U.S.
SECURITIES AND EXCHANGE COMMISSION


WASHINGTON,
D.C.  20549





FORM
10-Q





(Mark
One)





[X]            QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934





For
the quarterly period ended December 31, 2009








[ 
]           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





Tianyin Pharmaceutical Co.,
Inc.


(Exact
name of registrant as specified in its charter)





Delaware(State
      or other jurisdiction of incorporation or organization)
            
            (IRS Employer
      Identification No.)





23rd
Floor, Unionsun Yangkuo Plaza


No.
2, Block 3, Renmin Road South


Chengdu,
P. R. China, 610041





+0086-028-86154737


(Address,
including zip code, and telephone number,


including
area code, of Registrant’s principal executive offices)








Indicate
by check mark whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the past
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 [X ] No [ ]





Indicate
by check mark whether the registrant is a large accelerate 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
      FilerNon-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 Securities Exchange Act of 1934) Yes [  ] No
[X]







As of
February 4, 2010,we are authorized to
issue up to 50,000,000 shares of Common Stock, par value US$.001 per share and
10,000,000 shares of Series A Preferred Stock, of which 26,644,026
and 2,072,750 respectively are currently issued and
outstanding.














TABLE
OF CONTENTS





PagePART
      I - FINANCIAL INFORMATION
            3Item
      1.  Financial Statements
            4Consolidated
      Balance Sheets at
                December
      31, 2009 (unaudited) and June 30, 2009
            4Unaudited
      Consolidated Statements of
                Operations
      for the three and six months ended
                December
      31, 2009 and 2008
            5Unaudited
      Consolidated Statements of Cash Flows
                for
      the six months ended December 31, 2009 and 2008
            6Unaudited
      notes to Consolidated Financial Statements
            7Item
      2.  Management’s Discussion and Analysis or Plan of
      Operation
            19Item
      3.Quantitative and
      Qualitative Disclosure About Market Risk
            27Item
      4.  Controls and Procedures
            28PART
      II – OTHER INFORMATION
            29Item
      1.  Legal Proceedings
            29Item
      2.  Unregistered Sales of Equity Securities And Use Of
      Proceeds
            29Item
      4.  Submission Of Matters To A Vote Of Security
      Holders
            23Item
      6.  Exhibits
            30











2


PART
I- FINANCIAL INFORMATION




Report
of Independent Registered Public Accounting Firm





To the
Board of Directors and Stockholders


Tianyin
Pharmaceutical Co., Inc.











We have reviewed the accompanying consolidated balance sheet of Tianyin
Pharmaceutical Co., Inc. and subsidiaries (the “Company”) as of December 31,
2009, and the related consolidated statements of operations and comprehensive
income for the three months and six months ended December 31, 2009 and 2008, and
cash flows for the six months ended December 31, 2009 and 2008. These
consolidated financial statements are the responsibility of the Company's
management.





We
conducted our reviews in accordance with the standards of the Public Company
Accounting Oversight Board (United States). A review of interim financial
information consists principally of applying analytical procedures and making
inquiries of persons responsible for financial and accounting matters. It is
substantially less in scope than an audit conducted in accordance with the
standards of the Public Company Accounting Oversight Board (United States), the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an
opinion.





Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial statements referred to above for them to
be in conformity with accounting principles generally accepted in the United
States of America.





We have previously audited, in accordance with auditing standards of the Public
Company Accounting Oversight Board (United States), the balance sheet of Tianyin
Pharmaceutical Co., Inc. and subsidiaries as of June 30, 2009, and the related
consolidated statements of operations and comprehensive income, stockholders’
equity, and cash flows for the year then ended (not presented herein); and in
our report dated September 10, 2009, we expressed an unqualified opinion on
those financial statements. In our opinion, the information set forth in the
accompanying condensed balance sheet as of June 30, 2009, is fairly stated, in
all material respects, in relation to the balance sheet from which it has been
derived.











/s/  Patrizio
& Zhao, LLC
 Patrizio
& Zhao, LLC





Parsippany,
New Jersey


January
22, 2010











3




TIANYIN
PHARMACEUTICAL CO., INC.




Consolidated
Balance Sheets
 (Unaudited)
 December
      31,
              
              
              June
      30,2009
              
              
              2009(Unaudited)AssetsCurrent
      assets:Cash
      and cash equivalents
              
              $
              19,866,573
              
              
              $
              12,352,223Accounts receivable, net of
      allowance for doubtful accounts of $172,182and $171,947 at
      December 31, 2009 and June 30, 2009, respectively
              
              
              8,642,875
              
              
              
              5,620,519Inventory
              
              
              3,220,937
              
              
              
              3,808,289Advance payments
              
              
              381,420
              
              
              
              1,188,115Loan receivable
              
              
              293,400
              
              
              
              -Other receivables
              
              
              201,321
              
              
              
              601,912Other current
    assets
              
              
              43,811
              
              
              
              81,277Total
      current assets
              
              
              32,650,337
              
              
              
              23,652,335Property
      and equipment, net
              
              
              10,646,495
              
              
              
              9,642,526Intangibles,
      net
              
              
              15,470,215
              
              
              
              12,037,483Total assets
              
              $
              58,767,047
              
              
              $
              45,332,344LiabilitiesCurrent
      liabilities:Accounts
      payable and accrued expenses
              
              $
              1,650,451
              
              
              $
              1,392,639Short-term bank
    loans
              
              
              1,400,985
              
              
              
              1,399,075VAT taxes payable
              
              
              542,629
              
              
              
              458,930Income taxes
    payable
              
              
              571,885
              
              
              
              490,514Other taxes
    payable
              
              
              15,696
              
              
              
              11,890Dividends payable
              
              
              98,538
              
              
              
              325,417Other current
      liabilities
              
              
              501,851
              
              
              
              307,934Total
      current liabilities
              
              
              4,782,035
              
              
              
              4,386,399Total liabilities
              
              
              4,782,035
              
              
              
              4,386,399EquityStockholders’
      equity:Common stock, $0.001 par value,
      50,000,000 shares authorized,25,795,902 and
      17,908,912 shares issued and outstanding atDecember 31,
      2009 and June 30, 2009, respectively
              
              
              25,796
              
              
              
              17,909Series A convertible preferred
      stock, $0.001 par value, 10,000,000shares
      authorized, 2,322,750 and 7,146,500 shares issued andoutstanding at
      December 31, 2009 and June 30, 2009, respectively
              
              
              2,323
              
              
              
              7,147Additional paid-in
      capital
              
              
              28,337,810
              
              
              
              19,694,514Statutory reserve
              
              
              2,299,807
              
              
              
              2,299,807Treasury stock
              
              
              (111,587
              )
              
              
              (111,587
              )Retained earnings
              
              
              20,393,640
              
              
              
              16,486,775Accumulated other comprehensive
      income
              
              
              2,598,164
              
              
              
              2,551,380Total stockholders’
      equity
              
              
              53,545,953
              
              
              
              40,945,945Noncontrolling
      interest
              
              
              439,059
              
              
              
              -Total equity
              
              
              53,985,012
              
              
              
              40,945,945Total liabilities and
      equity
              
              $
              58,767,047
              
              
              $
              45,332,344
   The accompanying notes are an integral part of these
consolidated financial statements.
    4
   TIANYIN
PHARMACEUTICAL CO., INC.
 Consolidated
Statements of Operations and Comprehensive Income
 (Unaudited)
 For
      the Three Months Ended
              
              
              For
      the Six Months EndedDecember 31,
              
              
              December 31,2009
              
              
              2008
              
              
              2009
              
              
              2008Sales
              
              $
              14,936,378
              
              
              $
              10,101,869
              
              
              $
              28,341,581
              
              
              $
              19,663,809Cost
      of sales
              
              
              7,177,503
              
              
              
              4,944,980
              
              
              
              13,526,730
              
              
              
              9,627,603Gross
      profit
              
              
              7,758,875
              
              
              
              5,156,889
              
              
              
              14,814,851
              
              
              
              10,036,206Operating
      expenses:Selling, general and
      administrative
              
              
              4,409,735
              
              
              
              2,595,311
              
              
              
              8,527,501
              
              
              
              5,228,672Research and
      development
              
              
              197,380
              
              
              
              84,220
              
              
              
              389,870
              
              
              
              166,858Total operating
      expenses
              
              
              4,607,115
              
              
              
              2,679,531
              
              
              
              8,917,371
              
              
              
              5,395,530Income
      from operations
              
              
              3,151,760
              
              
              
              2,477,358
              
              
              
              5,897,480
              
              
              
              4,640,676Other
      income (expenses):Interest income (expense),
      net
              
              
              (10,443
              )
              
              
              15,564
              
              
              
              (19,995
              )
              
              
              29,808Other expenses
              
              
              -
              
              
              
              (26,975
              )
              
              
              (39,510
              )
              
              
              (54,695
              )Total other
    expenses
              
              
              (10,443
              )
              
              
              (11,411
              )
              
              
              (59,505
              )
              
              
              (24,887
              )Income
      before provision for income tax
              
              
              3,141,317
              
              
              
              2,465,947
              
              
              
              5,837,975
              
              
              
              4,615,789Provision
      for income tax
              
              
              571,756
              
              
              
              408,827
              
              
              
              1,081,691
              
              
              
              767,677Net
      income
              
              
              2,569,561
              
              
              
              2,057,120
              
              
              
              4,756,284
              
              
              
              3,848,112Less:
      Net income attributable to noncontrolling interest
              
              
              1,485
              
              
              
              -
              
              
              
              (1,040
              )
              
              
              -Net
      income attributable to Tianyin
              
              
              2,568,076
              
              
              
              2,057,120
              
              
              
              4,757,324
              
              
              
              3,848,112Other
      comprehensive incomeForeign currency translation
      adjustment
              
              
              10,927
              
              
              
              256,933
              
              
              
              46,784
              
              
              
              346,367Comprehensive
      income
              
              $
              2,579,003
              
              
              $
              2,314,053
              
              
              $
              4,804,108
              
              
              $
              4,194,479Basic
      earnings per share
              
              $
              0.10
              
              
              $
              0.11
              
              
              $
              0.20
              
              
              $
              0.20Diluted
      earnings per share
              
              $
              0.08
              
              
              $
              0.13
              
              
              $
              0.17
              
              
              $
              0.16Weighted
      average number of common sharesoutstandingBasic
              
              
              24,906,965
              
              
              
              15,691,495
              
              
              
              22,323,116
              
              
              
              15,637,623Diluted
              
              
              30,439,912
              
              
              
              15,691,495
              
              
              
              28,521,127
              
              
              
              24,697,018
 
 The accompanying notes are an
integral part of these consolidated financial statements.
    5
 
 TIANYIN
PHARMACEUTICAL CO., INC.
  Consolidated
Statements of Cash Flows
 (Unaudited)
 For
      the Six Months EndedDecember 31,2009
              
              
              2008Cash
      flows from operating activities:Net
      Income
              
              $
              4,757,324
              
              
              $
              3,848,112Adjustments
      to reconcile net income to net cashprovided
      by (used in) operating activities:Depreciation and
      amortization
              
              
              393,575
              
              
              
              237,619Noncontrolling
      interest
              
              
              (1,040
              )
              
              
              -Share-based
    payments
              
              
              1,055,395
              
              
              
              -Loss on disposal of fixed
      assets
              
              
              39,510
              
              
              
              -Changes in current assets and
      current liabilities:Accounts
      receivable
              
              
              (3,013,450
              )
              
              
              132,660Inventory
              
              
              592,309
              
              
              
              (1,117,856
              )Other
      receivables
              
              
              401,237
              
              
              
              608,042Other
      current assets
              
              
              37,500
              
              
              
              227,140Accounts
      payable and accrued expenses
              
              
              256,055
              
              
              
              (119,588
              )VAT
      taxes payable
              
              
              83,038
              
              
              
              71,402Income
      tax payable
              
              
              80,668
              
              
              
              66,275Other
      taxes payable
              
              
              3,788
              
              
              
              (35,705
              )Other
      current liabilities
              
              
              193,483
              
              
              
              732Total adjustments
              
              
              122,068
              
              
              
              70,721Net cash provided by operating
      activities
              
              
              4,879,392
              
              
              
              3,918,833Cash
      flows from investing activities:Additions to property and
      equipment
              
              
              (1,288,234
              )
              
              
              (570,491
              )Additions to intangible assets –
      drug
              
              
              (2,742,168
              )
              
              
              (130,323
              )Advance payments for research and
      development
              
              
              -
              
              
              
              (2,155,450
              )Loan receivable
              
              
              (293,280
              )
              
              
              -Net cash used in investing
      activities
              
              
              (4,323,682
              )
              
              
              (2,856,264
              )Cash
      flows from financing activities:Repayment of bank
      loans
              
              
              -
              
              
              
              (512,505
              )Additional paid-in
      capital
              
              
              7,590,962
              
              
              
              -Proceeds from minority
      shareholders
              
              
              439,920
              
              
              
              -Payment of
    dividends
              
              
              (1,077,335
              )
              
              
              -Net cash provided by (used in)
      financing activities
              
              
              6,953,547
              
              
              
              (512,505
              )Effect
      of foreign currency translation on cash
              
              
              5,093
              
              
              
              66,124Net
      increase in cash and cash equivalents
              
              
              7,514,350
              
              
              
              616,188Cash
      and cash equivalents – beginning
              
              
              12,352,223
              
              
              
              12,057,150Cash
      and cash equivalents – ending
              
              $
              19,866,573
              
              
              $
              12,673,338Supplemental
      schedule of non cash activitiesAdvance payments exchanged for
      intangible assets – drug
              
              $
              807,986
              
              
              $
              -
 
 The accompanying notes are an
integral part of these consolidated financial statements.
  6
   Note
1 – Organization and Nature of Business
 
 Tianyin
Pharmaceutical Co., Inc. (Formerly Viscorp, Inc.) was established under the laws
of Delaware on August 20, 2002. The accompanying consolidated financial
statements include the financial statements of Tianyin Pharmaceutical Co., Inc.
and its subsidiaries (the “Company” or “Tianyin”). The Company’s primary
business is to research, manufacture, and sell pharmaceutical
products.
 
 On
January 16, 2008, Viscorp Inc. (“Viscorp”) completed a reverse acquisition of
Raygere Limited (“Raygere”), which was incorporated in the British Virgin
Islands on January 26, 2007. To accomplish the exchange of shares Viscorp issued
12,790,800 shares of common stock on a one to one ratio for a 100% equity
interest in Raygere, per the terms of the Share Exchange and Bill of Sale of
assets of Viscorp and Charles Driscoll. Viscorp was delivered with zero assets
and zero liabilities at time of closing. Following the reverse acquisition,
Viscorp changed the name to Tianyin Pharmaceutical Co., Inc. The transaction was
regarded as a reverse merger whereby Raygere was considered to be the accounting
acquirer as its shareholders retained control of Tianyin after the exchange.
Although the Company is the legal parent company, the share exchange was treated
as a recapitalization of Raygere. Thus, Raygere is the continuing entity for
financial reporting purposes. The financial statements have been prepared as if
Raygere had always been the reporting company and then on the share exchange
date, had changed its name and reorganized its capital stock.
 
 In
September 2007, Raygere acquired 100% interest in Grandway Groups Holdings Ltd.
(“Grandway”), which was incorporated on May 25, 2007, in the city of Hong Kong,
the People’s Republic of China (“PRC”). On October 30, 2007, Grandway acquired
100% equity interest in Chengdu Tianyin Pharmaceutical Co., Ltd (“Chengdu
Tianyin”), which was incorporated on April 1, 1994 in the city of Chengdu, the
People’s Republic of China. As a result of the acquisition, Chengdu Tianyin
became the wholly owned subsidiary of Grandway and an indirect wholly owned
subsidiary or Raygere. The transaction was regarded as a reverse merger whereby
Chengdu Tianyin was considered to be the accounting acquirer as both Grandway
and Raygere were holding companies with no significant operations and Chengdu
Tianyin continues as the primary operating entity even after the exchange,
although Raygere is the legal parent company. As such, Chengdu Tianyin (and its
historical financial statements) is the continuing entity for financial
reporting purposes. The consolidated financial statements reflect all
predecessor statements of income and cash flow activities from the inception of
Chengdu Tianyin in July 2007.
 
 In June
2009, Chengdu Tianyin invested $723,500 to establish a wholly-owned trading
subsidiary, Chengdu Tianyin Medicine Trading Co., Ltd (“Tianyin Medicine
Trading”) for sales and distribution of medicine produced by Chengdu Tianyin. As
of December 31, 2009, the financial results of Tianyin Medicine Trading are
consolidated into the consolidated financial statements presented
herein.
 
 On August
21, 2009, Sichuan Jiangchuan Pharmaceutical Co., Ltd (“Sichuan Jiangchuan”) was
established by Chengdu Tianyin, Sichuan Mingxin Pharmaceutical and an individual
investor with crude drug production as its major business. Total registered
capital of Sichuan Jiangchuan is $2,934,000, of which Chengdu Tianyin accounts
for 77%. As of December 31, 2009, registered capital of $1,173,600 has been
invested and the results of Sichuan Jianchuan are consolidated into the
consolidated financial statements presented herein.
     7
 
 Note
2 – Summary of Significant Accounting Policies
 
 Basis
of Presentation
 
 The
accompanying consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in the United Stated of America.
The consolidated financial statements include the accounts of Tianyin
Pharmaceutical Co., Inc. and its wholly-owned subsidiaries. All inter-company
transactions and balances have been eliminated in consolidation. The
accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles (“GAAP”) applicable to interim
financial information and the requirements of Form 10-Q and Rule 10-01 of
Regulation S-X of the Securities and Exchange Commission. Accordingly, they do
not include all of the information and footnotes required by accounting
principles generally accepted in the United States of America for complete
financial statements. Interim results are not necessarily indicative of results
for a full year. In the opinion of management, all adjustments considered
necessary for a fair presentation of the financial position and the results of
operations and cash flows for the interim periods have been
included.
 
 Interim
Financial Statements
 
 These
interim financial statements should be read in conjunction with the audited
financial statements for the years ended June 30, 2009 and 2008, as not all
disclosures required by generally accepted accounting principles for annual
financial statements are presented herein. The interim financial statements
follow the same accounting policies and methods of computations as the audited
financial statements for the years ended June 30, 2009 and 2008.
 
 Fair
value of financial instruments
 
 The
Company’s financial instruments include cash equivalents, accounts receivable,
notes receivable, accounts payable, short-term debt and other financial
instruments associated with the issuance of the common stock.  The
carrying values of cash equivalents, accounts receivable, notes receivable, and
accounts payable approximate their fair value because of the short maturity of
these instruments. The carrying amounts of the Company’s bank borrowings under
its credit facility approximate fair value because the interest rates are reset
periodically to reflect current market rates.
 
 The
Company adopted Statement of Financial Accounting Standards (“SFAS”) No. 157,
“Fair Value Measurements” (“SFAS 157”) on January 1, 2008.  SFAS 157
has been codified as ASC 820-10, “Fair Value Measurements.”  ASC
820-10, among other things, defines fair value, establishes a consistent
framework for measuring fair value and expands disclosure for each major asset
and liability category measured at fair value on either a recurring or
nonrecurring basis. ASC 820-10 clarifies that fair value is an exit price,
representing the amount that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants. As
such, fair value is a market-based measurement that should be determined based
on assumptions that market participants would use in pricing an asset or
liability. As a basis for considering such assumptions, ASC 820-10 establishes a
three-tier fair value hierarchy, which prioritizes the inputs used in measuring
fair value as follows:
 
 Level 1:
Observable inputs such as quoted prices in active markets;
 
 Level 2:
Inputs, other than the quoted prices in active markets, that are observable
either directly or indirectly; and
    8
  
 Level 3:
Unobservable inputs in which there is little or no market data, which require
the reporting entity to develop its own assumptions.
 
 Recent
Accounting Pronouncements
 
 On July
1, 2009, the Financial Accounting Standards Board (“FASB”) officially launched
the FASB Accounting Standards Codification (“ASC”), which has become the single
official source of authoritative nongovernmental U.S. GAAP, in addition to
guidance issued by the Securities and Exchange Commission. The ASC is designed
to simplify U.S. GAAP into a single, topically ordered structure. All guidance
contained in the ASC carries an equal level of authority. The ASC is effective
for all interim and annual periods ending after September 15, 2009. The
Company’s implementation of this guidance effective July 1, 2009 did not have a
material effect on the Company’s condensed consolidated financial
statements.
 
 On July
1, 2009, the Company adopted the accounting and disclosure requirements of
Statement of Financial Accounting Standard (“SFAS”) No. 160, Noncontrolling
Interests in Consolidated Financial Statements, an Amendment of ARB No. 51,
which is now included with ASC Topic 810 Consolidation.  This standard
establishes a single method of accounting for changes in a parent’s ownership
interest in a subsidiary that do not result in deconsolidation.  On a
prospective basis, any changes in ownership will be accounted for as equity
transactions with no gain or loss recognized on the transactions unless there is
a change in control.
 
 Note
3 – Accounts Receivable
 
 Trade
accounts receivable are stated at original invoice amount less allowance for
doubtful receivables based on management’s periodic review of aging of
outstanding balances and customer credit history. Allowance for doubtful
accounts amounted to $172,182 and $171,947 at December 31, 2009 and June 30,
2009, respectively.
 
 Note
4 – Inventory
 
 Inventory
at December 31, 2009 and June 30, 2009 consists of the following:
 
 December 31, 2009
              
              
              June 30, 2009Raw
      materials
              
              $
              1,111,731
              
              
              $
              1,104,461Packaging
      supplies
              
              
              446,917
              
              
              
              412,314Work
      in process
              
              
              1,077,399
              
              
              
              1,314,344Finished
      goods
              
              
              723,337
              
              
              
              1,115,429Subtotal
              
              
              3,359,384
              
              
              
              3,946,548Less:
      Inventory reserve
              
              
              138,447
              
              
              
              138,259Total
              
              $
              3,220,937
              
              
              $
              3,808,289
    9
 
 Note5– Property and
Equipment
 
 Property
and equipment at December 31, 2009 and June 30, 2009 consists of the
following:
 
 December 31, 2009
              
              
              June 30, 2009Buildings
              
              $
              8,748,277
              
              
              $
              5,175,726Machinery
      and equipment
              
              
              2,631,347
              
              
              
              1,200,827Office
      equipment and furniture
              
              
              53,172
              
              
              
              48,777Vehicles
              
              
              62,788
              
              
              
              397,340Subtotal
              
              
              11,495,584
              
              
              
              6,822,670Less:
      Accumulated depreciation
              
              
              2,078,728
              
              
              
              2,165,7959,416,856
              
              
              
              4,656,875Add:
      Construction in progress
              
              
              1,229,639
              
              
              
              4,985,651Total
              
              $
              10,646,495
              
              
              $
              9,642,526
 
 Depreciation
expenses for the three months ended December 31, 2009 and 2008 were $130,008 and
$78,009, and for the six months ended December 31, 2009 and 2008 were $258,285
and $157,229, respectively.
 
 Note
6 – Goodwill and Intangible Assets
 
 The
Company previously adopted ASC 350-20, “Goodwill” (formerly known as SFAS
No. 142, Goodwill
and Other Intangible Assets). ASC 350-20 requires, among other things,
the discontinuance of goodwill amortization. Under ASC 350-20, goodwill is to be
reviewed at least annually for impairment; the Company has elected to perform
this review annually on June 30th of each calendar year. As of June 30th,
2009, no impairment had occurred.  We have not identified any
impairments as of December 31, 2009.  These reviews have resulted in
no adjustments in goodwill.
 
 
 Intangible
assets at December 31, 2009 and June 30, 2009 consist of the
following:
 
 December 31, 2009
              
              
              June 30, 2009Rights
      to use land
              
              $
              1,452,330
              
              
              $
              1,450,350Approved
      drugs
              
              
              14,692,485
              
              
              
              11,125,690Intangible
      assets
              
              
              16,144,815
              
              
              
              12,576,040Less:
      accumulated amortization
              
              
              674,600
              
              
              
              538,557Total
              
              $
              15,470,215
              
              
              $
              12,037,483
 Amortization
expenses for the three months ended December 31, 2009 and 2008 were $66,530 and
$40,203, and for the six months ended December 31, 2009 and 2008 were $135,290
and $80,390, respectively.
     10
 
 Note
7 – Accounts Payable and Accrued Expenses
 
 Accounts
payable and accrued expenses consist of the following:
 
 December 31, 2009
              
              
              June 30, 2009Accounts
      payable
              
              $
              1,232,041
              
              
              $
              1,182,714Accrued
      expenses
              
              
              418,410
              
              
              
              209,925Total
              
              $
              1,650,451
              
              
              $
              1,392,639
 
 The
carrying value of accounts payable and accrued expenses approximates their fair
value due to the short-term nature of these obligations.
 
 Note
8 – Short-Term Bank Loans
 
 Short-term
bank loans consist of the following:
 
 December 31,
              
              
              June 30,2009
              
              
              2009On
      July 11, 2008, the Company obtained a loan from Agricultural Bank
      ofChina,
      out of which the principal was paid in full by July 10,
      2009.Theinterest
      was calculated using an annual fixed interest rate of 7.881%
      andpaid
      monthly. The loan was secured by the Company’s property
andequipment.
              
              $
              -
              
              
              $
              520,075On
      June 24, 2009, the Company obtained a loan from Agricultural Bank
      ofChina,
      out of which the principal is to be paid in full by June 23, 2010.
      Theinterest
      is to be calculated using an annual fixed interest rate of
      5.6286%and
      paid monthly. The loan is secured by the Company’s property
      andequipment.
              
              $
              880,200
              
              
              $
              879,000On
      July 16, 2009, the Company obtained a loan from Agricultural Bank
      ofChina,
      out of which the principal is to be paid in full by July 15,
      2010.Theinterest
      is to be calculated using an annual fixed interest rate of
      5.6286%and
      paid monthly. The loan is secured by the Company’s property
      andequipment.
              
              $
              520,785
              
              
              $
              -Total short-term bank
      loans
              
              $
              1,400,985
              
              
              $
              1,399,075
     11
 
 Note
9 – Income Taxes
 
 Raygere
is incorporated in the British Virgin Islands. Under the corporate tax laws of
British Virgin Islands, it is not subject to tax on income or capital
gain.
 
 The
operating subsidiary Chengdu Tianyin is a wholly foreign-owned enterprise
incorporated in the PRC and subject to PRC Foreign Enterprise Income Tax
(“FEIT”) Law. Chengdu Tianyin is entitled to the preferential tax treatment for
Opening Up its production facility in Western China in Sichuan Province. The
applicable reduced preferential state EIT rate under this policy is 15% until
December 31, 2010. Accordingly, the effective tax rate for Chengdu Tianyin for
the period from its date of incorporation to December 31, 2009 is 15%. As
domestic invested companies, the effective tax rates of Tianyin Medicine Trading
and Sichuan Jiangchuan are both 25% each from their operations.
 
 Note
9 – Income Taxes (continued)
 
 On March
16, 2007, the National People’s Congress of China enacted a new Corporate Income
Tax (“CIT”) law, under which FIEs and domestic companies would be subject to CIT
at a uniform rate of 25%. The new CIT law became effective on January 1, 2008.
Currently, the Company does not believe the new CIT law will affect the
preferential tax treatments enjoyed by them. Since the Company intends to
reinvest its earnings to further expand its businesses in mainland China, its
foreign invested enterprises do not intend to declare dividends to their
immediate foreign holding companies in the foreseeable future. Accordingly, as
of December 31, 2009, the Company has not recorded any withholding tax on the
retained earnings of its foreign invested enterprises in China.
 
 On
February 22, 2008, the Ministry of Finance (“MOF”) and the State Administration
of Taxation (“SAT”) jointly issued Cai Shui [2008] Circular 1 (“Circular 1”).
According to Article 4 of Circular 1, distributions of accumulated profits
earned by a FIE prior to January 1, 2008 to foreign investor(s) in 2008 will be
exempt from withholding tax (“WHT”) while distribution of the profit earned by
an FIE after January 1, 2008 to its foreign investor(s) shall be subject to
WHT.
 
 Note
10 – Stockholders’ Equity and Related Financing Agreements
 
 On
January 16, 2008, the shareholders of Raygere were issued 12,790,800 shares of
Viscorp’s Common Stock, under a Share Exchange Agreement (SEA) pursuant to a
claim of exemption under Section 4(2) of the Securities Act of 1933, as amended,
for issuances not involving a public offering. Under the SEA, after the transfer
of all of its shares, Raygere became a wholly-owned subsidiary of Viscorp, which
has changed its name to Tianyin Pharmaceutical Co., Inc. (hereinafter
Tianyin).
 
 On
January 16 and 25, 2008, Tianyin (formerly Viscorp.) completed private
financings totaling $15,225,000, with 27 accredited investors (the “January 2008
Financing”). The net proceeds from the financing were approximately $13,697,000.
Consummation of the financing was a condition to the completion of the Share
Exchange transaction with Raygere and the Raygere Stockholders under the Share
Exchange Agreement. The securities offered in the financing were sold pursuant
to a Securities Purchase Agreement (the “Purchase Agreement”) by and among
Tianyin (formerly Viscorp.), Raygere, the Raygere stockholders, Grandway and the
investors named in the Purchase Agreement (collectively, the “Investors”). In
accordance with the Purchase Agreement, Tianyin (formerly Viscorp.) issued a
total of 152.25 units of securities consisting of: (i) An aggregate of
$15,225,000 principal amount of Tianyin 10% convertible exchangeable notes due
on or before June 30, 2009 (the “Notes”); (ii) Five (5) year warrants to
purchase 4,757,814 shares of Tianyin Common Stock, $0.001 par value per share at
an initial exercise price of $2.50 per share (the “Class A Warrants”), and (iii)
Seven (7) year warrants to purchase 4,757,814 shares of Tianyin common stock at
an initial exercise price of $3.00 per share (the “Class B Warrants” and
together with the Class A Warrants, the “Warrants”). The exercise prices of the
Warrants are subject to weighted average and other anti-dilution
adjustments.
     12
 
 Note
10 – Stockholders’ Equity and Related Financing Agreements
(continued)
 
 Pursuant
to the terms of the Purchase Agreement, the $15,225,000 of Notes automatically
converted into an aggregate of 9,515,625 shares of Tianyin Series A convertible
preferred stock, par value 0.001 per share (the “Series A Preferred Stock”) on
March 11, 2008, the effective date of the authorization and designation of such
class. As issued, the Series A Preferred Stock:
 
 ●
              Pays
      an annual dividend of 10%, payable at Tianyin’s option either in cash or
      (if such shares have been registered for resale under the Securities Act
      of 1933, as amended) in additional shares of Tianyin Common stock valued
      at $1.60 per share;
 
 ●
              Has
      a stated or liquidation value of $1.60 per share, or $15,225,000 as to all
      9,515,625 shares of Series A Preferred
Stock.
 
 Each
outstanding share of Series A Preferred Stock is convertible at any time at the
option of the holder into one (1) full share of Tianyin Common
stock.
 
 As at
December 31, 2009, a total of 7,192,875 shares of Series A Preferred Stock have
been converted to 7,192,875 shares of Tianyin Common Stock, of which 4,823,750
shares were converted during the six months ended December 31,
2009.
 
 As of
December 31, 2009, 562,501 Class A and 343,750 Class B Warrants have been
exercised for respective equivalent number of shares of common
stock. The exercise prices of Class A and Class B Warrants are $2.50
and $3.00 per share, respectively.  The following securities were also
issued or exercised during the six month period ended December 31, 2009:
warrants issued to the placement agent of the Company’s 2008 financings to
purchase 442,394 shares of common stock at $1.60; 15,025 shares of common stock
at $2.50;  and 150,000 options issued to external service providers at
$2.00 per share. As a result of these exercises and issuances, an aggregate of
1,513,670 shares of outstanding common stock have been issued and a total
of $3,287,895 net proceeds have been received from the exercise of these
warrants and options.
 
 On May 9,
2008, Chengdu Tianyin issued 20,000 shares of Common Stock to its employees. The
Company recorded this transaction to the General and Administrative expense at
the share price on the date of the issuance, which amounted to
$68,000.
 
 In
connection with the January 2008 Financing, Tianyin granted warrants to purchase
1,522,500 shares of Common Stock with an exercise price of $1.60, $2.50 and
$3.00 per share to TriPoint Global Equities, LLC, the placement agent in the
financing. These warrants have the same terms as the warrants issued to
investors and are included in the units.
 
 On July
29, 2008, the Company issued 236,488 shares of common stock, representing the
fiscal year 2008 fourth quarter dividend (10% per annum) in accordance with the
terms of the Certificate of Designation of the Relative Rights and Preferences
of the Series A Convertible Preferred Stock.
 
 On
September 30, 2008, the Company recorded $361,332 as dividends to the investors
of the Company’s January 2008 Financing, representing the quarterly dividend
(10% per annum) in accordance with the terms of the Certificate of Designation
of the Relative Rights and Preferences of the Series A Convertible Preferred
Stock. This resolution was approved by the Company’s Board of Directors and the
Company decided to issue 225,932 shares of common stock to those investors in
lieu of cash.
  On
October 29, 2008, the Company issued 225,932 shares of common stock,
representing the fiscal year 2009 first quarter dividend (10% per annum) in
accordance with the terms of the Certificate of Designation of the Relative
Rights and Preferences of the Series A Convertible Preferred Stock.
     13
 
 Note
10 – Stockholders’ Equity and Related Financing Agreements
(continued)
 
 On
December 31, 2008, the Company recorded $357,694 as dividends to the investors
of the Company’s January 2008 financings, representing the quarterly dividend
(10% per annum) in accordance with the terms of the Certificate of Designation
of the Relative Rights and Preferences of the Series A Convertible Preferred
Stock. This resolution was approved by the Company’s Board of Directors and the
Company decided issue 223,558 shares of common stock to those investors in lieu
of cash.
 
 On
January 5, 2009, the Company issued 223,558 shares of common stock, representing
the fiscal year 2009 second quarter dividend (10% per annum) in accordance with
the terms of the Certificate of Designation of the Relative Rights and
Preferences of the Series A Convertible Preferred Stock.
 
 On March
31, 2009, the Company recorded $346,578 as dividends to the investors of the
Company’s January 2008 financings, representing the quarterly dividend (10% per
annum) in accordance with the terms of the Certificate of Designation of the
Relative Rights and Preferences of the Series A Convertible Preferred Stock.
This resolution was approved by the Company’s Board of Directors and the Company
decided to issue 216,609 shares of common stock to those investors in lieu of
cash.
 
 On April
14, 2009, the Company issued 216,609 shares of common stock, representing the FY
2009 third quarter dividend (10% per annum) in accordance with the terms of the
Certificate of Designation of the Relative Rights and Preferences of the Series
A Convertible Preferred Stock.
 
 On April
14, 2009, the Company announced that its Series A Preferred shareholders
approved an annual cash dividend of $0.10 per common share that will be paid
quarterly for each quarter of this fiscal year to common shareholders. The
initial dividend of $0.025 per common share, which amounted to $73,944, was paid
to common shareholders of record on April 30, 2009, with the actual distribution
on June 10, 2009. The cash dividend was paid solely to common stockholders and
not paid on shares owned by management, advisors or other inside shareholders,
all of whom agreed to waive receipt of the dividend.
 
 On June
30, 2009, the Company recorded $325,417 as dividends to the investors of the
Company’s January 2008 financings, representing the quarterly dividend (10% per
annum) in accordance with the terms of the Certificate of Designation of the
Relative Rights and Preferences of the Series A Convertible Preferred Stock.
This resolution was approved by the Company’s Board of Directors and the Company
paid the dividends in cash to those investors on July 31, 2009.
 
 On July
8, 2009, the Company declared a quarterly cash dividend to be paid to its common
stock shareholders. The dividend of $0.025 per common share, with the total
amount of $172,023 was owed to all shareholders of record as of July 31, 2009,
with a pay date of September 9, 2009.
 
 On
September 30, 2009, the Company recorded $233,683 as dividends to the investors
of the Company’s January 2008 financings, representing the quarterly dividend
(10% per annum) in accordance with the terms of the Certificate of Designation
of the Relative Rights and Preferences of the Series A Convertible Preferred
Stock. This resolution was approved by the Company’s Board of Directors and the
Company decided to pay the dividends in cash to those investors.
 
 On
October 5, 2009, the Company declared a quarterly cash dividend to be paid to
its common stock shareholders. The dividend of $0.025 per common share, with the
total amount of $344,322 was owed to all shareholders of record as of October
30, 2009, with a pay date of December 10, 2009.
     14
 
 Note
10 – Stockholders’ Equity and Related Financing Agreements
(continued)
 
 On
October 27, 2009, the Company completed a private equity financing of
$4,987,500, with eight accredited investors (the “October 2009 Financing”). Net
proceeds from the offering are approximately $4,490,000. Pursuant to the October
2009 Financing, we issued, for $4,987,500, a total of 1,534,570 units of our
securities at $3.25 per unit. Each unit consists of (i) one share of the
Company's common stock, par value $0.001 per share (the "Common Stock"), and
(ii) a Series C Warrant (the "Series C Warrant"), with each Series C Warrant
exercisable at $4.50 to purchase one-fifth of a share of Common Stock, such that
the total amount of warrants issued to each investor as shall be equal to twenty
percent (20%) of the number of units purchased by each purchaser. Each of the
warrants has a term of three (3) years.
 
 In
connection with this financing, the Company paid cash compensation to the
placement agent, Tripoint Global Equities, in the amount of $495,250. In
connection with this financing, the Company granted warrants to purchase 122,766
shares of common stock at $3.25 and 24,553 shares at $4.50 to the placement
agent or its designees. These warrants have the same terms as the warrants
issued to investors and are included in the units.
 
 On
December 31, 2009, the Company recorded $98,538 as dividends to the investors of
the Company’s January 2008 financings, representing the quarterly dividend (10%
per annum) in accordance with the terms of the Certificate of Designation of the
Relative Rights and Preferences of the Series A Convertible Preferred Stock.
This resolution was approved by the Company’s Board of Directors and the Company
decided to pay the dividends in cash to those investors.
 
 Note
11 – Employee Welfare Plan
 
 The
Company has established an employee welfare plan in accordance with Chinese laws
and regulations. Full-time employees of the Company in the PRC participate in a
government-mandated multi-employer defined contribution plan pursuant to which
certain pension benefits, medical care, unemployment insurance and other welfare
benefits are provided to employees. PRC labor regulations require the Company to
accrue for these benefits based on a certain percentage of the employees’
salaries. The total contribution for such employee benefits was $101,121 and
$60,412 for the six months ended December 31, 2009 and 2008,
respectively.
 
 Note
12 – Risk Factors
 
 During
the six months ended December 31, 2009, three vendors accounted for
approximately 27% of the Company’s purchases of raw materials, while during the
six months ended December 31, 2008, three vendors accounted for approximately
38% of the Company’s purchases of raw materials. Total purchases from these
vendors were $3,576,269 and $4,337,100 for the six months ended December 31,
2009 and 2008, respectively.
 
 Five
customers accounted for 13% and 18% of the total revenue for the six months
ended December 31, 2009 and 2008. Sales to these customers were $3,640,376 and
$3,534,956 for the six months ended December 31, 2009 and 2008,
respectively.
 
 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 as well as by the general
state of the PRC’s economy. The Company’s business may be influenced 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.
     15
 
 Note
13 – Concentrations of Credit Risk
 
 Financial
instruments which potentially subject the Company to credit risk consist
principally of cash on deposit with financial institutions. Management believes
that the financial institutions that hold the Company’s cash and cash
equivalents are financially sound and minimal credit risk exists with respect to
these investments.
 
 Note
14 – Supplemental Cash Flow Disclosures
 
 The
following is supplemental information relating to the consolidated statements of
cash flows:
 
 Six Months Ended December
    31,2009
              
              
              2008Cash
      paid for interest
              
              $
              39,363
              
              
              $
              54,695Cash
      paid for income taxes
              
              $
              999,596
              
              
              $
              359,609
 
 Note
15 – Earnings Per Share
 
 The
Company presents earnings per share (“EPS”) on a basic and diluted basis. Basic
earnings per share have been computed by dividing net earnings by the weighted
average number of common shares outstanding. Diluted earnings per share has been
computed by dividing net earnings plus convertible preferred dividends and
interest expense (after-tax) on convertible debt by the weighted average number
of common shares outstanding including the dilutive effect of equity securities.
The weighted average number of common shares calculated for Diluted EPS excludes
the potential common stock that would be exercised under the options and
warrants granted to officers because the inclusion of the potential shares from
these options and warrants would cause an antidilutive effect by increasing the
net earnings per share.
 
 Three Months Ended December
    31,2009
              
              
              2008Net
      income (numerator for diluted income per share)
              
              $
              2,568,076
              
              
              $
              2,057,120Less:
      Dividend attributable to preferred stockholders
              
              
              98,538
              
              
              
              357,694Net
      income attributable to common stockholders(numerator
      for basic income per share)
              
              
              2,469,538
              
              
              
              1,699,426Weighted
      average common shares(denominator
      for basic income per share)
              
              
              24,906,965
              
              
              
              15,691,495Effect
      of diluted securities:Convertible
      preferred stock
              
              
              2,443,375
              
              
              
              -Warrants
              
              
              3,089,572
              
              
              
              -Weighted
      average common shares(denominator
      for diluted income per share)
              
              
              30,439,912
              
              
              
              15,691,495Basic
      net income per share
              
              $
              0.10
              
              
              $
              0.11Diluted
      net income per share
              
              $
              0.08
              
              
              $
              0.13
     16
 
 Note
15– Earnings Per Share
(continued)
 
 Six Months Ended December
    31,2009
              
              
              2008Net
      income (numerator for diluted income per share)
              
              $
              4,757,324
              
              
              $
              3,848,112Less:
      Dividend attributable to preferred stockholders
              
              
              332,221
              
              
              
              719,025Net
      income attributable to common stockholders(numerator
      for basic income per share)
              
              
              4,425,103
              
              
              
              3,129,087Weighted
      average common shares(denominator
      for basic income per share)
              
              
              22,323,116
              
              
              
              15,637,623Effect
      of diluted securities:Convertible
      preferred stock
              
              
              3,972,394
              
              
              
              8,947,622Warrants
              
              
              2,225,617
              
              
              
              111,773Weighted
      average common shares(denominator
      for diluted income per share)
              
              
              28,521,127
              
              
              
              24,697,018Basic
      net income per share
              
              $
              0.20
              
              
              $
              0.20Diluted
      net income per share
              
              $
              0.17
              
              
              $
              0.16
 
 Note
16 – Share - Based Payments
 
 The Company accounts for
stock-based non-employee compensation arrangements using the fair value
recognition provisions of ASC 505-50, “Equity-Based Payments to Non-Employees”
(formerly known as FASB Statement 123, Accounting
for Stock-Based Compensationand “Emerging Issues Task Force” EITF
96-18, Accounting for Equity Instruments That Are Issued to Other Than Employees
for Acquiring, or in Conjunction with Selling, Goods or
Services).
 
 In March,
April and November, 2009, the Company granted a total of 45,000 restricted
shares of common stock and options to purchase 195,000, 75,000 and 180,000
shares of common stock at $1.60, $2.00 and $3.28 per share, respectively, with
all expected lives of 5 years in addition to cash compensations, to external
service providers. The fair value of each option granted is estimated on the
measurement date using the Black-Scholes option-pricing model with the following
weighted-average assumptions used for grants in the quarter ended December 31,
2009: expected volatility of 132.52 percent and risk-free interest rate of 2.69
percent.
 
 In July
2009, the Company granted options to purchase 50,000 shares of common stock at
$2.00 per share with both expected lives of 3 years to an external service
provider in addition to cash compensation. The fair value of each option grant
is estimated on the measurement date using the Black-Scholes option-pricing
model with the following weighted-average assumptions used for grants in the
quarter ended December 31, 2009: expected volatility of 132.52 percent and
risk-free interest rate of 1.70 percent.
 
 Accordingly,
an aggregate of $422,306 and $-0- share based payments were charged against
income in professional fees of external service providers for the three months
ended December 31, 2009 and 2008, respectively. Share based payments for
external service providers for the six months ended December 31, 2009 and 2008
are $872,374 and $-0- respectively.
     17
 
 Note
17 – Treasury Stock
 
 On
October 27, 2008, the board of directors approved the stock repurchase program
and authorized the repurchase of up to three (3) million shares of the Company’s
common stock on the open market or through privately negotiated transactions. As
of December 31, 2009, the Company has repurchased 83,785 shares at an aggregate
cost of $111,587. The purpose of the repurchase program was to reduce the number
of shares outstanding and thus increasing the price of remaining
shares.
 
 Note
18 – Subsequent Events
 
 On
January 11, 2010, the Company declared a quarterly cash dividend to be paid to
its common stock shareholders for the second fiscal quarter of 2010. The
dividend of $0.025 per common share shall be paid to all shareholders of record
as of January 29, 2010, with occurring pay date on or about March 10,
2010.
 
 Additionally
on January 28, 2010, the Company authorized $500,000 USD as bonus compensation
to its top six executives, including Dr. Jiang, the Company’s Chief Executive
Officer; these bonuses will be paid out of the Company’s Hong Kong
subsidiary.
     18
 
 Item
2
 
 Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
 
 The
following discussion and analysis of financial condition and results of
operations relates to the operations and financial condition reported in the
financial statements of Tianyin Pharmaceutical for the periods ended December
31, 2009 and 2008 and should be read in conjunction with such financial
statements and related notes included in this report.
 
 Overview
 
 We are
engaged primarily in the development, manufacturing, marketing and sale of
modernized traditional Chinese medicines and other pharmaceuticals in China. We
currently manufacture and market a comprehensive portfolio of 39 products, 22 of
which are listed in the highly selective National Medicine Catalog of the
National Medical Insurance program.  We have an extensive product
pipeline of 40 products which are pending regulatory approvals with the China
State Food and Drug Administration.
 
 Established
in 1994, Chengdu Tianyin is a manufacturer and supplier of modernized
traditional Chinese medicines.  The current management of Chengdu
Tianyin acquired 100% of the equity interest of Chengdu Tianyin in
2003.  On October 30, 2007, Grandway completed the acquisition of the
100% of the equity interest and now owns 100% of the equity interest of Chengdu
Tianyin, a company located in Chengdu, Sichuan Province of the PRC that operates
our business.
 
 In June
2009, Chengdu Tianyin invested $723,500 to establish a wholly-owned trading
subsidiary, Chengdu Tianyin Medicine Trading Co., Ltd (“Tianyin Medicine
Trading”) for sales and distribution of medicine produced by Chengdu Tianyin. As
of December 31, 2009, Tianyin Medicine Trading has been in
operation.
 
 On August
21, 2009, Sichuan Jiangchuan Pharmaceutical Co., Ltd (“Sichuan Jiangchuan”) was
established by Chengdu Tianyin, Sichuan Mingxin Pharmaceutical and an individual
investor with crude drug production as its major business. Total registered
capital of Sichuan Jiangchuan is $2,934,000, of which Chengdu Tianyin accounts
for 77%. Tianyin will utilize Sichuan Jiangchuan as the foundation for a
broader, longer term strategy to build a significant presence in the rapidly
growing Chinese macrolide antibiotics market, while diversifying its revenue
base of western pharmaceuticals.
 
 Sichuan
Jiangchuan plans to acquire land rights to 121 mu (Chinese Acres) in the Xinjin
Industry Development Area, a provincial level development area (the “Xinjin
Area”). Once construction of the new production facility is complete, Sichuan
Jiangchuan will move operations to the Xingjin Area. Sichuan Jiangchuan plans to
focus its production on macrolide antibiotics medicine such as
Azithromycin.  Sichuan Jiangchuan has received a medicine production
license from SFDA and business license from related Industry and Commerce Bureau
and Tax department. It is currently in the process of applying for additional
licenses it will need to begin operations. The Company expects to receive
necessary approvals shortly and hopes to complete construction by August
2010.
 
 Competitive
environment
 
 The
market for pharmaceutical products is highly competitive. Our operations may be
affected by technological advances by competitors, industry consolidation,
patents granted to competitors, competitive combination products, new products
offered by our competitors, as well as new information provided by other
marketed products and/or other post-market studies.
 
 Development
and growth strategy
 
 The
cornerstone of our business development strategy relies upon our
partnership-based research and development efforts that support our ability to
commercialize, produce, and broaden our product pipeline allowing us to market
and expand those products through our sales and marketing
infrastructure.  In the past fiscal year, we continued this strategy
and increased market penetration and revenue growth in 2009. Management plans to
continue our emphasis on expanded and enhanced marketing and sales in our 2010
fiscal year and beyond.  Part of this strategy involves increasing and
improving our marketing and sales activities to enhance the market leadership of
our key leading products and to increase the sales of other products by
expanding our sales force, solidifying our distribution network and expanding
our market segment coverage, while increasing our marketing and promotional
activities.
     19
   As part
of our continuing growth strategy, we will continue our partnership-based
research and development efforts to further commercialize and broaden our
product pipeline. During the past six months, we have made significant process
with our new product development.  We currently have 40 drug
candidates under the Chinese State Food and Drug Administration (SFDA) review
and are planning a series of market launches in the next few years from our
product pipeline. In the quarter ended December 31, 2009, we have received four
new SFDA approvals as below:
   Drug Name
              
              SFDA Approval NumberPediatric
      Fever and Cough Oral Liquid
              
              (SFDA
      approval number Z20093060)Antibacterial
      and Anti-inflammatory Capsules
              
              SFDA
      approval number Z20090855)Fleroxacin
      Tablets
              
              (SFDA
      approval number Z20094057)Ofloxacin
      Tablets
              
              (SFDA
      approval number Z20094038)
   Descriptions
of the function of the above products are as follows:
  ·
              Pediatric
      Fever and Cough Oral Liquid is a generic prescription TCM that is
      used for respiratory tract infections and influenza of children to
      effectively reduce symptoms such as fever, shakes, cough, and phlegm,
      shortness of breath, dry mouth and sore
throat.
 
 ·
              Antibacterial
      and Anti-inflammatory Capsules is a generic OTC TCM which is used
      mainly as natural antibiotics to treat bacterial infections and
      inflammation. It has minimal side effects when compared to western
      antibiotics.
 
 ·
              Fleroxacin
      Tablets is a quinolone broad-spectrum antibiotic, which addresses
      several indications including chronic and acute bronchitis and pneumonia,
      salmonella, multiple gastrointestinal and abdominal infections, and
      skin/soft tissue infections.
 
 ·
              Ofloxacin
      Tablets is a fluoroquinolone-based antibiotic, which addresses
      several indications including staph infection, strep throat
      (Streptococcus), pneumonia, influenza, E. Coli, and several sexually
      transmitted bacterial diseases such as Chlamydia and
      gonorrhea.
 
 An
important component of our growth strategy is to enhance our production and
sales infrastructure in order to meet the increasing demand from our
customers.  As part of the use of proceeds from our January 2008
Financing, we built new production facilities on the vacant portion of our
current premises to accommodate our growth.  These new facilities cost
approximately US$4.98 million and were completed in July 2009. In August, the
facility passed Good Manufacturing Practice certification and commenced
production. As a result of this new facility, our production capacity of solid
dosage drugs increased by approximately threefold.
 
 Management
also plans to pursue strategic acquisitions and licensing opportunities as part
of our growth strategy in 2010 and beyond.   We plan to
selectively pursue strategic acquisition and licensing opportunities to further
consolidate our resources and expand our market coverage.  We believe
that strategic acquisitions and licensing provide effective means to broaden our
product lines, increase our market coverage and complement our research and
development capabilities.
 
 Management
believes that our emphasis on further commercializing and broadening our product
line coupled with the expansion of our production facility and capacity,
enhanced sales and marketing efforts should continue to yield significant
increases in revenue in 2010 and beyond. Additionally, we believe that our
growth and overall market coverage could be further improved by certain
strategic acquisitions or licensing opportunities.
     20
 
 In
addition, we believe the Pharmaceutical Industry could benefit from the expanded
social reform which is part of the recently announced government stimulus plan.
Twenty-three of our medicine compounds will be included in the 2009 Edition of
the National Basic Medical Insurance, Industrial Injury Insurance and Maternity
Insurance Medicine Directory.  The 2009 Edition Directory includes a
total of 2,151 medicines and became effective throughout the PRC on December 1,
2009. There are 1,164 Western drugs in the Directory, including 349 Category A
medicines, 791 Category B medicines, 20 restricted work injury insurance agents,
and four maternity insurance agents. In addition, there are 987 Chinese
medicines, including 154 Category A medicines and 833 Category B medicines.
Patients will be fully reimbursed for consumption of Category A medicines by the
National Basic Medical Insurance.  The twenty-three medicines treat a
variety of common indications and diseases and make up approximately 70% of
Tianyin's total revenues for the fiscal year 2009.  Among twenty-three
medicines produced by Tianyin, eight medicines are classified as Category A and
fifteen medicines are classified as Category B.
  Manufacturing,
Sales and marketing
 
 We
support our commercialized products with various manufacturing, sales and
marketing efforts. We are also in the process of enhancing our infrastructure
and business via additional investments, including capital expenditures on new
plant and production tools and facilities, improved and advanced information
technology systems, and continued post-marketing studies and monitoring
studies.
  In June
2009 we engaged a major advertising firm to commence a marketing initiative for
our Xuelian Chongcao Oral Liquid (Xuelian Chongcao) product that includes
prominent, prime-time advertisements on China Central Television
(CCTV).  CCTV is China's most famous television station and is viewed
by roughly 98% of households throughout China.  We anticipate this
advertisement initiative should expand the brand awareness for this product
materially.  We anticipate the increasing brand awareness should drive
incremental sales materially and lay the groundwork for this product to follow
similar growth histories of Ginko Mihuan and Xuelian Chongcao, which have become
blockbuster products for our Company.
  Discussion
on Operating Results
 
 The
following table shows the results of our business. All references to the results
of operations and financial conditions are combination of Chengdu Tianyin,
Tianyin Medicine Trading and Sichuan Jiangchuan.
 
 Comparison
of results for the three months and six months ended December 31, 2009
and2008
 
 Three Months Ended December 31,
              
              
              Six
      Months Ended December 31,2009
              
              
              2008
              
              
              2009
              
              
              2008Revenues
              
              $
              14,936,378
              
              
              $
              10,101,869
              
              
              $
              28,341,581
              
              
              $
              19,663,809Cost
      of revenues
              
              $
              7,177,503
              
              
              $
              4,944,980
              
              
              $
              13,526,730
              
              
              $
              9,627,603Gross
      profit
              
              $
              7,758,875
              
              
              $
              5,156,889
              
              
              $
              14,814,851
              
              
              $
              10,036,206Selling,
      general and administrative and research and development
      expenses
              
              $
              4,607,115
              
              
              $
              2,679,531
              
              
              $
              8,917,371
              
              
              $
              5,395,530Other
      income (expense)
              
              $
              (10,443
              )
              
              $
              (11,411
              )
              
              $
              (59,505
              )
              
              $
              (24,887
              )Income
      taxes
              
              $
              571,756
              
              
              $
              408,827
              
              
              $
              1,081,691
              
              
              $
              767,677Net
      profit (Loss)
              
              $
              2,569,561
              
              
              $
              2,057,120
              
              
              $
              4,756,284
              
              
              $
              3,848,112Minority
      interest
              
              $
              1,485
              
              
              $
              -
              
              
              $
              (1,040
              )
              
              $
              -Foreign
      currency translation adjustment
              
              $
              10,927
              
              
              $
              256,933
              
              
              $
              46,784
              
              
              $
              346,367Comprehensive
      income (Loss)
              
              $
              2,579,003
              
              
              $
              2,314,053
              
              
              $
              4,804,108
              
              
              $
              4,194,479
 
 Revenue.Total
revenues were approximately US$14.9 million for the three months ended December
31, 2009 as compared to approximately US$10.1 million for the three months ended
December 31, 2008, an increase of approximately US$4.8 million or 48%. Revenues
for the six months ended December 31, 2009 were approximately US$28.3
million,  as compared to total revenue of US $19.7 million for the six
months ended December 31, 2008, an increase of roughly US$8.6 million or 44%.
The increase in our revenue was primarily the result of our recent production
development, sales and marketing efforts.  Specifically, our revenue
growth was attributable to our sales channel expansion efforts that increased
our market penetration of our original products as well as new products.
Management believes that our emphasis on broadening our product pipeline coupled
with our continued sales channel expansions, the sound operations of our new
trading company, along with our enhanced sales and marketing efforts and our
continued expansion of our production facility should continue to yield
significant revenue growth in our fiscal year 2010 and beyond.
    21
 
 Cost of
Revenue.Cost of revenues for the three months ended December
31, 2009 was approximately US$7.2 million or 48% of revenues as compared to
US$4.9 million or 49% of revenues for the three months ended December 31, 2008.
Cost of revenues for the six months ended December 31, 2009 was roughly US$13.5
million or 48% of revenue as compared to US$9.6 million or 49% of revenues for
the six months ended December 31, 2008. Our cost of revenue is primarily
composed of the costs of direct raw materials, labor, depreciation and
amortization of manufacturing equipment and facilities, and other overhead. The
decrease in our cost of revenue , i.e. the increase in our gross margin, was
materially due to an increase in higher margin products in our sales mix along
with enhanced cost controls processes that we implemented that yielded greater
efficiencies in our production and manufacturing processes.  We
believe we should be able to  further reduce our cost of revenue and
improve our gross margin by continuing to expand our efforts to increase our
sales mix with a greater number of higher margin products and by continuing to
improve our production and manufacturing processes.
  Gross
profit.Gross
profit margin for the three months ended December 31, 2009 was approximately 52%
as compared to 51% for the three months ended December 31,
2008.  Considering the change of market environment and the adjustment
of the Group strategy, the management gradually developed the products structure
to expand the market of the products with higher gross profit margin since the
fiscal year 2009.
 
 Selling, general and administrative
and research and development expenses.Selling, general and
administrative expenses were approximately US$4.6 million for the three months
ended December 31, 2009, as compared to approximately US$2.7 million for the
three months ended December 31, 2008, an increase of approximately US$1.9
million or 70%.  Selling and general and administrative expenses were
approximately US$8.9 million for the six months ended December 31, 2009, as
compared to approximately US$5.4 million for the six months ended December 31,
2008, an increase of approximately US$3.5 million or 65%. The increase was
primarily a result of the implementation of our recent sales and marketing
strategy that increased our sales payrolls and direct marketing expenses,
coupled with the increase of compensation expenses to external service providers
including stock options expenses of roughly $0.9 million.
 
 Net income.Net
income was approximately US$2.6 million for the three months ended December 31,
2009, as compared to net income of approximately US$2.1 million for the three
months ended December 31, 2008, an increase of US$0.5 million or
24%.  Net income was approximately US$4.8 million for the six months
ended December 31, 2009, as compared to net income of approximately US$3.8
million for the six months ended December 31, 2008, an increase of US$1 million
or 26%.  The increase in our net income was primarily the result of
increase in our revenue along with higher product margins.
 
 Foreign Currency Translation
Adjustment.Our reporting currency is the US
dollar.  Our local currency, Renminbi (RMB), is our functional
currency.  Results of operations and cash flow are translated at
average exchange rates during the period, and assets and liabilities are
translated at the unified exchange rate as quoted by the People’s Bank of China
at the end of the period.  Translation adjustments resulting from this
process are included in accumulated other comprehensive income in the statement
of shareholders’ equity.  Transaction gains and losses that arise from
exchange rate fluctuations on transactions denominated in a currency other than
the functional currency are included in the results of operations as
incurred.
 
 Currency translation adjustments resulting from this process are included in
accumulated other comprehensive income in the consolidated statement of
shareholders' equity and amounted to US$46,785 as of December 31,
2009.  The balance sheet amounts with the exception of equity at
December 31, 2009 and 2008 were translated both at 6.81663 RMB to 1.00 US
dollar.  The equity accounts were stated at their historical
rate.  The average translation rates for the three months ended
December 31, 2009 and 2008 were 6.81798 RMB to 1.00 US dollar and 6.82768 RMB to
1.00 US dollar, respectively.  The average translation rates applied
to income statement accounts for the six months ended December 31, 2009 and 2008
were 6.81942 RMB and 6.82920 RMB to 1.00 US dollar.
    22
 
 Comprehensive
Income.As a result of the above, the comprehensive income,
which adds the currency adjustment to net income, was US$4.8 million for the six
months ended December 31, 2009, as compared to the comprehensive income of
US$4.2 million for the six months ended December 31, 2008, an increase of US$0.6
million or 14.5%.
 
 Liquidity
and Capital Resources
 
 Discussion
of cash flow
 
 For the six months ended December
      31,2009
              
              
              2008Cash
      flow from operating activities
              
              $
              4,879,392
              
              
              $
              3,918,833Cash
      flow from investing activities
              
              
              (4,323,682
              )
              
              
              (2,856,264
              )Cash
      flow from financing activities
              
              
              6,953,547
              
              
              
              (512,505
              )
 
 Operating
activities
 
 As of
December 31, 2009, we had working capital totaling approximately US$27.8
million, including cash and cash equivalents of US19.9 million.
 
 Net cash
generated from operating activities was US$4.9 million for the six months ended
December 31, 2009, as compared to US$3.9 million for the same period of 2008.
The increase of cash generated from operating activities during the six months
ended December 31, 2009 was primarily the result of revenue growth that bring an
increase in net income.
 
 Investing
activities
 
 Net cash
used in investing activities for the six months ended December 31, 2009 and 2008
totaled US$4.3 million and US$2.9 million, respectively and were mainly related
to the acquisition of intangible drug, and property and equipment. The increase
of cash used in investing activities during the six months ended December 31,
2009 was mainly due to our increased efforts in new drugs development and the
construction of our new production plant project.
 
 Financing
activities
 
 On
October 27, 2009, we completed a private equity financing of $4,987,500, with
eight accredited investors (the “October 2009 Financing”). Net proceeds from the
offering are approximately $4,490,000.
 
 Net cash
provided in financing activities for the six months ended December 31, 2008
totaled US$7.0 million and mainly related to capital contribution. Net cash used
in financing activities for the six months ended December 31, 2008 was US$0.5
million and mainly related to the repayment of short-term loans.
 
 Borrowings
and Credit Facilities
 
 The bank
borrowing balance equals to the credit facilities as of December 31, 2009. The
short-term bank borrowings outstanding as of December 31, 2009 and 2008 were
US$1.4 million and US$1.4 million respectively which born an average interest
rate of 5.6286% and 7.881% per annum, respectively. These loans are borrowed
from various financial institutions and secured by the property and equipment of
Chengdu Tianyin.  They do not contain any additional financial
covenants or restrictions. The borrowings have one year terms and contain no
specific renewal terms.
 
 Stock
Repurchase Program
  On
October 27, 2008, the Board of Directors authorized the Company to repurchase up
to US$3.0 million of its common stock from time to time in the open-market or
through privately negotiated transactions. The Company's original announcement
stated that the buyback would be conducted through January 2009, but it was
ultimately conducted through December 31, 2009.
    23
   On
January 30, 2009, we announced that start of the initial purchase of shares
under its previously announced stock repurchase program. These shares will be
retired to the treasury while reducing the number of outstanding shares of its
common stock or sold out wholly or partially when market turns better. The
initial share buyback illustrated our confidence in the long-term growth of the
Company and our commitment to our shareholders.
   As of
December 31, 2009, a total of 83,785 shares have been bought back at prevailing
market prices. With US$19.9 million in net cash and equivalents on December 31,
2009 and positive cash flow, we believe the Company is adequately funded to meet
all of the working capital and capital expenditure plans for 2009.
  Cash
dividend
  On March
26, 2009, we announced that the Board of Directors declared an annual cash
dividend of $0.10 per common share that will be paid quarterly. The initial
dividend of $.025 was paid to common shareholders of record on April 30, 2009,
with the actual distribution occurring around June 10, 2009. The cash dividend
was paid solely to common stockholders and was not be paid on shares owned by
management, advisors or other inside shareholders, all of whom have agreed to
waive receipt of the dividend.  The majority of the Company's Series A
Preferred Shareholders had approved the cash dividend as of April 14,
2009.
   Afterwards,
on July 8, 2009, October 5, 2009, and January 11, 2010, respectively, the
Company declared quarterly cash dividends to be paid to its common stock
shareholders. The dividend of $0.025 per common share, with total amount of
US$172,023, US$344,322 were paid to shareholders of record as of July 31, 2009
and October 30, 2009 for the first two declarations above, with the actual
distribution occurring September 9, 2009 and December 10, 2009. The dividends
declared for the second fiscal quarter of 2010 to shareholders of record as of
January 29, 2010 will be distributed on or about March 10, 2010.
  Changes
in Equity
 
 
 Common Stock Activity during
the Six Months Ended December 31, 2009
 
 Common
stock activity during the six months ended December 31, 2009, was as
follows:
 
 Common
      StockOutstanding,
      June 30, 2009
              
              
              17,908,912Series
      A  conversions
              
              
              4,823,750Warrant
      exercises
              
              
              1,363,670Option
      exercises
              
              
              150,000Financing
      shares
              
              
              1,534,570Newly
      issued
              
              
              15,000Outstanding,
      December 31, 2009
              
              
              25,795,902
 
 Series A Preferred Stock
Activity during the Six Months Ended December 31, 2009
 
 Series A
preferred stock activity during the six months ended December 31, 2009, was as
follows:
 
 Preferred
      StockOutstanding,
      June 30, 2009
              
              
              7,146,500Series
      A conversions
              
              
              (4,823,750
              )Outstanding,
      December 31, 2009
              
              
              2,322,750
 
 
 Stock Option Activity during
the Six Months Ended December 31, 2009
    24
 
 
 Stock
option activity during the six months ended December 31, 2009, was as
follows:
 
 Number
      of Shares
              
              
              Weighted
      Average Exercise PriceOutstanding,
      June 30, 2009
              
              
              456,000
              
              
              $
              1.90Granted
              
              
              230,000
              
              
              
              3.00Exercised
              
              
              150,000
              
              
              
              2.00Forfeited
              
              
              --
              
              
              
              --Expired
              
              
              --
              
              
              
              --Outstanding,
      December 31, 2009
              
              
              536,000
              
              
              $
              2.34
 
 Investor Warrant Activity
during the Six Months Ended December 31, 2009
 
 Warrant
activity during the six months ended December 31, 2009, was as
follows:
 
 Number
      of Warrants
              
              
              Weighted
      Average Exercise PriceOutstanding,
      June 30, 2009
              
              
              9,515,628
              
              
              $
              2.75Granted
              
              
              306,913
              
              
              
              4.50Exercised
              
              
              906,251
              
              
              
              2.69Forfeited
              
              
              --
              
              
              
              --Returned
      and exchanged
              
              
              --
              
              
              
              --Expired
              
              
              --
              
              
              
              --Outstanding,
      December 31, 2009
              
              
              8,916,290
              
              
              $
              2.82
 
 Pursuant
to the October 2009 Financing, the Company issued investors three year warrants
to purchase 306,913 shares of Tianyin Common Stock, $0.001 par value per share
at an initial exercise price of $4.50 per share.
    25
 
 During
the six months ended December 31, 2009, the Company received gross proceeds of
approximately $2,438,500 from the exercise of 906,251 warrants.  As a
result, as of December 31, 2009, the Company had 4,195,313 Class A Warrants at a
strike price of $2.50 which expire in January 2013, 4,414,064 Class B Warrants
at a strike price of $3.00 which expire in January 2015 and 306,913 Class C
Warrants at a strike price of $4.50 which expire in October 2012 outstanding. If
all these warrants are exercised, of which there can be no guarantee, the
Company would receive gross proceeds of approximately $25,100,000.
 
 Placement Agent Warrant
Activity during the Six Months Ended December 31, 2009
 
 Placement
agent warrant activity during the six months ended December 31, 2009, was as
follows:
 
 Number
      of Shares
              
              
              Weighted
      Average Exercise PriceOutstanding,
      June 30, 2009
              
              
              1,522,500
              
              
              $
              2.18Granted
              
              
              147,319
              
              
              
              3.46Exercised
              
              
              457,419
              
              
              
              1.63Forfeited
              
              
              --
              
              
              
              --Expired
              
              
              --
              
              
              
              --Outstanding,
      December 31, 2009
              
              
              1,212,400
              
              
              $
              2.54Exercisable,
      August 31, 2009
              
              
              1,212,400
              
              
              $
              2.54
 
 Pursuant
to the October 2009 Financing, the Company issued 122,766 Series II Placement
Agent Warrants and 24,553 Class C Placement Agent Warrants to the placement
agent in conjunction with the October 2009 Financing and are exercisable at
US$3.25 and $4.50 per share respectively. These warrants have the same terms as
the warrants issued to investors and are included in the units.
    26
 
 During
the six months ended December 31, 2009, the Company received gross proceeds of
approximately $745,000 from exercise of 457,419 warrants.
 
 As a
result, as of December 31, 2009, the Company had 318,856 Series I Placement
Agent Warrants at a strike price of $1.60, 365,600 Class A Placement Agent
Warrants at a strike price of $2.50 which expire in January 2013, 380,625 Class
B Placement Agent Warrants at a strike price of $3.00 which expire in January
2015, 122,766 Series II Placement Agent Warrants at a strike price of $3.25 and
24,553 Class C Placement Agent Warrants at a strike price of $4.50 which expire
in October 2012 outstanding. If all these Placement Warrants are exercised, of
which there can be no guarantee, the Company would receive gross proceeds of
approximately  $ 3,075,000.
 
 As a
result of the above, as of December 31, 2009, Tianyin has 25,795,902 common
shares and 2,322,750 Series A preferred shares outstanding. Each outstanding
share of Series A preferred stock is convertible at any time at the option of
the holder into one (1) full share of Tianyin Common stock. The company also has
Class A, Class B and Class C Warrants to purchase a total of 8,916,290 shares of
Tianyin common stock at weighted average exercise price of $2.82 per share. In
addition, Tianyin has stock options to purchase 536,000 shares of Tianyin common
stock at weighted average exercise price of $2.34 per share. The company also
has placement agent warrants in total to purchase 1,212,400 shares of Tianyin
common stock at weighted average exercise price of $2.54 per share.
 
 At
December 31, 2009, if all options and warrants were exercised and all shares of
Series A preferred stock were converted, the Company would have 38,783,342
shares of common stock outstanding and the Company would receive approximately
$29,445,000 of additional gross proceeds.
 
 
 Critical
Accounting Policies and Estimates
 
 Please
refer to “Management’s Discussion and Analysis of Financial Condition and
Results of Operations,” in our Annual Report on Form 10-K for the year ending
June 30, 2009, for disclosures regarding Tianyin’s critical accounting policies
and estimates.  The interim financial statements follow the same
accounting policies and methods of computations as those for the year ended June
30, 2009. There were no new accounting policies and estimates during the period
ended December 31, 2009 which affected the Company.
 
 Off-Balance
Sheet Arrangements
 
 We do not
have any off-balance sheet arrangements that have or are reasonably likely to
have a current or future effect on our financial condition, changes in financial
condition, revenues or expenses, results of operations, liquidity, capital
expenditures or capital resources that is material to investors.
 
  Item
3. Quantitative and Qualitative Disclosure About Market Risk
 
 Not
applicable
 
 
 
 
 
 
 
 27
 
 
 Item 4.
Controls and Procedures
 
 (a)
              Evaluation of
      disclosure controls and
procedures
 
 We
maintain disclosure controls and procedures designed to provide reasonable
assurance that material information required to be disclosed by us in the
reports we file or submit under the Securities Exchange Act of 1934 is recorded,
processed, summarized and reported within the time periods specified in the
SEC’s rules and forms, and that the information is accumulated and communicated
to our management, including our Chief Executive Officer and Chief Financial
Officer, as appropriate to allow timely decisions regarding required disclosure.
We performed an evaluation, under the supervision and with the participation of
our management, including our Chief Executive Officer and Chief Financial
Officer, of the effectiveness of the design and operation of our disclosure
controls and procedures as of the end of the period covered by this report.
Based on this evaluation, our Chief Executive Officer and our Acting Chief
Financial Officer have concluded that our disclosure controls and procedures are
effective in ensuring that information required to be disclosed in reports filed
under the Securities Exchange Act of 1934, as amended, is recorded, processed,
summarized and reported within the time periods specified by the Securities and
Exchange Commission, and are effective in providing reasonable assurance that
information required to be disclosed by the Company in such reports is
accumulated and communicated to the Company’s management, including its Chief
Executive Officer and Acting Chief Financial Officer, as appropriate to allow
timely decisions regarding required disclosure.
 
 We do not
expect that our disclosure controls and procedures will prevent all errors and
all instances of fraud. Disclosure controls and procedures, no matter how well
conceived and operated, can provide only reasonable, not absolute, assurance
that the objectives of the disclosure controls and procedures are met. Further,
the design of disclosure controls and procedures must reflect the fact that
there are resource constraints, and the benefits must be considered relative to
their costs. Because of the inherent limitations in all disclosure controls and
procedures, no evaluation of disclosure controls and procedures can provide
absolute assurance that we have detected all our control deficiencies and
instances of fraud, if any. The design of disclosure controls and procedures
also is based partly on certain assumptions about the likelihood of future
events, and there can be no assurance that any design will succeed in achieving
its stated goals under all potential future conditions.
 
 (b)
              Changes in internal
      control over financial
reporting
 
 In
our Management’s Report on Internal Control Over Financial Reporting included in
our Form 10-K for the year ended June 30, 2009, management concluded that our
internal control over financial reporting was effective. Management did however
identify a significant deficiency as of June 30, 2009, as discussed below.
A significant deficiency is a deficiency, or a combination of deficiencies, that
is less severe than a material weakness, yet important enough to merit attention
by those responsible for oversight of the registrant’s financial
reporting.
 
 Currently
we do not have sufficient in-house expertise in US GAAP
reporting.  Instead, we rely very much on the expertise and knowledge
of external financial advisors in US GAAP conversion.  External
financial advisors have helped prepare and review the consolidated financial
statements.  Although we have not identified any material errors with
our financial reporting or any material weaknesses with our internal controls,
no assurances can be given that there are no such material errors or weaknesses
existing.  To remediate this situation, we are seeking to recruit
experienced professionals to augment and upgrade our financial staff to address
issues of timeliness and completeness in US GAAP financial
reporting.  In addition, we do not believe we have sufficient
documentation with our existing financial processes, risk assessment and
internal controls.  We plan to work closely with external financial
advisors to document the existing financial processes, risk assessment and
internal controls systematically.
 
 We
believe that the remediation measures we are taking, if effectively implemented
and maintained, will remediate the significant deficiency discussed
above.
 
 Except as
described above, there have been no changes in our internal controls over
financial reporting that occurred during our last fiscal quarter to which this
Quarterly Report on Form 10-Q relates that have materially affected, or are
reasonably likely to materially affect our internal controls over financial
reporting.
 
 
  28
  
 PART
II - OTHER INFORMATION
 
 ITEM
1.                      
Legal Proceedings
 
 From time
to time, we may be involved in litigation relating to claims arising out of our
operations in the normal course of business.  We are not aware of any
pending or threatened legal proceeding that, if determined in a manner adverse
to us, could have a material adverse effect on our business and
operations.
  ITEM
2.                     
Unregistered Sales of Equity Securities and Use of Proceeds
 
 (a)
              As
      disclosed on the Current Report on Form 8-K that we filed with the
      Securities and Exchange Commission on October 30, 2009, we issued
      1,534,570 units of our securities pursuant to a Securities Purchase
      Agreement we entered into with eight accredited investors.  For
      a complete description of these terms and documents, please refer to the
      October 30th
      8-K.
 
 The
Financing was consummated pursuant to the exemption from the registration
provisions of the Securities Act of 1933, as amended, provided by Section 4(2)
of the Securities Act, Rule 506 of Regulation D and/or Regulation S promulgated
thereunder.
 
 (b)
              Not
      applicable.
 
 (c)
              Not
      applicable. No repurchases occurred during the period covered by this
      Report.
 
 ITEM
4.                   
Submission of Matters to a Vote of Security Holders
 
 We did not submit any matters to our
shareholders during the quarter covered by this
Report.  However, we did solicit votes from our shareholders
during the period covered by this Report.  On December 30, 2009, we
mailed out a proxy statement soliciting votes to re-elect our Board of Directors
at our Annual Shareholder Meeting, which was held on January 21,
200.  All of our directors were re-elected; the following shows the
voting tabulation for such election:
 
 Director
      Nominee
              FOR
      (# and %)
              WITHHELD
      (# and %)Dr.
      Guoqing Jiang
              2,916,977(2,803,398
      and 96.11%)
              113,579
      and 3.89%Prof.
      Zunjian Zhang, Ph.D
              2,916,977
      (2, 730,083 96.60%)
              186,
      894 and 6.4%Professor
      Jianping Hou, Ph.D
              2,916,977
      (2,730, 553 & 93.61%)
              186,424
      7 & 6.39%James
      T. McCubbin
              2,916,977
      (2,732,174 & 93.67%)
              184,
      803 & 6.33%Stewart
      Shiang Lor
              2,916,977
      (2,803,662 & 96.12%)
              113,315
      & 3.88%
 
 
 29
 
 
 ITEM
6.               
Exihibits
 
 (a) The
following exhibits are filed as part of this report.
 
 Exhibit
      No.
              Document3.1
              Articles
      of Incorporation, as amended (Incorporated by reference to Exhibit 3.1 to
      our Annual Report on Form 10-K filed on September 24,
      2009).3.2
              Bylaws
      (Incorporated by reference to Exhibit 3.2 to our Annual Report on Form
      10-K filed on September 24, 2009).31.1
              Certification  of  Chief  Executive  Officer  required  by
      Rule 13a-14/15d-14(a) under the Exchange Act31.2
              Certification
      of  Acting Chief Accounting Officer required by Rule
      13a-14/15d-14(a) under the Exchange Act32.1
              Certification
      of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted
      pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.32.2
              Certification
      of Acting Chief Accounting Officer pursuant to 18 U.S.C. Section
      1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.
 
 
 
 SIGNATURES
 
 Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
 
 
 Date:    February
5, 2010
 
 By: TIANYIN PHARMACEUTICAL CO., INC.
 
 
 /s/  Dr.
Guoqing Jiang
 Name:  Dr. Guoqing Jiang
 Title:   Chairman,
Chief Executive Officer and Acting Chief Accounting Officer
    30