China Yct Intl Group Inc (OTC BB:CYIG)

Notwithstanding the efficiencies that we expect to realize from continued growth, we expect that several factors will cause our selling, general and administrative expenses to increase in the coming months:

• If we are successful in obtaining the funds to complete our manufacturing facility, we will initiate manufacturing activities. This will cause us to incur facility costs and the expense of administrative personnel.
• Although we have $4.32 million in property, plant and equipment on our balance sheet, we are not recording any significant amount of depreciation, since we have not put our facility into service yet. When we commence manufacturing, we will begin to depreciate our property – which will have a substantially larger book value at that time – and incur the expense as a general expense to the extent it is not allocable to cost of goods sold.

Source: SEC Form 10Q ( For the quarterly period ended June 30, 2009, page21)

Net income for the fourth quarter was $1.02 million, or diluted income per share of $0.03, compared to net income of $1.6 million, or diluted income per share of $0.05 in the fourth quarter of fiscal year 2008.

 "During the fourth quarter of fiscal year 2009, we felt the effects of the global economic slowdown," stated Mr. Yan Tinghe, the Company's Chairman. "In addition, with an earlier than normal start to the Chinese New Year this year, there was an extended period of minimized business activity for our dealers."

Source: Marketwire (June 30, 2009)

'We believe that the mid- to long-term market opportunity for our products is growing at noticeable speed. Moreover, we have strengthened our balance sheet by reducing other receivable and current liabilities,' Mr. Yan continued. 'While the impact of the global economic slowdown will persist for the foreseeable future, we are seeing stronger operating results quarter-to- quarter, and we believe that, on a year-to-year basis, we will continue our strong growth into fiscal year 2010.'

Source: PR Newswire (February 18, 2009)

GeoTeam Comment:

The outlook appears positive, but the inference to mid- to long-term opportunity and referring to year over year growth could raise some questions regarding short-term growth. 

CYIG reported preliminary results for its fiscal 2009 third quarter ended December:

• Sales Increased 60.4% Compared to FYQ3 2008 to $8.63 million.
• Net earnings increased 125% to approximately $2.19 million compared to FYQ3 2008 net   income of $0.97 million.

GeoTeam® Comment:  The company did not provide an EPS figure for the third quarter. Extrapolating EPS from the outstanding shares of 29.3 million yields about $.07 .  However, using 29.3 million shares may be a little presumptuous, on a going forward basis, as a result of some commentary from the second quarter SEC filling:

"In order to fully implement our business plan, however, we will require capital contributions far in excess of our current asset value. Our budget for bringing our manufacturing facility to an operating level that assures profitability is $10 million. 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 $40 million. Our expectation, therefore, is that we will seek to access the capital markets in both the U.S. and China to obtain the funds we require. At the present time, however, we do not have commitments of funds from any source."

This may cause some investors to approach CYIG with caution until more details on this matter become available. 

 Source: Marketwire (January 26, 2009)

Guidance Report:

"The Company expects the positive trend in its financial performance to continue into the last quarter of fiscal year 2009 and through fiscal year 2010. In addition, the Company expects to improve its revenue in 2010 by contributing more in advertising via nationwide multi-media outlets."

Source: Marketwire (January 26, 2009)