416		2,423,091
Total stockholders' equity		101,518,316		87,301,481
Total liabilities and stockholders' equity	$	102,880,878	$	90,287,026

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

1

CHINA YCT INTERNATIONAL GROUP, INC.

CONSOLIDATED STATEMENTS

OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

	THREE MONTHS ENDED DECEMBER 31,					NINE MONTHS ENDED DECEMBER 31,
	2017		2016			2017		2016
Sales	$	17,211,156	$	14,171,624		$	48,212,805	$	35,478,603
Cost of Goods Sold (including $3,623,226 and $2,590,947 from a related party for the three months ended December 31, 2017 and 2016, respectively; including $10,932,869 and $6,648,948 from a related party for the nine months ended December 31, 2017 and 2016, respectively)		10,422,916		8,358,123			29,521,454		21,281,950
Gross profit		6,788,240		5,813,501			18,691,351		14,196,653
Operating expenses
Selling expenses		1,278,544		969,495			3,596,983		2,525,178
General and administrative expenses		1,445,469		1,137,609			3,222,132		2,722,468
Research and development expenses		280,229		279,589			406,640		754,485
Total operating expenses		3,004,242		2,386,693			7,225,755		6,002,131
Income from operations		3,783,998		3,426,808			11,465,596		8,194,522
Gain on disposal of acer truncatum bunge plants		-		-			573,092		-
Interest income		32,376		11,073			88,678		43,222
Income before income tax provision		3,816,374		3,437,881			12,127,366		8,237,744
Income tax provision		954,093		849,716			3,031,841		2,078,344
Net income		2,862,281		2,588,165			9,095,525		6,159,400
Less: Net income attributable to noncontrolling interest		85,869		-			272,866		-
Net income attributable to the Company		2,776,412		2,588,165			8,822,659		6,159,400
Other comprehensive income (loss):
Foreign currency translation adjustment		1,557,010		(3,096,813	)		5,121,310		(5,747,120	)
Comprehensive income (loss)		4,419,291		(508,648	)		14,216,835		412,280
Less: Comprehensive income attributable to noncontrolling interest		132,578		-			425,325		-
Comprehensive income (loss) attributable to the Company	$	4,286,713	$	(508,648	)	$	13,791,510	$	412,280
Earnings per common share
Basic and Diluted	$	0.09	$	0.09		$	0.30	$	0.21
Weighted average number of common shares outstanding
Basic and Diluted		29,789,168		29,764,168			29,789,168		29,761,322

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

2

CHINA YCT INTERNATIONAL GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	NINE MONTHS ENDED DECEMBER 31,
	2017			2016
Cash Flows From Operating Activities:
Net income	$	9,095,525		$	6,159,400
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of plant, property and equipment		951,711			534,567
Amortization of intangible assets		949,886			830,262
Amortization of prepaid leases		654,324			697,741
Issuance of common shares for services		-			10,609
Stock-based compensation expenses		-			101,026
Deferred taxes		268,475			(10,893	)
Gain on disposal of acer truncatum bunge plants		(573,092	)		-
Changes in operating assets and liabilities:
Advance payment to vendors		669,250			-
Inventory		2,286,222			(1,739,711	)
Accounts receivable		962,842			(9,878	)
Cancellation of lease		57,137			-
Prepaid expenses		(175,771	)		-
Taxes payable		(1,034,267	)		645,178
Purchase deposit and accounts payable to related party, net		(1,996,995	)		132,348
Accounts payable and other accrued expenses		17,174			(67,505	)
Net cash provided by operating activities		12,132,421			7,283,144
Cash flows from investing activities:
Acquisition of property, plant and equipment		(2,125,638	)		(1,374,790	)
Proceeds from disposal of acer truncatum bunge plants		2,129,638			-
Development cost of acer truncatum bunge planting		(4,457,916	)		(3,133,278	)
Net cash used in investing activities		(4,453,916	)		(4,508,068	)
Effect of exchange rate changes on cash and cash equivalents		781,409			(629,729	)
Net increase in cash and cash equivalents		8,459,914			2,145,347
Cash and cash equivalents at beginning of period		10,308,622			7,639,084
Cash and cash equivalents at end of period	$	18,768,536		$	9,784,431
Supplemental disclosures of cash flow information:
Cash paid during the periods for:
Interest	$	-		$	-
Income taxes	$	3,495,744		$	1,663,060

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

3

CHINA YCT INTERNATIONAL GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 NOTE 1 - ORGANIZATION AND PRINCIPAL ACTIVITIES

China YCT International Group, Inc. ("China YCT") 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 97% 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". The Company, through its 97% owned subsidiary, Shandong Spring, engages 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, 2017 and the results of operations and cash flows for the periods ended December 31, 2017 and 2016. 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, 2017 are not necessarily indicative of the results to be expected for any subsequent periods or for the entire year ending March 31, 2018. The balance sheet on March 31, 2017 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, 2017 as included in our Annual Report on Form 10-K.

Certain amounts have been reclassified to conform to current year presentation.

Principles of consolidation

The consolidated financial statements include the financial statements of China YCT, Landway Nano and its 97% 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, intangible assets, and the valuation of deferred tax assets.

4

Foreign currency translation

The accounts of the Company's Chinese subsidiary are maintained in RMB and the accounts of the U.S. companies 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 comprehensive 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 comprehensive income.

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,
	2017		2016
Period End Exchange Rate (RMB/USD)		6.5342		6.937
Average Period Exchange Rate (RMB/USD)		6.709		6.6785

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 – PREPAID EXPENSES

The prepaid expenses consist of the payments that the Company has made in advance for the advertising services to be received in the future. On September 19, 2017, the Company signed an advertising contract with Shenzhen Henghe Media Co., Ltd.  In pursuant to the contract, in September 2017, the Company made approximately $450,000 (RMB 3 Million) advance payment to Shenzhen Henghe Media Co., Ltd for the advertising services to be received within the period from September 2017 to December 31, 2018.  The prepaid expenses are amortized over the service period and unamortized balance as of December 31, 2017 was $180,473.

NOTE 4 - INVENTORY

The components of inventories were as follows: 

	December 31,		March 31,
	2017		2017
Raw materials	$	1,449,623	$	1,276,254
Packaging materials		556,574		476,803
Work-in-process		475,074		1,373,919
Finished goods		960,753		2,356,064
Total inventories	$	3,442,024	$	5,483,040

5

NOTE 5 – PLANT, PROPERTY, AND EQUIPMENT, NET

 The components of property and equipment were as follows:

	December 31,			March 31,
	2017			2017
Machinery and equipment	$	3,459,466		$	2,254,813
Office equipment		739,992			717,259
Building		13,094,246			12,401,320
Leasehold improvements		4,080,854			2,803,052
Subtotal		21,374,558			18,176,444
Less: Accumulated depreciation and amortization		(4,872,620	)		(3,689,309	)
Total plant, property and equipment, net	$	16,501,938		$	14,487,135

The depreciation and amortization expense for the three months ended December 31, 2017 and 2016 was $336,599 and $176,755, respectively.

The depreciation and amortization expense for the nine months ended December 31, 2017 and 2016 was $951,711 and $534,567, respectively.

NOTE 6 – DEVELOPMENT OF ACER TRUNCATUM BUNGE

Development costs primarily include land development cost incurred for land leveling, irrigation, and fertilization, the purchase costs of acer truncatum bunge trees, and acer truncatum bunge planting fee.

Since July 2013, the Company has developed the acer truncatum bunge planting bases. As of March 31, 2017, the Company had completed planting of 6,080 Mu (1Mu is equal to approximately 666.67 square meters) at four leased farmlands. On April 1, 2017, the Company entered an agreement with Zhongce No.4 Village to terminate the lease for the 200 Mu farmland because the parcel of farmland was recalled by the local government to build a new urban district. Based on the agreement, the Company received the refund of the remaining prepaid lease payments of approximately $56,000 (RMB383,333) and compensation of approximately $350,000 (RMB2,400,000) from the government for the early termination of the lease.  On May 1, 2017, the Company signed two contracts with third parties to sell all of the plants from the farmland for approximately $1,974,000 (RMB13,527,000). The total capitalized cost of the acer truncatum bunge planting in Zhongce No.4 Village farmland was approximately $1,512,000 (RMB10,360,000). In addition, the Company incurred approximately $239,000 (RMB1,639,260) in  expenses to pack the plants for sale. The gain from disposal of the acer truncatum bunge plants was approximately $573,000. As a result of the lease termination, the Company's acer truncatum bunge planting acreage was reduced to 5,880 Mu at December 31, 2017 from 6,080 Mu at March 31, 2017.

6

NOTE 7 - TAXES PAYABLE

Taxes payable at December 31, 2017 and March 31, 2017 were as follows:

	As of
	December 31,			March 31,
	2017			2017
Corporate income tax		$	707,653		$	1,382,382
Value-added tax			334,843			576,086
Other tax & fees			37,084			69,722
Total tax payable		$	1,079,580		$	2,028,190

NOTE 8 - INCOME TAXES

China YCT and Landway Nano were incorporated in the United States of America and are subject to United States federal taxation. No provisions for income taxes have been made, as there was no taxable income from U.S. operations for the three and nine months ended December 31, 2017 and 2016. The Company has a net loss carryforward of approximately $22,000 which will expire in 2047. The Company has established a 100% valuation allowance on deferred tax assets resulting from the net operation loss incurred in the U.S.

The Company's Chinese subsidiaries are governed by the Income Tax Law of the PRC concerning 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 Company has not provided deferred taxes on undistributed earnings attributable to its PRC subsidiaries as they are to be permanently reinvested. On February 22, 2008, MOF, and SAT, jointly issued Cai Shui 2008 Circular 1, "Circular 1." According to Article 4 of Circular 1, distributions of accumulated profits earned by foreign investment enterprises, ("FIE") prior to January 1, 2008 to their foreign investors will be exempt from withholding tax, ("WHT") while distribution of the profits earned by a FIE after January 1, 2008 to its foreign investors shall be subject to WHT.

Dividend payments by PRC subsidiaries are limited by certain statutory regulations in the PRC. No dividends may be paid by PRC subsidiaries without first receiving prior approval from SAFE. Dividend payments are restricted to 90% of after tax profits.

Should the Company's PRC subsidiaries distribute all their profits generated after December 31, 2007, the aggregate withholding tax amount will be $9,188,426 and $8,306,160 as of December 31, 2017 and March 31, 2017, respectively.

Prior to the new Tax Cut and Jobs Act (the "New Law"), since Shandong Spring intends to reinvest its earnings to further expand its businesses in mainland China, it does not intend to declare dividends to their immediate foreign holding companies in the foreseeable future. Accordingly, the Company has not recorded any deferred taxes in relation to US tax on the cumulative amount of undistributed retained earnings since January 1, 2008. Under the "#1703. Treatment of deferred foreign income upon transition to new participation exemption system-deemed repatriation" of the New Law, U.S. shareholders owning at least 10% of foreign subsidiary general must include in income, for the subsidiary's last tax year beginning before 2018, the shareholder's pro rata share of the accumulated post-'86 historical E&P of the foreign subsidiary as of the "measurement date" to the extent such E&P has not been previously subject to U.S. tax.  The measurement date" is November 2, 2017, or December 31, 2017, whichever date produces a greater result. The portion of the E&P comprising cash or cash equivalents is taxed at a reduced rate of 15.5%, while any remaining E&P is taxed at a reduced rate of 8%. At the election of the U.S. shareholder, the tax liability is payable over a period of up to eight years. The payments for each of the first five years equal 8% of the net tax liability. The amount of the sixth installment is 15% of the net tax liability, increasing to 20% for the seventh installment and the remaining balance of 25% in the eighth year. The Company is still estimating the tax liability as result of the New Law being effective on December 22, 2017.  If such liability is determined, the Company will make adjustments to its liabilities at the year ended March 31, 2018 in accordance with the provisions of ASC Topic 740, Income Taxes.

7

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,
	2017				2016
U.S. Statutory rate		$	4,244,578			$	2,883,210
Tax rate difference between China and U.S.			(1,212,737	)			(823,774	)
Permanent difference			-				18,908
Effective tax rate		$	3,031,841			$	2,078,344

The provisions for income taxes are summarized as follows: 

	Nine Months Ended
	December 31,
	2017			2016
Current		$	2,763,366		$	2,089,237
Deferred			268,475			(10,893	)
Total		$	3,031,841		$	2,078,344

NOTE 9 - RELATED PARTY TRANSACTIONS AND BALANCES

 Balances:

 (i)      Security deposit to related party:

The security deposit - related party of $1,530,409 represents the deposit paid to Shandong Yongchuntang Bioengineering Co. Ltd. ("Shandong Yongchuntang") on January 4, 2017 for using the direct-sales license issued to Shandong Yongchuntang. The amount is non-interest bearing and not secured. Shandong Yongchuntang owns 3% of the common stock of Shandong Spring.

 (ii)     Trade related balance with related party:

On December 31, 2017, the purchase deposit to related party of $1,304,919 pertains to purchase deposit paid in respect of the purchase of healthcare products from Shandong Yongchuntang.

On March 31, 2017, accounts payable balance of $706,048 pertains to payable in respect of the purchase of healthcare products from Shandong Yongchuntang.

8

(iii)    Sales to related party:

During the three and nine months ended December 31, 2017, the Company sold acer truncatum oil product to Shandong Yongchuntang for $131,906.

(iv)    Purchase from related party:

See Note 10 for details.

Contingency:

The Company is authorized by Shandong Yongchuntang to sell Shandong Yongchuntang's products using the direct-sales license issued to Shandong Yongchuntang.  As a condition for using the direct-sales license, the Company needs to increase sales each year based on the 95% of sales of the year 2014.  If the Company cannot meet this sales target in any year from April 1, 2017 to June 30, 2020, the Company needs to pay approximately $1.5 million as an annual fee for using the direct-sales license.  There is risk that the Company may fail to meet the sales target and may need to pay approximate $1.5 million in one or more subsequent years.

NOTE 10 - MAJOR CUSTOMER AND VENDOR

The Company sold products through ten distributors during the three and nine months ended December 31, 2017 and 2016. Sales to five distributors represented 17%, 14%, 12%, 11%, and 11% of total sales for the three months ended December 31, 2017 and sales to three distributors represented 19%, 15%, and 12% of total sales for the three months ended December 31, 2016, respectively.

The Company's sales through four distributors represented 17%, 16%, 13%, and 12% of total sales for the nine months ended December 31, 2017. Sales to three distributors represented 20%, 15%, and 13% of total sales for the nine months ended December 31, 2016.

The Company sold 11 and 7 products during the three months ended December 31, 2017 and 2016, respectively. Sales of two products represented 38% and 24% of total sales for the three months ended December 31, 2017. Sales of three products represented 46%, 20%, and 14% of total sales for the three months ended December 31, 2016.

The Company sold 11 and 7 products during the nine months ended December 31, 2017 and 2016, respectively. Sales of three products represented 41%, 17% and 10% of total sales for the nine months ended December 31, 2017.  Sales of three products represented 48%, 17%, and 16% of total sales for the nine months ended December 31, 2016.

The Company purchases its products from Shandong Yongchuntang, a related party, according to the purchase contract signed between the Company and Shandong Yongchuntang. Pursuant to the renewed one year contract dated February 20, 2017, the Company agreed to purchase nine products from Shandong Yongchuntang at fixed prices. Total purchases from Shandong Yongchuntang represented 33% and 30% of our total purchases during the three months ended December 31, 2017 and 2016, respectively.  The purchases from three other vendors represented 33%, 13%, and 11% of the Company's total purchases for the three months ended December 31, 2017. The purchases from three other vendors represented 33%, 16%, and 10% of the Company's total purchases for the three months ended December 31, 2016.

Total purchases from Shandong Yongchuntang represented 42% and 32% of our total purchases during the nine months ended December 31, 2017 and 2016, respectively.  The purchases from two other vendors represented 25% and 14% of the Company's total purchases for the nine months ended December 31, 2017. The purchases from two other vendors represented 25% and 17% of the Company's total purchases for the nine months ended December 31, 2016.The Company has evaluated subsequent events that have occurred after the date of the balance sheet through the date of issuance of these consolidated financial statements and determined that no subsequent event requires recognition or disclosure to the consolidated financial statements.

NOTE 11 – 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 consolidated financial statements and determined that no subsequent event requires recognition or disclosure to the consolidated financial statements.

9

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 its wholly-owned subsidiary, Landway Nano Bio-Tech, Inc. ("Landway Nano"), incorporated in Delaware, which, in turn, owns 97% of  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 Shandong Spring, is engaged in the business of (i) distributing health care supplement products manufactured by Shandong Yongchuntang, (ii) developing, manufacturing, and selling Huoliyuan Capsules, a prescription  medicine, and (iii) developing the acer truncatum bunge planting bases and selling acer truncatum seed oilin the PRC. Acer truncatum bunge plants are a species of maple tree.

Since July 2015, the Company has produced acer truncatum bunge seed oil and sold the product to customers through an internet direct sales system operated by the Company pursuant to an agreement with Shandong Yongchuntang.  The acer truncatum bunge seed oil was extracted from 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 fall of 2018.

Results of Operations

The following table sets forth information from our statements of comprehensive income (loss) for the three months ended December 31, 2017 and 2016, in dollars:

	Three Months Ended
	December 31,					$		%
	2017		2016			Change		Change
Sales		17,211,156		14,171,624			3,039,532		21.4	%
Cost of Goods sold		10,422,916		8,358,123			2,064,793		24.7	%
Gross Profit		6,788,240		5,813,501			974,739		16.8	%
Operating Expenses		3,004,242		2,386,693			617,549		25.9	%
Operating Income		3,783,998		3,426,808			357,190		10.4	%
Interest Income		32,376		11,073			21,303		192.4	%
Income Tax Provision		954,093		849,716			104,377		12.3	%
Net Income		2,862,281		2,588,165			274,116		10.6	%
Comprehensive Income (Loss)		4,419,291		(508,648	)		4,927,939		(968.8	)%

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The following table sets forth information from our statements of comprehensive income for the nine months ended December 31, 2017 and 2016, in dollars:

	Nine Months Ended
	December 31,				$		%
	2017		2016		Change		Change
Sales		48,212,805		35,478,603		12,734,202		35.9	%
Cost of Goods sold		29,521,454		21,281,950		8,239,504		38.7	%
Gross Profit		18,691,351		14,196,653		4,494,698		31.7	%
Operating Expenses		7,225,755		6,002,131		1,223,624		20.4	%
Operating Income		11,465,596		8,194,522		3,271,074		39.9	%
Interest Income		88,678		43,222		45,456		105.2	%
Gain on Disposal of Acer Truncatum Bunge Plants		573,092		-		573,092		100.0	%
Income Tax Provision		3,031,841		2,078,344		953,497		45.9	%
Net Income		9,095,525		6,159,400		2,936,125		47.7	%
Comprehensive Income		14,216,835		412,280		13,804,555		3,348.3	%

Revenue

During the three months ended December 31, 2017, we realized $17,211,156 in revenue, representing an increase of 21.4% or $3,039,532 as compared to $14,171,624 for the same period in 2016.  However, the actual increase in revenue was 18.3% as compared to the same period in 2016, but 3.1% of the increase was caused by higher USD converted from RMB due to a RMB appreciation that occurred during the quarter ended December 31, 2017, compared with the same period in 2016. The 18.3% revenue increase was due to the increased sales of health care products, acer truncetum bunge seed oil and Huoliyan Capsules. During the nine months ended December 31, 2017, we realized $48,212,805 in revenue, representing an increase of 35.9% or $12,734,202 as compared to $35,478,603 for the same period in 2016.  The 35.9% revenue increase was due to the increased sales of health care products, acer truncatum bunge seed oil, and Huoliyuan Capsules.

Our revenues for the three months and nine months ended December 31, 2017 include $6,603,431 and $19,967,630,  respectively, that we generated as the distributor of the health care products manufactured by Shandong Yongchuntang. We purchase products from Shandong Yongchuntang, a related party, according to the purchase contract signed between the Company and Shandong Yongchuntang. On February 20, 2017, the Company renewed the purchase contract with Shandong Yongchuntang for a term of one year ending on February 25, 2018.  Pursuant to the renewed one year contract, the Company agreed to purchase nine products from Shandong Yongchuntang at fixed prices. During the three months ended December 31, 2017, 38.4% of our total revenue was generated as the distributor of Shandong Yongchuntang, as compared to 33.4% during the three months ended December 31, 2016.  During the nine months ended December 31, 2017, 41.4% of our total revenue was generated as the distributor of Shandong Yongchuntang, as compared to 34.2% during the nine months ended December 31, 2016.

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For the three months ended December 31, 2017, our revenue from sales of the health care products of $6,603,431 represented  an increase of 39.7% or $1,877,837 as compared to $4,725,594 for the same period in 2016.  The increase in sales of the health care products was primarily due to the growth of our customer base and the internet direct-sales. For the nine months ended December 31, 2017, our revenue from sales of the health care products of$19,967,630 represented an increase of 64.4% or $7,821,081 as compared to $12,146,549 for the same period in 2016.  The significant increase in sales of the health care products was primarily due to the growth of our customer base and the internet direct-sales.

The sales of the Huoliyuan Capsule accounted for 37.7% of our revenue during the three months ended December 31, 2017, compared to 45.5% during the three months ended December 31, 2016.  The sales of the Huoliyuan Capsule accounted for 41.0% of our revenue during the nine months ended December 31, 2017, compared to 48.2% during the nine months ended December 31, 2016.  The sales of the Huoliyuan Capsule in the three months ended December 31, 2017 was $6,494,994, a slight increase of 0.7% or $42,088 as compared to the same period for the prior year. However, the actual sales in RMB for the three months ended December 31, 2017 decreased by 2.3% compared to the same period in 2016 but offsetting by 3% of the increase that was caused by higher USD converted from RMB due to a RMB appreciation occurred during the quarter ended December 31, 2017, compared with the same period in 2016.

Since July 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.  Our self-grown acer truncatum pods will not be ready to be used for production until approximately the fall of 2018. During the three months ended December 31, 2017, 23.9% of our total revenue was generated from the sales of acer truncatum oil products, compared to 21.1% during the same period in 2016. During the three months ended December 31, 2017, the sales of acer truncatum bunge seed oil was $4,112,731, representing an increase of 37.4% or $1,119,607 compared to $2,993,124 for the same period in 2016. During the nine months ended December 31, 2017, 17.6% of our total revenue was generated from the sales of acer truncatum oil products, compared to 17.6% during the same period in 2016. During the nine months ended December 31, 2017, the sales of acer truncatum bunge seed oil was $8,498,770, representing an increase of 36.1% or $2,254,334 compared to $6,244,436 for the same period in 2016. The increase in sales of acer truncatum oil products was primarily due to the increased promotion of our acer truncatum bunge seed oil by organizing conferences to introduce the features and benefits of the product to our distributors and customers through internet direct sales. .

The following is the sales breakdown by products during the three months ended December 31, 2017 and 2016:

	For the Three Months Ended December 31,
Sales	2017				2016
Health care supplements		6,603,431	38.4	%		4,725,594	33.4	%
Drugs (Huoliyuan Capsule)		6,494,994	37.7	%		6,452,906	45.5	%
Acer truncatum oil		4,112,731	23.9	%		2,993,124	21.1	%
Total		17,211,156	100	%		14,171,624	100	%

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The following is the sales breakdown by products during the nine months ended December 31, 2017 and 2016:

	For the Nine Months Ended December 31,
Sales	2017				2016
Health care supplements		19,967,630	41.4	%		12,146,549	34.2	%
Drugs (Huoliyuan Capsule)		19,746,405	41.0	%		17,087,618	48.2	%
Acer truncatum oil		8,498,770	17.6	%		6,244,436	17.6	%
Total		48,212,805	100	%		35,478,603	100	%

Cost of Goods Sold

Our cost of goods sold were comprised primarily of the cost of finished goods that we purchased from Shandong Yongchuntang, the raw materials that we purchased from third party vendors to produce Huoliyuan Capsules and acer truncatum bunge seed oil, and the manufacturing costs of acer truncatum bunge seed oil and Huoliyuan Capsules. The cost of manufacturing the Huoliyuan Capsules was approximately 43.3% and 49.8% of the total cost of goods sold during the three months ended December 31, 2017 and 2016, respectively.  The cost of manufacturing the Huoliyuan Capsule was approximately 46.5% and 52.5% of the total cost of goods sold during the nine months ended December 31, 2017 and 2016, respectively. The cost of manufacturing acer truncatum bunge seed oil was approximately 21.6% and 18.7% of the total cost of goods sold during the three months ended December 31, 2017 and 2016, respectively. The cost of manufacturing acer truncatum bunge seed oil was approximately 16.0% and 15.7% of the total cost of goods sold during the nine months ended December 31, 2017 and 2016, respectively.

During the three months ended December 31, 2017, our cost of goods sold totaled $10,422,916, representing an increase of $2,064,793 or 24.7% as compared to $8,358,123 during the three months ended December 31, 2016. However, the 24.7% increase in cost was a net result of the actual increase in cost and the appreciation of RMB. There was 21.4% actual increase in cost due to the increased sales of the acer truncetum bunge seed oil and the health care products and the decreased sales of the Huoliyuan capsules but 3.3% of the increase was caused by higher USD converted from RMB due to a RMB appreciation occurred during the three months ended December 31, 2017, compared with the same period in 2016. The percentages of the cost of goods sold to total revenues increased slightly from 59.0% for the three months ended December 31, 2016 to 60.6% for the three months ended December 31, 2017.

During the nine months ended December 31, 2017, our cost of goods sold totaled $29,521,454, representing an increase of $8,239,504 or 38.7% as compared to $21,281,950 during the nine months ended December 31, 2016. However, the 38.7% increase in cost was a net result of the actual increase in cost and the depreciation of RMB. There was 39.4% actual increase in cost due to the increased sales of all products, but 0.7% of the increase in cost was offset by fewer USD converted from RMB due to a RMB depreciation occurred during the nine months ended December 31, 2017, compared with the same period in 2016. The percentages of the cost of goods sold to total revenues increased slightly from 60.0% for the nine months ended December 31, 2016 to 61.2% for the nine months ended December 31, 2017.

Gross Profit

Gross profit for the three months ended December 31, 2017 was $6,788,240, an increase of 16.8% or $974,739 as compared to the same period for the prior year. The overall gross profit as a percentage of net revenues was approximately 39.4% for the three months ended December 31, 2017, a slight decreased from 41.0% for the same period of 2016.  The gross profit as percentage of net revenues for the health care products was approximately 44.5% for the three months ended December 31, 2017, a slight increase from 44.3% for the same period of 2016.  The gross profit as percentage of net revenues for Huoliyuan Capsules was approximately 30.6% for the three months ended December 31, 2017, a decrease from 35.6% for the same period of 2016. The gross profit as percentage of net revenues for acer truncatum bunge seed oil was approximately 45.4% for the three months ended December 31, 2017, a decrease from 47.7% for the same period of 2016. The lower gross profit as percentage of net revenue for Huoliyuan Capsules  during the three months ended December 31, 2017 was due to the increased raw material and manufacturing costs. The lower gross profit as percentage of net revenue for the acer truncatum bunge seed oil during the three months ended December 31, 2017 was primarily due to the decreased sales price offset by the decreased raw material cost.

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The comparison of the gross profits for the three months ended December 31, 2017 and 2016 as follows:

	December 31, 2017		GrossProfit Margin			December 31, 2016		GrossProfit Margin			Change in $			Variance
Health care supplements		2,935,950		44.5	%		2,092,442		44.3	%		843,508			40.3	%
Drugs (Huoliyuan Capsule)		1,986,669		30.6	%		2,294,172		35.6	%		(307,503	)		(13.4	)%
Acer truncatum oil		1,865,621		45.4	%		1,426,887		47.7	%		438,734			30.7	%
Total		6,788,240		39.4	%		5,813,501		41.0	%		974,739			16.8	%

Gross profit for the nine months ended December 31, 2017 was $18,691,351, an increase of 31.7% or $4,494,698 as compared to the same period for the prior year. The overall gross profit as a percentage of net revenues was approximately 38.8% for the nine months ended December 31, 2017, slightly decreased from 40.0% for same period of 2016. The gross profit as percentage of net revenues for the health care products was approximately 44.6% for the nine months ended December 31, 2017, a slight increase from 44.4% for the same period of 2016.  The gross profit as percentage of net revenues for Huoliyuan Capsules was approximately 30.4% for the nine months ended December 31, 2017, a decrease from 34.6% for the same period of 2016. The gross profit as a  percentage of net revenues for acer truncatum bunge seed oil was approximately 44.5% for the nine months ended December 31, 2017, a decrease from 46.4% for the same period of 2016. The lower gross profit as percentage of net revenue for Huoliyuan Capsules during the nine months ended December 31, 2017 was due to the increased raw material and manufacturing costs. The lower gross profit as percentage of net revenue for the acer truncatum bunge seed oil during the nine months ended December 31, 2017 was primarily due to the net impact of decreased sales price offset by the decreased raw material cost.

The comparison of the gross profits for the nine months ended December 31, 2017 and 2016 as follows:

	December 31, 2017		GrossProfit Margin			December 31, 2016		GrossProfit Margin			Change in $		Variance
Health care supplements		8,900,597		44.6	%		5,393,886		44.4	%		3,506,711		65.0	%
Drugs (Huoliyuan Capsule)		6,008,881		30.4	%		5,906,331		34.6	%		102,550		1.7	%
Acer truncatum oil		3,781,873		44.5	%		2,896,436		46.4	%		885,437		30.6	%
Total		18,691,351		38.8	%		14,196,653		40.0	%		4,494,698		31.7	%

Research and Development Expenses

Our R&D expenses for the three months ended December 31, 2017 were $280,229 or approximately 1.6% of total corresponding revenue, an increase of $640 or 0.2%, as compared to $279,589 or approximately 2.0% of total corresponding revenue for the three months ended December 31, 2016.  Our R&D expenses for the nine months ended December 31, 2017 were $406,640 or approximate 0.8% of total corresponding revenue, a decrease of $347,845 or 46.1%, as compared to $754,485 or approximately 2.1% of total corresponding revenue for the nine months ended December 31, 2016. The lower R&D expense and the decrease on the percentage of R&D expense over total revenue compared with the same period of the prior year was mainly due to the decreased purchase of the materials that were used in the R&D.

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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 trunkatum bunge plants. As of December 31, 2017, we had 27 employees in the  in the research and development department.

Operating 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, 2017 were $1,278,544 or 7.4% of our total revenue for the period, representing slight increase on the percentage of total revenue from 6.8% for the prior year's quarter ended December 31, 2016. Our selling expenses for the three months ended December 31, 2017 increased by 31.9% or $309,049 as compared to the same period in the prior year. The increase in selling expenses was primarily due to the increase in shipping cosst, sales commission as a result of increased sales and increased advertising costs.

Our selling expenses for the nine months ended December 31, 2017 were $3,596,983 or 7.5% of our total revenue for the period, representing an increase on the percentage of total revenue from 7.1% for the prior year's nine months ended December 31, 2016. Our selling expenses for the nine months ended December 31, 2017 increased by 42.4% or $1,071,805 as compared to the same period in the prior year. The increase in selling expenses was primarily due to the increase in shipping costs, sales commission as a result of increased sales and increased advertising costs.

Our G&A expenses for the three months ended December 31, 2017 were $1,445,469 or 8.4% of our total revenue for the period, representing a slight increase on the percentage of total revenue from 8.0% for the prior year's quarter ended December 31, 2016.  Our G&A expenses for the three months ended December 31, 2017 increased by 27.1% or $307,860 as compared to the same period in the prior year.  The increase in G&A expenses was primarily due to the increase in depreciation and amortization expenses and legal and consulting fees.

Our G&A expenses for the nine months ended December 31, 2017 were $3,222,132  or 6.7% of our total revenue for the period, representing a decrease on the percentage of total revenue from 7.7% for the prior year's nine months ended December 31, 2016.  Our G&A expenses for the nine months ended December 31, 2017 increased by 18.4% or $499,664 as compared to the same period in the prior year. The increase in G&A expenses was primarily due to the increase in depreciation and amortization expenses and legal and consulting fees offset by the decrease of stock options amortization.

Income Taxes

Income tax expense increased by $104,377 during the three months ended December 31, 2017, as compared to the prior year's quarter ended December 31, 2016, as a result of the increase in income from operation.

Income tax expense increased by $953,497 during the nine months ended December 31, 2017, as compared to the nine months ended December 31, 2016, as a result of the increase in income from operations and the gain from disposal of acer truncatum bunge plants.

Net Income

As a result of the above, during the three months ended December 31, 2017, we realized net income of $2,862,281, representing a 10.6% or $274,116 increase, compared to $2,588,165 during the three months ended December 31, 2016. The increase was mainly due to the higher revenue from sales of health care products and acer truncatum bunge seed oil, in the three months ended December 31, 2017.

During the nine months ended December 31, 2017, we realized net income of $9,095,525, representing a 47.7% or $2,936,125 increase, compared to $6,159,400 during the nine months ended December 31, 2016. The increase was mainly due to the higher revenue from sales of all products, the lower R&D expenses and the gain from disposal of acer truncatum bunge plants in the nine months ended December 31, 2017.

15

Comprehensive Income (Loss)

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 "Accumulated other comprehensive income (loss)," 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, 2017, the effect of converting our financial results to USD was income of $1,557,010 to our other comprehensive income, as compared to a loss of $3,096,813 during the three months ended December 31, 2016 as a result of the currency exchange rate fluctuation.

During the nine months ended December 31, 2017, the effect of converting our financial results to USD was income of $5,121,310 to our other comprehensive income, as compared to a loss of $5,747,120 during the nine months ended December 31, 2016 as a result of the currency exchange rate fluctuation.

Noncontrolling interest

In March 18, 2017, Shandong Yongchuntang  became a 3% shareholder of Shandong Spring.  During the three months ended December 31, 2017, $132,578 of comprehensive income was attributable to Shandong Yongchuntang.

During the nine months ended December 31, 2017, $425,325 of comprehensive income was attributable to Shandong Yongchuntang.

Liquidity and Capital Resources

Our principal source of liquidity were generated from our operations. As of December 31, 2017, we had $23,328,756 in working capital, an increase of $7,836,335 or 50.6% as compared to $15,492,421 in working capital as of March 31, 2017. 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 $12,132,421 during the nine months ended December 31, 2017. We had accounts receivable of $209,784 outstanding as of December 31, 2017. 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 additional capital contributions. Our budget to increase our capacity to manufacture blended edible oil products is $5 million. Our expectation, therefore, is to access the capital markets in the U.S. and China to obtain the funds we need. At present we have no firm 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:

	For the Nine Months Ended December 31,
	2017			2016			Change in $		Change in %
Net cash provided by operating activities	$	12,132,421		$	7,283,144			4,849,277		66.6	%
Net cash used in investing activities	$	(4,453,916	)	$	(4,508,068	)		54,152		(1.2	)%
Effect of exchange rate change on cash and cash equivalents	$	781,409		$	(629,729	)		1,411,138		(224.1	)%
Net increase in cash and cash equivalents	$	8,459,914		$	2,145,347			6,314,567		294.3	%
Cash and cash equivalents, beginning balance	$	10,308,622		$	7,639,084			2,669,538		34.9	%
Cash and cash equivalents, ending balance	$	18,768,536		$	9,784,431			8,984,105		91.8	%

Operating Activities

Net cash provided by operating activities was $12,132,421 for the nine months ended December 31, 2017, which was an increase of 66.6% or $4,849,277 from the $7,283,144 net cash provided by operating activities for the same period of the prior year. The increase was primarily due to the increase from cash inflow from sales revenue and accounts receivable, and the decrease from cash out flow from inventory.

Investing Activities

During the nine months ended December 31, 2017, our net cash used in investing activities was $4,453,916, as compared to $4,508,068 of net cash used for the nine months ended December 31, 2016. The cash used in investing activities for the nine months ended December 31, 2017 of $4,453,916 was primarily attributable to the acquisition of property, plant and equipment of $2,125,638, and capital expenditures of $4,457,916 in acer truncatum bunge planting, and offsetting by a cash receipt of $2,129,638 from the disposal of acer truncatum bunge plants.

Financing Activities

No net cash was generated or used by financing activities over the three and nine months ended December 31, 2017 and 2016.

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 not 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, 2017, 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.

16

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

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.

17

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 14, 2018

/s/ Yan Tinghe

Yan Tinghe Chief Executive Officer (Principal Executive Officer)

/s/ Li Chuanmin

Li Chuanmin Chief Financial Officer (Principal Financial Officer)

18

EX-31.1

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 of 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 14, 2018

By:     /s/Yan Tinghe

            Yan Tinghe, Chief Executive Officer (Principal Executive Officer)

EX-31.2

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 of 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 14, 2018

By:       /s/ Li Chuanmin

              Li Chuanmin Chief Financial Officer (Principal Financial Officer)

EX-32.1

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, 2017 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 14, 2018	By: /s/Yan Tinghe
	Yan Tinghe, Chief Executive Officer (Principal Executive Officer)
February 14, 2018	By: /s/Li Chuanmin
	Li Chuanmin, Chief Financial Officer (Principal 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.

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Document and Entity Information - shares	9 Months Ended
	Dec. 31, 2017	Feb. 14, 2018
Details
Registrant Name	CHINA YCT INTERNATIONAL GROUP, INC.
Registrant CIK	0000847464
SEC Form	10-Q
Period End date	Dec. 31, 2017
Fiscal Year End	--03-31
Trading Symbol	cyig
Tax Identification Number (TIN)	652954561
Number of common stock shares outstanding		29,789,168
Filer Category	Smaller Reporting Company
Current with reporting	Yes
Voluntary filer	Yes
Well-known Seasoned Issuer	No
Amendment Flag	false
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q3
Entity Incorporation, State Country Name	Delaware
Entity Address, Address Line One	Gucheng Road
Entity Address, City or Town	Sishui County
Entity Address, State or Province	Shandong Province PR
City Area Code	406
Local Phone Number	282-3188

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Consolidated Balance Sheets - USD ($)	Dec. 31, 2017	Mar. 31, 2017
Current Assets
Cash and cash equivalents	$ 18,768,536	$ 10,308,622
Accounts receivable	209,784	1,134,967
Inventories	3,442,024	5,483,040
Purchase deposit to vendors	0	650,790
Purchase deposit to related party	1,304,919	0
Prepaid expenses	180,473	0
Prepaid leases - current portion	785,582	900,547
Total current assets	24,691,318	18,477,966
Prepaid expenses	770,737	1,265,252
Development cost of acer truncatum bunge planting	47,384,846	42,055,972
Plant, property, and equipment, net	16,501,938	14,487,135
Intangible assets, net	11,740,353	12,042,758
Deferred tax assets	261,277	508,521
Security deposit to related party	1,530,409	1,449,422
Total assets	102,880,878	90,287,026
Current liabilities:
Accounts payable to related party	0	706,048
Accounts payable and other accrued expenses	282,982	251,307
Taxes payable	1,079,580	2,028,190
Total current liabilities	1,362,562	2,985,545
Stockholders' Equity
Preferred shares	22,500	22,500
Common shares	29,789	29,789
Additional paid-in capital	4,322,838	4,322,838
Statutory reserve	1,828,504	1,828,504
Retained earnings	91,884,263	83,061,604
Accumulated other comprehensive income (loss)	582,006	(4,386,845)
Total stockholders' equity attributable to the Company	98,669,900	84,878,390
Noncontrolling interest	2,848,416	2,423,091
Total stockholders' deficit	101,518,316	87,301,481
Total liabilities and stockholders' deficit	$ 102,880,878	$ 90,287,026

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Consolidated Balance Sheets - Parenthetical - $ / shares	Dec. 31, 2017	Mar. 31, 2017
Details
Preferred Stock, Par or Stated Value Per Share	$ 500	$ 500
Preferred Stock, Shares Authorized	45	45
Preferred Stock, Shares Issued	45	45
Preferred Stock, Shares Outstanding	45	45
Common Stock, Par or Stated Value Per Share	$ 0.001	$ 0.001
Common Stock, Shares Authorized	100,000,000	100,000,000
Common Stock, Shares, Issued	29,789,168	29,789,168
Common Stock, Shares, Outstanding	29,789,168	29,789,168

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Consolidated Statement of Operations - USD ($)	3 Months Ended		9 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2017	Dec. 31, 2016
Details
Sales	$ 17,211,156	$ 14,171,624	$ 48,212,805	$ 35,478,603
Related parties amount in cost of sales	10,422,916	8,358,123	29,521,454	21,281,950
Gross profit	6,788,240	5,813,501	18,691,351	14,196,653
Operating expenses:
Selling expenses	1,278,544	969,495	3,596,983	2,525,178
General and administrative expenses	1,445,469	1,137,609	3,222,132	2,722,468
Research and development expenses	280,229	279,589	406,640	754,485
Total operating expenses	3,004,242	2,386,693	7,225,755	6,002,131
Income from operations	3,783,998	3,426,808	11,465,596	8,194,522
Gain on disposal of acer truncatum bunge plants	0	0	573,092	0
Interest income	32,376	11,073	88,678	43,222
Income before income tax provision	3,816,374	3,437,881	12,127,366	8,237,744
Income tax provision	954,093	849,716	3,031,841	2,078,344
Net Income (Loss)	2,862,281	2,588,165	9,095,525	6,159,400
Net inome attributable to noncontrolling interest	85,869	0	272,866	0
Net income attributable to the Company	2,776,412	2,588,165	8,822,659	6,159,400
Other comprehensive income (loss):
Foreign currency translation adjustment	1,557,010	(3,096,813)	5,121,310	(5,747,120)
Comprehensive income (loss)	4,419,291	(508,648)	14,216,835	412,280
Less: Comprehensive income attributable to noncontrolling interest	132,578	0	425,325	0
Comprehensive income (loss) attributable to the Company	$ 4,286,713	$ (508,648)	$ 13,791,510	$ 412,280
Basic and diluted net loss per common share	$ 0.09	$ 0.09	$ 0.30	$ 0.21
Basic and diluted weighted-average common shares outstanding	29,789,168	29,764,168	29,789,168	29,761,322

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Consolidated Statements of Cash Flows - USD ($)	9 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Net Cash Provided by (Used in) Operating Activities
Net Income (Loss)	$ 9,095,525	$ 6,159,400
Adjustments to Reconcile Net Income (Loss) to Cash Provided by (Used in) Operating Activities
Depreciation and amortization of plant, property and equipment	951,711	534,567
Amortization of intangible assets	949,886	830,262
Amortization of prepaid lease	654,324	697,741
Issuance of common shares for services	0	10,609
Stock-based compensation expenses	0	101,026
Deferred taxes	268,475	(10,893)
Gain on disposal of acer truncatum bunge plants	(573,092)	0
Changes in operating assets and liabilities:
Change in advance payment to vendors	669,250	0
Change in inventory	2,286,222	(1,739,711)
Change in accounts receivable	962,842	(9,878)
Change in cancellation of lease	57,137	0
Change in prepaid expenses	(175,771)	0
Change in taxes payable	(1,034,267)	645,178
Change in purchase deposit and accounts payable to related party, net	(1,996,995)	132,348
Increase (Decrease) in Accounts Payable and Accrued Liabilities	17,174	(67,505)
Net Cash Provided by (Used in) Operating Activities, Continuing Operations	12,132,421	7,283,144
Net Cash Provided by (Used in) Investing Activities
Acquisition of property, plant and equipment	(2,125,638)	(1,374,790)
Proceeds from disposal of acer truncatum bunge plants	2,129,638	0
Development cost of acer truncatum bunge planting	(4,457,916)	(3,133,278)
Net Cash Provided by (Used in) Investing Activities	(4,453,916)	(4,508,068)
Effect of exchange rate changes on cash and cash equivalents	781,409	(629,729)
Cash and Cash Equivalents, Period Increase (Decrease)	8,459,914	2,145,347
Cash and Cash Equivalents, at Carrying Value, Beginning Balance	10,308,622	7,639,084
Cash and Cash Equivalents, at Carrying Value, Ending Balance	18,768,536	9,784,431
Supplemental Cash Flow Information
Interest Paid	0	0
Income Taxes Paid, Net	$ 3,495,744	$ 1,663,060

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Note 1 - Organization and Principal Activities

9 Months Ended

Dec. 31, 2017

Notes

Note 1 - Organization and Principal Activities

NOTE 1 - ORGANIZATION AND PRINCIPAL ACTIVITIES

China YCT International Group, Inc. ("China YCT") 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 97% 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". The Company, through its 97% owned subsidiary, Shandong Spring, engages in the business of research, developing, manufacturing, and selling traditional Chinese medicine and other healthcare products in China.

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Note 2 - Basis of Presentation and Summary of Significant Accounting Policies

9 Months Ended

Dec. 31, 2017

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, 2017 and the results of operations and cash flows for the periods ended December 31, 2017 and 2016. 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, 2017 are not necessarily indicative of the results to be expected for any subsequent periods or for the entire year ending March 31, 2018. The balance sheet on March 31, 2017 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, 2017 as included in our Annual Report on Form 10-K. 

Certain amounts have been reclassified to conform to current year presentation.

Principles of consolidation

The consolidated financial statements include the financial statements of China YCT, Landway Nano and its 97% 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, intangible assets, and the valuation of deferred tax assets.

Foreign currency translation

The accounts of the Company's Chinese subsidiary are maintained in RMB and the accounts of the U.S. companies 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 comprehensive 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 comprehensive income.

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,
	2017		2016
Period End Exchange Rate (RMB/USD)		6.5342		6.937
Average Period Exchange Rate (RMB/USD)		6.709		6.6785

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.

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Note 3 - Prepaid Expenses

9 Months Ended

Dec. 31, 2017

Notes

Note 3 - Prepaid Expenses

NOTE 3 – PREPAID EXPENSES

The prepaid expenses consist of the payments that the Company has made in advance for the advertising services to be received in the future. On September 19, 2017, the Company signed an advertising contract with Shenzhen Henghe Media Co., Ltd.  In pursuant to the contract, in September 2017, the Company made approximately $450,000 (RMB 3 Million) advance payment to Shenzhen Henghe Media Co., Ltd for the advertising services to be received within the period from September 2017 to December 31, 2018.  The prepaid expenses are amortized over the service period and unamortized balance as of December 31, 2017 was $180,473.

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Note 4 - Inventory

9 Months Ended

Dec. 31, 2017

Notes

Note 4 - Inventory

NOTE 4 - INVENTORY

The components of inventories were as follows: 

	December 31,		March 31,
	2017		2017
Raw materials	$	1,449,623	$	1,276,254
Packaging materials		556,574		476,803
Work-in-process		475,074		1,373,919
Finished goods		960,753		2,356,064
Total inventories	$	3,442,024	$	5,483,040

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Note 5 - Plant, Property, and Equipment, Net

9 Months Ended

Dec. 31, 2017

Notes

Note 5 - Plant, Property, and Equipment, Net

NOTE 5 – PLANT, PROPERTY, AND EQUIPMENT, NET

 The components of property and equipment were as follows:

	December 31,		March 31,
	2017		2017
Machinery and equipment	$	3,459,466	$	2,254,813
Office equipment		739,992		717,259
Building		13,094,246		12,401,320
Leasehold improvements		4,080,854		2,803,052
Subtotal		21,374,558		18,176,444
Less: Accumulated depreciation and amortization		(4,872,620)		(3,689,309)
Total plant, property and equipment, net	$	16,501,938	$	14,487,135

The depreciation and amortization expense for the three months ended December 31, 2017 and 2016 was $336,599 and $176,755, respectively.

The depreciation and amortization expense for the nine months ended December 31, 2017 and 2016 was $951,711 and $534,567, respectively.

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Note 6 - Development of Acer Truncatum Bunge

9 Months Ended

Dec. 31, 2017

Notes

Note 6 - Development of Acer Truncatum Bunge

NOTE 6 – DEVELOPMENT OF ACER TRUNCATUM BUNGE

Development costs primarily include land development cost incurred for land leveling, irrigation, and fertilization, the purchase costs of acer truncatum bunge trees, and acer truncatum bunge planting fee.

Since July 2013, the Company has developed the acer truncatum bunge planting bases. As of March 31, 2017, the Company had completed planting of 6,080 Mu (1Mu is equal to approximately 666.67 square meters) at four leased farmlands. On April 1, 2017, the Company entered an agreement with Zhongce No.4 Village to terminate the lease for the 200 Mu farmland because the parcel of farmland was recalled by the local government to build a new urban district. Based on the agreement, the Company received the refund of the remaining prepaid lease payments of approximately $56,000 (RMB383,333) and compensation of approximately $350,000 (RMB2,400,000) from the government for the early termination of the lease.  On May 1, 2017, the Company signed two contracts with third parties to sell all of the plants from the farmland for approximately $1,974,000 (RMB13,527,000). The total capitalized cost of the acer truncatum bunge planting in Zhongce No.4 Village farmland was approximately $1,512,000 (RMB10,360,000). In addition, the Company incurred approximately $239,000 (RMB1,639,260) in  expenses to pack the plants for sale. The gain from disposal of the acer truncatum bunge plants was approximately $573,000. As a result of the lease termination, the Company's acer truncatum bunge planting acreage was reduced to 5,880 Mu at December 31, 2017 from 6,080 Mu at March 31, 2017.

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Note 7 - Taxes Payable

9 Months Ended

Dec. 31, 2017

Notes

Note 7 - Taxes Payable

NOTE 7 - TAXES PAYABLE

Taxes payable at December 31, 2017 and March 31, 2017 were as follows:

	As of
	December 31,		March 31,
	2017		2017
Corporate income tax	$	707,653	$	1,382,382
Value-added tax		334,843		576,086
Other tax & fees		37,084		69,722
Total tax payable	$	1,079,580	$	2,028,190

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Note 8 - Income Taxes

9 Months Ended

Dec. 31, 2017

Notes

Note 8 - Income Taxes

NOTE 8 - INCOME TAXES

China YCT and Landway Nano were incorporated in the United States of America and are subject to United States federal taxation. No provisions for income taxes have been made, as there was no taxable income from U.S. operations for the three and nine months ended December 31, 2017 and 2016. The Company has a net loss carryforward of approximately $22,000 which will expire in 2047. The Company has established a 100% valuation allowance on deferred tax assets resulting from the net operation loss incurred in the U.S.

The Company's Chinese subsidiaries are governed by the Income Tax Law of the PRC concerning 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 Company has not provided deferred taxes on undistributed earnings attributable to its PRC subsidiaries as they are to be permanently reinvested. On February 22, 2008, MOF, and SAT, jointly issued Cai Shui 2008 Circular 1, "Circular 1." According to Article 4 of Circular 1, distributions of accumulated profits earned by foreign investment enterprises, ("FIE") prior to January 1, 2008 to their foreign investors will be exempt from withholding tax, ("WHT") while distribution of the profits earned by a FIE after January 1, 2008 to its foreign investors shall be subject to WHT.

Dividend payments by PRC subsidiaries are limited by certain statutory regulations in the PRC. No dividends may be paid by PRC subsidiaries without first receiving prior approval from SAFE. Dividend payments are restricted to 90% of after tax profits.

Should the Company's PRC subsidiaries distribute all their profits generated after December 31, 2007, the aggregate withholding tax amount will be $9,188,426 and $8,306,160 as of December 31, 2017 and March 31, 2017, respectively.

Prior to the new Tax Cut and Jobs Act (the “New Law”), since Shandong Spring intends to reinvest its earnings to further expand its businesses in mainland China, it does not intend to declare dividends to their immediate foreign holding companies in the foreseeable future. Accordingly, the Company has not recorded any deferred taxes in relation to US tax on the cumulative amount of undistributed retained earnings since January 1, 2008. Under the “#1703. Treatment of deferred foreign income upon transition to new participation exemption system-deemed repatriation” of the New Law, U.S. shareholders owning at least 10% of foreign subsidiary general must include in income, for the subsidiary’s last tax year beginning before 2018, the shareholder’s pro rata share of the accumulated post-’86 historical E&P of the foreign subsidiary as of the “measurement date” to the extent such E&P has not been previously subject to U.S. tax.  The measurement date” is November 2, 2017, or December 31, 2017, whichever date produces a greater result. The portion of the E&P comprising cash or cash equivalents is taxed at a reduced rate of 15.5%, while any remaining E&P is taxed at a reduced rate of 8%. At the election of the U.S. shareholder, the tax liability is payable over a period of up to eight years. The payments for each of the first five years equal 8% of the net tax liability. The amount of the sixth installment is 15% of the net tax liability, increasing to 20% for the seventh installment and the remaining balance of 25% in the eighth year. The Company is still estimating the tax liability as result of the New Law being effective on December 22, 2017.  If such liability is determined, the Company will make adjustments to its liabilities at the year ended March 31, 2018 in accordance with the provisions of ASC Topic 740, Income Taxes.

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,
	2017		2016
U.S. Statutory rate	$	4,244,578	$	2,883,210
Tax rate difference between China and U.S.		(1,212,737)		(823,774)
Permanent difference		-		18,908
Effective tax rate	$	3,031,841	$	2,078,344

The provisions for income taxes are summarized as follows: 

	Nine Months Ended
	December 31,
	2017		2016
Current	$	2,763,366	$	2,089,237
Deferred		268,475		(10,893)
Total	$	3,031,841	$	2,078,344

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Note 9 - Related Party Transactions and Balances

9 Months Ended

Dec. 31, 2017

Notes

Note 9 - Related Party Transactions and Balances

NOTE 9 - RELATED PARTY TRANSACTIONS AND BALANCES

 Balances:

 (i)      Security deposit to related party:

The security deposit - related party of $1,530,409 represents the deposit paid to Shandong Yongchuntang Bioengineering Co. Ltd. ("Shandong Yongchuntang") on January 4, 2017 for using the direct-sales license issued to Shandong Yongchuntang. The amount is non-interest bearing and not secured. Shandong Yongchuntang owns 3% of the common stock of Shandong Spring.

 (ii)     Trade related balance with related party:

On December 31, 2017, the purchase deposit to related party of $1,304,919 pertains to purchase deposit paid in respect of the purchase of healthcare products from Shandong Yongchuntang.

On March 31, 2017, accounts payable balance of $706,048 pertains to payable in respect of the purchase of healthcare products from Shandong Yongchuntang.

(iii)    Sales to related party:

During the three and nine months ended December 31, 2017, the Company sold acer truncatum oil product to Shandong Yongchuntang for $131,906.

(iv)    Purchase from related party:

See Note 10 for details.

Contingency:

The Company is authorized by Shandong Yongchuntang to sell Shandong Yongchuntang's products using the direct-sales license issued to Shandong Yongchuntang.  As a condition for using the direct-sales license, the Company needs to increase sales each year based on the 95% of sales of the year 2014.  If the Company cannot meet this sales target in any year from April 1, 2017 to June 30, 2020, the Company needs to pay approximately $1.5 million as an annual fee for using the direct-sales license.  There is risk that the Company may fail to meet the sales target and may need to pay approximate $1.5 million in one or more subsequent years.

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Note 10 - Major Customer and Vendor

9 Months Ended

Dec. 31, 2017

Notes

Note 10 - Major Customer and Vendor

NOTE 10 - MAJOR CUSTOMER AND VENDOR

The Company sold products through ten distributors during the three and nine months ended December 31, 2017 and 2016. Sales to five distributors represented 17%, 14%, 12%, 11%, and 11% of total sales for the three months ended December 31, 2017 and sales to three distributors represented 19%, 15%, and 12% of total sales for the three months ended December 31, 2016, respectively.

The Company's sales through four distributors represented 17%, 16%, 13%, and 12% of total sales for the nine months ended December 31, 2017. Sales to three distributors represented 20%, 15%, and 13% of total sales for the nine months ended December 31, 2016.

The Company sold 11 and 7 products during the three months ended December 31, 2017 and 2016, respectively. Sales of two products represented 38% and 24% of total sales for the three months ended December 31, 2017. Sales of three products represented 46%, 20%, and 14% of total sales for the three months ended December 31, 2016.

The Company sold 11 and 7 products during the nine months ended December 31, 2017 and 2016, respectively. Sales of three products represented 41%, 17% and 10% of total sales for the nine months ended December 31, 2017.  Sales of three products represented 48%, 17%, and 16% of total sales for the nine months ended December 31, 2016.

The Company purchases its products from Shandong Yongchuntang, a related party, according to the purchase contract signed between the Company and Shandong Yongchuntang. Pursuant to the renewed one year contract dated February 20, 2017, the Company agreed to purchase nine products from Shandong Yongchuntang at fixed prices. Total purchases from Shandong Yongchuntang represented 33% and 30% of our total purchases during the three months ended December 31, 2017 and 2016, respectively.  The purchases from three other vendors represented 33%, 13%, and 11% of the Company's total purchases for the three months ended December 31, 2017. The purchases from three other vendors represented 33%, 16%, and 10% of the Company's total purchases for the three months ended December 31, 2016.

Total purchases from Shandong Yongchuntang represented 42% and 32% of our total purchases during the nine months ended December 31, 2017 and 2016, respectively.  The purchases from two other vendors represented 25% and 14% of the Company's total purchases for the nine months ended December 31, 2017. The purchases from two other vendors represented 25% and 17% of the Company's total purchases for the nine months ended December 31, 2016.

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Note 11 - Subsequent Events

9 Months Ended

Dec. 31, 2017

Notes

Note 11 - Subsequent Events

NOTE 11 – 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 consolidated financial statements and determined that no subsequent event requires recognition or disclosure to the consolidated financial statements.

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Note 2 - Basis of Presentation and Summary of Significant Accounting Policies: Basis of Presentation (Policies)

9 Months Ended

Dec. 31, 2017

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, 2017 and the results of operations and cash flows for the periods ended December 31, 2017 and 2016. 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, 2017 are not necessarily indicative of the results to be expected for any subsequent periods or for the entire year ending March 31, 2018. The balance sheet on March 31, 2017 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, 2017 as included in our Annual Report on Form 10-K. 

Certain amounts have been reclassified to conform to current year presentation.

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Note 2 - Basis of Presentation and Summary of Significant Accounting Policies: Principles of Consolidation (Policies)

9 Months Ended

Dec. 31, 2017

Policies

Principles of Consolidation

Principles of consolidation

The consolidated financial statements include the financial statements of China YCT, Landway Nano and its 97% owned subsidiary, Shandong Spring.  All inter-company transactions and balances are eliminated in consolidation.

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Note 2 - Basis of Presentation and Summary of Significant Accounting Policies: Use of estimates (Policies)

9 Months Ended

Dec. 31, 2017

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, intangible assets, and the valuation of deferred tax assets.

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Note 2 - Basis of Presentation and Summary of Significant Accounting Policies: Foreign Currency Translation (Policies)

9 Months Ended

Dec. 31, 2017

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. companies 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 comprehensive 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 comprehensive income.

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,
	2017		2016
Period End Exchange Rate (RMB/USD)		6.5342		6.937
Average Period Exchange Rate (RMB/USD)		6.709		6.6785

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Note 2 - Basis of Presentation and Summary of Significant Accounting Policies: Recent Accounting Pronouncements (Policies)

9 Months Ended

Dec. 31, 2017

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.

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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, 2017

Tables/Schedules

Schedule of Intercompany Foreign Currency Balances

	December 31,		December 31,
	2017		2016
Period End Exchange Rate (RMB/USD)		6.5342		6.937
Average Period Exchange Rate (RMB/USD)		6.709		6.6785

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Note 4 - Inventory: Schedule of Inventory (Tables)

9 Months Ended

Dec. 31, 2017

Tables/Schedules

Schedule of Inventory

	December 31,		March 31,
	2017		2017
Raw materials	$	1,449,623	$	1,276,254
Packaging materials		556,574		476,803
Work-in-process		475,074		1,373,919
Finished goods		960,753		2,356,064
Total inventories	$	3,442,024	$	5,483,040

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Note 5 - Plant, Property, and Equipment, Net: Property, Plant and Equipment (Tables)

9 Months Ended

Dec. 31, 2017

Tables/Schedules

Property, Plant and Equipment

	December 31,		March 31,
	2017		2017
Machinery and equipment	$	3,459,466	$	2,254,813
Office equipment		739,992		717,259
Building		13,094,246		12,401,320
Leasehold improvements		4,080,854		2,803,052
Subtotal		21,374,558		18,176,444
Less: Accumulated depreciation and amortization		(4,872,620)		(3,689,309)
Total plant, property and equipment, net	$	16,501,938	$	14,487,135

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Note 7 - Taxes Payable: Schedule of Taxes Payable (Tables)

9 Months Ended

Dec. 31, 2017

Tables/Schedules

Schedule of Taxes Payable

	As of
	December 31,		March 31,
	2017		2017
Corporate income tax	$	707,653	$	1,382,382
Value-added tax		334,843		576,086
Other tax & fees		37,084		69,722
Total tax payable	$	1,079,580	$	2,028,190

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Note 8 - Income Taxes: Schedule of Effective Income Tax Rate Reconciliation (Tables)

9 Months Ended

Dec. 31, 2017

Tables/Schedules

Schedule of Effective Income Tax Rate Reconciliation

	Nine Months Ended
	December 31,
	2017		2016
U.S. Statutory rate	$	4,244,578	$	2,883,210
Tax rate difference between China and U.S.		(1,212,737)		(823,774)
Permanent difference		-		18,908
Effective tax rate	$	3,031,841	$	2,078,344

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Note 8 - Income Taxes: Schedule of Provision for Income Tax Expense (Benefit) (Tables)

9 Months Ended

Dec. 31, 2017

Tables/Schedules

Schedule of Provision for Income Tax Expense (Benefit)

	Nine Months Ended
	December 31,
	2017		2016
Current	$	2,763,366	$	2,089,237
Deferred		268,475		(10,893)
Total	$	3,031,841	$	2,078,344

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Note 1 - Organization and Principal Activities (Details)	9 Months Ended
	Dec. 31, 2017
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	97.00%

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Note 3 - Prepaid Expenses (Details) - USD ($)	Dec. 31, 2017	Mar. 31, 2017
Details
Prepaid expenses	$ 180,473	$ 0

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Note 5 - Plant, Property, and Equipment, Net (Details) - USD ($)	3 Months Ended		9 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2017	Dec. 31, 2016
Details
Depreciation	$ 336,599	$ 176,755	$ 951,711	$ 534,567

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Note 7 - Taxes Payable: Schedule of Taxes Payable (Details) - USD ($)	Dec. 31, 2017	Mar. 31, 2017
Details
Corporate Income Tax	$ 707,653	$ 1,382,382
Value-Added Tax	334,843	576,086
Other Tax and Fees	37,084	69,722
Taxes payable	$ 1,079,580	$ 2,028,190

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Note 8 - Income Taxes (Details) - USD ($)	9 Months Ended
	Dec. 31, 2017	Mar. 31, 2017
Details
Operating Loss Carryforwards	$ 22,000
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent	25.00%
Withholding Tax	$ 9,188,426	$ 8,306,160

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Note 8 - Income Taxes: Schedule of Effective Income Tax Rate Reconciliation (Details) - USD ($)	3 Months Ended		9 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2017	Dec. 31, 2016
Details
Effective Income Tax Rate Reconciliation at Federal Statutory Income Tax Rate, Amount			$ 4,244,578	$ 2,883,210
Effective Income Tax Rate Reconciliation, Foreign Income Tax Rate Differential, Amount			(1,212,737)	(823,774)
Permanent difference			0	18,908
Income tax provision	$ 954,093	$ 849,716	$ 3,031,841	$ 2,078,344

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Note 8 - Income Taxes: Schedule of Provision for Income Tax Expense (Benefit) (Details) - USD ($)	3 Months Ended		9 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2017	Dec. 31, 2016
Details
Current Federal Tax Expense (Benefit)			$ 2,763,366	$ 2,089,237
Deferred taxes			268,475	(10,893)
Income tax provision	$ 954,093	$ 849,716	$ 3,031,841	$ 2,078,344

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Note 9 - Related Party Transactions and Balances (Details) - USD ($)	3 Months Ended
	Dec. 31, 2017	Mar. 31, 2017
Details
Security deposit to related party	$ 1,530,409	$ 1,449,422
Purchase deposit to related party	1,304,919	0
Accounts payable to related party	0	$ 706,048
Revenue from Related Parties	$ 131,906

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Note 10 - Major Customer and Vendor (Details)	3 Months Ended		9 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2017	Dec. 31, 2016
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 five distributors represented 17%, 14%, 12%, 11%, and 11% of total sales	and sales to three distributors represented 19%, 15%, and 12% of total sales	sales through four distributors represented 17%, 16%, 13%, and 12% of total sales	Sales to three distributors represented 20%, 15%, and 13% of total sales
Concentration Risk, Product	Sales of two products represented 38% and 24% of total sales	Sales of three products represented 46%, 20%, and 14% of total sales	Sales of three products represented 41%, 17% and 10% of total sales	Sales of three products represented 48%, 17%, and 16% of total sales
Shandong YCT
Concentration Risk, Supplier			42%	32%
Other Vendor 1
Concentration Risk, Supplier			25%
Other Vendor 2
Concentration Risk, Supplier			14%
Other Vendor 3
Concentration Risk, Supplier				25%
Other Vendor 4
Concentration Risk, Supplier				17%