Spring Pharmaceutical Group Inc (OTC:CYIG)

Established in 2005, China YCT International Group, Inc., through its operating subsidiary, Shandong Spring Pharmaceutical Co. Ltd. ("Shandong Spring Pharmaceutical"), a corporation organized under the laws of the People's Republic of China, is a high-tech enterprise, which applies modern biological technology and integrates research & development, production and sales of ginkgo healthcare products, ginkgo cosmetics, daily-use chemical products, ginkgo glycoside products and biological medicines. All of Shandong YCT's businesses are currently in China.

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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.
 
Shandong Spring Pharmaceutical was originally organized as a subsidiary of Shandong Yong Chun Tang for the purpose of focusing on advanced technology related to the use of gingko as an aide to health.  Shandong Yong Chun Tang later transferred ownership of Shandong Spring Pharmaceutical to its equity-holders.  Through the end of its 2009 fiscal year on March 31, 2009, Shandong Spring Pharmaceutical served solely as a distributor for Shandong Yong Chun Tang, pursuant to a distribution agreement that fixed the resale profit that would be earned by Shandong Spring Pharmaceutical.
 
In March 2010, the Company purchased a patent from Shandong YCT for US$6.74 million, which enables the Company to manufacture and distribute the Huoliyuan Capsule that was newly introduced by the Company.. Huoliyuan Capsule is a self-manufactured product by the Company which bears a higher gross profit margin as compared to the products  manufactured by Shandong Yong Chun Tang. In the year of 2010, the Company has produced Huoliyuan Capsule for approximately 232 million boxes with 12 capsules per box.

The purchase price for the patent was determined via negotiation between China YCT and Shandong YCT based on a valuation price of US$11.14 million The patent for manufacturing method of Huoliyuan capsule that the Company acquired from Shandong YCT, was assessed by Beijing Fangya Certified Asset Evaluation Company. The Company received an independent assessment, based on  the  current income value method, that the patent had a fair value of US$11.14 million.  Shandong YCT sold the patent to the Company at a discount from the assessed value because Shandong YCT retained a license  to produce products based on the patent technology.

The Huoliyuan capsule is a product based on ginseng, which is manufactured according to the traditional Chinese medicine concepts.  It has a slow release and is good for daily use as a health care product. It promotes the body’s condition by using tradition Chinese medicine materials in proportion. The therapeutic effect of Huoliyuan was tested by independent analysts, who found that Houliyan  was good for the human cardiovascular system and as an aid in treatment of chronic hepatitis, diabetes, insomnia, memory loss, menopause syndrome, and other maladies.   Huoliyuan is sold at 20 Chinese Yuan (approx. $3.00) per box