Tianyin Pharmaceutical 10-Q 2009 Q1 Quarterly report

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 September 30, 2008

        [  ]           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.)

11th Floor, South Tower, Jinjiang Times Garden

107 Jin Li Road West

Chengdu , P. R. China, 610072

+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 Filer
Non-accelerated filer	(do not check if a smaller reporting company)	Smaller reporting company	X

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934) Yes [  ] No [X]

As of November 10, 2008,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 15,690,955 and 8,893,750, respectively are currently issued and outstanding.

TABLE OF CONTENTS

	Page
PART I - FINANCIAL INFORMATION
Item 1.  Financial Statements
Consolidated Balance Sheet at September 30, 2008 (unaudited) and June 30, 2007	2
Unaudited Consolidated Statements of Operations for the three months ended September 30, 2008 and 2007	3
Unaudited Consolidated Statements of Cash Flows for the three months ended September 30, 2008	4
Unaudited notes to Consolidated Financial Statements	5
Item 2.  Management’s Discussion and Analysis or Plan of Operation	12
Item 3. Quantitative and Qualitative Disclosure About Market Risk	16
Item 4.  Controls and Procedures	17
Item 4T.  Controls and Procedures	18
PART II – OTHER INFORMATION
Item 1.  Legal Proceedings	19
Item 2.  Unregistered Sales of Equity Securities And Use Of Proceeds	19
Item 3.  Defaults Upon Senior Securities	19
Item 4.  Submission Of Matters To A Vote Of Security Holders	19
Item 5.  Other Information	20
Item 6.  Exhibits	20

i 

PART I- FINANCIAL INFORMATION

TIANYIN PHARMACEUTICAL CO. INC.

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 September 30, 2008, and the related consolidated statements of operations and comprehensive income, and cash flows for the three months ended September 30, 2008 and 2007. 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 for them to be in conformity with accounting principles generally accepted in the United States of America.

Patrizio & Zhao, LLC

Patrizio & Zhao, LLC

Parsippany, New Jersey

October 29, 2008

TIANYIN PHARMACEUTICAL CO. INC.

Consolidated Balance Sheets

(Unaudited)

	September 30,		June 30,
	2008		2008
	(Unaudited)
Assets:
Current assets:
Cash and cash equivalents	$	12,417,925	$	12,057,150
Accounts receivable, net of allowance for doubtful accounts of $90,311
and $90,064 at September 30, 2008 and June 30, 2008, respectively		4,560,718		4,460,406
Inventory		4,584,781		3,555,691
Other receivables		712,120		371,815
Other current assets		94,317		247,139
Total current assets:		22,369,861		20,692,201
Property and equipment, net:		5,695,589		5,758,966
Intangibles, net:		10,471,414		10,307,754
Total assets:	$	38,536,864	$	36,758,921
Liabilities and stockholders’ equity:
Current liabilities:
Accounts payable and accrued expenses	$	1,280,592	$	1,337,682
Short-term bank loans		1,397,165		1,393,345
VAT taxes payable		262,079		277,090
Income tax payable		358,629		341,214
Payroll taxes payable		17,354		39,939
Dividend payable		-		378,545
Other current liabilities		113,866		142,733
Total current liabilities:		3,429,685		3,910,548
Total liabilities:		3,429,685		3,910,548
Stockholders’ equity:
Common stock, $0.001 par value, 50,000,000 shares authorized,
15,465,563 and 14,738,450 shares issued and outstanding at
September 30, 2008 and June 30, 2008		15,466		14,739
Common stock dividend distributable		226		-
Series A convertible preferred stock, $0.001 par value,8,893,750
9,384,375 shares issued and outstanding at September 30, 2008
and June 30, 2008		8,894		9,384
Additional paid-in capital		18,741,688		18,002,439
Statutory reserve		1,584,154		1,380,806
Retained earnings		12,189,443		10,963,131
Accumulated other comprehensive income		2,567,308		2,477,874
Total stockholders’ equity:		35,107,179		32,848,373
Total liabilities and stockholders' equity:	$	38,536,864	$	36,758,921

The accompanying notes are an integral part of these consolidated financial statements.  

2

TIANYIN PHARMACEUTICAL CO. INC.

Consolidated Statements of Operations and Comprehensive Income

(Unaudited)

	For the Three Months Ended
	September 30,
	2008			2007
Sales:	$	9,561,940		$	7,169,493
Cost of goods sold:		4,682,624			4,293,829
Gross profit:		4,879,316			2,875,664
Operating expenses:
Selling, general and administrative		2,633,361			1,036,480
Research and development		82,638			27,451
Total operating expenses:		2,715,999			1,063,931
Income from operations:		2,163,317			1,811,733
Other income (expenses):
Other income		14,245			-
Interest expense		(27,720	)		(34,703	)
Total other income (expenses):		(13,475	)		(34,703	)
Income before provision for income tax:		2,149,842			1,777,030
Provision for income tax:		358,849			265,074
Net income:		1,790,993			1,511,956
Other comprehensive income:
Foreign currency translation adjustment		89,434			183,851
1.1.1
1.1.2    Comprehensive income:	$	1,880,427		$	1,695,807
Basic earnings per share:	$	0.09		$	0.12
Diluted earnings per share:	$	0.07		$	0.12
Weighted average number of common shares outstanding:
Basic		15,357,818			12,790,800
Diluted		24,558,625			12,790,800

The accompanying notes are an integral part of these consolidated financial statements.  

3

TIANYIN PHARMACEUTICAL CO. INC.

Consolidated Statements of Cash Flows

(Unaudited)

	For the Three Months Ended
	September 30,
	2008			2007
Cash flows from operating activities:
Net Income	$	1,790,993		$	1,511,956
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization		119,399			81,486
Changes in current assets and current liabilities:
Accounts receivable		(88,138	)		7,982
Inventory		(1,019,969	)		285,546
Other receivables		(339,566	)		(159,635	)
Advances to suppliers		-			(397,200	)
Other current assets		152,822			-
Accounts payable and accrued expenses		(60,470	)		(277,424	)
VAT taxes payable		(15,780	)		(40,499	)
Income tax payable		16,489			(42,565	)
Payroll taxes payable		(22,708	)		-
Other current liabilities		(29,277	)		77,928
Total adjustments:		(1,287,198	)		(464,381	)
Net cash provided by operating activities:		503,795			1,047,575
Cash flows from investing activities:
Additions to property and equipment		-			(713	)
Additions to intangibles		(175,668	)		-
Net cash used in investing activities:		(175,668	)		(713	)
Cash flows from financing activities:
Additional paid-in capital		-			8,000
Issuance of preferred stock		-			140,207
Repayment of short-term bank loans		-			(794,760	)
Repayment of long-term bank loans		-			(120,541	)
Net cash provided by (used in) financing activities:		-			(767,094	)
Effect of foreign currency translation on cash:		32,648			11,007
Net increase in cash and cash equivalents:		360,775			290,775
Cash and cash equivalents – beginning:		12,057,150			624,390
Cash and cash equivalents – ending:	$	12,417,925		$	915,165

The accompanying notes are an integral part of these consolidated financial statements.  

4

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION AND DESCRIPTION OF BUSINESS

Tianyin Pharmaceutical Co., Inc. (Formerly Viscorp, Inc.), a public shell company as defined in Rule 12b-2 of the Exchange Act of 1934, 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.

BASIS OF PRESENTATION

The Company’s Consolidated Financial Statements include the accounts of its direct wholly-owned subsidiaries and its indirect proportionate share of subsidiaries owned by the wholly-owned subsidiaries. All intercompany balances and transactions are eliminated in consolidation. The accompanying unaudited financial statements have been prepared in accordance with GAAP for interim financial information and with the instructions to Form 10-Q and Regulation S-X applicable to small business issuers. 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.

NOTE 2 - INTERIM FINANCIAL STATEMENTS

These interim financial statements should be read in conjunction with the audited financial statements for the year ended June 30, 2008, as not all disclosures required by generally accepted accounting principles for annual financial statements are presented. The interim financial statements follow the same accounting policies and methods of computations as the audited financial statements for the year ended June 30, 2008.

5

NOTE 3 – EARNINGS PER SHARE

The Company presents earnings per share 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.

	September 30,			September 30,
	2008			2007
Net income (numerator for diluted income per share)	$	1,790,993		$	1,511,956
Less: Dividend attributable to preferred stockholders		(361,331	)		-
Net income attributable to common stock holders
(numerator for basic income per share)		1,429,662			1,511,956
Weighted average common shares
(denominator for basic income per share)		15,357,818			12,790,800
Effect of diluted securities:
Convertible preferred stock		9,001,495			-
Warrants		199,312			-
Weighted average common shares
(denominator for diluted income per share)		24,558,625			12,790,800
Basic net income per share	$	0.09		$	0.12
Diluted net income per share	$	0.07		$	0.12

NOTE 4– ACCOUNTS RECEIVABLE

Trade accounts receivable are stated at original invoice amount less allowance for doubtful receivables made based on management’s periodic review of aging of outstanding balances and customer credit history. Allowance for doubtful accounts amounted to $90,311 and $90,064 at September 30, 2008 and June 30, 2008.

NOTE 5– INVENTORY

Inventory at September 30, 2008 and June 30, 2008 consists of the following:

	September 30,  2008		June 30, 2008
Raw materials	$	888,617	$	584,003
Packaging supplies		1,171,378		1,327,283
Work in process		1,609,032		647,607
Finished goods		915,754		996,798
Total	$	4,584,781	$	3,555,691

6

NOTE 6– PROPERTY AND EQUIPMENT

Property and equipment at September 30, 2008 and June 30, 2008 consists of the following:

	September 30,  2008		June 30, 2008
Building	$	5,168,660	$	5,154,528
Manufacturing equipment		1,141,253		1,138,133
Office equipment and furniture		48,711		48,577
Vehicles		396,797		395,713
Subtotal		6,755,421		6,736,951
Less: Accumulated depreciation		1,864,482		1,780,435
		4,890,939		4,956,516
Add: Construction in progress		804,650		802,450
Total	$	5,695,589	$	5,758,966

Depreciation expense for the three months ended September 30, 2008 and 2007 was 79,215 and 74,930, respectively.

NOTE 7– INTANGIBLE ASSETS

Net intangible assets at September 30, 2008 and June 30, 2008 were as following:

	September 30, 2008		June 30, 2008
Rights to use land	$	1,448,370	$	1,444,410
Approved drugs		9,302,866		9,102,351
Intangible assets		10,751,236		10,546,761
Less: accumulated amortization		279,822		239,007
Total	$	10,471,414	$	10,307,754

Amortization expense for the three months ended September 30, 2008 and 2007 amounted to $40,184 and $6,556, respectively.

NOTE 8 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consist of the following:

	September 30, 2008		June 30, 2008
Accounts payable	$	1,261,592	$	1,237,682
Accrued expenses		19,000		100,000
Total	$	1,280,592	$	1,337,682

The carrying value of accounts payable and accrued expenses approximates fair value due to the short-term nature of these obligations.

7

NOTE 9 – SHORT-TERM BANK LOANS

Short-term bank loans consist of the following:

	September30,		June 30,
	2008		2008
On July 11, 2007, the Company obtained a loan from Agricultural Bank of
China, of which the principal is to be paid in full by July 10, 2008. The interest
is to be calculated using an annual fixed interest rate of 8.541% and paid
monthly. The loan is secured by the Company’s property and equipment.	$	-	$	145,900
On July 16, 2007, the Company obtained a loan from Agricultural Bank of
China, of which the principal is to be paid in full by July 15, 2008. The interest
is to be calculated using an annual fixed interest rate of 8.541% and paid
monthly. The loan is secured by the Company’s property and equipment.	$	-	$	145,900
On July 25, 2007, the Company obtained a loan from Agricultural Bank of
China, of which the principal is to be paid in full by July 24, 2008. The interest
is to be calculated using an annual fixed interest rate of 8.892% and paid
monthly. The loan is secured by the Company’s property and equipment.	$	-	$	226,145
On June 23, 2008, the Company obtained a loan from Agricultural Bank of
China, of which the principal is to be paid in full by June 23, 2009. The interest
is to be calculated using an annual fixed interest rate of 7.881% and paid
monthly. The loan is secured by the Company’s property and equipment.	$	877,800	$	875,400
On June 23, 2008, the Company obtained a loan from Agricultural Bank of
China, of which the principal is to be paid in full by June 23, 2009. The interest
is to be calculated using an annual fixed interest rate of 7.881% and paid
monthly. The loan is secured by the Company’s property and equipment.	$	519,365	$	-
Total short-term bank loans	$	1,397,165	$	1,393,345

NOTE 10 – 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% up to December 31, 2010. Accordingly, the effective tax rate for Chengdu Tianyin for the period from its date of incorporation to September 30, 2008 should be 15%.

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 will become 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 intend 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 September 30, 2008, the Company has not recorded any withholding tax on the retained earnings of its foreign invested enterprises in China.

8

NOTE 10 – INCOME TAXES (continued)

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.

In July 2006, the FASB issued FASB Interpretation No.48, Accounting for Uncertainty in Income Taxes (FIN 48). FIN 48 clarifies the accounting for income taxes by prescribing a minimum probability threshold that a tax position must meet before a financial statement benefit is recognized. The minimum threshold is defined in FIN 48 as a tax position that is more likely than not to be sustained upon examination by the applicable taxing authority, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The Company does not recognize any benefits in the financial statements for the three months ended September 30, 2008.

NOTE 11 – 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.

Pursuant to the terms of the Purchase Agreement, the $15,225,000 of Notes automatically convert 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.

9

NOTE 11 – STOCKHOLDERS’ EQUITY AND RELATED FINANCING AGREEMENTS

As of June 30, 2008, there were 131,250 shares of Series A Preferred Stock converted to 131,250 shares of Tianyin Common stock.

On May 9, 2008, Chengdu Tianyin issued 20,000 shares of Common stock to employees. The company recorded this transaction to the General and Administrative expense at the share price on the date of the issuance, amounting to $68,000.

In connection with the financing, Tianyin granted warrants to purchase 1,522,500 shares of Common Stock with an exercise price of US$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 FY 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 $361,331 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 and the Company decided issue common stock to those investors in lieu of cash.

NOTE 12 – EMPLOYEE WELFARE PLAN

The Company has established an employee welfare plan in accordance with Chinese laws and regulations. Full-time employees of the Group 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 Group to accrue for these benefits based on certain percentage of the employees’ salaries. The total contribution for such employee benefits was $46,292 and $47,225 for the three months ended September, 2008 and 2007, respectively.

NOTE 13– STATUTORY COMMON WELFARE FUND

As stipulated by the People’s Republic of China (PRC), net income after taxation can only be distributed as dividends after appropriation has been made for the following:

(i) Making up cumulative prior years’ losses, if any;

(ii) Allocations to the “Statutory surplus reserve” of at least 10% of income after tax, as determined under PRC accounting rules and regulations, until the fund amounts to 50% of the Company's registered capital;

(iii) Allocations of 5-10% of income after tax, as determined under PRC accounting rules and regulations, to the Company's “Statutory common welfare fund”, which is established for the purpose of providing employee facilities and other collective benefits to the Company's employees;

Allocations to the discretionary surplus reserve were approved in the shareholders’ general meeting. The Company provides a reserve for the welfare fund $ 203,348 and $ 150,208 for the three months ended September 30, 2008 and 2007, respectively

10

NOTE 14 – RISK FACTORS

The three months ended September, 2008, two major vendors accounted for approximately 36% of the Company’s raw materials, while the three months ended September, 2007, two major vendors accounted for approximately 41% of the Company’s raw materials. Total purchases from these vendors were $2,071,521 and $1,464,495 for the three months ended September 30, 2008 and 2007, respectively.

Fine major customers accounted for 18.5% and 59% of the net revenue for the three months ended September 30, 2008 and 2007. Total sales to these customers were $2,074,811 and $2,494,176, for the three months ended June 30, 2008 and 2007, 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

Change 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.

NOTE 15 - 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 16 – SUPPLEMENTAL CASH FLOW DISCLOSURES

The following is supplemental information relating to the consolidated statements of cash flows:

	2008		2007
Cash paid for interest	$	27,720	$	34,703
Cash paid for income taxes	$	358,849	$	265,074

NOTE 17 – SHARE EXCHANGE

On January 16, 2008, the shareholders of Raygere entered into and consummated certain transactions contemplated under a Share Exchange Agreement (the “SEA”) with Viscorp. As part of the Share Exchange, the shareholders of Raygere were issued 12,790,800 shares of Common Stock (the “Common Stock”) of Viscorp, which represented 87.68% of the 14,587,200 issued and outstanding shares of Common Stock of Viscorp immediately following the Share Exchange, but prior to private financings that were executed on January 16 and January 25, 2008. See Note 11.

NOTE 18 - SUBSEQUENT EVENTS

Tianyin Pharmaceutical,Co., Inc’s common stock began trading on the NYSE Euronext (formerly known as theAmerican Stock Exchange) under the ticker 'TPI' at market open on Wednesday, October 1, 2008.

11

Item 2

MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

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 Chengdu Tianyin for the three months ended September 30, 2008 and 2007 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 38 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 47 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.

Development and strategy

In the first three months of 2009 fiscal year, we continued the product channel expansion and increasing market penetration of our products that resulted in revenue growth in 2008.  Management plans to continue the emphasis on expanded and enhanced marketing and sales in our 2009 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, and increasing our marketing and promotional activities.

        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. We have 47 drug candidates currently under SFDA review and are planning a series of market launches in the next few years from our product pipeline. In the first three months of 2009 fiscal year, we have received approval from the Chinese State Food and Drug Administration (SFDA) to produce Laonian Kechuan Tablets (SFDA approval number H2008S02059) and Fuke Zhidai Tablets.

   Laonian Kechuan Tablets is a drug which is used to treat chronic bronchitis. Also, can improve male sexual function and female natural function and enhance immunity, promotion of recovery. This drug approved by SFDA with its highly effective, and fewer side effects when compared to other similar drugs.

   Fuke Zhidai Tablets is a drug which is used to treat abnormal leucorrhea which caused by chronic cervicitis, endometritis and endocolpitis. This tablet can also alleviate fever to restraining abnormal leucorrhea. This drug approved by SFDA, and the clinical outcome is remarkable, and there’s no related side effect identified.

12

                As part of the use of proceeds from our recent private placement financings, we are building production facilities on the vacant land of our current premises to accommodate our growth.  The new production plant project will enhance the overall production capacity by 3 times with an estimated expenditure of $5 million. The capital need for the expansion was utilized from the recent $15.2 million financing completed in January 2008. The planned GFA is about ten thousand square meters with state- of-the-art equipment which will be installed. Construction started in July 2008 and operations are planned to begin in January 2009. The new capacity is expected to meet increasing market demand of current products and support new product launches from the pipeline which will be the key element to maintaining and enhancing the current growth of the Company.

 Management also plans to pursue strategic acquisitions and licensing opportunities as part of our growth strategy in 2009 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 expansion of our production facility and capacity, enhanced sales and marketing efforts will continue to yield significant increases in revenue in 2009 and beyond. Additionally, we believe that our growth and overall market coverage could be approved by certain strategic acquisitions or licensing opportunities.

Manufacturing, Sales and marketing

We supports commercialized products with manufacturing, sales and marketing efforts. We are also moving forward with additional investments to enhance our infrastructure and business, including capital expenditures for the new production plant, information technology systems, and post-marketing studies and monitoring.

Management continually reviews the business, including manufacturing operations, to identify actions that will enhance long-term competitiveness. By continuously streamlining the management of the production processes and improving the recipes for drugs, we lowered the costs and eliminated some overhead during manufacturing.

We expanded our market by increasing the sales force and aggressive advertising. We also performed extensive marketing research and adjusted our sales structure timely in order to increase the profit margin.

Competitive environment

The market for pharmaceutical products is competitive. The Group’s operations may be affected by technological advances of competitors, industry consolidation, patents granted to competitors, competitive combination products, new products of competitors, new information of marketed products or post-marketing surveillance.

13

Discussion on Operating Result

The following table shows the results of our business.  All references to the results of operations and financial condition are those of Chengdu Tianyin.

Comparison of results for the three months ended September 30, 2008, the three months ended September 30, 2007

the three months ended Sep 30	2008	2007
Revenues	US$ 9,561,940	US$7,169,493
Cost of revenues	US$ 4,682,624	US$4,293,829
Gross profit	US$4,879,316	US$2,875,664
Selling, general and administrative and research and development expenses	US$2,715,999	US$1,063,931
Other expense	US$13,475	US$34,703
Income taxes	US$358,849	US$265,074
Net profit (Loss)	US$1,790,993	US$1,511,956
Foreign currency adjustment	US$ 89,434	US$183,851
Comprehensive income (Loss)	US$1,880,427	US$1,695,807

Revenues.  Total revenues were approximately $9.56 million for the three months ended September 30, 2008 as compared to approximately $7.2 million for the three months ended September 30, 2007, an increase of approximately $2.39 million or 33%.  The increases in revenues were primarily the result of our expanded marketing efforts for our pipeline of new and current products.  There are 28 products of which the sales increased by various percentages. The major increase are as follows: the sales of Apu Shuangxin increased by $2.55 million, the sales of Ginkgo Mihuan Oral Liquid increased by $1.37 million, and the sales of Hugan Tablets increased by $0.33 million. Management believes that our emphasis of broadening our product pipeline coupled with our enhanced sales marketing efforts and the planned expansion of our production facility will continue to yield significant increases in revenue in the remainder of this fiscal year and beyond.

Cost of Revenues.  Cost of revenues for the three months ended September 30, 2008 was approximately $4.68 million or 49% of revenues as compared to $4.29 million or 59% of revenues for the three months ended September 30, 2007.  Our cost of revenues is primarily composed of the costs of direct raw materials, labor, depreciation and amortization of manufacturing equipment and facilities, and other overhead. The increase of the gross profit margin was mainly due to the saving of material consumption and manufacturing overhead, production method innovation and more importantly the improvement on the product mix to produce more products with higher gross profit margin.

Gross profit margin.  Gross profit margin for the three months ended September 30, 2008 was approximately 51% as compared to 40% for the three months ended September 30, 2007.  Considering the change of market environment and the adjustment of the Group strategy, the management gradually developed the products mix to expand the market of the products with higher gross profit margin since the fiscal year 2008. For the three months ended September 30, 2008, the sales of Apu Shuanxin and Ginkgo Mihuan Oral Liquid increased by 340% and 31% respectively comparing to that for the same period in 2007, while these two products had comparatively higher gross profit margin, 58% and 77% respectively. On the other hand, the sales of other products with lower gross profit margin, such as Qingrejiedu Oral Liquid and Fukangbao Oral Liquid, decreased for the three months ended September 30, 2008.

14

Operating Expenses.  Operating expenses were approximately $2.7 million for the three months ended September 30, 2008 as compared to approximately $1.06 million for the three months ended September 30, 2007, an increase of approximately US$1.6 million.  The increase was mainly due to the management’s effects to strengthen the marketing and sales activities in order to increase sales, including hiring more sales people, having more advertisement and promotion activities. Selling department increased by 206 employees for the three months ended September 30, 2008 compared to one year ago.

Net income.  Net income was approximately US$1.79 million for the three months ended September 30, 2008 as compared to net income of approximately US$1.51 million for three months ended September 30, 2007, an increase of US$0.28 million.  The increase in our net income was mainly the result of our increased sales with higher gross margin.

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$ 88,924 as of September 30, 2008.  The balance sheet amounts with the exception of equity at September 30, 2008 were translated at 6.83527RMB to 1.00 US dollar as compared to 7.49625 RMB at September 30, 2007.  The equity accounts were stated at their historical rate.  The average translation rates applied to income statement accounts for the three months ended September 30, 2008, and June 30, 2007 were the average rate of exchange during the three months.

Comprehensive Income.  As a result of the above,the comprehensive income, which adds the currency adjustment to Net Income, were US$1.88 million for the three months ended September 30, 2008, as compared to the comprehensive income of US$1.70 million for the three months ended September 30, 2007, an increase of US$0.88 million.

Liquidity and Capital Resources

Discussion of cash flow

	For the three months ended September 30,
	2008			2007
Cash flow from operating activities		503,795			1,047,575
Cash flow from investing activities		(175,668	)		(713	)
Cash flow from Financing activities		0			(767,094	)

Operating activities

As of September 30, 2008, we had working capital totaling approximately US$18,940,176, including cash and cash equivalents of US12,417,925.  On January 16, 2008 and January 25, 2008, we completed private financings totaling $15,225,000, with 27 accredited investors (the “January 2008 Financing”).  The net proceeds from the January 2008 Financing were approximately $13,697,000.  

Net cash provided by operating activities was US$503,795 for the three months ended September 30, 2008 as compared to US$1,047,575 for the three months ended September 30, 2007. The decrease was primarily the result of increased raw material and packing supplies as a result of production expansion in the year.

15

Investing activities

Net cash used in investing activities for the three months ended September 30, 2008 totaled US$175,688 and related to the acquisition of intangible drug.  Net cash used in investing activities for the three months ended September 30, 2007 totaled US713 and related to the acquisition of property and equipment.

Financing activities

Net cash provided in financing activities for the three months ended September 30, 2008 totaled US$0.  Net cash used in financing activities for the three months ended September 30, 2007 was US$767,094 and majorly related to the repayment of short-term bank loans and long-term bank loans.

Borrowings and Credit Facilities

The bank borrowing balance equals to the credit facilities as of September 30, 2008. The short-term bank borrowings outstanding as of September 30, 2007 and 2008 were $1,273,970 and $1,397,165 respectively, which bore an average interest rate of 7.56% and 7.881% per annum, respectively. These loans do not contain any financial covenants or restrictions. The borrowings have one year terms and expire at various times throughout the year. These facilities contain no specific renewal terms. The short-term bank borrowings of $ $1,397,165 as of September 30, 2008 (2007: $ 1,273,970) were secured by the property and equipment of Chengdu Tianyin.

Stock Repurchase Program

   On October 27, 2008, the Board of Directors authorized the Company to repurchase up to $3.0 million of its common stock through January 2009. The amount and timing of specific repurchases are subject to market conditions, applicable legal requirements and other factors deemed appropriate by the Company's CEO and President. Repurchases may be in open-market transactions or through privately negotiated transactions, and the repurchase program may be expanded by the Board of Directors in the future. The Company has approximately 15.5 million shares of common stock outstanding and approximately 2.5 million shares are in the public float as of today. Any shares repurchased by the Company in this program will be retired to the treasury while reducing the number of outstanding shares of its common stock.

Critical Accounting Policies and Estimates.

Please refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in Tianyin Pharmaceutical’s 2008 10-K/A 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, 2008.

Item 3. Quantitative and Qualitative Disclosure About Market Risk

Not applicable

16

Item 4. CONTROLS AND PROCEDURES

(a) Evaluation of disclosure controls and procedures

Under the supervision and with the participation of our management, including our principal executive officer and acting chief accounting officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as of September 30, 2008. Based on this evaluation, our principal executive officer and our acting chief accounting officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective and adequately designed to ensure that the 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 applicable rules and forms and that our Internal Controls are effective at that assurance level to provide reasonable assurance that our financial statements are fairly presented inconformity with accounting principals generally accepted in the United States.

(b) Changes in internal control over financial reporting

During the quarter ended September 30, 2008, there has been no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Management does not expect that Disclosure Controls or Internal Controls will prevent all error and all fraud. A control system, no matter how well developed and operated, can provide only reasonable, but not absolute assurance that the objectives of the control system are met. Further, the design of the control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of a system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated objectives under all potential future conditions. Over time, control may become inadequate because of changes in conditions, or because the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

17

ITEM 4T. CONTROLS AND PROCEDURES.

Management's Quarterly Report on Internal Control over Financial Reporting.

Management is responsible for establishing and maintaining adequate internal control over financial reporting.  Our management conducted an evaluation of the effectiveness  of our internal  control over  financial  reporting  based on the framework in Internal  Control - -  Integrated  Framework  ("ICFT")  issued by the Committee of Sponsoring  Organizations of the Treadway Commission.  Based on our evaluation, management has concluded, as of September 30, 2008, we did not maintain effective controls over the financial reporting process.

Management’s assessment of the effectiveness of the registrant’s internal control over financial reporting is as of the period ended September 30, 2008. Based on the evaluation, management concluded that there was a material weakness in our internal control over financial reporting. Although currently we do not identify any material weaknesses in the process of self assessment, we have recognized significant weaknesses in internal controls.  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 reviewed the consolidated financial statements.  Although we have not identified any material errors with our financial reporting or any material weaknesses with our internal controls and do believe that the financial statements included in this report fairly present, in all material respects, our financial position and results of operations as of and for the period ended September 30, 2008, no assurances can be given that there are no such material errors or weaknesses existing.

A  material  weakness  is  a  control  deficiency,  or  combination  of  control deficiencies,  in Internal Control over Financial Reporting (“ICFR”)  such  that  there  is a  reasonable  possibility  that a material  misstatement of our annual or interim financial statements will not be prevented or detected on a timely  basis by  employees  in the normal  course of their assigned functions.

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.

This quarterly report does not include an attestation report of the Company's registered public accounting firm regarding internal control over financial reporting.  Management's  report was not subject to attestation by the Company's registered  public accounting firm pursuant to temporary rules of the Securities and Exchange  Commission  that permit the Company to provide  only  management's report in this quarterly report.

18

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 1A. Risk Factors

Not applicable.

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

(a) Not applicable.

(b)  Not applicable.

(c) Not Applicable.

ITEM 3. Defaults upon Senior Securities

(a) Not Applicable.

(b) Not Applicable.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to our security holders during the period covered by this Report.  However, we did file and mail proxy statements to re-elect our Board of Directors for our upcoming Annual Shareholder Meeting, to be held on December 9, 2008, on or about October 30, 2008.

19

ITEM 5.  OTHER INFORMATION

(a) Since we filed and mailed out our Proxy Statement for this year’s Annual Shareholder Meeting, which will be held on December 9, 2008, the date for which we must receive a stockholder proposal for next year’s annual meeting has changed.  Accordingly, any stockholder who intends to present a proposal at next year’s annual meeting of stockholders must ensure that we receive the proposal, at our offices:

· Not later than July 2, 2009, if the proposal is submitted for inclusion in our proxy materials for that meeting pursuant to Rule 14a-8 under the Securities Exchange Act of 1934; or

· August 26, 2008

No other changes to the procedures by which security holders may recommend nominees to our board of directors or any other proposal for next year’s annual meeting have been made.

ITEM 6.  EXHIBITS

(a) The following exhibits are filed as part of this report.

Exhibit No.	Document
3.1	Articles of Incorporation, as amended (Incorporated by reference to Exhibit 3.1 to our Annual Report on Form 10-K filed on September 29, 2008).
3.2	Bylaws (Incorporated by reference to Exhibit 3.2 to our Annual Report on Form 10-K filed on September 29, 2008).
31.1	Certification  of  Chief  Executive  Officer and Acting Chief Accounting Officer  required  by Rule 13a-14/15d-14(a) under the Exchange Act
32.1	Certification of Chief Executive Officer and 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:     November 10, 2008

By: TIANYIN PHARMACEUTICAL CO., INC.

 /s/  Dr. Guoqing Jiang

      Name:  Dr. Guoqing Jiang

      Title:   Chairman, Chief Executive Officer and Acting Chief Financial Officer

20