China Yct Intl (PINK:CYIG)

On October 21, 2011, the Company entered into an Amendment Agreement with L.Y. Research to amend the purchase agreement of one of its two subidiaries, dated as of February 28, 2011, and amended and restated as of August 15, 2011 (the “Purchase Agreement”).

The Amendment Agreement added the following terms:

(1)   In the event that the Company cannot, within one year from October 21, 2011, either (i) raise a minimum of $20M in gross proceeds from a debt or equity financing, or a series of debt and/or equity financings, or (ii) list its common stock on NASDAQ or a major foreign stock exchange, then the shares issued pursuant to the Purchase Agreement shall be returned to the Company and the LY Patent shall be returned to LY Research and the Purchase Agreement, as amended, shall be cancelled and of no further force or effect; and

(2)   LY Research agrees that it waives its right to (i) vote the shares and (ii) receive any dividends or other distributions from the Company until the earlier of (a) completion of the financing or (b) the listing of the shares of common stock of the Company on NASDAQ or a major foreign stock exchange.

Related Party Relationship:

From January 2006 until January 2007 management of Shandong Spring Pharmaceutical was engaged in developing the company’s manufacturing facility and distribution network. In January 2007 Shandong Spring Pharmaceutical commenced revenue-producing activities; specifically distributing products manufactured by Shandong Yong Chun Tang Bioengineering Co., Ltd. (“Shandong Yong Chun Tang”), which is owned by Yan Tinghe, the Chairman of Shandong Spring Pharmaceutical.

China YCT International Group, Inc.  entered into an agreement as of February 28 2011, with L.Y. Research Corporation (“LY Research”), Pursuant to the Agreement, the Company will acquire 100% of the issued and outstanding stock of L.Y.(HK) Biotech Limited, a corporation organized under the laws of Hong Kong, (“HK Biotech”). The assets of HK Biotech include HK Biotech’s US patent No. 6,475,531 B1, titled “Safe Botanical Drug for Treatment and Prevention of Influenza and Increasing Immune Function”. HK Biotech is a development stage company. The closing of the transactions contemplated by the Agreement are subject to customary closing conditions.

Consideration. In consideration for the purchase of the LYHK Shares, the Buyer shall issue Seller the following:

GeoTeam® Note:

The price tag of this acquisition seems high given that the target is a development stage company. Couple this with the fact that this company needs to raise  money makes dilution a forgone conclusion.