10-Q/A

UNITED STATES

  SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q/A

Amendment No. 1

x             QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

                             For the quarterly period ended June 30, 2011

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

                 For the transition period from ______________ to _____________

Commission file number: 0-53600

CHINA YCT INTERNATIONAL GROUP, INC.

(Exact name of registrant as specified in its charter)

Delaware	65-2954561
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)
c/o Shandong Spring Pharmaceutical Co., Ltd Economic Development Zone. Gucheng Road Sishui County Shandong Province PR China	273200
(Address of principal executive offices)	(Zip Code)

Issuer's telephone number: 406-282-3188

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 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 o No x

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 x  No o

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 x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes x No o

The number of shares outstanding of the issuer’s common stock on September 5, 2011 was 73,780,610.

EXPLANATORY NOTE – AMENDMENT

The sole purpose of this Amendment No. 1 to our Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2011 as filed with the Securities and Exchange Commission on September 9, 2011 (the “Form 10-Q”) is to (i) furnish Exhibit 101 to the Form 10-Q in accordance with Rule 405 of Regulation S-T and (ii) to change the heading on the Condensed Consolidated Statement of Cash Flows to "Three Months Ended."

No other changes have been made to the Form 10-Q. This Amendment No. 1 to the Form 10-Q speaks as of the original filing date of the Form 10-Q, does not reflect events that may have occurred subsequent to the original filing date, and does not modify or update in any way disclosures made in the original Form 10-Q.

Pursuant to Rule 406T of Regulation S-T, the interactive data files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, and otherwise are not subject to liability under those sections.

CHINA YCT INTERNATIONAL GROUP, INC.

FORM 10-Q/A

 QUARTERLY PERIOD ENDED JUNE 30, 2011

INDEX

TABLE OF CONTENTS

		Page
	PART I - FINANCIAL INFORMATION
Item 1:	Financial Statements	3
Item 2:	Management's Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3:	Quantitative and Qualitative Disclosures About Market Risk	21
Item 4:	Controls and Procedures	22
	PART II - OTHER INFORMATION
Item 1:	Legal Proceedings	23
Item 1A:	Risk Factors	23
Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	23
Item 3:	Defaults Upon Senior Securities	23
Item 4:	Removed and Reserved	23
Item 5:	Other Information	23
Item 6:	Exhibits	23

2

Item 1. Financial Statement

CHINA YCT INTERNATIONAL GROUP, INC.

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED JUNE 30, 2011 AND 2010 (UNAUDITED)

Table of Contents

	Page
Consolidated Balance Sheets as of June 30, 2011 (Unaudited) and March 31, 2011	4
Consolidated Statements of Income for the three months ended June 30, 2011 and 2010 (Unaudited)	5
Consolidated Statements of Cash Flows for the three months ended June 30, 2011 and 2010 (Unaudited)	7
Notes to Consolidated Financial Statement (Unaudited)	8-16

3

CHINA YCT INTERNATIONAL GROUP, INC.

CONDENSED CONSOLIDATED BALANCE SHEET

	UNIT: USD$
	June 30, 2011		March 31, 2011
	(Unaudited)		(Audited)
Assets
Current assets:
Cash and cash equivalent	$	16,316,460	$	6,046,804
Prepaid accounts		5,551,348		15,602,258
Inventory		1,635,250		59,183
Total current assets		23,503,059		21,708,245
Plant, property and equipment, net		9,677,789		9,629,558
Construction in progress		213,956		211,189
Intangible assets, net		62,137,004		63,755,346
Total assets		95,531,808		95,304,338
Liabilities and Stockholders’ Equity (Deficit)
Liabilities:
Current liabilities:
Accounts payable		209,871		0
Tax payable		754,647		1,634,801
Other payable		113,937		229,561
Total current liabiliites		1,078,454		1,864,362
Contingency		23,391,902		23,391,902
Total liabilities		24,470,356		25,256,264
Stockholders’ Equity
Preferred stock, par value $500.00 per share; 45 shares authorized and issued at September 30, 2010 and March 31, 2010		22,500		22,500
Common stock, par value $0.001 per share; 100,000,000 shares authorized; 73,780,610 and 73,758,388 shares issued and outstanding at June 30, 2011 and March 31, 2011, respectively		73,780		73,758
Additional paid-in capital		36,879,643		36,868,554
Statutory reserve		956,633		956,633
Retained earnings		31,929,575		30,085,336
Accumulated other comprehensive income		1,199,321		2,041,293
Total stockholders’ equity		71,061,452		70,048,074
Total liabilities and stockholders’ equity	$	95,531,808	$	95,304,338

Notes to Financial Statements is attached.

4

CHINA YCT INTERNATIONAL GROUP, INC.

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

(Unaudited)

	UNIT: USD$
	FOR THE THREE MONTHS ENDED
	June 30, 2011		June 30, 2010
Sales Revenue	$	7,944,264	$	5,661,519
Cost of Goods Sold		3,582,345		3,061,321
Gross Profit		4,361,919		2,600,198
Selling Expenses		1,179,552		502,713
G&A Expense		583,223		294,536
R&D Expenses		193,518		60,338
Total expense		1,956,293		857,587
Income from operation		2,405,626		1,742,611
Interest income (Expense)		-41		-
Other income (Expense)		68,215		-
Profit before tax		2,473,800		1,742,611
Income tax		618,450		459,298
Net income		1,855,350		1,283,313
Other comprehensive income
Foreign currency translation adjustment		- 841,973		144,853
Compenhensive income	$	1 ,013,377	$	1 ,428,166
Basic and diluted income per common share
Basic and Diluted		0.03		0.04
Weighted average number of common shares outstanding
Basic and Diluted		73,731,361		29,471,503

Notes to Financial Statements is attached.

5

CHINA YCT INTERNATIONAL GROUP, INC.

CONSOLIDATED STATEMENT OF STOCKHOLDER EQUITY

																			UNIT: USD$
	Preferred Stock
CHINA YCT INTERNATIONAL GROUP, INC.	Series A				Common shares				Additional paid				Accumulated			Retained
	Shares		Amount		Shares		Amount		in capital		Statutory Reserve		OCI			Earnings			Total
Balance - March 31, 2010		45		22,500		29,461,304		29,461		4,138,480		956,633		1,152,764			20,012,077			26,311,915
Issuance of common shares to independent directors						41,997		42		25,664										25,706
Issuance of common shares for the owner of an acquired patent						44,255,087		44,255		32,704,410										32,748,665
Net income for the year																	10,067,340			10,067,340
Adjustment to Retained Earnings																	5,919			5,919
Foreign currency translation adjustment														888,529						888,529
Balance - March 31, 2011		45	$	22,500		73,758,388	$	73,758	$	36,868,554	$	956,633	$	2,041,293		$	30,085,336		$	70,048,074
Net income for the quarter																	1,855,350			1,855,350
Issuance of common shares to independent directors						22,222		22		11,089										11,111
Adjustment to Retained Earnings																	(11,111	)		(11,111	)
Foreign currency translation adjustment														(841,972	)					(841,972	)
Balance - June 30, 2011		45	$	22,500		73,780,610	$	73,780	$	36,879,643	$	956,633	$	1,199,321		$	31,929,575		$	71,061,452

Notes to Financial Statements is attached.

6

CHINA YCT INTERNATIONAL GROUP, INC.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW

(Unaudited)

	UNIT: USD$
	THREE MONTHS ENDED
	June 30, 2011			June 30, 2010
Cash Flows From Operating Activities:
Net income	$	1,855,350		$	1,283,313
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		1,225,006			147,414
Issue of common shares as compensation					19,760
Changes in operating assets and liabilities:
Inventory		(1,576,067	)		71,837
Accounts payable		209,871			(2,299,928	)
Taxes payable		(439,998	)		(478,039	)
Accrued expenses and other payables		(115,624	)		42,292
Net cash provided by (used in) operating activities		1,158,536			(1,213,351	)
Cash flows from investing activities:
Addition to plant and equipment		(77,596	)		(52,618	)
Prepayment to a third party verndor for acquisition of patent		10,030,688			(7,355,192	)
Net cash provided by (used in) investing activities		9,953,092			(7,407,810	)
Effect of exchange rate changes on cash and cash equivalents		(841,973	)		101,975
Net increase (decrease) in cash and cash equivalents		10,269,655			(8,519,186	)
Cash and cash equivalents at beginning of period		6,046,804			11,911,933
Cash and cash equivalents at ending of period	$	16,316,460		$	3,392,747
Supplemental disclosures of cash flow information:
Cash paid during the periods for:
Interest		81			0
Income taxes	$	1,936,972		$	1,231,593
Non-cash financing activities:
Stock issued for services		22,222			14,970

Notes to Financial Statements is attached.

7

NOTE 1 - ORGANIZATION AND PRINCIPAL ACTIVITIES

China YCT International Group, Inc. (“China YCT”) was incorporated in the State of Florida, in the United States (the “US”) in January 1989, and reincorporated in the State of Delaware on April 4, 2007.  China YCT principally operates through the following directly owned subsidiaries: Landway Nano Bio-Tech, Inc. (100% owned), incorporated in Delaware, in the United States, and Shandong Spring Pharmaceutical Co., Ltd. (“Shandong Spring”), (100% owned), incorporated in the People’s Republic of China (“PRC”). China YCT International Group, Inc. and its subsidiaries are collectively referred to as the “Company.”

China YCT, through its wholly owned subsidiary, Shandong Spring, is engaged in the business of developing, manufacturing and marketing its own medicine from gingko extract, and other dietary supplement products in the P.R. China.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

The consolidated financial statements of the Company are prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”).

Principles of consolidation

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

Use of estimates

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

Cash and cash equivalents

For the purposes of the statement of cash flow, the Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.

8

Inventory

Inventory is primarily composed of raw materials and packing materials for manufacturing, work in process, and finished goods. Inventories are valued at the lower of cost or market with cost determined on a weighted average basis. Management compares the cost of inventory with the market value and an allowance is made for writing down the inventory to its market value, if lower than cost.

Property and equipment

Property and equipment are stated at cost. The cost of an asset comprises its purchase price and any directly attributable costs of bringing the asset to its present working condition and locations for its intended use. Depreciation is calculated using the straight-like method over the following useful lives:

Buildings	30-35 years
Machinery, equipment and automobiles	7-15 years

Expenditures for maintenance and repairs are charged to expense as incurred. Additions, renewals and betterments are capitalized.

Intangible Assets

(i) Land Use Rights:

All land in the PRC is owned by the government and cannot be sold to any individual or company.  However, the government may grant a “land use right” for occupying, developing and using land. The Company records land use rights obtained as intangible assets at cost, which is amortized evenly over the grant period of 50 years.

(ii) Patents:

In March 2010, the Company purchased one patent from Shandong YCT Corp.  The patent is the Company’s exclusive right to use an aglycone type and purification method of biotransformation in the gingko product manufacturing process for a period of 20 years from the patent application date.  The patent was recorded at cost when purchased, and is being amortized over the shorter of its remaining legal life, 16.5 years, or its useful life, on a straight-line basis.

On February 28, 2011, the Company acquired U.S. patent No. 6,475,531 B1 titled “Safe Botanical Drug for Treatment and Prevention of Influenza and Increasing Immune Function”) through a purchase agreement with L.Y. Research Corp., a New Jersey Corporation.

9

However, according to the purchase agreement between the Company and L.Y. Hong Kong Biotech Limited (LYHK), CYIG acquires the patent for a consideration of issuing total 75,865,631 shares of CYIG common stock. The total value of the consideration on the acquisition date is $56,140,567 which is calculated by the total issuing shares, multiplying CYIG’s quoted stock price $0.74 per share on February 28, 2011. The Company also received an independent third party assessment that supported the value of the patent.

Revenue recognition

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

Unearned revenue

Revenue from the sale of goods or services is recognized at the time that goods are delivered or services are rendered. Receipts in advance for goods to be delivered or services to be rendered in a subsequent period are carried forward as unearned revenue.

Impairment of long-lived assets

The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may no longer be recoverable. An impairment loss, measured based on the fair value of the asset, is recognized if expected future undiscounted cash flows are less than the carrying amount of the assets.

Value-added tax

Sales revenue represents the invoiced value of goods, net of a Value-Added Tax (“VAT”). All of the Company’s products that are sold in the PRC are subject to a Chinese value-added tax at a rate of 17% of the gross sales price. This VAT may be offset by VAT paid by the Company on raw materials and other materials included in the cost of producing their finished product.

The Company recorded net VAT Payable in amount of $85,160 and $465,811 as of June 30, 2011 and March 30, 2011, respectively.

Research and development

Research and development costs are related primarily to the Company’s developing its intellectual property. Research and development costs are expensed as incurred. The costs of material and equipment that are acquired or constructed for research and development activities and have alternative future uses are classified as plant and equipment and depreciated over their estimated useful lives.

10

The research and development expense for the three months ended June 30, 2011 and 2010 was $193,518 and $60,338, respectively.

Advertising costs

Advertising costs for newspaper and television are expensed as incurred.  The Company incurred advertising costs of $76,910 and nil for the three months ended June, 2011 and 2010, respectively.

Mailing and handling costs

The Company accounts for mailing and handling fees in accordance with the FASB ASC 605-45 (Emerging Issues Task Force (EITF) Issue No. 00-10, Accounting for Shipping and Handling Fees and Costs). The Company includes shipping and handling fees billed to customers in net revenues. Amounts incurred by the Company for freight are included in cost of goods sold. For the three months ended June 30, 2011 and 2010, the Company incurred $390,010 and $247,031 mailing and handling costs, respectively.

Net income (loss) per share (“EPS”)

Basic EPS excludes dilution and is computed by dividing net income (loss) attributable to common stockholders by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock (convertible preferred stock, forward contracts, warrants to purchase common stock, contingently issuable shares, common stock options and warrants and their equivalents using the treasury stock method) were exercised or converted into common stock. There are 31,610,679 and nil common stock equivalents available for dilution purposes as of June 30, 2011 and 2010, respectively.

Risks and uncertainties

The Company’s operations are carried out in the PRC. Accordingly, the Company’s business, financial condition and results of operations may be influenced by the political, economic and legal environments in the PRC, and by the general state of the PRC’s economy. The Company’s operations in the PRC are subject to specific considerations and significant risks not typically associated with companies in the North America and Western Europe. These include risks associated with, among others, the political, economic and legal environments and foreign currency exchange. The Company’s results may be adversely affected by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things.

11

Fair Value of Financial Instruments

For certain of the Company’s financial instruments, including cash and cash equivalents, restricted cash, accounts receivable, accounts payable, accrued liabilities and short-term debt, the carrying amounts approximate their fair values due to their short maturities.

As of March 31, 2011, the Company did not identify any financial instruments that are required to be presented on the balance sheet at fair value other than those whose carrying amounts approximate fair value due to their short maturities.

Foreign currency translation

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

Translation adjustments resulting from this process amounted to $(841,973) and $144,853 as of June 30, 2011 and 2010, respectively.

The following exchange rates were adopted to translate the amounts from RMB into United States dollars (“USD$”) for the respective periods:

	June 30, 2011		March 31, 2011		June 30, 2010
Three Months End RMB Exchange Rate (RMB/USD$)		6.4716		6.5564		6.7909
Average Period RMB Exchange Rate (RMB/USD$)		6.5011		6.7111		6.8235

12

Recent accounting pronouncements

In April 2010, the FASB issued FSP FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments. This FSP amends SFAS No. 107, Disclosures about Fair Value of Financial Instruments, to require an entity to provide disclosures about the fair value of financial instruments in interim financial information. This FSP also amends Accounting Principles Board Opinion No. 28, Interim Financial Reporting, to require those disclosures in summarized financial information at interim reporting periods. FSP FAS 107-1 and APB 28-1 are effective for interim periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009.  Effective April 1, 2009, the Company adopted this pronouncement.  The adoption of this pronouncement did not have any significant impact on the Company’s financial condition or results of operations.

In January 2010, the FASB issued authoritative guidance to improve disclosures about fair value measurements. This guidance amends previous guidance on fair value measurements to add new requirements for disclosures about transfers into and out of Levels 1 and 2 and separate disclosures about purchases, sales, issuances, and settlements relating to Level 3 measurement on a gross basis rather than on a net basis as currently required. This guidance also clarifies existing fair value disclosures about the level of disaggregation and about inputs and valuation techniques used to measure fair value. This guidance is effective for annual and interim periods beginning after December 15, 2009, except for the requirement to provide the Level 3 activities of purchases, sales, issuances, and settlements on a gross basis, which will be effective for annual and interim periods beginning after December 15, 2010. Early application is permitted and, in the period of initial adoption, entities are not required to provide the amended disclosures for any previous periods presented for comparative purposes. The Company does not expect the adoption of this pronouncement to have a significant impact on its financial condition or results of operations.

NOTE 3 – PREPAID ACCOUNTS

The prepaid account in amount of $5,551,348 is a cash payment to a Chinese research company for the acquisition of a patent.  During the quarter ended June 30, 2011, $10,050,910 prepayment was refunded by the owner of the patent due to the incompletion of the required transferring paper work.  When the Company obtains the title of the patent, the rest of the payment will be made to the owner of the patent and the prepayment will be reclassified to a patent.

NOTE 4 - INVENTORY

Inventory consists of finished goods, work-in-process, and raw materials. No allowance for inventory was made for the three months ended June 30, 2011 and 2010.

13

The components of inventories as of June 30, 2011 and March 31, 2011 were as follows:

	Period Ended
	June 30, 2011		March 31, 2011
Raw materials	$	854,854	$	8,699
Work-in-progress		212,846		27,225
Finished goods		567,550		23,259
Total Inventories	$	1,635,250	$	59,183

NOTE 5 – PLANT, PROPERTY AND EQUIPMENT, NET

The components of property and equipment as of June 30, 2011 and March 31, 2011 were as follows:

	Period Ended
	June 30, 2011			March 31, 2011
Machinery & Equipment	$	512,191		$	516,935
Furniture & Fixture		129,405			96,156
Building		9,632,593			9,685,212
Subtotal		10,474,188			10,298,303
Less: Accumulated Depreciation		(796,399	)		(668,745	)
Total plant, property and equipment, net	$	9,677,789		$	9,629,558

The depreciation expense for the three months ended June 30, 2011 and 2010 was $127,654 and $54,456, respectively.

NOTE 6 – CONSTRUCTION IN PROGRESS

Construction in progress represents direct costs of construction or acquisition and design fees incurred for the Company’s new plant and equipment. Capitalization of these costs ceases and the construction in progress is transferred to plant and equipment when substantially all the activities necessary to prepare the assets for their intended use are completed. No depreciation is made until construction is completed and put into use.

NOTE 7 - MAJOR CUSTOMER AND VENDOR

In the three months ended June 30, 2011, the Company mainly sells products to individual retail customers through eight major distributors.

14

For the three months ended June 30, 2011, the purchase from the two major vendors was $4,774,381, representing 83% of the Company’s total purchase for the quarter.

Shandong Kangyuan		3,329,167
Shandong YCT		1,445,213
Total	$	4,774,381

NOTE 8 - INTANGIBLE ASSETS, NET

The intangible assets of the Company consist of land use right and purchased patents.

Net land use right and purchased patents were as follows:

	Amortization	As of
	Period	June 30, 2011			March 31, 2011
Land use right	50 years		1,547,801			1,547,801
Less: Accumulated amortization			(149,626	)		(139,821	)
Land use right, net			1,398,175			1,407,980
Patent 1	16.5 years		7,107,979			7,016,045
Patent (U.S. No. 6,475,531 B1)	119 months		56,140,567			56,140,567
Less: Accumulated amortization			(2,529,998	)		(809,245	)
Patents, net		$	60,718,548		$	62,347,368

The amortization expense of land use right for the three months ended June 30, 2011 and 2010 was $9,805 and $8,141, respectively.

The amortization expense of patent for the three months ended June 30, 2011 and 2010 was $1,720,753 and $84,819, respectively.

15

NOTE 9 - TAX PAYABLE

Tax payable at June 30, 2011 and March 31, 2011 were as follows:

	As of
	June 31, 2011			March 31, 2011
Corporate Income Tax	$	671,495		$	1,141,293
Value-Added Tax		85,160			489,962
Other Tax & Fees		(2,009	)		3,546
Total Tax Payable	$	754,647		$	1,634,801

NOTE 10 - INCOME TAXES

Shandong Spring Pharmaceutical Co., Ltd is subject to the Enterprise income tax (“EIT”) at a statutory rate of 25%.

For the years ended March 31, 2011 and 2010, Shandong Spring Pharmaceutical Co., Ltd. recorded income tax provisions of $671,495 and $459,533, respectively.

NOTE 11 - CONTINGENCY

On February 28, 2011, the Company entered into a purchase agreement with L.Y. Research Corp., a New Jersey corporation.   Pursuant to the terms of the purchase agreement, the Company acquires a patent from L.Y. (HK) Biotech Limited, in exchange for 75,865,631 shares of the Company’s common stock. Pursuant to the terms of the purchase agreement, the total consideration was paid and will be $56,140,567.  However, the occurrences of $23,391,902 are considered as contingent considerations.

16

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operation

You should read the following discussion together with our consolidated financial statements and the related notes included elsewhere in this Form 10-Q and our audited financial statements included in our Annual Report on Form 10-K. This discussion contains forward-looking statements. These forward-looking statements are based on information available at the time the statements are made and/or management’s belief as of that time with respect to future events and involve risks and uncertainties that could cause actual results and outcomes to be materially different. Important factors that could cause such differences include but are not limited to: competitive factors, general economic conditions, customer relations, relationships with vendors, the interest rate environment, governmental regulation and supervision, seasonality, distribution networks, product introductions and acceptance, technological change, changes in industry practices, onetime events and other factors described herein and in other filings made by the company with the Securities and Exchange Commission. While we may elect to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, and therefore, you should not rely on these forward-looking statements as representing our views as of any date subsequent to the date this Form 10-Q is filed with the Securities and Exchange Commission.

Overview

China YCT International Group, Inc. (“China YCT”) was incorporated in the State of Florida in January 1989, and reincorporated in the State of Delaware on April 4, 2007. China YCT principally operates through two of its wholly-owned subsidiaries: Landway Nano Bio-Tech, Inc., incorporated in Delaware, and Shandong Spring Pharmaceutical Co., Ltd. (“Shandong Spring”), incorporated in the People’s Republic of China (the “PRC”). China YCT International Group, Inc. and its subsidiaries are collectively referred to as the “Company”. China YCT, through its wholly-owned subsidiary, Shandong Spring, is engaged in the business of developing, manufacturing and marketing gingko and distributing other dietary supplement products in the PRC.

Results of Operations – Three Months ended June 30, 2011 compared to the Three Months Ended June 30, 2010

Net Sales

During the three months ended June 30, 2011, we realized $7,944,264 of sales revenue, an increase of 40% or $2,282,745 as compared to $5,661,519 for the same period of 2010. Starting from April 2010, we restructured our product distribution line due to profitability considerations. We discontinued the distribution of 24 cosmetic and daily necessities products due to increases of advertisement, transportation costs that resulted from new government regulations issued by SFDA of China. Meanwhile, we continued the distribution of our 10 types of health care supplement products, which are not affected by the government regulations. Since September 2009, we started to engage in the production and distribution of our own patented drug,, Huoliyuan Capsule,, and develop distribution channels for the drug. Our sales have increased since September 2009 as a result of the establishment of our manufacturing and distribution of Huoliyuan Capsule.

17

During the three months ended June 30, 2011, 58% of our revenues were from the sale of the 10 types of health care supplement products and 42% of our revenues were from sales of Huoliyuan Capsule. The following table sets forth a sales breakdown comparison by product for the periods under review:

Sales from:	June 30, 2011		June 30, 2010		Change in $			Variance
Health care supplements		2,769,518		3,632,333		(862,815	)		-24	%
Drugs		4,627,751		2,029,186		2,598,565			128	%
Others		546,995		0		546,995
Total		7,944,264		5,661,519		2,282,745			40	%

Cost of Goods Sold

Our costs of revenue were comprised primarily of the cost of finished goods we purchased from Shandong YCT, the raw materials we purchased from third party vendors and the manufacturing cost of Huoliyuan Capsule. During the three months ended June 30, 2011, our cost of goods sold totaled $3,582,345, representing an increase of $521,024 or 17% as compared to $3,061,321 during the same period of 2010. The percentages of the costs of goods sold to total revenues decreased to 45% from 54%, as compared to the same quarter of the previous year. The decrease of the ratio of cost of goods sold to total revenue is mainly due to the increased production and sales of Huoliyuan Capsule, which costs less than other products.

Gross Profit

Gross profit during the three months ended June 30, 2011 was $4,361,919, an increase of 68% or $1,761,721 as compared to the same period in the previous year. The increase in gross profit is a result of increased sales revenue and decreased cost of goods sold. Gross profit as a percentage of net revenues was 55% during the three months ended June 30, 2011, an increase of 9% as compared to the same period of the prior year. The increase in gross profit and gross profit percentage are primarily due to the increased sales revenue and the decreased cost of goods sold during the quarter ended June 30, 2011.

18

The following table sets forth a breakdown of our gross profits and gross margin of different products during the quarters ended June 30, 2011 and 2010:

	Gross Profit				Gross Profit
	For the quarter ended June 30, 2011,				For the quarter ended June 30, 2010
Products
Health care supplements		3,316,513	55	%		1,591,014	45	%
Drugs		4,627,751	54	%		1,047,648	47	%
Overall		7,944,264	55	%		2,638,662	46	%

Research and Development Expenses.

Our R&D expenses during the three months ended June 30, 2011 and 2010 were $193,518 or approximate 2% of total corresponding revenue and $60,338 or approximate 1% of total corresponding revenue, respectively. We have not incurred any significant R&D expenses since June 30, 2011. However, 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. Toward that end, we have a staff of eight employees engaged in research and development of new technologies and products. In addition we maintain close ties to the research staffs at Tsinghua University, China Agriculture University, Shandong Herbal Medicine University, and the Shandong Herbal Medicine Research Institute.

Selling, General and Administrative Expenses (SG&A Expenses).

During the quarter ended June 30, 2011, our SG&A expenses consisted primarily of sales commissions, promotion expenses, freight charges and related compensation. Our overall SG&A expenses for three months ended June 30, 2011 were $1,762,775 or 22% of our net sales for the period, representing an increase of 121% or $965,526 as compared with the SG&A expenses for the same period of the previous year. The increase in our overall SG&A expenses was primarily due to the increase of selling expenses and depreciation expense of an acquired patent.

Net Income

During the quarter ended June 30, 2011, we realized $1,855,350 in net income, representing a 45% or $572,037 increase as compared to $1,283,313 during the quarter ended June 30, 2010. The increase of our net income was a result of the increase in our sales revenue.

Liquidity and Capital Resources

Our principal sources of liquidity were primarily generated from our operations. As of June 30, 2011, Shandong Spring Pharmaceutical had $22,424,604 in working capital, an increase of $2,580,721 or 13% as compared to $19,843,883 in working capital at March 31, 2011. The increase in the working capital at June 30, 2011 was primarily due to the increase in inventory to $1,635,250 from $59,183.

19

On October 26, 2010,, Shandong Spring Pharmaceutical signed an agreement to purchase three patents relating to Chinese herbal formulas from Jining Tianruitong Technology Development Limited Company for $15,557,318, which agreement was subsequently amended and restated on March 14, 2011.  As of June 30, 2011, cash and cash equivalents were $16,316,460, an increase by $10,269,656 or 170% from $6,046,804 as of March 31, 2011. The increase in the amount of cash was caused by a return of $10,050,910 from the owner of three patents because certain governmental approvals for the transfer of one patent was not completed and the patents are being purchased as a group.. We are obtaining the governmental approval for the transfer and expect to complete the transfer in the fourth quarter of the fiscal year ending March 31, 2012.  Approval from the State Intellectual Property Office of the PRC. is required to transfer the remaining patent. .The total purchase price for the patents is $15,557,318 (based on the exchange rate on March 31, 2011) and , as of June 30, 2011, $5,414,557 had been paid. After the Company obtains title to the patents, the balance of the payment will be made in three equal annual installments of RMB 25,500,000 and the prepayment will be reclassified to the patents.

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 $11,189,224 during the three months ended June 30, 2011. We did not have accounts receivable outstanding as of June 30, 2011. We expect our marketing activities to continue to help generate positive cash flow.  However, once we commence our gingko production operations, the working capital requirements of manufacturing may put pressure on our cash flow, and we may be required to seek additional capital and reduce certain spending as needed. There can be no assurance that any additional financing will be available on acceptable terms.

The following table sets forth a summary of our cash flows for the periods as indicated:

	Three months ended
	June 30, 2011			June 30, 2010
Net cash provided by operating activities	$	1,158,536		$	(1,213,351	)
Net cash provided by(used in) investing activities	$	9,953,092		$	(7,407,810	)
Net cash provided by financing activities	$	0		$	0
Effect of exchange rate change on cash and cash equivalents	$	(841,973	)	$	101,975
Net increase in cash and cash equivalents	$	10,269,655		$	(8,519,186	)
Cash and cash equivalents, beginning balance	$	6,046,804		$	11,911,933
Cash and cash equivalents, ending balance	$	16,316,460		$	3,392,747

20

Operating Activities

Net cash provided by operating activities was $1,158,536 for the three month period ended June 30, 2011, an increase of 195% or $2,371,887 from the $(1,213,351) net cash provided by operating activities during the three month ended June 30, 2010. The increase was mainly attributable to the increase in our net income and accounts payable.

Investing Activities

During the quarter ended June 30, 2011, our net cash provided by investing activities was $9,953,092, as compared to $(7,407,810) during the quarter ended June 30, 2010. This positive cash flow from the investing activities during the quarter ended June 30, 2011 was primarily caused by a refund of prepayment of $10,050,910 from the owner of a patent due to the patent not being transferred.

Financing Activities

Net cash generated or used by financing activities during the three month period ended June 30, 2011 and 2010 were both 0. None of our officers or shareholders has made commitments to the Company for financing in the form of advances, loans or credit lines.

In order to fully implement our business plan, we will need capital contributions far in excess of our current asset value. Our estimate for bringing our manufacturing facility to an operating level to be profitable is $10 million, although there can be no assurance profitability can be achieved.  To fully implement our business plan, including development of a facility to utilize our proprietary method of extracting flavones from ginkgo by using enzyme technology, we will need approximately $40 million. Our expectation, therefore, is that we will seek to access the capital markets to obtain the funds we need. At the present time, however, we are still looking for commitments of funds and there is no assurance such funds will be available or, if available, if the terms will be acceptable.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

A smaller reporting company is not required to provide the information required by this Item.

21

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures.

Our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of our disclosure controls and procedures as of June 30, 2011. Pursuant to Rule 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, “disclosure controls and procedures” means controls and other procedures that are designed to insure that information required to be disclosed by China YCT International Group in the reports that it files with the Securities and Exchange Commission is recorded, processed, summarized and reported within the time limits specified in the Commission’s rules.  “Disclosure controls and procedures” include, without limitation, controls and procedures designed to insure that information China YCT International Group is required to disclose in the reports it files with the Commission is accumulated and communicated to our Chief Executive Officer and Chief Financial Officer as appropriate to allow timely decisions regarding required disclosure. Based on their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that China YCT International Group’s system of disclosure controls and procedures was effective as of June 30, 2011 for the purposes described in this paragraph.

Changes in Internal Controls.

There was no change in internal controls over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) identified in connection with the evaluation described in the preceding paragraph that occurred during the three months ended June 30, 2011 that has materially affected or is reasonably likely to materially affect China YCT International Group’s internal control over financial reporting. Pursuant to Rule 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, the term “internal control over financial reporting” is defined as a process designed by, or under the supervision of, the issuer's principal executive and principal financial officers, or persons performing similar functions, and effected by the issuer's board of directors, management and other personnel, 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 and includes those policies and procedures that:

· Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the issuer;

· Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the issuer are being made only in accordance with authorizations of management and directors of the issuer; and

· Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the issuer's assets that could have a material effect on the financial statements.

22

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

On June 8, 2011, the Company issued 22,222 shares of our common stock to Robert J. Fanella, our independent director, as part of his compensation to serve as the independent director during the year of 2011. The offer and sale of the common stock therein were exempt from the registration requirements of the Securities Act of 1933 by virtue of Section 4(2) thereof and Regulation D promulgated thereunder, as transactions by an issuer not involving a public offering.

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
32.1	Section 1350 Certification of Chief Executive Officer
32.2	Section 1350 Certification of Chief Financial Officer

XBRL Exhibit

101.INS XBRL Instance Document.

101.SCH XBRL Taxonomy Extension Schema Document.

101.CALXBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB XBRL Taxonomy Extension Label Linkbase Document.

101.PRE XBRL Taxonomy Extension Presentation Linkbase Document.

23

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

CHINA YCT INTERNATIONAL GROUP, LTD.

By:  

Date: September 9, 2011

/s/ Yan Tinghe

Yan Tinghe Chief Executive Officer

 (Principal Executive Officer)

/s/ Li Chuanmin

Li Chuanmin Chief Financial Officer

 (Principal Financial Officer)

EX-31.1

EXHIBIT 31.1: Rule 13a-14(a) Certification

I, Yan Tinghe, certify that:

1.  I have reviewed this Amendment No. 1 to the quarterly report on Form 10-Q of China YCT International Group, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or 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 Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-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. The 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: September 9, 2011
	By:	/s/ Yan Tinghe
		Yan Tinghe, Chief Executive Officer

EX-31.2

EXHIBIT 31.2: Rule 13a-14(a) Certification

I, Li Chuanmin, certify that:

1. I have reviewed this Amendment No. 1 to the quarterly report on Form 10-Q of China YCT International Group, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or 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 Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-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. The 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: September 9, 2011	By:	/s/ Li Chuanmin
		Li Chuanmin, Chief Financial Officer

EX-32

EXHIBIT 32: Rule 13a-14(b) Certification

In connection with the Amendment No. 1 to the Quarterly Report of China YCT International Group, Inc. (the “Company”) on Form 10-Q for the period ending June 30, 2011 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 18 U.S.C. Section 1350, 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 Section 13(a) or 15(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.

September 9, 2011	/s/ Yan Tinghe
	Yan Tinghe, Chief Executive Officer
September 9, 2011	/s/ Li Chuanmin
	Li Chuanmin, Chief Financial Officer

A signed 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

XML



CONDENSED CONSOLIDATED BALANCE SHEET (Parenthetical) (USD $)	Jun. 30, 2011	Mar. 31, 2011
Preferred stock, par value	$ 500.00	$ 500.00
Preferred stock, shares authorized	45	45
Preferred stock, shares issued	45	45
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	100,000,000	100,000,000
Common stock, shares issued	73,780,610	73,758,388
Common stock, shares outstanding	73,780,610	73,758,388

XML



CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (USD $)	3 Months Ended
	Jun. 30, 2011	Jun. 30, 2010
Sales Revenue	$ 7,944,264	$ 5,661,519
Cost of Goods Sold	3,582,345	3,061,321
Gross Profit	4,361,919	2,600,198
Selling Expenses	1,179,552	502,713
G&A Expense	583,223	294,536
R&D Expenses	193,518	60,338
Total expense	1,956,293	857,587
Income from operation	2,405,626	1,742,611
Interest income (Expense)	(41)
Other income (Expense)	68,215
Profit before tax	2,473,800	1,742,611
Income tax	618,450	459,298
Net income	1,855,350	1,283,313
Other comprehensive income
Foreign currency translation adjustment	(841,973)	144,853
Compenhensive income	$ 1,013,377	$ 1,428,166
Basic and diluted income per common share
Basic and Diluted	$ 0.03	$ 0.04
Weighted average number of common shares outstanding
Basic and Diluted	73,731,361	29,471,503

XML



Document and Entity Information	3 Months Ended
	Jun. 30, 2011	Sep. 05, 2011
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2011
Document Fiscal Year Focus	2011
Document Fiscal Period Focus	Q1
Trading Symbol	CYIG
Entity Registrant Name	CHINA YCT INTERNATIONAL GROUP, INC.
Entity Central Index Key	0000847464
Current Fiscal Year End Date	--03-31
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		73,780,610

XML



CONSTRUCTION IN PROGRESS

3 Months Ended

Jun. 30, 2011

CONSTRUCTION IN PROGRESS

NOTE 6 – CONSTRUCTION IN PROGRESS

Construction in progress represents direct costs of construction or acquisition and design fees incurred for the Company’s new plant and equipment. Capitalization of these costs ceases and the construction in progress is transferred to plant and equipment when substantially all the activities necessary to prepare the assets for their intended use are completed. No depreciation is made until construction is completed and put into use.

XML



CONTINGENCY

3 Months Ended

Jun. 30, 2011

CONTINGENCY

NOTE 11 - CONTINGENCY

On February 28, 2011, the Company entered into a purchase agreement with L.Y. Research Corp., a New Jersey corporation.   Pursuant to the terms of the purchase agreement, the Company acquires a patent from L.Y. (HK) Biotech Limited, in exchange for 75,865,631 shares of the Company’s common stock. Pursuant to the terms of the purchase agreement, the total consideration was paid and will be $56,140,567.  However, the occurrences of $23,391,902 are considered as contingent considerations.

XML



SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

3 Months Ended

Jun. 30, 2011

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

The consolidated financial statements of the Company are prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”).

Principles of consolidation

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

Use of estimates

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

Cash and cash equivalents

For the purposes of the statement of cash flow, the Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.

Inventory

Inventory is primarily composed of raw materials and packing materials for manufacturing, work in process, and finished goods. Inventories are valued at the lower of cost or market with cost determined on a weighted average basis. Management compares the cost of inventory with the market value and an allowance is made for writing down the inventory to its market value, if lower than cost.

Property and equipment

Property and equipment are stated at cost. The cost of an asset comprises its purchase price and any directly attributable costs of bringing the asset to its present working condition and locations for its intended use. Depreciation is calculated using the straight-like method over the following useful lives:

Buildings	30-35 years
Machinery, equipment and automobiles	7-15 years

Expenditures for maintenance and repairs are charged to expense as incurred. Additions, renewals and betterments are capitalized.

Intangible Assets

(i) Land Use Rights:

All land in the PRC is owned by the government and cannot be sold to any individual or company.  However, the government may grant a “land use right” for occupying, developing and using land. The Company records land use rights obtained as intangible assets at cost, which is amortized evenly over the grant period of 50 years.

(ii) Patents:

In March 2010, the Company purchased one patent from Shandong YCT Corp.  The patent is the Company’s exclusive right to use an aglycone type and purification method of biotransformation in the gingko product manufacturing process for a period of 20 years from the patent application date.  The patent was recorded at cost when purchased, and is being amortized over the shorter of its remaining legal life, 16.5 years, or its useful life, on a straight-line basis.

On February 28, 2011, the Company acquired U.S. patent No. 6,475,531 B1 titled “Safe Botanical Drug for Treatment and Prevention of Influenza and Increasing Immune Function”) through a purchase agreement with L.Y. Research Corp., a New Jersey Corporation.

However, according to the purchase agreement between the Company and L.Y. Hong Kong Biotech Limited (LYHK), CYIG acquires the patent for a consideration of issuing total 75,865,631 shares of CYIG common stock. The total value of the consideration on the acquisition date is $56,140,567 which is calculated by the total issuing shares, multiplying CYIG’s quoted stock price $0.74 per share on February 28, 2011. The Company also received an independent third party assessment that supported the value of the patent.

Revenue recognition

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

Unearned revenue

Revenue from the sale of goods or services is recognized at the time that goods are delivered or services are rendered. Receipts in advance for goods to be delivered or services to be rendered in a subsequent period are carried forward as unearned revenue.

Impairment of long-lived assets

The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may no longer be recoverable. An impairment loss, measured based on the fair value of the asset, is recognized if expected future undiscounted cash flows are less than the carrying amount of the assets.

Value-added tax

Sales revenue represents the invoiced value of goods, net of a Value-Added Tax (“VAT”). All of the Company’s products that are sold in the PRC are subject to a Chinese value-added tax at a rate of 17% of the gross sales price. This VAT may be offset by VAT paid by the Company on raw materials and other materials included in the cost of producing their finished product.

The Company recorded net VAT Payable in amount of $85,160 and $465,811 as of June 30, 2011 and March 30, 2011, respectively.

Research and development

Research and development costs are related primarily to the Company’s developing its intellectual property. Research and development costs are expensed as incurred. The costs of material and equipment that are acquired or constructed for research and development activities and have alternative future uses are classified as plant and equipment and depreciated over their estimated useful lives.

The research and development expense for the three months ended June 30, 2011 and 2010 was $193,518 and $60,338, respectively.

Advertising costs

Advertising costs for newspaper and television are expensed as incurred.  The Company incurred advertising costs of $76,910 and nil for the three months ended June, 2011 and 2010, respectively.

Mailing and handling costs

The Company accounts for mailing and handling fees in accordance with the FASB ASC 605-45 (Emerging Issues Task Force (EITF) Issue No. 00-10, Accounting for Shipping and Handling Fees and Costs). The Company includes shipping and handling fees billed to customers in net revenues. Amounts incurred by the Company for freight are included in cost of goods sold. For the three months ended June 30, 2011 and 2010, the Company incurred $390,010 and $247,031 mailing and handling costs, respectively.

Net income (loss) per share (“EPS”)

Basic EPS excludes dilution and is computed by dividing net income (loss) attributable to common stockholders by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock (convertible preferred stock, forward contracts, warrants to purchase common stock, contingently issuable shares, common stock options and warrants and their equivalents using the treasury stock method) were exercised or converted into common stock. There are 31,610,679 and nil common stock equivalents available for dilution purposes as of June 30, 2011 and 2010, respectively.

Risks and uncertainties

The Company’s operations are carried out in the PRC. Accordingly, the Company’s business, financial condition and results of operations may be influenced by the political, economic and legal environments in the PRC, and by the general state of the PRC’s economy. The Company’s operations in the PRC are subject to specific considerations and significant risks not typically associated with companies in the North America and Western Europe. These include risks associated with, among others, the political, economic and legal environments and foreign currency exchange. The Company’s results may be adversely affected by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things.

Fair Value of Financial Instruments

For certain of the Company’s financial instruments, including cash and cash equivalents, restricted cash, accounts receivable, accounts payable, accrued liabilities and short-term debt, the carrying amounts approximate their fair values due to their short maturities.

As of March 31, 2011, the Company did not identify any financial instruments that are required to be presented on the balance sheet at fair value other than those whose carrying amounts approximate fair value due to their short maturities.

Foreign currency translation

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

Translation adjustments resulting from this process amounted to $(841,973) and $144,853 as of June 30, 2011 and 2010, respectively.

The following exchange rates were adopted to translate the amounts from RMB into United States dollars (“USD$”) for the respective periods:

	June 30, 2011		March 31, 2011		June 30, 2010
Three Months End RMB Exchange Rate (RMB/USD$)		6.4716		6.5564		6.7909
Average Period RMB Exchange Rate (RMB/USD$)		6.5011		6.7111		6.8235

Recent accounting pronouncements

In April 2010, the FASB issued FSP FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments. This FSP amends SFAS No. 107, Disclosures about Fair Value of Financial Instruments, to require an entity to provide disclosures about the fair value of financial instruments in interim financial information. This FSP also amends Accounting Principles Board Opinion No. 28, Interim Financial Reporting, to require those disclosures in summarized financial information at interim reporting periods. FSP FAS 107-1 and APB 28-1 are effective for interim periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009.  Effective April 1, 2009, the Company adopted this pronouncement.  The adoption of this pronouncement did not have any significant impact on the Company’s financial condition or results of operations.

In January 2010, the FASB issued authoritative guidance to improve disclosures about fair value measurements. This guidance amends previous guidance on fair value measurements to add new requirements for disclosures about transfers into and out of Levels 1 and 2 and separate disclosures about purchases, sales, issuances, and settlements relating to Level 3 measurement on a gross basis rather than on a net basis as currently required. This guidance also clarifies existing fair value disclosures about the level of disaggregation and about inputs and valuation techniques used to measure fair value. This guidance is effective for annual and interim periods beginning after December 15, 2009, except for the requirement to provide the Level 3 activities of purchases, sales, issuances, and settlements on a gross basis, which will be effective for annual and interim periods beginning after December 15, 2010. Early application is permitted and, in the period of initial adoption, entities are not required to provide the amended disclosures for any previous periods presented for comparative purposes. The Company does not expect the adoption of this pronouncement to have a significant impact on its financial condition or results of operations.

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INTANGIBLE ASSETS, NET

3 Months Ended

Jun. 30, 2011

INTANGIBLE ASSETS, NET

NOTE 8 - INTANGIBLE ASSETS, NET

The intangible assets of the Company consist of land use right and purchased patents.

Net land use right and purchased patents were as follows:

	Amortization	As of
	Period	June 30, 2011			March 31, 2011
Land use right	50 years		1,547,801			1,547,801
Less: Accumulated amortization			(149,626	)		(139,821	)
Land use right, net			1,398,175			1,407,980
Patent 1	16.5 years		7,107,979			7,016,045
Patent (U.S. No. 6,475,531 B1)	119 months		56,140,567			56,140,567
Less: Accumulated amortization			(2,529,998	)		(809,245	)
Patents, net		$	60,718,548		$	62,347,368

The amortization expense of land use right for the three months ended June 30, 2011 and 2010 was $9,805 and $8,141, respectively.

The amortization expense of patent for the three months ended June 30, 2011 and 2010 was $1,720,753 and $84,819, respectively.

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TAX PAYABLE

3 Months Ended

Jun. 30, 2011

TAX PAYABLE

NOTE 9 - TAX PAYABLE

Tax payable at June 30, 2011 and March 31, 2011 were as follows:

	As of
	June 31, 2011			March 31, 2011
Corporate Income Tax	$	671,495		$	1,141,293
Value-Added Tax		85,160			489,962
Other Tax & Fees		(2,009	)		3,546
Total Tax Payable	$	754,647		$	1,634,801

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MAJOR CUSTOMER AND VENDOR

3 Months Ended

Jun. 30, 2011

MAJOR CUSTOMER AND VENDOR

NOTE 7 - MAJOR CUSTOMER AND VENDOR

In the three months ended June 30, 2011, the Company mainly sells products to individual retail customers through eight major distributors.

For the three months ended June 30, 2011, the purchase from the two major vendors was $4,774,381, representing 83% of the Company’s total purchase for the quarter.

Shandong Kangyuan		3,329,167
Shandong YCT		1,445,213
Total	$	4,774,381

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CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW (USD $)	9 Months Ended
	Jun. 30, 2011	Jun. 30, 2010
Cash Flows From Operating Activities:
Net income	$ 1,855,350	$ 1,283,313
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	1,225,006	147,414
Issue of common shares as compensation		19,760
Changes in operating assets and liabilities:
Inventory	(1,576,067)	71,837
Accounts payable	209,871	(2,299,928)
Taxes payable	(439,998)	(478,039)
Accrued expenses and other payables	(115,624)	42,292
Net cash provided by (used in) operating activities	1,158,536	(1,213,351)
Cash flows from investing activities:
Addition to plant and equipment	(77,596)	(52,618)
Prepayment to a third party verndor for acquisition of patent	10,030,688	(7,355,192)
Net cash provided by (used in) investing activities	9,953,092	(7,407,810)
Effect of exchange rate changes on cash and cash equivalents	(841,973)	101,975
Net increase (decrease) in cash and cash equivalents	10,269,655	(8,519,186)
Cash and cash equivalents at beginning of period	6,046,804	11,911,933
Cash and cash equivalents at ending of period	16,316,460	3,392,747
Cash paid during the periods for:
Interest	81	0
Income taxes	1,936,972	1,231,593
Non-cash financing activities:
Stock issued for services	$ 22,222	$ 14,970

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PREPAID ACCOUNTS

3 Months Ended

Jun. 30, 2011

PREPAID ACCOUNTS

NOTE 3 – PREPAID ACCOUNTS

The prepaid account in amount of $5,551,348 is a cash payment to a Chinese research company for the acquisition of a patent.  During the quarter ended June 30, 2011, $10,050,910 prepayment was refunded by the owner of the patent due to the incompletion of the required transferring paper work.  When the Company obtains the title of the patent, the rest of the payment will be made to the owner of the patent and the prepayment will be reclassified to a patent.

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INVENTORY

3 Months Ended

Jun. 30, 2011

INVENTORY

NOTE 4 - INVENTORY

Inventory consists of finished goods, work-in-process, and raw materials. No allowance for inventory was made for the three months ended June 30, 2011 and 2010.

The components of inventories as of June 30, 2011 and March 31, 2011 were as follows:

	Period Ended
	June 30, 2011		March 31, 2011
Raw materials	$	854,854	$	8,699
Work-in-progress		212,846		27,225
Finished goods		567,550		23,259
Total Inventories	$	1,635,250	$	59,183

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PLANT, PROPERTY AND EQUIPMENT, NET

3 Months Ended

Jun. 30, 2011

PLANT, PROPERTY AND EQUIPMENT, NET

NOTE 5 – PLANT, PROPERTY AND EQUIPMENT, NET

The components of property and equipment as of June 30, 2011 and March 31, 2011 were as follows:

	Period Ended
	June 30, 2011			March 31, 2011
Machinery & Equipment	$	512,191		$	516,935
Furniture & Fixture		129,405			96,156
Building		9,632,593			9,685,212
Subtotal		10,474,188			10,298,303
Less: Accumulated Depreciation		(796,399	)		(668,745	)
Total plant, property and equipment, net	$	9,677,789		$	9,629,558

The depreciation expense for the three months ended June 30, 2011 and 2010 was $127,654 and $54,456, respectively.

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CONSOLIDATED STATEMENT OF STOCKHOLDER EQUITY (USD $)	Total	Preferred Stock Series A	Common shares	Additional paid in capital	Statutory Reserve	OCI	Retained Earnings
Beginning Balance at Mar. 31, 2010	$ 26,311,915	$ 22,500	$ 29,461	$ 4,138,480	$ 956,633	$ 1,152,764	$ 20,012,077
Beginning Balance (in shares) at Mar. 31, 2010		45	29,461,304
Net income	10,067,340						10,067,340
Issuance of common shares to independent directors (in shares)			41,997
Issuance of common shares to independent directors	25,706		42	25,664
Issuance of common shares for the owner of an acquired patent (in shares)			44,255,087
Issuance of common shares for the owner of an acquired patent	32,748,665		44,255	32,704,410
Adjustment to Retained Earnings	5,919						5,919
Foreign currency translation adjustment	888,529					888,529
Ending Balance at Mar. 31, 2011	70,048,074	22,500	73,758	36,868,554	956,633	2,041,293	30,085,336
Ending Balance (in shares) at Mar. 31, 2011		45	73,758,388
Net income	1,855,350						1,855,350
Issuance of common shares to independent directors (in shares)			22,222
Issuance of common shares to independent directors	11,111		22	11,089
Adjustment to Retained Earnings	(11,111)						(11,111)
Foreign currency translation adjustment	(841,973)					(841,972)
Ending Balance at Jun. 30, 2011	$ 71,061,452	$ 22,500	$ 73,780	$ 36,879,643	$ 956,633	$ 1,199,321	$ 31,929,575
Ending Balance (in shares) at Jun. 30, 2011		45	73,780,610

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ORGANIZATION AND PRINCIPAL ACTIVITIES

3 Months Ended

Jun. 30, 2011

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 (the “US”) in January 1989, and reincorporated in the State of Delaware on April 4, 2007.  China YCT principally operates through the following directly owned subsidiaries: Landway Nano Bio-Tech, Inc. (100% owned), incorporated in Delaware, in the United States, and Shandong Spring Pharmaceutical Co., Ltd. (“Shandong Spring”), (100% owned), incorporated in the People’s Republic of China (“PRC”). China YCT International Group, Inc. and its subsidiaries are collectively referred to as the “Company.”

China YCT, through its wholly owned subsidiary, Shandong Spring, is engaged in the business of developing, manufacturing and marketing its own medicine from gingko extract, and other dietary supplement products in the P.R. China.

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INCOME TAXES

3 Months Ended

Jun. 30, 2011

INCOME TAXES

NOTE 10 - INCOME TAXES

Shandong Spring Pharmaceutical Co., Ltd is subject to the Enterprise income tax (“EIT”) at a statutory rate of 25%.

For the years ended March 31, 2011 and 2010, Shandong Spring Pharmaceutical Co., Ltd. recorded income tax provisions of $671,495 and $459,533, respectively.

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CONDENSED CONSOLIDATED BALANCE SHEET (USD $)	Jun. 30, 2011	Mar. 31, 2011
Current assets:
Cash and cash equivalent	$ 16,316,460	$ 6,046,804
Prepaid accounts	5,551,348	15,602,258
Inventory	1,635,250	59,183
Total current assets	23,503,059	21,708,245
Plant, property and equipment, net	9,677,789	9,629,558
Construction in progress	213,956	211,189
Intangible assets, net	62,137,004	63,755,346
Total assets	95,531,808	95,304,338
Current liabilities:
Accounts payable	209,871	0
Tax payable	754,647	1,634,801
Other payable	113,937	229,561
Total current liabiliites	1,078,454	1,864,362
Contingency	23,391,902	23,391,902
Total liabilities	24,470,356	25,256,264
Stockholders' Equity
Preferred stock, par value $500.00 per share; 45 shares authorized and issued at September 30, 2010 and March 31, 2010	22,500	22,500
Common stock, par value $0.001 per share; 100,000,000 shares authorized; 73,780,610 and 73,758,388 shares issued and outstanding at June 30, 2011 and March 31, 2011, respectively	73,780	73,758
Additional paid-in capital	36,879,643	36,868,554
Statutory reserve	956,633	956,633
Retained earnings	31,929,575	30,085,336
Accumulated other comprehensive income	1,199,321	2,041,293
Total stockholders' equity	71,061,452	70,048,074
Total liabilities and stockholders' equity	$ 95,531,808	$ 95,304,338